• making Medicaid available up to 133% of poverty line (income of $31,720 for a family of 4)--federal government will pay 100% of the cost of these new people for five years, then 90% of the cost
  
• people who make more than 100% of the poverty line must buy insurance on an exchange but they get a subsidy if the cost of insurance is greater than 9.5% of their income and they make less than 400% of the poverty level.  From 100% of FPL to 123% the subsidy covers the entire cost of insurance.
  
• Supreme Court ruled the federal government could not compel the states to expand Medicaid
• subsidy is only available over 133% of poverty line, what about the people who make less, but their state has not expanded Medicaid to cover them?
• in South Carolina you can only get Medicaid if you make less than 67% of the poverty line and have dependent children--only about 14% of the people below the poverty level currently get Medicaid
  

• balancing strategy: make compromises with those who have concerns about the new program
• cost-based reimbursement to hospitals and behind-the-scenes work towards desegregation
• by the time Nixon succeeded Johnson, Medicare had wide support and the Republicans did not try to change it

Concerns about costs in the 1970s led to payment reform in the 1980s

• 1982 change from cost-based reimbursement to fixed payment for diagnostic related groups in a Prospective Payment System (PPS)
  
• 1989 new fee schedule for physicians based on a fee schedule setting fixed fees for each service
• Republicans proposed changing Medicare to a voucher program to buy the private insurance of your choice instead of a government insurance program, as the way to control costs by increasing competition

How to design a drug benefit that would not require raising taxes?

• the 2003 result was insurance that paid most of drug costs from $250 to $2,250 per year, then no coverage at all until expenses reached $5,100, at which point coverage resumed but with the federal government rather than the insurance company picking up most of the cost
  

welfare vs. social insurance

• welfare approach is help only the poor
• social insurance approach is to include everyone in the program
• change in ideas: perhaps private insurance companies were not unwilling to cover the elderly
• Medicare Advantage is one option, allow other kinds of options (and allow selective recruiting)

Is Medicare going to run out of money? 

• some years it looks that way
• adjustments to payments and premiums keep making the problem go away--is that sustainable in the long term?
• limiting payments isn't a good way of controlling costs
• other alternatives:
• higher premiums or copays, but half of Medicare recipients are poor
• raising the eligibility age would mean more uninsured and not save much money
  
• higher payroll taxes are politically impossible

Medicaid 1965  South Carolina battle over Medicaid expansion

• welfare approach, much of the funding comes from the federal government but it is administered by the states
• funding actually increased during the Reagan administration by focusing on children
• Republican efforts to change Medicaid to block grants rather than matching funds were opposed by the states
• states chose to cut reimbursements to reduce costs and reduce eligibility, covering 40-60% of the poor
• the Affordable Care Act puts Medicaid on the path of expanding towards a social insurance approach

Controlling costs
compared to other developed countries the US has:

• fewer doctors per capita
• more procedures
• fewer nurses
• similar outcomes
• higher wages and fees
• higher costs for medications

Brasfield believes the key issue is more procedures

• how to reduce unnecessary procedures?  part of the task may be to reduce unnecessary facilities
• cost control is relatively easy to implement, volume is much harder to control
  

Other ways to reduce costs:

• reorganize the system to reduce administrative costs
• payment for performance
• comparative effectiveness research
• electronic medical records
• rationing