Biden has no real plan to save Medicare

IN American politics, there is no greater applause line than promising to save Medicare from the feckless mismanagement of the other party. Almost everyone is in favor of saving Medicare. So it’s not surprising that President Joe Biden has chosen to sell his new budget this way.

The problem is that Biden isn’t actually doing anything substantive to save Medicare at all.

He doesn’t need to save it from “MAGA Republicans” because the party lost interest in substantial reforms years ago after discovering major change to the program were politically toxic.

The Medicare problem that needs fixing is the program’s cost. The Congressional Budget Office projects that its expenditures as a percentage of gross domestic product will grow by almost a third in the next 10 years, while the percentage of GDP collected by the payroll taxes that fund Medicare and Social Security will stay roughly flat. And this will take place in the context of massive deficits — projected to be nearly 7 percent of GDP in 2033 — that will make it impossible simply to paper over those gaps with transfers from the general fund indefinitely. Some combination of spending cuts and higher taxes will be needed to put the program on a sustainable footing.

Unfortunately, there’s no political will to fix the actual problem, as Biden’s proposals themselves indicate.

Consider that the only major delivery-side reform the administration could come up with was a proposal to force price cuts on the pharmaceutical companies that just delivered us from the worst ravages of an unexpected pandemic (not to mention real revolutions in other treatment areas).

Consider too that pharmaceutical spending actually accounts for a relatively small share of our medical spending, roughly 10 percent; it is not possible to balance Medicare’s books entirely on the backs of drug companies. As Marc Goldwein of the Committee for a Responsible Federal Budget points out, drug cuts are “politically easy, but there is tons of money in hospitals and these Medicare/ Medigap insurance plans. That’s where most of the real money is.”

On the tax side, the administration is concentrating its proposed tax hikes on corporations and people who make more than $400,000 a year. Raising taxes on the top 1 percent is understandably popular, given that they take home about 22 percent of national income. But they also pay 42.3 percent of income taxes already. By 2033, under current law, federal spending is projected to be 25 percent of GDP, while revenue is on track to be roughly 18 percent. Mathematically, we can’t close our budget gap, much less fund the larger government Democrats want, entirely by hitting the same small pool of taxpayers over and over.

To solve our actual problem, politicians are going to have to get serious in the face of serious blowback. Taxes will have to be raised on people who make less than that $400,000-a-year threshold. Delivery reforms will have to be undertaken in more-controversial areas, such as those Medicare Advantage plans. And, unfortunately, those changes will need to be used to fund what we’re already doing, rather than diverted to some popular new spending idea. Using Medicare reforms to fund new spending like Obamacare has already used up some of the easiest trims already. We can’t afford to lose any more.