This is the first of a four-part series looking back, and ahead, at Medicare as the 50th anniversary of its enactment approaches.
On July 30, 1965, an 81-year-old Missourian proudly accepted the nation's first Medicare card.
Former President Harry S. Truman was awarded this honor by his greatest admirer, President Lyndon B. Johnson. Johnson had been a young Texas congressman when Truman first proposed a national health insurance plan in 1945. Faced by implacable congressional opposition led by most Republicans and several conservative Democrats, national health insurance never had a chance and had disappeared ignominiously from national consideration even before Truman left office in 1952.
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Also see an with important events in Medicare’s history, and a reflection on what the program has meant to .
Now, 13 years later, Truman found himself able to thank Johnson for giving him the "highlight of his post-White House days."
The legislation President Johnson signed that day had traveled a long and winding path through the congresses of the 1950s and early 1960s. Even though most Republicans, as well as the American Medical Association, continued to oppose any federal government health program or add-ons to Social Security, Congress had enacted the so-called Kerr-Mills Act in 1960 enabling creation of state-run insurance programs for the elderly.
These became active in 39 states, but they came under criticism as inadequately protective of the elderly. Supporters of a fully national system said the country needed a program offering Americans older than 65 the same access and quality of care that was available to those with private insurance.
Why focus on the elderly and not, say, on children or the disabled for a program of this scope? , a longtime Social Security Administration leader and widely regarded as the father of Medicare, advocates of universal health insurance picked coverage for seniors as an initial step in a broader and longer-term effort.
"We all saw insurance for the elderly as a fallback position, which we advocated solely because it seemed to have the best chance politically," Ball recalled later. "The elderly were an appealing group to cover first, in part because they were so ill suited for coverage under voluntary private health insurance."
The American Medical Association also saw that this was the strategy and determined to oppose it. Said Edward Annis, MD, the AMA president who led the anti-Medicare fight in the early 1960s, He and others of like mind predicted Medicare would be a harbinger of "socialized medicine" or would, at least, engender a mountain of red tape and regulations that would bury the physician-older patient relationship irretrievably forever.
The forces led by the AMA enjoyed early political success, defeating the King-Anderson legislation enabling Medicare shortly before the assassination of President John F. Kennedy in November 1963. President Lyndon B. Johnson took up the cause immediately thereafter but with uncertain success until the 1964 presidential election crowned him "Landslide Lyndon." Robert Ball suggested that "if there had been no landslide victory for Lyndon Johnson in 1964, it is unlikely that Medicare could have mustered the necessary votes for enactment the following year."
A coalition of liberal Democrats and a majority of Republicans -- 70 Republicans voting "yes" to 68 "no" -- passed it in the House.
Even so, Medicare was never a political slam-dunk. Public opinion polls taken during the congressional debates showed
It had been pushed over the top by a coalition of labor union retirees, calling themselves the National Council of Senior Citizens, who gained the support of most Democrats (many newly elected) and some liberal Republicans. The legislative drive was guided by the wily and powerful chairman of the House Ways and Means Committee, Wilbur Mills (D-Ark.).
Although Medicare was initially to be a hospitalization coverage plan only, paid for by a payroll tax assessed on the nation's employees, it became clear to Mills and other legislative leaders that physician payments had to be included for the Medicare to be sufficiently comprehensive. Physician coverage, eventually to be called Medicare Part B, was quickly added. As a concession to congressional Republicans, Part B was modeled on an Aetna Insurance plan provided for federal workers under the Federal Employees Health Benefits Program. It would be financed by premiums and, to enhance its affordability for the elderly, supported by a federal subsidy from the general U.S. Treasury.
Once enacted, in a sequence of events similar to the early days of the Affordable Care Act's insurance exchange rollout in 2013, Medicare employed a battalion of 5,000 paid workers to explain the program to the elderly and sign them on. Within a matter of months some 19 million Americans, nearly a tenth of the U.S. population at the time, followed President Truman as qualified beneficiaries.
The earliest out-of-pocket costs: Part A deductible, $40; Part B premium, $3/month. (For a timetable showing how these amounts have grown over the years, see )
This dramatically expanded coverage was accompanied by a new relationship between the federal government and physicians that started amicably enough but became increasingly fraught.
The initial reimbursement mechanism was basically a pretty good deal. Part B was to pay physicians at their "customary, prevailing, and reasonable rates" -- with "reasonable" being the lowest of three charges: the physician's submitted charge for a particular service, the "customary" charge (the median of charges submitted by the physician for the same service the previous year), and the "prevailing" charge (the 75th percentile of "customary" charges for all physicians in the area the previous year). Not surprisingly, the "reasonable" charge was what Medicare actually paid but, in terms of physicians' overall charges, it was close to their normal fees.
