July 27, 2005
Medicare at 40: Midlife Crises Threaten Successful Program
Aging Baby Boomers, rising costs will stretch its resources, experts say
On July 30, 1965, Lyndon Johnson was still savoring his landslide election as president, and he drew upon that broad support to sign an ambitious public health-care plan called Medicare into law.
But the battle to create the program "was intensely fought, and it didn't pass by a wide margin," said Karen Davis, president of the Commonwealth Fund, an independent research foundation focused on health and social issues.
Conservatives in the South opposed the program because it meant the end of racial segregation in hospitals, and the American Medical Association fought it because many doctors worried Medicare would impinge on physician autonomy, she said.
"Medicare's number-one goal was to provide financial protection to elderly people and their adult children," Davis said. Before Medicare, many newly retired Americans found themselves both uninsured and uninsurable after losing their employer-based health coverage.
"The potential of being wiped out financially by any kind of hospitalization was very real," Davis said. "Not only wiping out the assets of the elderly, but also those of their children, who of course felt like they had to help pay those bills."
Now, 40 years later, most experts -- and Medicare beneficiaries -- agree the program has succeeded in meeting its goals. In fact, Davis pointed to one 2003 Commonwealth Fund survey that found that the bulk of the 42 million Americans covered by Medicare were actually more satisfied with their coverage than younger people insured through the private sector.
"They are much more likely to say that they get care when they need it and are much less likely to report having to change their way of life because of medical bills," she said.
John Rother, director of policy and strategy at AARP, agreed that "Medicare has really achieved what it set out to do." And he believes all players have benefited, with the program "providing a stable source of financing to doctors, hospitals and other health-care providers."
That's not to say Medicare can't be improved or doesn't face serious challenges ahead.
"Ultimately, we're going to have twice as many people in the program when the Baby Boomers retire as we do today," Rother pointed out. "We're going to have to find some source of revenue to finance all that."
Rother believes the rising cost of drugs, new medical technologies, and other elements of health care pose the biggest threat to the program. "There are certainly many challenges facing Medicare, but most of them are facing our entire health-care system," he said. "You can't solve Medicare's problems without really looking at the system in which it is embedded."
In a survey released Tuesday, the Commonwealth Fund asked 230 experts drawn from various segments of the health-care spectrum to weigh in on Medicare. While the overwhelming majority labeled the program an overall success, most wished it could also use its clout to improve the quality of care for beneficiaries.
"It's imperative that Medicare look for any opportunities to improve care and lower costs," Davis said. "There are certainly some ideas that look promising."
For example, she said, the Commonwealth Fund is sponsoring a study looking at whether advanced-practice nurses can save the system money by helping heart-failure patients better manage their illness after they return home from the hospital. "That way, they're much less likely to wind up back in the hospital, which costs so much money," she explained.
Another key area for improvement centers on information technologies. Davis imagines a new Medicare where data on each beneficiary -- all their medications, test results and history -- is kept on one secure, centralized e-file that's available to patients and their doctors. Rother supports such a move, noting that "none of the private-sector health plans have the clout that Medicare does to really push forward in this area."
Then there are innovative financing schemes, such as Medicare "buy-ins" for younger Americans. In such an arrangement, a 50-year-old worker could earmark a small percentage of his or her income toward a "Medicare savings plan" that would help pay for any future medical expenses not covered by the program. Sixty-five percent of experts responding to the Commonwealth Fund survey said they would support such a plan.
However, Rother said that while buy-ins "make sense," they remain little more than a "Band Aid" solution to Medicare's future fiscal woes. "The fundamental problems are going to be deeper than that," he said.
AARP's 35 million members are increasingly concerned about the future of Medicare and health care in general, Rother said. "Right now, their concerns are focused on prescription drug costs, but I think the cost of health care generally is likely to be the biggest problem people face in their retirement," he said. "Because they see that costs are going up much faster than their incomes."
For her part, Davis said she remains optimistic. "When I look at the high satisfaction level of beneficiaries covered by Medicare, it's clear it works for people -- far more so than for employer coverage, which you're never sure is going to be there. You can be sure that Medicare is going to be there."
For more on Medicare at 40, head to the Commonwealth Fund.