Johnson Signs the Medicare and Medicaid Amendments

Date July 30, 1965

The Medicare and Medicaid amendments to the Social Security Act of 1935 instituted federally administered health insurance for retirees and increased federal involvement in financing health care for indigent Americans of all ages. A high point of social legislation during the Johnson’s Great Society era, Medicare succeeded in improving health care for the elderly but proved unexpectedly costly and never realized its sponsors’ hopes of expanding coverage to the general population.

Locale Independence, Missouri

Key Figures

• Lyndon B. Johnson (1908-1973), president of the United States, 1963-1969
• Wilbur Mills (1909-1992), legislator and chair of the House Ways and Means Committee
• Harry S. Truman (1884-1972), president of the United States, 1945-1953, and supporter of a national health insurance program

Summary of Event

On July 30, 1965, a select group of Americans, including former president Harry S. Truman, gathered in the Truman Memorial Library in Independence, Missouri, to witness President Lyndon B. Johnson sign the Medicare and Medicaid amendments to the Social Security Act of 1935. Johnson chose the venue to honor Truman’s unwavering support for national health insurance during his career as legislator, vice president, and president, and to emphasize the continuity between social legislation during the New Deal under Franklin D. Roosevelt and its expansion during the era of the Great Society in the 1960’s. Many of those in attendance saw the moment as a link in a progression that would lead to comprehensive health coverage—comparable to that enjoyed by citizens of most other industrialized countries—for all Americans.

Looking back after forty years marked by stagnation and retrenchment in health care accessibility, one author described the Medicare and Medicaid amendments as “memorial[s] to the world as it was in 1965.” The time was ripe for such reform. The economy was booming. Many social programs that failed to gain support during the presidency of John F. Kennedy gained sympathy, as people idolized the fallen president. While Kennedy’s effectiveness suffered from a narrow Democratic majority in the U.S. Congress, the 1964 elections handed Johnson a popular mandate in his own election and in both the House and Senate. That popularity, which declined precipitously as the Vietnam War escalated, was at its height in 1965. The 1964 Civil Rights Act helped to dampen conservative southern Democrats’ objections to federal involvement: If segregation could not be maintained under any circumstances, there was no point in opposing programs that required integration. A large birth cohort just entering the workforce allowed optimistic financial projections for expanding Social Security.

The idea of involving the federal government or state governments in individual health care, either for select vulnerable groups or for the population as a whole, had been around since the late nineteenth century, waxing and waning in popularity according to the political climate of the times. The idea gained impetus after passage of the British National Health Insurance Act in 1911. Associated with labor movements, this first wave succeeded in getting fifteen states to adopt workers’ compensation insurance by 1915. In that year, the American Association for Labor Legislation drafted a model bill for publicly funded health insurance, a bill that was introduced in a number of state legislatures but never adopted. The American Medical Association (AMA) was neutral on the issue. After the entry of the United States into World War I, national health insurance was belittled and denigrated as a “German innovation”; later, reaction against Bolshevism made all parts of the radical labor agenda suspect. States were reluctant to enact legislation that could render industries uncompetitive, and the AMA was now unequivocally opposed to any state health plan.

The Great Depression shifted attitudes. When Roosevelt established the Committee on Economic Security in 1934, health needs as well as provision for old age formed part of the agenda. Roosevelt withdrew the medical component when the AMA threatened to hold the entire Social Security bill hostage to health insurance provisions. The Social Security Act, which took effect on August 14, 1935, included only pensions, living allowances for unemployed workers, and grants to states to provide public assistance (welfare) to people incapable of supporting themselves.

In 1939, Democratic senator Robert F. Wagner of New York introduced a bill providing for a national system of health insurance. The bill died in committee. It resurfaced in various guises over the next ten years, but never reached the floor of Congress, despite strong support from Truman. The AMA mounted a massive and successful publicity campaign linking national health insurance to the communist bogeyman in public consciousness.

With full employment, modestly increasing health care costs, and the growth of private insurance plans, health care for working families ceased to be a major issue; the debate in the 1950’s turned to select vulnerable groups, notably seniors. In 1959 a bill providing health insurance to Social Security beneficiaries was introduced into the House, and it was referred immediately to the House Ways and Means Committee. Its chair, Wilbur Mills, a conservative Arkansas Democrat, was to play a prominent role in the development of Medicare and Medicaid legislation. In September of 1960, Congress passed the Kerr-Mills Act, authorizing federal subsidies to states for hospital care of the medically indigent, including the elderly. Only half of the states elected to participate in this forerunner of Medicaid.

