Medicare managed care: budgetary and tax implications.

The Medicare program is in precarious financial condition because of underfunding and structural defects in the way it pays providers of medical care. Given the prevailing anti-tax sentiment, the more promising route for attaining Medicare fiscal solvency would seem to lie on the expenditure side of the equation. This paper proposes a managed care model for reform that relies on an efficient and already-tested form of competitive bidding for the provision of medical care. It concludes with a discussion of short-run, intermediate-run, and long-run budgetary and tax implications for the Medicare program.