Week 2 Case Study - Solving the Medicare Crisi

Week 2 Case Study: Solving the Medicare Crisis

You are chief of staff to your brother-in-law, Representative Howard Hughes, who was recently elected to fill out a term in Congress.

He has been asked to participate in a panel discussion on the Medicare funding crisis. You have been asked to prepare paper for him. The panel is asked to respond to a proposal for reducing Medicare expenditures by enrolling participants in HMOs. What does the Congressperson say?

The following key questions must be addressed in the paper:

• Is Medicare in a state of crisis? Are radical measures necessary to preserve the program?
• How is Medicare funded now? Why do elderly people feel that Medicare is an insurance program and not a welfare program? Is this perception accurate?
• Should there be a Medicare program at all? Why should the government be involved in providing insurance to elderly preople? Does Medicare have detrimental effects on the market for healthcare or on the market for health insurance?
• Are these economic effects, offset by the positive effects of the Medicare program for the elderly? What about the positive effects of caring for the elderly for society? Are there any externalities here?

Justify your position on either economic efficiency or equity grounds (or both).

Your Congressperson wants to appear intelligent. Do not be afraid to refer to economic theory or theories of distributive justice.