The Medicare program has been a major boon to the United States’ national well-being since its enactment in 1965, resulting in enormously improved access to high-quality, affordable health care for many millions of older and disabled Americans. But these benefits of Medicare have been achieved only through the expenditure of vast financial resources. Today, Medicare’s precarious long-range economic viability is well-documented, and disturbing projections about the Medicare Hospital Insurance (HI) trust fund’s near-term demise abound from reputable sources including the Congressional Budget Office and the Annual Reports of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Insurance Trust Funds.

Who in the past could possibly have foreseen Medicare’s present financial unsustainability? If we had only been prescient enough to anticipate this situation, surely we would have taken timely, reasonable, and equitable legislative and regulatory action to protect the program and its beneficiaries in an orderly and pain-minimizing fashion!

Of course, I am being rhetorical here. No crystal ball was necessary, just an objective appraisal of the healthcare financing landscape. Many astute health policy activists and commentators did foresee the inevitably approaching Medicare funding danger and honestly acknowledged it several decades ago, not to mention multiple Congresses and Presidential Administrations.

For evidence of such foresight, one need look no further than the Summer 1996 issue (Vol. 20, No. 2) of Generations. Guest-edited by national health policy icon Ed Howard, the issue theme was “Where Is Healthcare Headed?” and it contained several contributions urging policy and practice reforms of the Medicare program before crisis mode would take hold. The most prominent analyses of the inevitable fiscal dilemma were Howard’s introductory essay, “A Look at the New, Improved (?) American Healthcare System,” and “Rethinking Medicare,” by economist Judith R. Lave, one-time director of the Office of Research at the Health Care Financing Administration (predecessor agency of today’s CMS).

The Lave piece asserted the truth (in 1996 and as well in 2024) that, “In the long term, there will need to be a fundamental reevaluation of the nature of the contract between the federal government and its older citizens.” But in the meantime, Lave described a number of “modest” specific, realistically actionable alterations aimed at buttressing the Medicare program’s future financial security, while continuing to fulfill its central policy goal concerning meaningful healthcare coverage for the program’s beneficiary population.

Quite unfortunately, in the intervening years between the Summer 1996 Generations issue and the present, national lawmakers have for the most part willfully ignored Lave’s structural recommendations and those of other commentators anxious about Medicare’s future financial capacity.

Instead, the forecast for long-term solvency has steadily, and predictably, declined over time. With only a few brave exceptions who were willing to touch the metaphorical “third rail” of electoral survival, office holders and candidates at the highest levels of both major political parties have weaponized the topic of even the most incremental Medicare reform ideas. Supposed policy leaders have figured out how to demonize opponents who can be made vulnerable to accusations of “cutting benefits” because they may have shown an openness to even listening to possible deviations from existing Medicare program details, when options are tinged however softly with any hint of fiscal responsibility.

We were duly warned almost 30 years ago. Another quarter-century hence, will a future Generations issue be celebrating an ongoing Medicare program made robust by the design and implementation of necessary, timely structural changes, or will authors be lamenting the demise of a great program relic that eventually could not survive the proclivities of feckless political leaders who would not remove their heads from the sand and act, reluctantly but soberly?

Marshall B. Kapp, JD, MPH, is an emeritus professor at Florida State University, where he was a faculty member in both the College of Medicine and the College of Law. He also is emeritus professor at Wright State University School of Medicine. He chaired the Generations Editorial Advisory Board from 1995 to 1998.

Photo credit: Shutterstock/Drepicter

Howard, E. (1996). A look at the new, improved (?) American healthcare system. Generations, 20(2), 5–6. https://www.jstor.org/stable/44877344

Lave, J. R. (1996). Rethinking Medicare. Generations, 20(2), 19–23. https://www.jstor.org/stable/44877347

A Look at the New, Improved (?) American Healthcare System

By Ed Howard

The editorial board of Generations first approached me early in 1995 to discuss devoting an issue to a look into the future of our healthcare system, in light of what we all thought were the soon-to-be-enacted sweeping changes in Medicare and Medicaid—the healthcare programs most important to older people, their families and advocates.

