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Potential Consequences of Reforming Medicare Into a Competitive Bidding System

Zirui Song, PhD; David M. Cutler, PhD; Michael E. Chernew, PhD
JAMA. 2012;308(5):459-460. doi:10.1001/jama.2012.7909.
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The idea of a premium support (or voucher) system for Medicare has generated substantial debate. Under premium support, Medicare beneficiaries would choose from health plans that compete in a market-based bidding system. In some models, traditional Medicare is abandoned entirely in favor of private health plans. In other models such as the Ryan-Wyden plan, traditional Medicare becomes one option among many.

Proponents of premium support cite 2 potential strengths. First, competition may lower health care spending. Second, by pegging the Medicare contribution to one of the lower-cost plans and limiting the increase in the government's contribution over time, public spending on Medicare will slow.1 Critics state that bidding essentially shifts costs to beneficiaries by increasing their required premiums.2

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