Medicare, Drugs, and the Rich
House and Senate conferees are trying to craft a compromise on their conflicting plans to add a prescription-drug benefit to Medicare. They are reportedly considering a new-old idea to shore up the program's finances: require wealthier beneficiaries to pay more in insurance premiums for their doctor visits.
It's new because it's not part of either the House or Senate bills that passed earlier last summer. It's old because it's been tried before and found to be a political hot potato.
The problem conferees face is gargantuan. On the one hand, the White House and many elderly voters are clamoring for a drug benefit. On the other, without some change, the new benefit would be tacked onto a Medicare program that already faces a grim financial future - with no new funding except to take more out of general revenues paid for by income taxes.
"Means testing," in this case the bureaucratic name for the idea that the wealthier ought to pay more, comes up every time Medicare reform is under discussion. In theory, it's one of the best steps Congress could take to shore up the popular program. But it was rejected in the past on the grounds that it would move Medicare away from the concept of a universal healthcare program for those over 65 - in which everyone pays and receives the benefits they need - toward a welfare program for the elderly poor. Critics worry this step would undermine public support for the program.
One way to prevent that is to subject premiums, but not benefits, to a means test. That's the idea currently on the table. Everyone would still get the same benefit, but wealthier beneficiaries would pay higher premiums for Part B medical insurance, the voluntary portion of Medicare that pays for doctor visits, outpatient care, and some home healthcare. They already pay more for Part A hospital insurance through payroll taxes.
AARP policy director John Rother suggests such means-testing of premiums would garner public acceptance only if it met certain conditions: It would have to kick in at a relatively high income level, say $100,000; it would have to be tied directly to a new benefit, such as prescriptions; and it would need a simple collection system - for example, an extra line on the 1040 tax form. Whether Congress can agree on such conditions is uncertain.
A more difficult problem is how to discourage potential overuse of the drug benefit. In part, that will require serious changes in how Americans approach preventive healthcare and health maintenance.
The comprehensive solution to the entire Medicare puzzle is to change the program to one resembling the federal-employee healthcare program: Washington would subsidize premiums, and seniors could choose the program they prefer. This would create a more flexible program, able to adapt to changing healthcare needs.
In the meantime, however, Congress must find whatever ways it can to pay for the current Medicare program - especially if it's going to add a costly new benefit. Asking wealthier seniors to pay higher Part B premiums seems a logical and fair step.