Potential Consequences of Reforming Medicare Into a Competitive Bidding System


The idea of a premium support (or voucher) system for Medicare has generated substantial controversy in recent days. Under premium support, Medicare beneficiaries would choose from health plans that compete in a market-based bidding system. In some models, traditional Medicare is abandoned entirely in favor of private health plans, whereas in other models such as the Ryan-Wyden plan, traditional Medicare is one option among many. Proponents of premium support cite two potential strengths, namely that competition may lower health care spending, and by pegging the Medicare contribution to one of the lower cost plans and limiting the increase in the government’s contribution over time, public spending on Medicare will slow. Critics of the plan argue that bidding essentially shifts costs to beneficiaries by increasing their required premiums. Premium support, based on competitive bidding, may offer a fiscal solution if Affordable Care Act (ACA) reforms fail, but at the cost of making Medicare beneficiaries responsible for solving Medicare’s fiscal crisis. Without ACA improvements, beneficiaries must pay more for traditional Medicare or join a private plan. Given the current fiscal pressures, this may be acceptable, but it is a major shift from traditional Medicare that may have deleterious consequences on the health of the country’s elderly.

Keywords: Government, Delivery of Health Care, Health Planning, Medicare, United States

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