Abstract
This article examines the history and formation of Medicare and Medicaid to determine how America’s two major public health insurance programs came to have such vastly different implementation structures. Drawing upon theories of social construction and path dependence, findings show how the programs were set on divergent paths. This article also explores how the intergovernmental nature of Medicaid has promoted inequities, both between programs and among recipients across states. The findings show how social construction can influence the policy tool chosen and how the implementation structure impacts the individuals whom these programs are intended to serve for years to come.
Medicaid and Medicare are two of the largest public health insurers in the world, but despite similar mandates and roots in the same legislation, their implementation has been starkly different. The Social Security Amendments of 1965 established Medicare, the nation’s public health insurance program for the elderly, who contributed to the system, and Medicaid, the nation’s public health insurance program for the poor and the disabled. 1 Although both are federal entitlement programs, Medicare is implemented at the federal level while the responsibilities for implementing Medicaid have been left to individual states. However, growing budget deficits, the soaring costs of health care, and the growing number of those in need of health care coverage are contemporary challenges facing Medicare and Medicaid. Under fiscal burden, the federal government has begun to respond by cutting federal funding to state Medicaid programs and, through the recent Deficit Reduction Act (DRA), shifting more responsibility to the states by increasing state flexibility. Medicare, in contrast, is implemented at the federal level. How did America’s two major public health insurance programs come to have such different implementation and financing structures, and what impact does this have on the individuals that these programs are intended to serve?
The purpose of this article is to examine the effects that social construction and historical context have had on the implementation of these vast public programs. After a brief review of Medicare’s and Medicaid’s mandates, the article examines the historical context in which the two programs were formulated and how social construction influenced the policy tools chosen to implement program mandates. Next, it explores the magnifying effect that the intergovernmental nature of Medicaid has had in promoting inequities, both between Medicaid and Medicare and among Medicaid recipients across states. Finally, it discusses the impacts that the DRA of 2005 has had in causing further inequities, especially in Medicaid program implementation.
Medicare and Medicaid: Background, Mandates, and Historical Context
While Medicare and Medicaid were both established by the Social Security Amendments of 1965, the implementation and financing structures of each program are dramatically different. The unique implementation structures of the health insurance programs are only more surprising as the two programs are integrated and even overlap at times. However, a closer look at the historical context and original passage of Medicare and Medicaid sheds light on how America’s health insurance programs for the elderly and the poor began and continue on such different paths.
Medicare and Medicaid are the products of a longstanding political struggle to identify an effective means of financing health care in the United States. Although Germany enacted a national compulsory health insurance program in 1883 and Great Britain enacted a national health insurance program in 1911, a safety net for public health insurance did not enter the political arena in the United States until 1912, when it was introduced as part of Theodore Roosevelt’s campaign platform (Social Security Administration, 2010a). Despite sporadic efforts to create a public safety net—notably President Franklin D. Roosevelt’s call for “cradle to grave” insurance in his 1943 State of the Union Address (Social Security Administration, 2010a)—real action was not taken until the 1960s. Brown (2005) attributes this to “America’s exceptionalism,” writing that “culture, institutions, interests, and ‘path dependence’ on the voluntary sector for health coverage put cross-national achievements beyond American reach” (p. 325). For example, Blue Cross Blue Shield was created during the Great Depression as public providers sold insurance to local employers on a voluntary basis, and while these plans were nonprofit at the time, private sector plans soon came to dominate. With this as historical context, France (2008) identified two thresholds that government has faced to address health care inequalities: “the private sector must have shown itself to be incapable to fill the gap and the intended beneficiaries must be deserving” (p. 669, emphasis added).
The issue of “deservedness” became a core part of debates about health care following World War II. In the 1950s, health care efforts focused more on the elderly, a group viewed sympathetically by the public, than on the poor, a group perceived much more negatively. With the difficulties of President Truman advancing his health insurance aims, the decision was made to focus on the elderly, as Oscar Ewing stated to a group of reporters in 1951: “It is difficult for me to see how anyone with a heart can oppose this” (Harris, 1966, p. 55). The Medicare proposal focusing on insuring the aged Social Security beneficiaries hoped to combat the major oppositions of health insurance programs. One point of contention is the view that health insurance is a “giveaway” program that fails to differentiate between the deserving and undeserving poor. Another point of opposition was that such a program would benefit too many wealthy Americans who do not need financial assistance. Others thought that utilization of health care would grow beyond its capacity. Last, some feared such a program would create too much federal control of physicians. The elderly as a target population was able to overcome these oppositions, as they would be seen as both needy and deserving. The elderly could be seen as needy because their earning potential decreased and health expenses increased as they aged, through no fault of their own, and deserving because the beneficiaries could be limited to those who contributed to Social Security. This framing of the elderly helped not only with interest groups and gaining support but also in making opposition of a program to help the elderly politically infeasible (Marmor, 2000).
