Medicare, Governance, and the National Debt

In this economics lesson, students will learn about how medicare affects the national deficit and debt.

Having given our pensioners their medical care in kind, why not food baskets, why not public housing accommodations, why not vacation resorts, why not a ration of cigarettes for those who smoke and of beer for those who drink?
—Barry Goldwater, 1964 (Nichols, 2011, p. 16)

Don’t ever argue with me [about health]. I’ll go a hundred million or billion on health or education. I don’t argue about that any more than I argue about Lady Bird [Mrs. Johnson] buying flour. You got to have flour and coffee in your house. Education and health. I’ll spend the goddamn money. I may cut back some tanks. But not on health.
—Lyndon B. Johnson, 1965 (New York Times, 2009)

Essential Dilemma – What level of medical care should the federal government provide for the elderly, and what trade-offs are we willing to make to provide that care?

In 1966, with the active leadership and support of President Lyndon B. Johnson, Congress passed the act establishing Medicare, a program of government-sponsored health insurance for those age 65 years or older. In 1972 it was amended to include the disabled. Although beneficiaries pay premiums for voluntary parts of the program, the basic benefit of Medicare, the benefit covering hospital care, is financed by a dedicated payroll tax. In 2016, that tax totaled 2.9% of an employee’s salary, half of which was paid by the employee and half by his or her employer. Medicare faces dramatic shortfalls in the future as the population ages and the average per-person cost of American medical care continues to rise from an average of $356 per person in 19701 to an average of $10,021 in 20151 (Centers for Medicare and Medicaid Services, 2015)

Today, as in the 1960s, there are many opinions about the level of medical care the federal government should provide to the elderly. Some believe this is not the proper role for the federal government, and that individuals should acquire their own medical insurance from private companies. Others believe that the federal government has a duty to provide the elderly with medical care to better ensure their basic level of health.

The debate about Medicare is about more than taxes and government spending. Ultimately, this debate gets to core questions about the kind of country we are and the kind of country we want to be. Are we a country of individuals who value free choice, comfortable with the fact that not everyone will be best served by such a system? Or are we a country that values community and shared responsibility, comfortable that some individual choices may be sacrificed?

UNDERSTAND:

• Medicare affects the national deficit and debt, and trade-offs made may affect groups differently.
• The rising cost of health care and, to a much lesser extent, the retirement of the large cohort of babies born after World War II make the current Medicare program unsustainable without a decrease in the cost of health care, an increase in sources of revenue, a reduction in the level of services, or some combination thereof.

BE ABLE TO:

• Analyze graphs, tables, and charts.
• Examine sources for information and interpretations, and for cases where they corroborate, complement, or contradict each other.

• “Poverty Rates by Age: 1959 to 2014”
• Cartoon: “Threats”
• Presidential Viewpoints on Medicare
• Individual Responsibility, Social Responsibility, and Medicare
• Overview of Medicare
• Social Security and Medicare Timeline
• Overview of the Budget Process
• Printable PDF of this lesson

Day 1 of 2

ENTRY

Begin by presenting students with the graph “Poverty Rates by Age: 1959 to 2014” from the U.S. Census Bureau (Resource 1). Ask students to work in small groups to analyze the graph and explain its data in their own words. If students have trouble understanding the graph, use the following questions and comments to guide their analysis:

• What information does the graph provide?
  [The graph depicts changes in the percentage of citizens living in poverty between 1959 and 2014. The data are divided into three age ranges: under 18 years, 18 to 64 years, and 65 years and older.]
• Describe the relationship among the three lines.
  [The lines are moving in similar directions. The percentage of Americans age 65 years and older living in poverty dropped the most overall and had the steepest decline during the 1960s and 1970s.]

Tell students that in 1966 Congress passed the act establishing Medicare, a program of governmentsponsored health insurance for those age 65 years and older, then ask:

• From the information provided in this graph, what can we hypothesize about the effect of Medicare’s passage in 1966?
  [Medicare probably played a part in reducing the poverty rate of Americans age 65 years and older.]

