Dems, GOP … You do agree on Medicare

Marketplace Staff Oct 10, 2007

Dems, GOP … You do agree on Medicare

Marketplace Staff Oct 10, 2007


KAI RYSSDAL: They’d probably deny it if you asked them, but from time to time Democrats and Republicans actually agree. The common ground at the moment is what to do about Medicare.

Commentator David Frum says the two sides are saying the same things about how to solve the crisis — they just don’t realize it.

DAVID FRUM: The new prescription drug program is expected to cost about half-a-trillion dollars over its first decade. After that, it’s going to get really expensive.

To rein it in, the White House has proposed scaling back prescription drug benefits to seniors with incomes over $80,000, double the national median household income.

In other words: A means test.

All of Washington is now bracing for a good, destructive fight. But let’s go behind the scenes of this kabuki performance: The two sides actually agree on an important core principle… Confused? Don’t be distracted.

Historically, Democrats have opposed means-testing. They fear, as the saying goes, that programs for poor people become poor programs. They prefer to maintain the universality of programs while raising taxes on upper incomes to pay for them.

Republicans prefer to leave taxes where they are, and would rather reduce benefits for those who need them less.

From an economic point of view, there is not a lot of difference between raising taxes on a targeted population and cutting their benefits. In both cases, the program becomes a worse deal for the better off. The rest is all packaging.

Of course packaging matters, especially in Washington. But let’s look inside the box…

Programs like Social Security and Medicare were set up to transfer money from young to old in an era when there were lots of young and not so many old. Today, not only are the old becoming more numerous, they are also becoming much more affluent.

My American Enterprise Institute colleague, the late Herbert Stein, is the author of Stein’s law: “If something cannot go on forever, it will stop.”

Transferring money from the less affluent young to the more affluent old cannot go on forever. In its present form, it will stop. So means testing is coming.

And if the phrase conjures up grim images from the 1930s, the solution also will be classic Washington: We’ll return to that old policy — we’ll just have to develop some new euphemisms.

RYSSDAL: David Frum was once a speechwriter for President Bush. He’s now a resident scholar at the American Enterprise Institute.

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