Cake and Cupcakes for Medicare and Medicaid’s 50th Anniversary

Fifty years ago this Thursday, July 30th 1965, President Lyndon Baines Johnson signed into law legislation creating two new national health insurance programs, Medicare and Medicaid.  Fifty years later, these programs appear as recognizable and durable as any monuments in Washington DC.  That’s an illusion because there’s little difference between the Lincoln and JeffersLBJ HSTon Memorials today versus 1965.  On the other hand, Medicare and Medicaid today look radically different from the law signed by LBJ as former President Harry Truman looked on.

If there is one constant in Medicare and Medicaid, it is change — constant, persistent change to fit the needs and preferences of the time.  Both programs have been works in progress for 50 years, and so it continues.

The law’s original metaphor, coined by then-House Ways & Means Chairman Wilbur Mills (D-AR), was the “three layered cake.”  The bottom layer was Medicare Part A — the original Democratic proposal for hospital insurance, funded by new employer/employee Social Security taxes deposited in a new Part A Hospital Insurance Trust Fund.  When reference is made to “Medicare going broke,” it means this Trust Fund. When debate over the legislation that became the Affordable Care Act/Obamacare began in 2009, the Fund was scheduled to have insufficient funds by 2017 — last week’s new Trustees’ report now pegs the Fund’s financial reserves as solid through 2030.


The second/middle layer was Medicare Part B — payment for physician services, funded by enrollee premiums and government revenues.  During the original Medicare debate, Democrats wanted what became Part A and Republicans pressed for what became Part B.  It was Wilbur Mills’ inspiration to combine them into a single program.  This past March, Congress passed a new law overhauling physician payment in Part B.  Parts A and B make up what is often called “Traditional Medicare,” a federal insurance program with no state government involvement.

The third layer was Medicaid — a new federal-state program to provide medical benefits for low income mothers and their children who were on “welfare” or public assistance.  The law required the feds to set national rules and left administration to states with lots of discretion.  A more appropriate metaphor — less tidy than Mills’ — would have been to cupcakesdescribe Medicaid as 51+ (including DC and US territories) marbled cupcakes.  The saying goes: “if you’ve seen one state Medicaid program, you’ve seen one state Medicaid program.”  Because of changes brought by the ACA, Medicaid today is more a national program with uniform standards than ever — still it is 51+ marbled cupcakes, each one different from the rest.

In 1965, Medicaid was an afterthought — a make-shift, temporary caboose on the bold, new federal Medicare system that many expected/hoped would expand to cover all Americans within several years.  In his definitive book on Medicare’s creation, “The Politics of Medicare,” Ted Marmor did not even mention Medicaid.  Today’s ACA-reformed Medicaid covers more than 70 of 320 million Americans (Medicare covers about 54 million). It is the nation’s largest health insurance program covering 40% of all our children and paying for 40% of the nation’s births, the largest payer for nursing home and long-term care, and so much more.  Sure, 19 states are still refusing to expand Medicaid as permitted by the ACA.  History tells us they will come around — the last state to join original Medicaid was Arizona, and not until 1982, 17 years after the program’s creation!  I continue to predict that all 50 states will be in no later than 2020.

More than Medicaid, though, Medicare has become the undisputed driver of health system reform in the US and around the world.  In the 1965 law, Medicare was required to pay hospitals and physicians their “usual, customary, and ordinary” fees, a mega-inflationary scheme if there ever was one.  In 1983, under “conservative” President Ronald Reagan, Medicare became the world’s biggest government agent for administered prices with the creation of the Inpatient Hospital Prospective Payment System (PPS), with Diagnostic Related Groups (DRGs) as the price-setting tool.  Today, DRGs are one of the most familiar hospital payment forms around the globe.

