Medicare came into effect in 1965, with the intention of providing older adults in the United States with affordable health insurance.

The Social Security Administration (SSA) note that President Lyndon B. Johnson signed the bill that launched the Medicare program on July 30, 1965.

The program initially offered only hospital and medical insurance. Later, it expanded to provide prescription drug coverage, supplemental insurance, and a wider choice of health plans. Coverage also increased to include previously excluded groups of people.

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Medicare is federal health insurance for people aged 65 years and older, as well as younger individuals with certain disabilities and conditions. It has four parts:

  • Original Medicare is Part A, hospital insurance, and Part B, medical insurance. It does not include prescription drug coverage.
  • Medicare Advantage, or Part C, is the alternative to original Medicare. The plans provide Part A and Part B benefits and often include prescription drug coverage and extra benefits, such as dental, vision, and hearing care.
  • Part D is prescription drug coverage, which is available to a person enrolled in original Medicare (parts A and B). The plans include at least two medications in each of the commonly prescribed drug classes, but the specific medications may vary among plans.

Before Medicare, older adults often had inadequate protection against healthcare costs, which generally increase with age, just as income usually decreases. When President Johnson took office in 1963, only slightly more than one-half of the older adult population had hospital insurance, according to the SSA.

In addition, private insurance companies often terminated health policies for individuals whom they considered high risk. Although federal state medical aid programs were in existence, they were not meeting the needs of older adults.

The Johnson administration made affordable health insurance for older adults a top priority. Within 1.5 years, their efforts to find a solution to the problem were successful. After much consensus building in Congress, on July 30, 1965, the president signed the bill that enacted the Medicare program.

The Medicare bill was an amendment to the Social Security benefits program. After the bill became law, the Medicare program became operational within a year, in July 1966.

During that time, the government established Medicare’s administrative system. The SSA trained personnel and developed systems to deal with the wider responsibilities of the health insurance program. They also negotiated contracts with agencies and certified hospitals to serve as providers.

The initial program implementation included various other agencies and associations, including Blue Cross, Blue Shield, private insurance companies, government departments, and the Public Health Service.

Original program

Original Medicare included two related healthcare insurance programs. The first was a hospital insurance plan to give coverage for hospitalization and related care. The second was a medical insurance plan to provide coverage of doctor visits and other health services that the hospital plan did not cover.

The two programs were united as original Medicare (Part A and Part B).

The initial original Medicare monthly premium was $3. In some cases, Medicare could deduct this from a person’s monthly benefits, such as civil service retirement cash payments, Railroad Retirement, or Social Security. If this was not an option, a new enrollee in the Medicare program had to make payments directly to the government.

Over the years, Medicare has introduced new programs to increase healthcare coverage.

1972

When Medicare began, the only people eligible for the program were adults aged 65 years and older. In 1972, Medicare eligibility increased to include younger individuals with end stage renal disease and long-term disabilities.

1980

In 1980, the government placed supplemental insurance, called Medigap, under federal oversight. Medigap plans pay varying percentages of the out-of-pocket costs of original Medicare.

Learn more about Medigap here.

2003–2006

The enactment of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 introduced Medicare-approved private health plans. These plans were called Medicare Part C, also known as Advantage plans.

Learn more about Medicare Advantage here.

In 2006, a program called Medicare Part D provided an optional prescription drug coverage plan.

Learn more about Medicare Part D here.

2010

On March 23, 2010, President Barack Obama signed the Patient Protection and Affordable Care Act (ACA) into law. This act prevented insurance companies from denying coverage or charging more for coverage based on a person’s health. The bill also expanded Medicare’s preventive and drug services.

It is possible that Medicare may make changes in the future, if support grows, to make it available to every person regardless of their age. Other changes in the program may come from attempts to supplement diminishing funds.

Medicare for All

According to the Kaiser Family Foundation, about one-half of people in the U.S. of voting age favor expanding the current Medicare program to include every person in the country. This concept, called Medicare for All, could involve trading higher taxes for lower out-of-pocket healthcare costs.

Medicare for All was a topic of debate during the 2020 nomination process for the Democratic presidential candidate. A large proportion of Democrats and Independents favor the proposal, while most Republicans oppose it. At this time, it is unclear when or if Medicare for All will become a reality.

Solutions for the funding deficit

Another area in which Medicare may adapt in the future involves developing solutions for the projected funding shortfall. Due to the rising number of older adults in the U.S., the agency is facing monetary challenges. The trust fund that pays for Part A will run out of money in 2026, according to a report by the Congressional Research Service.

Congress may eventually have to decide whether and how to provide another source of funding for Part A. Measures could include raising the Medicare eligibility age or increasing premiums for people with higher incomes.

For more than 50 years, Medicare has made it possible for adults aged 65 years and older to get quality healthcare. Prior to the program, many older adults had inadequate health insurance.

Over time, Medicare has broadened to provide additional coverage, including coverage for younger people with certain diseases or conditions.

The future may hold additional changes for the program as it seeks to address the problem of diminishing funding.

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