Medicare Reform and Social Insurance: The Clashes of 2003 and Their Potential Fallout

Medicare pays for at least half of the hospital and medical expenses incurred by America's elderly and disabled. It is also periodically the object of intense political debate, marked by exaggerated claims about how the sky will fall unless some fundamental change is made in the financing, benefits, or administration of the program. Over the past decade and a half, this political attention has had less and less to do with legitimate concerns about budget deficits and Medicare's real (if usually overstated) faults. Instead, it has become principally fueled by the alarmist rhetoric of those who ideologically oppose Medicare's social insurance structure.

Most of these critics, mindful of Medicare's broad popularity, mask their underlying hostility to the program with a veneer of public-minded concern. Unfortunately, their rhetoric of crisis clouds more than it illuminates what is fundamentally at issue in all these disputes. In this Essay, we concentrate on one such confused aspect of the recent debate that is emblematic of the contemporary politics of Medicare: the debate over "means-testing" Part B of Medicare, the medical insurance program. In a significant break with Medicare's history, the reform legislation of 2003 - the Medicare Modernization Act (MMA) - imposes sharply higher premiums on wealthy beneficiaries.

The story of how this came to pass has been largely lost in the crowded pages of American journalism. But at least one journalist noted that "House and Senate negotiators, struggling for accord on a plan to redesign Medicare, have agreed in principle that wealthy older Americans should pay more for doctor visits and other outpatient care, reprising an idea that has proved politically explosive." The income or means-testing dispute was just one small part of the larger struggle over the shape of the prescription drug benefit that President George W. Bush signed into law in early December 2003. Yet the dispute was symbolic of the confusion that surrounds the questions of whether and how Medicare ought to be restructured.