The Future of Medicare

Lolita Fields
William Carey University
NMBA 6920

Medicare celebrated 50 years in 2015. Since being passed in 1965 Medicare has been the source of health insurance for nearly 45 million Americans. According to CMS.gov Medicare has a Part A hospital insurance, Part B medical insurance, and Part D prescription drug coverage. There is also a Medicare Advantage Plan which is called Part C. Today there is a challenge of how to finance care to future generations without burdening the economy or taxpayers. Before we look in to the future lets revisit the past starting with the birth of Medicare.
In 1965 President Harry S. Truman proposed a national health care program. He wanted health security for all regardless of residence, station, or race for everyone in the United States. The proposed plan came under scrutiny from the American Medical Association and the bill was not passed.
By 1960 the government recognized there was a problem with access to health care for the senior American population. The Kerr-Mills law was enacted so states could receive federal dollars to provide health care for older poor people in the south. By 1963 only 32 states adopted the Kerr-Mills Act and the program proved ineffective because it only reached less than 1% of the senior population. This laid the foundation for Medicare.
On July 30, 1965 President Lyndon B. Johnson signed Medicare into law. The principles of Medicare was to provide coverage to all people age 65 and older regardless of income and health status. It prohibited any federal interference in the practice of medicine and covered hospital and doctor visits paying providers for each service given to the patient. The Social Security Administration office saw an enrollment of one million in the first week. Medicare ended racial segregation in hospitals since only integrated hospitals could receive reimbursement for treatments.
The percentage of elderly with hospital coverage rose by 41% in 1970. In 1972 Medicare coverage expanded to include younger adults with disabilities and end stage kidney disease. Medicare also began to offer coverage through managed care plans. By 1975 the number of elderly living in poverty dropped by half within a decade.
Hospice benefits were added to Medicare in 1982. In 1983 a new hospital payment system was enacted to help control cost. Medicare began paying fixed rates instead of what a hospital chooses to charge. In 1988 Congress passed the Medicare Catastrophic Coverage Act. The act set limits on out-of-pocket spending and added a drug benefit. It also required only people on Medicare to finance the new benefits. This became the center of many protests. Congress repealed the Medicare catastrophic Coverage Act including the out-of-pocket limit and the drug benefit in 1989.
In 1995 Medicare officials warned Congress that Medicare will not have enough money to pay all hospital bills beginning in 2001. Congress passes the Balanced Budget Act in 1997 to reduce Medicare spending growth. This act created a new formula to control growth in physician payments and expands the role of private pay plans under the new Medicare +Choice program. By 1998 Medicare officials said the financial outlook was much improved.
Congress passed the Medicare Modernization Act in 2003 which added a new prescription drug benefit delivered only through private plans. The drug benefit included catastrophic coverage and the infamous doughnut hole. This act also expanded the role of private health plans in Medicare which is now called Medicare Advantage. Medicare Part D prescription drug benefit took effect in 2006.
In 2010 President Barack Obama signed the Affordable Care Act into law. This act reduces Medicare spending growth and extends solvency payments to providers such as hospitals and home health agencies and reduces Medicare payments to private insurance plans. Part D premiums were increased for higher income beneficiaries and the doughnut hole was phased out. Total Medicare spending increased from seven billion dollars in 1970 to 521 billion dollars in 2010 according to Newman (2013). Out-of-pocket spending on Medicare went from 6% in 1970 to 27% by 2010.
Medicare spending is 15% of the federal budget. That number is expected to steadily grow as health care costs rise and baby boomers join Medicare. Government analyst forecast that the Medicare trust fund will have enough money to pay all the hospital bills until 2024, but not beyond. Medicare spending per person is now growing more slowly than private insurance. The longer term challenge is how to sustain the program while maintaining access to affordable care. According to the Congressional Budget Office, annual Medicare cost will reach over $1.041 trillion dollars by the year 2022.
According to Kaiser’s Policy Option to Sustain Medicare for the Future raising the age of Medicare eligibility from 65 to 67 is under discussion. Attention is also being placed on possibly reforming Medicare’s physician payment system and restructuring Medicare’s traditional benefit design. One proposal that is receiving a lot of attention is the premium support plan which replaces current benefits with standard amount vouchers. Increasing beneficiary premiums, Medicare payroll taxes, and reduce spending for prescription drugs have also been under review. Efforts to sustain Medicare will more than likely be a forever changing endeavor for policy makers as long as the cost of healthcare continues to increase.

References
Cohen, W. (1985). Reflections on the enactment of Medicare and Medicaid. Health care financing review, 3-11. Retrieved from www.ncbi.nlm.nih.gov/pmc/articles/PMC4195078/
Medicare. (n.d.). Retrieved from Centers for Medicare and Medicaid Services: www.cms.gov/medicare/medicare.html
Neuman, P. (2013). Policy options to sustain medicare for the future. Retrieved from www.kff.org/medicare/report/policy-options-to-sustain-medicare-for-the-future/
This day in truman history: President truman's proposed health program. (n.d.). Retrieved from Harry S. Truman Library & Museum: www.trumanlibrary.org/anniversaries/healthprogram.htm