Biden Proposes Taxing Higher Income Earners To Help Save Medicare

Topline

The White House unveiled a budget proposal Tuesday to extend funding for Medicare at least till the 2050s by raising taxes on high-income individuals and negotiating lower prices for prescription drugs.

President Joe Biden speaks near the Edmund Pettus Bridge in Selma, Ala., Sunday.

Key Facts

In a statement, the White House said its budget plan will shore up funding for a key Medicare trust fund—which is in danger of running out of money in 2028—by an additional 25 years at least.

The proposal calls for “modestly increasing” the Medicare tax rate on individuals earning more than $400,000 a year, from its current 3.8% to 5%.

The plan also seeks to expand Medicare’s authority to negotiate lower prices for prescription drugs and put the savings toward the Medicare trust fund.

President Joe Biden outlined this plan in a guest column for the New York Times, saying his budget will make the Medicare trust fund “solvent beyond 2050 without cutting a penny in benefits.”

Biden’s column takes a shot at “MAGA Republicans,” claiming if they are allowed to get their way, seniors will be forced to pay higher out-of-pocket costs for prescription drugs and insulin.

Crucial Quote

“For decades, I’ve listened to my Republican friends claim that the only way to be serious about preserving Medicare is to cut benefits…Some have threatened our economy unless I agree to benefit cuts,” Biden writes.

What To Watch For

The Medicare proposal is part of a larger budget plan that the Biden administration is set to release on Thursday. The plan faces a difficult path in Congress due to the House’s Republican majority and the Democrats having a slim majority in the Senate.

Key Background

According to a report released by the Medicare Board of Trustees in June 2022, reserves for the program’s Hospital Insurance Trust Fund are at risk of running out in 2028. If this happens, the program will face a shortfall of 10% starting in 2029, and this will rise to 20% in 2046. The Biden administration is engaged in a standoff with the House Republicans over raising the debt ceiling. As part of negotiations, Republican lawmakers have demanded deep cuts to federal spending. Biden has accused GOP leaders of trying to gut key programs such as Social Security and Medicare.

Tangent

Starting with his State of the Union address last month, Biden has focused his attacks on the GOP by accusing its lawmakers and leaders of trying to cut Social Security and Medicare. In his annual address to Congress Biden said: “Instead of making the wealthy pay their fair share, some Republicans want Medicare and Social Security to sunset.” A key target of Biden’s criticism has been a proposal outlined by Sen. Rick Scott (R-Fla.) which would require Congress to vote on renewing major federal programs like Medicare and Social Security every five years. Scott’s proposal, however, is unlikely to pass as it has failed to garner support from even his own party. The GOP leadership, including House Speaker Kevin McCarthy (R-Calif.), has insisted cuts to these key federal entitlement programs are “completely off the table” as part of the debt ceiling discussions.