In the 50 years since they were signed into law by President Lyndon Johnson, Medicare and Medicaid have grown into health insurance behemoths, covering one-third of all Americans and accounting for $4 of every $10 spent on health care here. Widely supported by beneficiaries, the programs have been dramatically successful on many fronts: Medicare has extended health insurance to nearly all the elderly, and Medicaid provides vital prenatal and maternity care for almost half of U.S. births. … But the programs’ size is also their biggest challenge.
In the 50 years since they were signed into law by President Lyndon Johnson, Medicare and Medicaid have grown into health insurance behemoths, covering one-third of all Americans and accounting for $4 of every $10 spent on health care here. Widely supported by beneficiaries, the programs have been dramatically successful on many fronts: Medicare has extended health insurance to nearly all the elderly, and Medicaid provides vital prenatal and maternity care for almost half of U.S. births. … But the programs’ size is also their biggest challenge.
Medicare and Medicaid were designed to plug gaping holes in health coverage for retirees and impoverished families back in the days when insurance was provided almost exclusively by employers. To finance Medicare, workers and employers paid payroll taxes into a fund for hospital coverage (Medicare Part A), and retirees paid income-based premiums if they wanted coverage for doctors’ visits (Part B). The cost of insuring poor families through Medicaid was split between the federal government and states that chose to participate — which every state did.
The programs are as large as they are today because they were expanded through the years to cover more people. Congress extended Medicare to the permanently disabled and people of all ages with advanced kidney disease, while also adding coverage for prescription drugs (Part D), with most of the cost falling on taxpayers. Medicaid, meanwhile, was extended to children from families with somewhat higher incomes and, in the 2010 Affordable Care Act, to childless adults and families earning up to 138 percent of the federal poverty level. State Medicaid programs also started picking up the tab for low-income retirees’ Medicare Part B coverage.
… The dollars flowing to doctors and hospitals help keep care available for all Americans, while also financing improvements in treatments and medical technology. There’s also a clear benefit to public health in providing a third of the population access to care that might otherwise be unaffordable. Finally, bringing more people under the insurance umbrella helps the effort to deliver more preventive care, manage the treatment of chronic disease and address problems before they become acute.
On the other hand, these programs are staggeringly expensive — together, they cost more than $1 trillion annually — and they’re expected to gobble up a growing percentage of federal and state budgets in the future. Those pressures have led House Republicans to propose transforming Medicare into a subsidy for private insurance, with a cap on the program’s growth, while giving states Medicaid block grants that would not keep pace with inflation. Those changes wouldn’t address the forces driving up the programs’ costs, however ….
The right approach is to address the roots of the growing costs. A major factor is how many people the programs reach. The retirement of the baby boom generation is causing Medicare enrollment to increase by more than a third during the coming decade … Medicaid costs, meanwhile, would shrink if more Americans were able to climb out of poverty and into higher-paying jobs.
… Another problem is the incentives built into the health care system that promote excessive spending. Here is where policymakers have been making some progress.
… Because they account for so much of the annual spending on health care, Medicare and Medicaid can lead the efforts to promote more efficient care.
Lawmakers should look at the programs as the means to solve larger spending problems in the health care system as a whole, rather than simply trying to cut the federal taxpayers’ bill.
— Los Angeles Times