New legislation seeks to close key tax loopholes in a bid to extend the solvency of the Medicare Hospital Insurance Fund by another decade and avert a looming shortfall.
House Rep. Lloyd Doggett, D-Texas, introduced the Assuring Medicare’s Promise Act on Monday aimed at redirecting income tax revenue as a solution to Medicare’s hospital fund that will run out of money in 2028.
“The creation of Medicare represented a pledge to every American of access to quality, affordable health care during their senior years or in the event of disability,” Doggett said in a statement. “To assure we keep this promise, I am offering a clear way to assure greater tax fairness, prevent disruption of benefits, and provide sufficient time to implement other cost-saving measures.”
The legislation aims to close the loophole for wealthy individuals to bypass paying net investment income tax (NIIT) and would direct the revenue to the Hospital Insurance Fund, which pays for Medicare Part A that covers inpatient care in hospitals.
It ensures high-income owners of pass-through businesses must pay either the 3.8% Medicare employment tax or the 3.8% NIIT. The legislation would also redirect revenue generated from the NIIT to the Medicare Hospital Insurance Fund, a move expected to generate $650 billion to help prop up Medicare.
If the bill is implemented, Doggett expects Medicare Trust Fund solvency to be extended through 2040.
The legislation comes as Congress is taking a sharper eye at ways to shore up Medicare’s finances. The Senate, for instance, is eyeing closing similar loopholes for NIIT and would extend Medicare solvency for another three years, according to a CNN report.
Senate Democrats are working on a deal to give Medicare the power to negotiate lower drug prices, and the tax provisions could be included.