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The Promise of Medicare

By Dr. Christopher Hughes

In my last post for DFA, I talked about Dignity, and the humanitarian goals of Medicare that Lyndon B. Johnson spoke about explicitly at the signing of Medicare into law.

Since then, I finished a course in Health Economics, and as part of that course, I researched the origins of Medicare, looking back to see whether it had accomplished what it set out to do as envisioned by President Johnson, and Presidents Kennedy and Truman before him. I learned quite a lot; much of it surprised me. I won't bore you with all twenty-some pages, but here are the major conclusions, which I hope will enlighten you all a bit, too!

- Medicare resulted, along with other anti-poverty programs in a remarkable reduction in poverty for the elderly, reductions in spending as a portion of income, and reductions in out of pocket expenditures
- Medicare caused a shift in generational transfer of wealth, from individual families to needy relatives, to a societal transfer under social (societal) health insurance.
- Medicare resulted in welfare gains for society including reduced welfare loss associated with misallocated resources,   reduced moral hazard, and reduced risk exposure for seniors.
- Medicare obviated the need for charity care for most seniors, the disabled, and patients with End Stage Renal Disease (ESRD).
- Medicare resulted in major gains in availability of health insurance, covering essentially the entire elderly population, and starting in 1973, the disabled and ESRD patients.
- Medicare insurance resulted in great improvements in access to care, both from physicians and in hospitals.
- The costs of the program far exceeded expectations, but so did the influx of cash to providers, the growth in the medical profession, and the rapid growth of hospitals and use of technology.
- Doctors and hospitals had large growth in reimbursement both from higher prices and a larger pool of insured.
- Medicare induced system-wide demands so high as to move the market and firm behavior (growth of hospitals, growth in   technology). 
- Medicare and other Civil Rights legislation resulted in racial integration of health care in America. (A fascinating aspect of Medicare that deserves much more than I can deliver here, but I recommend this article for more information.)
- And, finally, in spite of Ronald Reagan's warnings (via the AMA), it does not appear that "we are going to spend our sunset years telling our children and our children's children, what it once was like in America when men were free."

On the whole, I find it difficult to not conclude that Medicare has been a staggering success, warts and all.

"The Medicare bill of 1965 reflects a deep ambivalence that Americans have long felt about poverty. The traditional idea was that poverty was caused by personal moral delinquency. In the early twentieth century some social thinkers argued that poverty could result from other factors: ill health, unemployment, old age, widowhood, and disability. Judging from the tumultuous history of legislation when state and federal government tried to ameliorate those factors, it seems that many Americans were never completely convinced that poverty was not the fault of the individual." (Sheri David, from With Dignity: The Search For Medicare And Medicaid, 1985)

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