POLITICS FEBRUARY 22, 2013
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I have a big scoop, straight from an extremely reliable White House source: The Obama Administration has endorsed means-testing of Medicare.
For some time now, Republicans have been saying that wealthy seniors should pay more for Medicare. "You know Warren Buffett's always complaining about not paying enough taxes," Senate Minority Leader Mitch McConnell said last month on "Meet the Press." "And what I'm complaining about is we're paying for his Medicare. We ought not to be providing these kinds of benefits for millionaires and billionaires." New York Times columnist David Brooks seconded the plea in the New York Times today. Apparently Obama has been listening. According to my administration source, the president would support means-testing.
Huge news! And who was my reliable source? The White House website. See, this isn't a new proposal. It's part of last year's budget. And the administration has reaffirmed, as recently as yesterday, that the budget offers remain valid in discussions over how to replace the budget sequestration cuts set to take effect on March 1.
Here's the actual language of the administration’s proposal, from page 35 of the budget.
Increase Income-Related Premiums Under Medicare Parts B and D. Under Medicare Parts B and D, certain beneficiaries pay higher premiums as a result of their higher levels of income. Beginning in 2017, the Administration proposes to increase income-related premiums under Medicare Parts B and D by 15 percent and maintain the income thresholds associated with income-related premiums until 25 percent of beneficiaries under Parts B and D are subject to these premiums. This will help improve the financial stability of the Medicare program by reducing the Federal subsidy of Medicare costs for those beneficiaries who can most afford them. This proposal will save approximately $28 billion over 10 years.
Allow me to translate: The administration would take two steps. It would ask wealthy seniors to pay higher premiums than they do now. Then it would freeze the income threshold at which those higher premiums kick in. Over time, as incomes rose naturally, more and more seniors would end up paying the higher premiums—until, under the administration's proposal, one-quarter of all seniors were paying the surcharge. If you do the math, as analysts at the Kaiser Family Foundation have, you'll see that it would eventually mean every senior making more than $47,000 a year in today's dollars will be paying higher premiums. The change would raise only $28 billion for the next ten years. But it would probably save much more—over $100 billion—in the following decade.
I don't mean to pick on this one example. I also don't mean to pick on Brooks, who has already taken a lot of grief today from Steve Benen, Jonathan Chait, and Kevin Drum. In fact, Brooks, to his credit, has already appended a correction to his column and clarified, in a conversation with Ezra Klein, that he had in mind a different sort of mean-testing, in which wealthy seniors would actually get less insurance. (That's a topic for another time.)
But the failure to recognize, or at least acknowledge, that the administration has already proposed serious means-testing is widespread in Washington—and emblematic of a broader truth in the budget debate. The administration has proposed serious compromises, the kind that makes liberals like me squeamish. And while plenty of Democrats don’t like them, plenty would go along with them, if—and only if—they are part of a deal in which Republicans are making equal concessions. But Republicans aren't doing that. They oppose raising any more revenue, and they want to replace existing cuts to the Defense Department with yet more cuts to social programs. No deal is possible until Republican behavior changes. And that behavior won’t change as long as it escapes notice.
12 comments
This isn't about whether Obama has a "plan", it's about a "plan" that doesn't fit Brooks' priorities. Brooks' priorities are stated in his answer to Klein's final question: "Achieve a floor [on stabilizing debt] and then focus on growth and equity." Of course, his priorities are the opposite of those stated by most economists, their first priority being to restore growth. I suspect that his real first priority is to reduce the size of government, achieved by setting the "floor" as he calls it, fearing that restoring economic growth first would jeopardize his first priority; indeed, a growing economy might reveal we don't have a debt issue at all, and conservatives will have missed their opportunity to use the "crisis" over debt to cut the size of government.
- rayward
February 22, 2013 at 3:30pm
As for means testing (a similar but narrower issue), Brooks' preference (reducing benefits rather than increasing premiums for higher income beneficiaries) reveals his real priority regarding Medicare: shift it to the private sector (which would have to make up for the reduction in Medicare benefits). I've commented before that progressives should develop and promote their own plan for means testing (and not just for Medicare); otherwise, I fear some real or imagined crisis could result in the adoption of the conservatives' plan for means testing. [Thanks for the link to Kaiser, but it doesn't work. I'm very interested in reading their analysis.]
- rayward
February 22, 2013 at 3:38pm
The link will take you to Kaiser, then click Medicare and that will take you to the series of Medicare reports, etc. prepared by Kaiser.
- rayward
February 23, 2013 at 8:08am
SHOW 1 RESPONSE
Thank you again to both Jons, Cohn and Chait. You both show once again Brooks is either a liar or an idiot.
- tmmats
February 22, 2013 at 3:59pm
Ray hits on precisely the most important point in all this that JC treated as a separate topic: Reducing gov-provided benefits to the well off will not grow the size of the government. While increasing premiums on the well off will increase the size of government. These are not the same thing, JC. McConnell's position IS NOT the same as Obama's position.
