RETHINKING MEDICARE REFORM

Many health policy analysts argue that demographic pressures, the infl ationary nature of fee-for-service payment, and the uncontrollable nat ure of defined-benefit insurance make Medicare unsustainable in its cu rrent form. They assert that Medicare can remain fiscally viable in th e next century only by embracing a voucher system and exposing benefic iaries to the economic consequences of their medical care decisions. W e argue here, however, that Medicare need not rely on vouchers or on p lacing financial incentives on individual beneficiaries to control cos ts. Instead, we contend that Medicare can control expenditures the way most other industrial democracies do: through budgetary caps and cent ralized regulation of provider payments.