In , former President Lyndon Johnson called on Congress to create the program that is now Medicare. The program was signed into law in In recognition of his dedication to a national healthcare plan during his own term, former President Truman and his wife, Bess, were the first people to receive Medicare cards after it was signed it into law.
Parts A and B looked pretty similar to original Medicare as you may know it, although the costs have changed over time.
In , former President Richard Nixon expanded Medicare coverage to include people with disabilities who receive Social Security Disability Insurance. He also extended immediate coverage to people diagnosed with end stage renal disease ESRD. This expansion is still in effect today. Medigap , also known as Medicare supplement insurance, helps you pay the out-of-pocket costs of original Medicare, like copays and deductibles.
These plans are sold by private insurance companies. This coverage was added in Before , everyone paid the same amount for Medicare, regardless of income.
Today people with higher incomes might pay more, while people with lower incomes might pay less. This change began in with the creation of programs to help lower-income enrollees pay for their Medicare premiums and other costs.
Additional programs to help people pay for their Medicare coverage were added through the s. Some examples of these programs include the Extra Help program , which helps those with low income pay for their medications, and four different Medicare savings programs to help pay for premiums and other Medicare expenses. In , coverage under each of these plans became standardized.
Medicare Part C was introduced through the Balanced Budget Act of , with coverage beginning in Medicare Part C plans, today sometimes called Medicare Advantage plans, are offered by private insurance companies that contract with Medicare. Medicare Advantage plans work with a network of providers.
After more than a decade of debate on health insurance for the elderly, when Johnson was elected President in , he asked Congress to give Medicare top priority. The earlier efforts towards national health reform finally resulted in coverage for the elderly Medicare and the poor Medicaid , with advocates hoping that coverage would be expanded to other population groups at a later date.
In honor of President Truman's leadership, President Johnson flew to the Truman Library in Independence, Missouri to sign the bill into law on July 30, and presented the first two Medicare cards to former President Truman and Mrs.
I am one of your old retired teachers that has been forgotten. I am 80 years old and for 10 years I have been living on a bare nothing, two meals a day, one egg, a soup, because I want to be independent. I am of Scotch ancestry, my father fought in the Civil War to the end of the war, therefore, I have it in my blood to be independent and my dignity would not let me go down and be on welfare. When Medicare was enacted in , America was in many ways a different place than it is today.
In , the elderly were the group most likely to be living in poverty—nearly one in three were poor Figure 1. Today, the poverty rate for the elderly is similar to that of the age group —about 1 in 10 are poor. Children are now the group most likely to be living in poverty. Before a hospital could be certified for Medicare, it had to do more than have a plan to end discrimination: It had to demonstrate nondiscrimination. Segregation denied minorities access to the same health care as white persons.
With the passage of the Civil Rights Act recipients of Federal funds are prohibited from discrimination based on race in and Medicare the source of the Federal funds in , minorities were able to receive health care in the same hospitals and clinics used by white persons. More than 1, Medicare and Public Health Service staff worked with hospitals to make sure they understood they would have to serve all Americans when they signed up for the federally funded Medicare program.
Black hospitalization rates were about 70 percent of white hospitalization rates in the program's first few years. Over the next several years, hospitalization rates rose to comparable levels. In , minorities age 75 or over averaged 4. While Medicare and Medicaid have contributed to considerable progress in the health of minorities, there is still room for improvement as disparities in health status, utilization, and outcomes persist today Gornick, About one-half of America's seniors did not have hospital insurance prior to Medicare.
By contrast, 75 percent of adults under age 65 had hospital insurance, primarily through their employer. More than one in four elderly were estimated to go without medical care due to cost concerns Harris, b. Medicare, along with other programs, notably Social Security, and a strong economy, have greatly improved the ability of the elderly and the disabled to live without these worries.
Medicare covers nearly all of the elderly about 97 percent , making them the population group most likely to have health insurance coverage. Today, the groups least likely to have health insurance coverage are young people, Hispanics, and low-wage workers. We proposed assuring the same level of care for the elderly as was then enjoyed by paying and insured patients; otherwise, we did not intend to disrupt the status quo.