In 1964, Congress was presented with three options to improve older Americans’ access to care: “1) a universal hospital insurance program based on Social Security (the King-Anderson bills of 1963 and 1964); 2) a voluntary physician services program supported by beneficiary premiums; or 3) an expansion of the means-tested Kerr-Mills program, which offered a wide range of health care benefits to the low-income elderly” (Grogan, 2005, p. 279). Instead of choosing one of these paths to providing coverage, Congress combined all three into what Wilbur Mills, Chairman of the House Ways and Means Committee, called a “three layer cake.” Smith (2002) highlights the significance of the analogy as it “is useful to call attention to the historic fact that Medicare-Medicaid was from the beginning a joining of separate parts, never an integrated system” (p. 14). However, the two programs are related, as Wilbur Mills thought Medicaid “was yet another means of ‘building a fence’ around Medicare, by undercutting future demands to expand the social security insurance program to cover all income groups” (Marmor, 2000, p. 60). Unlike health insurance coverage in other countries that began with a majority of the population, such as Great Britain, or one medical service for all citizens, such as Canada, the United States “ended up with a distinctly categorical and incomplete system that divided Americans into separate groups with unequal access to the fruits of medical science” (Hacker, 1998, p. 118).
Engel (2006) identifies several reasons that the elderly were targeted for a safety net faster and with more force than the poor. First, “the elderly were an appealing beneficiary group, not least because they were a large and growing political constituency, but one which drew sympathy from the nonelderly as well” (Engel, 2006, p. 46). In addition, the elderly were beyond the reach of many private insurance providers at the time due to their medical risk profiles and had the redistributive precedent of Social Security to assist with political support. Engel also identifies several factors that reflect the impact of the social construction of the poor on the design of Medicaid, including the commitment of matching federal aid to states rather than a unified federal program, the program being limited to recipients who already participate in federal assistance programs, and the eligibility requirements would be housed within existing state welfare departments. “At its inception, Medicaid received scant attention from public, press and government planners. Overshadowed by the much vaster Medicare program, and described as a mere expansion of existing welfare programs, the proposal drew little opposition . . . ” (Engel, 2006, p. 49).
Medicare was established by Title XVIII of the Social Security Act to provide health insurance to people age 65 and older, regardless of income or medical history, if they contributed to the system. Elderly individuals qualify if they are a U.S. citizen or permanent legal resident, and the individual or his or her spouse has worked and paid into the Social Security and/or Medicare system through Federal Insurance Contributions Act (FICA) taxes. Medicare Part A, the hospital insurance plan, is in turn financed through this separate earnings tax and a separate trust fund. As of 2010, 47 million Americans rely on the federally administered Medicare for health insurance, 39 million elderly people, and 8 million people with permanent disabilities (Kaiser Family Foundation, 2010).
Medicaid was established by Title XIX of the Social Security Act to provide medical assistance to low-income individuals and families. The Medicaid program is administered at the state level but subject to federal oversight, and both federal and state governments are responsible for funding the program. Individual states establish their own eligibility standards, determined services, and payment rates. In 2006, Medicaid expenditures totaled $57.8 million, averaging about $4,672 per beneficiary (Klees, Wolfe, & Curtis, 2009).
Not all low-income individuals are eligible for Medicaid, and income is only one of the criteria for receiving health insurance assistance (Klees et al., 2009). Medicaid eligibility is categorized into four groups: “categorically needy,” which consists of the mandatory eligibility groups for which matching federal funds are provided to the states; “optional eligibility,” which consists of other individuals whom states may choose to treat as categorically needy in their state programs; “medically needy,” where states extend eligibility to additional individuals who may have too much income 2 to otherwise qualify; and a fourth group of individuals who are eligible for certain state-level programs that cover those who do not qualify under the first three standards.
