Means Testing and Its Limits
America faces a massive crisis of entitlement spending. Reformers must now entertain policy solutions once considered unimaginable. Prominent among those solutions is subjecting Social Security and Medicare to some form of means-testing, by which poorer seniors would receive more generous benefits and the wealthy would receive less (or none at all). Means-testing entitlements would save huge amounts of money by not paying out benefits to wealthy Americans who can get along just fine without them. On paper, they can provide significant budgetary savings while sparing the poor from benefit reductions. In practice, however, they can generate disincentives to work and to save, and do more harm than good. The challenge for today’s policymakers is to craft policies that make the most of the benefits of means-testing while avoiding its worst consequences.