Had we advocated anything else, it never would have passed. Medicare's benefit package, administration, and payment methods were modeled on the private sector insurance plans prevalent at the time, such as Blue Cross and Blue Shield plans and Aetna's plan for Federal employees the model for Medicare Part B Ball, Hospitals were allowed to nominate an intermediary a private insurance company to do the actual work of bill payment and to be the contact point with the hospitals.
Payment methods for facilities hospitals, nursing home, and home health were based on reasonable costs. Payments for physicians and other suppliers were based on the lower of the area's prevailing or their own customary or actual charge. These payment methods were designed to make sure Medicare beneficiaries would have access to care on the same terms as privately insured patients. When Medicare began, there was concern, which did not turn out to be the case, that demand for services would strain the capacity of the health care system Gornick, Advantages of this approach included: faster implementation—and with 11 months between enactment and implementation that was no small consideration—and political acceptability: The program looked familiar to providers, insurance companies who would administer the new program, and beneficiaries.
Disadvantages of this approach included: payment methods that turned out to be inflationary, prompting considerable legislative activity in subsequent years to control escalating costs; and using private insurance companies to administer the program without allowing for their selection on a competitive basis, which hampered control of the program.
Medicare's benefit package was not designed for some of the specific needs of the elderly. For instance, today, nearly one-third have hearing impairments, nearly 20 percent have visual impairments, and nearly one-third have no natural teeth National Center for Health Statistics, Yet, hearing aids, eyeglasses, dentures, outpatient prescription drugs, and long term nursing home care were not generally covered by private insurance and so were not covered by Medicare.
There was no limit on beneficiary liability, leaving beneficiaries vulnerable to catastrophic expenses. Nor was there provision in the statute for what are now known as preventive services.
Only medical care that was necessary for the treatment of an injury or an illness was covered. After receiving SSDI, the disabled have a lengthy waiting period, 24 months, before Medicare coverage begins. People with ESRD needed very expensive dialysis services to stay alive; concerns about their access to such life-saving services motivated the expansion of Medicare coverage. ESRD remains the only disease-specific group eligible for Medicare coverage; although others have been proposed, notably human immunodeficiency virus acquired immunodeficiency syndrome, none has been enacted.
When Medicare was enacted, the original statute comprised 58 pages of text. Over the subsequent 35 years, the statute has grown nearly tenfold to more than pages. Highlights by type of reform include:. Eligibility —Significant expansion of eligibility occurred once, when the disabled and those with ESRD were included in Public-sector employees were required to pay Medicare payroll taxes in the early s. Part B premiums were initially set at one-half of the program's cost, but due to program spending growing faster than Social Security benefit increases, premiums were limited to the growth in the Social Security cost of living adjustment and are now set by statute at 25 percent of program spending.
Payment Policy —Most of the major legislative activity in the s and s focused on payment policy, in an effort to control rapidly escalating program spending. Hospitals and other Part A providers were moved from cost-based payment to prospective payment systems PPSs. Physicians and many other Part B suppliers were moved from charge-based payment to fee schedules.
Managed care plans' risk-based payment was modified at the end of the s to reduce the geographic variation in payment amounts and to adjust for the relative health status of their patients. Benefits —The benefit package was substantially updated in the Medicare Catastrophic Coverage Act MCCA to include coverage of outpatient prescription drugs and other changes. It was repealed in after higher income elderly protested a new tax to partially finance the new benefits.
As the importance of preventive benefits became clear, many have been added by the Congress on an incremental basis. Other changes in covered services have included the addition of hospice care, improved coverage for mental health services, and expanded home health benefits. July 1, —Medicare benefits began for more than 19 million individuals enrolled in the program. Hospice benefits for the terminally ill were covered.
Medicare was made secondary payer for aged workers and their spouses. Medicare utilization and quality-control peer review organizations were established. Rate-of-increase limits were placed on inpatient hospital services. The PPS was subsequently adopted by other payers and other countries.
In , as the battle over Medicare heated up, Congress established the Kerr-Mills program that initiated Federal grants to the States to pay for medical services for the medically indigent elderly Berkowitz, ; Corning, After the death of Kerr at the beginning of , the Kerr-Mills program remained an item of interest to Mills. Stalling for time in the Medicare debate, Mills argued that the Kerr-Mills approach, with its emphasis on the States and benefits for the poor, should be given time to develop to determine if it was adequate to handle the problem of health insurance for the elderly.