Today, Medicare is much more than traditional A+B.  It now includes C+D — (“new” Medicare).  C has had several names during its 40+ year history, prominently “Medicare+Choice” between 1997 and 2003, and today’s “Medicare Advantage” by which enrollees get Medicare benefits managed by a private health insurer, now covering about one third of all Medicare enrollees.  Part D was established by Congress in 2003 to provide, for the first time, an outpatient prescription drug benefit for enrollees managed by private drug plans. There’s no mandate, but if enrollees don’t sign up when first eligible, they pay increasingly higher premiums for the rest of their lives!  But it’s not a mandate, so they say.

Understanding the politics of Medicare is much more straightforward if you remember this: Democrats like A+B, traditional Medicare because it is government-paid fee-for-service which keeps insurance companies out of the picture (except for Medigap coverage — another topic!) and tend to dislike C+D because of these programs’ reliance on private health insurers.  By contrast, Republicans detest A+B as government bureaucracy, and love C+D because both rely on private insurers.  Understand this, and everything becomes easier.  Below, I also add Medicaid and the Exchanges to the political mix.

Your Easy Guide to the Politics of Federal Health Programs

Democrats Republicans
Medicare A+B (traditional Medicare) +
Medicare C+D (new Medicare) +
Medicaid +
ACA Health Exchanges + ?@%&!

Republicans also tend to loathe and despite Medicaid because it is government provided health insurance.  One irony is that, today, most states require that Medicaid enrollees get  their coverage through private Medicaid managed care plans run by private insurers.  Go figure.

While the ACA established yet a third pillar to the US health landscape in the form of Health Insurance Exchanges/Marketplaces to provide subsidized private health insurance to Americans unable to get insurance elsewhere, Obamacare also made dramatic changes to both Medicare and Medicaid, reinforcing my premise that these program always have been, and continue to be, works in progress.

The ACA not only expanded greatly who is eligible for Medicaid (to all non-elderly with incomes below 138% of the federal poverty level [$15,654 in yearly household income for a single adult]), it established for the first time national eligibility and enrollment standards.  Though the Obama Administration is permitting all manner of experiments in conservative states (i.e.: Arkansas, Iowa, Indiana) hoping to “get to yes” on eligibility expansion (because of the 2012 US Supreme Court decision that made the ACA expansion an option rather than a requirement for states), Medicaid looks more like a national program today than ever before.

Meanwhile, the ACA accelerated Medicare’s role as a national delivery system reform engine through initiatives such as Accountable Care Organizations (ACOs), bundled payments, penalties on hospitals with high rates of readmissions and patient injuries, and much more.  In US health policy today, Medicare is  driving the reform agenda as the private sector follows and innovates in Medicare’s footsteps.

As someone who follows US health policy developments closely, I am constantly amazed by the daily and incessant deluge of news relating to both Medicare and Medicaid.  Lots of these stories offer hyperbolic predictions of impending doom and calamity — this one I read today by Joe Antos of the American Enterprise Institute predicts that Medicare will be the next Greece!

Fifty years of Medicare and Medicaid and the pace of change just keeps accelerating — for better and worse.  While many Americans fervently wish we could just have one solid federal health insurance pillar, now we’ve got three (not even counting the Veterans Administration and Tricare).  I’m an optimist and believe that our system is  getting better.  I think that’s true most and not all the time.  What’s undeniable is that our major health programs are works in progress, constantly moving and changing.

Here’s hoping that in the next 50 years, we will find a more stable and durable solution for all Americans.

CVS Quits US Chamber of Commerce over Tobacco

The reaction against the U.S. Chamber of Commerce’s advocacy for the global tobacco industry is growing, first reported last week in the New York Times.

Today, the Times reported that CVS Health Corporation announced that it is quitting the U.S. Chamber because of their work around the world in fighting restrictions on tobacco and smoking.  This follows CVS’s major step last year discontinuing tobacco product sales in all its stores.  Double hurray for CVS!smoking

We are still waiting to see whether Boston’s Steward Health Care System and its CEO Ralph de la Torre, will turn their words into action.  Last week, a Steward spokesperson said: “If the chamber is in fact advocating for increased smoking, we do not agree with them on this public health issue.”  Now that the Chamber’s advocacy is clear, it’s time to go beyond words — as Paul Levy makes clear.

