Bob Semro: We’re better off thanks to Medicare, Medicaid

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— July 30, 1965, was a milestone date in American history. On that day 46 years ago, the Social Security Act of 1965 was signed into law. That legislation introduced two new programs, Medicare and Medicaid. We take them for granted now, without realizing how much they have achieved and how much we rely on them.

In 1964, before the implementation of Medicare, 49 percent of Americans 65 and older had no health care coverage, and 30 percent of seniors lived below the poverty line. The average life expectancy in the United States was 70.

Now, virtually all American seniors (39 million) have health care coverage, only 7.5 percent of seniors live in poverty and life expectancy has increased to 78. While Medicare is not the exclusive reason for the increased financial security and life expectancy of America’s seniors, it has certainly been a major contributor. 

Medicaid, the other program introduced in 1965, is a federal-state partnership that provides health coverage for more than 52 million low-income Americans. More than half of Medicaid enrollees are children. In fact, one-third of all American children are covered through Medicaid. Under the Affordable Care Act, an additional 16 million Americans are expected to enroll in the program.

Given this expanded role for Medicaid, how well has the program worked to date? For an example, we can turn to Oregon, which enrolled an additional 10,000 uninsured residents into its Medicaid program in 2008. These newly enrolled Oregonians became the focus of an empirical study to determine the effects of Medicaid coverage on a previously uninsured population. The National Bureau of Economic Research released the results in July.

When compared with the uninsured, the new Medicaid enrollees were 35 percent more likely to visit a clinic or doctor, 30 percent more likely to get hospital care, 60 percent more likely to get a mammogram for breast cancer screening, 25 percent more likely to call their health good or excellent, and 40 percent less likely to say their health had worsened in the past year. Compared to the uninsured, the population in this study appears to be healthier and more likely to get regular treatment.

However, those good outcomes come at a price. Medicare and Medicaid are not cheap. Medicare represents $525.7 billion of the federal budget and Medicaid another $272.8 billion. Together, they represent more than 21 percent of our current $3.7 trillion in annual federal expenditures. A number of provisions of the Affordable Care Act are designed to reduce costs and improve efficiencies in Medicare and Medicaid, and both programs became a major point of discussion in the recent debt ceiling debate. 

The debt ceiling deal does not include any immediate cuts to Medicare or Medicaid, but that may not be the case in the long term. The current agreement establishes a 12-member bipartisan legislative committee, or “super-committee,” that will be required to reduce federal spending by $1.5 trillion over the next decade. The super-committee’s deliberations will provide the most obvious opportunity for considering deep cuts to entitlement programs. Since Medicare and Medicaid are such a significant part of the federal budget, they are unlikely to remain untouched.

If this committee cannot reach an agreement by Thanksgiving, or if Congress is unable to enact the committee’s plan by Dec. 23, the debt ceiling deal would trigger automatic, across-the-board cuts equal to $1.2 trillion. However, Medicaid would be exempt. Medicare could be cut by only 2 percent; benefits would not be touched, and cuts would be limited to providers and insurers, which could affect access to care.

Even though Medicare and Medicaid were not part of the initial round of cuts, both programs face significant challenges on this 46th anniversary. The deliberations of this new committee and whether it will ultimately agree upon a deficit-reduction plan should be of real interest to us all.

Bob Semro is a health policy analyst with the Bell Policy Center in Denver.

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