25-07-2025
Medicare at 60: Care, Cost, Control
This transcript has been edited for clarity.
Jen Brull, MD: Sixty years ago, Congress passed legislation that created Medicare. In 1966, its first year of implementation, there were 19.1 million enrollees. Almost a decade later, enrollment had grown to 22.5 million. Today, 68.8 million Americans have Medicare coverage, with about half enrolled in Advantage plans. The original idea for this insurance program was even bigger.
It started as a plan for all Americans, with President Harry Truman endorsing universal coverage in 1945. Today we'll take a look back at how we got there and look ahead to the next 50-60 years. How might the future of medicine be shaped by Medicare policy? I'm Jen Brull, MD, president of the American Academy of Family Physicians.
We represent nearly 130,000 family physicians across the country, residents, and medical students. I'm also a senior advisor for clinical strategy and physician well-being at Aledade, where I help physicians in independent primary care succeed in the shift to value-based care. I'm delighted to be joined by three outstanding panelists.
Dr Claudia Fegan recently retired as chief medical officer at Cook County Health in Chicago, the third largest public health system in the country, providing care for over 190 years. She is also the national coordinator of Physicians for a National Health Program, which advances a universal health system. Thank you for being with us, Dr Fegan.
Dr Jonathan Gruber is joining us from the Massachusetts Institute of Technology in Cambridge, where he chairs the economics department. He previously consulted for the administration of former President Barack Obama in crafting the Affordable Care Act. He was also instrumental in creating Massachusetts 2006 health reform law, which led the state to the lowest uninsured rate in the nation.
Dr Norman Ornstein is a retired scholar from the American Enterprise Institute and co-host of the podcast Words Matter . He has written extensively about Medicare, privatization, Part D, and the program's inability to negotiate drug prices. He's also the author of numerous books, including Intensive Care: How Congress Shapes Health Policy .
Thank you all for being here today, and let's get started. Five years from now, the last of the baby boomers will turn 65 and 1 in 5 Americans will have Medicare coverage. Dr Fegan, I know that many physicians debate about opting out of taking Medicare and perhaps only seeing patients with other insurance or going the direct primary care route.
Paying the Doctor
Brull: Can physicians survive without taking Medicare patients? Do you think more physicians will do so in the next decades?
Claudia Fegan, MD: I think that the advancement of concierge medicine, where physicians are entering into direct financial agreements with the patients they're seeing, as opposed to using Medicare as a payer, is a trend.
However, the majority of physicians in this country today are in an employment arrangement as opposed to being in private practice, which is where the majority of us were, say, 40 years ago. I would say that those large groups, as well as hospitals, cannot survive without Medicare. The majority of people over the age of 65 use Medicare as their insurance.
As you pointed out, the majority of Medicare recipients today are now in Medicare Advantage plans, which are private plans. But without Medicare, I don't think it's economically feasible for the majority of physicians to survive. There will always be some who are catering to a group of patients who have the financial wherewithal to afford their care.
But that is not the majority of Americans in this country. And more importantly, I would say that the majority of hospitals and large outpatient facilities cannot survive without payments or reimbursements from Medicare.
Shaping Care
Brull: Dr Gruber, you've done a lot of research on insurance policy design, like the use of copayments and formularies and decreasing utilization of unnecessary care and specific services that patients receive.
How has Medicare policy impacted the types of drugs, imaging, and treatments that physicians can prescribe or perform?
Jonathan Gruber, PhD: That's a great question. Thanks for having me here.
Medicare influences [coverage] a lot through the copayments that they charge. Remember, Medicare, at least 30 years ago, was not actually that great of insurance. Most employer plans had very low copayments and deductibles. Medicare actually had relatively high copayments and deductibles.
Today, Medicare looks more like a typical employer-provided health insurance plan in imposing copayments and deductibles on people using services. There is mixed evidence on the implications of that. My general read is that when you impose a copayment or deductible, people use less of all services, both necessary and unnecessary. But there does not look to be enormous evidence that, at least at the level of current Medicare copayments, it significantly impacts their health to be using less of those services.
But then there's the long run, which is when Medicare covers services; it changes the shape of innovation in the United States. If Medicare says, "We're covering this surgery," people are going to innovate and create surgeries covered by Medicare.
Setting Prices
Brull: Medicare has a huge impact on the long-run structure of what is provided by healthcare in the United States, and that's important to consider as well. As a follow-up for anyone on the panel: As technological innovation in medicine advances, how might the program manage patient access and costs?
Fegan: I think it's important to use data to make these decisions, and as clinicians, we appreciate — for example — peer-reviewed articles which compare whether something is a useful or beneficial service or not.
You know the slogan about when you have a hammer in your hand, everything looks like a nail? When there's a new innovation, there's an inclination to want to use it. But I think the most important way to make these decisions is to do studies where we look at whether there's a real benefit to the innovation. And when clinicians use studies and examine outcomes, they make better decisions than just what happens to be the most exciting or innovative approach.