The program started slowly. By only 30 States had initiated Kerr-Mills programs and the program was well-developed in only a few States Berkowitz, Mills responded to this slow start by pushing for the program's expansion. At the beginning of , he wanted to create provisions that would make Kerr-Mills more acceptable to the States perhaps creating financial incentives that would encourage States to start the Kerr-Mills programs , and that would fill in the gaps in medical coverage for people on welfare perhaps extending Kerr-Mills from the elderly to other welfare beneficiaries.
They wanted, in particular, to make sure that children on welfare, who, in fact, made up the single largest category of welfare beneficiaries, had access to health care. Hence, they developed what they called the Child Health and Medical Assistance Act for consideration in the administration's legislative program. In creating what became Medicaid, he managed to incorporate elements of proposal that had been pushed by the AMA, known as Eldercare, into the large omnibus legislation.
The administration acquiesced in this request, but thought of a program like Eldercare as a supplement to Medicare rather than as a substitute for it. Medicaid made it into the law as a supplement, but one that would play a key role in the future of health care finance.
Medicare and Medicaid were the primary, but by no means only, ways in which the Federal Government became involved in the field of health care finance. Ever since universal health care had become a significant social policy ideal in the twenties, reformers had been interested in what Derickson has called the supply-side solution to the problem of access to medical care.
This solution concentrated on insuring that an adequate number of doctors and hospitals were available to treat and serve patients. Beginning in the forties, the Federal Government made significant investments in what might be described as the medical infrastructure. These included grants to the States for hospital construction in a program, known as the Hill-Burton program, started in and expanded many times after that, and subsidies for medical research and medical education.
Unlike national health insurance, Federal grants for these purposes attracted little political opposition, as increasing congressional appropriations for the National Institutes of Health in the forties, fifties, and sixties indicated Strickland, They were a consensus item in health policy, supported by both the proponents and opponents of Medicare.
At the same time that Medicare was passed in , the Johnson administration also was interested in a program designed to counter the risks of heart disease, cancer, and stroke. Variations of each of these proposals became law during the same session that Congress passed Medicare.
One might argue that what led up to Medicare is irrelevant and that what matters is the shape of the final Medicare law and the ways it has been subsequently amended to reflect the predilections of policymakers from the era of Richard Nixon to the era of George W. After the passage of Medicare and Medicaid in , controversy over national health insurance quickly yielded to consensus Oberlander, ; Feder, Items that might have been controversial, such as whether or not the elderly would elect the voluntary Part B coverage for Medical bills and accept the resulting deductions from their Social Security checks, proved not to be.
Instead, the Social Security Administration conducted a media blitz and sold the public on the idea that Part B was a good deal. These efforts were so successful that the voluntary feature of the program became almost insignificant, since nearly everyone elected to receive Part B coverage Berkowitz, As for the doctors who had worried about Federal interference in the private practice of medicine, they discovered, particularly in the years between and that Federal administrators honored their intention not to interfere.
To be sure, the Federal administrators made demands of private hospitals and private medical practitioners, as in the insistence that any hospital that received funds from Medicare should be racially integrated. But the law tempered such demands with a very permissive method of cost reimbursement that allowed hospitals and doctors to capture nearly all of their costs in treating elderly patients Feder, If anything, Medicare and Medicaid made doctors richer and preserved their autonomy, rather than making doctors' wards of the State.
Partly as a result of the money that Medicare pumped into the system, doctors became solid members of the upper middle class. Gone forever were the depression days in which one third of the physicians in the U. Despite this initial lack of political conflict in the Medicare and Medicaid Programs, tension ultimately arose that recapitulated some of the themes of the historical transformation of health insurance in the twentieth century and the political debate over Medicare in the sixties.
Medicaid, for example, emerged in as a program aimed at the poor and administered by the States. In these respects, it resembled the concept of sickness insurance that had been prevalent in the progressive era, although it covered the costs of health care rather than providing temporary disability insurance and it did not reach the entire working class, just those members of it who happened to qualify for welfare.
