• Readers’ questions on means testing Medicare and state exchanges

    Here are two:

    1. What would be the economic effects of adding more means testing to Medicare?
    2. What are the biggest problems the administration will face with all the different state exchanges?

    A start — but only that — to an answer to 1 is in the recent Urban Institute publication that includes a scoring of additional means testing of Medicare for 65 and 66 year olds. One thing to think about their proposal is whether it would be appropriate to include an asset test for retirees. After all, a very wealthy retiree could choose to draw a low income, thereby qualifying for subsidies. Does that make sense?

    The second question is also very good, but I have even less of an answer than my meager one to the first, particularly if I interpret it as “what are the technical problems?” I don’t know the answer to that one. I do anticipate the administration will have substantial political problems. That is, there will be some technical glitches, areas of confusion, and associated disruption in some states. Count on it. Then count on those, however insignificant (if they are, which they  may not be) to be dramatically amplified by those who wish to paint the whole enterprise as a boondoggle (which it may be, but not necessarily).

    Early 2014 will not be an easy time for health reform, just as early 2006 was not an easy time for Medicare Part D, which is far simpler to administer.

    Anybody have better answers to these or care to pose other questions? Comment away.


    • I believe they are approaching things from the wrong direction. Their attempt is to reduce costs (or increase revenues) which is good for what appears to be their purposes, but a reduction of costs alone does little in the long run. What is needed is a reduction in the rate of growth and this type of solution likely has little effect in accomplishing that goal.

    • I think the answer to the exchange problem is to get the insurance companies involved. If there is one thing they protect, it is market share. No one will want to be left out. Dominant players will want to stay dominant. Besides, if they want to meet MLR requirements, they will want to eliminate brokers as much as possible. The down side to this is that they will likely push for less transparent exchanges. Political actors will try to sabotage the exchanges. But, in the states that are receptive, I predict they will be very popular since it will be easy (I hope) to do real apples to apples comparison while shopping on line. Consumers in other states will want that also. Imagine if you knew your neighbor can buy books on Amazon and you cannot.


      • “No one will want to be left out.”

        That is right and they will all function under the same rules provided. That is how a country can develop a Yugo. Industry works on profit margins so they can compete and make a profit while working under the same rules, but the product can be garbage.

    • In regard to 1: An interesting NBER working paper by Hult and Philipson on this topic (http://www.nber.org/papers/w18571) considers the effects of means testings (among other reforms) on technology development. Counter-intuitively, the authors find means testing may increase long-run Medicare spending through increased demand for medical innovation.

    • Again, not problems with marketplaces in general, but state to state. I am also not looking at the out years, just first few:

      1) Subsidy bands, eligibility and churning. How the difft agencies–state and federal–will communicate income changes will depend on state cooperation. I sense the state agency folks–even in the hardcore rejectionist states, want to play ball (they have good hearts, work hard, and see folks as individuals). The oped writers and pols, who play spoiler and pull the levers, get the spotlight however. We’ll see.

      2) Access and providers, but with a focus on Medicaid. By definition, any state to state problem has to begin with Medicaid. AK, Utah, Indiana, and Mass good examples. If I have my math right, the feds have 46 other children to suckle. Any giveaway violates rules of fair play. The line between incentive and bribe thin.

      3) Start up costs and funding. No money = no navigators, no training, no enrollment, and usuable gateway points. State preferences, expecially if feds choke funds, will play a role.


    • If Medicare “means testing” simply means that wealthy retirees pay higher Part-B and D premiums, then I would think that the economic effects would be positive overall. But if it gets implemented as it is in Medicaid — where you’re not even eligible until you’ve exhausted essentially all of your assets — then the economic effects will be quite adverse for a sizeable segment of the retiree population. Turn it into a “welfare program” and it will get ever more penurious, as political support for it dries up.

    • Dr Robert Evans of Canada solved this 20 years ago, and Bobby G has the right notion…

      give the benefit to everyone, and pay for it with progressive taxes.

      That way, you do not need elaborate income or asset examination at the time of enrollment………..because those taxpayers with more money have already paid more into the system, silently, every year.

      Bob Hertz, The Health Care Crusade

      • Bob, I have no problem with Canadians choosing the system they wish even though I wouldn’t want it for the US. I’d like to be able to choose private care rather than a public system for certain problems and wouldn’t want the government interfering with my ability to spend my own money the way I feel it should be spent. The Canadian government doesn’t like the idea of a two tiered system so it has been trying to stop any privatization of health care.

        As we all know this was litigated in Quebec Province: Chaoulli v Quebec.

        The ruling by Chief Justice Beverly Mclachlin stated “Access to a waiting list is not access to health care. As we noted above, there is unchallenged evidence that in some serious cases, patients die as a result of waiting lists for public health care.” … ” interferes with life and security of the person “

    • I just published an article that looked into the impact of more means-testing in Medicare on seniors.

    • What would be the economic effects of adding more means testing to Medicare?

      If you are not careful in how you means test Medicare you could encourage people to quit working earlier than they would otherwise.