Over the preceding two years, a combination of interest group opposition, tactical errors by proponents, and preferences for incremental change among the American public had doomed the comprehensive health reform plans put forth by President Clinton and Democrats in Congress, eroding what one prominent commentator called the “aura of inevitability” that major national reform would be enacted (Lundberg, 1993).

Then the tidal wave of electoral change swept through the land in November 1994, putting conservative Republican majorities in control of both houses of Congress. The “Contract with America,” endorsed by most Republican House candidates, contained not a word about health. But one of its central premises was that the federal budget must be balanced, by constitutional amendment if necessary.

Coupled with Republican promises to seek major reductions in taxes and a major buildup in defense spending, and what both parties conceded was the political inviolability of the Social Security program, this agenda guaranteed that Medicare and Medicaid would be targeted for major savings. Once one takes Social Security, interest on the debt, and defense spending off the table, Medicare and Medicaid constitute two-fifths of what is left (Congressional Budget Office, 1996). If a balanced budget is your goal, you can't get there from here unless Medicare and Medicaid are a major part of the plan. And since the Clinton healthcare plan had itself envisioned substantial cutbacks in Medicare and Medicaid growth as a means of financing broader coverage, a different aura of inevitability began to become visible.

Thus the plan was to use this issue of Generations to take stock of the major changes in the major federal health programs, and to look down the road at the implications for both older people and for the healthcare system in general.

Indeed, last year the new Republican majorities in both the House and the Seriate did pass a blueprint for achieving a balanced federal budget by the year 2002. And to achieve that goal, they called for reductions in Medicare and Medicaid of some $430–470 billion over seven years. These were not cuts, Republicans reminded everyone, but reductions in the rate of growth. Adding to the climate for change was the report of the Medicare trustees in April 1995, which predicted that the Hospital Insurance trust fund of Medicare would reach zero balance—"go bankrupt”—in 2002.

Pledging that their budget plans would “protect, preserve, and strengthen” Medicare, Republicans pressed their spending reduction plan.

Over the course of the summer and fall, negotiations and re-estimates lowered the proposed Medicare and Medicaid cutbacks from $270 billion over seven years to about $250 billion.

Still, invoking the need to protect these health programs and those who depend on them, President Clinton vetoed the legislation that came from the budget blueprint. The veto stood.

Medicare and Medicaid not only were not scaled back, but the impasse between congressional Republicans and the administration meant that even agreed-upon steps were not taken. Thus, provider reimbursements were not shaved by a percentage point or two as in most recent years, and the monthly Part B premium paid by beneficiaries actually went down by $3.60 in January 1996.

All of this change in our expectation of change has meant recalibration of the tone and content of the healthcare debate. But it seems clear to me that the genie is out of the bottle; the partisan clash of 1995 has triggered a serious debate not only over the future of Medicare and Medicaid, but over our vision of how those programs fit into our fast-evolving healthcare system.

And it is by now a cliché to say that the private sector is reforming itself—consolidations, mergers and acquisitions, for-profit conversions, and, above all else, the steady (if mutating) march of managed care. Whether or not Congress can muster the strength to pass a simple insurance reform measure—and at this writing such modest action looks more and more doubtful—the winds of change are clearly whistling.

Just as Medicare was designed long ago to echo the structure of coverage common to the under-65 population, it assuredly will be reshaped in ways that make it more closely resemble the starkly different structure of coverage today. And America’s governors are intent on changing the nature of the Medicaid program in order to better control its costs to their states.

The authors who have contributed articles to this issue have done their job magnificently. These articles provide invaluable insight into what makes the current system tick—its strengths and weaknesses, who profits and who suffers. And though there are few attempts to envision “the healthcare system of the twenty-first century,” I believe our authors capture most of the trends at work that will shape that system. I am honored to have the chance to make a contribution to their good work. The major issues still undecided are identified and debated vigorously. Here are just a few:

Fewer than one in ten Medicare beneficiaries is enrolled in a health maintenance organization. How will the growth of HMOs and other forms of managed care affect older people and all of the rest of us? And what kinds of consumer protections need to be developed?