Over the past 40 years and in particular since the s, Medicaid has expanded beyond its roots as a welfare program to cover more people in need of medical services. In , Congress widened the scope of the program to cover pregnant women and children living in families with incomes nearly percent above the Federal poverty level Morgan, As a result of such actions, a State program endures, even thrives, as a major component of the U.
Suggestions that the Federal Government take over the Medicaid Program arise periodically, as in when President Reagan suggested that the States take over the Aid to Families with Dependent Children Program and that the Federal Government pick up all the costs of Medicaid Berkowitz, However, none of these suggestions have moved beyond the proposal stage.
As for Medicare, it was modeled on health insurance practice that was current in in ways that respected the contribution that the private sector had made to health care delivery and finance.
No one in Congress seriously proposed that the Federal Government should get directly involved in the health care business by operating hospitals or drafting doctors into national service.
The program also reflected some of the wisdom of Falk et al. The doctor who treats a patient does not also have the right to certify him or her for disability benefits Berkowitz, Furthermore, Medicare was a national program, rather than a source of funds for State programs. Still, the story of Medicare over the past 40 years has been one of experimenting with elements of choice and of cost containment while trying to maintain the quality of care for the Nation's elderly.
State waivers, which permitted variations in practice from State-to-State, figured prominently in the development of Medicare in the seventies and eighties. The program's demonstration waiver made it possible for States to test the prospective payment system for hospitals that ultimately became a formal part of the program in Shirk, The prospective payment system itself reflected a major change from the Medicare cost-reimbursement model that prevailed in the program's early years.
Its creation reflected the fact that, despite the deference paid to private health practitioners in , the law became much more regulatory in its approach as time progressed.
Increasingly, the government wanted to reign in the costs of medical care, of which Medicare and Medicaid were prominent components, by providing financial incentives that encouraged effective, but less costly care.
Liberals worried that rising costs would crowd out the funds available for the expansion of the program to cover groups other than the elderly or to pay for new types of benefits such as prescription drugs or long-term care. Conservatives, who were opposed to the idea of government regulation, nonetheless saw the need to reign in costs. Hence, prospective payment in the form of diagnosis-related groups to cover the costs of treating Medicare patients in hospitals became a feature beginning in , and prospective payment for doctor fees soon followed in Oberlander, After the element of choice, which had been so important in the debate over Medicare between and , also resurfaced.
At first policy insiders were confident that, if there was ever to be a Medicare Part C, it would be an extension of the program so that it covered people in different age groups, such as children or people in their fifties Berkowitz, The events immediately following passage of Medicare appeared to confirm this expectation, as the expansion of the program to cover beneficiaries of social security disability insurance and people with end stage kidney disease in seemed to indicate.
Yet, a Part C that would be America's national health insurance program that assured all Americans' access to medical care continued to elude policymakers, even in periods, such as the early seventies, when the passage of such a program appeared, if not likely, then at least plausible Berkowitz, As matters turned out, Part C took a long time to arrive and when it did it was something completely different than what the creators of Social Security would have expected.
Explaining the new program to seniors, a financial journalist reflected the popular understanding of Part C's purpose. Hence choice, such as Javits and Lindsay might have favored, was once again in vogue. The decision to link public financing of medical care and private health care plans run by private companies was also a prominent feature of Medicare Part D. This feature of the Medicare law arrived in as part of the Medicare Prescription Drug, Improvement, and Modernization Act of It laid the groundwork for a prescription drug benefit for seniors and people with disabilities on Medicare, something that reformers had sought as early as As created in , the benefit featured a scheme that allowed Medicare beneficiaries to enroll in private plans that would contract with CMS to provide prescription drugs to patients.
Here was another feature that took a different form than most would have expected in , but that Javits and Lindsay would have found congenial Henry J. Many of its architects thought Medicare for the elderly was the first step toward eventually achieving health care coverage for all.
Part B coverage of physician and other outpatient services, however, is a critical part of the program with almost universal enrollment among traditional Medicare enrollees. As private health insurance evolved to a more managed-care approach with an integrated benefit design, including both hospital and physician services, the Medicare Plus Choice program was enacted in with the addition of Medicare Part C that allowed Medicare HMOs to participate.
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