President Obamas proposed $3.77 trillion budget takes on entitlement reform with proposals to slow the rise in spending on politically sensitive Medicare and Social Security, which are major drivers of the federal deficit.
Both programs are facing insolvency under fiscal pressures created by retiring baby boomers unless spending is restrained. Social Security paid benefits to an estimated 42 million people in 2012, and that is expected to rise by 40 percent in the next 10 years with Medicare expected to see a similar increase, which combined could overwhelm spending on other discretionary programs.
President Obama seeks to lower Medicare spending by $400 billion over the next 10 years by reducing payments to hospitals and providers but also by raising more revenue through premium changes on upper-income Americans through means-testing, which links premiums and benefit costs to income.
Well-to-do Americans now contribute more based on their income, but President Obama would ask higher-income people to pay more on their Part B, which pays for doctor visits and outpatient coverage, and Part D, the prescription drug benefit.
Republicans have offered means-testing proposals in the past, but they have met with opposition from some Democrats who fear the policy would cause upper-income Americans to withdraw from Medicare and undermine support for it.
Social Security spending would be slashed by changing the way the consumer price index is calculated. Using what is called a chained CPI would reduce the size of future cost-of-living increases to recipients.
Although opponents object to lower benefits to senior citizens, President Obamas proposal incorporates some protections for older seniors by making a supplemental payment to those over 76 to offset some of the reduction.
Emphasizing the need for reforms, Sen. Mark Warner, a Democrat, said, The math on entitlements is just not sustainable. And if youre not finding ways to reform, where do you squeeze? Well, then you squeeze early-childhood programs, you squeeze Head Start, you squeeze education and veterans.
That is the stark choice facing Congress as it confronts the need for long overdue reforms to entitlement programs. President Obamas budget should jump-start the debate. His ideas are not new; they have been talked about before. Congress has to find the political courage to work with him to enact changes essential to curb costs to ensure they will be here for future generations.