Medicare vs. Medicaid: Differences, Evolution & Reform

Medicare vs Medicaid Differences and Evolution and Reform
Marilyn Tavenner, Acting Administrator for the Centers for Medicare & Medicaid Services, addressing concerns at the HHS 2014 Budget Press Conference.

Medicare and Medicaid are channels for distributing funds to help people access health care services. They were created to address concerns on the difficulty of accessing health care services due to people’s financial difficulties or limitations. These programs channel some of the nation’s funds and states’ funds to help optimize accessibility of health care services. Also, these programs are mainly supported through tax revenues, thereby pointing to the need to impose limits on funding, while addressing the need for healthcare accessibility. Thus, Medicare and Medicaid are socialist programs in that they help redistribute wealth to those who need it most for health care.

Medicaid and Medicare differ significantly. This article discusses some of these differences, along with the evolution of Medicare, and the effects of reform initiatives on Medicaid and Medicare.

Differences: Medicare vs. Medicaid

Medicare and Medicaid differ in terms of the following:

  • Administration
  • People covered by the program
  • Services covered
  • Costs and contributions

Administration. The federal government administers Medicare. The program has general provisions that apply to all states, although some provisions differ among states, depending on decisions made by the federal government regarding the needs of the states. In contrast, state governments administer Medicaid. Medicaid provisions vary from state to state based on state rules and regulations.

Coverage. Medicaid provides health care financing assistance to people who have low income and cannot afford health care services in general. In contrast, Medicare provides health care financing support for the elderly and people with disabilities. Medicare is especially designed to help in long-term care spending for the elderly.

Services Covered. Medicare does not cover all inpatient and outpatient hospital services, depending on the eligibility of the person. In contrast, Medicaid covers most inpatient and outpatient health care services. However, some states’ Medicaid programs do not cover the costs of prescription drugs, while Medicare provides some assistance to cover the costs of prescription drugs.

Costs and Contributions. Medicare requires annual contributions, while Medicaid does not require annual contributions. The Medicaid funds come from state and federal government coffers. Medicare also does not cover about 20 percent of some professional fees, thereby requiring the member/consumer to pay for the corresponding amount when availing health care services not covered under the program. In contrast, the qualified individual under Medicaid pays none or only a small amount for professional fees and most other fees.

Evolution of Medicare

Medicare has evolved to accommodate the changing needs of society. The Social Security Amendments were implemented in 1960. Specifications of Medicare benefits were implemented in 1965, thereby establishing the Medicare system and its authority in the states. Medicare, even at the start of its implementation, has addressed increasing health care needs, in consideration of the increasing population of aging people, people with illnesses and the aging people who were victims of the Second World War. The main concern, though, was the increasing elderly population facing increasing costs of health care.

Along with improvements in the health care system, individuals have faced increased costs of health care services. This condition has made it even more difficult for people to access these services. The federal government implemented the Medicare Secondary Payer Act in 1980 to help decrease the costs consumers spend for health care. This law also provides financial assistance for purchasing prescription drugs, thereby increasing the coverage of the Medicare program.

In 2003, the government implemented the Medicare Prescription Drug, Improvement and Modernization Act, aiming to improve various processes to enhance the system. This law pushed for the improvement of the infrastructure of Medicare to make the system at par with the improving standards of the medical profession and medical facilities.

Additional laws and regulations were also implemented to address increasing attention to the rights of patients and the role of educating people regarding health.

Thus, Medicare has evolved to accommodate the changing needs of society by gradually increasing and diversifying its coverage, while also enhancing processes over time.

Impact of Health Care Reform Initiatives on Medicare and Medicaid

The impact of health care reform on Medicare and Medicaid can be examined in terms of the effects of reform on funding and effectiveness of these programs. The underlying goal in health care reform is to improve the health care system, including the improvement of health care insurance.

One of the impacts of health care reform initiatives on Medicare and Medicaid is the reduction of costs. This impact is based on the goal of increasing the coverage and effectiveness of health care insurance. More of the costs of health care have been shifted away from Medicare and Medicaid, and toward insurance companies. Medicare and Medicaid have experienced less expenditure as insurance companies shoulder more of health care costs.

Health care reform initiatives have also led to increased Medicare coverage. Through the SCHIP program, the government decreased the funds given to Medicare Advantage providers, and shifted the funds to increasing the effectiveness of Medicare in covering the health care needs of children. Consumers who used to benefit from the Medicare Advantage program have experienced reduced benefits, but more children have benefited from this reform.

Other reforms include cutting spending for Medicare and Medicaid to address budget deficits.

Overall, health care reform initiatives have led to shifts in coverage and potential shift of costs from Medicare and Medicaid toward health insurance companies, as well as some reduction in benefits to address governmental budgetary concerns.


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