Some economists and policymakers have argued that one way to control federal government spending on Medicare is to have a board of experts decide whether new medical technologies are worth their higher costs. If the board decided that they are not worth the costs, Medicare would not pay for them. Other economists and policymakers argue that the costs to beneficiaries should more closely represent the costs of providing medical services. This result might be attained by raising premiums, deductibles, and copayments or by "means testing," which would limit the Medicare benefits that high-income individuals receive. Political columnist David Brooks summarized these two ways to restrain the growth of spending on Medicare: "From the top, a body of experts can be empowered to make rationing decisions.... Alternatively, at the bottom, costs can be shifted to beneficiaries with premium supports to help them handle the burden." a. What are "rationing decisions"? How would these decisions restrain the growth of Medicare spending? b. How would shifting the costs of Medicare to beneficiaries restrain the growth of Medicare spending? What does Brooks mean by "premium supports"? c. Should Congress and the president be concerned about the growth of Medicare spending? If so, which of these approaches should they adopt, or is there a third approach that might be better? (Note: This question is normative and has no definitive answer. It is intended to lead you to consider possible approaches to the Medicare program.

Step by step solution

01

Understanding Rationing Decisions

Rationing decisions refer to the process where a group of experts decide on limiting the availability of certain costly medical services based on their judgements of whether the benefits of these services outweigh the costs. This could restrain the growth of Medicare spending by denying coverage for expensive treatments that do not correspondingly deliver high value health outcomes.

02

Understanding Shifting Costs and Premium Supports

Shifting the costs of Medicare to beneficiaries would restrain the growth of Medicare spending by requiring users of the service to cover a larger portion of the costs. This especially targets those procedures that are expensive but do not significantly improve health outcomes. 'Premium supports' refer to government-provided subsidies that individuals could use to purchase their own private health insurance. This can manage the burden of cost shifting for those who require more medical attention.

03

Opinion Formulation

Formulating a response to question c) is normative, meaning it depends on individual value judgments. A student can make an argument for adopting one of the mentioned approaches, for combining them, or for introducing a completely new approach. All potential answers should consider the pros and cons of each approach and how they affect different demographic groups. They could also consider factors like the financial sustainability and healthcare outcomes of each approach.

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Key Concepts

These are the key concepts you need to understand to accurately answer the question.

Rationing Decisions

In the realm of controlling Medicare expenses, rationing decisions play a crucial role. These are decisions made by a board of experts who evaluate new medical technologies and treatments to determine if their health benefits justify the costs. The core question is: do these technologies deliver value proportional to their expenses?

If a determination is made that a certain technology is not cost-effective, Medicare would not cover it. This would, in theory, restrain spending by preventing coverage for treatments that do not significantly improve patient health or extend life relative to their high costs. The underlying principle of this approach is to optimize the allocation of limited healthcare resources to ensure that Medicare funds are used effectively and efficiently.

Cost Shifting to Beneficiaries

Another strategy to control Medicare spending is through cost shifting to beneficiaries. This can take the form of raising premiums, deductibles, and copayments. Essentially, this means that the users of Medicare would pay more out-of-pocket for their healthcare.

By increasing the cost burden on beneficiaries, they may become more discerning in utilizing services, thus potentially reducing overall expenditures. However, to mitigate the risk of excessive financial burden on individuals, especially those on limited incomes, there may be mechanisms implemented such as 'means testing' to adjust the benefits according to the beneficiaries' income level. This targeted approach can ensure that cost sharing is implemented more equitably.

Premium Supports

David Brooks' concept of premium supports refers to government subsidies that are provided to help Medicare beneficiaries manage the increased costs that come from cost-shifting strategies. Beneficiaries could use these subsidies to purchase private health insurance.

This approach promotes consumer choice and competition among insurance providers. However, the degree of support needed varies among individuals, and the challenge is to balance adequacy of support with the objectives of controlling spending and incentivizing the efficient use of medical services. Premium supports could be designed to be inversely related to the beneficiaries' income, ensuring that those with the least ability to pay receive the most assistance.

Economic Policy Approaches

When confronting the rising cost of Medicare, there are various economic policy approaches to consider. These can range from the implementation of expert panels for rationing decisions to beneficiary cost sharing, premium supports, and beyond. Economists often debate the merits and downsides of these strategies, exploring their potential impact on healthcare access, quality, equity, and long-term fiscal sustainability.

Some economists advocate for a more market-based system that might include premium supports, while others argue for the preservation of Medicare's current structure, but with stricter cost control measures. Each approach requires carefully weighing the trade-offs between cost containment, beneficiary impact, and the overall goal of maintaining a high-quality, accessible healthcare system for seniors.