Medicare reform: 2010 through 2020 and beyond

In 1965, former President Lyndon B. Johnson signed the Medicare and Medicaid bills into law with one mission in mind: to institute a national health insurance plan for older Americans and low-income families.

Over 50 years have passed, and Medicare and Medicaid have since delivered on that promise and more—expanding coverage for prescription drug costs, long-term care patients, pregnant women, uninsured children, and disabled persons of all ages. But national health insurance initiatives have been a major focus in the U.S. government for much, much longer.

In his presidential reelection campaign in 1912, Theodore Roosevelt ran as head of the newly-founded Progressive Party—whose platform called for the creation of a national health service and social welfare for the elderly and unemployed, among other things. Roosevelt lost the election, but his “radical” ideals paved the way for more progressive thinking in American politics.

Social security and national health insurance programs have evolved tremendously since the early 20^th century. Today, Medicare beneficiaries enjoy coverage for services like inpatient hospital care, outpatient care treatments, home health care, hospice, skilled nursing and, more recently, certain telehealth services.

With a new decade upon us, let’s take a look back at some of the most noteworthy policy reforms of the last 10 years.

Medicare policy under the Obama Administration (2009-2017)

Former President Barack Obama signed the Affordable Care Act (ACA) into law on March 23, 2010—establishing what would become one of the longest lasting legacies of his two terms in office. The ACA was enacted to achieve three main goals:

1. Expand health insurance coverage in the United States
2. Control rising healthcare costs, and
3. Improve the quality of healthcare delivery

When the ACA was established in 2010, the United States had an uninsured population of nearly 50 million individuals. According to a 2018 U.S. Census Bureau report, that number has now fallen to just 27.5 million people—or 8.5 percent of the U.S. population.

Under the Affordable Care Act, most Americans are required to hold some degree of health insurance coverage or risk paying a penalty fee. But this decrease in the uninsured population is also due in large part to expansions in state Medicaid programs. As of this year, a total of 38 states have expanded their Medicaid programs to extend health insurance coverage to all adults with an income at or below 138 percent of the federal poverty level.

ACA legislation also established The Center for Medicare and Medicaid Innovation (CMMI)—an organization intended to test alternative payment and healthcare delivery models. The goal in testing alternative payment models like the Merit-Based Incentive Payment System (MIPS) or other Value-Based Purchasing Programs is to ensure reduced care costs and enhanced care quality for Medicare, Medicaid, and Children’s Health Insurance Program (CHIP) beneficiaries.

In 2016, for instance, the CMS Innovation Center began piloting a five-year model to increase quality and cost efficiency for Medicare beneficiaries undergoing two of the most common comprehensive joint replacement (CJR) procedures: hip and knee replacements. In their Performance Year Two Evaluation, CMS reported an overall decrease in average cost per care episode for both hip and knee replacement procedures.

These value-based incentive programs continue to improve care quality and reduce costs for both Medicare beneficiaries and privately insured patients alike.

New 2019 legislation lowers drug costs for Medicare beneficiaries

One of the most recent developments in U.S. healthcare reform combats rising pharmaceutical costs across the industry. In December 2019, the House of Representatives passed the Elijah E. Cummings Lower Drug Costs Now Act—legislation that now gives CMS the power to negotiate directly with pharmaceutical companies for lower Medicare drug costs, and to extend those same prices to Americans on private insurance.

The bill establishes several programs and requirements relating to prescription drug prices, including:

1. Creating a new $2,000 out-of-pocket limit on prescription drug costs for Medicare beneficiaries
2. Limiting the maximum negotiated drug cost to an average price in order to prevent pharmaceutical companies from charging more in the U.S. for the same drug products as they do in other countries, and
3. Reinvesting the drug cost savings into research for new breakthrough treatments and cures at the National Institutes of Health

This legislation safeguards affordable access to essential drugs like insulin and protects Americans—particularly Medicare beneficiaries—from unforeseen price inflation on their prescription drug costs.

Medicare for all dominates the debate in 2020 policy reform

One topic dominates democratic debates in the 2020 presidential election race: Medicare for all. In discussions of healthcare reform, democratic candidates are divided between those in strong support of a single-payer, Medicare for all model and those in favor of a multi-payer system with a public healthcare option like Medicare.

Some candidates, for instance, have embraced plans for healthcare reform that involve a more gradual transition to a universal system. Within this model, some candidates support either lowering the minimum Medicare eligibility age to extend coverage to a wider patient population. Others claim that opening optional Medicare enrollment to all Americans is a more feasible solution that provides national healthcare to those who want it and gives other individuals the choice to retain their private insurance.

What happens to private insurance companies under a Medicare for all model?

In a single-payer system, the existing market of private insurers would be replaced by a single, government-run model that provides health insurance coverage for all Americans. In this case, the government—rather than an insurance company—would serve as the middleman between patients and providers in all healthcare transactions.

Strong supporters of the Medicare for all model claim that private insurance companies are, in part, responsible for maintaining high health care costs. Within this argument, eliminating these companies would therefore standardize affordable healthcare for all Americans.

More than that, Medicare for all proponents argue that access to a universal healthcare system that provides Americans with adequate coverage for all basic healthcare provisions—including prescriptions, medical, vision, dental, and mental health services—would remove any need for supplemental coverage through private insurance.  

What are the problems with a Medicare for all model?

Medicare is a government-funded program. Because of this, provider reimbursement rates for the roughly 64 million Medicare enrollees are currently negotiated at about 90 percent of the full cost of a given treatment or procedure. What does this mean? Right now, national health plans like Medicare and Medicaid only work because private insurers offset the cost.

In order to offset the underpayments that hospitals and other healthcare facilities receive for treatment of Medicare and Medicaid patients, providers sometimes charge private insurers as much as 120 to 130 percent of the cost for those same procedures.

If the U.S. were to replace private insurers with a single-payer, Medicare for all model, one of three possible scenarios might occur:

1. The government will continue to underpay healthcare providers for treatment and services—likely bankrupting hundreds of community hospitals and other care facilities
2. The government will reimburse healthcare providers for the full cost of care delivery—resulting in significant tax raises and increasing total healthcare spending by an estimated $3 trillion within a 10-year period
3. Medicare for all will create a two-tier market in which wealthy individuals pay for supplemental healthcare coverage outside of the universal insurance system, while others are funneled into an underfunded public healthcare model

Critics of the Medicare for all model worry that the U.S. might face challenges in transitioning to a public, single-payer system.

Learn more

Interested in learning more about current healthcare policy and the future of healthcare delivery? We’ll be exhibiting at the Federation of American Hospitals Conference and Business Expo from March 1^st – 3^rd at the Marriott Wardman Park Hotel in Washington, D.C. Schedule a meeting with us to discuss how Definitive Healthcare data and insights can help you understand the impact of Medicare policy reform within your organization.