The history of Medicare is quite interesting as the creation of original Medicare and the numerous attempts the Presidents, over several terms, took to create a National Healthcare System (i.e., Medicare).  The history of Medicare reveals that it took numerous attempts to convince Congress to pass the Bill that created original Medicare.  After reading the following history of Medicare you will fully understand how original Medicare was created and the changes that have been made to original Medicare over time. 


The History of Medicare Reveals That the First Attempt to Create Original Medicare Was in 1937

In reviewing the history of Medicare it is important to note that creation of what we now know as original Medicare involved almost 20 years of debate regarding the creation of a health care system to ensure health insurance to the elderly. In 1937 The Technical Committee on Medical Care was established under the interdepartmental Committee to Coordinate Health and Welfare Activities was created for the purpose of addressing the concern that older individuals, or retired individuals, had no access to health care coverage.  The Technical Committee was composed of staff members of the Children’s Bureau, U.S. Public Health Service and Social Security Board.  In February 1938 the Technical Committee on Medical Care published the first proposal of a health care reform entitled “A National Health Program: A Summary”.  The National Health Conference was held in Washington under the direction of the Interdepartmental Committee to Coordinate Health and Welfare Activities, to bring the problems of national health and certain recommendations for a national health program before professional groups and the public from July 18-20, 1938.

Original Medicare and the Social Security Bill of 1932

The history of Medicare reveals that what we know now as Medicare was actually introduced in the Social Security Bill that was signed into law in 1932.  However, the health care portion of the Social Security Bill was removed from the original Social Security bill during President Roosevelt’s term as president.  In 1932 Social Security was implemented in order to provide income for individuals as they entered retirement.  The Social Security Trust Fund was created and allowed workers to receive regular income after retirement.  The Social Security Trust Fund is funded by withdrawing a small sum from each paycheck from every worker in the United States and depositing it into a government fund. While president Roosevelt attempted to address health care reform in his January 11, 1944, State of the Union message when he outlined an “economic Bill of right”, which included “the right to adequate medical care and the opportunity to achieve and enjoy good health”.  However, President Roosevelt did not make any subsequent proposal for health insurance.

Similarly, President Kennedy’s health care reform in 1962 was intended to prevent elderly from going broke, or worse — bankrupt, when they incurred unexpected medical costs not covered by pensions or insurance which could easily bankrupt an individual. 

The History of Medicare:  The Creation of Original Medicare

A review of the history of Medicare reveals that it took several attempts over a number of years before Congress finally approved the creation of the national social insurance program that we now call Medicare.  Health care reform was also addressed by President Kennedy, who was unsuccessful in getting a Bill passed by Congress to create Medicare.  It was not until 1965, under the presidential term of President Johnson, that Congress created Medicare under Title XVIII of the Social Security Act.  One objection that is revealed in the history of Medicare that delayed its creation was the argument by the American Medical Association (also known as “AMA”) that “the act would strain the United States’ medical resources, lower doctors’ incomes by making their jobs government-funded, and cause individuals to be assigned doctors based on insurance rather than preference.”   A second delay in the creation of Medicare was the fact that Congress was wary of passing a Bill and creating a law that would substantially increase the national tax rates even though the citizens of American supported the idea.  Thus, President Kennedy persisted in his efforts for health care reform to ensure that every individual over 65 years of age, regardless of income or medical history, would have health insurance.   The history of Medicare reveals that President Kennedy’s persistence was successful and original Medicare was signed into law in 1965.

The History of Medicare Reveals Creation of Medicare Created Additional Payroll Taxes

A review of the history of Medicare reveals President Johnson signed original Medicare into law on July 30, 1965, after the long debate that started almost 20 years earlier . However, with the approval of the creation of original Medicare, like the Social Security, came an additional tax that would be paid by employees, employers, and the self-employed. The tax went into its own trust, called the Federal Supplementary Medical Insurance Trust Fund, and was distributed to people enrolled in the original Medicare system.  

The History of Medicare Reveals it Initially Included Medicaid as a Part

Review of the history of Medicare reveals that the The Medicare Bill consisted of three parts:  Part A, which guaranteed hospital insurance to the elderly, and Part B, which covered medical costs for outpatient hospital care for elderly patients who paid premiums for enrollment. Medicaid was the third part of the Medicare bill.  Medicaid was an independent Social Security system that gave funds to impoverished individuals who could not afford medication. The history of Medicare also reveals that the Medicare system created in the beginning works much in the same way today.  If a person qualifies for Medicare, he or she receives a Medicare card, which is used as proof of insurance when receiving medical treatment. Medicare created relationships with insurance companies and participating hospitals that provided treat Medicare enrollees. When an individual is treated, the resulting claim is paid out of the Medicare Trust Fund.  It is important to note that the relationships Medicare has with insurance companies and participating hospitals and physicians continue to be a very important role in Medicare today. 