Federal guidelines also outline the benefits that states are required to provide and those for which the federal government will provide matching funds. States are required to provide Medicaid beneficiaries with hospital care, nursing home care, physician services, laboratory and X-ray services, immunizations for children, family planning services, health center and rural health clinic services, and nurse midwife and nurse practitioner services. States have the discretion to offer additional services without a federal funding match, such as prescription drug coverage, institutional care for those with mental disabilities, home and community-based care for the elderly and disabled, and dental and vision care for adults. States also have great flexibility in setting benefit levels, as federal guidelines specify only that benefits must be “sufficient in amount, duration, and scope to reasonably achieve its purpose” (Schneider et al., 2002).
The Role of Social Construction
The evolution of Medicare and Medicaid reflects a broader theory of policy design in which decision makers craft and implement policy on the basis of two considerations: (a) whether a group is constructed as deserving by the public and (b) whether the group has political power (Schneider & Ingram, 1993, 1997). “The social construction of potential target populations refer to the images, stereotypes, and beliefs that confer identities on people and connect with others as a social group who are possible candidates for receiving beneficial or burdensome policy” (Schneider & Ingram, 1997, p. 75). Politics and values are an inherent part of policy design (Stone, 2011), and Ingram and Schneider (2005) describe how policy has been “the primary means of legitimating, extending, and even creating distinctive populations—some of whom are extolled as deserving and entitled and others who are demonized as undeserving and ineligible” (p. 2).
Schneider and Ingram (1993, 1997) argue that policymakers choose different tools for different types of target populations, and this appears to have been the case for both Medicare and Medicaid. Indeed, the language used in the political actions leading up to the enactment of the Social Security Amendments of 1965 and the Act itself reflect the different social constructions of the deserving elderly compared with the poor, disabled, and “needy” elderly. In a special message to Congress on the nation’s health on February 10, 1964, President Lyndon B. Johnson stated, “many of our older citizens are still defenseless against the heavy medical costs of severe illness or disability,” and “the mentally ill and the mentally retarded have a right to a decent, dignified place in society” (Social Security Administration, 2010b). His remarks seemed to construct the elderly as deserving and in need of the nation’s help and the disabled as dependent and in need of the nation’s pity, but made no mention of the poor.
The elderly, who had worked and paid taxes, were socially construed as deserving or advantaged in the adoption of Medicare. The deserving elderly were portrayed as having worked hard all their lives as contributing members of society, who then needed assistance later in life, a situation many other contributing members will be in one day. The advantaged groups, those with a positive construction and high political power, tend to be chosen as the first targets (Schneider & Ingram, 1997). This was seen in the adoption of Medicare and Medicaid as the deserving elderly were the initial focus to address health insurance as the politically feasible target population. Medicare also illustrates the implementation of a “strong statute model” where advantaged populations are chosen by the legislature and written into the statute (Schneider & Ingram, 1997, p. 135). In the case of Medicare, the deserving elderly were chosen by the legislature and written into the statute as “beneficiaries,” while Congress named intended beneficiaries of Medicaid “recipients” (Engel, 2006), which included “needy” aged or elderly individuals. Entitlement programs, such as Medicare, clearly illustrate the influence of social construction, as Jensen (2005) describes:
Of all of the public policies involved in the social construction of citizens, entitlements are undoubtedly the most overt. Such policies deliberately and overtly invoke state authority to categorize groups of citizens as deserving of public benefits. They embed carefully crafted rationales for the allocation of public benefits and burdens in powerful legal discourses that render particular citizens worthy of the state’s attention at particular moments in history. Individually and collectively, a nation’s entitlements specify which people, personal situations, and behaviors deserve tangible, public recognition at a given time, while the entitlements’ qualifying criteria and their silences describe those who are not deserving. (p. 35)
While some elderly—those who worked and paid into the system—were categorized as deserving or worthy, the poor, disabled, and “needy” elderly were categorized and socially construed as dependent and even undeserving in the adoption of Medicaid. The dependent groups, those with a positive construction and low political power, are often in greater need of assistance, but their problems tend to be seen as private concerns rather than concerns in need of government intervention as there is little to gain politically in directing resources to such groups (Schneider & Ingram, 1997). As a result, policies tend to be left to the private or nonprofit sectors, or responsibility is shifted to state or local governments, where much of the policy decisions are based on differentiating deserving from undeserving. This was seen in the adoption of Medicaid as a state grant-in-aid program that shifts responsibility for insuring the poor, disabled, and “needy” elderly to state governments. The House Ways and Means Committee’s (1965) reasons for recommending the adoption of Medicare and Medicaid illustrate the social constructions of the deserving elderly compared with the needy—the poor, disabled, and undeserving elderly:
[A] threefold approach to meet this national problem has been developed. First, since your committee believes that Government action should not be limited to measures that assist the aged only after they have become needy, your committee recommends more adequate and feasible health insurance protection under two separate but complementary programs which would contribute towards making economic security in old age more realistic, a more nearly attainable goal for most Americans. In addition, your committee recommends . . . a strengthening of the medical assistance provisions of the Social Security Act so that adequate medical aid may be provided for needy people. (p. 20, emphasis added)
From their inception, Medicare and Medicaid were set down different paths. For dependents, there is considerable discretion to determine eligibility for benefits (Schneider & Ingram, 1997), which in this case is left to the individual states to determine eligibility levels, to further differentiate who is “deserving” and who is “undeserving.” A summary of some of the key differences is shown in Table 1.
