Medicare Means Testing

Nothing in this world is free. Everything costs something. Especially things that are necessary for the sustenance of life like healthcare. However, not everyone possesses the means of paying for things like that, even if they are vital to one’s health. That is why our nation provides financial assistance for people of limited means. They get the healthcare they need to prevent the spreading of disease and injury, and the healthcare is paid for. However, one must first qualify for this assistance. Because if you are capable of paying for something on your own, why would the government give you assistance in paying for it?

This is why there are means tests for assistance and relief programs. A means test is essentially an evaluation of one’s household income to determine if they qualify for financial assistance. For example, colleges may offer means in the form of scholarships to students who qualify to attend the school but would not be able to afford the tuition.

President Johnson did not intend for Medicare to be an assistance program. It is meant to be an entitlement program. If you had been paying social security taxes for forty quarters by working full time in the U.S., you are legally entitled to Medicare benefits at the age of sixty-five. However, it is predicted that by 2030, approximately 81 million beneficiaries will be enrolled in Medicare, therefore depleting the government’s means of providing benefits. To increase funding, the Medicare Modernization Act introduced means testing to beneficiaries as a way to charge more to those who can “afford it”.

Means testing would do a world of good. Giving benefits only to those who need it the most would greatly reduce entitlement spending. This would save a significant amount of money by not paying out benefits to wealthy Americans. At the same time, Medicare and Social Security will still be able to serve their purpose of providing a safety net to the elderly.

However, this could also lead to serious drawbacks on those who work the hardest and save the most in order to earn their wealth. Means-testing could ultimately lead to a negative impact on how Americans make their financial decisions. It could potentially lead to higher taxes, depressing economic activity and discouraging good behavior.

On paper, means testing can provide significant budgetary savings while sparing the poor from benefit reductions. In practice, however, they can generate disincentives to work and to save, and do more harm than good. The challenge for today's policymakers is to craft policies that make the most of the benefits of means-testing while avoiding its worst consequences.

If you have questions or are confused if you are liable for any of these costs, than book a meeting with an agent. The goal is to lower your potential cost as low as possible while still receiving great medical care when you need it.

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