Question

This week we are focused on health economics in the hospital sector. Hospitals represent the largest segment of healthcare spending. In this discussion we will explore how the dominant healthcare supplier (hospitals) responds to changes in payment by the dominant healthcare payer (Medicare).

What was the hospital sector's response after the enactment of Medicare (in its original form) in 1965? Describe fully. Cite sources.

Answer 1

On July 30, 1965, President Lyndon B. Johnson signed the Social Security Amendments of 1965 into law. With his signature he created Medicare and Medicaid, which became two of America's most enduring social programs. The signing ceremony took place in Independence, Missouri, in the presence of former President Harry S. Truman, as if to indicate that what President Truman and other Presidents before him had tried to get done had now been accomplished. Yet, for all of the appearance of continuity, the law that President Johnson approved differed in significant ways from the law that President Franklin D. Roosevelt would have passed in the thirties or President Truman would have signed in the forties. The very idea of national health insurance underwent a major transformation between the beginning of the century and 1965. Even as the passage of Medicare became assured late in 1964 and in 1965, the legislation remained fluid, with important matters related to consumer choice and the basic design of the program in constant flux.

  

Since that time, the government has poured billions into health care each year. That has led to better care, but also resulted in the need for constant re-evaluation so the government can ensure people continue to get coverage.

Medicare and Medicaid aimed to reduce barriers to medical care for America's most vulnerable citizens – aging adults and people living in poverty. At the time Medicare was enacted, 19 million Americans enrolled. Today, that number has reached 56 million, or 17 percent of the population.

Medicaid, a joint state-federal program, was small when it was first signed into law, covering only people who received government assistance. Today, it is the largest health insurance program in the country, providing coverage for more than 71 million low-income people. Changes in the programs over the years have resulted in a significant shift for public insurance: One in three Americans is covered by Medicare