Social Construction, Medicare, and Medicaid.
Further evidence of social construction is provided by France (2008), who argues that social solidarity is especially important in the social construction of target populations. France asserts:
U.S. social solidarity is qualified, that is, selective or discriminating, [which] translates into more generous protection being given by public health insurance programs to the so-called deserving persons (the aged and permanently disabled and poor pregnant women and children) compared to that given to “undeserving” persons (chiefly poor adults of working age without children). (p. 668)
In examining variances in health care rights, France points out that while Medicare is a federal entitlement program where beneficiaries have the right to go to court to seek protection of their entitlement, no such provision exists for Medicaid. Both Medicare and Medicaid are very large, complex programs that lead to implementation difficulties, but variation across states—and states’ abiding by vague federal guidelines for matching grants—leads to the issue of joint action for Medicaid. France concludes, “In the United States, qualified social solidarity appears to have translated into a hierarchy of differentiated and categorical rights with some people having scarcely any rights at all” (p. 678).
“Class wars” (Lowi, 1964) may contribute to the social construction. Katz (1986) illustrates how welfare programs for the middle class, such as social security and Medicare, have been defined as social insurance programs with no stigma attached, whereas public assistance programs, such as Medicaid, are strictly for the poor, tend to have less generous benefits, and are often stigmatized. As Gordon (1994) states, Social Security established a “stratified system of provision in which the social insurance programs were superior both in payments and in reputation, while public assistance was inferior—not just comparatively second-rate but deeply stigmatized” (p. 5). The “deserving” are those who have participated in the paid labor market, have paid into social security, and have reached retirement age, such as the elderly, where benefits are reasonably generous and free of conditions (Handler & Hasenfeld, 2007). The “undeserving” are those who are expected to work and support themselves, where aid is only provided as a last resort (Handler & Hasenfeld, 2007). Therefore, the two programs were both enacted with the Social Security Amendments of 1965 but are quite distinct based on the social construction of the target populations as deserving and undeserving. As Starr (1982) describes:
Though adopted together, Medicare and Medicaid reflected sharply different traditions, Medicare was buoyed by popular approval and acknowledged dignity of Social Security; Medicaid was burdened by the stigma of public assistance. While Medicare has uniform national standards for eligibility and benefits, Medicaid left the states to decide how extensive their programs would be. Medicare allowed physicians to charge above what the program would pay; Medicaid did not and participation among physicians was far more limited. The objective of Medicaid was to allow the poor to buy into the “mainstream” of medicine, but neither the federal government nor the states were willing to spend the money that would have been required. (p. 370)
The differences in social construction of the elderly, who worked and paid taxes, compared with the poor and the disabled illustrate that “deserving” groups tend to benefit from federal government programs, whereas public benefits for “undeserving” groups are left to state governments (Campbell, 2003; Handler & Hasenfeld, 2007; Katz, 2001; Schneider & Ingram, 1997; Skocpol, 1995) and parallel those articulated by Mettler (1998) for men and women in the New Deal. The elderly, who had jobs and paid taxes, are often constructed similarly to men, who are described by Mettler as “endowed with national citizenship, incorporated into policies to be administered in a centralized, unitary manner through standardized, routinized procedures” (p. xi). Benefits of national programs, such as Medicare, do not vary by state and are the most popular programs in America’s welfare state because they are universal and resemble private insurance (Katz, 2001). Meanwhile, the poor, including the “needy” elderly, and disabled are constructed more similarly to women and minorities, where they “remain state citizens, subject to policies whose development was hindered by the dynamics of federalism and which were administered with discretion and variability” (Mettler, 1998, p. xi). Highlighting the issue of federal versus national citizenship, Katz (2001) states that “it is perfectly acceptable for citizens with identical situations to find life harsher because of an accident of geography” due to the variations across states and the lack of defined minimum benefits (p. 355).
