Public Administration Most Important Economic Essay

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Recession is a period characterized by increased unemployment rate, lower inflation, lower spending, reduced production and stocking. Different economic theories such as the Classical, Neo-classical, Keynesian and the Growth curve and life cycle theories argue differently about the economic cycles. The neo-classical theorists for example argue that interest rates are crucial in the shift towards the different cycles and therefore by regulating the flow of funds (increasing or decreasing) it is even possible to avoid the economic slump. [ Stanley Salvary, (2004)]

Medicare and Medicaid

Medicaid and Medicare are two important federal healthcare programs that together serve roughly more than 80 million Americans. These programs were included in the Social Securities act in 1965. These programs cater to the healthcare needs of specific groups of people and are both managed by the U.S. Department of Health and Human Services. Medicaid is a Social welfare program that provides health services to pregnant women, Blind or disabled people with limited income, Teenagers living on their own, people who live below poverty line, families below poverty line and for families with dependent children with limited income. [CMS] Medicaid is implemented with the active cooperation of the states with the federal government sharing the costs. Medicaid programs constitute a huge chunk of federal healthcare expenditure. The 2007 figures for Medicaid programs stand at $330 billion roughly constituting 2.4% of the nation's GDP for that year. [Medical News]

Social Protection is the main goal of the Medicaid program and the program has provided healthcare services for millions of low -income people. However, the Medicaid program has been subjected to intense criticism over the recent years relating to its mismanagement and how this is limiting the coverage for the really needy people. One of the significant problems involved in the Medicaid program is to enlist enough providers for the service. The federal government included the 'Equal Access Clause" in the Medicaid act to remove any discrepancies in this regard. This clause requires all State governments to assure that payments are "sufficient to enlist enough providers so that care and services are available . . . At least to the extent . . . available to the general population in the geographic area.." [Sean Jesse, 2009] However the glaring truth is that state governments offer poor reimbursement rates and this has forced most private healthcare providers to reject Medicaid patients.

Since private healthcare participation in Medicaid program is only optional, more and more healthcare providers find it unprofitable leaving the poor patients eligible under Medicaid programs struggling for their healthcare. Complicating the problem is the reducing federal share in the Medicaid Programs and the increasing burden on the states. In 2005, for example federal government spent $177.6 billion while the states contributed $133.8 billion. [Sean Jesse, 2009] The similar figures for 2008 were $192 billion and $146 billion indicating a consistent increase in state commitment to the Medicaid program. [Kaiser Family Foundation] This trend of declining federal matching rate has forced the State governments to lower their reimbursement rates as a cost cutting measure, which is not encouraging for enlisting more private healthcare providers as participants in the Medicaid program. The result is that eligible Medicaid patients are subjected to prolonged waits to receive medical treatment for non-emergency health services. As professor and specialist in health Law services Dr. Sidney D. Watson says, "Medicaid has failed in its mission to care for the poor because doctors refuse to participate in the program." [Sean Jesse, 2009]

Medicare, on the other hand, is a federal social insurance program. Medicare eligibility requirements are for a person to be atleast 65 years of age, or below 65 with disabilities or end stage renal disease. Besides the requirement of U.S. Citizenship or permanent resident status, Medicare program also requires that a person has contributed at least 10 years to the insurance program. The goal of the Medicare program is to offer comprehensive healthcare coverage including, emergency, outpatient, and prescription drugs cost coverage for senior citizens who are at least 65 years of age and above. Medicare plan is divided into four parts. Part A includes emergency hospital admission and treatment expenses, Part B covers non-emergency and routine outpatient services, part C is the 'Medicare Advantage Plan' managed by private insurance companies approved by Medicare which includes coverage of the services included under part A and B. together. Part D, which is an optional coverage includes coverage for Prescription drugs and helps to lower drug costs. [Medical News]

Like Medicaid, Medicare is also hurt by fiscal pressures. The main funding source for Medicare programs are the Hospital Insurance payroll taxes (2.9% of salary) and premiums paid by beneficiaries. As a nation with an aging population Medicare spendings are projected to escalate at an alarming rate. Statistics suggest that from 2.5% of GDP in 2005, Medicare expenditure would rise significantly constituting 11% of the GDP by 2080. This coupled with the fact that the projected revenue is insufficient creates a huge fiscal pressure. Medicare statistics indicate that at the current payroll tax rate of 2.9%, the Medicare HI trust funds would be exhausted by 2018 and to sustain the program would involve an increase in tax from 2.9% to 6.41%. [FRASER, 2007, pg 9] So there is a clear focus on controlling costs while at the same time maintaining health protection. To manage this overblowing situation the government has planned to make significant cuts in its Medicare expenditure. As the MA President Cecil B. Wilson, MD. Stated, "Congress has finally taken its game of brinkmanship too far, as the steep 21% cut is now in effect and physicians will be forced to make difficult practice changes to keep their practice doors open." [Katherine Hatwell] The proposed cuts are forcing healthcare practitioners to limit care provision for Medicare patients. In other words, Medicare is also facing a crisis situation leaving millions of senior citizens worried about their healthcare.


1) IOUSA, 'One Nation Under Stress In Debt', 2008,

2) Fox news, 'Growing National Debt Maybe Next economic Crisis', (Jul 3, 2009)

3) Senator Bob Bennett, 'Bennett on Social Security reform', (Feb 12, 2009),

4) David Goldman, 'Obama's big Idea: Digital Health records', (Jan 12, 2009),

5) Economy Watch, 'German Economy',

6) Stephan Pfeffenzeller, "Economic Growth: What Macro Economic

Factors Lead to Economic Growth', (2008)" http://www.jet-to-let-

7) Stanley Salvary, 'The NeoClassical Model, Corporate Retained Earnings, and the Regional Flows of Financial Capital', (2004),

8) Kaiser Family Foundation, 'Federal and State Share of Medicaid Spending', (2010)

9) Sean Jesse, 'Fulfilling the Promises of Medicaid Act: Why the Equal Access Clause Creates Privately Enforceable Rights', Emory Law Journal; Vol 58, (2009),

10) CMS, 'Medicaid Eligibility: Are you Eligible',

11) Medical News Today, 'What is Medicare and Medicaid', available online at,

12) Katherine Hatwell, 'Congress Fails Seniors; 21% Medicare cut in effect…[continue]

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