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Because of demographic, economic, and social pressures, it is likely that public programs benefitting the elderly population will be subject to much public debate and calls for the reform in the next few years. This paper presents an analysis of two prototypical reforms that are based on alternative views of government's role in caring for the elderly. One view focuses on means-testing as a method for restricting the role of government to caring for the poor. The second view focuses on universal standards of care for the poor. The purpose of the analysis is to assess the implications of these two alternative views of the role of government as the basis for altering public support for the elderly. The authors show that either view of government results in a redistribution of public resources so that basic medical care, long-term care, and food and shelter needs of all poor elderly are met. The redistribution, however, involves a large reduction of public support for healthy, non-poor elderly.

This article analyzes the financial structures of the prevailing public and private health insurance mechanisms. Based on this analysis, it was concluded that the financial structures of health insurance mechanisms are deficient in that they neither produce efficiency in the consumption of health services, nor generate efficiency in the production of health services. On the other hand, closed-end systems of finance, such as the health maintenance organization (HMO) or the new Arizona Health Care Cost-Containment System (AHCCCS), give more promise of achieving such efficiencies. The AHCCCS represents an important innovation in the public financing of health care, and, for policy purposes, should be considered a viable national alternative for the reform of Medicare and Medicaid.