Stealth GOP Tax Bill Provision Will Trigger Deep Cuts to Medicare

Posted Nov. 22, 2017

MP3 Interview with Nancy Altman, president of Social Security Works, conducted by Scott Harris

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According to the calculations of many economists, President Trump and the Republican’s proposed tax reform legislation, which passed in the House Nov. 16 and now moves to the Senate, will primarily benefit the top one percent of wealthiest Americans, not the middle class as advertised. In fact, by some estimates, 80 percent of the benefits from GOP tax reductions and tax code changes would go to people making more than $730,000 a year over the next decade. Other features of the Republican tax plan include elimination of the estate tax that only benefits couples with more than $11 million in assets; ending most tax deductions for college student; dropping deductions for state and local taxes – predominantly hurting blue state residents – and repeal of the Obamacare individual mandate. In the Senate version of the tax bill, that will result in 13 million Americans losing their health insurance coverage.

But while many of the effects of the GOP tax reform plan operate like “Robin Hood in reverse,” another set of negative consequences for average Americans relates to little discussed cuts in the federal social safety net. According to the Congressional Budget Office, the GOP tax bill will instantly trigger $400 billion in automatic cuts to Medicare over the next 10 years, including a $25 billion reduction in the first year after enactment.

Between The Lines’ Scott Harris spoke with Nancy Altman, president of Social Security Works, who examines the proposed Trump-GOP tax plan’s major cuts to Medicare, and the likelihood that "chained CPI" will be imposed through the tax bill, increasing taxes and reducing Social Security benefits. (Rush transcript.)

NANCY ALTMAN: The Republicans have really just one play in their playbook that they've been using over and over again since Jan. 1, and that is what they want to do is give tax breaks to their billionaire donors and then, in the process even though they say there will be cuts to middle class, many middle class families will see their taxes increase. The way they want to pay for those huge tax cuts for the very wealthy is by cutting vital programs. They want to really end Medicare and Medicaid as we know it. They have had a vendetta against Social Security, really, since the time it's been enacted.

And, what they did over the summer with Trumpcare was they were really going to destroy Medicaid, get rid of the Affordable Care Act, and use that to pay for big tax cuts. Now they're just doing that in reverse order. They passed a budget that has big cuts in Medicare and Medicaid and tax breaks for the very wealthy. They've now passed through the House a tax cut bill that will, by itself, automatically trigger what CBO calls $400 billion of cuts in Medicare over the next decade. People are not really talking about it, but as soon as the tax bill gets passed, unless they waive another provision of an existing law, there will be $400 billion of cuts in Medicare.

They also wanted in the Senate version, to repeal a part of Obamacare that again, CBO projects will cut $185 billion out of Medicaid.

BETWEEN THE LINES: Nancy, with these hundreds of billions of dollars in cuts that may come out of Medicare, what will the net effect be on Medicare recipients down the line? How will it affect them personally?

NANCY ALTMAN: One way it may affect them is their choice of doctor. All these cuts in reimbursements of doctors and so forth, a lot of doctors may decide that it's not in their economic interest to keep seeing Medicare patients and Medicare patients can wind up not being able to go the hospital if they want, not being able to go to the doctors they want. The problem is that if this bill passes, it automatically triggers these cuts. And the person in charge of figuring out how to implement the cuts will be the director of the Office of Management and Budget, a man by the name of Mick Mulvaney, who is an extreme conservative who has a long-standing hatred of Social Security, Medicare and Medicaid and he will be in charge of deciding how the Medicare cuts come about. And as a consequence, I'm concerned that he will come up with the most destructive way as possible because he wants to see this program ended.

BETWEEN THE LINES: And Nancy before we go, I wanted to make sure to talk about another situation that's waiting in the wings here again, not being much discussed. And that is, there is a proposal by the Republicans to include something called "chained CPI" in the final tax legislation which could increase taxes for many Americans – but also mean future reductions in Social Security benefits. Tell our listeners a bit about chained CPI. I'm sure many haven't heard about it.

NANCY ALTMAN: It is an absolute tax increase and it does have this potential for Social Security – as you mentioned. One of the big advantages of Social Security over private pension plans, is that the benefits are indexed so they don't erode over time as inflation goes up, the benefits go up. So the purchasing power is maintained.

Now the same thing is true on the tax side. The brackets are indexed so that if you're getting more dollars, but if the real value of that money is not increasing, you don't pay a higher percentage in taxes, which why the brackets are indexed. When they decided to have automatic increases in 1972, there was only index available. That was the consumer price index for workers. And so that was used.

Now of course, retirees, people who get Social Security are by definition NOT workers, yet that was the only index that was available then. The current inflation adjustment – the CPIW, as it's called for Social Security, is inadequate because seniors and people with disabilities have disproportionately large expenditures on healthcare. And health care costs have risen much more rapidly than other costs. So there's another index called CPIE, the Consumer Price Index for Elderly that is a better measure.

But instead of going for the CPIE, in order to save money, politicians a few years ago said, "Well, let's use a stingier index." And that's the chained CPI. They're now saying let's use the stingier index for taxes and that will cause the middle-class and working class people to pay higher income taxes and what many fear is that once they get a foothold on the taxes, it'll be easy to say, "Well we're using it for this, let's use it for Social Security, too" and that would be a cut in Social Security benefits.

For more information, visit Social Security Works at socialsecurityworks.org and Strengthen Social Security Coalition at strengthensocialsecurity.org.

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