Medicare and Medicaid refer to the United States government-sponsored programs that were established in 1965 for the sole purpose of covering healthcare costs. Medicare and Medicaid differ in terms of the eligibility requirements and coverage with Medicare catering for long term assistance of the citizens while Medicaid takes care of the poor. Since its inception in 1965, Medicare has evolved with the most prominent features being continuity in basic financing sources, types of regulation and range of benefits.
However there are challenges with the expenditures rising steadily as a proportion of gross domestic product. As the baby boom generation ages, additional demands are created posing a significant financial burden to the Medicare program. Therefore, health care reform is needed first because the increasing health care costs will outweigh the Medicare and Medicaid payments therefore devastating the federal budget
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Since its inception in 1965, Medicare has evolved with the most prominent features being continuity in basic financing sources, types of regulation and range of benefits. However there are challenges with the expenditures rising steadily as a proportion of gross domestic product. As the baby boom generation ages, additional demands are created posing a significant financial burden to the Medicare program. Therefore health care reform is needed to address increasing health care costs which will outweigh the Medicare and Medicaid payments.
Both Medicare and Medicaid have different eligibility requirements and coverage with Medicare being designed for long term care assistance of the elderly while Medicaid covers the costs for the poor. Although Medicare has served the U.S citizens including the retired and disabled for more than forty years, the bankruptcy potential demands considerations on the maintenance of the program. Medicare involves a four part program that is attached to social security and covers all the United States citizens that have certain disabilities or over sixty five years old (Niles, 2010). The hospitalization cover and medical insurance which are the first two parts of the program are catered for by deductions and payroll taxes from the social security income. The third part of the program is privately purchased supplemental insurance while the last part is prescription drug coverage that are paid by the participants own money.
Medicaid is a partnership between the federal and state government to assist families and individuals with low-income to pay medical and long-term custodial care costs. Each state has its own program since the federal government funds half the cost of every state. Medicaid is not available to everyone unlike Medicare and therefore there are strict requirements with the rules varying within states. Since the Medicaid program is designed for the poor, there are income restrictions and other eligibility requirements that ensure the program covers specific groups such as pregnant women, children and the disabled among others. Some of the services covered include hospitalization, laboratory services, x-rays and doctor services but each state can include additional benefits such as eyeglasses, physical therapy, dental services and prescription drug coverage. In most cases Medicaid is used to fund long-term care that is not catered by private health insurance or Medicare. The individual insured does not need to have assets.
Evolution of Medicare
The outstanding feature about the evolution of Medicare since its inception in 1965 is the continuity in basic financing sources, types of regulation and range of benefits. Although there has been no fundamental expansion, changes in policy and program operation have occurred because due to the failure of the disabled and victims of renal in 1970s. Medicare has been constrained in expansion for most of the twentieth century due to structural account of political change. Large policy change in the United States is unlikely due to the fragmentation of the constitution which requires super majorities to change a bill into a law. The fundamental beliefs about the responsibilities of the government also pose a constraint on the political action (Marmor, 2000).
The enactment of Medicare was under extraordinary circumstances after the overwhelming victories in the presidential and congressional elections in 1964 and there has been limited change due to the absence of such majorities (Marmor, 2000). The original Medicare program was divided into Hospital Insurance and Supplementary Medical Insurance. The major benefit of Hospital Insurance was ninety days of hospital care per episode of care and sixty lifetime reserve days. Others were one hundred post-hospital home health visits per year, hundred days of post-hospital care per episode in skilled nursing facility if preceded by an inpatient admission and one hundred and ninety lifetime days of inpatient psychiatric care (Andersen, Rice and Kominski, 2007).
Home health care was shifted to supplementary medical insurance which covered most physician services, durable medical equipment and outpatient hospital services (Andersen, Rice and Kominski, 2007). The hospice benefits were added later and In 1980s, presidential administrations that were committed to the free-market ideology imposed administered prices on American hospitals and physicians (Marmor, 2000). Although the original Medicare remains essentially unchanged, in 2006, a new outpatient prescription drug began.
Medicare financing is by a combination of general revenues, beneficiary contributions and payroll taxes. In 1999, the Medicare costs decreased but in 2000, law makers faced political pressure to return some of the savings from health plans seeking higher capitation rates, and providers. The demands were addressed by the Medicare Prescription Drug, Improvement and Modernization Act of 2003. In order to encourage health plans to enroll high-risk beneficiaries, the act improved risk-adjustment system for payments to health plans and hospitals (Andersen, Rice and Kominski, 2007).
Medicare faces challenges with the expenditures rising steadily as a proportion of gross domestic product. As the baby boom generation ages, additional demands are created posing a significant financial burden to the Medicare program. It is estimated that the number of beneficiaries will rise from forty million in 2000 to seventy eight million in 2030. In addition to the economic impact, the population changes have social and political implications such as an increase in the number of individuals dependent on the Medicare program due to improvement in the average life expectancy (Andersen, Rice and Kominski, 2007).
Medicare is also subject to influence by unique political pressure that is not faced by universal health care programs because it is a public program. The changes in price, volume and service intensity affect the medical therefore the PPS and MFS mechanisms were developed to limit provider payment and reduce utilization. Technology has increased the intensity of services consumed per capita leading to the growth in healthcare costs.
Impact of Health Care Reform initiatives
President Obama launched a health care reform proposal in February 2010 that created an exchange which allowed families to shop for insurance plans and kept restriction on federal funding for abortion. Due to the changing health care needs of the elderly and current funding levels and mechanisms a new approach to Medicare is essential.
The health care reform is needed first because the increasing health care costs will outweigh the Medicare and Medicaid payments therefore devastating the federal budget. Secondly, the quality of care in America is worst with chronic diseases causing most of the deaths while other diseases such as diabetes, arthritis and cancer affecting a tenth of all Americans. Thirdly, about 25% of all America citizens lack health insurance to cover their costs and the reforms in the health care will reduce the economic costs of fraud. The government on Medicare and Medicaid is therefore unsustainable without the health care reform (Amadeo, 2011).
In conclusion it is noted that most debates on the future of Medicare concentrate on financing, and the advantages and disadvantages of privatization. Medicare was initiated by people who believed that believed that it would lead to a broader coverage for the whole population. Although the incremental system has not been achieved, incremental change in policy is useful to realize optimal benefits. Therefore it is necessary to consider the organization of the program, the value of services as well as the benefits attained by implementing incremental changes.