Medicare’s history: Key takeaways
- President Harry S Truman called for the creation of a national health insurance fund in 1945.
- President Lyndon B. Johnson signed Medicare into law in 1965.
- As of 2021, nearly 63.8 million Americans had coverage through Medicare.
- Medicare spending accounts for 21% of total health care spending in the U.S.
- Medicare per-capita spending grew at a slower pace between 2010 and 2017.
Discussion about a national health insurance system for Americans goes all the way back to the days of President Teddy Roosevelt, whose platform included health insurance when he ran for president in 1912. But the idea for a national health plan didn’t gain steam until it was pushed by U.S. President Harry S Truman.
Although Truman fought to get a bill passed during his term, he was unsuccessful and it was another 20 years before some form of national health insurance – Medicare for Americans 65 and older, rather than earlier proposals to cover qualifying Americans of all ages – would become a reality.
President John F. Kennedy made his own unsuccessful push for a national health care program for seniors after a national study showed that 56 percent of Americans over the age of 65 were not covered by health insurance. But it wasn’t until after 1966 – after legislation was signed by President Lyndon B Johnson in 1965 – that Americans started receiving Medicare health coverage when Medicare’s hospital and medical insurance benefits first took effect. Harry Truman and his wife, Bess, were the first two Medicare beneficiaries.
By August 2021, there were nearly 63.8 million people receiving health coverage through Medicare. Medicare spending reached $926 billion in 2020, and accounts for about 21% of total national health spending in 2019.
Medicare spending projections fluctuate with time, but as of 2021, the Medicare Part A trust fund was expected to be depleted by 2026. (Medicare will continue to exist, but claims will have to be covered by payroll taxes, which won’t be sufficient to fully cover all Part A claims.)
But Medicare per capita spending has been growing at a much slower pace in recent years, averaging 1.5 percent between 2010 and 2017, as opposed to 7.3 percent between 2000 and 2007. Per capita spending is projected to grow at a faster rate over the coming decade, but not as fast as it did in the first decade of the 21st century.
A brief look at Medicare milestones
- On July 30, 1965 President Lyndon B. Johnson made Medicare law by signing H.R. 6675 in Independence, Missouri. Former President Truman was issued the very first Medicare card during the ceremony. In 1965, the budget for Medicare was around $10 billion.
- In 1966, Medicare’s coverage took effect, as Americans age 65 and older were enrolled in Part A and millions of other seniors signed up for Part B. Nineteen million individuals signed up for Medicare during its first year.
- In 1972, President Richard M. Nixon signed into the law the first major change to Medicare. The legislation expanded coverage to include individuals under the age of 65 with long-term disabilities and individuals with end-stage renal disease (ERSD). People with disabilities have to wait for Medicare coverage, but Americans with ESRD can get coverage as early as three months after they begin regular hospital dialysis treatments – or immediately if they go through a home-dialysis training program and begin doing in-home dialysis. This has served as a lifeline for Americans with kidney failure – a devastating and extremely expensive disease.
- When Congress passed the Omnibus Reconciliation Act of 1980, it expanded home health services. The bill also brought Medigap – or Medicare supplement insurance – under federal oversight.
- In 1982, hospice services for the terminally ill were added to a growing list of Medicare benefits.
- In 1988, Congress passed the Medicare Catastrophic Coverage Act, adding a true limit to the Medicare’s total out-of-pocket expenses for Part A and Part B, along with a limited prescription drug benefit. Most of the Catastrophic Care law was repealed less than a year later after opposition from senior groups over the program’s higher premiums. (To this day, there continues to be no cap on out-of-pocket costs for Medicare A and B.)
- The new law also required states to “buy-in” to the Medicare system by using Medicaid funds to cover Medicare premiums and cost-sharing for impoverished Medicare beneficiaries. These individuals are known as Qualified Medicare Beneficiaries (QMB). In 2016, there were 7.5 million Medicare beneficiaries who were QMBs, and Medicaid funding was being used to cover their Medicare premiums and cost-sharing. To be considered a QMB, you have to be eligible for Medicare and have income that doesn’t exceed 100 percent of the federal poverty level.
- New legislation required state Medicaid programs to cover premiums of the new Specified Low-Income Medicare Beneficiary (SLMB) eligibility group – those eligible for Medicare with incomes between 100 and 120 percent of the federal poverty level.
