Means testing in Medicare, other entitlement programs could help address financial problems

The U.S. faces a "financial crisis," in part because of spending on entitlement programs, and the "situation will become much worse as Americans age and health care costs rise," Tyler Cowen, a professor of economics at George Mason University, writes in a New York Times opinion piece.

According to Cowen, the implementation of means testing -- "paying out full benefits only to those who really need them and cutting back payments to everybody else" -- "is one way to better allocate benefits" and help reduce spending on entitlement programs.

Cowen recommends "expanding Medicaid ... and making it an entirely federal program rather than one partly paid for by the states" in combination with efforts to "limit the growth of Medicare," adding, "With limited resources, it would be better to reallocate health care subsidies toward the poor whether they are young or old." An "alternative path is to put in place more means testing throughout Medicare," he adds. Cowen writes that "inducing the wealthy to pay for their own health coverage would create pressures to lower costs."

The "biggest problem" with means testing "is measuring and enforcing the rules that establish who receives a specified benefit and who doesn't," but the "fiscal difficulties of staying on our current spending path may well be far worse," according to Cowen. He writes that, "if you're asking which ideas are most likely to transform economic policy over the next 15 to 20 years, here is one place to start looking," adding that U.S. residents should not "expect to hear much about targeted benefits anytime before November" (Cowen, New York Times, 7/20).