The Transformation of Medicare, 2015 to 2030.

Medicare today is a better program on almost every dimension than it was just after July 30, 1965 when Lyndon Johnson signed public law 89-97. Nonetheless, short-comings, limitations, and inadequacies remain. What should be done to make Medicare a better program? What should Medicare look like in 2030? In this paper we try to answer these questions. Three perspectives are relevant: that of beneficiaries, current and future; that of policymakers and administrators, the program's stewards; and that of society at large. We posit certain objectives and goals that we believe - and that we think a broad swath of Americans would agree - should be pursued to improve the Medicare program. Those goals include (a) affordability for Medicare beneficiaries, (b) affordability for the working population that is paying and should continue to pay for much of the current cost of the program, (c) reduction in what we regard as needless complexity, and (d) stability and continuity in several different senses. We restrict ourselves to changes that we judge to be affordable and feasible - politically, technically, and administratively - if not today, then over the next decade or two. We believe that changes in Medicare will remain incremental, as they have been for the last 50 years. We shall assume that the ACA takes root and that the exchanges, whether managed by states or by the federal government on behalf of the states, continue to operate. We shall assume that federal and state officials eventually surmount the administrative challenges they still confront. In particular, we assume that the exchanges come to serve a growing share of the American population and that they increasingly exercise the rather considerable regulatory powers over insurance offerings that the ACA grants to them. We divide Medicare reforms into four categories: payment reform, benefit reform, quality reform and management, and the role of private insurance plans (Medicare Advantage [MA]).

Is health spending excessive? If so, what can we do about it?

The case that the United States spends more than is optimal on health care is overwhelming. But identifying reasons for excessive spending is not the same as showing how to wring it out in ways that increase welfare. To lower spending without lowering net welfare, it is necessary to identify what procedures are effective at reasonable cost, to develop protocols that enable providers to identify in advance patients in whom expected benefits of treatment are lower than costs, to design incentives that encourage providers to act on those protocols, and to provide research support to maintain the flow of beneficial innovations.