A research collaboration of CHP/PCOR and the Stanford Institute for Economic Policy Research (SIEPR) has been awarded a $350,000 grant to conduct a detailed analysis of the Medicare program and develop a comprehensive plan for Medicare reform. Recent controversies over the solvency of Social Security and the far more difficult financial challenges facing Medicare have underscored the timeliness of the project, which is funded by a private, family-run foundation.

"Medicare poses perhaps the most important single challenge to the federal budget in the coming years," according to the project investigators. "Rising per capita health expenditures and demographic change make a fiscal crisis inevitable if Medicare does not undergo significant change."

CHP/PCOR director Alan M. Garber is the principal investigator for the project, which will run from June 2005 through June 2008. The other members of the core research team are Victor R. Fuchs, the Henry J. Kaiser Jr. Professor, emeritus, and a CHP/PCOR core faculty member; John Shoven, the Charles R. Schwab professor of economics and the Wallace R. Hawley director of SIEPR; and Dana Goldman, director of the Program in Health Economics at the Rand Corp.

Assisted by experts at universities and think tanks around the country, the research team will examine and prepare white papers on key issues related to Medicare reform, including: defining eligibility for the program; identifying alternative financing options, such as the use of a consumption tax; changing the structure of Medicare benefits; and estimating the impact of Medicare reform on revenues, expenditures and the health of the elderly. The researchers expect to develop a detailed reform proposal that could be implemented within the next decade.

Garber notes that several weaknesses of the Medicare program that make it a prime candidate for reform. Among them: Medicare relies heavily on an antiquated fee-for-service system that leads to fragmented acute-care services and does not reward high-quality care; the program has little ability to ensure that expensive new technologies are introduced and used appropriately; and there is little connection between the costs of care provided and the benefit patients receive from it.

This project was discussed in an article in the May 25 issue of Stanford Report.