The History of Medicare and
The Current Debate

The Birth of Medicare The Heritage Foundation Media Campaign Leading Market-Driven Legislative Proposal Instability in the Medicare HMO Marketplace The New Medicare Law: A Victory for the Proponents of Privatization Growing Power of Extremist Think Tanks MRC's Media Education Campaign

The Birth of the Medicare Program

In the early 1950s, Social Security officials realized that older Americans were facing a health care crisis. The Social Security system, which was created as an economic safety net for older Americans, was failing to protect them against the greatest single cause of economic dependency in old age–the high cost of medical care. The 1950 census showed that the aged population had grown from 3 million in 1900 to 12 million in 1950, or from 4 to 8 percent of the U.S. population. Two-thirds of older Americans had incomes of less than $1,000 annually, and only 1 in 8 had health insurance.¹ Private insurers had long considered this illness-prone population a "bad risk," and even unions were generally unable to purchase coverage for retirees through employer-sponsored plans.

A broad debate about the need for a social insurance program to provide older Americans with reliable health care coverage started within the Social Security Administration and in Congress. Public hearings were held and several proposals were considered by the House of Representatives, but the debate did not intensify until 1960, when it became clear that private insurers were becoming increasingly incapable of providing comprehensive, affordable health care coverage to the rapidly growing population of older adults. Between 1950 and 1963, the aged population grew from about 12 million to 17.5 million, or from 8.1 to 9.4 percent of the U.S. population. At the same time, the cost of hospital care was rising at a rate of about 6.7 percent a year, several times the annual increase in the cost of living. and health care costs were rapidly outpacing growth in the incomes of older Americans.² To support these costs, private health insurance carriers repeatedly raised premium rates and/or reduced benefits, making private insurance too expensive and/or inadequate for older adults living on fixed incomes.

Between 1960 and 1965, the health coverage debate was a front burner issue in Congress, with dozens of proposals introduced and testimonies given by representatives of major organizations, including the American Hospital Association, the American Medical Association, and the AFL-CIO. A 1964 Senate study estimated that only 50 percent of the policies issued to retirees provided comprehensive coverage (75 percent or more of the average hospital bill), meaning only 1 in 4 older Americans had adequate hospital insurance protection.³ Finally, in July 1965, the House and Senate passed the bill which established Medicare, a social insurance program designed to provide all older adults with comprehensive health care coverage at an affordable cost. In 1972, Medicare eligibility was extended to two other groups that were facing similar problems in obtaining reliable health coverage–people with disabilities and people with end-stage renal disease.

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¹ Corning, P., "The Evolution of Medicare...From Idea to Law," Social Security Administration Office of Research and Statistics, 1969.
² Ibid.
³ Ibid.

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