More Pandering to Seniors

Sep 25, 2009

Yesterday, the House voted 406-18 to prevent an 8 percent increase in Medicare premiums for 11 millions seniors, many of whom are well-off. At a time when Medicare is on an unsustainable path and budget deficits are out of control, we are very concerned about this provision and others like it. Congress cannot afford to keep making “easy choices” without a risk of breaking the bank. As House Majority Steny Hoyer (one of the five Democrats to courageously vote against the bill) said:

Ladies and gentlemen, I don't know how many of you go to sleep at night worried about whether Ross Perot can pay his premium, but this will freeze Ross Perot's basic premium from going up.

Typically, Medicare premiums are allowed to increase every year as health care costs rise. They are scheduled to do so, under law, so that they continue to cover roughly 25 percent of Medicare’s costs. However, a “hold harmless” provision makes it so premium increases cannot be larger than Social Security’s cost of living adjustment (COLA) for most recipients. But since the economy is experiencing deflation, there is no scheduled COLA, and so roughly three quarters of seniors will not be subject of a premium increase. That leaves the remaining quarter of seniors – mainly those who did not collect Social Security in the previous year, those making above $85,000, and those whose premiums are covered by Medicaid -- paying all the extra costs.

If the bill used general revenue to pay for the costs imposed by the hold harmless provision, that would be one thing. But this bill goes too far by exempting seniors from a premium increase at all, at a time when health care costs are continuing to rise.

Worse still, there is continued political pressure to provide seniors with some type of ad-hoc COLA. As we’ve explained before, the reasons seniors are not getting a COLA is because there isn’t any inflation. In fact, there is deflation; and so the fact that Social Security benefits stay the same actually means that seniors are already receiving a benefit increase, when you adjust for inflation.

The economy is doing badly, and we are all suffering. Seniors have not been insulated from this economic crisis. But at a time when our public resources are becoming scarcer by the moment – and so many of them are already going to retirees – we can’t afford this type of pandering. We need to focus any new spending where it is truly needed, and be honest with the public – even if it isn’t politically popular to do so.