Medicare and Medicaid

Medicare and Medicaid. On 31 July 1965, at the Truman Library in Independence, Missouri, President Lyndon B. Johnson signed the Medicare and Medicaid Bill into law. The site was chosen to honor former president Harry S. Truman, who had supported national health insurance during his presidency. The date of the signing anticipated by only two weeks the thirtieth anniversary of the 1935 Social Security Act, to which Medicare was attached.

The new law contained three parts that had been put together a year earlier by the House Ways and Means Committee chairman, Wilbur Mills, an Arkansas Democrat. The first part, Medicare, expanded the Social Security Act's old‐age pension program. Through wage deductions, employees would contribute to a Medicare trust fund. At retirement, those eligible for Social Security benefits would also receive coverage for hospital care, some surgical care, and nursing‐home reimbursements. The original law specified 120 days of hospital benefits and 120 days of nursing‐home follow‐up benefits. The Medicare program also included general revenue funds for hospital construction, diagnostic equipment purchase, and grants to teaching hospitals for medical education.

A second part of the 1965 law, called Part B, covered visits to physicians. This option had to be selected by eligible individuals on retirement. If this option were chosen, deductions were made from the recipient's monthly Social Security checks. Part B originated as the American Medical Association's (AMA) alternative to Medicare, called Eldercare, which Mills had streamlined and turned into an optional addition to Medicare.

The third part of the bill, Medicaid, funded from general tax revenue, provided health care for the needy poor and others. Administered by the individual states, Medicaid covered a broad range of people, including welfare recipients, persons who were blind or disabled, and low‐income elderly citizens who did not qualify for Social Security or whose Medicare benefits had run out. The Medicaid idea had originated in the early 1960s as a Republican alternative to the Johnson administration's push for a compulsory health‐insurance plan.

The enactment of Medicare and Medicaid in 1965 culminated three decades of political controversy. Agitation for federal (as opposed to state) health‐care coverage arose with the passage of the 1935 Social Security Act, which left out any provision for health insurance. Repeated failures over the next two decades to establish a comprehensive national health‐insurance plan, in large part because of fierce opposition by the AMA, led reformers to try for more limited plans covering the neediest groups. In 1957, advocates of health insurance for the elderly enlisted the support of Representative Aime Forand (Dem.‐R.I.), but the resulting Forand Bill, the direct ancestor of Medicare, failed to win passage. In 1960, President John F. Kennedy made Medicare part of his national agenda. Representative Cecil King (Dem.‐Calif.) and Senator Clinton Anderson (Dem.‐N. Mex.) sponsored the bill in Congress. After a number of hearings in the House and Senate—and the Democratic landslide in the 1964 elections—Medicare became President Johnson's top priority.

In the years after 1965, Medicare and Medicaid were modified periodically by Congress in an effort to control escalating costs. Changes in 1971 and 1974 instituted a review of standards and costs and tried to eliminate duplication of equipment and hospitals. Revisions in 1983 standardized charges for medical procedures. Both state and federal agencies waged a continual battle to control fraud and abuse in the system. In the 1980s health‐care discussion turned to the long‐term needs of the elderly, coverage for medical catastrophes, and ways to preserve the Medicare system when the large baby‐boomer cohort of the population reached retirement age. Health maintenance organizations (HMOs), introduced by the private sector after being enabled by legislation passed by Congress in 1973 as a way to control rising costs, were subsequently included as an option for Medicare and Medicaid recipients. At the end of the century, debate focused on ways to cover the approximately forty‐four million uninsured Americans and to provide reimbursement to Medicare recipients for expensive pharmaceuticals.

In 2003, under intense pressure from the George W. Bush administration and the American Association of Retired Persons, Congress narrowly passed legislation giving older Americans limited prescription-drug benefits under Medicare beginning in 2006. Critics charged that the added benefits (estimated to cost $534 billion in the first decade alone) could bankrupt the system. The critics also targeted the law's failure to regulate drug-company prices and its ban on the purchase of cheaper drugs from Canada. By permitting private health-care providers to compete with Medicare by offering lower rates to healthier seniors, critics further charged, the new legislation could in the long run destroy the entire program.
See also Great Society; Medicine: From the 1870s to 1945; Medicine: Since 1945; New Deal Era, The; Welfare, Federal.

Bibliography

Richard Harris , A Sacred Trust, 1966.
Theodore Marmor , The Politics of Medicare, 1970.
Robert J. Myers , Medicare, 1970.
Robert Stevens and and Rosemary Stevens , Welfare Medicine in America: A Case Study of Medicaid, 1974.
Sheri I. David , With Dignity: The Search for Medicare and Medicaid, 1985.
Edward Berkowitz , America's Welfare State: From Roosevelt to Reagan, 1991.

Sheri I. David

; Updated by

Paul S. Boyer