Markets Without Magic: How Competition Might Save Medicare by Mark V. Pauly

By Mark V. Pauly

This ebook argues that unavoidable limits on Medicare financing can top be imposed via market-based offerings instead of govt path. Policymakers face a basic problem: tips to safeguard Medicare's skill to supply its beneficiaries with monetary safety and entry to powerful therapy whereas securing some great benefits of pageant.

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Extra info for Markets Without Magic: How Competition Might Save Medicare (AEI Studies On Medicare Reform)

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If government can risk-adjust reasonably well (compared to what beneficiaries can predict), markets can work reasonably well. Thus, this type of argument against market-like arrangements ultimately rests on an assumption that government is unable to perform the task of risk adjustment well. Since nothing in life is ever perfect, the assumption is surely true to some extent. It is, however, possible to guard against the adverse impact of mistakenly classifying some sickly person as a lower risk than he or she really is if one is willing to pay the price—that is, hedging our bets on the safer side of that equation.

Cracks are developing in the payment systems for physicians especially. Legislated payment-rate reductions for physicians under the “sustainable growth rate” formula have proved to be politically unacceptable, placing pressure on Congress to find a way to void scheduled reductions despite the increasing cost to the federal budget. I do not anticipate that further price constraint by traditional Medicare would cause suppliers (especially hospitals) to desert in droves, but it does seem likely that, having priced above its supply curve for many years, traditional Medicare is pushing it and is starting to experience adverse side effects of lower prices.

The real question is how to preserve Medicare’s ability to achieve its goals of financial protection and access to effective medical care while at the same time securing some of the advantages that reasonably competitive markets provide. Since perfection is not to be expected in any realistic market, discovery of a possible defect is not necessarily a fatal flaw. The alternatives to market-based Medicare, even in the current environment and certainly in the future, are not perfect, either, since they also have gaps in protection and access.

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