Inequality in Implementation and the Exacerbating Force of Federalism
In addition to differences in program implementation, Medicare and Medicaid use policy tools that appear to reflect the underlying social construction of the elderly and poor. In 2008, Medicare provided health insurance coverage for about 15% of all Americans and Medicaid provided health care coverage for about 19% of all Americans (U.S. Census Bureau, 2008, 2012). However, Medicare has a much larger budget, with expenditures totaling $468.1 billion in 2008, compared with $356.3 billion for Medicaid in fiscal year (FY) 2008 (Klees et al., 2009). 3 Both programs’ expenditures have been steadily increasing, but Medicare has been increasing at a much higher rate and has consistently had significantly higher payments per beneficiary 4 (Figure 1).
Medicaid and Medicare payments per beneficiary, 1997-2005.
While the variances in expenditures and benefits between Medicare and Medicaid described above are problematic, also of concern are the potential inequalities that exist in Medicaid across the states that are given the flexibility to design their own Medicaid programs and that may widen existing inequities in coverage. Growing budget deficits, the soaring costs of health care, and the growing number of those in need of health care coverage threaten the Medicaid program and may cause greater inequality of health care coverage. The federal government has responded to fiscal burden by cutting funding to state Medicaid programs and, through the 2005 DRA, shifting more responsibility for program delivery to the states. The result is that states are left with the same fiscal burden but little to no guidance about how to reform their Medicaid programs.
This particular problem is likely to get worse before it gets better. According to the Urban Institute, Medicaid spending is likely to continue to grow at a rate of about 8.5% each year, due to a combination of decreased federal funding and several additional factors. First, health care costs continue to rise despite slow economic growth, and declining employer coverage may leave more people uninsured. Second, hospital and prescription drug prices are likely to continue to escalate. Third, Medicaid managed care is no longer providing the savings the program did in the 1990s, so states are left to find a new way of reducing the cost of acute care. Finally, long-term care costs are likely to rise with the aging baby boom population, shortages in the labor force, and efforts to improve the quality of nursing homes (Holahan, Weil, & Wiener, 2003).
Medicaid also faces the classic tensions of federalism. In FY 1998, federal grants to the states for the implementation of Medicaid provided $104.8 billion, which was 39% of all grant-in-aid provided to state and local governments and thus the largest federal grant program (Beam & Conlan, 2002). Several theoretical and practical considerations influence the choice of grants as a policy tool and the implementation of a grant program. Constitutionally, “grants became the tool of choice because they helped square the constitutional circle of extending the federal role while respecting the autonomy and prerogatives of subnational jurisdictions” (Beam & Conlan, 2002, p. 360). In terms of administration, grants are efficient for the federal government by placing the administrative burden of implementing Medicaid on the individual states. Politically, the “use of the grant device has provided a way to reconcile liberal purposes with conservative means” (Beam & Conlan, 2002, p. 371). In addition, proponents of decentralization argue that shifting authority from the federal to state-level grants states the flexibility to meet their local needs effectively and efficiently (Goldsmith & Eggers, 2004). However, states that gain autonomy may let politics or financial constraints dictate the implementation of statewide programs (Sosin, 2012).
The implementation of grant programs and decentralization of responsibility from the federal government to individual states raises a number of concerns that are relevant for Medicaid, including equity and accountability. Funds are usually distributed broadly across the states, where the federal government provides matching funds for the states’ Medicaid programs. However, there is no consideration for those states with higher proportion of individuals in need of Medicaid or states with greater financial distress. This potential inequality across the states is then passed on to low-income, many of whom are elderly, and disabled individuals who may not be able to obtain needed Medicaid benefits. Accountability is also an important issue for Medicaid and grants in general as “they introduce additional complexity, with multiple actors, complex motives, and strong incentives for finger pointing if things go wrong” (Beam & Conlan, 2002, p. 372). Grant programs may also face issues with effectiveness as states may experience goal displacement by focusing on the federal requirements and goals rather than considering local needs, such as limiting their state program to the mandatory beneficiaries.
