Wednesday, Dec. 8, 2004, 12:01 a.m EDT

Jon Gardner, Health Affairs,


Means-Testing Expensive Health Technologies Could Improve Medicare's Long-Term Finances,
Health Affairs
Article Says

Proposal Could Preserve Access And Funding Without Resorting To "Brute Rationing"


BETHESDA, MD.—To control costs, Medicare should in the future consider asking middle- and upper-income seniors to pay more for the expensive medical technologies that are the main sources of spending growth, according to a new paper published today on the Health Affairs Web site.

The stage already has been set for such “means-testing” of Medicare beneficiaries by provisions in the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003 that require those middle- and upper-income seniors to pay more than low-income beneficiaries for their Part B and drug coverage, writes Mark Pauly, chair of the Health Care Systems Department at the University of Pennsylvania's Wharton School.

Because beneficial yet costly technologies are what causes Medicare spending to outpace tax revenues, means-testing those technologies—through out-of-pocket payments or by paying for public- or private-sector supplemental coverage--may help put an important restraint on Medicare spending, Pauly writes.

"Such changes should increase the chances for continued funding for every benefit in today's Medicare for all without greatly increasing tax rates," Pauly says. "Far from being a threat to Medicare as we know it, means-testing may be one of the few ways to preserve the program's generous funding and access, without across-the-board brute rationing, that we all want to be able to anticipate in retirement."

Without any effort to constrain costs, Medicare will consume a larger and larger share of the U.S. economy. If Medicare spending grows at historical rates, it will increase from 2.6 percent of gross domestic product (GDP) now to 10.2 percent of GDP in 2035. But with means-testing, Medicare spending growth could be constrained to as little as 3.3 percent of GDP by 2035, Pauly says.

In a perspective, Marilyn Moon, vice president and health program director at the American Institutes for Research, writes that Pauly's proposal will "allow Medicare contributions for people with modest incomes and above to deteriorate over time." She argues that Pauly's proposal amounts to a "voucher" program for nonpoor Medicare beneficiaries, the value of which will deteriorate over time.

An accompanying article by J.D. Kleinke, executive director of Omnimedix Institute, examines the federal government's efforts to reform Medicare reimbursement for injectable drugs.

Pauly's article can be read at http://content.healthaffairs.org/cgi/content/abstract/hlthaff.w4.546.

Moon's perspective can be read at http://content.healthaffairs.org/cgi/content/abstract/hlthaff.w4.558.

Kleinke's article can be read at http://content.healthaffairs.org/cgi/content/abstract/hlthaff.w4.561.



Health Affairs, published by Project HOPE, is a bimonthly multidisciplinary journal devoted to publishing the leading edge in health policy thought and research. Additional peer-reviewed papers are published weekly online as Health Affairs Web Exclusives at www.healthaffairs.org. Health Affairs Web Exclusives are supported in part by a grant from the Commonwealth Fund.

©2004 Project HOPE–The People-to-People Health Foundation, Inc.