Medicare and Medicaid

Summary / Explanation

Medicare and Medicaid are pivotal components of the United States healthcare system, each serving distinct purposes. Both are government programs involving public health insurance coverage. However, each faces distinctive challenges and varies in eligibility, benefits, and historical significance.

In 1927, during J. Calvin Coolidge's presidency, the Committee on the Cost of Medical Care was assembled by Isidore S. Falk, who served as its director. "Medical costs should be placed on a group payment basis through insurance, taxation, or both," he stated.[1] In 1949, President Harry S. Truman proposed a universal health care system. On July 30th, 1965, in Independence, Missouri, President Lyndon B. Johnson signed 2 titles of legislation under the Social Security Act: XVIII and XIX.[2][3] "Because the need for this action is plain, and it is so clear indeed that we marvel not simply at the passage of this bill, but what we marvel at is that it took so many years to pass it," Johnson pronounced.[1] This signified the practical conception of Medicare and Medicaid. Harry S. Truman would be the first individual to sign up for Medicare.[1]

The United States Department of Health and Human Services houses the Centers for Medicare and Medicaid Services, a federal agency headquartered in Baltimore, Maryland, that administers Medicare and Medicaid while regulating private supplemental coverage programs such as Medigap.[4]

Medicare extends health coverage to Americans aged 65 and older. Its goals initially focused on older adults; coverage later expanded to disabled individuals receiving Social Security disability insurance, those with dialysis or transplant-dependent end-stage renal disease, and those with amyotrophic lateral sclerosis.[2] Medicare initially included Part A (Hospital Insurance) and Part B (Outpatient Services), a combination typically referred to as traditional Medicare. This was later expanded in 1977 to include Part C (Medicare Advantage) and again in 2003 to include Part D (Prescription Medications).[1]

Medicaid was established to allow low-income individuals access to health insurance and extend healthcare services to a broad category of adults and children who meet eligibility and benefit qualifications, including household income, citizenship, and age.[5][6] Although established under federal ordinance, Medicaid has cooperative state involvement with state-dependent eligibility standards and policies.[5]

Clinical Significance

Medicare and Medicaid cover a considerable fraction of the United States population; more than 90% of older Americans are Medicare beneficiaries, with a projected increase set to exceed 81.8 million individuals by 2030.[7] Over 80 million people are covered under Medicaid, making it the most extensive domestic health insurance program.[8]

The sheer magnitude of individuals dependent on Medicare and Medicaid makes it clinically significant by volume, with particular attention paid to baby boomers. According to the United States Census Bureau, 20% of the population is expected to be 65 or older and eligible for Medicare by 2029.[9] In 2015, only 2% of older adults in the United States were uninsured because of Medicare.[7]

Issues of Concern

As impactful as Medicare and Medicaid have been, concerns surround these healthcare programs, including long-term fiscal sustainability and complex reform challenges. Medicare is the largest single source of health spending in the United States, with approximately $671.2 billion utilized in 2020.[8][10] In like manner, Medicaid drew out 27.2% of state funding in 2021, placing a significant burden on federal administrative budgets in the face of rising healthcare costs.[8]

Medicare trustees predicted insolvency by 2026, however economic stress from the COVID-19 pandemic shortened that prediction to 2024.[11] Despite this financial stress, Medicare has the highest projected spending and enrollment growth among significant healthcare payers.[12]

Progress is not without change, and advancement is not without reform. In March 2010, President Obama signed the Patient Protection and Affordable Care Act (PPACA) into law to increase health insurance quality and access while reducing costs through eligibility standardization expansion.[13] This evolution reflected improvements in the form of increased Medicaid coverage by 9.8% and more participation in annual checkups, though some challenges to access persist, including linguistic and cultural barriers.[6][14]

Despite this reform, challenges still exist for beneficiaries navigating the intricacies of Medicare and Medicaid. Many guidelines are seemingly antiquated. One example seen in current Medicare policy states that coverage to beneficiaries will only cover skilled nursing facility rehabilitation care under Medicare Part A following an inpatient hospital stay of 3 nights. This policy was established in 1965 when post-acute care was scarce.[15] 

Another example is apparent when evaluating the hospice system; approximately twenty million people in the world will require various aspects of care in their final life stages.[16] Despite increased hospice enrollment over the past 20 years, Medicare beneficiaries only spend 12% to 15% of their last year of life utilizing hospice services despite known positive associations with hospice, including increased quality of care.[17][18] Literature suggests that Medicare beneficiaries enrolled in Medicare Part C have higher rates of hospice enrollment with fewer interventions of low clinical value than traditional Medicare despite the same recertification guidelines: 2 90-day benefit periods followed by unlimited 60-day benefit periods.[17][19][20] Prior to 2024, more individuals were enrolled in traditional Medicare than Medicare Part C. The predominance of Medicare Part C is vital given the documented differences in quality of life and hospice utilization between these options, coupled with increased Medicare spending in the final 12 months of life, typically amounting to 25% of annual outlays.[21][20]

Complexities have adjusted over time; some reforms bring positive change, while others fail to address opportunities for improvement. Growth will require multifaceted innovation and enhanced accountability in the face of social determinants of health. Despite these challenges, Medicare and Medicaid remain critical components of the United States healthcare system, providing essential coverage and access to healthcare for millions of Americans.