Financing the Health Care of the Aged

Abstract

The Medicare and Medicaid programs, which were enacted through the 1965 amendments to the Social Security Act, placed the federal government in the central role of assuring access of the aged and the poor to needed medical care. In this article the trends in the sources of financing medical care services for the aged are examined. The distinction in terms of insurance coverage between acute care services and long-term care services is highlighted. The effect of the programs in terms of reducing the aged's direct financial cost of medical care, increasing their access to medical services, and improving their health status is explored. The unanticipated increase in the cost of these programs has led to a change in emphasis in public policy, from assuring access to mainstream medical care to containing the cost of providing care. The direction of new federal policies is analyzed, and it is concluded that no longer will it follow the private sector's specifications of the conditions and arrangements under which health services are provided to program beneficiaries.

Get full access to this article

View all access options for this article.

References

1. Dorothy P. Rice , “Coverage of the Aged and Their Hospital Utilization in 1962: Findings of the 1963 Survey of the Aged,” Social Security Bulletin, 27(7):9-28 (July 1964).

2. Although we focus here only on the aged, the same issues we present arise in the public financing of care for the disabled and the indigent.

3. For a more complete discussion of Medicare, see Kathryn D. Barrett , Medicare: Persons Enrolled in Health Insurance Program, 1978-1979, HCFA pub. no. 03142 (Baltimore, MD: Health Care Financing Administration, 1982).

4. The Medicare HI and SMI programs are financed from separate trust funds. Revenues for the HI trust fund are derived principally from payroll taxes on employed workers and their employers and from self-employed persons in covered work. SMI premiums are paid for each enrollee. States may pay premiums on behalf of aged Medicaid recipients, thereby buying into SMI. In 1979 about 2.5 million of the 24.1 million aged SMI enrollees were buy-ins. The revenues derived from enrollee premiums are supplemented by contributions by the federal government from general revenues. Originally beneficiary premiums were to provide half of the SMI revenues. Subsequent changes in the formula for computing the premium have resulted in general revenues accounting for about 70 percent of the income required for the coverage of SMI benefits to the aged.

5. For a discussion of the groups eligible to receive Medicaid benefits and of the benefits furnished under the program, see Donald N. Muse , National Annual Medicaid Statistics: Fiscal Years 1973 through 1979, HCFA pub. no. 03133 (Baltimore, MD: Health Care Financing Administration, 1982).

6. Larry Corder and Allen Dobson , “Health Care Coverage Estimates from the National Medical Care Utilization and Expenditure Survey: February to April 1980” (Report presented to the American Public Health Association, 109th Annual Meeting, Los Angeles, CA, 1-5 Nov. 1981).

7. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation , “Working Papers on Long-Term Care” (Unpublished, DHHS, Washington, DC, 1981).

8. Bennett Hirsch , Herbert A. Silverman , and Allen Dobson , Medicare Summary: Use and Reimbursement by Person, 1976-1978, HCFA pub. no. 03137 (Baltimore, MD: Health Care Financing Administration, 1982).

9. James Lubitz and Ronald Prihoda , “Use and Costs of Medicare Services in the Last Years of Life,” Health Care Financing Review (in press); Martin Ruther , Medicare: Use of Short-Stay Hospitals by Aged and Disabled Inpatients, 1978, Program Statistics Series (Baltimore, MD: Health Care Financing Administration, forthcoming).

10.

10. Karen Davis and Roger Reynolds , “Medicare and the Utilization of Health Services by the Elderly,” Journal of Human Resources, 10(2):361-377 (Summer 1975).

11.

11. Martin Ruther and Allen Dobson , “Equal Treatment and Unequal Benefits: A Reexamination of the Use of Medicare Services by Race, 1967-1976,” Health Care Financing Review, 2(3):55-83 (Winter 1981); Charles R. Link , Stephen H. Long , and Russell F. Settle , “Equity and the Utilization of Health Care Services by the Medicare Elderly,” Journal of Human Resources, 17(2):195-212 (1982).

12.

12. Jack Hadley , More Medical Care, Better Health? (Washington, DC: Urban Institute, 1982).

13.

13. John E. Wennberg , John P. Bunker , and Benjamin Barnes , “The Need for Assessing the Outcome of Common Medical Practices,” Annual Review of Public Health, 1:277-295 (1980).

14.

14. Hirsch , Silverman , and Dobson , Medicare Summary.

15.

15. Alain C. Enthoven , Health Plan: The Only Practical Solution to the Soaring Cost of Medical Care (Reading, MA: Addison-Wesley, 1980).

16.

16. This conclusion was written before the DHHS distributed a special supplement to the Medicaid manual, indicating that states can require adult family members to support adult relatives. “Family responsibility laws” have been passed or are under consideration in several states.