Medicaid/Medicare

Medicaid is a social welfare program operated by both federal and state governments. It was created in 1965 with an amendment to the Social Security Act of 1935. That act gave low-income persons access to medical care they otherwise could not afford.

Before Medicaid, health care for the poor was limited and came from a variety of sources, including hospitals, local governments, and charities. Under Medicaid, the federal government gives money to each state. The state adds its own funds to the amount and administers medical programs. These programs must comply with federally established standards.

As health care costs have increased, limits on care have been imposed on Medicaid recipients. For example, they once were able to choose their own doctors. Medicaid patients now must see only approved health care providers. In 2007, hundreds of thousands of Medicaid recipients lost their coverage when they were unable to present proof of their identity and U.S. citizenship. The Deficit Reduction Act of 2005 included a law requiring this proof so as to keep undocumented immigrants from receiving federal assistance. Most of those who lost coverage were children, and most were legal citizens of the United States.

Medicare, also a government health care program, provides health and hospital insurance to disabled individuals and people age sixty-five and older. Although President Harry S. Truman (1884–1972; served 1945–53) proposed the program, it was not enacted as policy until 1965, under President Lyndon B. Johnson (1908–1973; served 1963–69).

Originally, Medicare was managed by the Social Security Administration. In 1977, its operations were transferred to the Health Care Financing Administration and remain under the auspices of that department. Although Medicare can be used in conjunction with Medicaid, it differs in that the only requirements are disability and/or age.

Recipients of Medicare pay a small monthly premium and deductible for medical costs in exchange for having the majority of their medical bills paid. Most doctors and all hospitals accept Medicare. The program has become controversial because improved health care and increased life expectancy mean the federal government is paying for individuals’ health care for more years than was planned.

In 2003, the U.S. House of Representatives passed a major revision of the program when it added prescription drug benefits to its list of services covered. The law also increased private sector competition. The reform was highly controversial. Opponents claimed it would encourage private insurance companies to compete with Medicare by offering financially more attractive coverage. Private insurers would thus attract the healthiest senior citizens, leaving only those most in need of medical care to remain on an overburdened Medicare system, which as of the end of 2007 was spending $427 billion annually.

Under the reform, pharmaceutical and equipment companies charge Medicare more than they do individuals. Because Medicare is partially funded with taxpayers’ money, this means that every American taxpayer is paying more than is necessary for the health coverage of the nation's senior citizens and disabled. Critics of the program point out that companies that overcharge Medicare realize major profits. As the first decade of the twenty-first century passed, industry experts and reformers recognized that further reform and deeper analysis of Medicare were necessary to keep it useful and cost effective.