HISTORY OF MEDICARE
On July 30, 1965, former President Harry Truman sat next to President Lyndon Johnson in Independence, Missouri. Johnson signed Medicare into law. That day did not start the history of Medicare. The day had been a long time coming. For decades, Truman and others had pushed to pass legislation that helped the disabled and people over 65 receive medical care. The ceremony also began the process of expanding healthcare coverage and options for millions of Americans.
“It was Harry Truman of Missouri who planted the seeds of compassion and duty which today flower into care for the sick and serenity for the fearful,” said Johnson at the ceremony, according to United Press International. “The need for this action is plain; so clear indeed that we marvel at not the simple passage of this bill, but that it took so many years. There are more than 18 million Americans over the age of 65. Most of them have low incomes and most of them are threatened by illness and medical expenses they cannot afford.”
Americans have argued about the nation’s healthcare system for over a century, but in the early days of the debate, Congress left matters to the states. No substantial debate about healthcare started until the early 20th century when political leaders began talking about improving the rights of working Americans. Labor laws were passed, and some politicians started to discuss healthcare as a national issue.
President Teddy Roosevelt took to the stage in 1910 in Osawatomie, Kan. The audience rose to its feet and applauded. The president waved and acknowledged the crowd. Soon, the noise died down, and Roosevelt began to deliver a speech on the power of freedom and the strength of the Democratic form of government. Roosevelt believed the country should learn from its history and move forward to build better Democratic institutions.
Roosevelt is known for creating the National Parks and other land conservation issues, but he also understood that a healthy nation was a stronger nation. The people, especially the poor and elderly, could benefit from the federal government’s help when it came to healthcare. He argued that profit should not be more important than basic human rights.
“Of all the questions which can come before this nation, short of the actual preservation of its existence in a great war, there is none which compares in importance with the great central task of leaving this land even a better land for our descendants than it is for us,” Roosevelt said at the gathering in Kansas. “Let me add that the health and vitality of our people are at least as well worth conserving as their forests, waters, lands, and minerals, and in this great work the national government must bear a most important part.”
Roosevelt was president from 1901 to 1909, and served as a Republican. He ran for president a second time as a progressive in the Bull Moose Party in 1912. His New Nationalism platform sought a National Health Service. Roosevelt lost the election, but the former president brought the issue to the forefront. In 1915, the American Medical Association backed a national bill, and several states considered healthcare reform legislation. None, however, were adopted. California voted down a referendum on healthcare, and a bill before the New York legislature died in committee in 1919. The reform movement died the same year when the communists seized control of Russia, and Americans became concerned about the influence of socialism. Many argued that national healthcare was a form of socialism.
The New Era
The healthcare reform movement was not revitalized until the New Deal and President Franklin D. Roosevelt. In 1935, Rep. Ernest Lundeen, a member of the Farmer-Labor Party, introduced a bill that was similar to Social Security, and provided payments to the people who lost income due to injury, sickness or old age. The bill gained some support in the House, and a group of women got behind the bill. They even distributed a pamphlet entitled “What Every Working Woman Wants,” and it contained healthcare reform ideas. The bill died because Roosevelt supported a Social Security bill in the Senate, which had a more narrow focus. He never fully embraced healthcare, partially, it is believed because he saw the challenge of passing Social Security, which Roosevelt signed in 1935.
The debate died down, but it was sparked again by World War II. Before the war ended, British economist William Beveridge wrote “Full Employment and a Free Society.” He advocated a more centralized role for the federal government in social policy. Politicians in the United States and the United Kingdom paid attention to Beveridge. Soldiers were returning from the war injured, and government officials needed to determine the best treatment methods.
“If Social Security is defined as security of the individual, organized by the State, against risk to which the individual will remain exposed even when the condition of the society as a whole is good as it can be made, both children’s allowances and medical treatment are part of social security,” Beveridge wrote.
Beverledge toured the United States and gave a series of speeches. He spoke with American officials who were thinking about life after the war and trying to determine social policy in a post-World War II era.
