Should Medicare be Means-Tested, Quite Simply, Yes.

Should Medicare be means-tested? Quite simply, I say “yes.” This solution to the well-documented problem of out-of-control entitlement spending may not be “fair,” assuming that further changes are not made and that high-income people will continue to contribute disproportionately to the program, but government programs are never “fair.”

That’s why, when I’m presented with the opportunity to shrink a major government program, I can’t help myself but to say “yes.”

After all, today’s productive workers are footing the bill for Medicare and Social Security programs that are far beyond what will benefit them. That is not fair, either.According to a New York Times article outlining concerns about means-testing provisions contained in the 2003 expansion of Medicare, the two major objections to means-testing are (1) wealthy retirees will abandon the program and rely on private insurance instead, leaving poorer, sicker people in Medicare; and (2) higher premiums could drive people with higher incomes out of Medicare, thus making Medicare a welfare program rather than a universal social insurance program.

The second point is the key, because it follows directly from the first. Many supporters of means testing will quibble with these facts and attempt to gloss over the very real political issues associated with transforming Medicare into a welfare program, but I do not.

Calling Medicare “welfare” only articulates what has always been true about it: Any entitlement program that annually transfers $418 billion from one group of people to another (as Medicare did in 2006) must be considered “welfare.” The only difference is that one welfare program (the current version of Medicare) essentially buys the support of higher-income Americans by giving them access to basically the same welfare as low income recipients.

Taking money from productive taxpayers and arbitrarily allocating it to another group, no matter how wealthy, is still welfare. We see this regularly with “corporate welfare” that is given to multi-billion-dollar corporations. All of this is not to say that people who oppose Medicare means-testing are being disingenuous. They really do have the right to be afraid that if welfare were means-tested, political pressure might build to alter or even eliminate the program.

Of course, the end of Medicare in its current form is exactly what I (and presumably most advocates of limited government) want. Many conservatives and nearly all libertarians believe that Medicare is a deeply flawed program and even a regrettable mistake. That said, if we simply move forward under the assumption that some kind of health care program for seniors will always be with us, then means testing could help open the door for other reforms. These include the adoption of more market-based insurance mechanisms such as health savings accounts, which allow patients to plan for medical expenses and retirement as a whole, or some form of block-granting of Medicare money, as was done in 1996 with welfare reform.

Empowering patients would be a major positive step in reducing the burden of this program on taxpayers and, along with means-testing, would serve the very people who need help without shoe-horning everyone into the same unsustainable government program. Means testing may not be the silver bullet needed to put Medicare on a path to sustainability, but by altering political calculations, needed reforms may be in the offing.

Paul Gessing is president of the Rio Grande Foundation, a non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico, based on principles of limited government, economic freedom, and individual responsibility (www.riograndefoundation.org).

The full symposium document can be found at:http://www.americanexperiment.org/uploaded/files/should_medicare_be_meanstested.pdf