Managed care figures prominently in concerns over Medicaid as well. Most states are acting swiftly to herd mothers and children, who constitute three-fourths of Medicaid beneficiaries, into HMOs. How feasible is it to move frail older and disabled people, on whose care 60 percent of Medicaid money is spent, into managed care arrangements?

Quality and cost are central to the evolution of the private system and public policy. You will find in this issue provocative examinations of our search for quality and of the real causes of healthcare cost escalation. We often equate higher quality with higher technology, and the link between high technology and high cost is unmistakable.

And one overarching theme will be played out in many issue areas: How prominent should the role of government be in paying for or regulating care?

As you will find in the excellent guide to public opinion in this issue, American attitudes toward healthcare are sometimes ill informed and always difficult to discern. No substantial movement toward quality, affordable healthcare and long-term care for all Americans is likely before we all come to grips with the difficult trade-offs this topic presents.

It is almost an article of faith among some analysts that our country’s pace of spending on healthcare “cannot be sustained.” Much of what needs to be done over the next period is to get better value for our healthcare dollar. But that does not mean we have decided how much is the “right” amount to spend on healthcare. And to say that we cannot “afford” to extend coverage to those without it—and I mean long­term care as well as acute care—is to fly in the face of fact. Whether we choose to act is quite another question, and the real one.

References

Lundberg, G. D. 1993. "American Health Care System Management Objectives: The Aura of Inevitability Becomes Incarnate.” Journal of the American Medical Association 26 9: 2 5 54.

Congressional Budget Office. 1996. “The Economic and Budget Outlook: Fiscal Years 1997–2006 (May)” pp. 42, 46. Washington, D.C.

Rethinking Medicare

By Judith R. Lave

In 1995, the Congress passed the Medicare Preservation Act, which proposed major changes the Medicare One justification for this act, which was vetoed by the president, was a call for action by the Board of Trustees of the Federal Health Insurance Trust Fund, which oversees Medicare, urging Congress to begin a careful evaluation of the program because the trust fund faced significant financial problems in both the short and the long term (Board of Trustees, 1995). Such urging is not rare. For instance, in 1991 I chaired a health technical panel for the 1991 Advisory Council on Social Security that reached the following conclusion: “the current state of the Medicare program is precarious, and the status quo cannot be maintained. . . . policy makers will have to make a number of difficult choices about how to bring the Hi Trust Fund into balance and how to control the increasing costs of the SMI program” (Advisory Council on Social Security, 1991).

In fact, ever since the implementation of Medicare, the research and pol- icy community has not been reluctant to recommend changes in the program. The professional journals have been filled with recommendations—both large and small. For instance, among the many suggested changes in benefits are the following: (1) to expand Medicare by adding long-term-care benefits and prescription drugs, (2) to restructure the cost-sharing pro- visions under fee-for-service and in clude a limit on out- of-pocket payments, or even (3) to change Medicare from a defined benefit to a defined contribution (voucher) program. In other words, people have been "re-thinking" Medicare since its inception. The purpose of this paper is to consider what types of changes the Medicare program should undergo in the near term. First is a brief discussion of some of Medicare s successes; second, some of the major problems; and last, issues related to the restructuring and financing of the Medicare program.

Medicare's Successes

Medicare has been a successful program in many respects. It dramatically increased access to high-quality medical care for Americas older people. It has facilitated the development and spread of modern medical techniques and technology in such areas as cardiac surgery, ophthalmology, and prosthesis and joint replacement that have contributed to the quality and length of life. Furthermore, under Medicare, most older people are treated equally; that is, providers receive the same payments for providing a specific service to the rich or the poor. As a group, Medicare beneficiaries are more satisfied with their health plan than are other large identified groups (employed people, Medicaid recipients, unemployed people) (Davis, 1995). Finally, the program has relatively low administrative costs compared to private sector insurance programs.

