Those of us who favor real health care reform need to have a back up plan should the Senate Finance Committee version of health care reform continue to progress. In my view the principal cause of the loss of momentum is two-fold. First, the President and Congress' insistence that universal health care reform can be paid for by taxing millionaires. The American people do not believe in something for nothing and view Democratic promises as unrealistic, causing them to discount the promised benefits of heath care reform. (Who would have thought it possible for the Republicans to sound credible after the last eight years.) Second, the discussion of controlling Medicare costs as a part of health care reform has given seniors the false idea that their benefits are being cut to pay for health care reform.
There is a solution ...
First, let me be clear: I favor a fully funded public option as a means of disciplining insurance companies and implementing true health care reforms. My explanation is here.
If a public option is unavailable, we need to insist that as an alternative that the age for joining Medicare be lowered to at least 55. This will counteract senior concerns that Medicare is being looted to pay for universal health care reform. Lowering the age for Medicare also will be a step forward with "Medicare for All." Rather than a watered down public option, Medicare could be a robust alternative to private insurance that would help ease the way to a public option. When people hear public option, they do not think Medicare, which is generally well regarded.
Small businesses ought to be one of the advocates for true health insurance reform, but their input first was ignored and now discouraged because the high income surtax falls unfairly on them and not big companies. Tax rules require that businesses that offer health insurance to their employees have to offer essentially the same plans to all of them. If small businesses were allowed to let their older employees join Medicare and provide employer insurance only as a supplement to ensure comparable out of pocket costs, the result would be a significant benefit. If this idea were introduced, I am sure that the small businesses would seek to drive the Medicare age down to 50 to provide even further relief.
Finally, the increase in Medicare should be paid for by levying the Medicare tax on unearned as well as earned income. I have written extensively here and here on this topic. By reducing the competitive advantage that public corporations enjoy over their small business and family and employee owned competitors, rather than increasing the unfairness with a surtax, small business would be an ally rather than an opponent of universal health care reform.
Because this extension of the Medicare tax to unearned income should generate more revenue than needed to fund the age change in Medicare and end its projected deficiency, the overall Medicare rate can be lowered from its current combined 2.9%. Because so much of the income of those earning less than $250,000 comes from salaries, rather than unearned income, the lower rate will reduce the tax burden of those earning less than $250,000 in the aggregate. Reducing the payroll tax also is one of the most effective stimuli to the economy.