“(W)hat is to happen after military victory is a matter in which private individuals can take part usefully in public and internationally,” Beveridge said during a speech in Atlanta. “It is highly desirable that they should do so. Plans should be made now – else when the fighting stops they will be made not at all or made badly in a hurry
Beverly’s tour and his ideas heavy influenced the Roosevelt Administration, which was already thinking about post-war reconstruction. During his State of the Union speech in 1943, Roosevelt talked about the need to protect Americans after the war was over. They talked about a “cradle to grave” social insurance program.
“When you talk with our young men and women, you will find that with the opportunity for employment they want assurance against the evils of all major economic hazards — assurance that will extend from the cradle to the grave,” Roosevelt said. “And this great Government can and must provide this assurance.”
Not everyone supported Beveridge’s or Roosevelt’s ideas for expanding the social safety net in the United States. Some newspapers across the country argued that the federal government would collect a lot of taxes and promise to provide extensive service. It, however would not deliver, they argued.
Shortly after the Beveridge tour was completed, the Wagner-Murray-Dingell bill for nationalized healthcare was introduced into Congress in 1943. The war altered the debate about healthcare. The federal government built hospitals and invested millions of dollars to improve the healthcare system in the United States. It had an ever-expanding role in American healthcare.
The Wagner-Murray-Dingell bill was based on Beveridge's ideas and provided an expansion of Social Security, permanent disability insurance, and medical and hospital insurance. The bill’s sponsors, however, were quick to point out that the bill was not a form of nationalized medicine, as was being proposed in Europe. The bill “assured a complete” freedom of choice of doctors.
President Roosevelt never fully backed the bill, and it died in committee. The debate made it clear that healthcare would become a major issue in the post-World War II era.
In 1945, Roosevelt died, and Harry Truman became president. On November 19, 1945, a revised Wagner-Murray-Dingell was reintroduced in Congress, and Truman was behind the effort. Public opinion polls at the time indicated support for some form of national healthcare. A Gallup poll had shown 59 percent support, and a Fortune Magazine poll tallied 74% of people in favor of national healthcare.
Hearings were held in Congress, but the American Medical Association, the National Physicians' Committee for the Extension of Medical Service, the American Hospital Association, the American Dental Association, and the Chamber of Commerce opposed the legislation. These groups heavily lobbied against the bill. They argued that the bill was a move toward socialism, and it would limit healthcare choices.
The sponsors of the bill defended it. In the Journal of the American Medical Association, Sen. Robert F. Wagner stated: “There is absolutely no intention on the part of the authors to ‘socialize’ medicine, nor does the bill do so. We are opposed to socialized medicine or to state medicine. The health insurance provisions of the bill are intended simply to provide a method of paying medical costs in advance and in small convenient amount.”
Despite strong public support, Congress had other ideas. In 1946, Republicans gained control of Congress, and they influenced the debate on the bill. Several Republicans introduced a more limited version of a healthcare bill, but the sponsors of the Wagner-Murray-Dingell bill opposed it.
Truman pressed the issue in 1948. He won the presidency that year and Democrats retook control of Congress. Truman made healthcare a major part of his platform in 1948, and national healthcare was at the forefront when Congress reconvened in 1949.
The Truman Administration issued a report on the nation’s healthcare system. The author, Oscar Ewing, wrote in “The Nation’s Health, A Ten Year Program: A report to the President” that “at a minimum only about half of the families in the United States can afford even a moderately comprehensive health insurance plan on a voluntary basis.”
The medical community saw the bill as a threat, and the American Medical Association encouraged doctors and other healthcare professionals to publicly speak out against the bill. At a Lion’s Club meeting in Tennessee a doctor proclaimed: “This Republic was fought and founded on the principles of human freedom and dignity of the individual. The fundamental freedoms of Democracy such as ours, are the freedom of speech, the freedom to choose our rulers, the freedom to choose the God whom we shall worship, and the right to choose the doctor who shall invade the sacred precincts of our homes when the lives of our loved ones are in jeopardy.”
Public opinion polls began to split on support for a national healthcare program, and Truman never presented a clear direction for the healthcare debate. He supported the idea of national healthcare policy, but he was reluctant to raise taxes. Several bills once again stalled in committee, and that effectively ended a chapter in the adoption of Medicare.