The flak against the Chamber is going global, as Margaret Chan, Director General of the World Health Organization, made clear this week:

“By lobbying against well-established, widely accepted and evidence-based tobacco control public health policies, the U.S. Chamber of Commerce undermines its own credibility on other issues … So long as tobacco companies continue to be influential members of the chamber, legitimate businesses will be tarred with the same brush.”

The Chamber is feeling the heat and beginning to lash out against those taking them to task for the deathly advocacy.  Here’s part of their recent statement: “It’s unfortunate that a concerted misinformation campaign about the U.S. Chamber’s position on smoking has resulted in a company leaving our organization.”

If the Chamber wants any legitimacy on this issue, step number one — come clean on how much money you have taken from tobacco companies over the past 20 years. Put it all on the table without delay.  Otherwise — you have no credibility.

U.S. Chamber of Commerce and Global Tobacco: The Heat Is On — Sign the Petition!

Signs of life regarding last week’s New York Time’s expose of the U.S. Chamber of Commerce’s role as the leading advocate around the globe to prevent governments from taking steps to control and reduce their citizens’ use of tobacco products:money-pile-188

  • Strong New York Times editorial, “Tarred by Tobacco:”
    • “Now that it is clear what kind of pro-tobacco advocacy the chamber is carrying out, the organization’s members, particularly in the health care industry, ought to speak out. Do they want their names associated with such a blatant attempt to stop governments in developing countries from enacting sensible public health policies?”
  • Strong Washington Post editorial:
    • “A chamber spokesman told us that the organization “is not an advocate for cigarette smoking and we know that smoking carries obvious health risks” but that the group is opposing encroachment on business rights. Does a health warning on a pack encroach on intellectual property of a cigarette company? We doubt it.”
  • Joint statement by U.S. Senators Sherrod Brown, Richard Blumenthal, Dick Durbin, Jeff Merkley, Al Franken, Elizabeth Warren, and Sheldon Whitehouse:
    • “The U.S. Chamber of Commerce’s decision to use its international clout to fight regulations of tobacco products around the world is craven and unconscionable. Commerce member companies should be concerned that their good name is sullied in efforts to strike down public health protections worldwide. The U.S. Chamber of Commerce is, in effect, renting its letterhead and name to big tobacco, contrary to responsible corporate interests and Americans’ interests in improving global public health. We urge the chamber to rethink this strategy and instead find partners to help improve global public health, not strengthen efforts that will worsen the health of millions globally and cause innumerable deaths from tobacco usage.”
  • The Campaign for Tobacco Free Kids has started a Facebook Petition to tell the Chamber to cut it out.  Add your name please!

Continue reading “U.S. Chamber of Commerce and Global Tobacco: The Heat Is On — Sign the Petition!”

Financing the ACA — Explained, Updated, and Revealed!

Now that King v. Burwell has been relegated to history’s dustbin, let’s return for a deeper dive into the June 2015 report from the Congressional Budget Office (CBO), “The Budgetary and Economic Effects of Repealing the Affordable Care Care Act,” because much juicy and compelling detail has been ignored.  See my original article here.  Let’s start with this table, an earlier version of which (without 2016-25 numbers) I created for my 2011 book, “Inside National Health Reform.”


The table contrasts ACA spending and revenues as calculated by CBO in March 2010 (when the law was signed) for the period 2010-2019 with brand new CBO estimates released last month for 2016-2025 (in bold).  Not all items in the 2010 analysis were included in the 2015 version, though the biggies are.  The table shows costs/spending and revenues/savings according to each respective ACA title — I created both versions using CBO data.

What can we see?  Lots!

First, look at the projected reductions in numbers of uninsured Americans because of the ACA.  In 2010, CBO expected the ACA would lower the nation’s uninsured by 32 million by 2019, half from private insurance/exchanges and half from Medicaid.  In the 2015 report, that number is 24 million.  Eight million fewer insured Americans — a 25% drop(!), and I’ve seen no comment on this.

