MedicareLecture

MedicareLecture - Medicare: Outline Simple OLG framework...

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1 Medicare: Outline Simple OLG framework for analyzing Medicare Current reform proposals Fiscal and generational imbalances
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2 Medicare: OLG Model Suppose Medicare is introduced in period 2 Tax of 1% on young (C); finances health care for old generation (B) of $0.15 per capita In period 3, the cost of health care per capita increases to $0.50 To finance this, would need to increase tax rate on D to 15%
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3 Medicare: OLG Model Generation No. of Individuals Medicare Tax Rate (when young) Medicare Benefits per capita Net Lifetime Tax Rate A 100 0% 0 -10% B 100 0% $0.15 -5% C 150 1% $0.50 -5% D 50 15%
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4 Medicare: OLG Model Or if the govt wants to maintain a lower tax rate on the young, Some of the medical “needs” of the elderly in period 3 will have to remain unmet . . . Or some combination of higher taxes and lower levels of medical care will have to be implemented → Medicare “crisis”
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5 Fuchs: Medicare “Myths” Growth in Medicare expenditures is due primarily to demographic change The rate of increase in Medicare spending can be slowed without significantly reducing medical services Means-testing Medicare benefits will not have significant effects on work incentives
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6 Sources and Uses of “Full Income”
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7 Sources and Uses of “Full Income”
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8
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9 Gokhale and Smetters (2003) Background: Government activities are increasingly shifting from the provision of traditional public goods to the provision of social
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This note was uploaded on 04/08/2008 for the course ECON 253 taught by Professor Damika during the Spring '08 term at UConn.

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MedicareLecture - Medicare: Outline Simple OLG framework...

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