Kennedy Makes an Attempt
President Kennedy had an interest in healthcare from his early days as a political leader, and he brought that interest to the presidency. Soon after taking office, he requested that a Medicare bill be introduced into Congress. Members of Congress began crafting a bill, but by 1962 the process was bogged down. No significant legislation had advanced.
Kennedy saw the need to jumpstart the process and used his power of the bully pulpit. With the help of the AFL-CIO, 33 rallies were held across the country. The events were highlighted by a speech Kennedy gave at Madison Square Garden. Kennedy’s speech was nationally televised on all three major networks. The idea was to put public pressure on Congress to adopt a Medicare bill.
Kennedy began his speech by painting a picture of a man who worked hard all his life and retired. He lived well between Social Security and a pension. Soon his wife got sick, and he was unable to support the family with his fixed income. The bill ate into the family’s savings, and before long they had financial difficulties.
“This is not a rare case,” Kennedy said during the speech. “I talked to a member of the Congress from my own state a week ago, who told me he was going to send his daughter away to school but because his father had been sick for two years, he could not do it. And Congressmen are paid $22,500 a year--and that's more than most people get.”
The American Medical Association opposed any form of Medicare. It had seen the Medicare fight coming and had raised dues prior to the election. The organization warned its members about the harm that Medicare would do to the medical industry.
Kennedy addressed the concerns of the American Medical Association head on. He argued that people should have their basic needs met in retirement. They worked hard to support the country. Kennedy said the legislation would not impact doctors, because all medical bills would be paid. He said the same arguments were made when other presidents tried to pass similar legislation.
“The problem, however, is more complicated, because they do not comprehend what we are trying to do,” Kennedy said. “We do not cover doctors' bills here. We do not affect the freedom of choice. You can go to any doctor you want. The doctor and you work out your arrangements with him.”
Kennedy said adoption of a Medicare bill “is long overdue.” The legislation serves the public’s interest and will benefit society. People would contribute to the program during their working years and receive benefits in retirement.
Kennedy concluded: "I refuse to see this country, and all of us, shrink from these struggles which are our responsibility in our time. Because what we are now talking about, in our children's day will seem to be the ordinary business of government."
The American Medical Association had purchased 30 minutes of television time right after Kennedy’s speech was complete. The organization said the cost of government-funded healthcare was too expensive and argued that the national treasury would be “looted” if the legislation passed.
Many members of Congress did not support Kennedy’s approach. They wanted to see negotiations take place in the back rooms of Congress and did not want to the debate to be in the forefront of the public.
"Kennedy understandably wanted to take his case to the people, but in this particular instance that approach didn't work." said Larry O'Brien, a close aide to Kennedy.
In one last attempt to get Medicare passed, Kennedy and his supporters in Congress tried to get Medicare legislation attached to a welfare bill. But they were outmaneuvered. The amendment was never attached to the bill, and Kennedy failed in his attempt.
Johnson Takes It Across the Finish Line
Johnson became president in 1963 after Kennedy was assassinated. Johnson took the mantle of Medicare and pushed for its adoption. The Ways and Means Committee had suspended debate on a Medicare bill after the president’s assassination, but they resumed debate in early 1964.
On Jan. 8, Johnson spoke to Congress during his State of the Union address. He urged Congress to pass a healthcare program for seniors and addressed the needs of the poor and disadvantaged.
“We must provide hospital insurance for our older citizens financed by every worker and his employer under Social Security, contributing no more than $1 a month during the employee's working career to protect him in his old age in a dignified manner without cost to the Treasury, against the devastating hardship of prolonged or repeated illness,” he said.
Congress could not pass any legislation. Both chambers passed versions of a bill, but the conference committee failed to hammer out the differences. No compromise was reached, and the effort failed.
Then came the Democrats’ landslide victory in the 1964 election. Johnson easily defeated Barry Goldwater, and the Democrats held 290 seats in the House and 68 seats in the Senate, a super majority. Medicare had been a major issue during the election, and during the campaign, Johnson told audiences that Medicare “will be on the top of my list” of proposals. The party had a mandate.
