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As you near age 65 and celebrate your 65th birthday, Medicare becomes more and more important. While many people navigate their 40s and 50s without thinking much about it, that rapidly changes as retirement appears on the horizon.
Understanding the history of Medicare means you have a grasp on the overall purpose and function of the system, making it easier for you to get the benefits you’ve earned. Read on to learn all about the origins of Medicare and how it grew into the program it is today.
When did Medicare start and why?
Medicare was signed into law by President Lyndon B. Johnson in 1965, the goal being to provide older Americans with insured health coverage. In the early 1960s, the insurance market was saturated with plans and coverage linked to employers—meaning as folks retired and needed more medical services, they didn’t have affordable options for getting treatment.
At the time of its enactment, Medicare was solely focused on providing health insurance to all people aged 65 or older—no matter what their medical history or income status was.
At that time, employer-linked health insurance began terminating coverage for older people… but as these people retired, their income shrank. Without an employer-linked plan and without disposable income, people were left without access to affordable healthcare. President Johnson and his administration gave top priority to solving this problem during his term.
Many of the original writers and architects of Medicare expected it to be the first step toward universal healthcare. Though this ended up not being the case, the Medicare program is still an absolutely crucial program for the nearly 64 million Americans currently getting coverage.
What Was Before Medicare?
Before Medicare, there were a few federal- and state-funded programs offering medical assistance… but none of them were geared towards serving retiring and aging Americans. In fact, these programs were so tightly restricted that very few people received any kind of assistance. Less than 60% of people aged 65 or older had any kind of health coverage before the creation of Medicare.
These Americans lived in fear that a lifetime of hard work and savings would be wiped out by just 1 unexpected serious medical expense—and many people were forced to go through exactly that. President Johnson and his administration saw America’s growing retired population experiencing undue suffering, and sought to rectify it.
Medicare History Timeline
Since its creation and enactment in 1965, the Medicare program has been widely expanded and reformed at least once a decade. Let’s take a look at the timeline of Medicare’s history.
The 1960s
•July 30, 1965: In Independence, Missouri, President Lyndon B. Johnson signs H.R. 6675 into law, thus enacting the Medicare program. Former President Harry S. Truman receives his Medicare card at the signing ceremony, becoming the very first Medicare recipient. The Medicare budget in 1965 is set at approximately $10 billion.
•July 1, 1966: Medicare is made available to all people aged 65 or older. Many Americans enrolled in Part A at this time, while millions of other retirees enrolled in Part B. During its first year, 19 million people enrolled in Medicare. Retired Americans everywhere breathe a collective sigh of relief, as there’d been nationwide concern over how these folks would afford healthcare in retirement.
The 1970s
•October 30, 1972: President Richard M. Nixon signs H.R. 1, expanding Medicare coverage. This legislation extended coverage to Americans under the age of 65 with long-term or lifelong disabilities, and those with ESRD (end-stage renal disease). Under this expansion, people suffering from ESRD became eligible for Medicare 3 months after starting hospital treatment or immediately after starting in-home dialysis. People suffering from disabilities had to receive Social Security benefits for several years before becoming eligible for Medicare.
The 1980s
•December 5, 1980: Congress passes the Omnibus Reconciliation act of 1980. This expansion focused primarily on in-home medical services, provided by either the patient’s friends/family or medical professionals. This was instrumental in providing more aid to elderly patients, who often can’t travel comfortably.
•September 3, 1982: Congress expands Medicare benefits to include hospice coverage and care for patients with terminal illnesses. It also outlined the requirements a hospice service had to meet in order to partner with Medicare, thereby protecting Medicare patients from receiving poor or substandard care.
•July 1, 1988: The Medicare Catastrophic Coverage Act is signed into law. This finally capped Medicare members’ out-of-pocket expenses for Medicare Part A and B, and added a small amount of coverage for prescription drugs. But the program’s premiums shot up, drawing widespread condemnation from senior groups.
