The study examined the tax impact of these two Medicare proposals for a child now in the second grade who will enter the work force at the age of 22 and earn an average wage, which today would be $25,000. The study, conducted by former Health Care Financing Administration chief actuary Guy King, found that this second grader would have to pay:
• $140,691 more in income taxes under the Clinton plan over his or her lifetime to support Medicare Part B than under Congress' plan ($26,076 if calculated in 1995 dollars) and
• $64,532 more in payroll taxes under Clinton's Medicare plan than under the plan approved by Congress ($13,626 if calculated in 1995 dollars).
"The President's plan would require today's second graders to pay $140,691 more in income taxes during their working years—twice as much—than the plan approved by Congress," said Pamela Bailey, president of the Healthcare Leadership Council and co-chair of the Coalition to Save Medicare. "Why? Because the Clinton Administration has decided it is better for our children to pay higher income taxes than to require senior citizens to pay $7 more per month in premiums."
Medicare Part B which covers doctor and outpatient services, is funded partly by seniors' premiums, but mostly through general taxes. The President's Medicare plan would increase the taxpayers' share of the cost from 69 percent today to 75 percent, in order to keep seniors' monthly premiums slightly lower than under Congress' plan.
"Most Americans are not aware of the trade-off between keeping premiums low and increasing the taxes future generations of working Americans will have to pay," Bailey observed. "This study emphasizes the need to ask everyone—doctors, hospitals, seniors and taxpayers—to contribute to a long-term Medicare solution. Excluding senior citizens from this obligation only increases the income taxes their grandchildren will have to pay. If asked, most seniors would be willing to pay their fair share."
The study also found that to ensure the solvency of medicare's hospital trust fund, the Clinton plan would have to raise the payroll tax rates from 2.9 percent to 5.3 percent. Congress' plan would require a smaller payroll tax rate increase—from 2.9 percent to 4.38 percent.
To receive a copy of the study, please call the Healthcare Leadership Council at (202) 347-5741.