Medicare, Medicaid 50th Anniversary: 5 Facts About How They Changed Health Insurance And Medical Care

When it comes to Medicaid and Medicare, most Americans don’t know one from the other. They sound nearly identical, and they're both massive government programs that many have -- wrongly -- assumed have little impact on their own lives. Yet, for better or worse, Medicare and Medicaid have substantially influenced the American healthcare system, even in unexpected ways.

In the simplest terms, Medicare is a health insurance program for those over the age of 65, while Medicaid is for disabled and low-income Americans. Those are the basic characteristics of the two programs, although each program has many nuances and variations. U.S. President Lyndon B. Johnson signed both programs into law on July 30, 1965.

Today, about 55 million Americans are covered through Medicare, and about 66 million people, including 31 million children, are insured through Medicaid. That’s about one-third of America’s population. In 2013, spending for both programs combined amounted to roughly $1 trillion.

On the occasion of the two programs’ 50th birthday, commemorated Thursday, here are five ways, some better known than others, that Medicare and Medicaid have changed healthcare in America and affected the lives of far more than those who are enrolled in those programs.

1. Medicare and Medicaid helped end segregation in medical facilities. If hospitals and nursing homes wanted to be paid by Medicare and Medicaid, they could not be racially segregated. Thus, they had to begin accepting black patients. "That's one of the really important accomplishments of the program that people don't know about," Nancy De Lew, a senior policy expert at the Department of Health and Human Services, told the Associated Press.

The effect was almost immediate, even if it did not fully eliminate racial barriers in healthcare. “In hundreds of hospitals in all parts of the nation, but especially in the South, quality medical care is now being offered to every sick person, regardless of his race,” Dr. William H. Steward, then the U.S. Surgeon General, wrote in a paper in 1967. Blacks “are able to enter hospitals that were previously reserved for white patients only,” he added, even though he acknowledged that “in too many hospitals some subtle and ingenious devices to maintain discrimination are still in effect.”

2. Healthcare spending in America rose. From 1965 to 1970, total hospital spending rose by 23 percent, an increase that Amy Finklestein, a professor of economics at the Massachusetts Institute of Technology, linked to Medicare’s implementation. In the United States overall, a 40 percent increase in spending on healthcare from 1950 to 1990 can be linked at least in part to the expansion of healthcare coverage, including under Medicare, throughout the country.

3. Doctors are gradually being paid based on the quality, not the quantity, of the care they provide. For a long time in the U.S., medical care was purchased much the way one buys groceries: with each item paid for separately. Under this fee-for-service model, each visit to the doctor, each x-ray and each blood test had the same price, regardless of how much it benefited a patient. This system, many have argued, encouraged excessive medical services and testing. Some estimates suggested that up to 30 percent of spending on healthcare ends up being wasted on unnecessary or useless care.

The U.S. government has set the goal that by 2018, 50 percent of Medicare payments will be tied to the quality of care provided. Ideally, patients will receive higher-quality but less costly medical care where doctors are paid based on the quality, not the quantity, of their services. The new models for achieving this goal are varied and complex, and they have plenty of critics and doubters. Still, regardless of how doctors, insurers and healthcare companies feel about it, value-based payment is here to stay.

Because Medicare is changing the way it pays doctors and hospitals, other health insurance companies will gradually start to do the same. “Medicare shapes much of the quotidian of office practice for most physicians and surgeons,” noted Dr. Robert Martensen in a 2011 article in the American Medical Association’s Journal of Ethics. Medicaid can have a similar impact, as it provides funding for hospitals and doctors to devise new ways to care for people that can eventually spread to the broader healthcare system, the Kaiser Family Foundation said in a recent report.

4. In conjunction with allowances granted by the Affordable Care Act, a lot more low-income people can get health insurance through Medicaid. Obamacare, as the Affordable Care Act is also known, allows states to decide whether or not to expand Medicaid to a broader swath of poor people. It even gives them funding to do so. Thirty states currently have opted to expand Medicaid, most recently Alaska, whose governor announced in July that he would expand the program.

In the U.S., 4.6 million poor adults overall were newly enrolled in Medicaid as of September 2014 in states that expanded Medicaid so as to have better access to preventative and regular medical care instead of relying on emergency rooms and charity care.

5. Far more Americans over the age of 65 have health insurance specifically because of Medicare. The percentage of elderly people with insurance increased by 75 percent because of Medicare, research by Finkelstein, the MIT professor, has shown. And as a result of having insurance, far more elderly people actually receive medical care.

"No longer will older Americans be denied the healing miracle of modern medicine," Johnson said when he signed Medicare and Medicaid into law. "No longer will illness crush and destroy the savings that they have so carefully put away over a lifetime so that they might enjoy dignity in their later years.”

Now, an estimated 10,000 people enroll in Medicare every day, so that by 2030, about 81 million people were expected to be covered under the program.

Medicare and Medicaid are enormous government programs, and even its supporters admit that they are unwieldy and hardly perfect. One of several major upcoming challenges for Medicaid and Medicare will be controlling rising costs, especially as baby boomers age and more people sign up for Medicaid. Conservative detractors have frequently denounced Medicare or threaten to eliminate it.

However, both Medicaid and Medicare are here to stay, at least for the foreseeable future, and as long as they exist they will continue to shape the American healthcare landscape.