As part of his broader speech on economic issues John McCain last week called for high income seniors to pay more for their D drug coverage. Couples making more than $160,000 a year would pay higher premiums.
This is a good idea and a down payment on something I believe is ultimately unavoidable– means testing for entitlement programs.
It isn’t news that the cost of senior programs –Medicare, Social Security, and Medicaid–are not sustainable. The current federal cost for these three programs now tops $27,000 a year for each senior over the age of 65. That number increased 24% since 2000– after adjusting for inflation.
Part D alone added $8 trillion to Medicare’s 75-year unfunded
liability –twice the unfunded liability of the entire Social Security
system and a fourth of Medicare’s overall unfunded liability.
The cost of these entitlement programs is unsustainable in the long-term.
Some believe that a better use of the market will help us control
costs. Some believe that more use of the government is needed to
control costs. Either way, market competition or government controls,
means paying out less to someone.
Many people believe means testing–the richer getting less or paying
more for these benefits–is bad policy because it has the potential of
creating a two-tiered system. They worry that if the more wealthy don’t
share in these generous benefits we will lose important political
support for these entitlement programs and the less well off will
suffer. That is possible.
But when the day is done, how are we going to control these costs
and just who is it that will get less? Will it be seniors, drug
companies, insurers, doctors, hospitals? Well likely all of these. But
why not the better off getting less help as well?
Means testing would appear to me to be the easiest way to reduce the cost of these programs and do the least harm.
McCain is on the right track here and I hope he takes means testing even further.