Medicare Public Policy Summary

Medicare is a federally administered health insurance program that was started in 1965 by President Lyndon B. Johnson and took effect in 1966 and was aimed to combat the high percentage of elderly individuals who were without health insurance coverage and thus improve their health. Originally, Medicare provided health insurance coverage for retirees and their spouses 65 and older. But in 1972 Richard Nixon signed the first change to Medicare allowing for certain disabled persons under 65, and anybody diagnosed with kidney failure who require dialysis or a transplant to receive coverage under the program. In 2003, President Bush singed a bill called the “Medicare Prescription Drug Improvement and Modernization Act” which provided an optional

Many uninformed individuals believe that Medicare is only a single program, this is a common mistake.

Medicare is actually three different programs. Medicare Part A, the first program, financed by payroll taxes offers coverage of inpatient hospital costs and some of the costs of long-term care for the elderly. Medicare Part B covers the costs of both physician expenditures and outpatient hospital services. Part B, different from that of Part A, is financed through enrollee premiums and the general revenues of the government. Lastly, Part D covers the costs of prescription drugs. According to the text book “Public Finance and Public Policy” by Jonathan Gruber, “there is surprisingly little evidence that the medicare program actually improves the health of the elderly.” This means that the existing policy does not improve the overall

Gruber then goes on to say that this type of payment system would create competition in the Medicare program and help the government set an optimal reimbursement level (472). The benefit of this type of system is that the government is able to find the optimal amount of reimbursement without putting more resources into the program meaning that less will be spent in the future. Another benefit is that the individuals covered by medicare would be able to get the exact coverage they require as opposed to coverage options that are pre-set by the federal government. But this type of system does come with a cost. If a premium support system were created it would redistribute “from the sickest enrollees to the most healthy” (Gruber, 472). Allowing more healthy individuals to save more money by keeping part of the voucher and sickest people to spend more money above the voucher and thus not save as