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Medicare: Past, present and future

Medicare and what to do about it is one of the most bedevilling issues facing the nation — a problem that has both political parties and interest groups from the AARP to the AMA trying to find a way to shore up the increasingly unaffordable program.

Since Medicare and other social safety net programs were created in the mid-1960s’, the poverty rate for America’s elderly has dropped precipitously. However, the general U.S. population is aging and living longer, leading to inevitable increases in the program’s overall cost.

This week, Need to Know’s panel discussion examined some of the Medicare “alternatives” on the table: privatization, cuts to coverage and raising the enrollment age. The full menu is presented in a recent Kaiser Family Foundation’s brand new report “Policy Options to Sustain Medicare.”  

To truly understand how we got here, let’s first take a look back at the history of the program.

Medicare Past:

Video from The Kaiser Family Foundation

Medicare Present:

Today ,Medicare provides coverage for more than 50 million Americans, including adults over the age of 65 and younger individuals living with permanent disabilities. Medicare covers “health care services, including, but not limited to, hospitalizations, physician services, medical devices, and prescription drugs.” In 2013, average per capita Medicare spending is projected to exceed $12,000 (Boards of Trustees, 2012). While most people with Medicare use some amount of medical care in any given year, a majority of spending is concentrated among a relatively small share of beneficiaries with significant needs and medical expenses.

Medicare does not cover all the costs of health care, including long-term care for the elderly and disabled. Most people with Medicare have supplemental coverage to cover the out-of-pocket expenses the program does not cover.  Today, more than half of Medicare beneficiaries have an annual income of $22,500 or less. These Medicare recipients spend about 15 percent of their household budgets on health expenses; by comparison, younger households spend about 5 percent.

As the cost of Medicare rises — the growing expenditures impacts the American economy in it’s entirety:

Medicare costs -- percentage of total economy

Medicare Future:

With the past and present accounted for, here’s where Medicare is headed. According to the Congressional Budget Office, annual Medicare costs will reach over a trillion dollars by 2022.

annual Medicare costs 2012 and 2022

Glossary & resources:

For more information, the Kaiser Family Foundation has compiled some helpful resources on everything you need to know about Medicare. The 2012 candidates’ party platforms also give a simple glimpse into two dueling plans, see ProPublica’s analysis “Where the Candidates Stand on Medicare.”

But those campaign trail pronouncements barely scrape the surface. To get a clear sense of the plans on the table you need to turn to the new KFF report, Policy Options to Sustain Medicare for the Future. Here’s a basic categorization of what’s under discussion:

  • Raise the age of Medicare eligibility from 65 to 67 or raise it only for people with relatively high lifetime earnings
  • Increasing or modifying beneficiary cost sharing in a variety of way
  • Increasing beneficiary premiums
  • Increase revenue through: raising the Medicare payroll tax or other existing taxes
  • Reduce federal spending on the Medicare advantage program by lowering benchmarks, competitive bidding for payment rates, change risk adjustment and quality ratings
  • Reduce spending for prescription drugs
  • Reform Medicare’s physician payment system
  • Change malpractice systems through traditional or innovative tort reform
  • Accelerate implementation of payment reforms authorized under the Affordable Care Act
  • Improve care and reduce costs for high-need Medicare beneficiaries
  • Increase patient and family caregiver engagement:
  • Restructure Medicare’s traditional benefit design with a unified deductible, modified cost sharing, and a limit on out-of-pocket spending, possibly in conjunction with policies to discourage or restrict supplemental coverage
  • Provide a new government-administered plan with a comprehensive benefit package, as an alternative to traditional Medicare and Medicare Advantage

One of the reform plans getting the most attention (other than simply raising the eligibility age) is the one favored by former Republican VP candidate Paul Ryan. Called “Premium Support”  this plan aims to restructure the way Medicare is delivered — replacing current benefits with standard amount vouchers.

Typically, proposals of this nature provide a fixed Federal payment per enrollee and give beneficiaries the opportunity to choose among plans based on their own preferences for premiums, benefits, and other plan attributes. Proponents say this approach would promote greater competition among insurance plans and produce stronger incentives to reduce Medicare spending. Critics argue it would shift costs to Medicare beneficiaries and erode their entitlement to a defined set of guaranteed benefits. — Kaiser Family Foundation report

You can keep up on the ever-changing Medicare debate with Kaiser Health News, which has a robust viewpoints section.



  • brookej

    I just watched Need To Know on Medicare. Neither the moderator nor any of the panelists even mentioned the elephant in the hospital.

    Medical care in this country costs about twice as much per capita as in the rest of the developed world. (And, by objective measures of outcomes, it produces inferior results.) If we paid rest-of-developed-world rates, Medicare would cost half as much.

    Why is our medical care so much more expensive? Other developed countries’ health care systems are designed to maximize efficiency. Our politicians have designed our health care system to maximize the profits of their “contributors”.

    Utah’s Senator Hatch claims to be concerned about the cost of Medicare, yet he just added a rider to a bill which will enable Amgen to suck $500 million more out of Medicare over the next two years. Why? Because Amgen paid him to do it. Why does Medicare pay so much for drugs? Because (a Republican) Congress prohibited Medicare from negotiating drug prices. Medicare thus pays far more for drugs than the VA or Kaiser. A few years ago I was advised to use a medical device which was advertised at $285. Medicare paid $500 for the same device.

