chAPTER ThiRTEEn • DomEsTic AnD Economic Policy 299
Medicare
A federal health-insurance
program that covers U.S.
residents over the age of
sixty-five. The costs are
met by a tax on wages and
salaries.
Medicaid
A joint state-federal
program that provides
medical care to the poor
(including indigent elderly
persons in nursing homes).
The program is funded out
of general government
revenues.As of 2010, before the reform legislation was implemented, government spending on
health care constituted about 50 percent of total health-care spending. Private insurance
accounted for more than 30 percent of payments for health care. The remainder—less
than 20 percent—was paid directly by individuals or by charities. The government pro-
grams medicare and medicaid have been the main sources of hospital and other medical
benefits for about 100 million Americans—one-third of the nation’s population. Many of
these people are elderly.medicare. The Medicare program, which was created in 1965 under President Lyndon
Johnson, pays hospital and physician bills for U.S. residents over the age of sixty-five. Since
2006, Medicare has also paid for at least part of the prescription drug expenses of the
elderly. In return for paying a tax on their earnings (currently set at 2.9 percent of wages
and salaries) while in the workforce, retirees are assured that the majority of their hospital
and physician bills will be paid for with public funds.medicaid. Within a few short years, the joint federal-state taxpayer-funded Medicaid pro-
gram for the “working poor” has generated one of the biggest expansions of government
entitlements ever. In 1990, federal Medicaid spending was about $41 billion. By 2013,
spending on Medicaid, the Children’s Health Insurance Program, and allied functions was
$349 billion. At the end of the century, 34 million people were enrolled in the programs.
Today, in the wake of the Great Recession, there are more than 60 million enrolled.
In recent years, the federal government has paid about 55 percent of Medicaid’s total
cost. The states pay the rest. Wealthy states must pick up a greater share of the tab than
poor states. Medicaid costs have imposed major strains on the budgets of many states. As
you will learn later in this section, the new health-care reform legislation adopted in 2010
will expand considerably the share of the population that is eligible for Medicaid. Much of
the extra expense due to the new enrollees will be picked up by federal taxpayers.The Problem of the uninsured. In 2011, about 48 million Americans—more than
15 percent of the population—did not have health insurance. The uninsured population
has been relatively young, in part due to Medicare, which covers almost everyone over
the age of sixty-five. Also, younger workers are more likely to be employed in entry-
level jobs without health-insurance benefits. The traditional system of health care in the
United States was based on the assumption that employers would provide health insur-
ance to working-age persons. Many small businesses, however, simply have not beenSTONE SOUP © 2005 Jan Eliot. Reprinted by permission of Universal Uclick. All rights reserved.
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