Frozen Minds on the Medicare Part B Premium Freeze

This week, Sen. Tom Coburn (R-OK) blocked an attempt by Sen. Max Baucus (D-MT) to move — without a recorded vote or CBO score – H.R. 3631, legislation to freeze Medicare Part B premiums. These premiums are automatically deducted from the Social Security checks of seniors, almost all of whom are enrolled in the Medicare Part B (Supplemental Medical Insurance) program.

Social Security recipients will not receive a COLA increase in their monthly checks beginning January 2010 because inflation between October 2008 and September 2009 was negative. But if Part B premiums increase, the dollar amount of their Social Security checks will decrease beginning in January 2010.

What would happen if the Part B premium were frozen for 2010? Seniors would get a double benefit. First they are gaining from a zero reduction in their Social Security checks even though inflation in 2008-2009 was negative. That means the purchasing power of their Social Security checks will be larger (assuming inflation remains low during the 4th quarter of this year).

On top of that, a frozen Part B premium would provide them with more generous Part B coverage because health care prices became more expensive during 2009 relative to other goods and services.

Senator Coburn’s action in blocking the premium freeze is courageous and correct. In a small but important way, it combats the busting of the federal budget by already generous Medicare Part B benefits that seniors receive — three-quarters of which are funded out of federal general revenues (that is, financed out of taxes paid by younger workers).

Note that the fiscal gimmickry this action prevents is not limited to seniors’ Medicare benefits. Some lawmakers on both sides of the aisle are intent on raiding the Medicare Improvement Fund (MIF) established in 2008 to offset cuts in future physician reimbursements. That fund is actually empty right now — it is not scheduled to receive monies until 2014. But an “advance funding” provision in its legislation would allow lawmakers to make transfers from the Treasury’s general fund as a stop-gap mechanism until MIF’s revenues become available.

Of course, when it comes time to deal with the issue of physician payment cuts, there will be zero dollars left in the MIF. They will have been used up to finance the 2010 Part B premium freeze — and Congress will turn to taxpayers and demand more money to bail out physicians.