DemDaily: What are Medicare and Medicaid?

August 1, 2023

Sunday marked the 58th anniversary of Medicare and Medicaid, the two government-run, social insurance programs that provide health care to the most vulnerable of our citizens -- the elderly, poor and disabled. For almost six decades Medicare and Medicaid have been a critical bulwarks of economic security for Americans.

Medicare is a federal program that provides health coverage for those 65 or older, or who have a severe disability or certain illnesses, regardless of income. Medicaid is a state and federal program that provides health coverage for low-income families, the disabled, those with long-term care needs, and pregnant women, regardless of age.

Medicaid and Medicare were parts of President Lyndon Johnson's Great Society domestic program, which launched in 1964 and focused on eliminating poverty and racial injustice.

On July 30, 1965, Johnson signed the Social Security Act of 1965, which introduced Medicaid and Medicare as national social health care programs under law and, for the first time, made health care available to millions of Americans.

Congress has made numerous changes to the programs over the years, expanding access for more Americans to quality and affordable health care while adding more benefits like prescription drug coverage.

The Children’s Health Insurance Program (CHIP) was created in 1997 to provide health care to uninsured American children from families with incomes too high to qualify for Medicaid, but who can't afford private coverage. All 50 states, the District of Columbia, and the territories have CHIP plans, covering an estimated nine million children per year.

Under President Barack Obama's Affordable Care Act (ACA), which was signed into law in March of 2010, Medicaid was expanded to include more preventative services and lower drug costs. The ACA's major provisions came into force in 2014, and by 2016, an estimated 24 million additional Americans were covered by insurance -- in part due to the expansion of Medicaid eligibility.

Efforts by Republicans and the Donald Trump administration to repeal the landmark legislation, also known as "Obamacare," were unsuccessful. Trump, however, was able to provide waivers to the states regarding implementation of Medicaid, including limiting enrollment and allowing for imposition of a work requirement barrier between the uninsured and Medicaid.

The week he took office, President Joe Biden signed an executive order to take steps to "strengthen Medicaid and initiate an open enrollment period under the ACA," along with imposing special measures to address the COVID-19 pandemic.

Under Biden's American Rescue Plan (ARP) nine million citizens who buy their coverage through the Affordable Care Act have lower premiums. Since the ARP's March 2021 passage, 34% of new and returning customers have found plans with premiums of $10 or less per month.

The Inflation Reduction Act, signed into law in August 2022, includes significant improvements in drug coverage, allowing Medicare to negotiate drug prices, cap seniors’ insulin costs at $35 a month, and create a $2,000 yearly cap on seniors’ out-of-pocket drug costs.

Over the last thirty years, Republicans have consistently been adverse to Medicare and Medicaid "entitilements" expansion, opposing budget increases, advocating annually for a raise in eligibility requirements -- and sometimes even threatening the existence of both programs. Most recently, during April 2023 debt ceiling negotiations, the GOP-controlled House passed legislation that would force up to one third of Medicaid recipients to satisfy a work threshold to recieve benefits. The bill failed in Senate.

Today nearly 160 million Americans have access to the health care they need thanks to Medicare and Medicaid programs.

Medicare & Medicaid: How It Works
 is administered by the federal government's Centers for Medicare and Medicaid Services (CMS) and paid for by two trust funds held by the US Treasury, which are funded by payroll taxes and other revenue authorized by Congress.

Beneficiaries pay part of the costs though premiums for medical and drug coverage, deductibles and coinsurance. As a federal program, the coverage offered is the same for each recipient in every state.

Medicare is divided into four parts: A and B, often referred to as "orginial medicare," which cover hospital, skilled nursing, and hospice and outpatient services. Part D covers self-administered prescription drugs, and Part C, referred to as "Managed Medicare," is an alternative that allows patients to supplement thir benefits through private insurance or public health plans.

In 2022, 65 million people received health coverage through Medicare at a cost of more than $900 billion -- accounting for near 4% of U.S. gross domestic product.

Medicaid is jointly funded by federal and state governments, and managed by the states. Each state administers its own program while the CMS monitors the state-run programs and establishes requirements for service delivery, quality, funding, and eligibility standards.

In 2021, the federal government paid 69% of state Medicaid expenses, at a cost of $522 billion. Today more than 94.2 Americans and legal permanent residents have free health insurance through Medicaid.

To participate in the plan, states are required to offer Medicaid to all persons on public assistance, but the individual states determine the eligibility guidelines for enrollment in their own programs.

Since ACA was signed into law, 10 states have still chosen not to expand access to Medicaid benefits, leaving an estimated 2.1 million people without access to coverage in Georgia, Mississippi, Tennessee, Alabama, South Carolina, Texas, Wyoming, Kansas, Florida and Wisconsin.

"More than a decade after the landmark passage of the Affordable Care Act ... we are on our way to truly making health care a right and not a privilege. " -- President Joseph Biden

Learn More: Centers for Medicare and Medicaid

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Sources: HHS, Centers for Medicare & Medicaid Services, White House, CBS

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