In this lesson, you will tackle the question of why Medicare and Medicaid programs can be expensive and what solutions have been proposed to address this. We will consider the benefits provided by these services and the costs involved.
Not-So-Free Health Care
'Finally! Free health care, here I come!,' Judy says as she applies for Medicare coverage a few months before her 65th birthday. She's been paying for private health insurance premiums and copays for most of her life, and she's ready for this new plan provided by the government. Judy hasn't learned yet about the costs of Medicare that she will still have to pay out of her pocket or the price tag to the nation for this care.
This lesson looks at the costs and problems of the Medicare and Medicaid programs, along with some of the potential solutions that have been proposed.
The Basics of Medicare of Medicaid
But first, we look at the basics of these two programs, established by the Johnson Administration in 1965, the year that Judy turned 16 years old and rocked out to 'Stop! In the Name of Love,' by the Supremes.
The Medicare program provides health coverage for aging citizens and permanent residents of the United States age 65 and older. Judy qualifies because she is about to turn 65. The program was groundbreaking in its ability to ease the concern of older adults for how to afford their own care and has had a lasting legacy. It provides support in parts, from Part A to Part D, to cover the costs of a range of services, such as hospital stays, typical medical visits, durable medical equipment, and prescriptions.
However, Medicare does not cover all of a person's health care costs. Some costs are passed on to the patient, and unless a person qualifies for a subsidy, they must pay a monthly premium. Medigap coverage is private insurance that can be purchased to help pay for what Medicare does not.
For those who have very few resources, the Medicaid program may help. Medicaid is a state-run program that provides hospital and medical coverage to those with low income. Each state has its own rules for who qualifies. Typically, only those who have significant need are eligible. Some individuals will qualify for both Medicare and Medicaid.
Both programs are funded by the public and their employers through payroll taxes. So everyone working is contributing to these programs with each paycheck.
According to the Congressional Budget Office of the government, health care spending is the single most important factor for the long-term financial health of the country. Since the time they were developed, the Medicaid and Medicare programs have become more expensive, typically requiring more funding over time. Although the past few years have seen more steady numbers than predicted in 2008, why has the cost climbed in past years, and why is it expected to rise?
Many Americans believe that fraud and mismanagement are major reasons behind the cost increases, but these are only part of the story. A more significant reason for higher costs is that the medical field has developed over time and gained new technologies and techniques. Medicine can provide a great deal more service to someone who experiences health problems than ever before. More possibilities for care can sometimes mean more expensive care. Better care can be good for the patient, like Judy, and yet there are costs involved that must be paid.
Many of us never see the real cost of the services we receive. We mainly care about whether our insurance covers the cost but don't think too much about the rest. For instance, the average Medicare payment to provide a major cardiac procedure to one individual was over $20,000 in 2012. These costs can easily add up for the government programs providing for the care of older adults, who tend to have the most health problems.
Another issue is that the percentage of older adults is on the rise. This means that during this period of history, the portion of the population that is over 65 is growing, and so the overall cost for Medicare will be greater.
Solutions and Alternatives
Judy worries that reducing costs will mean that Medicare will no longer exist or that doctors will allow patients to go without needed treatment. However, the government would not want patients to see reduced health outcomes. Instead, to help address the rising costs of Medicare, one idea is to focus on the effectiveness of treatments so the government and the public can get the most bang for their buck.
Various geographic regions sometimes choose to use different treatments due to the norms and standards of the local community or their understanding of certain medical approaches. For instance, if Judy goes to her family doctor in Iowa, he may have a different way to treat her than if she went to a doctor in another state or another country.
Many propose providing medical professionals with more information about the comparative effectiveness of different options. This means more data would be made available about the impact of various treatments available for addressing a particular health condition. A doctor treating Judy in Iowa could then use this information to recommend the most effective course of treatment for her situation to ensure that money is spent most appropriately.
When Judy's provider is comparing treatments, there can sometimes be a financial factor that influences the provider's recommendations. To address this, President Obama's Affordable Care Act includes a program called Medicare's Accountable Care Organizations program. These voluntary groups of providers are rewarded for more efficiency in the use of medical resources rather than relying on the most expensive treatments when they are not necessary. Other solutions from the Act include addressing fraud and promoting preventative health measures.
Medicare provides health coverage for aging citizens and permanent residents of the United States age 65 and older. The program is funded by the government mainly through monthly premiums and taxes on wages and employers.
Since Medicare does not pay for all of a person's costs, Medigap coverage is private insurance that can be purchased to help pay for what Medicare does not.
For those who qualify due to limited resources, Medicaid is available. This program is a state-run program that provides hospital and medical coverage to those with low income. Some individuals will be eligible for both Medicare and Medicaid.
These programs have grown in cost since they started in 1965 and are anticipated to rise in the future. Factors that have influenced this increase include technological improvements in the field of medicine and more older adults than in past time periods.
To help address cost concerns, many propose providing medical professionals with more information about the comparative effectiveness of different options. This means that doctors could see more data on the impact of various treatments available for treating a particular condition before making a decision about what route to choose. Other strategies include creating incentives for lower-cost treatments when effective, reducing fraud, and increasing attention to the prevention of chronic problems.
Now that you are done with this lesson, you should be able to:
- Describe the purposes of Medicare and Medicaid programs, as well as Medigap insurance
- Understand how Medicare and Medicaid programs are funded
- Explain why the cost of government health programs has increased over time
- Recall some methods to control healthcare costs