The King-Anderson bill, sponsored by Rep. Cecil King in the House and Sen. Clinton Anderson in Senate, was reintroduced into the House and Senate. The bill provided hospital care for seniors and was devised as a program to alleviate the financial burden for people who were acutely ill. An increase in the payroll tax funded the care. The bill underwent modifications in the House Ways and Means Committee, but it passed the House in April. By July, a bill had passed the Senate and a conference committee was established.
The American Medical Association, however, pushed hard against the bill. The organization argued that the bill did nothing to protect the healthcare needs of seniors. Republicans had introduced an alternative to the King-Anderson bill that the AMA supported, but Democrats and the Johnson administration opposed the legislation.
Throughout July, leaders in the House and Senate crafted a compromise piece of legislation. On July 27 and 28, the House and Senate adopted the legislation, and Johnson signed the measure into law on July 30. The measure provided healthcare benefits for 19 million Americans over the age of 65, and created what today is known as Medicare Part A and Medicare Part B. Part A is hospital insurance, and was part of Johnson’s original plan. Part B covers doctor visits by voluntary participation of the medical office in the program. The American Medical Association has wanted a means test to receive benefits, but that was not included in the final legislation. The idea later became the basis for Medicaid.
Disability Benefits Added to Medicare
As the Medicare program was implemented in the 1960s, some policymakers looked at ways to expand the program. They believed that people with long-term disabilities or diseases should qualify for the program.
Debate began in the early 1970s on expanding Medicare, and was somewhat influenced by the Gottschalk report. A group of medical experts wrote the report, and they argued that a person with kidney failure who was receiving dialysis was disabled and should qualify for Medicare. The report was released in 1967 and was widely circulated in the medical community.
The House and Senate drafted Social Security amendment legislation in 1970, but the two bodies were never able to reconcile the differences. Senate leaders did not want to start a conference committee to hammer out the differences, and pressured the House to pass its version. That effort failed.
Congress debated similar legislation in 1971 and 1972. A major component of the bill was welfare reform and members could not agree on the language of reform. As well, the supplemental security income benefit program was developed in 1971. At the time, states had different programs to provide for the disabled and the blind, and the Nixon Administration wanted to see a program with universal standards and coverage that was managed by the Social Security Administration. Many members thought that people who were disabled should qualify for some form of government health insurance.
The House added provisions that expanded coverage to people with disabilities, but much debate occurred over the addition of kidney dialysis treatment. Some members argued that there was no reason to have special provisions for dialysis, but others argued that paying for a treatment meant a person could stay alive.
Neither the House nor the Senate versions in 1972 contained coverage for renal disease. But in September, the Senate passed an amendment that added dialysis and renal disease to the amendment. The amendment was quickly added to the bill and both chambers adopted the legislation a few days later. Nixon signed the law on Oct. 30, 1972.
Standardizing Medigap Plans
Throughout the 1970s, private companies sometimes took advantage of seniors who wanted Medigap supplement plans. These are plans that pay costs not covered under Medicare. Medicare recipients reported high-pressure sales tactics and deceptive advertising. At the same time, the benefits these plans offered were not standardized across the states.
“Older people are lonely, and the salesman who comes to the door is someone to talk to,” an activist told the Baltimore Sun. “This the salesman play on. They’ll go to great length to sell insurance. They’ll tell you to change policies or that you need more coverage when you don’t.”
By the early 1980s, Congress had decided to act. Congress began an investigation, and hearings were held. Numerous reports of abuse were cited, and members began discussing ways to address the problem. The so-called Baucus Amendment was inserted into to Social Security Disability Act of 1980. It established legislation that encouraged states to adopt certification standards for Medigap plans. The goal was to get plans to meet minimum standards of coverage and enact various disclosure standards.
In many ways it worked. Most states adopted the standards. The problem, however, was that the Baucus Amendment did not set any minimum standards and did not establish rules on what benefits could be offered beyond the minimum standards. Legislation in the Omnibus Budget Reconciliation Act of 1990 was designed to address these issues. It stated that Medigap policies must conform to one of 10 benefit packages. These packages are labeled A through J. Prior to the legislation, hundreds of different policy options were available across the country.
The reconciliation act simplified the Medigap market and made it easier for Medicare recipients to understand. It provided consumer choice and brought stability to the Medigap insurance market. Insurance companies were competing on a level playing field.
