the Medicare program's future may see unprecedented advances in improving the lives of its elderly and disabled enrollees, as well as a sound financial future.

The reconciliation bill structures a market that will allow Medicare enrollees to choose to join (or leave) private health plans that provide Medicare benefits. The proposed design is similar to the Federal Employees Health Benefits Plan (FEHBP), the nation's largest health insurance purchasing arrangement, which now covers some 9 million government employees, their families, and retirees. In this model, health plans are held accountable to the federal government for meeting basic statutory conditions of participation and, via consumers' ability to switch plans, to enrollees for excellence in meeting their needs. This paper is intended to provide a framework for the Institute of Medicine (IOM) committee to discuss the key accountability issues in structuring this new Medicare health plan market. It is organized into three sections:

  • an overview of how governments structure markets, including the traditional fee-for-service health care market;
  • a consideration of how the new Medicare model would differ from the traditional health care market in terms of who is accountable, what they are accountable for, and how they are held accountable; and
  • a discussion of three strategies for how federal legislation might structure the respective influences of government, consumers, and professionalism differently to achieve excellent performance from Medicare health plans.

Accountability in Context

In the modern world, a vast amount of day-to-day activity is organized around "the market." Individuals purchase (rather than produce) most of the goods and services that they use; most individuals work for organizations that exchange their products for money. Although the concept of the market can be a useful abstraction, there are many individual markets that differ greatly by the actors involved, how they interact, their industry,



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