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Does One Medicare Fit All? The Economics of Uniform Health Insurance Benefits

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  • Shepard, Mark

    (Harvard Kennedy School)

  • Baicker, Katherine

    (University of Chicago)

  • Skinner, Jonathan

    (Dartmouth College)

Abstract

There is increasing interest in expanding Medicare health insurance coverage in the U.S., but it is not clear whether the current program is the right foundation on which to build. Traditional Medicare covers a uniform set of benefits for all income groups and provides more generous access to providers and new treatments than public programs in other developed countries. We develop an economic framework to assess the efficiency and equity tradeoffs involved with reforming this generous, uniform structure. We argue that three major shifts make a uniform design less efficient today than when Medicare began in 1965. First, rising income inequality makes it more difficult to design a single plan that serves the needs of both higher- and lower-income people. Second, the dramatic expansion of expensive medical technology means that a generous program increasingly crowds out other public programs valued by the poor and middle class. Finally, as medical spending rises, the tax-financing of the system creates mounting economic costs and increasingly untenable policy constraints. These forces motivate reforms that shift towards a more basic public benefit that individuals can “top-up†with private spending. If combined with an increase in other progressive transfers, such a reform could improve efficiency and reduce public spending while benefiting low income populations.

Suggested Citation

  • Shepard, Mark & Baicker, Katherine & Skinner, Jonathan, 2019. "Does One Medicare Fit All? The Economics of Uniform Health Insurance Benefits," Working Paper Series rwp19-036, Harvard University, John F. Kennedy School of Government.
  • Handle: RePEc:ecl:harjfk:rwp19-036
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    1. Jeffrey P. Clemens & Parker Rogers, 2020. "Demand Shocks, Procurement Policies, and the Nature of Medical Innovation: Evidence from Wartime Prosthetic Device Patents," CESifo Working Paper Series 8781, CESifo.

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    More about this item

    JEL classification:

    • H4 - Public Economics - - Publicly Provided Goods
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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