Washington will pause this week from warring over President Obama’s five-year-old healthcare law to commemorate a major milestone for the federal government’s two big health insurance programs.
Medicare and Medicaid hover in the background of just about every big fiscal fight in Washington, as they now cover one in three Americans, consume nearly one-fourth of the federal budget and constitute by far the country’s largest healthcare payer.
Thursday marks 50 years since President Lyndon Johnson signed the health coverage programs for the elderly, disabled and poor into law — and they will take center stage with commemorative events around Washington, including a Wednesday event hosted by Health and Human Services Secretary Sylvia Mathews Burwell at her agency’s headquarters.
While Medicare and Medicaid spark plenty of partisan tension, they have grown so dramatically over the last five decades— and provided so many Americans with health coverage — that it’s virtually impossible for even the most conservative politician not to recognize the impact they have had on the country’s safety net.
Enrollment has exploded over the last few decades, particularly in Medicaid, which now covers about 20 percent of Americans, up from 8 percent in 1985. Medicare enrollment has grown more steadily but still faster than population growth, and now covers about 16 percent of the country.
But the programs’ success has put them in the difficult financial straits that have long fueled political fights over whether they need to be overhauled. In 1975, 10 years after Medicare and Medicaid became law, federal spending on the programs equaled only 1.2 percent of gross domestic product. Today, they eat up federal dollars equal to 4.6 percent of GDP.
Yet Medicare and Medicaid aren’t going anywhere — and the pressing question for policymakers is whether they will be able to handle the many challenges bound to arise over the next few decade. Here’s what to watch for:
1. Medicare is looking more fiscally sustainable, but it’s not out of the woods yet.
After years of fears that Medicare’s hospital fund would soon run out of money, the program has recently enjoyed slower spending growth. So while it’s projected to reach insolvency in 2030 (a date the Congressional Budget Office recently pushed back), some experts are more hopeful than ever that it will continue down a sustainable fiscal path.
“Medicare’s financial footing is improving,” said Edwin Park, vice president for health policy at the left-leaning Center on Budget and Policy Priorities. “We need to produce some savings, but it’s manageable.”
But the spending slowdown is at least partly due to the recession, experts agree, and there’s no guarantee it’s the new normal. And the influx of baby boomers starting to enroll in the program will get much more expensive as they age, increasing financial pressure.
Even so, Congress is even less likely to enact any reforms during the spending lull, even if it’s temporary. Medicare polls well among seniors, with three out of four generally saying they’re satisfied with it, and that’s likely to deflate any serious attempts by Democrats or Republicans to enact major changes.
“This would be a great period of time to try to ease in gradual reforms that would really make a difference,” said Joe Antos, a healthcare economist at the right-leaning American Enterprise Institute.
2. Medicare is trying to transform how it pays doctors and hospitals, but it’s not clear how well that will work.
One of the reasons health spending — both public and private — has grown so rapidly is because doctors and hospitals are paid for ordering more tests and procedures instead of giving more effective care. There’s a big move afoot to change that, with the Obama administration setting new goals earlier this year toward value-based payments and Congress passing a bill in March to reform the way doctors are paid.
That has received a lot of applause, since virtually everyone agrees the U.S. healthcare system needs major payment reforms. But many experts are skeptical the changes can be accomplished quickly and warn that any substantial changes might take decades.
“The problem is there are lots of intangibles in the practice of healthcare that cannot be easily reduced to a measure,” said Bob Berenson, a healthcare expert at the left-leaning Urban Institute.
3. Medicaid’s future is linked to the 2016 elections.
The 2016 election could shift the balance of power in the White House, the Senate and in states around the country. If Republicans manage to win the presidency and keep control of Congress, their first move would likely be to target Obamacare.
But there’s a good chance they also would also push for changes to Medicaid, perhaps trying to turn it into a block grant program to keep spending better under control. The Congressional Budget Office has projected that with the new Obamacare enrollees, federal Medicaid payments will nearly double by 2025.
Conversely, if Hillary Clinton or another Democrat became president, they would be almost sure to block substantial changes.
“If there is a [Republican] president in 2017I would expect major changes and restrictions,” said Henry Aaron, a healthcare economist at the Brookings Institution. “If there is a [Democratic] president, not.”
The federal government’s bill would expand if more states decide to expand Medicaid. With recent moves by Alaska and Utah to expand the program, that leaves 19 states that have opted out. But more could come on board after 2016 if Democrats do well in gubernatorial and legislative races.
