Reforming Medicare with Personal Accounts, Incentives and Better Plan Design

Not long after Medicare was established in 1965, expenditures began to skyrocket. Rather than create a sustainable program where seniors shared some of the responsibility to control spending, politicians’ preferred method to contain costs was to ratchet down reimbursements to Medicare providers. This was a mistake. Increasingly, however, Medicare needs to encourage workers to prefund more of their retiree medical funds and empower seniors to make more prudent spending decisions with the appropriate incentives. In addition, Medicare should explore other cost-sharing tools that could make Medicare beneficiaries price-sensitive above their deductibles.

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