Medicare and Medicaid face growing pains at age 50

President Lyndon B. Johnson, left, with former President Harry S. Truman at his side, signs the Medicare Bill into law at ceremonies at the Truman Library in Independence, Missouri on July 30, 1965. Medicare is for people age 65 and older and Medicaid is for the poor. His legendary arm-twisting and a Congress dominated by his fellow Democrats succeeded in creating the kind of landmark health care programs that eluded his predecessors.
President Lyndon B. Johnson, left, with former President Harry S. Truman at his side, signs the Medicare Bill into law at ceremonies at the Truman Library in Independence, Missouri on July 30, 1965. Medicare is for people age 65 and older and Medicaid is for the poor. His legendary arm-twisting and a Congress dominated by his fellow Democrats succeeded in creating the kind of landmark health care programs that eluded his predecessors. AP

Fifty years ago on Thursday, President Lyndon B. Johnson signed legislation establishing the Medicare program to provide health coverage for seniors and the Medicaid program to cover the poor.

But it was former President Harry S. Truman who, in Johnson’s words, “planted the seeds of compassion” that laid the groundwork for both federal programs.

  1. President Johnson signed the Social Security Amendments of 1965 creating Medicare and Medicaid
  2. Medicaid eligibility expanded to those in the Suplemental Security Income Program
  3. Medicare made available to those under 65 with long-term disabilities or end-stage renal disease
  4. Hospice care coverage added to Medicare
  5. Children and pregnant women in poor families not receiving welfare receive Medicaid coverage
  6. Quality standards established for Medicare- and Medicaid-certified nursing facilities
  7. States required to provide Medicaid coverage to pregnant women and children six or younger with incomes below 133% of the poverty level
  8. Official links between Medicaid and welfare ended
  9. Plan and provider payments from Medicare reduced under the Balanced Budget Act
  10. Medicare Part B created for beneficiaries with higher incomes
  11. The drug benefit Medicare Part D began
  12. Affordable Care Act expanded Medicaid to most adults below 138% of the poverty level
  13. DC and 29 states adopted the Medicaid expansion
  14. Congress repealed the Sustainable Growth Rate, which had determined the growth of physician's fees
SOURCE: The Journal of the American Medical Association

In an address to Congress on Nov. 19, 1945, Truman became the first president to propose a comprehensive health insurance program, noting that large numbers of U.S. men had failed their World War II induction physicals because of poor health.

“Millions of our citizens do not now have a full measure of opportunity to achieve and enjoy good health,” Truman told Congress that day. “Millions do not now have protection or security against the economic effects of sickness. The time has arrived for action to help them attain that opportunity and that protection.”

The measure was introduced in Congress as legislation to expand Social Security. It was known as the “W-M-D Bill,” because its sponsors in the Senate were Democrats Robert Wagner of New York and James Murray of Montana. Rep. John Dingell, a Democrat from Michigan, sponsored the bill in the House of Representatives.

The American Medical Association criticized the bill as “socialized medicine” and described the Truman administration as “followers of the Moscow party line,” according to the Harry S. Truman Library and Museum. Sixty-five years later, critics of the Affordable Care Act would employ the same line of attack.

Truman was undeterred.

“The American people are the most insurance-minded people in the world,” the 33rd president told Congress. “They will not be frightened off from health insurance because some people have misnamed it ‘socialized medicine.’ I repeat: What I am recommending is not socialized medicine. Socialized medicine means that all doctors work as employees of government. The American people want no such system. No such system is here proposed.”

The legislation ultimately died with the onset of the Korean War. And it wasn’t until July 30, 1965, that Truman’s vision was fulfilled as President Johnson signed the Medicare and Medicaid legislation into law. Both were part of his Great Society initiatives to eliminate poverty and racial disparities.

Truman was on hand for the signing ceremony, which took place at his presidential library in his hometown of Independence, Mo.

“The need for this action is plain,” Johnson said that day. “And it is so clear indeed that we marvel not simply at the passage of this bill, but what we marvel at is that it took so many years to pass.”

No longer will older Americans be denied the healing miracle of modern medicine...No longer will young families see their own incomes, and their own hopes, eaten away simply because they are carrying out their deep moral obligations to their parents.

