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Commentary

Fixing Medicare
Laurence J. Kotlikoff, Forbes, 12-13-04

Kotlikoff offers a novel idea for making Medicare and Medicaid solvent as the nation’s huge baby-boomer generation ages and then retires: vouchers.

The government would end the current Medicare/Medicaid fee-for-service schedule for those programs and then offer vouchers to buy insurance based on health condition and (presumably) some form of means testing. That way, insurers would have an incentive to take in sick patients, and still keep the lid on health care costs. The vouchers would only increase as fast as rising wages, no faster. Kotlikoff says that under his plan “competition among insurers would ensure that participants got the best care per voucher or dollar spent. And the insurers would have an incentive to keep their customers from overusing the health care system, which would help restrain the growth in health care costs throughout the country.”

We think that Kotlikoff’s plan, as described, while an interesting idea, is overbroad. Most people should be encouraged to save for health care expenditures through health savings accounts; there is no reason for the government to provide blanket coverage for the many citizens who can afford to pay for it themselves. However, vouchers are an excellent idea for low-income Americans who couldn’t afford to purchase health insurance without some assistance, and might even help them build equity for retirement.



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