Medicare

Download this backgrounder as a World document

Worth Reading

Background

As people get older, they tend to get sicker. You've probably seen this yourself with your parents and grandparents. According to the Centers for Disease Control and Prevention (CDC), those 65 and older (usually called “the elderly” in the media) are nearly twice as likely to need to take pills in order to stay healthy; they are also much more likely to require hospitalization -- in fact, the CDC estimates that nearly 25 percent of those aged 65 and up are in “fair or poor health.”

In order to help older people struggling with health problems, the U.S. government created the Medicare program in 1965. Medicare provides near-universal health insurance for those 65 and up – meaning that doctor's appointments, hospital visits, pills, and other kinds of health care are paid for by the federal government. The program currently insures 45 million people (not all are elderly – Medicare also covers younger people with disabilities, such as kidney disease). Projections show that nearly 80 million people will be covered by Medicare by 2030 due to America's aging population (today's median* age of 36.8 years will be over 39 years by 2035). Nearly half of all Medicare recipients have incomes below the federal poverty line.

Medicare is one of the most popular federal programs, and is widely considered to be a “third rail” in American politics, meaning that if a politician “touches” Medicare (by slashing benefits or doing away with the program entirely), it will destroy his or her political career.

The program is divided into four parts, each with their own separate budget: Medicare Part A, which covers hospital stays; Medicare Part B, which covers ordinary doctor's visits; Medicare Part C, added in 1997, which allows Medicare recipients to receive their benefits through private insurance companies, and Medicare Part D, added in 2006, which covers prescription drugs.

Medicare is an expensive program -- in 2009, it cost the federal government $480 billion, and that's expected to increase in the future. Though Medicare is funded by a Medicare tax paid by all employed persons, Medicare Part A's expenses will start outpacing the income generated by this tax by 2024 (though there will still be enough money to cover most benefits, and Medicare Part B will still have a balanced budget). This long-term budget problem is one of the looming governmental crises, and it is expected to be a major part of upcoming budget talks between President Obama and the Republican-held House of Representatives in March.

*meaning that half of all people are above this age, half of all people are below it.

What the Left Says

Medicare is one of the fundamental parts of the social welfare state, along with Social Security and the similar Medicaid program, which provides health care for people in poverty and/or with limited incomes. In order to “fix” Medicare (meaning making the program fiscally stable), President Obama has proposed raising Medicare premiums, increasing the eligibility age for Medicare benefits from 65 to 67, and increasing Medicare payroll taxes.

What the Right Says

The right has long had a conflicted relationship with Medicare, and the concept of government health insurance in general. In the 1960s, Barry Goldwater and Ronald Reagan called the program socialistic, and there have been concerns that Medicare offers low-quality health care outcomes. Today, conservative politicians generally express support of Medicare due to its overwhelming popularity with voters – George W. Bush signed into law Medicare Part D, which covers prescription drugs, in 2006 – though cost-cutting reform plans by prominent Republicans like Paul Ryan would change the nature of Medicare by introducing vouchers for seniors to buy private (as opposed to government) insurance plans.

Historical Background

The earliest government health insurance program was introduced in Germany in the 1880s, part of Otto von Bismarck's social welfare reforms,, the first of their kind anywhere in the world.

With the increasing complexity of health care in the early twentieth century (sparked in part by the development of new technologies like x-rays, electrocardiographs, and antibiotics, along with the general increase in the complexity of medical knowledge), health care costs began to rise dramatically.

In the 1930s, Democrat Franklin D. Roosevelt tried to include some form of government health insurance in his New Deal reforms, but failed in the face of intense resistance from the American Medical Association (AMA). His successor, Harry S. Truman, also pushed hard for national health insurance after World War II, but again failed due to strong AMA resistance (a similar effort, incidentally, succeeded in Britain, leading to universal health care through the National Health Service, established in 1948).

Republican President Dwight D. Eisenhower was little interested in expanding the social welfare state, but in 1960 he signed the Kerr-Mills Act, which created a federal program to subsidize individual state health care programs for the elderly. John F. Kennedy called Kerr-Mills “grossly inadequate” in his 1960 campaign and proposed a program he called “Medicare.” Again, the AMA fiercely resisted, even enlisting the aid of Hollywood star (and future president) Ronald Reagan to act as spokesman against Medicare (he called it the first step toward socialism in the United States).

However, two things happened: one, Kennedy was assassinated and his successor, Lyndon Johnson, pushed most of Kennedy's social legislation through Congress – the Great Society programs. Two, the stance of the public changed, due both to increasing medical costs and an aging population (the elderly made up 10 percent of the population  in 1965, up from 4 percent in 1900, though still a far cry from the 2030 projections). Medicare passed in 1965, along with the Medicaid program for low-income Americans.

Since 1965, Democrats have been trying to expand national health insurance to cover all Americans, though not necessarily through expanding Medicare. (And indeed, the Affordable Care Act of 2010, which  did comprehensively expand health insurance to cover almost all Americans, did so through a combination of various policies, most significantly and controversially through mandated purchasing of private insurance plans.)

Medicare has since developed into the so-called “third rail of American politics” – if a politician touches it, he or she risks political suicide (and in fact one argument frequently employed by critics of the Affordable Care Act was that it would take money away from Medicare). But with a population that continues to age and with medical expenses that continue to climb, the future financial stability of Medicare is in doubt.

Questions