Journal of Economic Perspectives: Vol. 14 No. 2 (Spring 2000)


Quick Tools:

Print Article Summary
Export Citation
Sign up for Email Alerts Follow us on Twitter


JEP - All Issues

Making the Transition to Prepaid Medicare

Article Citation

Saving, Thomas R. 2000. "Making the Transition to Prepaid Medicare." Journal of Economic Perspectives, 14(2): 85-98.

DOI: 10.1257/jep.14.2.85


The Medicare system is facing a financial crisis brought on by the combination of rapidly rising consumption of health care services by beneficiaries and financing based on generation transfers. This paper simulates a transition to prepaid Medicare where each generation puts aside funds for the health care it will demand later in life. By prepaying Medicare we increase the nation's capital stock which in the long run will allow the nation to enjoy greater consumption for both working and retired generations and we achieve immunity from generation size shocks. By transferring the baby boomers and younger generations into a prepaid system we can complete the transition in less than fifty years and achieve an ultimate contribution rate of 1.26% of taxable payroll instead of the more than 12% of taxable payroll that will be required if we remain in the status quo.

Article Full-Text Access

Full-text Article (Complimentary)


Saving, Thomas R. (Private Enterprise Research Center, TX A&M U)

JEL Classifications

I18: Health: Government Policy; Regulation; Public Health


View Comments on This Article (0) | Login to post a comment

Journal of Economic Perspectives

Quick Tools:

Sign up for Email Alerts

Follow us on Twitter

Subscription Information
(Institutional Administrator Access)


JEP - All Issues

Virtual Field Journals

AEA Member Login:

AEAweb | AEA Journals | Contact Us