State-controlled programs are key to thriving national health insurance

Despite this initial lack of political conflict in the Medicare and Medicaid Programs, tension ultimately arose that recapitulated some of the themes of the historical transformation of health insurance in the twentieth century and the political debate over Medicare in the sixties. Medicaid, for example, emerged in 1965 as a program aimed at the poor and administered by the States. In these respects, it resembled the concept of sickness insurance that had been prevalent in the progressive era, although it covered the costs of health care rather than providing temporary disability insurance and it did not reach the entire working class, just those members of it who happened to qualify for welfare. Over the past 40 years and in particular since the 1980s, Medicaid has expanded beyond its roots as a welfare program to cover more people in need of medical services. In 1987, Congress widened the scope of the program to cover pregnant women and children living in families with incomes nearly 100 percent above the Federal poverty level (Morgan, 1994). As a result of such actions, a State program endures, even thrives, as a major component of the U.S. approach to national health insurance, a fact that might have surprised the creators of Medicare in 1965. Suggestions that the Federal Government take over the Medicaid Program arise periodically, as in 1982 when President Reagan suggested that the States take over the Aid to Families with Dependent Children Program and that the Federal Government pick up all the costs of Medicaid (Berkowitz, 1984). However, none of these suggestions have moved beyond the proposal stage. As for Medicare, it was modeled on health insurance practice that was current in 1965 in ways that respected the contribution that the private sector had made to health care delivery and finance. No one in Congress seriously proposed that the Federal Government should get directly involved in the health care business by operating hospitals or drafting doctors into national service. The program also reflected some of the wisdom of Falk et al. from the thirties and forties who had wanted a health insurance program run separately from cash disability programs. The doctor who treats a patient does not also have the right to certify him or her for disability benefits (Berkowitz, 1987). Furthermore, Medicare was a national program, rather than a source of funds for State programs. Still, the story of Medicare over the past 40 years has been one of experimenting with elements of choice and of cost containment while trying to maintain the quality of care for the Nation's elderly. State waivers, which permitted variations in practice from State-to-State, figured prominently in the development of Medicare in the seventies and eighties. The program's demonstration waiver made it possible for States to test the prospective payment system for hospitals that ultimately became a formal part of the program in 1983 (Shirk, 2003).