President Kennedy included a full-fledged national health insurance program as part of his platform but did not command enough support in Congress to push for Medicare, despite polls showing substantial public support. The topic became the subject of intense public debate, with organized labor and elderly lobbies strongly in favor, and the AMA bitterly opposed.

Kennedy’s assassination on November 22, 1963, and the overwhelming Democratic victory in the November, 1964, elections, created a climate favorable to radical social legislation. Mills, who had heretofore been opposed to Medicare, was convinced to put his financial acumen and negotiating talents into creating a revised bill meeting most of the objections of conservative southern Democrats. He was responsible for dividing Medicare into Part A—covers hospital costs, as well as later home-care costs if needed, and is financed through payroll deductions—and the optional Part B—covers physician and outpatient charges and is financed in part by premiums paid by Social Security recipients. Part B functions more like conventional health insurance. The Medicaid provisions of the bill expanded on the Kerr-Mills Act but left much of the implementation in the hands of the states. Once released from committee, the bill rapidly passed in the House and the Senate.

Significance

Medicare succeeded in its primary objective: making acute medical care available to all elderly Americans and taking most of the financial burden for that care from spouses and adult children and from hospitals that had traditionally passed the costs to other patients. Also, the program contributed to a substantial increase in life expectancy for those who reached age 65 after 1965, in stark contrast to the first half of the century, when most longevity gains resulted from decreasing infant mortality.

Part B, which requires contributions by enrollees, quickly achieved high levels of enrollment in the program’s early years despite being optional. Because medical costs have risen far more rapidly than the cost of living, premiums paid by enrollees cover an increasingly smaller proportion of the total cost of coverage. The remainder is subsidized by taxpayers, regardless of the retiree’s income and assets.

A chief concern of both the Medicare and Medicaid programs, almost since their inception, has been their skyrocketing costs. The programs consistently experienced double-digit annual increases. A rising elderly population, increased longevity, and overall inflation all contributed to these increases, but the chief factor was a proliferation of costly services, some unquestionably beneficial, but some less so. Legislative attempts to control costs through managed care proved disappointing. Most economists agree that without drastic overhaul, Medicare as it is financed and administered will collapse under the weight of the same birth cohort (the baby boomers), now entering retirement, which made financing the program feasible in the beginning.

Bibliography

Berkowitz, Edward. “Medicare: The Great Society’s Enduring National Health Insurance Program.” In The Great Society and the High Tide of Liberalism, edited by Sidney Mikis and Jerome Mileur. Amherst: University of Massachusetts Press, 2005. A good analysis of the philosophy behind Medicare and Medicaid legislation and the political climate that made it possible.

Corning, Peter A. The Evolution of Medicare . . . From Idea to Law. Washington, D.C.: Government Printing Office, 1969. U.S. Department of Health, Education, and Welfare report no. 29. Traces the history of attempts to institute national health insurance in the United States between 1900 and 1965, with details of the passage of the 1965 Medicare and Medicaid amendments.

Geyman, John. Shredding the Social Contract: The Privatization of Medicare. Monroe, Maine: Common Courage Press, 2006. A critical, exhaustively researched study of privatized Medicare, with detailed analysis of the program, its history, and its future. The author argues that Medicare should remain in the hands of the government.

Medicare Rights Center. http://www.medicarerights.org/ A nonprofit advocacy group’s site that provides resources detailing the Medicare rights of seniors and others in need. Highly recommended.

Patel, Kant, and Mark Rushefsky. Health Care Politics and Policy in America. 3d ed. Armonk, N.Y.: M. E. Sharpe, 2006. Traces the history of Medicare from the program’s planning stages through 2003. Especially useful for understanding the program’s historical context and for recent statistical information.

Pauly, Mark V., and William L. Kissick, eds. Lessons from the First Twenty Years of Medicare: Research Implications for Public and Private Sector Policy. Philadelphia: University of Pennsylvania Press, 1988. A collection of conference papers focused mainly on Medicare financing and delivery.

U.S. Department of Health and Human Services. Centers for Medicare and Medicaid Services. http://www.cms .hhs.gov/. A U.S. government site on the Medicare and Medicaid programs that includes valuable resources both for recipients and potential recipients and for medical care administrators.