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Medicare and Medicaid were both implemented by Congress in the same year to address the same issue: the War on Poverty. Both programs have also grown in enrollment and spending (Figure 19-1) and now represent the major growth markets for private health insurers.

Figure 19-1

Medicare and Medicaid Growth Markets. (Source: Centers for Medicare and Medicaid Services.)

The 2 programs could not be more different, however, and since 1965, they have taken very different trajectories. In contrast to the national Medicare program that covers all of the elderly and (starting in 1972) the disabled and those with kidney failure, Medicaid has traditionally been an income-based welfare program that sets minimum federal eligibility requirements, has varying state-level eligibility criteria, and historically covered selected (and very diverse) segments of the low-income population. Moreover, many of those eligible for Medicaid were initially “bolted on” over time through a series of program expansions, culminating in a huge increase in eligibility based on income following enactment of the Patient Protection and Affordable Care Act (PPACA) (Figure 19-2).

Figure 19-2

Evolution of Medicaid. PPACA, Patient Protection and Affordable Care Act; HCBS, Home and Community-Based Services; SCHIP, State Children’s Health Insurance Program; SSI, Supplemental Security Income. (Source: Robin Rudowitz, Rachel Garfield, and Elizabeth Hinton. “10 Things to Know About Medicaid: Setting the Facts Straight,” Kaiser Family Foundation, 2019. Available Online:

As briefly noted in Chapter 18, Medicare is a popular and dignified program, partly because it provides insurance to our parents and grandparents, but also because the latter paid into the system through their payroll taxes and are considered “deserving” to be paid back. This is despite the fact that Medicare is largely funded through general tax revenues and higher taxes on higher income earners (to cover Parts B and D). The elderly believe they have paid for their care, but not as much as they think. By contrast, Medicaid traditionally bore (until recent decades) the stigma of a welfare program that beneficiaries did not pay into and who may not be as deserving. These perceived differences are reinforced by the fact that Medicare serves the elderly and disabled, whereas Medicaid serves young people and racial minorities (Figure 19-3). These perceived differences are further bolstered by the contrast in voting participation between the elderly (high turnout) and the poor (low turnout). They are further reinforced by the relatively high payment rates that Medicare Part B pays physicians (39% more than Medicaid), which elicits high physician willingness to treat Medicare patients, and deters some physicians from seeing Medicaid patients.

Figure 19-3

Medicaid Disproportionately Serves Young People and Racial Minorities. (Source: Centers for Medicare and Medicaid Services, US Census Bureau, ...

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