Medicare's Problems

A number of problems are also associated with Medicare and have resulted in calls for change. The principal factor precipitating congressional proposals to change Medicare is cost. At the present time, Hospital Insurance (HI) disbursements exceed revenues (primarily payroll taxes) and, unless changes are made, the Hospital Insurance Trust Fund will be bankrupt by 2002. Furthermore, the in- crease in the costs of the Supplementary Insurance program (SMI), which is funded through general revenues and beneficiary premiums, is not sustainable. In 1995, the Medicare program consumed 13 percent of the federal budget; by 2000, according to projections, it will consume 16 percent. The long-term financial issues are even more pressing. As the baby boom generation begins to retire in 2010, the number of workers relative to retirees will decrease significantly.

The main factor driving the increase in Medicare cost has been technological change (Newhouse, 1992), which will no doubt continue to be a major force (Aaron, 1995). Still, several features of the Medicare program itself have contributed to inefficiencies in the provision of healthcare services and to the increase in Medicare outlays.

First, the structure of the program, with its distinction between HI (primarily inpatient) and SMI (primarily outpatient) services is a relic—a holdover from the healthcare system of the 1960s. The Medicare program is designed to cover short-term acute care services or acute exacerbations of chronic conditions, thus many preventive services and long-term-care services are not covered. (Even so, in recent years a major factor contributing to cost increases has been the rapid expansion in long- term-care services—specifically home health services and nursing home care [Prospective Payment Assessment Commission, 1995].) What is more, the cost-sharing provisions, which could be seen as a major tool for reshaping healthcare utilization patterns into a more efficient and cost-effective form, are ineffective. The SMI deductible is too low, the skilled nursing facility co-insurance is too high, the “episode of illness” concept is obsolete, and there is no limit on beneficiary liability. The majority of Medicare beneficiaries have Medigap policies, so, while the cost-sharing provisions have an impact on the allocation of the costs of Medicare-covered services between the government and the beneficiaries, these provisions are unlikely to have any significant impact on the utilization of healthcare services.

Rather than controlling costs by changing utilization patterns, Medicare uses price controls as its prime cost-containment instrument. And, because the American healthcare system itself is fluid, with little government control over growth in the number and variety of service providers or settings in which services are provided, there is continuous pressure to expand the types of providers, settings, and services covered under Medicare. While the Medicare program has been innovative, its administrators at the Health Care Financing Administration have not been handed the tools to manage the fee-for-service program efficiently. To contain costs, Medicare has implemented a fee schedule for physicians, a prospective payment system for hospitals, and payment limits for nursing home and home health services. While these payment systems are improvements over the ones they replaced, they are incomplete control mechanisms, since they do not control volume of use. Increases in use, particularly in home health and skilled nursing home services as noted above, have been a major factor contributing to the growth in Medicare costs. In addition, since Medicare prices have sometimes been set below the cost of care, the result has been some shifting of costs from the Medicare program to the private sector (Prospective Payment Assessment Commission, 1995).

As an alternative to the traditional fee-for-service system, the Congress has implemented the Medicare risk program, which pays for beneficiaries who enroll in health maintenance organizations. The number of beneficiaries enrolling in HMOs has been increasing rapidly. By 1995, 2.9 million, or 8 percent of beneficiaries, were enrolled in some kind of risk program. However, the structure of the Medicare risk program has many problems (Prospective Payment Assessment Commission, 1995; Physician Payment Review Commission, 1996). The method that Medicare uses to pay HMOs is deeply flawed. Most (e.g., Physician Payment Review Commission, 1996; Brown et al., 1993), although not all (Rogers and Smith, 1996), believe that there is biased se- lection into HMOs; that is, that the HMO beneficiaries are healthier than the Medicare population in general. In this case, payment rates to HMOs are seen as too high and the risk program is seen as more costly to Medicare than the fee-for-service system. Medicare beneficiaries receive relatively little information about the HMOs they could join from the Health Care Financing Administration or other public organizations. Furthermore, the program is designed so that most savings result in new health benefits for HMO enrollees rather than in savings to Medicare.

