Ray's Round Up: The Future of Medicare and Medicaid

As we survey the political landscape post-election, there has been a great deal of discussion and debate about an issue that received little attention during the presidential campaign – potential changes to the Medicare and Medicaid programs.  There has been speculation that the new administration and Congress may consider fundamental shifts in the way federal funds are distributed to the states to operate Medicaid. There has also been speculation that there may be proposals to change how older Americans get health insurance through Medicare.

We need to begin a discussion about the realities of this issue before examining what changes could mean.  No specific proposals have been put forward by congressional leadership or the incoming administration.  Much of the discussion about these issues has been generated by past statements and ideas that have come from U.S. House of Representatives Speaker Paul Ryan and the nominee for Secretary of Health and Human Services, Representative Tom Price.  Until the new Congress convenes in January 2017 and begins a discussion on specific proposals, it is difficult to judge the potential impact on current or future Medicare or Medicaid enrollees.

It may be helpful to review the basics of Medicare and Medicaid to understand the programs and the potential impact of proposals for change.   Both programs began in the 1960s as a way to ensure that two groups of Americans – those over the age of 65 and those with low incomes – had access to health care.  The programs are very different in the way they are funded and the health care services they deliver.

Let’s Talk Medicare

Medicare is a health insurance program that provides coverage for Americans over the age of 65, as well as individuals under the age of 65 with certain disabilities and anyone suffering from End-Stage Renal Disease.  Medicare is funded by a payroll deduction from every employee and employer in the United States. Medicare also receives funding from tax dollars from the general fund of the federal government and premiums paid by Medicare enrollees.

Standard, or traditional, Medicare is made up of three keys parts – Part A, which covers hospital inpatient services; Part B, which covers physician services; and Part D, which covers prescription drug costs.  Payroll taxes pay for Part A, while the federal budget and enrollee premiums pay for Parts B and D.  Medicare covers 80 percent of health care costs for Part A and B. Most enrollees purchase private Medicare supplemental insurance coverage to cover the remaining 20 percent of costs.  Part D prescription drug plans are purchased separately from private insurers and have specific rules regarding the enrollee’s share of prescription drug costs.

There is an alternative to standard Medicare coverage though..  Medicare Advantage plans, run by private insurance companies, offer Part A, B, and sometimes D coverage under one plan.  Unlike standard Medicare, these plans may limit what medical facilities and physicians an enrollee may utilize, but they may also cover some services that standard Medicare does not.

What About Medicaid?

The Medicaid program was designed to provide basic health care coverage for low-income individuals who cannot afford health insurance.  Individuals with incomes up to 138% of the Federal Poverty level, which in 2016 was $16,394 for individuals or $22,108 for a two person household, are eligible.  Medicaid is operated by the states with significant financial assistance from the federal government, with all the Medicaid funding coming from general revenues.    Another important component of Medicaid is that it pays for nursing home costs for individuals who have exhausted their personal assets.  However, most states have restrictive rules limiting medical facility and physician choice for those who receive Medicaid coverage.

The Cost of Medicare and Medicaid

Medicare and Medicaid costs have risen steadily over the years, and their costs now account for significant portions of the federal budget.  Medicaid is also one of the largest components of the budget for state governments.  While some elected officials have raised concerns about the overall cost of these programs, many health care providers including physicians, hospitals, and long-term care providers, have complained that they do not receive adequate reimbursements from Medicare and Medicaid for their services.  Enrollees in Medicare and Medicaid, meanwhile, have reacted negatively to increases in premiums, as well as increases in co-payments and deductibles for health care procedures.

The Great Debate - So What Now?

The great debate around Medicare and Medicaid centers on the program funding. Some believe that  too many taxpayer dollars are spent on these programs.  Others believe  future cost increases can take place too easily and there are no effective ways for states and the federal government to prevent or reduce these increases.   Those who agree with these ideas have floated the idea of limiting the amount of funding that the federal government would provide to these programs.  For Medicaid, that would take the form of what is known as a “block grant”, where each state would receive a set amount of Medicaid funding from the federal government, and then have flexibility in terms of how funds are utilized.  For Medicare, one idea is to have Medicare-eligible individuals enroll in a Medicare Advantage-like program. Each person would get a set amount of funding to pay for the premiums for basic coverage, and individuals would then have the option to pay more for more robust coverage should they need or want it.

Opponents of these ideas point out that the current Medicare and Medicaid programs have led to significant improvements in the health of older and low-income Americans. To propose these kinds of changes could alter the fundamental benefits to individuals.  They also note that Americans paid into the Medicare system through payroll deductions throughout their working lives, and this kind of plan would result in those who are wealthier getting better health care when they are older.  Opponents also note that “block grants” for Medicaid would allow individual states to offer different standards of care for Medicaid, meaning that residents of one state could find they are denied coverage for basic health care services that would be covered in another state.

AARP has expressed concerns about the possible direction this debate could take in 2017.  Health care coverage for those eligible for Medicare has resulted in a healthier population that has been able to continue to make important contributions to our society.  Limiting access to necessary health care services for this population is not only unfair to the individuals who count on Medicare, but it threatens to disrupt the lives of families who know their loved ones are able to afford their health care needs.  AARP’s CEO, Jo Ann Jenkins, issued the following statement in response to the speculation that Congress could consider taking action on Medicare:

“AARP will flatly oppose any attempts to cut, scale back or diminish the benefits that Medicare provides. This includes any efforts to eliminate the guaranteed level of Medicare coverage that current and future generations of Americans have paid in to, expect and deserve.” – Jo Ann Jenkins, AARP CEO

Changes in Medicaid, meanwhile, could exacerbate a problem we are already having a difficult time addressing – how to address the growing need for long-term care services and supports.

Many Americans currently covered by Medicare have expressed their fear about what the future will hold for this long-standing program.  Meanwhile,  many advocates fear a future where those with low-income will have no access to basic health care needs.

While no action has been taken yet, I encourage current Medicare beneficiaries, future Medicare beneficiaries, and those who rely on Medicaid, to pay attention to any emerging proposals that could impact the Medicare and Medicaid programs. We should be prepared to let our elected officials know about our feelings regarding these critical health care programs.  We have made a great deal of progress in health care coverage since these programs became law in the 1960s, taking steps to improve the quality of life for our older and low-income populations.  We cannot afford to take steps backward.

“Ray’s Round Up” features updates on current state and federal issues by Ray Landis, AARP PA’s Advocacy Manager.