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An Unhealthy Step Backward

Pegging the cost of premiums to income would undermine the basic structure of the Medicare system.

October 19, 2003|Jacob S. Hacker and Theodore R. Marmor

If media reports are to be believed, "means-testing" Medicare is the newest Capitol Hill answer to the embattled program's troubles. According to the Washington Post and New York Times, Congress is considering tripling Medicare Part B premiums for the very wealthiest of beneficiaries, from about $700 a year to more than $2,100.

But even though raising Medicare premiums for the wealthiest beneficiaries might sound like an easy way to improve the program's finances -- and make it more egalitarian, to boot -- this type of reform would be a mistake.

There are numerous reasons to object -- including the fact that Medicare is already progressively funded, through both federal income taxes and payroll taxes that take more from high-income Americans than from the less affluent.

Another reason is that the core idea of social insurance is to pool risks. When Medicare was created, its architects explicitly designed the program so that it encompassed rich and poor and sick and well. Yet steep income-related premiums could undermine this broad risk pool and, with it, the widespread popular support that has sustained Medicare since its inception. Few seem to know it, but Medicare Part B (which covers doctors and lab tests and outpatient hospitalization among other things) is voluntary. If faced with stiff new premium hikes, healthy and wealthy senior citizens would suddenly have a reason to opt out of Part B, especially if conservatives and private insurers get their way and enact huge new tax breaks for IRA-like medical savings accounts.

For those who believe in the mission of social insurance, high principles are at stake here. Although the current proposals do not include "means-testing" as a way of limiting enrollment, they could open the door to it -- moving Medicare from a universal social insurance program toward a program exclusively for the needy.

The means-testers on the right have found a political wedge issue that splits Medicare advocates on the left. But those worried about low-income citizens should not fall into the trap. Nor should they be fooled into thinking that making well-to-do Medicare beneficiaries pay more is simply a sensible expression of decent priorities.

Given the current structure of the program, not to mention the current anti-social-insurance environment in Washington, this seemingly sensible step forward represents a fundamental step backward. It should be rejected, as it was by Medicare's founders nearly 40 years ago.

Jacob S. Hacker is a fellow at the New America Foundation and the author of "The Divided Welfare State" (Cambridge University Press, 2002). Theodore R. Marmor is the author of "The Politics of Medicare" (Aldine de Gruyter; 2nd edition, 2000). They both are professors at Yale University.

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