Ask students what they know about Medicare. Use the material in the introduction to this lesson and in the “Overview of Medicare” included with this packet to help student understanding. Probe for understanding with questions such as:

• Where does the funding for Medicare come from?
  [Medicare is funded by payroll taxes and by premiums deducted from Social Security benefit checks. As of 2016, employers paid 1.45% of the Medicare payroll tax, and workers paid another 1.45% of their salary. However, this covers only about one-third of the cost of Medicare. The rest comes from the premiums and general funds, such as those authorized by Congress and interest earned on the trust fund investments.]
• What are some potential issues for Medicare due to the funding mechanism?
  [With funding based at least partially on current workers, it faces similar issues to Social Security in terms of a growing number of people reaching retirement age and a correspondingly shrinking number of current workers.]

After the mini-lesson, ask students what more they can now say about the graph in Resource 1. Ask students to consider the implications of Medicare spending growing faster than our economy. Help students recognize that the source of this money is not unlimited, and money spent on Medicare cannot be spent on other areas like education or defense. Explain to students that this represents a difficult decision that we face as a nation concerning how to allocate our funds. Tell students that they will be investigating this dilemma throughout the course of this lesson.
Cartoon: “Threats”

As students learned in the introductory discussion, the rising cost of medical care presents an important dilemma that we must address as a country. What trade-offs are we willing to make to provide that care?

Present students with the cartoon “Threats” (Resource 2) and ask them to consider its meaning. After students have studied the cartoon for several minutes, ask what they notice, drawing them out on the detail of what they see. If students jump to an interpretation of the cartoon, ask them for the basis of the interpretation and ask other students if they agree or disagree.

If students are having difficulty getting into the cartoon, ask them more directed questions, such as:

• Who are the individuals in the cartoon?
  [From left to right, the individuals are Saddam Hussein, President of Iraq from 1979 until he was deposed in 2003 by a U.S.-led coalition; Osama bin Laden, al Qaeda mastermind of the terrorist attacks of September 11, 2001; and an unnamed elderly American woman.]
• Why is the elderly woman holding a sign that reads “Entitlements”?
  [The sign indicates that the woman receives Social Security and/or Medicare benefits.]
• Why might this artist equate elderly Americans who receive government entitlements with Saddam Hussein and Osama bin Laden?
  [The artist could be insinuating that the rising federal debt we are accruing is a result of entitlement spending and as dangerous as threats to our country from war or terrorism. On the other hand, the artist could be drawing an intentionally extreme connection to lampoon the political rhetoric surrounding entitlement spending.]

Ask students if they believe the public would generally agree or disagree with the artist’s opinion. Ask them what more they would need to know before deciding if they agree or disagree with either interpretation of the artist’s opinion. Although an investigation is beyond the scope of this lesson, discuss with students what more they would want to know (1) about the sources of the current budget deficit, and (2) about the relative risk the federal debt represents to our security. Tell students that they will revisit this cartoon at the end of the lesson to see if their understandings have changed.

Ask students to provide hypotheses as to why the cost of health care has increased so much in the last 40 years, even accounting for inflation. Through discussion and, if time allows, reference to news stories analyzing the subject, encourage students to focus on the most likely possibilities, such as increases in administrative costs in health care (single-payer systems have much easier administrative and claims systems); increases in medical malpractice suits, which often lead to overtesting (so-called “defensive medicine”); and the rising costs of new pharmaceuticals and procedures and tests requiring expensive equipment and significant research. Conclude by asking students what more they would need to know in order to test their hypotheses.
Presidential Viewpoints on Medicare

Divide students into groups and distribute “Presidential Viewpoints on Medicare” (Resource  3). Explain to students that the information they just received should be thought of as possible answers to the essential dilemma of this unit.

Inform students that they will use these statements to summarize different beliefs about Medicare. Students should reference these statements as they work with their group to respond to the handout “Individual Responsibility, Social Responsibility, and Medicare” (Resource 4). As the students work, move from group to group, answering questions and clarifying points of confusion. Resource 4 includes a Teacher’s Guide to potential student answers.
Day 2 of 2

Reports from Discussion Groups

Ask students to review the handout “Individual Responsibility, Social Responsibility, and Medicare” that they examined yesterday and clarify any points of confusion within each group. When each group is comfortable with their answers, ask for volunteers to share an answer with the class. Write students’ answers on the board as they respond, and ask other groups to add to their classmates’ answers as you proceed through the handout. After each question, clarify any misconceptions and reinforce the recurring themes from the students’ explanations.
Affordable Care Act of 2010

Ask students what they know or have heard about the Affordable Care Act (often called “Obamacare” in the media). Encourage multiple answers and examples, including what they may have heard on the media or from their parents. Gather student responses and ask them to try to pinpoint one answer to the question “What are the basic points of the Affordable Care Act?”. It’s very likely they will be unable to answer that without media hype or rhetoric.