The current structure of the Medicare program is inconsistent with the restructuring of the healthcare system that is taking place for younger people. As the economist Henry Aaron (1995) described it in testimony before the Senate Budget Committee: “Most working Americans and the healthcare providers who serve them are experiencing revolutionary changes in the organization of healthcare financing arrangements and the delivery of healthcare services. Managed Care in its countless manifestations is forcing individuals into health arrangements in which the third parties oversee, supervise and manage the traditional direct relationships between providers and patients.” These new systems are designed to encourage providers to act efficiently and to provide incentives for the insured to select low-cost plans (ideally, those in which providers are acting efficiently).

Some Modest Proposals

Two years ago, this country was in the middle of a debate over healthcare reform. There was considerable discussion about how to extend access to health insurance to all Americans. Now, there seems to be little public interest in extending access. Furthermore, current commitments to disadvantaged members of the society are being threatened. Consequently, it is difficult to propose a “rethinking” of Medicare that would involve a major expansion of publicly financed services to that population given that they enjoy a relatively favored position in the healthcare arena. In the long term, there will need to be a fundamental re-evaluation of the nature of the contract between the federal government and its older citizens. The aims here are much more modest. I discuss four proposals for change: merging the Hospital Insurance and Supplementary Medical Insurance programs, improving the Medicare risk program, "modernizing" traditional fee-for-service Medicare, and changing the distribution of financing between beneficiaries and the government.

Merging HI and SMI.

When the Medicare program was first implemented, the hospital played the critical role in the healthcare system. All major and most minor procedures were done in hospitals, and a hospital stay was often a self-contained episode. Since 1965, the role of the hospital has changed as more and more care is provided in outpatient settings.

• With the development of managed care, in which one entity is responsible for providing all needed services in exchange for a single, fixed amount, the separation of medical care services into two separate funding sources makes little sense. Therefore, the Congress should consider merging these two programs. The funding sources for the merged programs should be a defined combination of payroll tax, income tax, and beneficiary premiums.

Improving the Medicare Risk Program.

Medicare beneficiaries should have access to quality healthcare services. They should have choices among a number of health plans. They should have incentives to select efficient plans, and plans should have incentives to manage care efficiently. There is a need to bring Medicare beneficiaries into the types of managed care systems that are evolving in the private sector. This will not be easy to do; indeed, it is not obvious that it can be done without putting many Medicare beneficiaries at risk.

Researchers and policy analysts have offered a number of plans for moving Medicare into a “managed choice” model (Dowd et al., 1992; Butler and Moffitt, 1995; Aaron and Reischauer, 1995; Medicare Work Group, 1995). The proposed plans differ in a number of ways:

1. In the range of choices that beneficiaries should be allowed to make (e.g., HMOs, HMOs plus point of service, other fee-for-service plans, and catastrophic insurance plus Medical Savings Accounts).
2. In the proposed methods for paying health plans (e.g., administered prices, negotiated prices, or competitive prices).
3. In whether Medicare should be a competitive option; that is, whether, depending on the prices of the other plans, Medicare beneficiaries should pay more or less to enroll in traditional Medicare.

The choices that one makes across this range of possibilities depends upon the answers to questions such as the following: How important is risk selection? Can Medicare adjust for health status in setting payment rates? How relevant is the experience of the private employed sector to the Medicare population? And how will the most vulnerable beneficiaries fare?

The Medicare population is different from the employed population in significant ways. It is older, sicker, poorer, and more demented. Current Medicare beneficiaries have much less experience in making the kinds of decisions that are being made by the employed population. Furthermore, risk selection is an important factor. It would be easy for a health plan to target its advertising to attract relatively healthy beneficiaries, and the consequences of having disproportionately healthy people join risk plans are serious. If Medicare cannot adjust its rates appropriately, the overall cost of the program will rise. This event, in turn, will put pressure on the Congress to reduce the prices paid under the fee- for-service system, a practice that could lead to problems of access for those beneficiaries who remain in that system. In addition, the Medicare risk pool will be broken up. The Medigap premiums will rise, reflecting the poorer health of those beneficiaries remaining in traditional Medicare.

