Posting date: December 8, 2004

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Health Affairs, 10.1377/hlthaff.w4.546
Copyright © 2004 by Project HOPE

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Means-Testing In Medicare

¹ Mark Pauly is the Bendheim Professor; a professor of health care systems, business and public policy, insurance and risk management, and economics; and chair of the Health Care Systems Department at the Wharton School, University of Pennsylvania, in Philadelphia.

^*Corresponding author.

Abstract

The Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003 introduces means-testing of premiums and benefits in two ways. It will means-test the Part B premium, setting higher premiums for better-off seniors. More importantly, it will offer much more generous drug benefits, at low or zero premiums, to lower-income beneficiaries. This paper argues that additional means-testing could improve Medicare’s financial picture. It proposes a strategy in which future Medicare beneficiaries with higher incomes will pay for cost-increasing but quality-improving new technology, possibly with prefunding that begins before retirement.

Key Words: Consumer Issues, Health Reform, Legal/Regulatory Issues, Medicare, Health Spending, Politics

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