Perhaps it was prescient. Fifty years ago on July 30, many baby boomers were listening to the number one record I Can’t Get No Satisfaction by the Rolling Stones at the time President Lyndon B. Johnson signed legislation creating Medicare. Many of those same boomers (and even the Stones) are now seniors and finding no satisfaction with the health care program, which no longer resemble the original plans. Meanwhile, future beneficiaries (or those who hope to be) see substantial amounts come out of their paychecks to keep the program afloat.
When Medicare (and its sister program for lower income people, Medicaid) became law on July 30, 1965, Johnson expressed belief that they would provide “the miracle of healing to the old and to the poor.” The architects of Medicare and Medicaid determined that private insurance was out of reach for many older and low-income people in the U.S., who could not obtain affordable coverage (sound familiar?). They sought to establish social insurance, which could eventually be extended to cover the rest of the population.
The legislation enacted five decades ago supported the President and Democratic Party platforms. However, unlike the Affordable Care Act (ACA), it had support for many Republicans, too.
The White House is claiming the ACA is a logical extension of Medicare and Medicaid. Administration officials have state the hope that the ACA will eventually be as “widely accepted” as those programs are now. However, they are ignoring the problems, financial shortfalls, and growing numbers of health care providers who do not accept patients on Medicare, Medicaid or ACA plans. Furthermore, the original designs of the new 1965 plans and the ACA offerings differ greatly, but both have wound up with a large population in health maintenance organizations (HMOs) or limited provider networks to control costs.
When Medicare began, people in the plan could go to any medical care provider who would take them, and the government paid the providers fee for service rendered. In the early 1980s, the Reagan administration and Congress established incentives for insurance companies to contract with Medicare. This led to a rise in enrollment. So, federal officials tinkered with (i.e., lowered) reimbursement rates.
In the last decade, health insurance companies aggressively began marketing supplemental plans to aging baby boomers used to managed care and HMO plans from their employers. The supplements, which have monthly premiums, are the only way to get coverage for prescription drug costs, medical care on vacations outside the U.S. and other things not offered in traditional Medicare.
Today’s Reality and Issues
Now, more than 30 percent of the 55 million people in Medicare, according to the New York Times, are in private health insurance plans through Kaiser Permanente, Anthem, Humana and others. Those participating are limited to providers in the networks of those insurance companies. Conversely, 30 percent of those who do not opt to pay for the additional supplemental coverage report having trouble finding a doctor who will treat them, largely because the government reimbursement rates have dropped lower than the cost of some care provided.
In spite of reimbursement cutbacks and the advantage of managed care plans, Medicare spending far exceeded the original expectations and is becoming unsustainable. In its first year, the government spent $3 billion. The Congressional House Ways and Means Committee estimated that the program would cost $12 billion by 1990. They were missing a zero! Medicare wound up costing $110 billion that year. Last year, the cost grew to $511 billion and is expected to hit $1 trillion in about a decade.
There are two ways for Congress to fix the program. Both of which will take political courage in the face of upset voters. They can change the age when Americans are eligible for Medicare, and raise the cost to those on the program. (Cutting reimbursements further would not work; it would drive more doctors away from accepting patients on the program.)
When Medicare was established 50 years ago, eligibility was set at age 65; life expectancy at the time was 70. Now, the eligibility is still 65, but average life expectancy is 79 and rising. Much like Social Security has done, raising the starting age in the future for Medicare recipients would help with financial stability.
The other scenario is to raise rates. Millions of seniors could face increases in their monthly payments for Medicare Part B and the supplements. However, those who do not purchase the additional coverages have their premiums tied to cost-of-living adjustments for Social Security benefits. Those adjustments lag way behind the increasing cost of the health care services rendered.
So, at age 50, Medicare is proving that I Can’t Get No Satisfaction applies to medical care providers squeezed with reimbursement cutbacks, members paying more for coverage and having issues finding a provider, and younger people in the workforce looking at the deductions on their paychecks. The program is showing its age and whatever fixes are established are likely to have broader impacts now with ACA and Medicaid too.
Written and edited by Dyanne Weiss
Wall Street Journal: Medicare at 50: Hello, Mid-Life Crisis
St. Louis Post-Dispatch: Uncertain financial outlook for Medicare as it celebrates anniversary
Investor’s Business Daily: Medicare’s Prognosis Is Far Worse Than Dr. Obama Says
New York Times: As Medicare and Medicaid Turn 50, Use of Private Health Plans Surges
Cake photo courtesy of Dark Dwarf’s Flickr page – Creative Commons license
Johnson bill signing photo courtesy of White House (public domain)