Proposal - recoup medicare as inheritance tax

Great Debates
1

This idea popped into my head the other day. I’m sure wiser Dopers will persuade me to pop it right back out. I haven’t tried to formulate this as a well-supported proposal, but I’ll offer some of my presumptions, and welcome your responses.

-One issue I perceive with much healthcare is the consumption of resources by folk who bear little/none of the cost. I believe this is referred to the “free rider” issue. It is easier to agree to prescribed treatment, if it will cost you nothing. (Of course, the elderly are not the only free riders.)

-A significant portion of healthcare costs are incurred by seniors, especially near the end of life, whether at the wishes of the individual or others acting on their behalf. I question whether individuals should be encouraged to make such decisions, with no eye to the costs involved. What societal benefit is served in subsidizing the extension of end-of-life, while preserving inheritable estates?

My proposal is to set up some system where Medicare expenditures (and possibly other benefits) are recouped in the form of estate taxes. I see a few potential benefits:

-This does not disadvantage the poor in terms of quality of publicly subsidized care.

-This might be more palatable than front-end “means testing” for the receipt of benefits.

-Even the wealthiest person could spend as much of their money as they wish while alive. This would not require an individual to exhaust their estate before receiving benefits. It simply affects the amount that is left to one’s heirs.

-This might encourage honest discussions of the costs of services compared to the quality of life and other benefits sought.

-This might reduce the incentive for healthcare providers to provide services “to the extent they are covered.”

I could imagine something like this being applied to other categories of public benefits, including old age Social Security. Of course, I realize many folk will disfavor any such proposal. But I’m thinking that SOMETHING needs to be done to reform our “entitlement” spending, and this strikes me as a relatively compassionate approach.

I readily admit this is an area in which I am pretty ignorant. And I acknowledge that recent trends have been to reduce estate taxes and expand healthcare coverage. I’m eager to hear what others think of this idea.

2

My wife and I are both on Medicare. Our “little/no cost” amounts to almost $600 a month. Another $120 for my wife’s medications.

3

And the subsidy received/expected?

4

What subsidy? We pay into insurance and receive medical care like everyone else.

5

Most (all?) people who receive Medicare paid a Medicare tax their entire working life before becoming eligible. It’s currently 2.9% (paid by you and your employer) of earned income plus some additional taxes on high income people. One might say they already paid for it.

6

OK, I suspected there would some element of “I hate Congress - except for MY Congressperson.” Sure, many folk feel THEY are participating responsibly, but it is those OTHER folk who are responsible for the system’s problems. I also imagine SOMEONE will feel disadvantaged by ANY proposal to reform entitlements.

I realize Medicare applies to folk other than the elderly. But Medicare is largely supported out of the general fisc. By no means do premiums cover your benefits. So in that respect, a Medicare recipient is NOT simply paying into insurance like everyone else. Now if we eliminated private health insurance and initiated universal Medicare, that would be a different matter. But I foresee that as politically more unpalatable than my suggestion.

My personal opinion is than much insurance - not just Medicare - insulates the beneficiary from weighing costs vs benefits. But that exceeds my intentions of this thread. I also think WAY too much spending takes place at the end-of-life, largely because individuals or folk exercising their their power-of-attorney, have little incentive to consider cost. Yeah - I’m putting a price tag on end-of-life care. Supporting “death panels.”

7

The correct term is moral hazard not free rider.
Something very similar is currently done for nursing home care. It might help a little but most of the benefit would be to estate planners rather than Medicare.

8

Since the heirs to the fortune are often the ones making the decision to pull the plug, wouldn’t this be a perverse incentive for kids to off their parents?

We might then be tempted to give such life and death decision to some sort of panel.

9

Thank you, puddleglum.

I understand the concern, John, but I’m not sure that is entirely bad. Underlying my suggestion is my personal opinion that far too much care is provided and $ expended for end-of-life treatment for terminally ill individuals. And IMO far too many decisions to extend individuals’ dying are extremely selfish. If more old people got put on hospice at an earlier date, rather than being rushed to the hospital or placed on life support, I would consider that a good thing.

I understand (but am not terribly sympathetic to) the arguments that “I paid for it.” Personally, I would support some type of means testing for SS retirement/old age, but I thought my proposal here was more limited, and might face greater acceptance.

Also, I imagine I would also support the denial of many services to indigent folk - but I realize that idea would be far less palatable to far more folk.

10

Medicare is an entitlement? No, it’s, as stated above, an insurance program paid into.

11

I don’t see how this actually does anything good. It has all of the disadvantages and none of the advantages of a means test.

12

And what percentage of expenditures is paid for by premiums and tax withholdings? Is this sustainable into the future?

13

Tax withholdings pay only for Part A of the program, Hospital Insurance. If you hear about the “Medicare trust fund,” that’s generally what people are talking about.

Part A is premium free for most people. Interest, certain other taxes, and premiums for those who don’t qualify for premium-free Part A are the other sources of funding.

Part B, the part of Medicare that covers doctor visits, is not paid for with withholding. Premiums are mandated to pay 25% of Part B costs, with the rest coming from the general funds.

14

I understand that. It just didn’t seem that other people do. And then there are parts C and D.

With private insurance, I do not believe that a significant portion of benefits are paid from the public fisc. I’m not a big fan of the word “entitlement,” but the choice has been made to fund health care above and beyond payroll taxes and premiums. I’d be happy to hear a term that better describes that than entitlement or subsidy.

15

I didn’t realize we were playing Socratic games. Have fun.

16

You should ask UK PM Theresa May how well a similar proposal from her partywent over with the voters…

17

Which require buying supplemental plans.
Did you look at what I said we were paying?
Premiums are taken out of our disability payments for B, we both have supplemental plans to cover C and D.

18

The premium cost for Part B is a fraction of the actual cost of coverage. It’s almost entirely a subsidy from general tax revenues.

Let’s modify the proposal a little bit. The government is now going to claim the amount of Medicare provider reimbursements which exceeded the individual’s premium contributions corrected for inflation plus a reasonable amount of interest. In other words, the estate only pays for what the deceased didn’t already. Now are we okay with it?

19

No, because that’s not how insurance works. If we do that, then let me just put my own money away and use it myself for what I want.

20

Medicare isn’t insurance. It’s a single-payer program (part A at least) designed to ensure that old people aren’t left on their own when they fail to adequately save for medical treatment later in life. “It’s not how insurance works” is exactly the point - Medicare doesn’t make a “profit” even off the healthiest seniors.