A half century seems like a good time to celebrate and take stock of Medicare and Medicaid—our two bedrock programs providing health security to millions of older adults, people with disabilities, children and low-income families. Not only did these programs open the doors to health and economic security to their beneficiaries, they have played an essential role in breaking down the (legal) segregation in our health care system and supporting major technological advances in health care. (An under-appreciated bit of Medicare history: prior to passage hospital wards were segregated, but hospitals had to desegregate in order to receive Medicare funds
As I reflected on this anniversary, what came to mind was this quote that is often attributed to Thomas Jefferson, but appears to actually have been said by the abolitionist Wendell Phillips: “Eternal vigilance is the price of liberty” and, he went on to add “power is ever stealing from the many to the few.”
No victory is ever permanent. Once it has been won it must be defended, essentially forever. While ACA proponents aspire for the law to achieve the popular status of Medicare and Medicaid, just last week a major political figure mused out loud about the need to end Medicare (at least as we know it). Although both programs were passed with bipartisan support, there remains a segment on the far right that has never accepted them. If you are looking for speculation as to why you can look here and here.
Despite, and in part because of, their great achievements, the programs face serious threats and challenges that must be overcome if they are going to survive for another 50 years.
Challenges for Medicare
Persistent efforts to change the program from defined benefit to defined contribution are the biggest threat to the future of Medicare. That effort has two parts, one that may not undermine the program, but is well underway, and another that remains a right wing talking point (for now).
The first part of the original, and still active, plan to get Medicare to “whither on the vine” was to move people away from “traditional Medicare” and into a more privatized system. Medicare Advantage has been the vehicle for accomplishing this. Medicare Advantage plans’ deliberately higher payment rates have helped it become a firmly established program, with nearly one third of Medicare beneficiaries enrolled. While the ACA has dialed back those overpayments, for many beneficiaries, Medicare Advantage is simply the most cost-effective option.
The real prize for those who want to take down the program, is moving from defined benefit to defined contribution. Under a defined contribution scheme, instead of being guaranteed a set of benefits for no more than a certain cost, the federal government would make capped per-enrollee payments that could be used to purchase private insurance. Most analysts anticipate that the size of the federal payments would not keep up with the rising cost of health care, shifting more and more cost onto beneficiaries over time (indeed, this is a feature not a bug–it’s how defined contribution saves money).
While opponents are active in attempts to destabilize Medicare, there is a competing vision for the future of the program. The goal is to progressively improve the quality and efficiency of the program, particularly for the sickest beneficiaries who use most of the program’s dollars. Many ACA provisions—accountable care organizations, bundled payments, etc.—are an effort to implement that vision and improve the long term affordability of the program from a budget perspective without shifting costs onto beneficiaries. These efforts, while in the early stages, offer the promise of both better care and lower cost.
Challenges for Medicaid
Medicaid is the program that everyone loves to hate but hates to cut. Federal budget hawks worry about the program’s cost and state officials struggle to fund the program while still paying for other state services. Providers regularly decry the low payment rates. But when it comes down to it, cutting Medicaid is generally an unattractive option for states facing a budget crunch. Since most of the savings from any cut go back to the federal government, Medicaid cuts represent a high pain, low gain approach to states managing budget challenges. And while providers grumble (and sometimes sue) over Medicaid rates, they are far better than nothing at all.
Again, there is a draconian vision for the future of Medicaid—a federal block grant to states that doesn’t keep pace with rising health care costs. Such a block grant would come with few strings attached and leave beneficiaries increasingly unable to afford or access medical care.
While the block grant debate is perennial in Congress, less extreme, but more pressing challenges loom largely from the fallout from the Supreme Court decision that created the coverage gap. As states debate closing the gap, two main threats have emerged—increased cost sharing and restrictive eligibility rules.
The effects of cost-sharing on low-income people are clear and well known. Premiums will discourage enrollment and co-payment will be a deterrent to seeking necessary medical care. Notwithstanding these negative effects, some degree of cost-sharing is often supported even by proponents of closing the coverage gap. The principle of universal contribution has to be balanced against the potential for economic hardship–a point that too often gets lost in the policy debate where cost sharing is often wielded as a strategy to suppress enrollment and use.
The other threat, which has made no headway thus far under with federal officials, is to return Medicaid to its welfare roots (albeit with a twist). In 1996, welfare reform severed the link between cash assistance and health care but some state officials are trying to shoehorn Medicaid back into a welfare program (think work requirements) instead of allowing it to serve as the foundation of our nation’s multi-layered coverage strategy.
If block grants, skimpy coverage, work requirements and financial barriers are one dystopian vision for the future of Medicaid, what about the other side? Is there a more positive vision?
Indeed there is. Like Medicare, there are efforts across the country to make Medicaid work better. Recent federal regulations are an effort to improve the quality of care for beneficiaries. As with Medicare, states are looking at ways to change how care is delivered and paid for to better and more efficiently provide care to high-need, high cost beneficiaries. The ACA has also created tools that can be used for more sweeping changes. Examples include the global budgeting waiver in Maryland and the now stalled single payer effort in Vermont.
Can the more optimistic vision of the future of Medicaid and Medicare prevail?
It will not be easy. One challenge to the financial sustainability of both programs is the growing cost of prescription drugs (a topic for another day). However both Medicaid and Medicare remain popular at their 50th anniversary and are strongly supported by organized consumers and providers. If we remain vigilant, Medicare and Medicaid can not only survive for 50 years they can thrive and continue to provide people with access to care and financial protection over the long-term.