Medicare Reform:

Modernization Requires Comprehensive Program View

GAO-01-862T: Published: Jun 14, 2001. Publicly Released: Jun 14, 2001.

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Medicare faces many challenges. The overarching issue is how to sustain the program for future generations. Meeting that challenge will require difficult decisions that will affect beneficiaries, providers, and taxpayers. However, the financing issue should not obscure other important challenges. Medicare's current cost-sharing arrangements do not encourage the efficient use of services without discouraging necessary care. Moreover, the lack of catastrophic coverage can leave some beneficiaries liable for substantial Medicare expenses. Finally, some aspects of Medicare's program management are inefficient and lag behind modern private sector practices. Changes in Medicare's program management could improve both the delivery of health care to beneficiaries and the program's ability to pay providers appropriately. Some view restructuring of the relationship between parts A and B as an important element of overall Medicare reform. Fundamentally, assessing the program as a whole is an important first step in addressing Medicare's challenges. Solutions to many of these challenges could be crafted without restructuring. However, restructuring may provide opportunities to implement desired reforms--with or without unifying the Hospital Insurance and Supplemental Medical Insurance trust funds--while undoubtedly raising issues that will have to be considered.

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