Means-testing the Medicare drug benefit

The Bush administration wants to restrain the growing costs of Medicare’s new prescription drug benefit by levying higher premiums and deductibles on upper-income enrollees. The plan is to raise fees on beneficiaries with incomes higher than about $80,000 a year.

Sen. John Ensign, R-Nev., is working to attach to upcoming legislation a “means-testing” provision that would save the government billions of dollars. In the past, similar proposals have been blocked by pro-welfare interest groups.

“You say it saves money and these people can afford it, but it also eats away at the incomes of seniors,” protests John Rother, policy director for the American Association of Retired Persons. “It erodes their sense of the reliability on these federal programs, and it certainly erodes political support.”

In response, Sen. Ensign declares, “Working couples with incomes over $160,000 should not be subsidized by retired firefighters or schoolteachers. They should pay more of their share.”

In truth, as The Washington Post pointed out this week, the part of Medicare that pays for outpatient care, including doctors’ fees, already imposes some means testing. Single seniors with incomes exceeding $82,000 and couples with incomes above $164,000 pay higher premiums on a sliding scale as their wealth rises. Those thresholds rise each year with inflation.

The original administration proposal — drafted as part of President Bush’s fiscal 2008 budget, but rejected by the Senate in March on a 52-44 vote — would have frozen those thresholds at $82,000 and $164,000, so that over time more seniors would have been affected by means-testing. The same thresholds would have applied to the new prescription drug benefit.

According to the White House budget office, that proposal would have saved more than $10 billion over five years. The higher fees would have hit only the richest 4.3 percent of seniors enrolled in the drug program, Sen. Ensign argues. The new, revised plan is likely to maintain the old inflation adjustments, Sen. Ensign said. But the senator is adamant that means testing must be added to the drug benefit, and he said he’s secured a strong White House commitment for the move.

The real objections of those now squawking that this “breaks the deal” under which the drug benefit was initially enacted is that means testing will tend to reveal to higher-earning taxpayers that this isn’t a self-paying, shared-risk “insurance program,” at all. Instead, Medicare will be revealed in its true form — income redistribution; federal welfare for the elderly.

As Amity Shlaes, former member of the editorial board of The Wall Street Journal and co-winner of the 2002 Frederic Bastiat Prize for free-market journalism, reveals in her current best-selling history of the Great Depression, “The Forgotten Man,” this is the way the leftists have been winning elections since Roosevelt’s great landslide of 1936: using taxes to shift wealth in ways that benefit and thus win the votes of specific interest groups — in this case, the elderly.

Any actuary can see that, within a few decades, the ballooning costs of meeting all the federal promises made to date will exceed any reasonable estimate of all tax collections.

You can start to see why some level subterfuge, some double-talk and sleight-of-hand, are now found to be in order on Capitol Hill.

Fortunately, at least one Democrat is now admitting the obvious. “Means testing is going to be a necessary part of all our entitlement programs,” says Rep. Jim Cooper, D-Tenn., who is seeking a new commission to tackle the issue. “We simply cannot afford the promises we’ve made.”