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Medicare is quickly approaching insolvency, in Chapter because the program pays too much for the services it provides. In Bring Market Prices to Medicare, Robert Coulam, Roger Feldman, and Bryan E. Dowd propose a groundbreaking solution: Use market-based arrangements to set prices for Medicare plans. The authors contend that the federal government should pay only the cost of the most economical health plan in each market area. To accomplish this, both traditional fee-for-service (FFS) Medicare and private Medicare Advantage (MA) would submit bids for the governments business; the federal contribution to premiums would be set to equal the lowest bid in each market area. This competitive pricing system would penalize plans that bid too high their beneficiaries would pay higher premiums providing an incentive for plans to offer their best prices. Meanwhile, low-bidding plans would be rewarded with increased enrollment. Such an approach would reduce Medicare spending by 8 percent, shoring up the programs finances while empowering consumers to make sensible choices about their health care.
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