Opinion: Happy Birthday, Medicare And Medicaid! Keys to Good Health in NJ

Healthcare Basics: A series that details the fundamentals of Medicare and Medicaid, two costly programs that play a critical role in keeping millions of Americans healthy

Credit: Amanda Brown
Richard F. Keevey
Fifty-four years after Medicare and Medicaid were established, our nation is rapidly approaching a crossroads in how we provide and pay for these government programs that are critical to the health of millions of elderly, disabled and poor Americans. This is the first in a four-part series by Richard F. Keevey, the former budget director and comptroller for New Jersey, breaking down the complicated issues, explaining what the programs are and whom they serve, how they came to this juncture and where they are headed. Keevey will also suggest steps that could be taken now to forestall a crisis.
Follow this link to read Part Two.

Overview and a short history

July 30, 2019 marks the 54th birthday of the two principal government-sponsored healthcare programs in New Jersey and in the United States. Both laws were signed on July 30, 1964 by President Lyndon Johnson.

Medicare covers 1.6 million elderly folks in New Jersey and almost 60 million across the nation. Medicaid covers 1.7 million low- to moderate-income adults and children in New Jersey and 75 million in the country. Medicaid significantly impacts the New Jersey state budget; Medicare does not.

For many generations, taxpayer-funded health programs were viewed as pariahs.

“The struggle leading up to the passage of Medicare and Medicaid was nothing short of explosive,” writes Princeton professor Julian Zelizer in the book, “Medicare and Medicaid at 50,” as “proposing health insurance was viewed as the third rail of politics.”

Attempts by President Harry Truman, for example were fought bitterly by the American Medical Association and Republicans in Congress.

Finally, Johnson — building on the success of his civil-rights legislation and his landslide election in 1964, and with former President Truman at his side — overcame congressional gridlock and orchestrated the passage of these landmark laws. The rest is history. Evolution and revolution are never easy.

It is important to acknowledge the significant and very positive impact these two programs have in New Jersey and on American society. Some view them as the principal reason the federal debt is so high. Others observe this day as a celebratory birthday of programs that are critical to healthcare in New Jersey and the entire country. Both observations are correct.


Medicare principally covers people older than 65 — providing a wide range of healthcare services. The program also pays for the care of 9 million people of any age with disabilities or end-stage renal disease.

It is managed by the Centers for Medicare and Medicaid (CMS), an agency within the Department of Health and Human Services.

In general, Medicare provides coverage four ways:

  • PART A is for hospital care, limited skilled nursing-home care, home healthcare, and hospice care;
  • PART B covers doctor visits, outpatient hospital, laboratory, durable medical equipment and other medical services;
  • PART C (Medicare Advantage) is a managed-care alternative offered by private insurance companies according to rules set by the government, and provides pretty much the same services traditional Medicare.
  • PART D: covers prescription drugs.
  • The principal sources of financing are a payroll tax on all wages, monthly premiums paid by beneficiaries, copayments and tax revenue from the federal budget. Non-wage income (e.g. capital gains, dividends and interest) is not subject to the tax.

    Under both traditional Medicare and Medicare Advantage, beneficiaries must pay some portion of their healthcare costs, through a combination of deductibles, copayment and coinsurance.

    Total expenditures in fiscal year 2018 were $711 billion — 18 percent of the federal budget, and 23 percent of the nation’s total spending on healthcare.

    There is no family coverage under Medicare, so each spouse must enroll separately. Seventy-five percent of senior citizens buy so-called “MediGap” supplemental insurance as Medicare does not cover all costs.

    A fuller discussion of Medicare is part of the third installment of this series.


    Medicaid is the government’s program for low-income folks, and provides coverage for adults, families with children, blind and disabled adults and, increasingly, elderly people in nursing homes. It’s administered by each state with fiscal assistance from the feds that’s based on the wealth of the state.

    New Jersey, being rich, receives 50 percent reimbursement, the lowest rate, as do 12 other states. Mississippi, for example, receives the top reimbursement level, 77 percent.

    All states participate and, at minimum, must provide coverage for physician care, hospitalization, laboratory services and long-term care. States can also elect to provide optional services such as dental care, eye care and prescription drugs. New Jersey provides almost every optional service.

    The Affordable Care Act (Obamacare) has increased the number of people eligible for Medicaid. Without delving into the details of eligibility and cost structure, the ACA has made a family of four in New Jersey with income up to $2,962 per month eligible for Medicaid.

    Total Medicaid expenditures were $625 billion in FY2018. The federal share was $407 billion, eating up 10 percent of the federal budget. Total Medicaid expenditures in New Jersey were $16 billion, including the portion paid by federal reimbursements.

    A broad statistic is very informative about where the money goes. Children, pregnant women and other adults are 75 percent of the client population but account for only 33 percent of costs. The aged, blind and disabled are 25 percent of the client base but account for 67 percent of the costs — driven principally by nursing-home and personal-care services in the home.

    A fuller discussion of Medicaid is part of the second installment of this series.

    Some observations

    Medicare has changed the lives of our elderly for the better, allowing millions of Americans to face the medical challenges of aging without having to worry about going broke to pay for their healthcare.

    Medicare is also very popular. Folks consider it an entitlement program, one that they have paid for via payroll taxes and premiums — even though, in reality, 42 percent of its backing comes from the federal budget.

    Medicaid, especially with its expansion under the ACA, also has a substantive societal impact by relieving poverty and providing healthcare for poor families, as well as coverage for many parents in nursing homes. But it has a much weaker support base, in part because it is totally taxpayer funded, and has that politically challenged and misguided “welfare” stigma.

    As we move through the next 20 years, these programs are expected to expand and become more expensive as our population gets older and medical costs increase.

    We’ll leave a full discussion of the troublesome issues of long-term costs of these programs and their impact on the debt of the country to the last installment of this series. For today, let’s just leave it with this: Happy Birthday Medicare and Medicaid!

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