- seattleeng
February 22, 2013 at 4:48pm
So the administration supports forcing the wealthy to pay an extra 2-3% of their earnings above $250k unlimited. But will means test the benefit they are supposedly paying to get. So the Administration is forcing people to pay for medical insurance and then making them pay more when they go to use it. And no one sees a problem with this?
- CRS9TNR
February 22, 2013 at 5:57pm
We have $16 trillion in debt. I can't imagine how it is possible to pay that off, rebuild the economy and run the government. I see an advantage in higher taxes no matter what it is for. On the other hand, there's supposed to be something like $5 trillion sitting on the sidelines, which I assume was an after tax accumulation of funds that suggest low taxes did not result in increased economic activity.
- Nusholtz
February 22, 2013 at 8:26pm
SHOW 1 RESPONSE
David Brooks is both a liar and an idiot. Speaking of idiocy, there is the idiotic repetition, ad nauseum, of the need to "reduce the size of government" as if this were self-evident. Actually, it is both backward and ass-backward. Government financing, transfer payments, are not part of the "size of government" as they do not represent a government service or expenditure. It is of no importance whatsoever whether financing for an activity is public or private so long as we adopt the most efficient and equitable means and in neither case is the "size of government" affected except as to the relatively de minimis costs of administration (a mere fraction of what is spent by the private sector for analogous functions). That way, we have the lowest overall share of GDP devoted to the particular service. In the case of retirement, education, and especially in the case of medical care, government financing is far preferable, both more efficient and more equitable. If private medical costs over the last 40 years had increased at only the rate of Medicare cost increases, the economy would now be saving roughly a trillion dollars a year. Moreover, in an advanced industrial economy, growth is not supply-constrained -- we always have idle capacity -- but demand-constrained. The private sector is not able to generate sufficient demand fully to employ productive resources, labor or capital. Therefore, the more efficient our economy becomes through technological innovation, the MORE government has to grow, the more government has to spend, in order to maintain output at or near its maximum. Thus, for three reasons, efficiency, equity, and aggregate demand, we need more government, not less. Does that stop the idiotic insistence that we shrink government? No, it does not. The ignorant and the ideological fanatics will repeat the same idiocy forever, regardless of the economic reality.
- roidubouloi
February 22, 2013 at 9:36pm
Roid, the size of government needs to track wages. Wages do not track GDP, especially as companies do more global selling. If government size tracks GDP, then taxes necessarily go up every year until you hit 100% tax rate. Wages are sitting at 44% of GDP, in 2001 they were 48%, and in 1970 they were 53%. See FRED WASCUR/GDP. /// Another way to look at this is: If our gov is a fixed size of GDP, and Apple sells another $100B in iphones this year over last, what on earth would require us to grow the fed gov by 20%, or $20B? Does it cost gov $20B when apple sells an extra $100B in iphones? No, it does not. So why assert it does?
- seattleeng
February 23, 2013 at 1:58am
Question--Is Warren Buffett actually *on* Medicare? He doesn't have to sign up, and in fact it makes no sense for him to even have health insurance.
- colablease
February 23, 2013 at 7:43pm
This is for Mr. Hughes from a long time TNR subscriber: So, Mr. Hughes are you paying attention? You are ruining an important American publication. I have two issues now of the NEW New Republic. Heavy on graphics light on content. And you did not publishing the most import example of long form journalism, Steven Brill's article on health care. Get help. You are in over you head, despite having all that Face Book money. For crying out loud you just got spanked by TIME magazine. Have you no shame.
- mjhill
February 23, 2013 at 11:03pm
Sorry, seattle, but that makes no sense whatsoever. You persist in thinking that the US economy is a giant household and what is paid in taxes disappears. If the government provides needed services that individuals would otherwise have to provide for themselves -- but does it more efficiently and equitably -- then you pay more in taxes, let's say for healthcare, but then you don't have to pay premiums to insurers. What you pay to government doesn't just vanish, it substitutes for other goods. There is no fundamental difference between government spending and private spending except as to the choice and allocation of goods and who makes the decision. Therefore, there is no particular size of government that is better than any other size. It is simply a question of which goods we want. If we think we need an aircraft carrier, government has to do it. If we want universal health care, government has to do it. Yes, private choice is itself a desirable good, but not without limit and not when it prevents us from taking care of more urgent needs than whether you buy an i-phone. You think the government is financed by taxes, but it isn't. The government commands whatever share of output it wants and then private incomes are used to buy up the rest. The only reason for taxes is so that we don't end up with too much money in the economy. This is not medieval England. The economy does not function like a fiefdom where the lord takes your corn for his own consumption. Apple has zero to do with anything. Our economy does not generate sufficient private demand to use all productive resources. Therefore, if we are not going to have idle labor and capital -- pure waste, never recouped -- government needs to employ those resources, preferably by spending on public investment in physical infrastructure, badly needed, and education, badly needed.
- roidubouloi
February 24, 2013 at 7:41pm