Significance of Medicare and Medicaid Programs for the Practice of Medicine

Article excerpt

"Nothing in this title shall be construed to authorize any Federal officer or employee to exercise any supervision or control over the practice of medicine or the manner in which medical services are provided ..." (Public Law 89-97.)


Notwithstanding what Congress wrote in 1965, the Medicare and Medicaid Programs have enormous influence over the practice of medicine. The evolution of medical care, its financing, and the expectations of the American population for high-quality care and rational use of public funds have linked, irreversibly, CMS to clinical medicine. (1) CMS finances health care for more Americans than any other single entity; the agency has a responsibility to its beneficiaries to ensure that they receive quality, effective, and efficient health care. As with other payers, CMS must answer to both the beneficiaries it serves and the investors (taxpayers); in addition, CMS must address the concerns of an array of political constituents, including Congress, presidential administrations, and groups representing the health care industry. To balance these competing interests and pursue evolving policy goals, CMS has had no choice but to become engaged in the practice of medicine and the delivery of health care services.

Now, 40 years into the life of Medicare and Medicaid, we reflect on how clinical medicine has become intertwined with CMS by highlighting four key policy areas that illustrate this changing relationship: (1) the end-stage renal disease (ESRD) program, (2) the quality improvement organizations and the effectiveness initiative, (3) financing of graduate medical education, and (4) State Medicaid activities. We discuss these policy initiatives, not as an exhaustive listing, but to demonstrate both the broad range of activities that CMS engages in and how those activities have evolved over time as CMS' influence over clinical medicine has increased. CMS' influence stems from both regulatory decisions by the policymakers in the agency and from legislative decisions made by the Congress. Both avenues of influence are important and are exemplified in this article. The article concludes with thoughts about the future of CMS' relationship with medical practice.


Organized medicine staunchly opposed the passage of Medicare, in part to keep government out of clinical medicine. The American Medical Association (AMA), reversing its initial supportive stance, declared its opposition to compulsory health insurance in 1920 and in subsequent decades became a powerful lobby against enactment of universal health insurance and its political legacy, Medicare (Oberlander, 2003). Precisely because of the opposition to national health insurance, political realities forced policymakers to focus on insuring the elderly and minimizing the regulatory role of Medicare in medical practice. Without conceding to the AMA and limiting the program's regulatory authority, Federal policymakers would have found it much more difficult to gain the medical profession's cooperation in implementing Medicare. Yet this limitation on regulation became untenable within just 5 years of Medicare's introduction; since that time, Federal policymakers have become increasingly involved and influential in clinical medicine.

Because of the weakness of regulatory oversight and the use of unfettered fee-for-service payment in the program's early years, Medicare quickly proved to be a blank check for the health care industry. This payment structure was not unique to the Federal programs since private health insurance plans generally used similarly inflationary arrangements. Medicare's aim was to finance access for the elderly to mainstream medicine and, in 1965, the mainstream of American medicine showed little concern for cost control or quality oversight.

Indeed, before the 1970s, U.S. health care policy was based on two broad assumptions: (1) Americans needed more medical care, and (2) medical professionals were the best arbiters of the use of health care services (Starr, 1982). …