- Congress also passed the Qualified Individual (QI) programs and the remaining program (of two originally enacted) requires Medicaid to pay premiums (through a federal grant) for Part B members with incomes between 120 and 135 percent of poverty. The annual funding for QI is limited and once exhausted, beneficiaries are not entitled to receive the benefit – though states can provide it on their own dime. Unlike QMB and SLMB, the QI program must be reauthorized by Congress every few years, and states generally do not take part in financing it.
- Other legislation gave those eligible for Medicare coverage more options on the private market through Medicare Part C – Medicare Advantage (MA). Originally known as Medicare HMOs or “Medicare+Choice” (among other names), the new private options ultimately offered add-on benefits such as prescription drug coverage for new enrollees. The Affordable Care Act requires more accountability from these plans, including tying the insurers’ reimbursements to the star rating system – a measure of several different ways the plans are required to provide quality care.
- Americans younger than age 65 with amyotrophic lateral sclerosis (ALS) are allowed to enroll in Medicare without a waiting period if approved for Social Security Disability Insurance (SSDI) income. (Most SSDI recipients have a 24-month waiting period for Medicare from when their disability cash benefits start.)
- President George W. Bush signed into law the Medicare Prescription Drug Improvement and Modernization Act of 2003, adding an optional prescription drug benefit known as Part D, which is provided only by private insurers. Until this time, about 25 percent of those receiving Medicare coverage did not have a prescription drug plan. Medicare Part D plans became available as of 2006; Part D can be purchased as a stand-alone plan, but it can also be integrated with Medicare Advantage plans (90 percent of Medicare Advantage plans include Part D coverage as of 2019). As of early 2019, more than 45 million Medicare beneficiaries —about three-quarters of the Medicare population — had Medicare Part D coverage (Medicare beneficiaries can also obtain prescription coverage from an employer or retiree program, or from Medicaid if they’re eligible for both Medicare and Medicaid).
- The Patient Protection and Affordable Care Act of 2010 includes a long list of reform provisions intended to contain Medicare costs while increasing revenue, improving and streamlining its delivery systems, and even increasing services to the program.
2015 through 2021
- As of August 2021, there were nearly 63.8 million people enrolled in Medicare. Enrollment had stood at fewer than 50 million people as of 2014, but has been rapidly growing as Baby Boomers turn 65.
- In early 2015 after years of trying to accomplish reforms, Congress passed the Medicare and CHIP Reauthorization Act (MACRA), repealing a 1990s formula that required an annual “doc fix” from Congress to avoid major cuts to doctor’s payments under Medicare Part B. MACRA served as a catalyst through 2016 and beyond for CMS to push changes to how Medicare pays doctors for care – moving to paying for more value and quality over just how many services doctors provide Medicare beneficiaries.
- MACRA also extended the QI program for certain low-income members’ Part B premium payments (among other extensions of Medicaid and CHIP – related programs).
- Premiums for Part B have increased in recent years, after declining in 2012 and then remaining steady for the next three years. When Medicare Part B debuted, enrollees’ premiums were set at $3 per month. By the early 2000s, premiums had reached about $50/month, and they now stand at $148.50/month as of 2021. For 2022, they’re projected to be $158.50/month.
- The donut hole has closed, as a result of the ACA. It was fully eliminated as of 2020 (it closed one year early – in 2019 – for brand-name drugs, but generic drugs still cost more while enrollees were in the donut hole in 2019). Enrollees with standard Part D plans now pay 25% of the cost of their drugs until they reach the catastrophic coverage limit (as opposed to paying the full cost of the drugs while in the donut hole, which had been the case before the ACA started to close the donut hole in 2010/2011).
- In 2019, CMS began allowing Medicare Advantage plans to offer more supplemental benefits, by relaxing the definition of “primarily health-related.” And in 2020, CMS began allowing Medicare Advantage plans to offer additional supplemental benefits to chronically ill enrollees, in an effort to address social determinants of health. Read more about these changes here.
- The COVID pandemic, which began in 2020, resulted in numerous regulatory changes for the Medicare program. Most were introduced on a temporary and emergency basis, avoiding the lengthy notice-and-comment process that new rulemaking normally must follow. But some, including increased access to telehealth, are likely to remain in place after the pandemic is over. The Commonwealth Fund has a good overview of the measures that have been put in place to protect Medicare beneficiaries and providers during the COVID pandemic.
- Congress is considering the Build Back Better Act in the fall of 2021. The legislation calls for dental, vision, and hearing coverage to be added to Medicare, although it’s unclear which provisions of the bill will ultimately be approved by lawmakers.
For more information, view the Kaiser Family Foundation’s comprehensive Medicare timeline.