Nearly 50 years ago, President Lyndon B. Johnson signed Medicare into law as an expansion of the Social Security Act. “No longer will older Americans be denied the healing miracle of modern medicine,” the President said at the bill’s signing. Now, experts are warning the program needs reform or risks persistent rising costs.
Medicare Structure
Medicare is primarily structured into four parts: Part A (hospital insurance), Part B (medical insurance), Part C (Medicare Advantage), and Part D (drug Coverage). So-called original Medicare is run by the federal government and comprised of hospital, medical, and drug insurance. Medicare Advantage, created in 1997, is managed not by the federal government, but by private insurers; Advantage also offers parts A, B, and D.
According to Robert Moffit of The Heritage Foundation, Medicare Advantage has a good track record. “Medicare Advantage offers affordable comprehensive coverage—including, crucially, protection against catastrophically large medical expenses—and has a record of superior-quality care.” Advantage also typically provides care at lower cost than original Medicare.
Need For Reform
Like Social Security spending, Medicare faces rising costs. In 2023, government spending on health care reached $1 trillion, and by 2034, some estimate that spending will reach $2 trillion. Brian Riedl of the Manhattan Institute suggests lawmakers put Medicare and Social Security reform on the table. “Social Security and Medicare shortfalls are responsible for 97 percent of projected budget deficits over the next 30 years.”
Both parties have been reluctant to put the sacred cow of entitlement reform in play. And the longer they wait, Riedl argues, the more dire the consequences. Waiting too long will “leave new taxes as the only option to produce substantial deficit savings quickly and without sharply reducing benefits for retirees in their 70s and 80s.”
To reform the programs, Moffit recommends that Medicare Advantage utilize a tax-free savings account and original Medicare should combine Parts A, B and D into “single, comprehensive, and integrated FFS health plan, with a single deductible, simplified cost-sharing, and an annual cap on out-of-pocket costs.”
Polling
Even though entitlement reform was not a central piece of 2024 campaign, voters signal worry that Medicare benefits will not be there for them. According to a Gallup survey, American anxiety over Medicare increased six points over the past two years to 73%. The age group with the largest increase was the 50–64-year-olds who increased 13 percentage points (74%), followed by 40–49-year-olds up 9 percentage points (83%).
Hopefully, our leaders have the courage to make the necessary reforms so that the promise President Johnson made over 50 years ago is kept alive today.
