Can Consumers Save Medicare?

Medicare spending is on autopilot, and it is coming in for a crash landing. Costs are projected to double to $900 billion over the next decade, and there is increasing evidence that Medicare does not provide good value for the money spent--paying too much or too little for necessary services, or paying for inappropriate and ineffective ones. Is it time to give beneficiaries a stronger voice in choosing the insurance plans and health services they receive through Medicare?

In two recently released studies in AEI's Studies on Medicare Reform series from the AEI Press, Mark V. Pauly of the Wharton School and Roger Feldman of the University of Minnesota argue that consumers can make sensible decisions if they are given the opportunity and means to do so. In Markets Without Magic: How Competition Might Save Medicare, Pauly addresses the unsustainable financial burden Medicare will place on taxpayers over the next few years and beyond. Rather than relying on tighter bureaucratic rules to limit program spending by controlling the use of health services, he suggests replacing Medicare's open-ended entitlement with a market-based credit that preserves the purchasing power of seniors but does not provide a blank check.

In How to Fix Medicare: Let's Pay Patients, Not Physicians, Feldman proposes to replace the current system of administered prices for physician services with medical indemnities--giving Medicare beneficiaries money to cover the cost of their treatments but allowing them to shop for the combinations of services, providers, and prices that most closely meet their needs.

Following Pauly's and Feldman's presentations, Paul Ginsburg, president of the Center for Studying Health System Change, and Michael Morrisey, director of the Lister Hill Center for Health Policy at the University of Alabama at Birmingham will discuss the role of consumer empowerment in Medicare. AEI visiting fellow Bill Thomas--former chairman of the House Ways and Means Committee, cochairman of the National Bipartisan Commission on the Future of Medicare, and chief architect of the Medicare Modernization Act--will give a keynote speech on the political and practical challenges of reforming Medicare.

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About the Author

 

Joseph
Antos

 

Bill
Thomas

 

Mark V.
Pauly

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