Bruce Vladeck, Ernst & Young LLP
July 2005
As Medicare approaches its 40th anniversary, it’s important to recognize that the program’s founders would have been profoundly ambivalent about its current success and popularity. They never intended that Medicare would stand alone as a unique example of national health insurance, nor that the elderly and disabled would be the only groups in the U.S. population with guaranteed access to health care.
Instead, Medicare was crafted as the first, incremental step towards universal health care. Just as the Social Security system, on which Medicare was modeled, had been improved and expanded upon many times in its first 30 years, so Medicare was supposed to be the seed from which future expansions—both vertical (incorporating more of the population) and horizontal (broadening the benefits)—would spring. At first, Medicare stayed on the expected track: The 1972 Social Security Amendments extended Medicare coverage to the disabled and patients with end-stage renal disease and provided some modest benefit improvements. Since then, however, we’ve stalled, if not regressed. The 2003 prescription drug legislation threw a lot of additional money into the program, but not in a way otherwise consistent with Medicare’s founding principles of universality and defined benefits.
Misconceptions About Medicare
Today, the proportion of the non-elderly population without health insurance is larger today than it was when Medicare was enacted, and many of those who nominally have health insurance coverage face higher out-of-pocket expenses and limited access to care. But instead of considering Medicare as a basis on which to expand coverage, Medicare’s critics increasingly describe it as an anachronism that lacks the flexibility and innovation available in managed care plans. They characterize it as something of a historic relic, in part because the coverage it provides, which 40 years ago was thought to be minimally adequate, now appears relatively generous.
In fact, Medicare achieves a higher level of satisfaction among covered beneficiaries than employer-based coverage, offers markedly improved access to care and financial protection for beneficiaries, and has much lower administrative costs than private coverage.
Health Care Costs
It’s true that in 1965, few could anticipate how dramatically health care costs would increase in the ensuing decades, nor could any but the most visionary have foreseen a society that includes thousands of 80-year-olds running around on artificial knees, sustained by implanted defibrillators. And it would have been almost impossible to envision the size, complexity, and sheer economic magnitude of the contemporary American health system. Over the last 40 years, the food, electronics, and computer industries have also grown at a remarkable rate, yet the real costs of agricultural commodities, televisions, and computing power have fallen. The same has not been seen in health care. One might therefore suspect that the problem of health care costs is as much one of political economy as of technology.
Whatever their source, rising health care costs are a real problem—and Medicare’s costs and the more general problem of health care cost inflation are one and the same. Medicare’s outlays track very closely (if often with a slight lag) the growth in total health care spending. So we can’t realistically expect to control the growth of Medicare spending without controlling the growth of health care costs generally.
The Next 40 Years
Because there’s little basis for optimism about controlling health care costs broadly, it’s likely that, as we Baby Boomers age, a growing share of total national resources will be required to provide the level of medical care to which Medicare beneficiaries have become accustomed—and even that may not be enough to meet the expectations of a generation far more demanding than current beneficiaries. Indeed, elderly beneficiaries, who now spend 22 percent of their income on health care, are expected to see that figure grow to 30 percent by 2025. The prevailing rhetoric contends that such a level of expenditure is “unsustainable,” and that implies that at some point we, as a society, will choose to deny medical care to at least some older people who really need it, just as we now so blithely accept the denial of care to millions of younger people.
I must confess that I have trouble getting my mind around that notion. But perhaps I am just trapped in an older way of thinking. In 1965, it was still possible to assume that a reasonable share of growing national wealth would be devoted to social benefits; that reductions in racial and socioeconomic inequality were a central part of a commitment to democracy; and that the notion of providing more freedom, in the United States and around the world, included providing freedom from want. In that very different era, one could just assume that universal health care would be an uncontroversial objective, and that a nation with so powerful a track record of getting things done would not be daunted by the very formidable difficulties inherent in achieving universal coverage.
But since then, we have become increasingly adept at finding excuses for why we can’t address important domestic problems, and for expressing pride in the fact that the United States is less generous in the provision of social benefits than any other industrial nation.
In that context, the daily reality of Medicare, in which millions of elderly and disabled people of modest means receive world-class medical care from the nation’s very finest providers, serves as a kind of constant reproach to the naysayers and prophets of budgetary doom. The track record is incontrovertible: Medicare has proven that, as a nation, we are capable of getting medical care to a particularly vulnerable part of the population, and of reducing mortality, morbidity, and human suffering in the process. We just need to be reminded of why, 40 years ago, people thought that doing that was such a good idea. And we need to remind ourselves that the founders of Medicare thought they were just getting things started, and that there’s a whole lot more work still to do.
Bruce Vladeck, East Coast director for Ernst & Young’s Academic Medical Center service group, is the former administrator (1993–1997) of the Health Care Financing Administration, now the Centers for Medicare and Medicaid Services. The views expressed by the author herein do not necessarily reflect the views of Ernst & Young LLP.
The views presented in this commentary are those of the author and should not be attributed to The Commonwealth Fund or its directors, officers, or staff.
Citation
Medicare’s Future: Finishing What We Started, Bruce Vladeck, The Commonwealth Fund, July 2005
