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Can We Cut Taxes and Still Pay for a Prescription Drug Benefit? Many members of Congress and President Bush insist that we can afford to cut taxes without tapping the surpluses in Social Security and Medicare. Recently the House passed a `lock box` measure that would put these funds off limits for any other purpose except to pay down the national debt, or to be used to reform those programs. The Senate, though, resisted such measures and the Medicare surplus has become a new battle ground in the tax cut debate. President Bush has proposed transferring $526 billion from Medicare`s Hospital Insurance (Part A) Trust Fund to Outpatient Part B. These funds, he says, could be used to provide prescription drug benefits. This is misleading. Not only does Congress need to set aside the $400 billion Medicare Part A surplus, but Congress also needs to set aside an additional amount to finance a new prescription drug benefit. This is important because Medicare is financed in two parts. Part A is financed out of Medicare payroll taxes. This is what is represented by the Medicare surplus. Part B Medicare however, is financed 75% from the general revenues (the non-trust fund surplus) and 25% from premiums paid by Medicare recipients. Part B currently represents about 40% of total Medicare expenditures and is growing faster than Part A expenditures. A new prescription drug benefit will add new costs. Therefore Congress must set aside a reasonable portion of the budget surplus from the general revenues PRIOR to enacting a tax cut in order to shore up Medicare Part B and to pay for a prescription drug benefit. Without setting aside this money, the Medicare Trust Fund would be depleted an estimated fifteen years sooner than anticipated if it is used to pay for other Medicare benefits such as prescription drugs, instead of general revenues. Contact your Members of Congress to ask them to set aside a reasonable portion of the general revenue budget surplus to ensure that the government will be able to pay for adding a prescription drug benefit. This article first appeared in Volume 6, Issue 6 of "The Social Security and Medicare Advisor" newsletter (May/2001). To receive future editions of "The Advisor" in its special, free e-mail version, please click here. | ||||||||
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