Second, look at the “$ Spent” column to see what the ACA actually buys — health insurance, private and Medicaid.  All over this chart, by the way, the 2016-25 money figures are much higher than the 2010-19 ones because the ACA’s big parts did not take effect until 2013 and 2014, while 2010-2012 had little spending or revenue, and while the 2020-2025 costs are high.  The $54B in Title 3, by the way, pays for closing the Medicare Part D prescription drug “doughnut hole” or coverage gap.

Third, let’s look at the final column that includes ACA financing in the form of: 1. Title 3’s Medicare spending reductions/savings ($879B); 2. Title 9’s new taxes on high income wage earners, and on drug, medical device, and insurance companies ($718B); and 3. Title 1’s employer and individual mandates ($210B), plus others.  The chart shows that Title 3’s Medicare cuts and Title 9’s new taxes pay for the Title 1 and 2’s insurance coverage expansions.  If you understand this, you get the ACA’s essential financing formula.

Because of missing data, all these numbers don’t add up to the deficit reduction number at the bottom of the table, though there’s enough to show the essential picture.  As detailed in my June CBO post, in 2010 the CBO projected that the ACA over 10 years would reduce the federal deficit by $124 billion; an apples to apples comparison now shows deficit reduction at $353 billion (2016-25); when including the Republicans’ voodoo economics “dynamic scoring,” this reduction drops to $137 (with a ridiculously wide variance).

There’s so much more compelling detail; here are a few important nuggets:

  • Title 1’s $210B revenue comes entirely from the employer and individual mandates, $167B from the former, and $43B from the latter.  Big lift to repeal — especially the employer mandate.
  • Title 9’s new taxes on the pharmaceutical, medical device, and insurance industries have new numbers.  And the winner is:
    • Health Insurance — $142B
    • Pharmaceutical — $30B
    • Medical Device — $24B
  • Title 9’s so-called “Cadillac Tax,” a new 40% excise on expensive health insurance policies scheduled to take effect in 2018, had estimated revenue at $32B (2010-19) and now comes in at $87B (2016-25), almost a tripling as business and labor groups begin pushing hard for repeal. Another big lift.
  • The savings from Title 3’s reductions in Medicare payments to hospitals, health insurers, home health agencies, and other providers has risen from $449B (2010-19) to $879B (2016-25).  This is perhaps most important to understand.  Except for insurers, hospitals and other providers agreed to these reductions to help finance expanded coverage. During the 2010, ’12 and ’14 elections, Republicans incessantly kicked Democrats for these reductions, charging them with cutting grandma’s Medicare to pay for Obamacare!  (Simplified, but true.) But then, in their subsequent budget proposals, House Republicans led by then Budget Chair Paul Ryan (R-WI) always included complete repeal of the ACA except for the Title 3 Medicare reductions!

Some wonder, how could Republicans, given the chance, ever finance repealing the ACA?  Here is the answer.  If you repeal the entire ACA, except for the the $879 billion in Medicare reductions, that bill would reduce the deficit.  A Republican President, working with a Republican-controlled Senate and House, using budget reconciliation rules which cannot be filibustered and only require 51 votes, could make that happen.

Inconceivable?  Consider this.  Twice, US Senate Finance Committee Chair Orrin Hatch (R-UT) and US House Commerce and Energy Chair Fred Upton (R-MI) have released the “Patient Choice, Affordability, Responsibility, and Empowerment Act” (Patient CARE) as their plan to repeal the ACA.  Read their release and then click on the full description and read footnote 3 on page two and here’s what you will find:

“All provisions of PPACA and HCERA are repealed except for the changes to Medicare. Medicare reforms should be considered in the context of reforms to improve Medicare and prevent its insolvency.”

[PPACA and HCERA are the two statutes that, together, constitute the ACA.]  The “changes to Medicare” — that’s the $879 billion.  If you don’t think Republicans have a strategy to repeal the ACA if they win the White House and hold the Senate in 2016, think again.