more on means-tests

Bryan Caplan’s post on “Means-Testing and Political Economy” generated a large number of excellent responses. Here is one more — from a self-styled “liberal with some libertarian views” — that I would like to share.

Frank Howland writes:

… I agree that means testing would certainly help our fiscal situation but I think that Bryan Caplan understates the slippery slope argument. Cash benefits to poor people are extremely unpopular … [so are] actually quite small relative to non cash benefits like food stamps and Medicaid. ….

Thus I believe if Social Security were perceived as a cash benefit for poor people it would lose substantial support.

As for Medicaid, not only is it a non-cash benefit, but a substantial part of Medicaid spending goes to nursing home care and much of that to people who are not in poverty. On paper Medicaid is terrific insurance, but because reimbursement levels for Medicaid to hospitals and doctors are very low, it’s pretty spotty insurance.

I’d predict that if Medicare were means-tested, reimbursement levels for Medicare to hospitals and doctors would fall toward the very low levels of Medicaid.

Posted June 8, 2012 11:54 PM at EconLog

Medicaid is means-tested, and supposedly targets the poor, but many of the elderly non-poor game the system when they are no longer able to live without assistance. They transfer assets to their adult children in order to qualify for Medicaid, then use Medicaid to cover nursing home expenses while continuing to access Medicare for hospital and other medical expenses.


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