Medicare History: The Timeline of Senior Healthcare in America

Brief History of Medicare: Understanding Medicare history means discovering and knowing that the idea for healthcare in the U.S. continues to evolve, as do the solutions to such complex problems. Overall, the history of Medicare shows us that we are better off with coverage than without any form of security.  Estimated Read Time: 32 mins

In many ways, Medicare history begins with President Lyndon B. Johnson signing the federal government program into law on July 30th, 1965. However, the history of Medicare predates its actual existence.

The program that we know today, Original Medicare (Medicare Part A and Part B), provides healthcare benefits to qualifying seniors and disabled persons for both hospital and outpatient care. However, Medicare coverage can come in many different forms these days as the needs of Americans have evolved.

This is evidenced through Medicare Part C (Medicare Advantage), Medicare Part D prescription drug coverage, and Medicare Supplement plans, also known as Medigap. Overall, this recurring theme has affected the Medicare history timeline—the evolution of healthcare needs in America.

The simple fact remains that there weren’t always adequate healthcare protections for Americans in place which mainly affected poorer residents. But when poverty became a much larger issue for more citizens, actions were taken.

In the aftermath of the Great Depression were various ideas, laws, and actions aimed at helping create a better country for Americans. Out of this would come the foundation of what would take decades to accomplish. But in the end, Medicare was created, a program that continues to see changes as seen fit by Congress to address the healthcare needs of Americans.

Medicare History Was Heavily Influenced by Social Security

The Great Depression began famously after the stock market crashed in 1929. This would affect Medicare’s history as the chain of events leading to the creation of the federal government’s program stemmed from Americans’ financial insecurity during this time.

President Franklin D. Roosevelt began to create many different agencies at the federal level during what is known as the New Deal. This would include many initiatives across a variety of aspects of American life, including Social Security.

On June 8, 1934, President Roosevelt enacted Executive Order No. 6757 to create the Committee on Economic Security (CES), which was tasked with figuring out why so much insecurity was affecting the finances of Americans and how the federal government could fix them.

After conducting research, compiling their findings, and reviewing their studies, the CES provided its report to the President, who in turn presented the study to Congress on January 17, 1935. The program was enacted to provide income to retirees once they hit the age of 65.

But while it was created with great intentions, the Social Security Act fell flare for many Americans who expected more. The two areas that were specifically not viewed as favorable were the protections, or lack thereof, for those with disabilities and the lack of benefits for medical expenses.

In the 1930s, some adjustments were made to Social Security before a decade where notable changes basically didn’t exist. But in the 1950s, several changes would occur to the Social Security program through various Amendments:

• The Social Security Administration was created with one leader replacing the three-person Social Security Board.
• Cost-of-living adjustments (COLA) came to be to help beneficiaries with inflation.
• Disability insurance was created in 1954, with various alterations to such endeavors over the next several years.
• Women could take a reduced benefit if they chose to receive Social Security benefits early.

But eventually, the 1960s would arrive. During the Amendments of 1961, the age for Social Security benefits would be lowered to 62 years for men if those accepting benefits would accept a lower amount, which had a major influence on the number of people enrolled in the program.

Medicare also gained support from President John F. Kennedy in 1961 as one of his core focal points for his term. This would never come to fruition due to his assassination, which further delayed the start of Medicare and affected Social Security policy.

However, arguably the biggest change for Social Security was when President Lyndon B. Johnson created Medicare by signing the bill on July 30, 1965, before providing former President Truman the very first Medicare card.

This would mark the beginning of Medicare history as we know it, but not how we know it today. Although the program continues to operate with the same goals, many changes have come about throughout the decades to adjust to the needs of Americans in terms of healthcare.

The History of Medicare Officially Begins on July 30, 1965

In 1961, President Dwight D. Eisenhower held the first White House Conference on Aging, introducing a healthcare program for Social Security beneficiaries. As you can see above, many other events led to the moment of the program’s inception, but the history of Medicare as we know the program today started in 1965.

President Lyndon B. Johnson signed the Medicare and Medicaid Act, also known as the Social Security Amendments of 1965, bringing to life the federally funded programs. Original Medicare would provide both Medicare Part A for hospital coverage and a supplemental option coverage, known as Part B.

