Fixing Medicare’s Insolvency Requires Both the Administration and Congress – So Where Are They?

The 2022 Medicare Trustees Report was full of grim news – namely, that the Hospital Insurance (HI) Trust Fund is projected to hit insolvency by 2028.  Given the serious implications insolvency could have on access to care, stakeholders have been begging Congress and the administration to do something.   

However, Washington has avoided serious attempts to address the HI Trust Fund’s insolvency for years, primarily because the most obvious fixes would be unpopular among voters.  Since the payroll taxes predominantly finance the HI Trust Fund, lawmakers could opt to raise payroll taxes to add more years to the fund.  Unfortunately, higher payroll taxes would mean less take-home pay for employees and would put pressure on employers, which sounds like a sure-fire way to anger the electorate.  Inflation and general concerns over cost-of-living issues would also exacerbate the impact of higher payroll taxes on workers. 

Lawmakers could also maximize existing revenue streams by cutting Medicare spending, but this would spark political backlash from the health care sector.  The pandemic has stretched hospitals’ operating margins even thinner and reducing already-low Medicare reimbursement rates would make life even more difficult for providers.  Medicare could shift costs to beneficiaries in the form of higher deductibles and co-payments, but this would once again be political damaging as seniors will then have to grapple with the combined effects of higher health care costs and inflation.

The federal government could also incur Medicare savings by making the program more cost effective, but that’s no easy task.  During a series of congressional hearings of the Fiscal Year (FY) 2023 budget request for the Department of Health and Human Services (HHS), Secretary Xavier Becerra repeatedly said value-based payment models could be used to save Medicare dollars and extend the HI Trust Fund’s solvency.  Unfortunately, these payment models haven’t had much of effect on Medicare’s finances.  Out of the 40 payment models launched by HHS over the past 10 years, only five have delivered “statistically significant savings.”  Even if all value-based payment models were to start immediately reducing costs, it would likely take years for these savings to make a serious dent on Medicare’s finances.

Congressional Action in Sight?

The urgency of addressing Medicare Part A’s finances isn’t lost on members of Congress.  During Becerra’s appearances before congressional committees last spring, Republican lawmakers repeatedly questioned the secretary about the administration’s plans for addressing the HI Trust Fund’s pending insolvency.  In response, Becerra repeatedly told lawmakers that they will have to work with HHS to develop legislation to improve the outlook for the HI Trust Fund. Rep. Adrien Smith (R-NE), one of the GOP members to question Becerra about the HI Trust Fund, penned a June 2022 op-ed that underscored the need for “bipartisan action” to shore up Part A revenue.

It’s not that Congress hasn’t taken action in the past.  There is a statutory requirement for the administration to submit a report to Congress when more than 45% of Medicare hospital spending is projected to come from general revenue – not the HI Trust Fund – within seven years.  However, as both Smith and Becerra confirmed in the recent HHS budget hearings, the Biden administration has no plans to meet this requirement. 

Fortunately, a viable proposal to address the HI Trust Fund has emerged in recent days.  On July 7,  Senate Democrats reached an agreement to extend the solvency of the HI Trust Fund to 2031 by closing a Net Investment Income tax (NIIT) loophole involving pass-through businesses.  Primarily targeting high-income earners, the proposal to close the tax loophole was first put forth by the Biden administration back in 2021 as a part of its Fiscal Year (FY) 2022 budget request.   Senate Democrats are reportedly including this proposal in a broader reconciliation package to secure the support of Sen. Joe Manchin (D-VW), whose decision to withdraw support from last year’s package caused it to fall apart. 

The proposal from Senate Democrats is getting attention in the House, too.  On July 11, Rep. Lloyd Doggett (D-TX) introduced legislation that would similarly close the NIIT loophole.

