Generational Aspects of Medicare

Long-term financial imbalances in the Medicare system make some sort of Medicare reform inevitable. But while the need to reform Medicare is widely acknowledged, understanding about the impact of proposed reforms, or even the current system, is limited. How much is Medicare worth to people? Which generations can reasonably be charged more or receive less in Medicare benefits? Analyzing the consequences of Medicare is difficult because Medicare is more than a cash-transfer program. Unlike Social Security, which provides cash income, Medicare is a health-insurance program, and the benefits of an insurance policy may differ from the cash transfer it makes. Still, understanding the dollar flows is a natural first step in Medicare reform. In this paper, the general aspects of the current Medicare system and some stylized reforms are examined.