Medicare eligibility extended to people under the age of 65 with long-term disabilities (and those with ESRD) under the Social Security Amendments of 1972. During this time, the program added more coverage for benefits like physical, speech, and chiropractic therapy.

The establishment of Medicare was a major improvement in access for older Americans and disabled Americans in need of healthcare coverage. Before Medicare, only 60% of seniors over 65 had health coverage because of the lack of availability and high prices. Seniors often paid three times as much for coverage as younger people.

But it wouldn’t be the final solution. There were numerous healthcare changes, pieces of legislation, and program adjustments that would alter Medicare benefits to help provide adequate coverage to Americans.

The Medicare-Medicaid Anti-Fraud and Abuse Amendments in 1977 allowed funding from the federal government to create Medicaid Fraud Control Units (MFCUs) in states.

1980 was a major year in which The Mental Health Systems Act required the Medicaid Management Information System (MMIS) in most states to be computerized.

The same year would see the Medicare and Medicaid Amendments of 1980 penalize those who fraud Medicare and Medicaid by excluding them from being a part of them.

Finally, the Omnibus Reconciliation Act of 1980 made the MFCU program permanent through federal funding.

Civil financial penalties against those accused of abuse and fraud came to be because of the Omnibus Budget Reconciliation Act of 1981.

The False Claims Act Amendments came to be in 1986 that would open the door for compensating whistleblowers and provide the path to fine those committing fraud.

The Medicare and Medicaid Patient and Program Protection Act in 1987 would make providing false medical information a felony crime.

The Medicare Catastrophic Coverage Act of 1988 implemented several restrictions to further protect consumers, such as out-of-pocket maximums and premiums. During this time, several voluntary guidelines became mandatory standards by the federal government.

The limitation of self-referrals for physicians came through the Omnibus Budget Reconciliation Act of 1989, also known as the Stark Law.

An amendment was needed to the Stark Law around four years later. The Omnibus Budget Reconciliation Act of 1993 is often called Stark II and requires an MFCU in every state unless the Secretary of the U.S. Department of Health and Human Services (HHS) deems otherwise through proof.

The creation of the Health Insurance Portability and Accountability Act of 1996, or HIPAA, was a sweeping piece of legislation that affected virtually every aspect of healthcare and continues to do so.

In the following year, the Balanced Budget Act of 1997 helped organize and change how billing, marketing, various conditions, and much more were handled on the state level.

The last act to be passed in the ‘90s was the Omnibus Consolidated and Emergency Supplemental Appropriation Act of 1999. The most important part of this act called on the providers that paid for these specific plans to be subject to civil penalties.

Under the Consolidated Appropriations Act of 2001, beneficiaries with a qualifying sudden life event of healthcare coverage change could purchase new supplemental coverage. This act ensured any pre-existing conditions excluded from the previous policy were also excluded from the new plan.

CMS created the Payment Error Rate Measurement (PERM) program due to the Improper Payments Information Act of 2002 for better reporting of improper payments and ways to prevent them from happening.

New programs were ushered in, including the Medicaid Integrity Program (MIP) and the Medicare-Medicaid data match program, due to the Deficit Reduction Act of 2005, among other changes.

Creating the Genetic Information Nondiscrimination Act in 2008 made it illegal for a health insurance plan provider to discriminate against genetic information.

The America’s Healthy Future Act of 2009 protected consumers and their policies. However, issues arose as people took advantage of this program on both the consumer and insurance sides.

Additionally, 2009 would see the creation of the Fraud Enforcement and Recovery Act. This would allow the False Claims Act a wider range of what could be prosecuted.

Furthermore, in what would prove to be a busy year for the history of Medicare, the Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA) affected the verification process for determining American citizenship while also simplifying enrollment and coordinating Medicaid Eligibility Quality Control (MEQC) and PERM program together.

The Patient Protection and Affordable Care Act (ACA) took place in 2010 and had many effects on healthcare entirely. For the history of Medicare and Medicaid, several things were established, including data processes for both programs, requirements for provider screenings, adjustments to Part D, and provided many other changes to the programs.

CMS also began a system to find patterns of fraud as allowed by the Small Business Jobs Act of 2010. The goal was to create a report for Congress to review in 2014 and showcase future use for CHIP and Medicaid in the future.

