By Mark V. Pauly
This booklet argues that unavoidable limits on Medicare financing can most sensible be imposed via market-based offerings instead of govt course. Policymakers face a basic problem: find out how to look after Medicare's skill to supply its beneficiaries with monetary security and entry to potent treatment whereas securing the benefits of pageant.
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Additional resources for Markets Without Magic: How Competition Might Save Medicare (AEI Studies On Medicare Reform)
Beneficiaries may choose among private insurance plans and cover the bulk of the premium with a subsidy of predetermined fixed dollar amount—in effect, a voucher. The vouchers are subject to some type of risk adjustment, with people needing more health care receiving a higher-value voucher. The vouchers can be used for a wide variety of insurance plans meeting a set of requirements regarding basic benefits and other operational issues. Those insurance plans can pay providers however they wish, can set whatever beneficiary premiums they wish, and can provide any benefits they wish in excess of the standard ones.
Specifically, I argue that the effects of dramatic demographic changes, which will increase the 1 share of the population on Medicare, combined with a continued growth in medical costs driven by technology, will lead inevitably to a financial crisis if the conduct of the program stays as it is. There is no magic that can preserve Medicare as we know it today. While limits to key financial aspects of the Medicare program are almost certainly unavoidable, I believe they would be best and least painfully implemented through market-based choices, rather than government direction.
In the short run, the lament was most likely due to the newness of Part D, but there certainly was government-approved information, presented in the form of web-based programs, that would allow beneficiaries to calculate which plan would provide the best coverage for the drugs they were likely to take—an engraved invitation to adverse selection if ever there was one. Regulations requiring all plans to offer a wide range of drugs would prevent the worst adverse selection, but helping beneficiaries to choose what is best for them would exacerbate it.