President Lyndon B. Johnson, on the signing of Medicare and Medicaid legislation, July 30, 1965

In 1966, Johnson presented Truman and his wife, Bess, with the first two Medicare cards ever issued.

80 million enrollees
Between 1966 and 2015, Medicaid rose from 4 million enrollees to 71.6 million, or 2 percent to 21 percent of the population.
Medicare rose from 19.1 million enrollees to 55 million, or 9.7 percent to 17 percent of the population.
By 2025, Medicare is expected to reach 74 million enrollees and Medicaid 77 million.
NOTE: 2015 Medicaid enrollment figures include Medicaid and CHIP enrollees
SOURCE: Centers For Medicare and Medicaid Services [1] [2] and The Journal of the American Medical Association

That same year, the U.S. had slightly more than 19 million seniors age 65 and over. More than half were uninsured. Today, Medicare covers more than 46 million seniors and 9 million disabled adults. Medicaid and the Children’s Health Insurance Program cover nearly 72 million people.

The programs account for 39 percent of U.S. health spending and 23 percent of the federal budget.

Before Medicare and Medicaid, most uninsured Americans relied on their savings, charity and family members to help with medical bills and life-threatening illnesses. The programs changed that dynamic and put federal policy behind the argument that health care is a right rather than a privilege.

“The establishment of Medicare and Medicaid didn’t just put an end to this injustice, it transformed our nation’s health care,” Health and Human Services Secretary Sylvia Burwell said during an event at HHS headquarters on Wednesday to mark the programs’ 50th anniversaries. “No other program has changed so many lives of our families, our friends, our neighbors. And no other program has given so many so much hope.”

Along the way, the programs helped make U.S. health care more affordable and accessible. They helped improve life expectancy and helped cut racial, cultural and economic health disparities. The programs also helped desegregate Southern hospitals and waiting rooms and opened doors for minority physicians.

But as the programs hit the half-century mark, they face economic and political challenges that will require tough decisions by policymakers.

Support for Medicare cost reduction

Strongly favor Somewhat favor Strongly oppose Somewhat oppose
Require drug companies to give Medicare a better deal on medications
Raise premiums for high-income seniors
Raise age from eligibility 65 to 67
Reduce payments to hospitals and other health care providers
Increase payroll taxes for Medicare
Raise premiums for all seniors

As millions of baby boomers born between 1946 and 1964 turn 65 at the rate of 10,000 per day, Medicare’s costs will continue to rise, presenting a major financial strain for U.S. taxpayers and a labor force that won’t keep pace.

To ensure the program’s viability, policymakers must find ways to sustain the current slowdown in the growth of health care costs. The Affordable Care Act is providing some of the solutions with care delivery reforms and incentives that reward the quality rather than quantity of care.

But more is needed, and policymakers will continue to debate possible solutions like trims to benefits coverage and caregiver payments, higher taxes and even higher costs for affluent enrollees. Republicans have proposed replacing Medicare’s guarantee of coverage for new beneficiaries with a flat payment to seniors known as a “voucher” or “premium support,” which could be used to purchase private insurance or traditional Medicare coverage.

With 10,000 Americans now enrolling in Medicare every day, it’s more important than ever to take stock of the program.

Cori Uccello, Senior Health Fellow, American Academy of Actuaries

The political implications of any such reforms will weigh heavily on future debates, since Medicare seniors are a powerful voting bloc that has traditionally been very protective of the program.

Medicaid, which has expanded coverage to higher-income adults with no children under the Affordable Care Act, also will face tough financial challenges as enrollment continues to grow. States that expanded coverage have seen enrollment grow faster than expected, which presents long-term funding concerns.

The federal government pays the full cost for new enrollees through 2016. After that, the states’ share of those costs will top out at 10 percent in 2020.

Medicaid is generally a state’s largest expenditure after education. Republicans have proposed giving states a capped amount of money or a “block grant” to operate and restructure their Medicaid programs with less federal oversight. They say the added flexibility would lead to greater efficiencies and less waste.

Democrats counter that if the federal grants don’t keep pace with rising medical costs and enrollment increases during economic downturns, states could end up with less federal funding over time.

This shortfall could force states to either pay a larger share of Medicaid program costs or reduce access to care through cuts in services, reduced eligibility, payment cuts to caregivers or greater cost-sharing for enrollees.