Provide students with the information that the Affordable Care Act (ACA) was signed into law in 2010, creating a firestorm of epic proportions between the two main political parties in the United States. The law has three main parts: improving the quality and lowering the costs of health care with prescription discounts for different parts of the populace and small business tax credits, increasing access to health care through the insurance marketplace, and providing new consumer protections such as required access to medical care through insurance for pre-existing conditions (U.S. Department of Health and Human Services, n.d.).

Have students work with a partner to discuss the following questions, then come back for a brief group discussion.

• Why has the ACA been such a politically divisive law?
  [Answers should focus on issues already discussed within this lesson and relate to the essential dilemma: What level of medical care should the federal government provide for the elderly, and what trade-offs are we willing to make to provide that care?]
• Has the implementation of the ACA changed the power of the federal government?
  [Students could answer yes or no, but need to provide evidence to support their position. This will provide background for the next topic, responding to the essential dilemma.]
• In what ways does the ACA seem to be similar to Medicare with regard to the role of the federal government and trade-offs in the budget, deficits, and debt? In what ways is it different?
  [Student answers will vary, but similarities may include that the additional consumer protections and availability of insurance through federal and state marketplaces expand the role of the government, place greater responsibility for health care on the government, and require the federal government to shoulder a greater share of the cost of health care. Also similar to Medicare, potential benefits of the expanded scope of government include reducing risks for the most vulnerable by sharing them across society and using the large market power of the government to potentially contain the costs of health care. The ACA differs from Medicare in that, for the most part, the federal government is not directly providing insurance or paying providers, but instead is facilitating exchange through a series of mandates and subsidies for individuals and insurers.]

Responding to the Essential Dilemma

To help students begin to develop their own opinions on this subject, ask them to do a “5-minute write” in response to the essential dilemma of this lesson: What level of medical care should the federal government provide for the elderly, and what trade-offs are we willing to make to provide that care? When students have finished writing, divide them into small groups and ask them to share what they wrote with their classmates. Explain to students that this is not a debate; rather, it is a way for students to learn about the opinions of their fellow classmates and further develop their own opinions on this topic. After each student has shared her or his opinion, the groups should discuss the ideas presented, guided by the following questions:

• What ideas did your group raise about the level of medical care that the federal government should provide for the elderly and how this care should be funded? What reasons were provided in support of these ideas?
  [Students’ answers could include President Clinton’s discussion of Medicare as a “common commitment” to all Americans, President Bush’s depiction of Medicare as a “binding commitment of a caring society,” or President Obama’s belief that Medicare provides Americans with “fundamental security.”]
• After hearing your classmates’ arguments, were you persuaded to modify your current opinions? Why or why not? Where do points of compromise exist between the various ideas shared in your group?
  [Students’ answers will vary, but should focus on commonalities and areas in which compromise could be reached between their potentially disparate ideas.]
• What additional information would you need to make an informed decision about the level of medical care the federal government should provide for the elderly and the trade-offs you are willing to make to provide that level of care? Where would you go to find that information?
  [Students’ answers might include discussion about how much money is currently allocated for Medicare spending, what percentage of the federal budget that money represents, and how those numbers are expected to change in the coming years. Students could use census data to determine population trends, government and private industry perspectives on the trajectory of health care costs, Congressional debates about budgetary trade-offs, and so on. Note: Teachers could use the “Overview of Medicare,” included with this packet (and available online), and the Understanding Fiscal Responsibility economics lesson “Medicare and the National Debt” to address many of these questions.]

After each group has discussed their ideas, ask for volunteers to summarize their deliberation for the rest of the class. Ask other groups if their experiences were similar or different, and discuss their responses with the class. Conclude this part of the activity by asking students to share what additional information they would need to make a more informed decision about the essential dilemma of this lesson. (Note: Students’ answers to this question could point to opportunities for future lessons on this topic.)

