The Origins of Medicare and Medicaid

Medicare is a widely popular program.  Most American support increasing taxes rather than making cuts to Medicare spending.  Americans prioritize spending on only Social Security and education more than Medicare.  Then there is the famous “Keep Your Goddamn Government Hands Off My Medicare!” statement.

Medicaid is Medicare’s ugly step-sister.  Whereas Medicare beneficiaries qualify primarily due to age, most Medicaid beneficiaries qualify based on income.  State legislatures fight constantly to reduce Medicaid spending in their states.

Why is Medicare so much more popular than Medicaid?  Paul Starr provides an answer:

Though adopted together, Medicare and Medicaid reflected sharply different traditions.  Medicare was buoyed by popular approval and acknowledged dignity of Social Security; Medicaid was burdened by the stigma of public assistance.  While Medicare had uniform national standards for eligibility and benefits, Medicaid left the states to decide how extensive their programs would be.  Medicare allowed physicians to charge above what the program would pay; Medicaid did not and participation among physicians was far more limited.  The objective of Medicaid was to allow the poor to buy into ‘mainstream’ of medicine, but neither the federal government nor the states were willing to spend the money that would have been required.

Another option for proving health services for the poor would be to establish federally funded community centers.  In fact proposals in 1967 called for one thousand community centers to serve 25 million people.  These proposals were never adopted even though some studies had shown them to be more cost-effective.  Why didn’t policymakers choose to use community health centers rather than Medicaid to treat the poor?

…policy makers did not deliberately choose to push Medicaid over neighborhood health centers on the basis of any evaluation of relative cost effectiveness.  Medicaid simply had the advantage of institutional compatibility.  It covered what would otherwise have been bad debts for hospitals and raised no challenge to private interests in the medical sector.  Although neighborhood health centers managed to survive (and even grow in the later seventies), they never became more than a marginal alternative.

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