Bob Rosenblatt

Throughout 2015, the Academy is working with partners to create a platform for dialogue around the history and future of these two vital programs, including this weekly Covered blog series. Covered is written by Bob Rosenblatt, a Senior Fellow at the National Academy of Social Insurance and editor of the website HelpWithAgingLearn more about the Academy’s celebration of the 50th anniversary of Medicare and Medicaid.

Johnson Signs Historic Medicare Bill Assuring Health Coverage for Seniors

Bob Rosenblatt, Special Correspondent

July 30, 1965

Washington, DC — President Lyndon Baines Johnson signed legislation today providing health care coverage for 20 million Americans over the age of 65. The new program, dubbed Medicare by President John F. Kennedy during the 1960 campaign, would finance care in hospitals and doctors’ offices as well as nursing home care and home care visits for seniors. The legislation is the first nationwide effort to provide health care coverage for a broad group of citizens outside of the military.

The President flew to Independence, Missouri to sign the bill on a stage with former President Harry Truman, an early and ardent advocate of federally-financed health care who was never able to muster enough votes in Congress for his plan.

Johnson succeeded by reducing the scope of the program from an effort to cover all Americans to a system focused on health coverage exclusively for the older population. And he needed a landslide victory in the 1964 election to give him large congressional majorities that supported the legislation.

Ironically, it was the complexities of congressional politics and the need to accommodate rival plans that gave President Johnson a much more expansive legislative package than he first proposed in 1964 and then again in 1965 after his reelection.

In January 1965, the White House sought legislation that would only cover hospital charges for people over 65. However, Rep. Wilbur Mills (D-AR), chairman of the House Ways and Means Committee, had a different idea – a plan that was more comprehensive and included mechanisms to help low-income people under the age of 65. He had frequent personal private conversations with Johnson, who supported a bigger deal.

The result was a “three-layer” legislative cake: A Republican proposal to cover doctors’ bills with voluntary private insurance, the original White House plan for universal federal coverage of hospital bills for people over 65, and an idea from the American Medical Association (AMA) to increase in federal support for states to pay the medical bills for poor people younger than age 65. In another irony, Johnson agreed to add this means-tested welfare approach to help younger people without health insurance, even though many of its supporters hoped this would forestall any future efforts to expand Medicare to the general population.

A Tribute to Truman
With Truman smiling broadly, Johnson signed the bill creating the biggest new piece of social legislation since the creation of Social Security 30 years ago. “I am happy to have lived this long and to witness today the signing of the Medicare bill,” said the 81 year-old former President.

Johnson lavished praise on Truman, who first asked Congress in 1945 to pass legislation providing for government-financed health care for all Americans.

“No longer will Americans be denied the healing miracles of modern medicine,” Johnson said, speaking in the auditorium of the Harry S Truman library. “No longer will illness crush and destroy the savings that they have so carefully put away over a lifetime so that they might enjoy dignity in their later years.”

What’s in the New Program?
Medicare benefits are scheduled to begin next July 1. They will include:

  • Coverage of 90-days of care in a hospital during a spell of illness. The patient will pay the first $40 in costs, and $10 a day for each day over 60.
  • Coverage of up to 100-days of care in a nursing home or other facility requiring skilled medical care for individuals discharged after  a three-day hospital stay. The first 20-days in a nursing home or similar facility are free, but there is a $5 payment for each additional day up to 100.
  • Coverage of up to 100-days of home care visits by trained medical personnel such as nurses or physical therapists for individuals discharged from the hospital. There is no charge for the visits.
  • Coverage for 80 percent of the cost of care provided by a physician, with the first $50 in charges paid by the patient. This insurance would cover any care and treatment provided by physicians, whether in the doctor’s office, a clinic, a hospital, or the patient’s home.

Coverage for in-patient hospital care will be paid by a trust fund set up to collect an increase in Social Security payroll taxes. Coverage will be automatic for individuals who turn 65-years old and have met the minimum working contribution requirements. The idea behind this approach, known as social insurance, is that everyone contributes financially and everyone in the eligible category (individuals over age 65) collects benefits. This approach spreads risk broadly, making the coverage more affordable and ensuring that people have adequate coverage. In the case of Medicare, the payroll tax is split between employers and employees.

Coverage for out-patient care will be provided through a new voluntary insurance program. Participants who enroll would pay $3 a month in premiums, and the federal government would pay an additional $3 a month for each person, using general tax revenues. Doctors will be paid through negotiations with voluntary private insurance companies, although individuals will not be purchasing private plans. This arrangement was an effort to defuse the long and strong opposition of many in the medical profession, led by the AMA, to any plan that could be regarded as a step toward socialized medicine.