Therefore, it is necessary to develop the appropriate infrastructure for a choice-based system for Medicare. This development involves identifying an organization at the local level that would manage the choice-based system and be responsible for gathering information and hearing complaints. This organization could be a government or government-contracted private agency. There should be an annual open enrollment period in which all competing plans would offer one standardized health plan or one of a set of standardized plans. (This feature could be modeled on the current system used to market Medigap policies.)

Medigap plans should be included in this open enrollment period. Catastrophic plans or Medical Savings Accounts should not be included as an option because I believe that they would break up the Medicare risk pool in a detrimental way. A standard set of information should be made available. It would include price, out- come, and beneficiary satisfaction data. There should be an annual lock- in, but with an allowable disenrollment period the first time an individual enrolls in a specific plan. Lock-ins are desirable because they lead a decrease in risk-selection problems.

Medicare payments to HMOs should be based on a revised adjusted average per capita cost (the name given to the method the Health Care Financing Administration uses to set the capitation rates paid, based on the cost of traditional Medicare in the same county). This system would base the prices paid to the local plans on a blended cost of local, regional, and national fee-for-service costs. The costs associated with the payments that Medicare pays to disproportionate- share hospitals (which serve a high volume of indigent patients) and teaching hospitals for the direct and indirect costs of graduate medical education should not be included in these prices. The best available risk adjustors should be used in making payments to the health plans. As is currently the case, the Health Care Financing Administration (HCFA) should continue to sponsor research and demonstrations to evaluate payment methods, risk adjustment methods, and methods for moving toward a more competitive system. These suggestions are not unique. They are close to those proposed by Congress's Prospective Payment Review Commission in 1995 and Aaron and Reischauer (1995) among others. They differ from the recommendations of more conservative analysts, since they would limit the types of plans that Medicare would sponsor. They also suggest a more gradual approach to encouraging Medicare beneficiaries to enroll in risk plans.

It should be pointed out that a substantial number of researchers have received funds to work on these issues, and various panels of experts have been assembled to examine the findings and push the research forward. In addition to the projects funded by HCFA, three activities are worth noting. In early 1996, the Institute of Medicine sponsored a conference to address informational needs ot a Medicare choice-based system. The Kaiser Family Foundation has awarded a grant to monitor advertising and other marketing tools used by Medicare risk plans, and the National Academy of Social Insurance has established a panel on Medicare capitation and choice under its Restructuring Medicare for the Long Term project.

Modernizing Traditional Medicare.

Under most projections, the traditional Medicare program will continue to be the predominant program for Medicare services for some time to come. Therefore, it is important to strengthen the fee-for-service system and to let it evolve into a managed indemnity system (Ethridge, 1995). Medicare needs to be given the necessary tools to accomplish this task—in spite of the public’s current distrust of government. There needs to be a careful evaluation of the administrative procedures system to see how it can be changed to enable HCFA to operate more like a private business. There needs to be a careful evaluation of those areas where HCFA can move into selective contracting. In addition, HCFA needs to continue to work on improving its price-setting methods. I believe it would be useful to re-evaluate the cost-sharing structure of Medicare in order to make it consistent with current practice. Furthermore, I would recommend that consideration be given to letting HCFA offer a catastrophic benefit package—which, if designed correctly, could lead to a decrease in the demand for supplemental insurance to cover front-end cost sharing. It surely is more efficient for Medicare to market a linked catastrophic plan than for the private market to do so.

Once again, it is worthwhile noting that recommendations to improve traditional Medicare are legion (e.g., Moon, 1993, Moon and Davis, 1995). In addition, groups of experts are being assembled to assess methods for modernizing Medicare. For example, under its long-term project on Medicare, the National Academy has established a panel to explore ways to strengthen traditional Medicare. Changing the financing of Medicare. Under current law, the HI trust fund is financed primarily by the payroll tax and secondarily from interest on the government securities held by the fund. The SMI trust fund is financed by general revenues and from beneficiary-paid premiums. When the Medicare program was first established, beneficiary premiums covered 50 percent of SMI funding; they now cover about 25 percent. The share of SMI costs covered by premiums was a contentious issue during the recent de- bate over Medicare: the Congress wanted to keep the share at just over 30 percent, while the president wanted to revert to the permanent limit of 25 percent. However, the share of the Medicare premium to be paid by Medicare beneficiaries, particularly those with incomes considerably above the poverty level, needs to be reevaluated.

