The administration and Republican Senate leaders want to cut Medicare outlays by more than $18 billion over the next three years. Much of these savings would come from requiring elderly and disabled Social Security recipients to pay more for health care. Because Medicare is headed for trouble several years hence, it makes sense to shore up the trust fund that supports it. But a better way to do that would be to require all state and local government workers, most of whom ultimately benefit from the program, to pay for those benefits.
The case for requiring Medicare coverage for state and local workers is basically the same as the one that finally persuaded Congress to extend Medicare coverage to all federal workers and Social Security retirement and disability to new fedeal hires. Almost all these workers ultimately will receive these benefits either from working for some years in private jobs or as spouses of covered workers. Yet they will have escaped paying for most or all of the cost. Requiring coverage, moreover, would be a favor to many state and local workers who, as a result of government parsimony, do not have adequate protection from their own benefit programs.
Seven out of 10 state and local government workers are already covered by both Social Security and Medicare. But 4 million such workers aren't covered because the governments they work for haven't chosen to participate. Unlike almost every other employer in this country, state and local governments have not been required by federal law to provide coverage for employees primarily from concern that the Supreme Court might declare that such a requirement infringed upon powers reserved to states by the Constitution.
That concern, however, has been put to rest by a Supreme Court decision in February which explicitly allowed application of federal laws to the employment terms of state and local workers. In any case, Congress could achieve the same result by deciding to treat state and local workers as self- employed persons, thus requiring them to bear a higher payroll tax burden unless their government employers opted into the Social Security system -- which they would then be almost sure to do.
Ultimately all state and local workers should be covered by the full range of Social Security benefits. A good way to start -- which would add about $6.3 billion to the trust funds over the next three years and reduce the federal deficit by the same amount -- would be to extend Medicare to these workers. For another $2.4 billion in savings, Congress could enroll new hires in the retirement and disability programs as well. Beyond savings, these changes would make the Social Security system fairer as well.