Medi-wha? Medicare vs. Medicaid (Part I)
Medi-wha? Medicare vs. Medicaid (Part I)
Which one is what one...or what one is who?
These two public health care programs made up 36 percent of national health expenditures in 2020, so let's figure them out! [1]
1. Birds of a feather
Medi-care covers those 65 or older, with some additional disability categories. Medi-caid focuses on low-income adults, children, and pregnant women. However, the two are often in the same breath for a reason- they share common goals and challenges. Both programs thrust the government into a challenging new role: functioning as an insurance firm. First, it must shoulder fluctuating risk linked to the population's health status and rising health care prices. Second, it must create and manage pricing schedules for all services and patient types. Finally, it has to collect taxes to pay for it all! (that one's less of a stretch…)
Why transfer these responsibilities to government agencies when the private sector already has insurers? We'll talk later about "crowding out," but traditional rationales suggest that both Medi- populations are particularly subject to asymmetric information. Elderly and low-income individuals with low medical literacy may have trouble navigating insurance and medical care. Another reason may simply be to promote equity- helping grandma, kids, and pregnant moms is something we value as a society.
2. Alphabet soup: Part A
Buckle up for the alphabet A-D in the next lessons, but let's start slow with Parts A and B, or "Traditional Medicare." Part A covers typical hospital expenses. Enrollment in Part A is functionally automatic if you're over 65 and show up at a hospital since most people already paid the premium through lifetime payroll deductions.
Maybe it's mentioned from time to time that Medicare costs are going up? Here's some good news- we're in a lull to deal with that. Part A and B costs rose 7.3 percent between 2000 and 2010, but since then to 2018, costs have only risen 1.7 percent![2] Why? Enrollment is up as the baby boomers age in, but they are "younger," and thus healthier, bringing down per-person costs. We need to leverage the next few years to make Medicare's 15 percent bite out of federal outlays as efficient as possible.
3. Part B and its clever parry
Part B is the second half of "Traditional Medicare" and covers physician and outpatient services. Part B has voluntary enrollment. Hold on, doesn't "voluntary health coverage enrollment" make you shiver?? (If not, see here for the whole spooky story! ) Here's the clever fix: if you don't sign up for Part B at 65, your monthly premium goes up 10% each year that you don't sign up, permanently. If you decide to adverse-select into Part B, you're going to have to pay for it!
For a deeper dive into Medicare costs as they stand now, the Kaiser Family Foundation has a nice summary here.
[1] NHE Fact Sheet, 2020. Center for Medicare and Medicaid Services. CMS.gov
[2] Cubanski, J., T. Neuman, and M. Freed, "The Facts on Medicare Spending and Financing," Issue Brief, Kaiser Family Foundation, August 2019.
Read the rest of the Medicare series: Medicare Advantage (Part II), Medicare Drug Plans (Part III), and Medi-caid (Part IV).