Medicare reform: who pays and who benefits?

As Medicare's share of federal spending and gross domestic product (GDP) rises, the program may have increasingly important consequences not only for the health of Americans but also for their net income and financial well-being. We use incidence analysis to study payments and benefits in Medicare to various generations and income groups. We find that Medicare actually provides larger net dollar transfers to wealthier beneficiaries, although the "insurance value" of these dollars is greater for low-income households. We then evaluate a range of proposed Medicare reforms with regard to their impact on the distribution of both health care and disposable income.