When students have completed their discussion of the options, turn their attention back to the cartoon they examined at the beginning of the lesson and ask them to revisit their comments. Lead students in a brief discussion guided by the following questions:

• Is slowing the growth rate of Medicare spending a threat to the well-being of the elderly, as well as a challenge to the value the United States traditionally places on caring for the vulnerable?
• Is increased spending on Medicare a threat to the United States as a country with a sound fiscal policy?
• What steps could be taken to address the dilemma these dueling threats present?

Assign students a 250-word essay addressing the essential dilemma: What level of medical care should the federal government provide the elderly, and what trade-offs are we willing to make to provide that care? The assignment can build on their 5-minute write, or subsequent discussion may have changed their mind. In either case, this is a more elaborated piece, and student work should make use of the statements they read in the handouts and incorporate the ideas developed in discussion with classmates.

ADDITIONAL STANDARDS

Common Core State Standards (CCSS) Initiative
CCSS.ELA-Literacy.RI.11-12.6. Determine an author’s point of view or purpose in a text in which the rhetoric is particularly effective, analyzing how style and content contribute to the power, persuasiveness or beauty of the text.
CCSS.ELA-Literacy.RI.11-12.7. Integrate and evaluate multiple sources of information presented in different media or formats (e.g., visually, quantitatively) as well as in words in order to address a question or solve a problem.
CCSS.ELA-Literacy.RH.9-10.6. Compare the point of view of two or more authors for how they treat the same or similar topics, including which details they include and emphasize in their respective accounts.

The College, Career, and Civic Life (C3) Framework for Social Studies State Standards
D2.Civ.5.9-12. Evaluate citizens’ and institutions’ effectiveness in addressing social and political problems at the local, state, tribal, national, and/or international level.
D2.Civ.13.9-12. Evaluate public policies in terms of intended and unintended outcomes, and related consequences.

NCSS National Curriculum Standards for Social Studies
6.Power, Authority, and Governance. Social studies programs should include experiences that provide for the study of how people create, interact with, and change structures of power, authority, and governance.

Center for Civic Education’s National Standards for Civics and Government
I.A.What Are Civic Life, Politics, and Government? Why are government and politics necessary? What purposes should government serve?
II.B. and D.What Are the Foundations of the American Political System? What are the distinctive characteristics of American society? What values and principles are basic to American constitutional democracy?
III.B. and E.How Does the Government Established by the Constitution Embody the Purposes, Values, and Principles of American Democracy? How is the national government organized and what does it do? How does the American political system provide for choice and opportunities for participation?
V.B.What Are the Roles of the Citizen in American Democracy? What are the rights of citizens?
REFERENCES CITED

American Presidency Project. (n.d.). Retrieved from https://www.presidency.ucsb.edu/

Cardow, C. (2011, August 3). Threats. Cagle Cartoons. Retrieved from http://www.politicalcartoons.com/ cartoon/76827563-85b2-4edd-ad11-63201937c851.html

Centers for Medicare and Medicaid Services. (2015). Projected. Retrieved from https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html

Committee on Education and the Workforce, Democrats. (2009, July 31). House Democrats expose campaign of misinformation on health insurance reform. Retrieved from https://edlabor.house.gov/

DeNavas-Walt, C., & Proctor, B. D. (2015). Income and poverty in the United States: 2014. Retrieved from https://www.census.gov/content/dam/Census/library/publications/2015/demo/p60-252.pdf

DollarTimes. (2016). Inflation calculator: The changing value of a dollar. Retrieved from https://www.dollartimes.com/inflation/

New York Times. (2009, September 19). Don’t let dead cats stand on your porch: A tutorial from Lyndon B. Johnson. Retrieved from https://www.nytimes.com/2009/09/20/weekinreview/20word.html

Nichols, J. (2011). The “S” word: A short history of an American tradition . . . socialism. New York: Verso Press. Social Security Administration. (2011). Special collection: Presidential statements. Retrieved from https://www.ssa.gov/history/presstmts.html

U.S. Department of Health and Human Services. (n.d.). Key features of the Affordable Care Act. Retrieved from https://www.hhs.gov/healthcare/about-the-aca/index.html