When the Bipartisan Budget Act of 2013 rolled out, Medicaid agencies at the state level were empowered to recover third-party payments, with the exception being the anti-lien statute for third-party liability for Medicaid.

More funding for CHIP and Medicaid was provided in 2015 by the Consolidated Appropriations Act, 2016, towards integrity initiatives while limiting durable medical equipment payments to Medicare.

The history of Medicaid and Medicare would see many different changes affecting the Medicaid program in 2016 because of the 21st Century Cures Act. This bill touched on many issues ranging from mental health to state requirements to creating databases and electronic visit verification systems and more.

There have been many more modern changes and adjustments to the program recently. Additionally, one of the most challenging hurdles in Medicare history, the outbreak of the COVID-19 pandemic, created unprecedented challenges for beneficiaries and the program itself.

Medicare continues to evolve to meet the needs of Americans requiring healthcare and the rising costs associated with that care. However, one of the first additions to Original Medicare benefits came early in Medicare History. Although it would take decades before Medicare Part C would be formally introduced, Medicare Advantage coverage has been around all along.

Medicare Part C History

The history of Medicare Part C begins at the beginning of Medicare history in 1966 after being signed into law the previous year. While Medicare Part C, also known as Medicare Advantage plans weren’t officially what we know today, even if bearing similar characteristics, they were the predecessors of what would help expand healthcare options for beneficiaries in a major way.

Initially, it’s important to remember that Original Medicare provided Part A benefits but only offered Part B benefits as supplemental coverage. But as the history of Medicare and Medicaid moved on, the importance of Medicare Part B coverage continued to grow, and an overwhelming majority of enrollees had both.

These factors and more would mean that private insurance companies were focusing on both hospital and outpatient services as a result. Things would change as new legislation would help evolve the Medicare program providing beneficiaries with more options from the private sector for their healthcare coverage in the ‘90s.

It was the Balanced Budget Act of 1997 (BBA) that would deliver beneficiaries Medicare Part C under the original name Medicare+Choice (M+C) program. In January 1999, the M+C program went into effect, opening the door for more plan varieties for coverage.

This was a monumental moment in the history of Medicare Advantage plans because now, beneficiaries could choose among healthcare plans that included Health Maintenance Organizations (HMOs), Medicare Medical Savings Account (MSA) plans, Preferred Provider Organizations (PPOs), Private-Fee-For-Service (PFFS) plans, Provider-Sponsored Associations (PSOs), and Religious Fraternal Benefit (RFB) plans.

In addition to providing all of the benefits of Medicare Parts A and B, Part C was designed to provide additional benefits as seen fit by private insurance companies. Medicare Part C history under its current name of Medicare Advantage began after the passing of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). This legislation is what created Medicare Part D and allowed Part C to offer coverage for prescription drugs as well.

Medicare Advantage history continues to advance the program, as ongoing changes from CMS in 2023 have provided revisions to Part C, among other Medicare programs. A variety of changes involving marketing, Star Ratings, coverage criteria, health equity, and more are being implemented along with sections 118 of Division CC of the Consolidated Appropriations Act, 2021, and 11404 of the Inflation Reduction Act of 2022.

Medicare Part D History

These days, it’s commonplace that Medicare provides coverage for prescription drugs. While Original Medicare benefits do not, beneficiaries have options through most Medicare Advantage plans and Medicare Part D. However, while Medicare Advantage plans have been around since the beginning, Part D plans have not.

A fundamental change in Medicare history would come under the Bush administration in 2003. The passing of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 created Medicare Part D plans.

Depending on the plan, some could keep their old policies while others took the option to purchase new coverage. Those that had to buy new insurance had protection from rising premiums.

The federal government made it illegal for the plan provider to consider the buyer’s past claims, health records, pre-existing conditions, and other issues to calculate the premium.

It was after the passing of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 that the federal government introduced two additional supplement plans.

These new plans offer two features:

1. Maximum out-of-pocket limits
2. Coinsurance

While the law allowed private companies to provide plans to cover prescription drugs to beneficiaries, it also prohibited Medigap plans that covered these expenses from being sold, effectively ending Medicare Supplement Plans E, H, I, and J for enrollees that did not already have coverage under one of these plans.

