Healthcare in America: Medicaid and Medicare

This lack in healthcare access is despite the best efforts by our government. Health care for all within one or two decades was generally thought to follow the enactment of Medicare and Medicaid in 1965. However, the vast rises in expenditures from $41 billion (~6% of GDP) in 1965 to over $1 trillion (14% of GDP) in 1997 were never anticipated (1).

In order to cut costs, federal and state governments have adopted more and more managed care propositions. The Balanced Budget Act of 1997 created new alternatives such as medical savings accounts, preferred provider organizations, enhanced fee-for-services and provider sponsored organizations. Other efforts to limit spending have included raising the Medicare eligibility age from 65 to 67 years of age and by raising the Medicare B premiums for those of incomes more than $50,000.(1,2)

In 1965, the private health insurance sector and the government each contributing about a quarter of the nation’s health care spending with the remaining 50% being spent out-of-pocket by consumers. (1)Since then, out-of-pocket spending has declined to about 18% with the federal government spending two thirds. It was not until the mid 1980s that the ever increasing expenditures fell under scrutiny. The cost-plus reimbursement for hospital inpatient care by Medicare was replaced by a prospective payment system. Employers began using managed care plans to control their annual premium hikes. The annual increase for Medicare, however, was around 10%. (1) Since the passage of Medicaid and Medicare, there have been continuous efforts to finance the programs.

For example, the General Accounting Office (GAO) once predicted that Medicare would go bankrupt by 2002 if Congress did not enact a Medicare-focused Balanced Budget Act. After the 1998 Balanced Budget Act, the GAO’s new estimates were 2008. Yet another government representative, The Bipartisan Commission on the Future of Medicare cited the expected the year of solvency to be 2015 while the latest estimate by the Medicare trustees is 2025. (3)
Over 69 million elderly and disabled are expected to be eligible for Medicare by 2025. At the present economic growth rate, the proportion of the GDP dedicated solely for Medicare is expected to almost double from 2.7% in 1998 to 5.32% in 2025 – making the Medicare program’s financial burden even more for the nation as a whole.

The segment of the population 65 years of age or older and the proportion over 80 are estimated to increase by 33 percent and 14 percent, respectively, between 2000 and 2020. (4) However healthy the elderly are in the future, as compared with earlier generations, the vast increases are almost certain to result in increased expenditures for their health care.

References:

1.Ginzberg E. The changing US health care agenda. JAMA. 1998; 279: 501. 12

2.Landers SJ. Commission looks at ways to reform Medicare. Am Med News. 1999; 42: 1. 27

3.Trustees Expect Medicare to Remain Solvent until 2025. Healthcare Financial Management. 2000; 54: 10.

4.Families USA. Cost Overdose: Growth in Drug Spending for The Elderly 1992-2010. Available at: http://www.familiesusa.org/site/DocServer/drugod.pdf?docID=726.