For Medicare, Means Testing Means Trouble

July 8, 2013

Medicare, as well as Social Security and many other programs, is in jeopardy in the current budget standoff in Washington. In his budget proposals unveiled in April, aimed at reaching a “grand bargain” with Republicans and ending the across-the-board “sequester” cuts, President Obama not only offered to cut Social Security by rigging the cost-of-living formula. He also offered cuts to Medicare through “means testing.”

Under “means testing”, eligibility for coverage under a benefits program, or perhaps the amount of coverage a person receives, is determined by income. When Social Security was enacted in 1935, President Roosevelt and his New Deal administration fought successfully for no means testing in the basic Social Security retirement benefit program (now known as Old Age and Survivors Insurance, OASI.) Although earnings are a factor in calculating a person’s benefits, everyone who pays into Social Security is also eligible for its benefits.

The Congressional Republicans with whom President Obama is seeking “compromise” like the idea of means testing, but they propose something even worse. The Republican-controlled House of Representatives has voted for a plan put forth by Congressman Paul Ryan (R-WI), chair of the House Budget Committee and 2012 Republican nominee for vice president, that would end Medicare as we know it. The Ryan plan would replace Medicare with a voucher with which seniors would be expected to buy their own insurance – a voucher that’s designed to not keep up with medical inflation.


Medicare and Social Security are both social insurance programs, benefiting a broad section of society, including the upper middle class and even the rich. The philosophy behind social insurance is social solidarity “We’re all in this together.”  Therefore we all pay into a program that protects each of us from risks we all face – in the case of Social Security, the need for income in old age.

Means testing is contrary to the idea of social insurance, and adding means testing to a program tends to weaken its broad support. Means-tested programs are seen as welfare, something that’s only for poor people. For those who promote a philosophy of greed, the beneficiaries of means-tested programs are more easily stigmatized as “takers” and “moochers” (as we heard during the last election.)

For the same reason Social Security isn’t means-tested, when Medicare was established in 1965, President Johnson and his advisors kept out means testing. Medicare is social insurance for all elderly Americans, not just the poor, and it is widely popular because it helps just about everyone. The Johnson administration did establish a means-tested healthcare program for the poor, Medicaid, and some low-income seniors need both Medicare and Medicaid to meet their healthcare costs.

Political and corporate opponents of Medicare (the same people who are against Social Security) have long advocated means testing, and really for the same reason the programs’ founders and supporters oppose means testing. The anti-Social Security, anti-Medicare crowd know that means testing will weaken public support for the programs and make it easier to kill them off entirely. In other words, means testing is a divide-and-conquer tactic.

Some means testing has already been introduced into Medicare. Since 2007, premiums for Medicare Part B (physician and outpatient services) has been means-tested for beneficiaries with incomes over $85,000 (individual) and $170,000 (couple). People above those thresholds pay premiums that are two to three times the standard premium of $104.90. These income thresholds are frozen under current law until 2019. That means that, over time, they’ll impact more people, and it’s expected that by 2019 some 10 percent of beneficiaries – 5.5 million people – will be paying higher premiums. Medicare Part D, the prescription drug benefits, is also means-tested with the same thresholds as Part B.

The National Committee to Preserve Social Security and Medicare (NCPSSM) – a strong advocacy group for these programs since 1982 – opposes any additional means testing of Medicare. NCPSSM warns, “Additional means testing would undermine the social insurance nature of Medicare and ultimately raise costs for middle and lower-income seniors who depend on it. If mean-testing results in Medicare becoming increasingly unfair to higher-income beneficiaries, they may opt out and purchase their own policy on the private market. The departure of higher-income beneficiaries, who tend to be younger and healthier, would increase overall costs and reduce public support for the program.”

NCPSSM also points out that “Medicare spending per enrollee has grown more slowly than private health insurance spending”, and that the real problem is the increase in general healthcare inflation. Major reforms are needed in the entire healthcare system to eliminate waste, misdirected resources, and overcharging.

Cutting Medicare or making it more expensive for seniors does nothing to fix those problems. As Senator Bernie Sanders (I-VT) has said, “The bottom line is that we need a revolution in primary health care services and accessibility. Providing all Americans access to health care when they need it will keep people healthier and substantially reduce health care costs.”


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