Today, Medicare and Medicaid mark their 56th birthday. They were signed into law by President Lyndon Johnson to ensure that seniors and the poor had access to quality, affordable health coverage as part of his Great Society.
They’ve grown far beyond what their creators envisioned. In 1967, the House Ways and Means Committee forecast that the program would cost $12 billion by 1990. The actual tab that year was $110 billion—nearly 10 times higher. In 2019, Medicare spending was just under $800 billion.
Medicaid isn’t far behind. Spending on the program has surged from roughly $3 billion in 1967 to $613 billion in 2019. It now covers more than 74 million people—about one in five Americans. In 1967, just under 4% of Americans were beneficiaries of the program.
Now Democrats are pushing to expand Medicare and Medicaid further—to the detriment of taxpayers and their own beneficiaries.
As part of a $3.5 trillion budget package, Democratic leaders have floated lowering the eligibility age for Medicare to 60 from 65. Doing so would cost about $200 billion over a decade. They’re also interested in expanding Medicare to cover dental, vision, and hearing benefits, at a cost of about $360 billion over 10 years.
Older adults are least in need of more government largesse. For starters, they’re well-off, relatively speaking. Americans between the ages of 55 and 64 have an average net worth of just under $1.2 million. Those between 65 and 74, who already enjoy taxpayer-funded health insurance through Medicare, have an average net worth of more than $1.2 million.
Older Americans are also more likely than members of other age groups to have health insurance. The over-65 crowd has access to Medicare, of course. But 92% of those between 60 and 64 have insurance coverage already. Nearly three in four people in this age group have private insurance, whether through their employer or the individual market.
Medicare can’t afford the cost of care for its existing beneficiaries, much less more generous benefits for a new crop of enrollees. According to the Congressional Budget Office, the trust fund for Medicare Part A—the program’s hospital insurance benefit—will become insolvent by 2024.
At that point, the tax revenue flowing into the program will not be enough to pay out the claims coming in. Federal law bars the government from using general revenue to fund the program’s expenses. So it could delay payments to hospitals and physicians—or just pay them less.
It can’t afford to cut payments much. Medicare already pays providers 86.8% of their costs. If the federal government cut payments further, then providers would likely limit the number of Medicare patients they’d see—and thereby jeopardize patient access to care.
And if Medicare swallowed up people aged 60 to 64, the access problems could be even worse, as more people would compete for fewer appointments.
Democrats are also looking to pump up Medicaid enrollment. As part of Obamacare, they opened the program up to everyone making less than 138 percent of the poverty level, including able-bodied adults. The U.S. Supreme Court later made that expansion optional for the states; 12 declined to expand.
Nevertheless, nearly 15 million newly eligible people have enrolled in the program as of December 2020.
Democrats are trying to force Medicaid expansion upon the 12 holdout states by creating a new, Medicaid-like plan paid for and administered by the federal government. If enacted, this new plan would pull 4.4 million more people into taxpayer-funded coverage.
Medicaid beneficiaries may have coverage. But that doesn’t mean they get quality care. A study comparing Medicaid beneficiaries in Oregon to similarly situated uninsured individuals found that those with public health coverage experienced no improvement in health outcomes relative to those without any coverage at all.
The program’s return on investment may be negative, once we consider how much the program loses to fraud. In 2020, one-fifth of Medicaid spending—$86 billion—went toward “improper payments.”
Even with all that waste, the program’s payments to doctors and hospitals are absurdly low. Medicaid pays healthcare providers 62.2% of what employer-sponsored insurance does. It’s no wonder roughly one-third of doctors won’t see new Medicaid patients.
The legacy of Medicare and Medicaid after 56 years is one of relentless growth — in enrollees and in spending. If Democrats have their way this year, the two programs could grow even bigger. That’s not an outcome taxpayers, or even the program’s beneficiaries, should welcome.