The History of Medicare and the Introduction of Medicare Advantage or “Part C”

A review of the overall history of Medicare reveals that the Medicare system overall remains very similar today as it did in the beginning.  However, the introduction of  Part C as the third part of Medicare brings more choices to Medicare beneficiaries and how their healthcare bills are paid. 

Part A, called Hospital Insurance Protection, provides insurance for health care administered within participating hospitals and post-hospital care. Individuals are immediately enrolled in Hospital Insurance Protection when they enroll in Medicare. Part A is primarily funded by the tax deposited in Medicare’s Trust Fund. It is supplemented through the payment of deductibles and premiums from patients. The amount of the deductibles and premiums depends on the patients’ financial status.

Part B, Medical Insurance Protection, covers medical care not included in Hospital Insurance Protection, such as outpatient care, physical therapy, and medical equipment. Individuals pay premiums to enroll in Part B, and the remaining funds are paid by the government.

Part C, which was initially identified as “Medicare+Choice” (now known as Medicare Advantage), allows individuals to contract alternative medical institutions through the Centers for Medicare and Medicaid Services, the Washington-based federal administrators of Medicare.  The passage of the Balanced Budget Act of 1997 allowed Medicare beneficiaries to receive their Medicare benefits through private insurance plans, instead of through original Medicare Part A and Part B.  Pursuant to the Medicare Modernization Act of 2003, “Medicare+Choice” or “Part C” became more attractive to Medicare beneficiaries by introducing Medicare Advantage plans.

The History of Medicare and Significant Changes to Original Medicare by President Bush in 2003

The history of Medicare reveals that one significant change is the fact that Medicare changed from a three-part system to a four-part system.  The fourth part, or Part D, was created by President George W. Bush to assist Medicare beneficiaries with their prescription drug costs.  Specifically, in 2003 President Bush was successful in the passage of a law to include prescription drug coverage for the elderly under Medicare, rather than continuing to allow it to be funded by Medicaid. This is known as the Medicare Prescription Drug Improvement and Modernization Act which was signed into law on December 8, 2003. However, Medicare Part D did not go into effect until January 1, 2006. While this change increased the costs of Medicare it was a very much needed change for Medicare beneficiaries.  Medicare supplement (also known as “Medigap”) plans sold before 2006 may include coverage for prescription drugs; however, after the introduction of Medicare Part D on January 1, 2006, Medicare Supplement plans are prohibited from coverage of prescription drugs.

Original Medicare and The Patient Protection and Affordable Care Act of 2010

Review of the history of Medicare reveals that The Patient Protection and Affordable Care Act (“ACA”) of 2010 made a number of changes to the Medicare program.  Several provisions of the law were designed to reduce the cost of Medicare.  Congress reduced payments to privately managed Medicare Advantage plans to align more closely with rates paid for comparable care under the traditional, or original, Medicare.  Congress also slightly reduced annual increases in payments to physicians and to hospitals that serve a disproportionate share of low-income patients.  Along with other minor adjustments, these changes reduced original Medicare’s projected costs over the next decade by $455 billion. 

Medicare Now and in the Future: Original Medicare May Face Financial Challenges But Will Remain Strong

A review of the history of Medicare reveals that the Medicare program remains strong and continues to enable elderly retired Americans to receive the care that they need.  There is concern regarding original Medicare become a greater expenditure for the nation as more individuals are eligible for it. With the “baby-boomers” becoming Medicare eligible, there is even more concern regarding funding of the Medicare Trust Fund.  In sum, over the long-term, Medicare faces significant financial challenges because of rising overall health care costs, increasing enrollment as the population ages, and a decreasing ratio of workers to enrollees.  However, with the implementation of changes addressed in The Patient Protection and Affordable Care Act to protect the Medicare Trust Fund against fraud, waste and abuse, as well as other changes, original Medicare will remain strong.

As the history of Medicare reveals the creation of Part C, which now consists of Medicare Advantage plans, and the creation of Part D, which consists of Prescription Drug Plans, as well as the creation of Medigap (also known as “Medicare Supplement“) plans has allowed Medicare Pathways to become active in the lives of Medicare beneficiaries.  Medicare Pathways provides assistance in determining the most appropriate and most affordable plan to assist the Medicare Beneficiary with their out-of-pocket costs that original Medicare Part A and Part B leaves them responsible for paying.  Contact a Benefit Specialist at Medicare Pathways Benefit Specialist for assistance  in reviewing your options regarding Medicare Supplement, Medicare Advantage and Prescription Drug Plans and determine if you qualify to enroll or enroll in a plan.  You can also simply click Request a Quote and a Benefit Specialist will contact you to provide assistance and review of your options.


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