However, the proposal is still in its infancy at this point, and it doesn’t have a strong likelihood of becoming law.  The Senate Parliamentarian has yet to complete the review of the new reconciliation proposal, and as last year has shown, delicate negotiations on a new reconciliation bill could collapse at any point.  However, as the Senate attempts to revive a reconciliation bill and the comments made during recent congressional hearings show that lawmakers are definitely concerned about Part A’s finances and recognize the importance of taking action before it’s too late.  

The Senate Parliamentarian, Explained

On September 19, Democrats’ plans to offer undocumented immigrants a legal pathway to permanent residency was torpedoed when the Senate Parliamentarian ruled against including immigration reform in their $3.5 trillion human infrastructure package.   As Democrats attempt to advance key priorities via budget reconciliation, the role of the Senate Parliamentarian has garnered much attention. 

Background: Democrats have long been seeking a way to offer permanent residency to Dreamers, who are undocumented immigrants who were brought to the US at a young age and have lived most of their lives in America. Currently, many Dreamers do not have a clear path to gain legal permanent residence status, which would then allow them to pursue citizenship.   

The role: The Senate parliamentarian interprets the Senate’s often complicated rules.  The position of the Senate Parliamentarian is strictly non-partisan, and individuals are traditionally appointed to the role from senior staff in the Parliamentarian office. There have only been six Senate Parliamentarians since the position was created in 1935.  Senate Parliamentarians have no defined term length and serve at the pleasure of the Majority Leader.  The current Parliamentarian is Elizabeth MacDonough, who was appointed by then-Majority Leader Harry Reid (D-NV) as the first woman to hold the position in 2012. 

Did you know?  The Senate Parliamentarian’s salary is $171,315 per year, as of 2019.

Some of the things the Senate Parliamentarian might do include:

  • Advising the Senate’s presiding officer, or Majority Leader, on the appropriate procedure, statements, and responses of the Senate.
  • Offering written guidance on procedural questions.
  • Recommending the referral of measures to relevant committees.
  • Maintaining and publishing procedural rules.

It’s not just the Senate: The House of Representatives has its own Parliamentarian, too, with a similar salary and responsibilities.  The current House Parliamentarian is Jason Smith (not to be confused with the Missouri Congressman), who was appointed in 2010.

Why the Senate parliamentarian is getting so much attention this year:  The Democratic majority is using the budget reconciliation process to accomplish their policy goals and bypass the need for Republican support. Therefore, enter the Parliamentarian, who decides what can and can’t be included in legislation passed under this process. The Parliamentarian uses the Byrd Rule to analyze legislation and makes a determination on whether a provision produces a change in spending or revenues and does not increase the deficit within a set period

This isn’t the first time where the Parliamentarian says no to a Democrat policy: Back in March, top Senate Democrats were upset by the Parliamentarian’s decision to not include a minimum wage increase in the American Rescue Plan due to an “incidental” impact on the federal budget. 

What Could Senate Democrats Do? The Senate Majority Leader does have the authority to fire the Senate Parliamentarian.  This last happened in 2001, when then-Majority Leader Trent Lott (R-MS) fired then-Parliamentarian Robert Dover after he interpreted Senate rules in way that would have made it difficult to pass then-President George W. Bush’s tax cut proposal through budget reconciliation. 

However, MacDonough’s job seems safe for now.  While Majority Leader Chuck Schumer (D-NY) has expressed disappointment with her recent rulings, he has yet to call for the Parliamentarian to be replaced.  Senate Majority Whip Dick Durbin (D-IL) has similarly indicated he doesn’t think MacDonough should be dismissed.  Instead, Senate Democrats have expressed a willingness to advance immigration reform and other priorities that can’t be included in budget reconciliation through regular order, even if the chances of doing so are slim to none. 

Senate Democrats could also overrule MacDonough’s ruling with the support of all 50 Senate Democrats and Vice President Harris, but this won’t be happening, either.  Both Sens. Joe Manchin (D-WV) and Kyrsten Sinema  (D-AZ) have previously stated they won’t overrule the parliamentarian, while Sens. Dick Durbin (D-IL) and Bob Menendez (D-NJ) have thrown cold water on the idea.