July 30 marks the 50th anniversary of the law that created Medicare and Medicaid. Let’s take a look at how much has changed since the programs were first conceived — and also at the role they play in employer-sponsored health care.
Medicare — When Medicare was established in 1965, as Federal health insurance for the elderly or disabled, there were fewer than 20 million Americans over the age of 65. Nearly half of them were uninsured, and the elderly population was viewed as politically disconnected. Today, Medicare covers 55 million people — one in six Americans. Each day 10,000 more people become eligible, while the number of workers paying the tax to fund the program decreases. And these seniors are “uber-citizens” who can’t be ignored. They are a political force to be reckoned with, and their health coverage is of great importance to them. Half of the covered individuals have four or more chronic conditions. When the George W. Bush administration expanded Medicare coverage to include prescription drugs, many employers decided to discontinue sponsoring plans for retirees over age 65.
Medicaid — Medicaid was originally intended only to provide coverage to children, pregnant women, and disabled persons. After the ACA expanded the scope of Medicaid to include residents with incomes as high as 133% of the Federal poverty level, the Supreme Court decided states could have the option to expand coverage or not, and 20 have chosen not to expand. Even so, a whopping 70 million people are enrolled — that’s one in four Americans. The annual cost of $500 billion is shared between the Federal government and states, where it tends to be one of the largest budget items. States manage cost by cutting payment rates to providers or reducing benefits, creating access challenges for members. As a potential coverage option for low-paid and part-time employees, Medicaid takes some of the pressure off employer-sponsored plans to provide affordable coverage to all.
What lies ahead for these landmark programs, and how can employers prepare? Consider that Medicaid is the only safety net for millions of middle-class people who need long-term care at home or in nursing homes — in fact, more than 60% of nursing home residents rely on Medicaid for assistance. Not surprisingly, Medicaid programs are working to shift people from costly nursing homes to less costly services at home or in community settings. Your employees should consider what they would want for their parents, or themselves, should they need this type of assistance. Advance planning for long-term care is a good thing to include in financial wellness coaching.
Medicare and employer programs have a symbiotic relationship. According to the Urban Institute, reducing the rate of chronic disease by just 5% would save Medicare and Medicaid $5 billion per year by 2030; 25% reduction would save $26.2 billion per year. Employer investments to help workers avoid and/or manage chronic conditions have the potential to contribute to significant savings. At the same time, the vast purchasing power of Medicare has the potential to move the market in productive ways. In 2014, 20% of Medicare spending ($72 billion) went to providers under contracts that gave them incentives to coordinate care to drive better quality and lower costs. This effort is parallel to employer efforts to utilize Accountable Care Organizations and patient-centered medical homes to achieve the same goals. The more pressure on providers to provide care this way, the faster we will be able to make progress.