Another Spending Siren for Joe Manchin

West Virginia Sen. Joe Manchin


Tom Williams/Zuma Press

Progressives are still trying to get West Virginia Senator Joe Manchin to support a partisan tax and spending bill. How rude of the Medicare and Social Security trustees to interrupt that serenade with a reminder last week that claims are going bust.

The silver lining of the 2022 Medicare Trustees report is that the hospital insurance fund is expected to remain solvent through 2028, two years longer than last year’s forecast. “This is encouraging news,” said Texas Democratic Rep. Lloyd Doggett. Unfortunately, a major reason is that Covid has killed many elderly people with health conditions that are expensive to treat.

Payroll tax receipts, which support the hospital fund, have also risen sharply on a buoyant recovery and faster wage growth. This underscores how stronger economic growth can help ease the country’s entitlement burden. However, the trustees still forecast that the hospital fund will run a $530 billion deficit over the next decade as spending exceeds tax revenue.

This is probably an optimistic scenario. The report notes that payments to providers are unlikely to keep pace with medical bills, so Congress will likely need to increase them to ensure seniors don’t lose access to care. Congress has repeatedly prevented payment cuts for providers over the past two decades.

Democrats blame big pharma for the bankruptcy of Medicare, but the annual cost of Part D prescription drugs has risen an average of 1% over the past five years. That’s far less than inflation, GDP, and other Medicare expenses. Even expensive drugs that increase spending in the short term can reduce healthcare spending in the long run.

Consider hepatitis C treatments, which public health hailed as too expensive when they hit the market nearly a decade ago. Since then, prices have plummeted 75% thanks to market competition of around $100,000 per course. A Department of Health analysis estimates that the treatments will reduce patients’ healthcare costs by about $16,000 annually and will save Medicaid $12 billion after this year.

Once the hospital trust fund is empty, spending must be cut by 10%. The democratic solution is to let Medicare “negotiate” drug prices — their euphemism for price controls. However, this will reduce the incentive to develop innovative treatments for difficult-to-treat diseases such as Alzheimer’s. The result can be higher Medicare spending over the long term.

The news from the Social Security Trustees’ report is little better. The program is expected to have exhausted its reserves by 2035, by which time all retirees will automatically face a 20% benefit cut. The Committee on Responsible Federal Budgeting notes that the benefit cuts or tax increases needed to keep both trust funds solvent will be less if Congress acts sooner.

But these days, eligibility reform is taboo in Washington. Even Republicans refuse to propose a gradual increase in the Medicare age to 67 or means-tested Social Security benefits, and progressives want to expand benefits for both programs.

Democrats are trying to persuade Mr. Manchin to raise taxes to fund the well-being of green energy businesses and the Affordable Care Act subsidies. The point for Congress is, don’t buy a Ferrari if you can’t afford to fix your leaking roof.

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