Under Medicare Part B, patients that choose to buy insurance will have their bills paid through the current system of private insurance carriers, such a Blue Cross. The only role of the government is to determine coverage and to contribute sufficient tax revenues to pay half the monthly cost of the policies. The doctors will be able to protect their current income since the Medicare system will pay their “reasonable and customary charges.” This should allow doctors to tell the insurers how much they should be paid.

Medicare Politics
The Medicare bill was approved by the House on July 27th by a vote of 307 to 116. Voting in favor were 237 Democrats and 70 Republicans. Voting against the proposal were 48 Democrats and 68 Republicans. The Senate passed its version of the bill on July 28th by a vote of 70 to 24. Voting in favor were 57 Democrats and 13 Republicans. Voting against were 7 Democrats and 17 Republicans.

The Medicare legislation is a political accomplishment that demonstrates the impact of elections on negotiations that is the lubricant that makes the legislative process work. The stars of this narrative, Johnson and Mills, were unlikely but effective allies in a cooperative relationship not visible to other political actors, let alone the general public. While they deserve the applause they are receiving, the road to their victory was of course paved by hard-working people at the grassroots level who actively sought to shape public opinion over the course of many years. People from the labor movement, social work agencies, and senior citizens groups saw the proposed Medicare legislation creating hospital benefit for people over 65 as a rare, hard-earned victory.

Today’s political climate was almost unimaginable in 1964, when a bill providing hospital care under Social Security for people over 65 was passed by the Senate but couldn’t win approval in a conference with the House. Mills refused to consider it, perhaps because he could, and the measure disappeared. Less than a year later, a much more expansive and expensive measure has now been signed into law.

Mills’ decision to create the three-part legislation that combined a hospital benefit, with voluntary out-patient coverage and an expansion of the Kerr-Mills Act made the bill “unassailable politically from any serious Republican attack,” White House lobbyist Wilbur Cohen wrote in a confidential memo to the President on March 2nd.  “The effect of this ingenious plan is… to make it almost certain that nobody will vote against the bill when it comes to the floor or the House,” White noted. Cohen was among those surprised that Johnson had encouraged Mills to make the package as broad as possible – with Johnson going so far as to tell Mills that he would get the political credit, according to key sources.

The final version of the bill largely followed the plan backed by Johnson Administration, with one important exception: the bills of anesthesiologists, radiologists, and pathologists will no longer be included in the total hospital bills sent to patients and processed by the insurance companies. This administration language – which would have kept the current practice of most hospitals – would have paid the fees for hospital specialists from the Part A Hospital Insurance trust fund rather than the Part B voluntary part of the program.

The change is the result of pressure from the AMA , which did not want any doctors to be paid under a mandated federal government program.  The AMA persuaded Mills to strip the Administration’s original language out of the bill. And then Mills insisted on his provision in the final version negotiated in a House-Senate conference. As a result, everything doctors do will be part of the voluntary insurance system. Patients can choose this coverage, and doctors can decide whether or not to see patients covered by Medicare.

The third layer of the legislation expands funding to states providing medical assistance to low-income people as part of the Medical Assistance to Aged Act of 1960 (better  known as the Kerr-Mills Act). That legislation provided state governments with funds to pay the bills of older people too poor to afford hospital charges. The Medicare provisions will give the states an additional $7 billion to pay the medical bills of low-income people, regardless of age. Each state will decide on the income and asset levels required to qualify for this financial help. It is a welfare rather than social insurance-based approach.

It is not known how many states will expand their medical assistance programs to assist low-income individuals under 65 or take advantage of the new funding to create such programs. Currently, there are 32 legislatures controlled by Democrats and there are 33 Democratic governors. That may boost efforts to launch of this new Medicaid program, although both parties have factions.

Medicare was a top priority for President Johnson, who knew speed would be important if he was to enact this major piece of domestic legislation.  He acknowledged this when he told his legislative team at the beginning of the 89th Congress, “ I’ve just been reelected by [an] overwhelming majority. And I just want to tell you that every day while I’m in office, I’m going to lose votes. I’m going to alienate somebody.” In the end, the speedy approach worked. Passage of Medicare came just a bit over seven months after introduction as HR 1 and S1 at the beginning of the new Congress.

Now, the challenge shifts to implementation: distributing Medicare cards to 20 million people, getting as many of them as possible to enroll voluntarily in Part B of the program, and making sure that Southern hospitals comply with the civil rights law by integrating their staff and facilities. Ultimately, the desegregation of the health care facilities may create as much social change in this country as the provision of health care for tens of millions of seniors.

► Directory of COVERED posts
► Learn more about the Academy’s celebration of the 50th anniversary of the enactment of Medicare and Medicaid

Posted on: July 30, 2015

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