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Medicare Celebrates Its 50th Birthday

medicare turns 50

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On July 30th 1965, President Lyndon Johnson sat in the Truman Library in Independence, Missouri with former President Harry Truman by his side. He was about to sign into law Title XVIII of the Social Security Act also known as Medicare. President Truman had long proposed a national healthcare plan, and it was in his honor that LBJ chose his Presidential Library as the venue for the enactment of this landmark legislation. On that historic day, former President Harry S. Truman became the first American to be enrolled in Medicare.

Medicare has become a cornerstone of financial security for all Americans over 65 and people with disabilities. Before Medicare, only 50% of Americans over 65 had health insurance and even minor illnesses could bring a family to bankruptcy. When the program began in 1966 19,000,000 people were enrolled in Medicare. In 2012, there were 50,000,000 beneficiaries enrolled with an enrollment rate of 98% of those over 65.

Medicare Part A pays for inpatient hospital benefits and Medicare Part B pays for outpatient benefits. These insurance plans pay for most of the costs, but beneficiaries have a share to pay in the form of deductibles, copays and coinsurance. The premium for Medicare Part A (Hospital) is generally at no cost to those who have worked enough quarters to earn it or have had a spouse that worked. There is a premium for Part B, generally $104.90 per month, which can vary according to income.

Over the years Medicare has seen some changes. The most significant being when the Medicare Modernization Act of 2003 was signed into law by President George W. Bush. The MMA created a voluntary prescription drug benefit called Medicare Part D. The program allowed private insurance companies to contract with Medicare to administer benefits. Companies were also allowed to compete for market share with premiums, copays and drug formularies as long as they were as good as the minimum standard model. For the first time, low income subsidies for a Medicare program were granted to beneficiaries that fell below federal poverty guidelines.

In 1973, grants were made to start private Medicare plans called Health Maintenance Organizations (HMOs) as a means of providing managed care and savings to Medicare. With the MMA of 2003 these plans were renamed Medicare Advantage, and funding was increased to promote expansion. What started as a savings model decades earlier, ended with payments of up to 14% more per beneficiary than payments for Traditional Medicare. The Affordable Care Act of 2010 mandated a reduction of Medicare Advantage payments to bring them more in line with Traditional Medicare.

So happy birthday to Medicare! The program has been a big success not only for seniors, but for America as a whole. In a modern world it’s hard to see how we ever lived without it. But the future of Medicare is anything but certain. Over the next 20 years enrollment will increase by 30 million to 80 million in 2030. With 9 of every 10 dollars spent on Medicare coming from the current 2.9% Medicare payroll tax, wage earners in the future can expect to pay even more to support an your overburdened program.

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