In How to Fix Medicare: Let's Pay Patients, Not Physicians, health economist Roger Feldman argues that a radical shift in Medicare policy is not only possible but imperative. Under Feldman's "medical indemnity" proposal, Medicare would pay each patient a fixed amount of money, reserving large subsidies for sicker people. Patients, in turn, would select their own medical services from providers who would set their own competitive rates.
A medical indemnity system would do away with the distortion in patients' incentives wrought by conventional Medicare coverage. Given a fixed amount of money to spend on medical care, patients would have strong incentives to shop for the combination of services, providers, and prices that most closely meet their needs. Implemented wisely, medical indemnities would expand consumer choice, improve program efficiency, and simplify the Medicare program.