It wasn't long, though, before the cost of fee-for-service Part B (and Part A as well) was escalating at twice the growth of the economy and taking up an ever-growing proportion of the gross domestic product. The early 1970s saw congressional concerns about this, leading to passage of a Medicare Economic Index, tying physician fee increases for the first time directly to their overall economic situation. Oversight groups were also created, including, among others, Professional Standards Review Organizations to ensure quality of services -- eventually to morph into Professional Review Organizations (1984), Quality Improvement Organizations (1997) and today's soon-to-be-created Practice Transformation Networks (2015 scheduled).
Another attempt to contain costs was the 1977 advent of the Health Care Financing Administration (HCFA, predecessor of the Centers for Medicare and Medicaid Services or CMS). HCFA was intended to integrate Medicare and Medicaid and get a handle on their costs.
Early results were mixed, though. Robert Derzon, HCFA's first administrator, wrote some 20 years later, "Most assuredly we fell short of ... expectations that the two programs could be totally unified at the management level. Yet quality assurance, program integrity, and research/policy were successfully consolidated.
Those "modest efforts" toward Medicare cost control and unsatisfying results led eventually to repeated physician pay freezes during the 1980s and then, in 1986, to creation of a Physician Payment Review Commission (PPRC), whose mission was to examine reimbursement policy and recommend future steps.
A subsequent Harvard University/American Medical Association study reviewed 200 common clinical procedural codes (CPTs) and proposed a formula for assigning them "relative values," aimed at enabling fair reimbursement within general economic limits. The AMA went on to establish a multi-specialty Resource Utilization Committee (RUC) to review relative values for all 7,000 CPTs and create a Resource-Based Relative Value Scale (RBRVS) to serve as the basis for Medicare reimbursement. The RUCs began their thrice-yearly meetings 1992.
But physician fees, and healthcare costs in general, continued to outpace economic growth, culminating in Congress's adoption, in 1997, of the now infamous sustainable growth rate (SGR) formula, set to begin in 2003 but never once applied. This set the stage for an annual congressional cliffhanger threatening ever-more ruinous physician pay cuts to pay for the previous year's "fix" -- which is playing out again this year even now.
Disenchantment with the SGR and the whole Medicare cost structure has now grown so strong that officials are now moving toward so-called alternative payment models (APMs), which would define and reward high-quality care and penalize anything less.
This latter-day history will be developed more fully in subsequent articles. But what of the Medicare program itself: has it fulfilled its purpose? Has it provided our vulnerable elderly population with good and equitable access to high-quality healthcare?
Looked at in those terms, Medicare does seem to have been a success. Some physicians have no problem acknowledging that.
"I remember when I first arrived at Johns Hopkins as a resident in 1966," Timothy J. Gardner, MD, Medical Director of the Center for Heart and Vascular Health at the Christiana Care Health System in Newark, Del., and long-time professional organization and academic leader, told 鶹ý.
"We had two patient categories: private patients and those subsidized in some form; the former received attending service and the latter resident service. With the advent of Medicare, it was ruled that every patient should have an attending, and facilities transformed from multi-patient wards to semi-private or three- or four-bed units. Quality and access improved quite quickly for many patients and this, in turn, led to the boom in hospital facilities and growth of high-technology we're experiencing today. Medicare led to a tremendous expansion of healthcare delivery in this country."
Peter Hollmann, MD, an American Geriatrics Society fellow and quality assessment leader, agreed, telling 鶹ý, "It's hard to overstate the benefits of Medicare to our country. We went from an era when the people most likely to need care were least able to access it to the reverse situation. And if Medicare did pay too much for some technologies or levels of specialty care, to give credit where it is due, the program helped sustain the growth of these."
Hollmann noted yet another benefit closer to home for participating physicians: "A friend of mine's father was a physician who took care of elderly patients and frequently didn't get paid. After Medicare started, he reported that the family income improved considerably."
On the other hand, Annis never conceded that Medicare had benefited anyone other than healthcare executives. The year before he died in 2009, he told an interviewer that, while life expectancy for seniors had risen 12 years since the law's passage, "
Richard Peck has been a writer and editor for healthcare publications since 1970 and, since 1982, edited geriatrics-related publications Geriatrics and Long-Term Living (formerly Nursing Homes Magazine). He recently published a long-term-care self-assist handbook, The Big Surprise, available at Amazon.com. He is married to Peggy Peck, 鶹ý Editor-in-Chief.
Medicare At 50 Series