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INTRODUCTION

Medicare was enacted in 1965 as Title XVIII of the Social Security Act. Medicare covers the elderly population (65+ years old) regardless of income or health status and represents the country’s only version of national health insurance. The program was expanded twice: (1) in 1972 to include individuals under 65 suffering from end-stage renal disease (ESRD) and the disabled who received Social Security Disability Insurance (SSDI) payments, and (2) in 2001 to cover people with amyotrophic lateral sclerosis (ALS, or Lou Gehrig’s disease).

Medicare (along with Medicaid) is one of the country’s largest “entitlement” programs (see Chapter 6). To be entitled to Medicare, an individual (or spouse) must have contributed payroll taxes into the Social Security system for at least 10 years. To some, the elderly are thus “deserving” and “worthy” of receiving Medicare benefits because they have already “paid into the system.” Moreover, the elderly have the highest level of voting participation in the country (Figure 18-1) and vote their interests (which include protecting Medicare and Social Security). That is why Medicare is often called “the third rail in American politics”: Touch it and you die instantly.

Figure 18-1

Voting Participation Rates in Presidential Elections, by Age, 1964 to 2016.

When seniors qualify for Medicare, they have several options (Figure 18-2). First, they can register for “traditional” Medicare, also known as fee-for-service (FFS) Medicare. This includes Part A and Part B (covered later), which provide hospital and medical services, respectively, on an FFS basis. Second, they can enroll in FFS Medicare with or without supplemental coverage (Medigap) and/or prescription drug plan (PDP) coverage. Third, seniors can also enroll, if they choose not to register for FFS Medicare, in a Medicare Advantage (MA) plan offered to seniors through private insurers. MA plans cover Medicare Part A and Part B services and may also cover prescription drugs through an MA prescription drug (MA-PD) plan. Many MA plans offer additional benefits such as dental and vision coverage.

Figure 18-2

Medicare Coverage Options. ACO, Accountable Care Organization; CMS, Centers for Medicare and Medicaid Services; FFS, Fee-for-Service; HMOs, Health Maintenance Organizations; MAPD, Medicare Advantage Prescription Drug; PPOs, Preferred Provider Organizations. (Source: Steve Wood, Clear View Solutions LLC. Presentation to the Wharton School, Spring 2017.)

MEDICARE BENEFITS AND COMPONENTS

The Two Wilburs

Medicare and Medicaid emerged as part of President Johnson’s “Great Society” program in 1965 and, specifically, its “war on poverty.” Medicare and Medicaid were not designed in any rational way. Rather, they reflected a political compromise brokered in Congress by Wilbur Mills, Chairman of the House Ways and Means Committee. Wilbur Cohen, a leader in the Social Security Administration, called ...

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