One of the most controversial topics of the current health care debate is “the public option” or socialized healthcare system which would enable millions of Americans that cannot afford private healthcare insurance an option to have guar anteed healthcare benefits.  But as we very often forget, the United States already operates under a socialized healthcare system since the 1960’s – at least for all seniors over the age of 65 covered under the governments Medicare program and low income individuals who qualify for Medicaid healthcare benefits.  The first healthcare “socialist proponent” was President Harry Truman who in 1945 sent a message to Congress asking for legislation to establish a “national health insurance plan”.  This request was heavily debated especially by several house and senate proponents warning about the dangers of “socialized medicine”.  The opposition was so strong that by the end of Truman’s administration, he had backed off from a plan for universal coverage.  But a seed had been planted – administrators in the Social Security systems and others had begun to focus on the idea of a program aimed at insuring Social Security Beneficiaries[1].

It was not until twenty years later that on July 30, 1965 President Lyndon Johnson signed into law the Social Security Act of 1965 which introduced for the first time the Medicare program and its companion Medicaid to the nation as part of his “Great Society”.  Symbolically, it was ex President Truman who was the first American citizen to enroll in Medicare at a monthly premium of $3 per month and by 1966 more than 19 million individuals were enrolled1.  The plan was intended to protect the most fragile in the population: the elderly, the blind and those with disabilities.  Seniors were the population group most likely to be in poverty at the time with only about half of the population receiving any sort of health care benefits.  Under its original legislation, Medicare Beneficiaries had to be 65 years or older and US citizens or legal residents for 5 continuous years and they or their spouses had to pay Medicare taxes for at least 10 years to qualify for benefits.  In 1972 under the Richard Nixon administration, congress introduced legislation that would extend Medicare benefits to the disabled under the age of 65 who had been receiving either Social Security benefits or Railroad Retirement Board disability benefits for at least 24 months.  In addition, benefits were also extended to individuals with end – stage renal disease (ESRD).  The Medicare Plan was to be financed by payroll taxes imposed by the Federal Insurance Contributions Act (FICA) and the Self Employment Contributions Act of 1954.  Currently, the tax is equal to 2.9% (1.45% withheld from the employee and a matching 1.45% paid by the employer) of the wages, salaries and other compensation in connection with employment.  In the case of self employed individuals, the entire 2.9% tax of self employed net earnings must be paid by the self – employed individual[2]. 

Initially, the program was designed to provide two types of insurances: Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance).  Under Medicare Part A beneficiaries receive coverage for hospital services (acute care, hospitalization, surgery, etc) and brief stays for medical services within a skilled nursing facilities.  Currently, the maximum length of stay that Medicare Part A will cover in a skilled nursing facility per ailment is 100 days. Over the years Home Health services have been also bundled under the Part A insurance.  Part B medical insurance on the other hand was designed to help pay for some services and products not covered by Part A, generally on an outpatient basis.  Currently, Part B coverage includes physician and nursing services, x-rays, laboratory and diagnostic tests, blood transfusions, renal dialysis, outpatient hospital procedures, limited ambulance transportation, immunosuppressive drugs for organ transplant recipients, chemotherapy, and many other outpatient medical treatments administered in a doctor's office.  Part B also helps with durable medical equipment (DME), including canes, walkers, wheelchairs, and mobility scooters for those with mobility impairments.  Moreover, prosthetic devices such as artificial limbs and breast prosthesis following mastectomy and oxygen for home use are also covered under the Part B benefits.[3]

In 1988 the Medicare Catastrophic Coverage Act passed by congress included the most significant changes since enactment of the Medicare program.  This particular program capped out of pocket expenses for patients’ part B benefits; enhanced Part A hospital benefits and limited hospital deductable payments; added an outpatient prescription drug benefit to 80% of the cost of intravenous drugs (to include antibiotics) and 50% of the cost of immunosuppressive; boosted home health, respite and skilled nursing facility benefits; and covered up to $50 for X-ray expenses incurred to detect breast cancer[4].

 Perhaps one of the most important changes of the Medicare Program since its inception was the passage of the Balanced Budget Act of 1997.  With the passage of this act, Medicare beneficiaries were given the option to receive their Medicare benefits through private health insurance plans, instead of through the original Medicare Part A or B plans.  These programs were known as "Medicare+Choice” and hence, Medicare Part C was born as a result of the Balance Budget Act of 1997.  Besides the birth of Medicare Part C, the Balance Budget Act of 1997 also provided other fundamental changes to the program such as:

• Requiring the Center of Medicare Services (CMS) to develop and implement five new prospective payment systems (PPS) for Medicare services (for inpatient rehabilitation hospital or unit services, skilled nursing facility services, home health services, hospital outpatient department services, and outpatient rehabilitation services); it is important to note a similar prospective payment system was introduced by Medicare in 1983 for inpatient acute hospital services which set a precedent for the changes made in 1997
• Slowing the rate of growth in Medicare spending and extending the life of the trust fund for 10 years
• Providing a broad range of beneficiary protections
• Expanding preventive benefits such as exercise and wellness services

In 2003, Pursuant to the Medicare Prescription Drug, Improvement, and Modernization Act of that year, "Medicare+Choice" plans were made more attractive to Medicare beneficiaries by the addition of prescription drug coverage and this became knows as the "Medicare Advantage" (MA) plans.   In a way, this was the precursor of Medicare Part D which officially went into effect on January 1^st, 2006.  In order to receive this benefit, a person with Medicare must enroll in a stand-alone Prescription Drug Plan (PDP) or Medicare Advantage plan with prescription drug coverage (MA-PD). These plans are approved and regulated by the Medicare program, but are actually designed and administered by private health insurance companies. Unlike Original Medicare (Part A and B), Part D coverage is not standardized. Plans choose which drugs (or even classes of drugs) they wish to cover, at what level (or tier) they wish to cover it, and are free to choose not to cover some drugs at all[5].  The future however of one of the costliest social programs in the country is not bright. With the increasing baby boom population rapidly approaching retirement and Medicare eligibility, one wonders if the program is sustainable enough to continue to be self sufficient.  In other words, is the program inflow (taxes) going to exceed its output (spending)?  If nothing is done, the answer is a resounding yes.  In fact, the Medicare program is operating at a deficit but there are still enough cash reserves in within the program to continue paying the bills.   It is projected however that by 2050 1 in 3 people will be pensioners and 1 in 10 over the age of 80.  More than 10,000 baby – boomers will become eligible for Medicare every day for the next two decades.  The Congressional Budget Office (CBO) calculates that entitlement spending will grow from 8% of GDP today to 20% in 2025[6].  This is in fact an unsustainable level of spending and if America keeps its distance from taxes or another alternative devised to drive revenue or decrease spending, we could see the our socialized medical program dwindle and indeed become a part of our history.   

Luis A. Montes, DPT, MBA