McCain Would Increase Medicare Part D Premiums

Oie_399px_john_mccain_mackinac_islaAs 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.

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4 replies »

  1. botetourt has it right. Why do we continue to look for more revenue streams without addressing cost controls? Does anyone think this is sustainable? Why should richer people pay more to prop up a system that is just a money sucking vacuum. Where is Tom’s “demands of justice” in that? I agree with the concept of means testing (with a cap) but if we can agree it would work with Medicare why can’t we agree it would be done more efficiently and more privately at the income tax level?

  2. Means testing is not inappropriate–but how about insisting on a competitive bid process for the Part D formulary like every other insurance company before passing more costs onto the Part D recipients?

  3. Philosophically, I agree, Part D premiums should rise. Practically, are we supposed to give our tax returns and balance sheets to Medicare and SS? I don’t think so. How would this work?
    A more important issue I’ve blogged on are the soaring co-pays being charged on higher tier drugs as recently reported by nytimes.com. While this applies mostly to the privately insured, it’s also important to Medicare.

  4. > Means testing would appear to me to be
    > the easiest way to reduce the cost of
    > these programs and do the least harm.
    Means testing will shift costs, but it will not reduce them.
    It seems to me you’re arguing for a French/German style system of private insurance companies with premiums for the less fortunate being paid out of taxes. This arrangement has the virtue of clearly separating the demands of justice from the demands of charity.