Other Issues

Unlike private health plans, Medicare has several obligations and responsibilities that go beyond providing healthcare services for an enrolled population. For example, the Medicare program is a major source of funding for graduate medical education in the country. It has become an important source of funds for rural hospitals and hospitals that serve a disproportionate number of low-income people. These responsibilities increase the cost of Medicare. If Medicare is to be compared with private health plans, these responsibilities have to be taken into consideration. If Medicare is to be competitive with private health plans, alternative approaches to providing these services will have to be examined.

In conclusion, the Medicare program must change, and the structure of the Medicare program has to be consistent with the healthcare system that is evolving for the majority of Americans. Furthermore, it will be necessary to reevaluate the relative roles of the federal government, the states, and beneficiaries in financing care for the elderly. None of this will be easy. However, the current system is not tenable for the long term, and a restructured system will need to be in place when the baby boomers start to retire.

Judith R. Lave , Ph.D., is professor of health economics, Graduate School of Public Health, University of Pittsburgh, Pittsburgh , Pa. This paper is a revised version of a presentation at the içç$ Annual meeting of the American Economic Association in San Francisco.

The author would like to thank Paul Hughes-Cromwick and Pamela Peele for reviewing an earlier draft of this paper.

Note: The Medicare program is divided into two parts: The Hospital Insurance program (HI) and the Supplementary Medical Insurance program (SMI), sometimes known as Part A and Part B, respectively.

References

Aaron, H. J. 1995. Testimony Before the U.S. Senate Budget Committee. Washington, DC.

Aaron, H. J., and Reischauer, R. D. 1995. “The Medicare Reform Debate. What is the Next Step? Health Affairs 14(4): 253–64.

Advisory Council on Social Security, Health Technical Panel. 1991. Report on Medicare Projections. Washington, DC.

Board of Trustees of the Federal Health Insurance Trust Fund. 1995. 1995 Annual Report. Washington, DC.

Brown, R. S., et al. 1993. Does Managed Care Work for Medicare? An Evaluation of the Medicare Risk Program for HMOs. Princeton, NJ. Mathematica Policy Research.

Butler, S. M., and Moffitt, R. E. 1995. “The FEHBP as a Model for a New Medicare Program.” Health Affairs 14(4): 276–80.

David, K. 1995. “Medicare Turns 30.” Testimony Before the U.S. Senate Finance Committee. Washington, DC.

Dowd, B., et al. 1992. “Issues Regarding Health Plan Payments Under Medicare and Recommendations for Reform.” Milbank Quarterly 70(3): 423–53.

Ethridge, L. 1995. Reimagining Medicare: From Bill-Paying Insurance to Account-able Purchases. Brief prepared for Health Insurance Reform Project, George Washington University, Washington, D.C.

Medicare Work Group. 1995. Comments and Recommendations on Medicare Reform. Washington, D.C.: American Academy of Actuaries.

Moon, M. 1993. Medicare Now and in the Future. Washington, D.C.: Urban Institute Press.

Moon, M., and Davis, K. 1995. “Preserving and Strengthening Medicare.” Health Affairs 14(f): 202–13.

Newhouse, J. P. 1992. “Medical Care Costs: How Much Welfare Loss?” Journal of Economic Perspectives 6(3): 127–32.

Physician Payment Review Commission. 1996. Annual Report to Congress. Washington, D.C.

Prospective Payment Assessment Commission. 1995. Medicare and the American Health Care System. Report to the Congress. Washington, D.C.

Prospective Payment Assessment Commission and Physician Payment Review Commission. 1995. Joint Report to the Congress on Managed Care for Medicaid. Washington, D.C.

Rodgers, J., and Smith, K. E. 1996. Is There Biased Selection in Medicare HMOs? Washington, D.C.: Price Waterhouse.