Medicare and Medicaid Summary

  • Last updated on November 10, 2022

Medicare and Medicaid have had positive impacts on the health care, insurance, pharmaceutical, and related industries, as well as on states’ economies.

Legislative proposals for federal programs for elderly and indigent health care assistance before 1965 were denounced as “socialized medicine” by medical-industry, insurance, and pharmaceutical lobbies, which helped prevent their enactment. Medicare and Medicaid (Titles XVIII and XIX, respectively, of the Social Security Act of 1965) were successful political compromises, however. Medicare covered hospital expenses, while participation for coverage of doctors’ fees was optional for patients and physicians. Medicaid was administered by states.MedicareMedicaid

Starting in 1975, a series of cost-containment measures reduced physicians’ compensation rates. However, the private sector benefited from the increase in health care facilities related to Medicare coverages, the creation of private “Medigap” insurance to pay for excluded services, and additional Medicare options, such as Part C, which provides benefits through private insurance plans. Starting in 2003, Medicare Part D prescription drug coverage generated profits for the insurance and pharmaceutical industries by using private-sector insurance and prohibiting the government from negotiating for discounted drug prices or reimporting less expensive drugs from foreign countries.

Public officials have expressed concerns regarding Medicaid costs. However, numerous studies have shown that Medicaid payments to health care providers and institutions are a major stimulus to state economies. Medicaid spending is the second-largest state budget expenditure, and the federal government matches states’ spending at a rate of 50 percent or more, generating the greatest amount of federal grant money in every state. The program is directly beneficial to nursing homes, hospitals, pharmacies, community and home health care agencies, and insurance companies, and it creates jobs in other related industries. It also increases the amount of money in circulation, which has benefited businesses in general.

Food and Drug Administration

Government spending

Health care industry

Pharmaceutical industry

Social Security system

Wages

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