Whereas there are only 1.2 million people age 65 and over who are not covered by Medicare, the removal of "qualifications" (wage taxes paid in over 10 years) cannot increase the Medicare roles or the Medicare costs more than 2.3%. BUT cutting the tax rate by 10% to 2.61% and broadening the tax to be a flat tax on all income regardless of source would increase revenue by 26%. IRA and 401K retirement funds, of course, do not attract any taxes at all.
It is important to note that unlike Social Security benefits, Medicare benefits are equal to all and not based on the amount of ones past earned income. So to tie benefits to wages has never made much sense. This "tax shift" produces a net gain of 23.7% in Medicare net cash flow (after the additional expense of adding people not currently qualified). And the bill to accomplish this feat would be a reconciliation bill because it reduces the deficit.
If the Democrats WANT to lose the elections then they can keep monkeying around with the current bill. The suggestion regarding the Medicare tax should actually be an outright demand on the part of the progressives. The current bill should be passed as is and done with. Then this Medicare bill and a Public Option bill can be passed as stand alone reconciliation bills because they can both be designed as deficit reduction bills. These actions are no longer optional if the Democrats want to maintain a decent congressional majority in the 2010 elections.
It appears that both the Democratic and Republican parties are wholly owned subsidiaries of the health insurance and Wall Street lobbies. In oder to move the country from its current position toward the center left, the Democrats must do things that make economic sense for the great majority. It is a matter of perception as opposed to anything else. The move to "help the poor" and to "extend health insurance to 30 million more" is perceived by the middle class as costing the middle class far too much of their "hard earned money". And this is because the "we care" nature of the left is at odds with the "stay out of my wallet" nature of the working class. We need not abandon the compassion, but the need for economic rationality and economic simplicity cannot be sidestepped. In the House version of HCR the cost of providing subsidies was undeniably on the rich. In the Senate version that is simply not the case in that the cost will be borne by the admittedly more well off segment of the producer class. The senate bill shifts the current cost for working poor health care from the true "middle class" to the upper middle class while providing better access to health care for the lower middle class and the poor. But there is no way to communicate that "lightening of load" on the average working people earning less than $250k because the people are simply not economically acute enough to understand it.
The burden of "free care" had been paid by the true middle class through much higher health insurance premiums as the cost of the "free care" was shifted to the insurance companies by the providers and then to employees and consumers in the form of high premiums (a sentence that long is NOT going to work). By subsidizing health insurance at the bottom as a substitute for "free care", the cost is shifted INSTEAD to whatever source will fund the subsidies. The House bill would have placed this source firmly on the rich. The Senate bill still moves it off of the primary middle and onto the more financially able people of the upper middle class and to a lesser extent onto the rich (the increase in MEDICARE tax for the high WAGE earners). But this "cost shift" away from the middle class majority and onto the upper class is either too complex or insufficient to produce support from the vast middle class.
There is no doubt that the Republicans are winning this war for the votes of the middle class and it is because the middle class still rejects the welfare queen and the left wing flower child images and because there is no way to convince the middle class that a tax on Cadillac insurance is going to pay for these subsidies. The middle class independents are simply not going to accept paying the cost of helping the poor while, at the same time, feeding the insurance companies. And that reaction isn't purely irrational.
The dysfunctional Senate simply destroyed Health Care Reform to the extent that it is going to be impossible to do enough arm waving to explain the economics of the cost shifts. And that is what must be fixed. We can do that ONLY by taking what is there, passing it in the House, and THEN using reconciliation to fix it. The very bold move of expanding the Medicare tax while providing tax relief to the true middle class is the best way to do that.