Wealthy May Face Higher Taxes to Fund Medicare

Long Island Elder Law and Estate Planning Lawyers

Under President Biden’s proposal, those who make over $400,000 annually would face a Medicare tax rate of 5 percent to help fund the program.
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With the 2024 presidential election in the not-too-distant future, heated debates over the nation’s government budget, including how to fund and secure the future of public benefits programs like Social Security and Medicare, have dominated the daily headlines.

In one recent development, President Biden, who has pledged to bolster such federal programs, has announced a proposal to fund Medicare through the year 2050.

What Is Medicare?

Medicare is a federal program providing health insurance to individuals who are 65 and older as well as those with qualifying disabilities.

More than 65 million Americans are currently enrolled in it – a number that is only expected to grow as the population of the country ages.

When Will Medicare Funding Be Depleted?

By 2028, however, the program’s funding source is estimated to run short, meaning that Medicare will no longer be able to provide full benefits for its enrollees.

Finding solutions to ensure Medicare remains solvent have therefore been under intense discussion among lawmakers as of late. While the Biden Administration cites protecting Medicare as one of its top priorities, Republicans in Congress have also stated in recent months that cutting Medicare, as well as Social Security, is a measure that is “off the table.”

With Medicare spending now accounting for about 10 percent of the federal budget – $689 billion in 2021 – questions remain about how the government will cover the costs of this program as they continue to rise.

Proposal Includes Additional Medicare Tax for High-Income Earners 

Under President Biden’s proposal, those who make more than $400,000 per year would face a Medicare tax rate of 5 percent, up from 3.8 percent.

“High-income people are supposed to pay a 3.8 percent Medicare tax on all of their income, but some high-paid professionals and other wealthy business owners have managed to shield some of their income from tax by claiming it is neither earned income nor investment income,” the White House stated.

Also included in the plan is a proposal to limit the cost to Medicare Part D enrollees for certain generic prescription medications for chronic illnesses to $2 per month.

Read more in the White House’s fact sheet. The proposal on Medicare is part of a more comprehensive budget plan which was recently proposed by the Biden Administration.

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