Medicare at 50: Will Reform Efforts Change Your Coverage?


Medicare celebrated its 50th birthday at the end of last month. During half a century of existence, the healthcare program aimed primarily at older Americans has given hundreds of millions of participants vital protection against the high costs of healthcare.

Medicare has come a long way since President Lyndon B. Johnson signed the Medicare Act in July 1965, and policymakers continue to debate whether further changes to the program are necessary in order to keep it financially viable and able to serve the needs of a growing number of participants. Let's take a look at Medicare's history, and then turn to the future to see what impact proposed reforms could have in transforming Medicare in the next half-century.

Medicare: Then and now By the 1960s, Social Security had already taken root, providing a key source of income for retired workers. Yet the lack of protection from high healthcare costs still posed an insurmountable challenge for many older Americans, with the greater need for healthcare in old age coming at a time when income is almost always lower than earlier in life. Few workers had any sort of comprehensive coverage in retirement, and many insurance companies were looking for ways to stop covering older policyholders because of their high-risk profiles.

Filling the healthcare gap in the nation's financial support for seniors was a key element of Medicare's mission. It took a year to implement Medicare, but by mid-1966, more than 19 million people had enrolled.

Over time, Medicare has seen plenty of changes. In 1972, those under 65 who had long-term disabilities, or end-stage renal disease, were given access to Medicare benefits. The following year, the HMO Act introduced health maintenance organizations to Medicare, allowing HMOs to contract to provide Medicare benefits to those who chose them over traditional Medicare. In 1980, there was greater coverage for home-health services, as well as the introduction of regulated Medicare supplemental insurance policies, also known as Medigap coverage.

The prescription-drug coverage that recipients now take for granted came about in fits and starts. In 1988, the Medicare Catastrophic Coverage Act introduced a drug benefit, but it was repealed the following year due to protests from some participants over premiums. Part D, as we know it, was created in 2003, with the program taking full effect after a few years.

Finally, the 2010 passage of the Affordable Care Act had major implications for Medicare. By introducing a wide variety of reforms, such as new preventive benefit requirements, Medicare recipients got expanded coverage under Obamacare.

What's ahead for Medicare in the next 50 years?Now, Medicare has come into the crosshairs of policymakers with opposing views of the program. Some believe that Medicare's one-payer model is fundamentally flawed, instead advocating for a program in which the government provides support to pay premiums for individuals to obtain their own private health insurance. Citing the costs that the federal government pays to manage the agencies running Medicare, those who favor alternatives to the current system believe that the massive bureaucracy inevitably leads to waste, and a private market would lead to lower costs that would be to everyone's benefit.

Yet many people staunchly oppose such fundamental changes to the Medicare program, arguing that the bargaining power that Medicare has gives it substantial savings over any private-market alternative. Even though Obamacare reforms used the private insurance market to drive participation, the unique situation that older Americans face because of their higher health risks could make private insurers less willing to offer affordable coverage. Even with some shortcomings in the system, Medicare proponents believe that the current program offers the best framework to ensure the stability for retiree healthcare costs for the next 50 years and beyond.

Should you worry about Medicare's future? With so many different positions on Medicare, it's hard to predict how things will pan out over the long run. For now, those who currently have Medicare coverage are likely to see few changes, as even some of the more ambitious proposals tend to grandfather existing participants, as well as those who are within a few years of becoming eligible. Younger people, though, need to pay close attention to the changing landscape for Medicare and for healthcare coverage generally, as evolving proposals could make it more important for you to make sure you can take care of a portion of your healthcare expenses in retirement.

Medicare has had a successful past, and despite the size of the program, and the amount of money needed to support it, it's likely to go on in some form for the next half-century and beyond. Policymakers will argue about details, but it's likely that some form of healthcare coverage for the elderly will survive well into the future.

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