    Rational policies could greatly restrain health care cost inflation. Instead, our present policies promote health care cost inflation, because it is profitable for the corporations which pay Congress to maximize their profits.

    Americans seem to be largely oblivious to the level of corruption in this country; the rest of the world is not. Transparency International rates Italy the most corrupt developed country; the U.S. and France are in a dead heat for second place. All other developed countries are less corrupt than the U.S. That is why our health care costs twice as much.

    Why does no one talk about this driver of Medicare costs?

    Brooke Jennings

  • Lifespanplus

    I’m concerned. The populace needs to get healthier and rely on yearly comprehensive blood tests as recommended by the Life Extension Foundation. Diets need to improve. Polyunsaturated oils, fried foods, and sugar should be minimised or eliminated. People need to accept death as better than long term sickness. Those on Social Security Medicare should strive for optimum health, and take responsibility for reducing their “draw” on the system. Health monitoring and blood tests should start as early as possible, like in high school.

  • Karen

    Agreed, we pay for quantity over quality

  • Bob Snodgrass

    I’m a physician working for a public sector hospital. Congress makes it hard for Medicare to save money, and then piously announces that services must be curtailed. The outrageous Amgen giveaway sponsored by Senators Baucus, Hatch and McConnell (they don’t work for the people, they work for their donors) is only the tip of the iceberg. Medicare Advantage is corporate welfare for the insurance companies and should never have been started in the Bush era, nor continued under the Obama administration. Congress won’t allow CMS to bargain with the drug companies- might curtail their profits. We can’t have a sustainable Medicare with our corrupt Congress that keeps shoveling money to big PhRMA. We need to get away from fee for service medicine, allowing it to remain only for those who pay their own bills. Yes, some doctors and libertarians will scream.

    As far as yearly comprehensive blood tests and the Life Extension Foundation, that’s a cruel joke.

  • Dennis Byron

    Under the Medicare Today section you say:

    “While most people with Medicare use some amount of medical care in any given year, a majority of spending is concentrated among a relatively small share of beneficiaries with significant needs and medical expenses.”

    Duh… that’s the way insurance works. That’s the entire freaking idea of insurance… what’s your point? (Oh by the way, Original LBJ Medicare is terrible insurance with no catastrophic coverage for these people with significant needs and very high copays and deductibles.)

    You say:

    “Medicare does not cover all the costs of health care… Most people with Medicare have supplemental coverage to cover the out-of-pocket expenses the program does not cover.”

    Most supplemental coverage does not cover health care that Medicare does not cover. Most seniors have to pay totally out of pocket for vision and dental care, annual physicals and more. Supplemental coverage is primarily to cover the high co-pays and deductibles for the relatively few (albeit expensive) services Medicare covers.

  • Dennis Byron

    Dear Bob

    Although the term Medicare Advantage dates to the 2003 Bush-presidency reform of Medicare, the program formally goes back to Clinton and the idea goes back to two hard core left wingers, Henry Aaron and current Medicare Trustee Reischauer (see from 1995)

    Part C Medicare health plans are not “corporate welfare” for insurance companies. They used to be a good deal — welfare if you will (probably unfair welfare) — for us seniors on Part C but Obamacare ended that. And most of the Part C Medicare health plans are exactly what you claim you want the rest of the country to move toward — managed care paid for with a global budget — and away from “fee for service”

    (As for your inaccurate comments about Part D, they’re not worth commenting on and are simply you parroting some left wing drivel you’ve read. Part D is peanuts in the big picture, is costing much less than originally estimated by the CBO, and is actually reducing Medicare Part A and B costs based on preliminary research. But if you don’t think seniors should take their meds… say so)

  • helene paxton

    Saving Medicare should not cut reimbursement to physicians but should focus on waste in hospitals and redundancy in personnel. We need to digitize all medical records with a common data base for all providers to access. There is so much waste in supplies and testing we would have more than enough money to fund needs.

  • Tisha

    After watching this program, I wondered why the funding part of medicare was not mentioned? How much is provided through the medicare tax (insurance payments made via our tax) each year and the income provided via the monthly premiums paid by medicare recipients? This program lacked both sides of the issue! On any future updates to this program, the producers should include the funding side as well as the cost side.

  • MirandaG

    Physicians, whether GPs or specialists, are paid much more than average in the OECD. Hospital stays cost much more here. Drugs cost much more. Even adjusted for higher costs of living in the US, we still pay much too much.
    Why do we put up with this? Partly, I suspect, it’s because people don’t know the just how far out of line we are. And some otherwise liberal people are content with the injustice of this overcompensation.
    But that enormous tax write-off for employer-sponsered health insurance! To quote NPR, It is “the biggest deduction of them all. It costs the government a whopping $180 billion a year.”
    Why worry about rip-offs, when the state pays for it? And if people in the general medical market are irresponsible, the inflation necessarily is passed along to the Medicare patients.

  • David King

    Hospice use to be a totally voluntary service. Once it received funds from Medicare a lot of creative financing occurred. I witnessed my mother-in-law receive (3) 15 minute/week visits by hospice who charged over $6,000/month for this service. And they did practically nothing. My dad when he was living even believed they were the cause of her death because they washed her hair and then left without dying it which caused her to catch a cold which very quickly led to her death. I recommend to immediately pull Hospice out of receiving Medicare or extremely limit their receipt of funds. When I alerted a family nurse of the money sent to Hospice she immediately called Medicare to halt the misuse of funds and Medicare said they understood our issue but could not control it and it would take congress to fix it.