The DRA of 2005
Intergovernmental relations became even more complicated in 2006, when President George W. Bush signed the DRA of 2005, which shifted more Medicaid responsibilities to the states with the goal of reducing federal spending. The DRA was designed to “restrain federal spending and leave more money in the hands of the American people” (President George W. Bush White House, 2006). Toward this end, the DRA aimed to reduce growth in Medicaid by nearly $5 billion over the following 5 years by reducing federal overpayment for prescription drugs, giving governors more flexibility, and tightening budget loopholes. Federal cuts to Medicaid and the DRA aimed to slow Medicaid’s average growth from 6.9% a year to 6.6% a year (President George W. Bush White House, 2006).
The logic behind the Medicaid provision of the DRA is that states have been overburdened with Medicaid requirements that prohibit them from providing care comparable to the private sector, thus increasing state costs. According to the National Governors Association, Medicaid typically accounts for 20% of state expenditures, a figure that the DRA is designed to keep as low as possible by increasing state flexibility. “Escalating program expenditures coupled with dramatic slowdown in state revenue has forced states to seriously review and implement cost-containment options, including containing pharmaceutical costs, reducing or eliminating benefits, and reducing or eliminating eligibility” (Krause, 2003, p. 1). The DRA allowed states to adopt cost-sharing mechanisms for recipients and allowed state demonstration programs of Health Opportunity Accounts (HOA) to resemble health saving accounts in the private market to reduce moral hazard (Quadagno & McKelvey, 2008). Thus, the rising costs of Medicaid are being addressed by cuts in federal funding and increased state flexibility to pursue cost-containment options, which may result in greater variance across states and widen the gap between the federal and state administered health care programs.
The DRA’s effects on the equitable provision of care will depend on the commitment of the states, which is “a product of complex policy processes involving strategic interaction among a cast of critical players—governors, legislators, state administrators, local officials, interest groups, the media, and more” (Thompson, 1998, p. 51). Thompson (1998) asserts that states have two possible scenarios: race to the bottom and compensatory federalism. In the race to the bottom scenario, states would not want to compete with nearby jurisdictions by charging their citizens higher taxes to support their Medicaid programs (Steuerle, Gramlich, Heclo, & Nightengale, 1998). States may race to the bottom for fear of losing businesses and affluent individuals due to higher tax rates or for fear of attracting individuals in need of the redistributive policy by offering higher benefits than nearby jurisdictions. Compensatory federalism, in contrast, supposes that federal retreat from a policy leads to new and greater state activity in response. From this point of view, “many states will rise to the occasion and compensate for diminished financial support through gains in efficiency and, possibly, increased provision of state dollars” (Thompson, 1998, p. 52).
States are attempting to cope with the growing costs of health care and decreased funding in a variety of ways, such as exploring new means of service delivery, capping enrollment, privatizing, and implementing cost sharing. With the states’ increased flexibility in running their Medicaid programs, there is great variation across the states where some seem to be following the race to the bottom scenario while others are rising to the occasion to expand their programs.
States can apply to the Center for Medicare & Medicaid Services for waivers that give states flexibility in operating their Medicaid programs. “The waiver process epitomizes the federal-state relationship in Medicaid: It is the vehicle states use to seek relaxation of federal rules and regulations in order to undertake experimentation and still qualify for matching funds” (Hurley & Zuckerman, 2003, p. 220). The three main types of waivers are Section 1115 for research and demonstration projects, Section 1915(b) for managed care/freedom of choice, and Section 1915(c) for home and community-based service. Section 1115 waivers were established with the intent to create and test new models of financing and delivery. Under Section 1115 waivers, some states expand eligibility, provide additional services, or use innovative service delivery systems. Section 1915(b) waivers allow states to implement managed care or otherwise limit individuals in choosing a provider under Medicaid. Under Section 1915(b) waivers, states have the option of enacting mandatory enrollment of beneficiaries into managed care or developing a “carve out” delivery system for specialty care. The specific requests available under the Section 1915(b) waivers are to mandate Medicaid enrollment into managed care, to utilize a “central broker,” to use cost savings to provide additional services, and to limit the number of providers for services. Section 1915(c) waivers allow long-term care services to be delivered in community settings as an alternative to institutional settings. As of 2010, 329 Section 1915(c) waivers were granted, 79 Section 1915(b) waivers were granted, and 69 Section 1115 waivers were granted to the states (Centers for Medicare & Medicaid Services, 2010).
