Economic Principles for Medicare Reform

Amitabh Chandra*, Craig Garthwaite

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

1 Scopus citations


In this article, we develop an economic framework for Medicare reform that highlights trade-offs that reform proposals should grapple with, but often ignore. Central to our argument is a tension in administratively set prices, which may improve short-term efficiency but do so at the expense of dynamic efficiency (slowing innovations in new treatments). The smaller the Medicare program is relative to the commercial market, the less important this is; but in a world where there are no market prices or the private sector is very small, the task of setting prices that are dynamically correct becomes more complex. Reforming Medicare should focus on greater incentives to increase competition between Medicare Advantage plans, which necessitates a role for government in ensuring competition; premium support; less use of regulated prices; and less appetite for countless “pay for performance” schemes. We apply this framework to evaluate Medicare for All proposals.

Original languageEnglish (US)
Pages (from-to)63-92
Number of pages30
JournalAnnals of the American Academy of Political and Social Science
Issue number1
StatePublished - Nov 1 2019


  • Medicare
  • health care reform
  • markets in health care
  • value-based care

ASJC Scopus subject areas

  • Sociology and Political Science
  • Social Sciences(all)


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