Happy Birthday Medicare, but Who Really Cares?

The following is an excerpt from Navigant Healthcare’s Pulse Weekly. Click here for a complete copy of this week's article. 

I was about to enter the 11th grade at Tyner High School when Medicare passed July 30, 1965. And I paid no attention. Two-a-day football practices and my job in central sterile supply at Erlanger Medical Center were my focus. A program to provide health coverage to seniors seemed irrelevant at the time. After all, a “senior” was anyone older than 40.

Fast forward: I am now one of THOSE. WE are 16% of the population and Medicare is a big deal to us. Consider…

  • One-fourth of us are living at or near poverty and struggling to make ends meet.
  • Three-fourths of us have a chronic condition that requires medicine daily.
  • And the health system is important to all of us, including the Medicare program.

On its 50th birthday last week, much was said about the program. Politicians of all flavors offered their tributes. The 21 candidates for the oval office issued statements opining to the program’s importance and their unique aptitude to be its protector in chief. And not coincidentally, the government’s chief bean counters issued a favorable report about the program’s solvency, estimating the Medicare hospital trust fund is adequate through 2030 (unless, as they cautioned, prescription drug costs don’t undermine its stability).

Before my mom died four years ago, I made regular visits to the Martin Center in Brentwood, Tennessee, where she was an active member of its Red Hatters’ club. Red Hatters are predominantly ladies in their 70s and 80s living alone sharing trips, meals, card games and stories. There, I’d meet her buddies and answer questions about the healthcare system—how it works, where it’s going, and what’s ahead for Medicare. It was, I reasoned, a frontline vista for understanding their impressions as insightful as the focus groups and surveys I conducted in my day job.

The Red Hatters’ views are deeply felt and quite personal. Like the majority of Americans, they’re not based on studious review of the Affordable Care Act nor careful deciphering of the federal budget. In a word, they “afraid.”

  • “I’m afraid about getting sick”
  • “I’m afraid I will not be able to get in to see doctors when I need them”
  • “I’m afraid I will spend all my money on healthcare and be a burden to my kids”

It’s a simple belief system and easy to understand.

When Lyndon Baines Johnson first proposed Medicare as part of his Great Society campaign, it met fierce resistance from the American Medical Association (AMA). He had been elected in 1964 with a commanding 61% of the vote. He leveraged his formidable political deal-making savvy to propose that “every person over 65 years of age be spared the darkness of sickness without hope.” It was the centerpiece of his war on poverty, addressing the reality that half of all seniors had no health insurance and a third lived in poverty. The AMA asserted it was “socialized medicine.”  Nonetheless, it won Congressional approval July 9, 1965, and three weeks later, the 36th President signed it into law in Independence, Missouri, giving the 33rd President and Mrs. Truman cards as Medicare Members #1 and #2.

Then, as now, addressing healthcare for seniors is a hot topic in political circles. In every developed system of the world, healthcare for seniors is managed as a publicly funded program. What varies between countries is how much funding is available from federal budgets, and how much is paid by enrollees themselves. In the U.S. system, enrollees pay indirectly from their earnings for their work years pre-65, and then premiums based somewhat on their income after.

Medicare plays a central role in our country’s social contract with its seniors. The program is evolving; it’s now entering its fourth version…

  • Medicare 1.0 (circa 1965-1983): Hospital and medical coverage was provided through employer and employee withholds and federal contributions and payments were made to private providers on a fee for service, cost-plus basis. In this era, there are 5 contributors (workers in the workforce) for every eligible enrollee.
  • Medicare 2.0 (circa 1983-2006): The fee for service, cost-plus model was tweaked: a “resource-based relative value scale” was implemented to attempt to rationalize what “costs” are or should be, adjusting for differences in communities. At this juncture, 3 workers were contributing to the system to 1 eligible recipient.
  • Medicare 3.0 (circa 2006-2014): Part C “Medicare Advantage” and Part D “Prescription Drug Discount Program” were added via the Medicare Modernization Act (2006) to facilitate care coordination and simplify the program for seniors. A notable feature in both: the requirement that private insurers be the channel through which seniors become participants in these elective programs.
  • Medicare 4.0 (circa 2014….): Against the backdrop of the Affordable Care Act (passed March, 2010), payments to providers are shifting from volume to value. Mandated bundled payments for hip and knee replacements, expansion of the accountable care organization program, implementation of the value-based purchasing program and other mechanisms are now the centerpiece of Medicare 4.0.

But even with its evolution, there remain glaring issues…

  • How to integrate long term care services appropriately, so that seamless transitions between physicians, hospitals and long term care providers is achieved, and funding appropriately shared;
  • How to address end of life choices and costs;
  • How to increase access to, organize and compensate primary care providers to engage Medicare enrollees effectively;
  • How to define and incentivize adherence to appropriate care and eliminate unnecessary tests and procedures;
  • How to simplify the Medicare program;
  • How to fund Medicare against a growing list of competing federal priorities while enrollment increases at 10,000 daily and employer contributions can’t keep pace; and
  • How Millennials and Gen Xers will embrace or not the program, as these generations evaluate the financial obligation values at a time when their debts are high and real disposable income shrinking.

Medicare is 50! I didn’t care much about it in 1965. I do now. And so do the majority of Americans. It matters, not just to the Red Hatters and their family members who depend on its support. It’s the cornerstone of America’s social contract with its elderly, the primary source of funding to the providers who deliver health services, and the health industry’s most significant agent of change. Millennials care. Gen Xers care. It matters not just to seniors. We all care.

Paul

Sources: Robert Dallek Professor of History Boston University Lyndon B. Johnson: Portrait of a President Oxford University Press; abridged edition (January 8, 2004); David A. Squires, “Explaining High Health Care Spending in the United States: An International Comparison of Supply, Utilization, Prices, and Quality,” The Commonwealth Fund, May 2012

The opinions expressed in this article are those of the author and do not necessarily represent the views of Navigant Consulting, Inc. The information contained in this article is a summary and reflects current impressions based on industry data and news available at the time of publication. Any predictions and expectations noted herein are inherently uncertain and actual results may differ materially from those contained in this article. Navigant undertakes no obligation to update any of the information contained in the article.

©2015 Navigant Consulting, Inc.