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How Government Policy Inflates Health Care Costs: The Curse of Cross-Subsidies

Cross subsidization

Cross subsidization is the practice of charging higher prices to one type of consumer in order to artificially lower prices for another group. 


Medicare is the federal health insurance program for people who are 65 or older. Workers contribute Medicare payroll taxes throughout their working lives and receive Medicare benefits once they reach retirement age. Medicare covers hospital insurance (Part A), supplementary medical insurance (Part B), and prescription drug coverage (Part D).


Medicaid is a state-run and partially federally funded program that provides health insurance to low-income Americans.