February 20, 2013
BOTH WOULD BE BETTER, BUT A MIX IS A START:
Old and Rich? Less Help for You (YUVAL LEVIN, February 19, 2013, NY Times)
Posted by Orrin Judd at February 20, 2013 10:44 AMBoth sides should agree at least to spend less money on the wealthy -- via means testing. It may surprise some Americans to learn that the United States spends quite a lot on the affluent, especially through the entitlement programs at the heart of the budget fight: Social Security and Medicare. Both programs move money from relatively poorer young people to relatively richer old people, and they are growing ever more expensive. Means-testing -- allocating benefits according to need -- might offer both sides a way out.The approach would require agreement on two principles. First, give less to the wealthy rather than take more from them. For Medicare, such means testing would mean giving prosperous older people fewer benefits rather than charging them higher premiums for the same benefits other elderly Americans get. Charging wealthy older Americans more, and then giving money back to them through an expensive and inefficient benefit, makes no sense. The goal should be to better target public benefits to those who need them.Second, assess wealth based on lifetime earnings rather than on income or assets -- the latter would discourage saving, and working past retirement age, as well as invite tax evasion and benefits fraud, as demonstrated by the abuse of Medicaid's long-term care benefit. Basing benefits on lifetime earnings, on the other hand, would encourage saving over time, would be far more difficult to game and, provided it was based on pre-retirement earnings, would not discourage older Americans who are able to work from continuing to do so.While many liberals oppose raising the Medicare age of eligibility, doing so on a means-tested basis would address most of their concerns while saving lots of money. For older people with the greatest lifetime earnings, the eligibility age could gradually rise to 70 from 65.