Gruber: I want to strongly endorse that comment.I think we are facing what I call sort of a tsunami of incredibly effective but incredibly expensive new treatments, from GLP-1s for weight loss to new cell and gene therapies.
Society is going to have to face a choice of how much we're willing to pay for those. And the only way to make that choice is not to leave it to the free market, because the free market is broken in healthcare.
I teach basic economics, and I teach the reasons why the free market might not work. As Kenneth Arrow wrote in 1963, every one of those reasons applies to healthcare. Healthcare is a broken market. The government needs to be involved in setting prices, but the only way it can do so is with evidence on what works and what doesn't. This is what the rest of the world does.
Norman Ornstein, PhD: Those are hard questions to ask, and we need to really invest resources in asking them. Let me just add that we don't know what impact artificial intelligence (AI) is going to have on the practice of medicine, at least not entirely. Something like 25 years ago, I went to a series of conferences with healthcare providers and talked about how I expected that within a short period of time — just as we saw with automobiles where you could plug something in and get a complete readout of what the issues were with the car — it wouldn't be long before people would go to a nurse practitioner, put their finger into a little device attached to a computer, and get a readout. And that would make general practitioners almost obsolete, and they would go right to specialists if there were issues. Obviously, that hasn't happened, but AI could be a game changer in terms of both providing great opportunities where physicians might miss things because they're siloed but also where it will change the whole provider community.
The Medicare Advantage Paradox
Brull: Dr Gruber, in 1997, Congress created Medicare Advantage plans as a way to help curb growing expenditures. About half of all beneficiaries are now enrolled in this type of coverage. We know that Advantage plans are more aggressive in using prior authorization. As these plans grow, what are the implications for patients and physicians in the coming years?
Gruber: Economists don't often come to a fairly consistent answer on a question, but there are a lot of studies which I think perhaps surprisingly show that Medicare Advantage saves money. These plans deliver care more and cost-effectively.
Medicare Advantage doesn't save federal spending, and I'll come back to that, but it delivers care more cost effectively without actually harming health in a measurable way.
I know people are upset about prior authorization and other things, and I'm not saying it doesn't have negative effects on people's mental health and well-being, but the truth is, there are a number of nicely done papers now which show that people in Medicare Advantage plans aren't in immeasurably worse health as a result.
So, I think care management can be productive. The problem is, and Norm is the expert on this, that we set up a program which was originally designed to save money and took on a life of its own.
Remember: When we set up Medicare Advantage, it paid at first 95% and then 90% of what Medicare paid. It then went up to 132% of what Medicare paid. How can a program save money if it's paying 132% of the alternative? The answer is, because it became a goal that people should have managed care, not that Medicare should save money — and that's the problem.
I think Medicare Advantage can be a proper part of a well-functioning system, but we have to fix the reimbursement so we're not overpaying the plans, and this is becoming the major money maker for all insurance companies in America.
Who's Overseeing Utilization Management?
Fegan: One of the problems with Medicare Advantage is that the insurance companies have learned to game the system and figured out how to get better reimbursement.
The other problem with prior authorization is that the Kaiser Family Foundation published a study that showed Medicare Advantage averaged two prior authorizations per enrollee at a time period when traditional Medicare averaged only one prior authorization for every 100 enrollees.
While prior authorizations may have an appropriate place, they're designed to decrease utilization and decrease particular services. Patients who have a prior authorization denied, less than 10% of them appeal that denial. But on the other hand, when the denials are appealed, over 80% of the denials are overturned.
The prior authorizations use AI. I think what happens with the appeal is that it goes to a physician who thinks this was a reasonable study or care to provide and therefore they're overturned. So prior authorizations may work in terms of decreasing the amount of more expensive care and studies and medications, but it's not clear to me that they meet the standard of care that most physicians would like to give.
Brull: You read my mind in terms of our next question. You have written about the practice of Medicare Advantage companies using AI to deny claims. I wonder if we could go into that a little bit more deeply. [Centers for Medicare & Medicaid Services] recently said it's going to experiment with AI for this same use, but for its traditional fee-for-service Medicare members, starting next year. I wonder if you could talk a little bit more about that.
Fegan: Traditional Medicare uses prior authorization, but as I pointed out, much less often than Medicare Advantage. As a result, when traditional Medicare denies a prior authorization, it's not overturned on appeal the majority of the time. It would seem that it's been a more appropriate use of the prior authorization.
Traditional Medicare continues to use prior authorizations, but in a more judicious manner. I have concerns about the large number of prior authorizations, because for certain populations, that prior authorization is difficult for patients to navigate. Sometimes patients are missing out on things that we would think to be appropriate care.
I have concerns about AI. I think there's a place for it, but we have to be careful in terms of the data we put in to arm the AI. And there should always be a backup in which experts who have experience in that particular field can have a say if they disagree with what would be in an algorithm.
