Medicare and Medicaid Reform: Prescription Drug Coverage for Elderly

Introduction

Medicare and Medicaid are government-sponsored programs whose objective is to provide patients with health assistance upon meeting specific criteria. Medicare is the federal program that provides insurance for elderly patients aged 65 and over, and approximately 40 million people are enrolled in this program. Medicaid is an insurance program available for disadvantaged persons, including the elderly, who cannot afford health benefits because of low incomes or other factors. Both programs are subsidized by government funds and, in many instances, will cover the costs of basic medical care as well as specialized testing and supplies.

However, as time progresses and the elderly population grows and requires additional medical care, it is evident that Medicare and Medicaid are assuming less responsibility for healthcare costs, leaving the majority of those costs to be absorbed by the patient. Furthermore, the need for prescription drugs is on the rise, yet pharmaceuticals are only covered by Medicare when they are used in a hospital setting. Congress has been in the process of developing a bill that would provide $310 billion for prescription drug coverage under Medicare over a ten-year period, with an additional $40 billion directed to hospitals and doctors to increase payments (Economist 28). However, this plan is not the complete answer to the problems Medicare faces today. Medicaid, similarly, is not a fail-safe plan in its own right.

Elderly persons are left to absorb much of the cost of their healthcare expenses in today's market, and their financial resources are increasingly strained. In order to reestablish Medicare as a dominant force in today's healthcare market, government leaders must evaluate Medicare and Medicaid in their current states and determine where reform is necessary in order to protect the financial well-being of distressed recipients. This paper presents a sustained argument for the implementation of a national prescription drug plan for elderly persons who depend on Medicare and Medicaid for their medical insurance needs. Since prescription drugs are costly and vital to the health and well-being of elderly persons, they should be the central focus of Medicare and Medicaid reform.

This issue warrants extended discussion because of its relevance to an ever-increasing elderly population in the United States. It is critical for Americans to gain awareness of government initiatives such as Medicare and Medicaid, to diagnose their problems, and to determine possible mechanisms for reform in order to maximize benefits for elderly recipients.

Brief History of Medicare in the United States

Medicare is managed by the Health Care Financing Administration and is composed of two primary areas: Part A and Part B (Vladeck 50). Medicare Part A, also known as general hospital insurance, covers payments for inpatient care, skilled care in nursing facilities, and hospice care (Vladeck 51). The funds for this type of program are obtained through regular deductions from earned wages and are kept entirely separate from those collected for Medicare Part B (Vladeck 51).

Medicare Part B is a voluntary program that provides coverage for a variety of physician services, laboratory tests, medical equipment, and ambulance services (Vladeck 51). In 2001, the required premium for Medicare Part B was $46.50 per month; if elected by the enrollee, this cost is deducted directly from the monthly Social Security payment (Vladeck 51).

Since its inception in 1965, Medicare has been enormously successful overall. In recent studies, approximately 90% of all Medicare enrollees reported satisfaction with their coverage, compared to 60% of those with private health insurance (Vladeck 51). Furthermore, access to Medicare for those over 65 years of age represents a foundational step toward the establishment of universal health care for all individuals. Access to quality health care for elderly persons does not decline with age as it does in other countries, and the availability of this coverage has undoubtedly contributed to the increased longevity of elderly Americans over the past few decades.

Problems That Medicare Faces

Despite its continuous overall success, Medicare faces a number of significant problems that must be addressed in future years. Primarily, with an increasingly aging population, a large influx of baby boomers will require Medicare coverage in the coming years (Vladeck 52). It will be a tremendous challenge for Medicare advocates to manage this anticipated increase in enrollment, estimated to reach 77 million users by 2030 — an increase of 38 million over current figures (Vladeck 52). Secondly, although Medicare benefits are relatively generous for a form of universal health care, increasing numbers of restrictions are being placed on both enrollees and healthcare providers. These two problems pose a serious threat to the future effectiveness of Medicare policy for seniors in the United States. Medicare policymakers and advocates regularly debate these issues, but it remains uncertain whether significant action will be taken in the near future.

Additional challenges include managing patients who require end-of-life care, which accounted for approximately 27% of all Medicare expenditures in recent years (Vladeck 53). Establishing a uniform health care policy for all enrollees is difficult given the country's emphasis on regional and demographic heterogeneity, and the differing policies that exist across states and regions make a single comprehensive benefit plan nearly impossible to achieve. Finally, a growing number of physicians are refusing to accept Medicare patients because they cannot afford to absorb skyrocketing operating costs, and many Health Maintenance Organizations (HMOs) are eliminating Medicare services because of inadequate reimbursement rates (Korcok 1322). These issues continually undermine Medicare's effectiveness in a diverse society.