Means testing for Medicare

Let’s first quote Mark Thoma’s response to my column; it is indirectly a good summary of what I argue:

I believe the political argument that giving everyone a stake in the
program helps to preserve it has more validity than Tyler does, market
failures (some of which hit all income groups) probably play a larger
role in my thinking about government responses to the health care
problem than in his, and I have more confidence than Tyler that a
universal care system has the potential to lower costs.

And now here’s me:

…the idea of cutting some government transfers provokes protest in
some quarters. One major criticism is that programs for the poor alone
will not be well financed because poor people do not have much political
power. Thus, this idea goes, we should try to make transfer programs as
comprehensive as possible, so that every voter has a stake in the
program and will support more spending.

But even if this argument
holds true now, it may not be very persuasive when Medicare costs start
to push taxation levels above 50 percent. A more modest program, more
directly aimed at those who need it, might prove more sustainable in
the longer run.

Americans have supported the growth of many
programs aimed mainly at the poor. Both Medicaid and the Earned Income
Tax Credit have grown rapidly in size since their inception. The idea
of helping the poor and not having the government take over entire
economic sectors was the original motive behind welfare programs, in
any case.

Furthermore, the argument for comprehensive and
universal transfer programs does not meet the ideal of democratic
transparency. If taking care of the poor is the real value in welfare
programs, those programs should be sold as such to the electorate. We
shouldn’€™t give wealthier people benefits just to €œtrick€ them, for
selfish reasons, into voting for greater benefits for everyone, the
poor included.

Here is another point:

Advocates of health care reform tend to be long on ideas for expanding
care and access, but short on practical solutions for cost control. The
argument is often made that single-payer health care systems in Canada
or Europe are cheaper than health care in the United States. But
Medicare is already a single-payer plan, yet its costs are
unsustainable.

Note that I am calling for higher benefits for the poor and lower benefits for higher-income groups.  That’s not a popular stance, not even with egalitarians.  In fact I view the contemporary left as oddly ill-prepared on the health care issue.  Electorally speaking, the issue is fully 100 percent in their court (and they are used to pressing it aggressively), until of course they get their way and have to "meet payroll," so to speak.  One attitude is to cite Europe and think that the production possibilities frontier can expand under better management of the U.S. system, even as you cover an extra 40 million people.  Another attitude is to face the notion of trade-offs. 

Here is the full column.  (By the way, I think that HSAs are ineffective as health care reform and that the so-called "right" is floundering on
this issue, just to get in my equal opportunity smack on the blog.)

Addendum: You can make a good argument that (some) public health programs are the best health care investment of all; I just didn’t have enough space in the column to cover that issue.

Second addendum: Greg Mankiw didn’t read so closely.  It’s not "an income tax surcharge on sick, old people."  It’s a reallocation of benefits toward people of greater need.  Is any benefit less than infinity an "income tax surcharge"?

Third addendum: Here is Paul Krugman on the topic.