Medicare Case Proposal

11/18/2015

To: Representative Paul Ryan (R-WI) and Senator Ron Wyden (D-OR)

From: Hassan Katmeh (Marquette University Student)

Subject: Perfecting the competitive-system in health care You proposed a bipartisan plan to reform Medicare which relies on a premium-support system for financing Medicare. Your plan intends to convert Medicare into a consumer-based model, which focuses on competitive bidding among health insurance plans. You also plan to create a fixed budget for Medicare spending, like a voucher system. In most other markets, competitive bidding tends to reduce costs; however, the insurance and health services market is different and assuming that competitive bidding will have the same effect in this market is a very risky. There

The first criteria will be the cost effectiveness. It is important to make sure that the amount of money being paid is similar to the services received. This is one of the goals of your competitive market model; to reduce the costs so that people are getting the care that they deserve. The second criteria is equity, which is vital to any health care system in the world. This is the biggest concern that many people have. If premiums become too expensive for seniors, then they will have to leave the traditional Medicare. In order to insure equity, we will have to solve the issue of being indexed to economic growth. Lastly, we will also evaluate a policy based on economics, such as its ability to effectively reduce costs or health care spending in the US. One of the goals of the competitive model was to reduce costs, which is what it usually does in other markets, but evidence suggests that it will increase costs instead of reducing them. To overcome that, a change will have to be made this this

You have a plan to put Medicare on a budget, and you want this budget to be indexed to economic growth (GDP +1 percent), but as I mentioned previously, this will surely result in more severe issues in the future. Since the rate of economic growth is slower than the rate of average health care costs, problems will arise; however, if the budget is indexed to average health care costs, this problem will not occur. Another issue your proposal faces is with your idea of a competitive market model. There are already elements of competition that exists in the private insurance system, and yet, Medicare spending has grown slower than private insurance premiums for over 30 years (Tyson, 2011). I suggest that you should lessen the number of plan options and keep them consistent. Also, marketing should be managed by an unbiased third party. This will help consumers recognize their options and will prevent insurers from only providing service to the healthy so they can make more money or prevent spending money. This new policy will tower over others as it will reduce costs by introducing a competitive market model into the health care system while removing the general issues that a competitive model will have, which should result in lowered costs and spending in the