Looks like Democrats’ gift horse on Medicare, if it is anything at all which is far from a given, is going to be “means testing”:
Rep. Emanuel Cleaver (D-Mo.) on Friday proposed means testing Medicare benefits as a way to reduce the deficit, an indication that Democrats may be warming to the idea as a way to compromise with Republicans on the so-called fiscal cliff.
Cleaver, the influential chairman of the Congressional Black Caucus, suggested Friday that more aggressive means testing would be a good alternative to cutting program benefits for seniors.
“I think most rational people, including Democrats, agree we have to make some cuts and deal with Medicare,” Cleaver said on MSNBC’s Morning Joe.
“Let’s have some means testing because I don’t think that cutting benefits at this time is going to go over well. We can do means testing and reduce the payments [to the wealthy],” Cleaver said.
As of late November, Obama was non-commital on means testing. Dick Durbin and Max Baucus have come out in favor of means testing.
By no means is means testing a purely Democratic concept. John Boehner is for it and it was part of his counter-offer to Obama on the fiscal cliff. Means testing is part of various premium support proposals proposed by Republicans.
But it’s just the type of hidden implicit tax which reduces the incentive for people to work more, a concept we have discussed many times as the implicit marginal rate.
That implicit marginal rate makes it economically irrational for people making $30,000 per year to increase their earned income to $50,000, because for every dollar they earn they lose more than one dollar in government benefits through direct payments and tax breaks.
If the test is set for the truly rich (way,way above Obama’s $250,000 threshold) then too few people will be affected to make much difference on total Medicare costs. If you drop the threshold to Obama’s definition of rich, you are hitting professionals and small businesses, who already appear headed for higher marginal rates and/or caps on deductions which will push their implicit marginal rates through the roof.
Even then, to make a big difference in total cost, you have to move beyond the hated top 2%.
If means testing turns into an asset test, it punishes savers over spenders. This is a concept any parent applying for college financial aid understands. Parents who have no savings because they spent everything and lived the high life get help, while parents of similar income history who saved pay full freight and see their savings dwindled without the “benefit” of those years of big living.
Means testing sounds good in theory, but it’s a gift horse which deserves a check-up.
It’s bipartisan, and it doesn’t address the heart of the problem. Sounds like a Washington, D.C., plan.
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Comments
I don’t think anyone is against means testing.
The real problem is caving Republicans– there is no “mean testiculating.” They don’t have the balls to stand up to the bullies and say enough is enough.
Hey! How about those parents who fought tooth and nail to keep things afloat? I sure don’t understand this “High Life” you speak of.
“parents of similar income history”
I could support a rational form of means testing regarding both Social Security and Medicare but along with such support, I would demand simplification on how health care in general is delivered. You never hear the word “simplification” from any government talking head because if they were to implement a simplified process, a lot of money suddenly wouldn’t be available to their “buddies.”
Over my working career, I saved employers tens of millions of dollars and simplification of process was one of the major ingredients.
But government is not a “bottom line” entity but more like a perpetual fat hog that just consumes everything and produces nothing.
Someday I’ll y’awl how I really feel…
The problem I’ve always had with means testing is that it reduces my post retirement standard of living much closer to that of a parasite because I had the foresight to defer goodies today to save for my retirement tomorrow. It makes any of the crappy Medicare and Social Security old age payroll taxes just another redistributive tax. So I pay the payroll taxes and get nothing at all out the other end? (Of course these programs always were ponzi schemes and coming at the tail end of the baby boom, I knew I’d be hosed, but the fair way of wrapping them up is through a Chilean-like privatization and transition to a system of individual savings accounts – not this arbitrary change to benefits)
Message to savers: Do not attempt to fund your retirement, you’ll get no benefit from the “universal” income security programs and your reward for your discipline and self-control will be to be reduced to the same standard of living as a parasite in your twilight years.
Wow. I think I might have to have dinner with John Galt tonight and discuss my options.
Just thinking out loud here, but if you means test all government programs doesn’t that effectively divide the population into two distinct groups: those who contribute and those who take. Gee, who would benefit from that?
Maybe they should start means testing at the post office. Worker bees pay market rate and parasites send mail for next to nothing. Of course, this only works if the parasites know how to write…
We already have that – You should see the numbers on how much “free” mail service that government entities receive. It’s about the only time I feel sorry for the postal service. How do you even start to balance a budget when you’re largest obligation get’s their work for pennies on the dollar?
It seems to me that the first step isn’t means testing but rather uncoupling of Social Security and Medicare. Giving people who currently have insurance that meets their needs and that they are happy with and don’t want Medicare the option of either not signing up or delaying signing up for several years. It seems there would be some decent cost savings in administrative hassle alone.
Why not come right out and admit that some Republicans are advocating communism: “From each according to his ability. To each according to his need” –Karl Marx?
The more people whine about what they paid in the the less likely it is the system will be properly fixed.
Medicare was ill designed from the start. It was enacted under some assumptions that were proven false within a decade. One was that the baby boomers would be as fecund as their parents, thus keeping the ratio of workers to retirees high. Another was that medical costs would remain stable or perhaps even be reduced by technology. Instead technology has caused costs to skyrocket. It also failed to take into account human behavior. Not only does Medicare empower hypochondria but the psychology of the elderly made demagoguery on entitlements inevitable. That is because no matter how many figures are to the left of the decimal place in their net worth, as they age most people begin to harbor often irrational fears of becoming impoverished.