The drug program funds about 2 billion prescriptions each year, which accounts for almost $90 billion in Medicare costs. Medicare Part D is the most abundant federal program that pays for prescription medications.

Since the creation of Medicare Part D, coverage has become quite popular among beneficiaries. In more recent years, Medicare Part D spending has outgrown the rest of the Medicare programs, a trend that is expected to increase, and while the benefits are new, there has been an ongoing effort to resolve the cost of prescription drugs for decades:

• Title XIX of the Social Security Act in 1965 did wonders for many groups in terms of healthcare, but it was unsuccessful in securing drug coverage for Medicare beneficiaries in the way supporters hoped.
• Adding coverage for ESRD patients in 1973 meant higher costs for drugs received in outpatient settings. Covering drugs in both inpatient and outpatient settings was an ongoing issue from Medicare’s inception that affected both Part B and Part D.
• The ‘90s would see further expansion of Medicare drug coverage due to the acceptance of medication for cancer.

A decade later, increasing costs would prove to be an even bigger problem than ever before, eventually leading to the need for change and the creation of Medicare Part D.

However, while the past several decades would have a role in shaping the coverage of prescription drugs, modern history, some of which is still underway, is shaping more and more of what we’ve come to know about how the government helps beneficiaries reduce the cost of medication.

Initially, Part D included a gap between the original coverage and a particular benefit point called catastrophic coverage. But the Affordable Care Act of 2010 filled the Medicare Part D donut hole. Meaning brand-name drug manufacturers were ordered to give a 50% discount on any drugs purchased during this phase. Then, the federal government covers an additional part of the drug expense.

The newest update in Medicare Part D history involves the Inflation Reduction Act of 2022. This bill, passed under the Biden administration, provides the government with the responsibility of covering up to 75% of the costs of prescription drugs when beneficiaries spend a specific amount on prescriptions within a year.

However, the Inflation Reduction Act of 2022 is set to do much more in the present and near future. This will affect the amount beneficiaries pay for prescription drugs for years to come.

There is a cap for beneficiaries on out-of-pocket drug spending. Now, if you are enrolled in a Part D plan, your plan and drug manufacturers will pay more of the cost for your medication when dealing with expensive drugs.

The change started at the beginning of 2023, but additional evolutions are coming in 2024 and 2025. There are four phases involved with the Medicare Part D benefit: the deductible phase, initial coverage phase, coverage gap phase, and catastrophic phase.

Each phase has different parameters in terms of who pays what share of the cost of prescription drugs. As of now, those enrolled in Medicare Part D coverage will pay 100% of their drug costs in the deductible phase, 25% during the initial coverage phase, 25% in the coverage gap phase, and 5% during the catastrophic phase.

As the history of Medicare moves forward, those enrolled in Part D coverage will no longer need to pay the 5% coinsurance charge during the catastrophic phase beginning in 2024.

Additionally, there will be an out-of-pocket cap with a catastrophic threshold of $8,000 in 2024. This combines the out-of-pocket costs with the worth of discount manufacturers put on brands during the coverage gap phase. In total, beneficiaries will only spend around $3,300 as a result.

Beginning in 2025, the out-of-pocket cap will be reduced to $2,000, the coverage gap phase will no longer exist, and Medicare Part D plans will pay more of the costs during the catastrophic phase. There will also be new discounts on manufacturer pricing and less liability for Medicare in the catastrophic phase as well.

It’s worth noting that after the reduction to the out-of-pocket cap in 2025, it will rise again. Furthermore, the cap doesn’t apply to drug costs that are purchased using Medicare Part B benefits, and out-of-pocket costs can be spread out throughout the year rather than facing higher costs in specific months.

These new features are interesting on many levels as Medicare history has shown that the programs involved with healthcare continue to look for ways to balance covering the needs of beneficiaries with the sustainability of it all. In addition to the changes above, there are several others coming to the future of prescription drug coverage in the U.S., including:

• Vaccines have no cost-sharing and are covered beginning in 2023.
• In 2024, changes to the Part D Low-Income Subsidy (LIS) Program are coming, including the elimination of the partial LIS benefit.
• Adjustments to base premiums that limit increases to a 6% cap on Part D plans from the year before beginning in 2024.
• There is also a cap of $35 per month for insulin that all Part D plans must follow.
• Medicare will pay less of its own share for brand-name drugs and generic drugs come 2025.
• A 10% discount from manufacturers on brand-name drugs during the initial coverage phase that starts in 2025.

