President Obama’s recess appointment of Donald Berwick, MD, as
administrator of the Centers for Medicare & Medicaid Services (CMS) was an
obvious political ploy to avoid the public debate and scrutiny that would have
occurred had the appointment taken place just prior to elections.
Berwick, a Harvard-trained pediatrician, will oversee a budget larger
than that of the Department of Defense. His appointment highlights
controversial topics related to implementation of the new
health care legislation; redistribution of wealth to fund
health care, governmental rationing of care, and wage and price controls.
During his career, Berwick has made many public comments on these subjects
that appear to prophesize White House positions and the administration’s
approach to future health care reform.
An open public debate of his nomination would have fulfilled a
pre-election promise of our president for governmental transparency. An example
of Berkowitz’s statements that would fuel that debate is this quote which
he said during a speech in 2008 at an event to celebrate the 60th anniversary
of the U.K.’s National Health Service, “Any health-care funding plan
that is just, equitable, civilized and humane must, must, redistribute wealth
from the richer among us to the poorer and less fortunate. Excellent health
care is by definition redistributional.”
His supporters note that the current Medicare and Medicaid plans are, by
definition, a redistribution of wealth since they are funded by taxpayer money
to fund programs that those taxpayers would not qualify for.
In economics, progressive redistribution is simply the transfer of
wealth from some individuals to others, usually the wealthy to the poor. The
administration has placed a monetary figure to quantify the income an
individual must earn to be defined as “wealthy” and those individuals
will be taxed at a higher rate to pay for the new government programs and
Our country is facing a record $12 trillion plus deficit. We know
politicians are notoriously weak in reducing costs, cutting back spending
and/or eliminating existing programs. It has been, and still is, much easier
for politicians to run up the debt by postponing payment for programs to the
future. When “the future” arrives and there is an obvious and
emergent revenue shortfall to pay for these programs — which by this time
have become engrained into the electorate — politicians will choose to
increase taxes rather than stop a popular program. It does not take much
foresight to understand our country will need more revenue and we will see
increases in income, estate and health care taxes. Some of these increases are
Increasing Medicare taxation
I would like to focus on the new Medicare-related taxes and the taxes to
assist funding health care (expansion) reform. These new health care taxes will
be added to the Obama Administration’s proposal for the two highest tax
brackets to expire from the 2001 and 2003 Bush tax cuts. If allowed to expire,
the top bracket would go from 36% to 39.6% for the federal tax rate. In
addition, a possible increase to 20% on dividends and capital gains is being
proposed which would increase to 23.8% in 2013. Future changes in estate taxes
are beyond the scope of this editorial.
The new Medicare taxes target high income families and/or individuals.
To understand the impact of this tax, look closely at your paycheck breakdown
under the column that lists FICA (Federal Insurance Contribution Act). This
employment tax has two components the OASDI (Old Age, Survivors, and Disability
Insurance), which takes 6.2% of your wages up to $106,800, and the HI (hospital
insurance) takes 1.45% of covered wages. The employers are responsible for
collecting and submitting this money and their contributions.
Specific health care taxes beginning 2013
Beginning 2013 the HI tax rises to 2.35% for high income earners who are
married and filing jointly, the additional tax will apply to combined income
exceeding $250,000 per year. Also, a 3.8% Medicare tax will be imposed on
unearned income. At this point, still excluded from the additional Medicare
contribution will be the interest from tax-exempt bonds, veteran’s
benefits, gains from selling principal residence and IRA and qualified plan
Those two Medicare-related taxes to help pay for reform are projected to
exceed $210 billion by 2019, according to the Joint Commission on Taxation in
March 20, 2010. In addition, as you enter the Medicare-beneficiary age group,
you will learn that means testing for your premiums has already started based
on your income tax returns. This is another form of taxation and redistribution
and is potentially an area for increased revenue with more means- testing
guidelines in the future by the government.
A recess appointment?
As I have stated, I believe that Berwick’s appointment during a
recess was done to not only avoid public debate before elections but to install
an individual that would most likely not have been confirmed after a divisive
hearing. I am disappointed that our medical associations have not made this a
greater issue and educated their members and the public as to the
As much as health care reform will impact our lives and our patients, we
were entitled to, and should have demanded, a public hearing. Whether you agree
with Berwick’s individual thinking for health care reform, his new
position running Medicare would not be easy for anyone. After the method of
appointment, I feel his future interactions with Congress will tend to be quite
White House Press Secretary Robert Gibbs tried to justify Berwick’s
appointment by stating, “It’s the type of politics that demonstrates
just how badly broken the appointments process is.” He went on to say,
“the president is going to install people that need to be installed for
this government to run … efficiently.”
For all of our sakes, I hope the current health care legislation and its
implementation and costs will be more widely embraced by those funding it in
the future. Our government is far from efficient in running large programs and
the public’s confidence in either party is extremely low. We all support
helping the poor and realize our current and future debt consequences will
result in us all giving more financial support from our incomes in the form of
higher taxes. However, there are many concepts and implementations to work
through to make those being taxed more to feel support for the redistribution
to be extracted.
I agree with Gibbs’ opinion that our system of appointments is
“broken.” I would add that health care reform has displayed a more
dysfunctional government on both sides of the aisle then I can support.
Something as important as health care reform to our economy, citizens, patients
and physicians deserves a more deliberative process involving outside opinions
and consensus-based reasoning.
Our current legislative process and political system need reform, which
will be more difficult then reforming health care. We are all prepared to pay
more for programs we can support that help control escalating health care
costs, does not contain more wasteful spending and improves quality and
Douglas W. Jackson, MD, is Chief Medical Editor of Orthopedics
Today. He can be reached at Orthopedics Today, 6900 Grove Road, Thorofare, NJ
08086; e-mail: OT@slackinc.com.
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