Is it a Revolution to Talk About Medicare Means Testing When Medicare is Already Means Tested?


Congressional Democrats have made it clear that they are uninterested in altering Medicare's benefits in order to restrain the program's costs as part of a fiscal cliff deal. But several Democrats have reportedly signalled a willingness to consider means testing the program, reports The Hill:

Sens. Dick Durbin (D-Ill.), Max Baucus (D-Mont.) and Claire McCaskill (D-Mo.) have all expressed a recent openness to expand means testing for the sake of deficit reduction. And in the lower chamber, Rep. Emanuel Cleaver (D-Mo.), the chairman of the Congressional Black Caucus, sounded a similar note this month."I think most rational people, including Democrats, agree we have to make some cuts and deal with Medicare," Cleaver said Dec. 7 on MSNBC.

"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 on Thursday emphasized that he's "not excited" about hiking Medicare rates on anybody, but said he could support such a plan – "not joyfully" – if it meant preserving benefits for lower-income seniors. "It's revolutionary to have Democrats even talk about means testing," he said.

It's really not. Medicare is already means-tested, thanks in part to policies put in place by the Obama administration requiring well off seniors to pay higher monthly premiums. And as a savings mechanism, most likely means testing schemes leave much to be desired.

The politically achievable sort of means testing — cutting benefits to the wealthiest of Medicare earners — just wouldn't save that much money. Meanwhile, as Andrew Biggs pointed out last year in an essay for National Affairs, the most commonly discussed form of entitlement means testing, which bases benefits on a seniors' current income, would actually produce significant disincentives for saving and investment.

That may not matter much given that House Democratic leadership opposes any entitlement changes entirely. Back to The Hill:

House Minority Leader Nancy Pelosi could also prove an obstacle to new means testing in a fiscal-cliff bill. On Thursday, the California Democrat argued that entitlement reform should not be a part of the lame-duck negotiations. She's calling instead for Congress to tackle those issues next year as part of a broader tax-and-spending package. "That should be left to next year," she said. "That's a longer conversation about where we go [on entitlements]."

The time to reform entitlements is…later!