Creation of Part C
As Medicare grew, the federal government considered ways to share its risks with private companies. The federal government began small tests in the 1970s and 1980s with Medicare and the private insurance market. They demonstrated potential savings from the private market. In 1985, Medicare moved these demonstration projects into the national market. That meant all Medicare recipients could purchase a private plan to manage their Medicare.
By the 1990s, private insurance companies had been able to reduce costs through managed care plans (HMOs), and the federal government sought to reform the way it interacted with private plans. Only about 5% of Medicare recipients enrolled in a private plan in the early days, but that number had grown to 14% by 1997. Members of Congress began researching a system to expand the use of private plans.
Congress passed the Balanced Budget Act of 1997, thus creating Medicare Part C. It completely changed the Medicare market. With the adoption of the act, the private market created preferred-provider organizations (PPOs) and provider-sponsored organization (PSO) plans, trying to replicate the HMO model. The idea was to keep Medicare recipients within a certain network and thus limit expenses.
Medicare Part C brought more options to Medicare recipients, and that created some challenges. Receipts now had to weigh the risk and rewards of different plans.
“Medicare beneficiaries are going to have to become more informed consumers,” a healthcare advocacy representative said at the time. “They are going to need to get considerably more advice than before to understand their choices and be smart about making good selections.”
Medicare Part D
From the outset, a gap in Medicare’s prescription drug benefit existed, and federal leaders had been unable to craft a solution. Originally, Medicare covered prescription drugs administered by a doctor, but it did not covered self-administered drugs. Throughout the 1990s, specific pieces of legislation were adopted that added particular drugs to Medicare, but no comprehensive prescription drug legislation was adopted.
By 1999, 17 percent of Medicare enrollees were spending $5,000 or more on prescription drugs. That was placing a burden on Medicare recipients, as more than half of prescription drug expenses were out-of-pocket. At the same time, Medicare was faced with growing prescription drug costs. A report by the Centers for Medicare & Medicaid Services found that Medicare was paying as much as 10 times as much for medication than the advertised price, because the agency was given no power to regulate prices.
“It is clear that Medicare's payment system for those covered drugs, based on average wholesale price, is seriously flawed,” said Thomas Scully, administrator of the Centers for Medicare & Medicaid Services, during congressional testimony.
President Bill Clinton proposed the idea of a comprehensive prescription drug plan within Medicare in 1999. Clinton had been pushing overall healthcare legislation early in his presidency, but the plan had failed shortly before he ran for a second term in 1996. In 1998, House Speaker Newt Gingrich and the Republicans took control of the House. Clinton saw the opportunity to craft bi-partisan Medicare legislation and increase prescription drug benefits. He brought the issue up at his State of the Union Address in 1999.
“If we work together, we can secure Medicare for the next two decades and cover the greatest growing need of seniors -- affordable prescription drugs,” Clinton said to a packed Capitol Hill.
The plan set off a huge debate in Congress, because drug makers were concerned about caps being set on drug prices. The pharmaceutical industry began an intensive lobbying effort and launched a national ad campaign. In the end, Clinton’s plan called for each Medicare beneficiary to receive $2,500 a year in federal money to help buy prescription drugs. Plans would start at $24 per month, but the legislation placed no limits on drug prices.
Nothing ever passed. Gingrich and the President never worked well together, and congressional leaders could never agree on a Medicare reform package.
"Consensus is not there on some of the issues, such as how we do prescription drugs," a congressional aide said at the time.
Bush Tackles Medicare Prescription Drug Reform
Medicare had been a prominent issue in the race between Bush and former Vice President Al Gore in 2000. Both Gore and Bush presented Medicare reform proposals during the campaign. The 9/11 attacks and the economic downturn that occurred afterwards delayed any discussions on Medicare reform until 2003.
After the 2002 election, Republicans controlled the White House, Senate, and House of Representatives. In early 2003, Bush released the “Framework to Modernize and Improve Medicare.” The document was a guideline, and described a plan that provided low-income beneficiaries with a $600 credit toward their drug expenses. It also required Medicare recipients to move to a private plan.
Republican House Speaker Dennis Hastert introduced the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 in June, and that started a heated debate in Congress. The government had been running a surplus, but the economic downturn and Bush’s tax cut had created a deficit. Nobody knew how the plan’s costs would be covered.