The History of Medicare for All

Similar to the implementation of Social Security, while the Medicare program operates by helping many achieve affordable healthcare, there are still groups calling for more to be done. This comes in the midst of rising healthcare costs and the idea that healthcare is a universal right rather than only accessible to those who can afford it.

Known as the Expanded and Improved Medicare For All Act, it was introduced by Rep. John Conyers of Michigan in 2003. The goal of the legislation was to provide Americans with a universal single-payer health care system. Though Conyers wasn’t taken seriously, he continued to bring up the initiative until leaving office at the end of 2017.

But there were other politicians who were ready to make Medicare history that came along with support for the idea. This would include Ted Kennedy in 2006 through the Medicare for All Act, and after mounting disappointment with healthcare in America, the Affordable Care Act under the Obama administration.

However, it’s arguable that no one in modern times has gained more notoriety for their support for Medicare for All than Vermont’s Senator, Bernie Sanders. At least five iterations of the Medicare for All Act have come about under the direction of Sanders, with more and more Americans supporting the endeavor.

Even with growing support, there is no question that the idea of Medicare for All is still divisive, as are any topics that can be deemed as political. There are also studies showing that the semantics involving the name and greater involvement from the government in personal healthcare are noted barriers to its success.

The story is still unfolding before our eyes as to which way things will go. Medicare reform history is an important component of American history as our nation continues to grow and provide for its citizens. Healthcare has many variables ahead, but fortunately, the U.S. is notorious for rising to meet such challenges head-on and overcoming them.

Medicare Tax History

The funding of Medicare comes from a variety of places, and as you have likely realized, the taxes used to pay for these benefits have gone up over time. This is for many reasons but with beneficiaries living longer, general inflation, and rising healthcare costs, it’s logical that more funding is needed. Therefore, taxes are raised.

Medicare uses the Hospital Insurance (HI) program to pay for its benefits, funded mostly by taxes involving employment. This is why there are certain employee contributions through tax periods that beneficiaries are required to fulfill before they can qualify for benefits.

Laws set the tax rate you’ll pay, as does the nature of your employment. Throughout Medicare tax rate history, this wasn’t always true, but since 1984, if you are self-employed, you’ll pay higher rates than those employed by a company.

When you are employed by a company, you pay the tax, but your employer does too. Those that are self-employed don’t have a company paying the matching portion, leaving a gap between the two worker segments.

Since 1966, when there has been a change to the MI tax rate, with the exception of the decrease in 1974 that lasted until 1977, they have only trended upwards. This means that taxpayers have paid a MI tax rate between 0.35% and 1.45% when employed by a company and between 0.35% and 2.9% when self-employed.

If you break down the various benefits that are a part of Medicare, you’ll find plenty of rabbit holes to go down in terms of funding. This includes Medicare Advantage, Part B, Part D, etc. But in terms of Medicare tax history, the MI rates directly correlate with the coverage of Part A benefits.

There are current calls for raising taxes on the higher income earners in America to help pay for healthcare, including Medicare. This is a highly controversial topic that has been politicized and has both strong support and opposition. But however it goes, the outcome is yet to be written in the pages of Medicare history.

Medicare History Continues To Unfold

The history of Medicare continues not only because of its use among the senior and disabled populations but because of the many changes to the program that continue to develop:

• CMS continues to push more emphasis on preventive care to help beneficiaries maintain healthier lifestyles.
• Adjustments to Medigap and Medicare Advantage plans continue as these programs navigate rising health costs to ensure their utility for the future.
• Legislation is taking some of the burden off of Medicare for covering prescription drug costs to provide a brighter future for Medicare Part D coverage.
• Marketing regulations continue as the federal government aims to make a safer marketplace for beneficiaries who deserve clear, honest communication from companies about their benefits.
• The discussion for Medicare For All continues to make its rounds throughout various forms of legislation.

Overall, Medicare history has always been moving forward with the same goal, even through different initiatives, and today, millions are reaping the benefits. The United States remains committed to providing quality healthcare coverage that is affordable and useful to seniors and disabled persons.