The Economics of Medicare Reform

The Economics of Medicare Reform

The Economics of Medicare Reform

The Economics of Medicare Reform

Synopsis

The authors propose a means for preserving Medicare as we know it. After detailing the reasons for Medicare's financial troubles, they present a cohort-based financing plan for Medicare that represents a fundamental departure from the generation transfer method currently used.

Excerpt

We are coming to the end of Medicare as we know it. This end will come about not because Medicare is not popular and not because the reason for Medicare’s existence is past, but because Medicare’s financing cannot sustain its expenditures. Spiraling per-capita benefit costs and the prospect of an avalanche of new members in the program will force Congress to find new revenues or to drastically cut benefits. the natural questions are: How did we get here? And, why didn’t we see the crisis coming? Yet the answers to these questions only give us the source of our problems and not the solution, if there is one. in this book, we follow Medicare through its relatively short life, pointing out the reasons for the briefness of its healthy period and proposing a permanent solution to the crisis. We deal with all three aspects of the Medicare program that have worked together to get us to the current situation: a payment scheme that ensures the users of the system will not care what it costs; a financing system that involves generation transfers as its principal source of revenue; and the penchant of Congress to fund “worthy” causes with any funds that appear available. the remainder of this chapter presents an overview of the factors that have resulted in the potential insolvency of Medicare and our solution to the Medicare crisis.

Who pays and the escalating PER-CAPITA cost
of medicare

As a point of departure, consider the difference between the fullpage grocery store advertisements that appear in every daily newspaper and those touting your local hospital or health care provider. the grocery store ads, no matter in what city they appear, are dominated by one thing: the price of the advertised goods. Health care firms also advertise, and their ads inform us about why we should use their . . .

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