President Biden is proposing to extend the solvency of the Medicare national healthcare program by 25 years with an increased tax rate on high earners.
The proposal, unveiled Tuesday morning, would fund the program into the 2050s by increasing the Medicare tax rate from 3.8 to 5 percent for households making more than $400,000 a year.
The Medicare trust fund is set to run out in 2028 under current tax and spending levels.
“Since Medicare was passed, income and wealth inequality in the United States have increased dramatically. By asking those with the highest incomes to contribute modestly more, we can keep the Medicare program strong for decades to come,” the White House said in a statement.
The White House’s tax increase would apply to both “earned and unearned income” above $400,000.
“High-income people are supposed to pay a 3.8 percent Medicare tax on all of their income, but some high-paid professionals and other wealthy business owners have managed to shield some of their income from tax by claiming it is neither earned income nor investment income,” the White House said.
The plan also beefs up a requirement that pharmaceutical companies pay into Medicare when they increase prices faster than inflation. By making this rule apply to commercial health insurance, the White House aims to dedicate around $200 billion to Medicare’s hospital trust fund over the next ten years.
It also proposes capping Medicare Part D cost-sharing on certain generic drugs to $2 per prescription per month. This would apply to popular medications for hypertension and cholesterol.
The White House said its plan will also expand Medicare’s negotiating power to lower drug prices, as well as “eliminate cost-sharing for three mental health or other behavioral health visits per year.”
The Medicare proposals are part of the president’s fiscal 2024 budget, which is set to be released this week in full. Those measures, however, are unlikely to make it into law as a GOP-controlled House spars with the White House and Senate over federal spending levels, the rising national debt and a potential debt ceiling crisis this summer.
While lawmakers in both parties constantly express support for shoring up Social Security and Medicare, Democrats and Republicans remain fiercely divided over how to bolster the program.
Biden’s proposed budget for 2022 floated a number of ideas to increase taxes on the rich, many of which did not make it into law.
A so-called billionaire tax that would have taxed both income and investment earnings of the extremely wealthy grabbed headlines last year but failed to make it into final legislation. A 15-percent minimum tax on corporations and a 1-percent tax on stock buybacks were passed last year as part of Democrats’ Inflation Reduction Act.