Government policies/Implementation

The largest welfare program directed at the poor by the federal government is Medicaid. Its costs are higher than other public assistance programs. Established in 1965, Medicaid is financed by both, the federal and state governments, each bearing approximately half the financial burden. Medicaid is funded completely from tax revenues, and there is no prior contribution from the recipients. States differ in establishing the eligibility requirements for the program, apart from covering all people receiving federal public assistance payments. Some states extend Medicaid to families whose head receives unemployment compensation.

Under Medicaid, states are required to provide inpatient and outpatient care at hospitals, family planning, laboratory and X-ray services, physician’s services and home healthcare. Early diagnosis, periodic screening and treatment program for children are also emphasized. The reimbursement to hospitals and physicians are decided by the state government. Thus lower rates would discourage hospitals and physicians from providing quality care. They adapt to several tactics to counter low rates, like scheduling too many patients in a very short time or by prescribing unnecessary tests to make the treatment expensive.

Sometimes the limitations on reimbursement to physicians in Medicaid in comparison to private and other patients would result in physicians refusing to entertain Medicaid patients. Medicaid has also been found to be affected by fraud and abuse, mainly by the service providers. Another program ‘Medicare’ was also introduced in 1965 by amending the basic Social Security Act. Medicare provides federally administered prepaid hospital insurance and low-cost voluntary medical insurance for the aged people.

Medicare includes a health insurance plan (HI) and a supplemental medical insurance (SMI) program paying about 80% of physician’s service charges and other medical expenses. These are funded partly by contributions from the aged and partly by general tax revenues. Medicare covers all aged persons irrespective of income, thereby making aged persons qualifying for Social Security also eligible for Medicare. The HI and SMI require patients to pay a small initial charge, to discourage them from unnecessary hospitalization and physician care. As Medicare does not pay for the prescription drugs, eyeglasses, hearing aids, etc.

, doctors bill Medicare patients for these above the SMI payments. As a result, Medicare does not really meet the needs of the elderly poor for whom the services are most needed. The health status among the rich elderly people and the poor elderly people have widened ever since the launch of the Medicare. Even with Medicare, less affluent elderly people are still incapable of providing for their medical needs. Prescription drugs in the US are the most expensive in the developed world and Medicare doesn’t cover prescription drugs. The American pharmaceutical industry justifies the high cost to the need for funding research.

The process of bringing new drugs into the market is made very complex and lengthy by the requirements of the Food and Drug Administration (FDA), thereby contributing to the high costs of drugs. The rise in the cost of healthcare in the US is much faster than the general price rise. The healthcare costs have increased phenomenally from 4% of the national GDP in 1960 to 11% in 1990. The rise in healthcare costs may be attributed to the growth of private health insurances, improvement in medical technology and specialization of the physicians who bring in specialized treatment.

The introduction of Medicare and Medicaid have also contributed to the price rise. The managed care, introduced to bring down costs, has been ridden with controversies. In an effort to control costs associated with medical care, governments and private insurance companies adopted the ‘managed care’ programs in 1990. Medicare and Medicaid shifted many of their beneficiaries to the managed care. But the managed care has been a frustrating experience for both, the physicians and the patients. Patients complain that they are not allowed to visit specialists or have had their tests reduced in number.