Trending in DC: The History and Future of Healthcare Reform

This year marks the 50th anniversary of Medicare and Medicaid.  

President Lyndon Johnson signed the legislation creating Medicare and Medicaid on July 30, 1965, fulfilling a promise he made to help the elderly and the poor receive health care.  Over the last century, health care has evolved and developed into what we know today.  And the next 50 years could once again redefine how healthcare is delivered in America.

Healthcare Policy Principles

The healthcare reform debate in America revolves around three competing priorities: cost, quality, and access.  We want the most people to have access to quality healthcare at the lowest cost possible.  These three goals create a significant challenge for those working to reform and improve the healthcare system.  It is extremely difficult to achieve success in one of these areas, not to mention achieving success in all three areas.  And often these priorities can be at odds with each other.  

The History of Healthcare

Historically, patients handled their healthcare needs.  They paid doctors directly for their care.  Healthcare costs were limited by the ability of patients to pay for the care they received.  The quality and access of care was also limited by the individual’s ability to pay for services.  

As early as the 1930s, President Franklin D. Roosevelt considered including a national health insurance program as part of Social Security.  However, this proved to be too politically difficult to pass.  President Harry S. Truman proposed a similar health insurance program in 1945, but it was not able to pass in Congress.  

However, around 1940 fundamental change happened in the US healthcare system.  Employers began to offer health insurance as part of their benefits packages to employees.  This benefit proved to be very popular, and the number of people covered by employer health insurance skyrocketed from just over 20 million in 1940 to more than 142 million in 1960.  As a result, 75 percent of all Americans had some form of health insurance by 1958.

While healthcare access increased dramatically in the twentieth century, coverage of the poor and the elderly continued to lag behind the rest of the population.  President Lyndon Johnson made coverage of these underserved groups a major part of his “Great Society” social reform agenda.  

Medicare vs. Medicaid

Medicare is a federal program and is essentially universal coverage for health care.  Any US citizen who is over 65 is entitled to receive Medicare benefits.  

Medicaid, on the other hand, is designed to focus on the needs of low-income individuals.  It is an optional program in which states partner with the federal government for funding.  It has always been more sporadic in its coverage.  While some states cover a large number of people, others limit coverage to only those with the highest need, such as children, pregnant women, or those with disabilities.

The Coverage Gap

The result is that while most people are covered through their employers, and others are covered by the government, a consistent number of people remained without any health insurance.  This has become the latest battleground for proponents of universal health coverage in America.  

In 1986, Congress enacted the Emergency Medical Treatment & Labor Act (EMTALA).  This law requires a hospital to treat any person who shows up in the emergency room, regardless of their ability to pay.  However, the emergency room is an extremely expensive place to provide care, and emergency rooms can’t address the long-term needs of patients.

President Clinton made universal healthcare a priority during his time in office, but the 1994 Republican takeover of Congress made this goal impossible.  However, universal healthcare advocates continued to work behind the scenes, setting the stage for the next opportunity.

The Birth of the Affordable Care Act

That opportunity came with President Obama.  The Affordable Care Act (ACA), which was passed in 2010, will go down as one of the defining policy issues for the Obama Administration.  However, there is a critical difference between the ACA and the original passage of Medicare and Medicaid.  In 1965, many Republicans supported the legislation.  In 2010, no Republicans voted to support the Affordable Care Act.  In 1965, the goal was to provide a basic safety net to those who were most vulnerable in society.  In 2010, the Affordable Care Act not only fills in all the gaps of those without coverage, but it extends government subsidies to those earning up to 400 percent of the federal poverty line.  Under the ACA, the typical family of four, with two kids, qualifies for some form of government subsidy up to an income of $97,000 per year.  This means that virtually all people will either receive free or subsidized government health care once the ACA is fully implemented.  

Because of the acrimony from the passage of the ACA, some states sued to stop its implementation.  First, in 2012 and again this year, the Supreme Court upheld the legal status of the new law.  While some members of Congress are still working to repeal the ACA, it is here to stay.  

Unchartered Waters

The question now is what’s next.  While the Supreme Court upheld the law as legal, it also ruled that the federal government could not force states to expand Medicaid.  As a result, about 60 percent of the states have decided to expand Medicaid while the other 40 percent have decided not to expand yet.  If adoption of the original Medicaid program is any indicator, it could be another 20 years before all states choose to expand their Medicaid programs consistent with the Affordable Care Act. Arizona waited until 1982 to adopt the original Medicaid program.

Cost control in healthcare is also becoming increasingly important.  The Congressional Budget Office projects that by 2090, healthcare programs will be 13.3% of US Federal Government Outlays.  This will cause US government debt to increase from 75% of GDP today to around 175% by the year 2090.  The only other time US debt has surpassed 100% of GDP was at the height of World War II.  

Policy makers in Washington will need to start focusing on controlling costs to prevent a financial disaster.  However, this will involve some very difficult decisions and a renewed debate about what size of government is appropriate.