Because the defined-contribution approach has no set benefit package, its average benefit package could gradually deteriorate as plans competed with one another for participants. Cost considerations would continue to make benefit expansion problematic under the incremental approach. The sooner the nation begins restructuring Medicare, the more options policymakers will have and the less wrenching the changes will be. Conditions for restructuring are favorable on a number of fronts. The economy is strong and can accommodate relatively painlessly the unavoidable dislocations arising from a major program restructuring.
Demographic conditions are also favorable.
The next decade will see a lull before the demographic storm breaks as the first of the baby boom generation turns 65 in 2011. This will give any new institutional structures created as part of Medicare reform time to become established before the boomers begin to turn 65. Health market conditions too are conducive for Medicare restructuring. Providers, particularly hospitals and physicians, are in excess supply. As employer-sponsored plans have constrained their payments to providers, Medicare payments have become relatively generous.