All issues · Health · No. 08

Medicare and Medicaid

Can programs designed for a younger, smaller population be sustained as the country ages?

Medicare covers people over 65 and some with disabilities. Medicaid covers low-income people and is jointly funded by states and the federal government. Together they cover a large share of Americans and represent a large and growing share of the federal budget.

Medicare's financing is split across trust funds and general revenue. The hospital insurance trust fund is supported by payroll taxes and faces projected shortfalls as the ratio of workers to beneficiaries falls.

Medicaid is administered by states within federal rules, so eligibility and benefits vary considerably. It is also the largest payer for long-term care, including most nursing home residents, a function often overlooked in debate.

Demographics drive the long-run picture. An aging population means more beneficiaries supported by proportionally fewer workers, independent of any policy choice.

The positionsFind your officials →

POSITION 1 / 3

Preserve and expand benefits

These programs work, they are popular, and shortfalls should be met with revenue rather than reduced coverage.

Coverage gaps in dental, vision, hearing, and long-term care leave real needs unmet.
Beneficiaries paid into the system across their working lives.
Lifting or removing payroll tax caps could address much of the projected gap.
Poverty among older Americans fell dramatically after these programs began.

POSITION 2 / 3

Restructure for solvency

Current commitments cannot be met on current financing, and delay narrows the options.

Gradual eligibility age changes tied to longevity spread the adjustment over time.
Premium support or capped allotments would create predictable budget paths.
Means-testing could focus resources on those who need them most.
Acting early allows small adjustments; waiting forces abrupt ones.

POSITION 3 / 3

Attack underlying costs

The programs are not the problem; the prices they pay in a high-cost system are.

Fee-for-service payment rewards volume rather than outcomes.
Administrative complexity and fraud consume a meaningful share of spending.
Investing in primary and preventive care reduces expensive later treatment.
Payment reform addresses cost growth without shifting it onto beneficiaries.

Terms you will hearFind your officials →

Trust fund: A dedicated account tracking program revenues and outlays; depletion triggers reduced payments, not termination.
Premium support: A model providing beneficiaries a set amount toward a plan of their choice.
Dual eligible: A person qualifying for both Medicare and Medicaid, often with high care needs.
Fee-for-service: Paying providers per service delivered rather than per patient or outcome.

What people actually disagree aboutFind your officials →

Should benefits adjust to available revenue, or revenue adjust to promised benefits?
Is it fair to change terms for people who planned around the current rules?
Who should bear the cost of long-term care: families, states, or the federal government?

Do something about itFind your officials →

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