States have used their increased discretion to explore several strategies through these waiver programs. Originally, states were required to provide all available benefits to both mandatory and optional enrollees, but states are now varying the benefits covered among different groups of enrollees. For example, New Jersey and Oregon reduced benefits for optional enrollees, and Florida granted Medicaid managed care plans great discretion in determining benefits for adult enrollees (Coughlin & Zuckerman, 2008). With the new benefit flexibility in some states, inequality has been extended between subgroups within states. Other states have implemented cost-sharing strategies in order to limit program costs and promote personal responsibility. Cost sharing targets those beneficiaries with income above the federal poverty level, but some states have also increased co-payments for low-income individuals. Others have reduced eligibility for their Medicaid programs, such as Tennessee, which was granted approval to disenroll 323,000 optional beneficiaries, and some states have instituted enrollment caps to reduce growing budgets concerns (Coughlin & Zuckerman, 2008).
States have also pursued market-based approaches to overhaul their Medicaid programs. The first statewide Medicaid managed care system in the country was the Arizona Health Care Cost Containment System (AHCCCS), which was created on October 1, 1982 (Centers for Medicare & Medicaid Services, 2010). AHCCCS allows Medicaid recipients to choose a Health Plan and a primary care provider, to whom AHCCCS pays a monthly fee upfront. Managed care was the first major cost-containment strategy that states began to take in the 1980s, but they have been expanded with the increased flexibility through waivers. Vermont obtained a Section 1115 waiver for Vermont’s Global Commitment to Health in September of 2005 to cap overall state and federal Medicaid expenditures. The reform transforms the Office of Vermont Health Access—the state Medicaid agency—into a public managed care organization, Catamount Health. The state projects a savings from the managed care system that can be used to reduce the number of uninsured, increase access to health care services, invest in health promotion activities, and encourage public–private partnerships (Vermont Global Commitment to Health, 2015).
Consequences for Medicaid Coverage
Since 1997, the average state expenditures per eligible individual have ranged from $2,212 to $10,213, with a mean of $4,699 (Table 2). Narrowing to the years between 2003 and 2007, the average expenditures per beneficiary have ranged from $2,228 to $10,338, with a mean of $4,919 (Table 3). Figure 2 illustrates the degree of variation in expenditures per beneficiary for the FYs immediately before and after the policy change. As the figure demonstrates, there is great variation in expenditures per beneficiary. The gap between the highest and lowest average expenditures per beneficiary was around $5,000 in FY 2003 and is even greater after the DRA with a difference of nearly $6,000 in FY 2007.
Medicaid Expenditures per Beneficiary, FY 2003-2008.
Source. Medicaid Statistical Information System (FY 2003-FY 2008).
Note. FY = fiscal year.
Medicaid Expenditures per Eligible, FY 2003-2008.
Source. Medicaid Statistical Information System (FY 2003-FY 2008).
Note. FY = fiscal year.
Expenditures per beneficiary by state, pre- and post-DRA (2005).
Table 4 shows the percent change in expenditures per beneficiary and per eligible across the states pre-DRA from FY 2003 to FY 2005 and post-DRA from FY 2006 to FY 2008. For Medicaid expenditures per eligible, only one state, New Hampshire, had a decrease in the 3-year period before the policy change, while six states had a decrease in expenditures from the year the DRA was signed to FY 2008, with Massachusetts having a 16% decrease and Maine having a 17% decrease. For Medicaid expenditures per beneficiary, five states saw a decrease in the 3 years before DRA, and seven states had a decrease over the 3-year period following the policy change, with Indiana and Maine facing the highest decreases of 13% and 14%, respectively. Thus, there has been great variation in the amount of expenditures per eligible and per beneficiary across the states due to varying levels of state commitment to resources and their Medicaid programs.
Medicaid Expenditures per Beneficiary and per Eligible: Percent in Expenditures Pre- and Post-DRA.
Source. Medicaid Statistical Information System (FY 2003-FY 2008).
Note. DRA = Deficit Reduction Act; FY = fiscal year.
