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Means Testing Emerges as a Social Insurance Pill Democrats Could Swallow

It certainly looked yesterday as if the White House had dropped any notion of using an increase in the Medicare eligibility age as a bargaining chip in future negotiations on a grand bargain. While the White House has not ruled out increasing the age, some of its leading allies did, and Dick Durbin went so far as to say this was “no longer one of the items being considered by the White House.” But the Press Secretary said they would not engage in hypotheticals, seemingly undercutting that categorical.

My theory is that the insistent focus on just the eligibility age masks other areas of Medicare policy where Democrats may remain open to benefit cuts. In particular, means testing has become something where Democrats have some bend in them. The problem with means testing is that it already exists; higher-income seniors pay higher premiums already. And the threshold for “higher-income” in Medicare for means-testing is only $85,000. In addition, there are only so many of these high-income seniors; to actually get anything resembling real savings out, you would have to lower that threshold for “high income” well into the middle class. But since the President already put this on the table last year, making it the menu from which Republicans have used to extract concessions, Democrats have pronounced themselves open to it, while holding firm in other areas.

And even though Democrats are open to this one cost cutting move, they are saying no to increasing the eligibility age on Medicare; no to touching Social Security; and no to cutting into Medicaid programs that cover the poor and disabled. Many of these concerns were voiced directly by liberals to White House economic adviser Gene Sperling in a closed-door Senate Democratic lunch on Thursday.

Yet as an olive branch to Republicans, a number of Senate Democrats are ready to drop their long-standing opposition to Medicare means testing if it means the GOP will raise taxes on the top 2 percent of wage earners and if it’s part of a large, deficit reduction plan.

If you really want to means-test, you can do it much more efficiently on the tax side of the ledger. Tax progressively to fund Medicare, and then offer a universal benefit on the other side. A means test on the benefit side is more kludgy, especially because we’re talking about a period where almost everyone is retired.

Of course, Democrats are under tremendous Beltway pressure to stick it to the poor, the old and the sick. This Washington Post editorial is almost a caricature.

The devil’s in the details on all of these possibilities. But this all stems from the language of a “balanced” solution to deal with the deficit “crisis.” We know we have an unemployment crisis that has lingered for 5 years and is scheduled for at least 3 more, but it never gets discussed in those terms.

Image by Brooks Elliott under Creative Commons license.

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David Dayen

David Dayen