Medicare and Medicaid: A 40 Year Success Story in Promoting Public Health

Medicare and Medicaid: A 40 Year Success Story in Promoting Public Health

August 1, 2005

Forty years ago this past weekend, President Lyndon Johnson passed legislation creating Medicare and Medicaid, the twin pillars of federal health care for the nation's elderly and poor.  Today, the two programs are shining jewels of progressive social policy together providing health care to 87 million Americans.  Both programs face enormous challenges over the next 40 years as the programs seek to handle millions of baby boomer retirees and the growing ranks of the uninsured.  Here are some progressive ideas for keeping these critical programs vibrant and responsive to 21st century needs:

• Expand Medicaid to help cover some of the 45 million uninsured Americans. Despite Medicaid's efficiency and effectiveness in providing needed health care for the poor, the popular health care program is again under attack at both the federal and state level. Congress is considering $10 billion in Medicaid cuts over five years and states have cut back eligibility and proposed new waivers that give insurers—not patients and doctors—more power to define care. With 45 million uninsured Americans, legislators should be finding ways to expand the program to meet public health needs rather than cutting it and avoiding responsibility.
  
  
• Use Medicare's bargaining power to drive down prescription drug prices for seniors.  Prices for drugs most often used by older Americans are growing at more than three times the rate of general inflation. Unfortunately, the Medicare Modernization Act (MMA) signed by President Bush in 2003 does not include effective mechanisms to lower prescription drug prices.  In contrast, other large purchasers have been able to leverage their purchasing power to get much deeper discounts. For example, the Department of Veterans Affairs is able to negotiate discounts of 50 percent or more.  If Medicare were able to get similar discounts, through negotiation, reimportation, or other means, the "doughnut hole" in the Medicare drug benefit could be eliminated.
  
  
• Eliminate tax shelters in new Medicare law that threaten to undermine job-based health benefits.  Tucked into the MMA was a completely unrelated provision creating Health Savings Accounts (HSAs), tax-preferred savings accounts combined with high-deductible health insurance. HSAs provide no assistance of any kind to Medicare beneficiaries and have potentially severe consequences for other individuals, particularly working Americans who have health coverage through their jobs.  As HSAs become more widely available, they are likely to destabilize employer-sponsored health benefits. Healthier and wealthier individuals will drop their traditional employer health coverage in favor of HSAs, leaving a sicker and poorer population in the traditional, more comprehensive plans. As a result, premiums for those plans will rise; prior studies have found that premiums could double.