Medicare is the nation’s health insurance program for people aged 65 and over and for certain disabled persons. In FY2008, the program covered about 44.6 million persons (37.4 million aged and 7.3 million disabled) at a total cost of $459.4 billion.
In FY2008, federal Medicare spending represented about 13% of the total federal budget. Medicare is an entitlement program, which means that it is required to pay for services provided to eligible persons.
Since Medicare was enacted in 1965, it has undergone considerable changes. First, program coverage was expanded to include the disabled and persons with end-stage renal disease (ESRD). Over time, increasing attention was placed on stemming the rapid increase in program spending, which outpaced projections, even in the initial years. This was typically achieved through tightening rules governing payments to providers of services and stemming the annual updates in such payments.
Medicare moved from payments based on “reasonable costs” and “reasonable charges” to payment systems under which a pre-determined payment amount is established for a specified unit of service. At the same time, beneficiaries were given the option to obtain covered services through private managed care arrangements. Most Medicare payment provisions were incorporated into larger budget reconciliation bills designed to control overall federal spending.
In 2003, Congress enacted a major Medicare bill, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). This legislation placed increasing emphasis on private sector management of benefits. It also created a new voluntary outpatient prescription drug benefit to be administered by private entities. Further, it introduced the concept of means testing into what had previously been strictly a social insurance program.
The rapid rise in Medicare spending continues and there is great concern about the ability of the existing funding mechanisms to support the program over the long-term. This is a difficult problem that must be resolved.
Access to quality, affordable health care is critical to the well-being of every American. Medicare and Social Security are the two most important social policy initiatives of the last 70 years. As we move further into this new century we must make sure that the advances of these critical programs are not lost.
