A tale of four cities: Medicare reform and competitive pricing

The current payment system for Medicare+Choice (M+C) plans is based on pric es calculated from administrative records. This system has been criticized as arbitrary, inefficient, and unfair. Most Medicare reform proposals would replace the current payment system with some form of competitive pricing. However, efforts over the past five years to demonstrate competitive pricin g for M+C plans have been blocked repeatedly by Congress, even when the dem onstrations were directly responsive to a congressional mandate. In the abs ence of political support, a demonstration of competitive pricing may be in feasible, and Congress could be forced to take the risky step of implementi ng broad Medicare reforms with very little information about their effects.