Conclusion and Implications
The historical context and social construction of the target populations in the adoption and implementation of Medicare and Medicaid set them on different paths. According to Schneider and Ingram (1997), the historical context not only shapes the policy design but also creates a subsequent context for future public policy decisions, and “over time, designs have a dramatic effect on the distribution of wealth and other resources within society” (p. 101). Hacker (1998) states that the “ongoing historical process in which past public policies and political battles shape what is possible in the future” (p. 127) and discusses the “inherited legacies” of established policies (Hacker, 2002). Therefore, the social construction of the elderly, who worked and paid taxes, as deserving and entitled and the poor and disabled as less so not only influenced the different structures of Medicare and Medicaid at their inception but also perpetuates in the implementation and financing of the programs today.
Pierson (2004) describes how policies tend to become path dependent as “despite massive social, economic, and political changes over time, self-reinforcing dynamics associated with collective action processes . . . mean that organizations will have a strong tendency to persist once they are institutionalized” (p. 34). The social construction of the elderly, who worked and contributed to the system, as a deserving advantaged group led to the federal entitlement program administered at the federal level, which resulted in consistent implementation and equitable benefits across the country. Meanwhile, the social construction of the poor, including the “needy” elderly, and the disabled as a dependent group that the nation should take pity on led to federal grants-in-aid to assist the states in implementing their own Medicaid programs. This resulted in varying and inequitable eligibility requirements and benefits across the states since the inception of the programs, which have only worsened in recent years with states given more freedom to design and implement their own programs and less federal funds to do so.
The Medicaid program also exhibits issues with using grants as an implementation tool and the complexity of balancing state rights and innovation with equality and consistency in our federalist system. Today, Medicaid is a matching grant program, as it has been since its inception. However, there have been calls for Medicaid to move to a block grant program, currently proposed as H.R. 567: State Health Flexibility Act of 2013, similar to the manner in which welfare moved to a block grant with the shift from Aid to Families With Dependent Children (AFDC) to Temporary Assistance for Needy Families (TANF) in 1996. However, such reforms can lead to further devolution, from state governments to local authorities and private organizations, which may result in greater inequalities (Soss, Fording, & Schram, 2008, 2011). Handler and Hasenfeld (2007) describe the process of devolution in welfare: “By concentrating on the ‘evils’ of the welfare system and delegating low-visibility decisions to the state and local level, politicians, policy makers, and the general public can ignore the serious, corrosive problems of poverty and inequality” (p. 5). Therefore, grants to the states as a policy tool raise several normative considerations, such as equity and fairness, which should be carefully considered, especially when designing federal programs using block grants.
In addition to the variability of the Medicaid program across individual states compared with the more universal entitlement of the Medicare program, growing research suggests that social construction and policy feedback dividing citizens into “deserving” and “undeserving” groupings can in turn influence the democratic citizenship of the groups (see Soss, Hacker, & Mettler, 2010, for example). “Most fundamentally, public policies define the boundaries of political community, establishing who is included in membership, the degree of inclusion of various members, and the content and meaning of citizenship” (Mettler & Soss, 2004, p. 61). Scholars have found that social construction of groups goes beyond shaping policy to in turn shape the meaning of citizenship for the effected groups. For example, on the deserving or advantaged side, Campbell (2003) finds that senior citizens are more active participants due to Medicare and Social Security, and Mettler (2002) finds that the G.I. Bill had lasting positive influences on veteran participation. On the undeserving or dependent side, Soss (2000) finds that the political efficacy of welfare recipients is undermined by the way benefits are distributed due to the means-testing and great discretion of caseworkers as “negative images of welfare have the power to stigmatize and to deprive groups of full and equal status in the citizenry” (Soss, Schram, & Fording, 2003, p. 9).
Future implementation research should consider the social construction of target populations that shape the implementation structure of programs and the impact this may have over time, especially as implementation is often path dependent, and inequities may influence not only benefits received but also recipients’ sense of citizenship. Future research should also further examine how and why certain programs are administered directly at the federal level, while others are implemented at the state level with federal grant support. Variances between Medicare and Medicaid illustrate the importance of examining how social constructivism and history shape the development of programs and their implementation. In the case of Medicaid, the initial social construction of the poor and the disabled led to inequalities that have persisted and seemed to worsen over time as budget constraints led to increased state discretion and states using a number of innovative approaches to revamp their programs. The fate of Medicaid, the “federal entitlement” program, has continued to be left in the hands of individual states to implement the crucial program that provides health insurance for the millions of low-income individuals, many of whom are elderly, who would otherwise be uninsured.
Footnotes
Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author(s) received no financial support for the research, authorship, and/or publication of this article.