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Medicare and Medicaid myths: setting the 50-year record straight

Over the past half-century, Medicare and Medicaid have constituted the bedrock of American healthcare, together providing insurance coverage for more than 100 million people. Yet these programs remain controversial: clashes endure between opponents who criticize costly “big government” programs and supporters who see such programs as essential to the nation’s commitment to protect the vulnerable. Not surprisingly, many myths have emerged in the highly politicized debate about these policies. What better time to set the record straight than today on 30 July 2015, the 50th anniversary of both programs?

“Medicaid originated as a welfare program for people in poverty. It remains a program that exclusively benefits the poor.” 

It is true that Medicaid, which initially provided matching federal dollars for states to provide medical assistance to people in poverty, was passed as an afterthought in 1965 and has carried the stigma of poorly financed “welfare medicine.” Yet Medicaid has expanded to cover people above the poverty line, as well as children, and has become increasingly a “middle-class entitlement.” The irony of history is that this poor program now covers more people—66 million in 2014—than Medicare, which covers 52 million people.

“Hospitals became desegregated as a result of the Civil Rights Act of 1964, not due to the passing of Medicare and Medicaid.” 

The passage of Medicare and Medicaid was integral to the desegregation of medical care in southern states. As health policy expert David Barton Smith points out, the implementation of Medicare in 1966 was deeply intertwined with the implementation of Civil Rights legislation. Segregated hospitals could not receive Medicare funds, and the threat of losing Medicare and Medicaid dollars became a powerful tool for the federal government to end racial segregation in healthcare.

“Doctor Themed Cupcakes” by Clever Cupcakes. CC BY 2.0 via Flickr.

“Over the decades, Democratic presidents and Congresses have championed expansion of these programs, while Republicans have fought to reduce their scope, eligibility, coverage, and costs.”

Ronald Reagan lobbied against Medicare before its passage, stating that the program was a fundamental assault on liberty. As president, he continued to criticize “big government.” But by the end of his presidency, Reagan had accepted an expansion of Medicare through his support for Medicare Catastrophic Insurance. Rhetoric aside, Republican presidents like Richard Nixon also oversaw costly but crucial new benefits, including coverage for people with kidney disease and individuals with permanent disabilities. Similarly, George W. Bush championed Medicare’s expansive prescription drug coverage benefit in 2003, and did so under a Republican Congress. Democratic presidents have also expanded these programs; Bill Clinton established the Children’s Health Insurance Program (CHIP) in 1997, which supplemented and expanded Medicaid’s commitments, even while Republicans controlled Congress.

“Medicare is more popular than Medicaid and has much stronger political support.”

While it is true that Medicare enjoys slightly greater popularity than Medicaid, numerous polls have shown that both programs remain popular with Americans. According to a January 2013 Kaiser poll, nearly 50% would not support cuts to Medicaid. The program has survived efforts to block grant it, and has grown to provide security for children, families above the poverty line, and—in the wake of the Affordable Care Act (ACA)—many “middle-class” Americans.

“Medicare and government programs have done a poor job of containing the rising cost of healthcare as compared to the private sector.”

While this claim makes good politics, it is simply not true. As political scientist Jacob Hacker noted, from the mid-1980s to the 2010s, Medicare outperformed the private sector despite private plans adopting many of Medicare’s payment modalities, including the diagnosis-related groups (DRG) approach to paying hospitals. Economist Uwe Reinhardt observed that the idea of reimbursing hospitals based on diagnostic categories (rather than fee-for-service) constituted a truly revolutionary innovation that was copied by many countries around the world, and eventually even by the private American health insurance system. These kinds of initiatives continue under the Center for Medicare and Medicaid Innovation, a new governmental office created by the ACA.

“Only recently have Governors and state legislatures resisted Medicaid expansion under the ACA.”

From the start, many states were slow to adopt Medicaid. By 1969, five years after passage, 12 states hadn’t joined the program, and it wasn’t until 1982 that Arizona became the final state to join. By then, states decried the rising toll of federal healthcare spending on state budgets, but at the same time also recognized the huge economic benefits of these programs for fields like cardiology, nursing homes, and academic health centers. This explains why, although many states vilify the ACA’s Medicaid expansion, some “red states” like Arizona decided in 2013 that the benefits of Medicaid expansion under the ACA were too good to turn down. It remains to be seen whether other red states will follow Arizona’s path.

“Today’s political fractiousness over the ACA and Medicare and Medicaid is unprecedented.”

Political and ideological divisiveness was present at the origins of Medicare and Medicaid and has rarely subsided. In contrast with the ACA—which passed by the slimmest of margins in the 2010 Democratic Congress under a Democratic president—Medicare and Medicaid was passed at a time when President Johnson enjoyed unprecedented liberal Democratic majorities in both houses of Congress following the 1964 election. By their 30th anniversary in 1995, both of these programs were squarely in the bull’s eye of conservative reform efforts. Republicans in control of Congress pushed for converting Medicaid to a block grant program and for the establishment of a Medical Savings Accounts in place of Medicare.

Myths about Medicare and Medicaid persist for the simple reason that they are politically useful, even as Americans continue to grapple with questions of cost, compassion, and the role of government in their lives. But the facts of history are stubborn. Despite the myths and political turmoil, those who support Medicare and Medicaid can take satisfaction in these programs and their underlying moral commitments, having reached the half-century mark.

Image Credit: “Healthcare Costs” by Images Money. CC by 2.0 via Flickr.

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