Medicare and Medicaid

MEDICAID

As the nation's second-largest health insurance program, Medicaid provided medical assistance to 52 million low-income Americans in 2004. It was established through Title XIX of the Social Security Act of 1965 to pay the health care costs for members of society who otherwise could not afford treatment. The program is jointly funded by the federal government and the state governments, but is administered separately by each state within broad federal guidelines. Medicaid recipients include adults, children, and families, as well as elderly, blind, and disabled persons, who have low or no income and receive other forms of public assistance. Medicaid also covers the "medically needy," or those whose incomes are significantly reduced by large medical expenses.

Medicaid covers the full cost of a wide range of medical services, including inpatient and outpatient hospital care, doctor visits, lab tests, X-rays, nursing home and home health care, family planning services, and preventative medicine. A large proportion of the Medicaid population is elderly or disabled, and thus also qualifies for Medicare. In these cases, Medicaid usually pays for Medicare premiums, deductibles, and co-payments, in addition to some non-covered services.

THE FUTURE

Although many Americans plan to rely on Medicare to meet their health insurance needs later in life, the program as it stood in 2000 actually covered only half of an average elderly person's medical costs, according to the American Association of Retired Persons (AARP). Medicare does not provide funds for dental, vision, or hearing care, for example, and 97 percent of the time it does not cover nursing home care. And the program faces significant challenges in the coming years as the baby-boom generation reaches retirement age.

The United State's Congressional Budget Office (CBO) projects that the Medicare program will run a $5.8 trillion cumulative deficit during the period 2003—2026 when the transfers that the trust fund receives from the general fund are excluded. This means that the revenues coming into the system will be far short of the funds the system will need to pay out. The CBO summarizes the situation this way in its report The Impact of Social Security and Medicare on the Federal Budget. "The looming fiscal strains are not a temporary phenomenon caused by the retirement of post-World War II baby boomers over the next few decades. They reflect a growing imbalance driven by currently prescribed entitlements as well as long-lasting and powerful demographic trends that could have major unfavorable consequences for the economy. Enacting changes to the Social Security and Medicare programs sooner is better than enacting them later because future beneficiaries would have longer to prepare, because the revisions could be less drastic, and because the changes could enhance economic growth."

The question is not whether or not changes will be made but when will they be made and how will they effect future retirees. All Americans need to include some form of contingency planning for post retirement health care coverage as a part of their retirement planning. And the same advice that the CBO offers our legislature in terms of the benefits of taking action early applies to individuals. The sooner one takes action to plan for the future, the longer one will have to prepare and the less dramatic the process may be.

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