Happy 50th birthday, Medicare! In just 15 years, you’ll qualify for federally funded health insurance. Well, maybe. The fiscal situation of the program is growing increasingly delicate, so don’t hold your breath.
On this monumental occasion, one is reminded of a quip so often found in birthday cards: Growing old is mandatory. Growing up is optional.
This may seem like a passing wisecrack, but there’s a deep truth lurking beneath the humor. And it applies well to Medicare: The program has grown old, and it’s time it grows up.
If it doesn’t, it will crumble under impossible fiscal pressures. And will be a barrier to national economic growth along the way. In a sense, Medicare at 50 does deliver healthcare to lots of Americans who need it -- and also to many who don’t.
So it’s time to confront 21st century facts. On Medicare’s 50th birthday, let’s have a look at how things have changed, and why it’s time to adapt.
We are getting older. The American population is aging. Lives are getting longer, birthrates are falling, and the 77 million baby boomers are passing into retirement and beginning to qualify for Medicare. The size of the population that will qualify for Medicare coverage towers over what it was in 1965.
Related: How the ‘Silver Economy’ Could Get Us to 4 Percent Growth
When Medicare was passed back in the 1960s, it was designed to provide coverage to the over-65 demographic, which roughly 19 million beneficiaries, or 9.5 percent of the overall population. Now this age group has shot up to 14.8% of the overall population, totaling 52 million beneficiaries.
In the decade ahead, these numbers will grow and the cost will continue to climb, going from 0.6 percent of GDP back in 1967 to 4 percent today. But this is just the beginning of the untenable spiral.
Are there solutions, other than scrapping it?
One idea is to apply the original math to today’s demographics. Limiting coverage to the oldest 9.5 percent of the population – the same percentage of the population covered in 1965 --would push the age of eligibility to 68 today, and then 77 in 2020. But what if we further amended it to take into account the wealth creation of the last 50 years? The Warren Buffets, Donald Trumps, Bill Clintons and millions of other wealthy individuals can take care of themselves, and there’s no reason to cover them through Medicare. The solution is to both raise the eligibility age and to make it needs-based.
Medical innovation is unbound. Much of the healthcare we enjoy today was science fiction when Medicare was created. We can now treat and cure diseases that were death sentences a half-century ago. Of all the progress over the past fifty years, medicine surely sits at the top of the list. Yet it has become common refrain to blame pharmaceutical companies for charging too much for medicines. This blame-game misses what’s really at issue.
Related: The Longevity Dividend from an Aging Population
Because we have these breakthrough medicines, devices and procedures, we are living longer. And because we are living longer, we are requiring more medicines and procedures.
That’s not all. The demand for these innovations is going up. To blame the innovators is to take a bizarre aim at precisely those who have been the creators of our “longevity miracle.” In effect, we are creating demand by inventing and innovating the supply side
And that’s a tremendous place to be. It’s the engine of healthy and active aging. But it also means that the actuarial tables we had in 1965 are obsolete. And if programs continue to be based on them, they become obsolete too.
We’re aging at home. Though we don’t often think of home-care as a space of innovation, it is. With the 80+ demographic growing faster than any other, we are creating new ways to provide care at home and give people greater and more durable choice and independence. This is a social and human triumph that translates into huge economic value.
Related: Why America's Aging Population Can Save Medicare
It’s time for Medicare to get on board. If Medicare can become a partner of innovative home care, the exorbitant costs of institutional care can drop – and older persons and their families will get the satisfaction and security that Medicare originally set out to provide.
It is admittedly a deeply complex intersection of policies and programs, but if we can find a way for Medicare to allow for innovation in the home-care space, one of the major drains on Medicare expenditure can be plugged.
Well, Medicare, enjoy this milestone birthday. But if you don’t grow up, you will go down and take us with you.