Press Release
Tuesday, June 24, 1997

WASHINGTON -- The Concord Coalition today praised the 70 members of the Senate who last night voted in favor of raising monthly Medicare premiums for the affluent elderly, and urged President Clinton and members of the House to support the measure.

"In the hundreds of public forums we have held in cities all across America, means-testing has been the most popular proposal for saving Medicare and Social Security for future generations," said Concord Co-Chair Warren Rudman. "It's an equitable solution not just for Medicare, but for other entitlement programs as well."

"It's simply not fair or sustainable to ask young working families who are struggling to make a living to pay an ever-rising portion of health care costs for well-off seniors," said Concord Co-Chair Sam Nunn. "While Medicare reform must include much more than a means test, this measure would introduce Americans to an idea that must ultimately be part of the long-term solution."

The Concord Coalition has championed a means test for all entitlement programs since its inception in 1992. The Concord version would begin gradually reducing Social Security, Medicare and other entitlement benefits for households exceeding $50,000 in annual income.

The proposal to means-test Medicare Part B premiums is not new to President Clinton or Congress. President Clinton's 1993 "Health Security Plan" proposed raising the Part B premium for wealthy Americans. The 1995 Balanced Budget Act (reconciliation), passed by the House and Senate, included a Medicare means-testing measure. Earlier this year, the influential House Democratic Coalition, known as the "Blue Dogs," introduced an alternative balanced budget plan that includes a Medicare means-testing proposal similar to the one the Senate passed last night.

Concord also applauded the Senate's vote to begin gradually raising the age of Medicare eligibility to 67. Savings from raising the age of eligibility would be minor for several decades because of the phase-in and because the youngest Medicare beneficiaries account for relatively little of the programs costs. Once the Baby Boom generation begins retiring, however, the savings would become significant.

Part B of Medicare covers doctors' bills. Twenty-five percent of the program's costs are paid by Medicare beneficiaries through a monthly premium of about $44. Even though the premium is set to cover 25 percent of program costs, it is not permitted to rise faster than Social Security's cost of living adjustments. This means that as Medicare Part B costs rise faster than inflation, the premiums gradually will cover less and less of costs. By 2007, premiums will cover only 16 percent of program costs.

The remainder of Medicare Part B costs are financed through general revenues. In effect, this means that Medicare Part B has an open pipeline to the U.S. Treasury. And this pipeline will gush faster and faster.

In the future, as Part B premiums gradually finance less and less, and general revenues finance more and more of program costs, the drain on the Treasury will be about $850 billion by 2025. At the same time, Medicare Part A's annual deficit will reach $758 billion, and Social Security's deficit will be $478 billion. In that single year (2025), the combined annual shortfall for these two entitlement programs (Medicare and Social Security) will reach $2.1 trillion.