Congress rejected the idea of forcing Medicare recipients into private plans, but kept the administration’s credit for low-income individuals. Members noted that many people enjoyed staying within the government plan, and they didn’t want to mandate where people got coverage.
Most Democrats rejected the legislation, but the House was able to muster the votes in a 216-215 vote. Many conservatives were reluctant to add a new multi-billion entitlement program, but several switched their vote at the last minute. Prior to the vote, AARP had come out in support, providing some cover for wavering Republicans.
The Senate quickly followed, and easily passed the legislation. Bush signed the bill and it created a standalone prescription drug program. People could keep traditional government Medicare, but still purchase a prescription drug plan. It was something different for the government and the private insurance industry.
It also left a significant gap in benefits for high-cost drugs, often called the “donut hole.” The plan created a gap between initial prescription drug benefits and catastrophic coverage. When Medicare recipients are in the “donut hole,” they can pay more for prescription drugs.
Affordable Care Act
The election of President Obama in 2008 and Democrats retaking control of the House and Senate brought renewed debate about healthcare reform. Obama wanted comprehensive healthcare coverage for all Americans. He made healthcare reform a major part of his platform during the campaign, and any discussion about healthcare reform had to include Medicare.
Congress had to find a way to control escalating Medicare costs, and some members of Congress began talking about extending Medicare to all Americans. Like all major healthcare legislation, the debate was filled with high political drama.
Democrats from the outset expressed no interest in seeking input from Republicans. They had control of all branches of government and wanted to set the agenda. At the outset, however, the debate took place against the backdrop of the Great Recession. The federal deficit was approaching $1 trillion, and millions of Americans were out of work.
The Obama administration also learned from past reform efforts and pressed forward even after Democratic Sen. Ted Kennedy died, and Republican Scott Brown won a special election to replace him.
Obama started the debate shortly after taking office with his first State of the Union Address. He acknowledged the challenges healthcare reform faced throughout history, but said it was the responsibility of Congress to ensure healthcare for the American people,” Obama said. “It has now been nearly a century since Theodore Roosevelt first called for health care reform. And ever since, nearly every President and Congress, whether Democrat or Republican, has attempted to meet this challenge in some way. A bill for comprehensive health reform was first introduced by John Dingell Sr. in 1943. Sixty-five years later, his son continues to introduce that same bill at the beginning of each session. Our collective failure to meet this challenge – year after year, decade after decade – has led us to a breaking point.”
Obama realized that Medicare recipients were concerned about healthcare reform, and he said: “nothing in our plan requires you to change what you have.” Congressional Democrats began marking up a bill throughout 2009, much to the consternation of Republicans. Republicans were concerned about healthcare in the United States becoming socialized. In August, Kennedy died. Throughout his career, he had pushed for healthcare reform, and tried to work with President Nixon on a comprehensive healthcare legislation. Political pundits assumed Attorney General Martha Coakley would replace Kennedy, but in early 2010, Scott Brown defeated Coakley, breaking the Democrat’s filibuster-proof majority in the Senate.
Brown had centered his campaign on opposing healthcare reform. The House had passed a version of healthcare reform in 2009, and the Senate had passed its version on Christmas Eve. Democrats assumed a compromise bill would be hashed out in 2010. Brown’s election changed that. Democrats decided to send the Senate version back to the House rather than risking another vote in the Senate. President Obama signed the Affordable Care Act in March.
The legislation greatly reformed Medicare and provided increased preventative care benefits. Certain services were completely covered for Medicare beneficiaries like Diabetes type 2 screenings, annual visits and certain colorectal cancer screenings. The Affordable Care Act also attempted to fix problems with the “donut hole” in Medicare Part D. It reduced the coverage gap through government subsidies and passed some of the costs on to drug manufacturers.
Medicare beneficiaries met the healthcare insurance coverage mandate of the Affordable Care Act if they were enrolled in Medicare Part A and B, but the law also instituted reforms aimed at reduce the government’s Medicare costs. It implemented new reforms to limit waste, fraud and abuse. In the end, the reforms were expected to decrease Medicare costs by $575 billion over the next 10 years.