•The Medicare Catastrophic Coverage Act created a requirement for states to “buy-in” to Medicare, by spending Medicaid funds and creating cost-sharing plans for Medicare members living in poverty. These people are defined as Qualified Medicare Beneficiaries, or QMB. To date, there are over 7.5 million QMBs nationwide—this act laid the groundwork to serve these impoverished beneficiaries today. To be considered a QMB today, you must already be eligible for Medicare and your income can’t exceed 100% of the federal poverty level.
•November 21, 1989: The Medicare Catastrophic Coverage Repeal Act of 1989 is enacted into law, thereby repealing most of the law signed in 1988. The pressure from senior groups due to the higher premiums won out. In present times, there’s still no cap on out-of-pocket expenses for Medicare Part A and B. While this keeps premiums lower for everyone, it also can get quite expensive for certain members.
The 1990s
•November 5, 1990: The Omnibus Budget Reconciliation Act of 1990 is signed into law by President George H. W. Bush. This law required states to use their Medicaid funds to pay premiums of the newly established Specified Low-Income Medicare Beneficiary (or SLMB) eligibility group. To be in this group, you must be eligible for Medicare with an income between 100-120% of the federal poverty level. This also added Medicaid coverage for children ages 6-18 living under 100% of the federal poverty level.
•December 12, 1991: State Disproportionate Share Hospital (DSH) spending allotments are reduced. Medical provider-specific donations and taxes to states were also capped. Overall, this was found to profoundly affect the resources hospitals had available for providing uncompensated care. US legislators would spend the rest of the 1990s passing laws and budgeting to curb this huge impact.
•Early 90s: Throughout the early years of the 1990s, Congress passes leftover bits and pieces of other Medicare legislation, which ultimately create the Qualified Individual (or QI) programs. This program required Medicaid to pay Part B members’ premiums if their income is between 120-135% of the federal poverty level. Limited federal grants fund this program, and once spent, beneficiaries are no longer entitled to the benefit… unless a state chooses to provide it out of their own budget. To this day, Congress must reauthorize this program every few years, which replenishes the federal funding. This has become a vital lifeline for many Part B members.
•August 5, 1997: The Balanced Budget Act (or BBA) of 1997 is signed into law by President Bill Clinton, which led to many changes in the Medicare program. First, it established what is now known as Medicare Part C, giving eligible members access to plan options in the private market. These options offered additional benefits like prescription drug coverage for new members. The BBA also expanded Medicare education resources for members and ensured the longevity of the fund for at least another 10 years, guaranteeing the survival of Medicare funding and benefits.
The 2000s
•July 1, 2001: Legislation takes effect which removes the 24-month waiting period for Social Security disability receivers with ALS to receive Medicare benefits. Previously, patients with ALS had to receive disability benefits from the Social Security Administration for 24 months before receiving Medicare benefits. This applies to all Americans with ALS, even those under the age of 65. The new legislation was life-changing for many patients who struggled to pay for their ALS-related prescriptions.
•December 8, 2003: The Medicare Prescription Drug Improvement and Modernization Act of 2003 is signed into law by President George W. Bush. This created what’s now known as Medicare Part D, an optional benefit for prescription drug coverage. Prior to this enactment, nearly 25% of Medicare members had no assistance with paying for prescription drugs. Today, nearly 50 million Medicare members—approximately 75% of all members—use Medicare Part D to cover the prescription drugs they need to safely navigate daily life.
2010
•March 23, 2010: The Patient Protection and Affordable Care Act is signed into law by President Barack Obama, leading to sweeping reforms across Medicare. This legislation was designed to keep costs manageable for members, increase fund revenue, create easier access, and add medical services. It ultimately reduced the cost to members for Medicare Advantage and increased reimbursement rates, but also reduced the average payment amount received by insurers. For better or for worse, the Affordable Care Act forever changed Medicare across the country.
2015 – 2021
•April 16, 2015: The Medicare and CHIP Reauthorization Act (or MACRA) is enacted, extending the QI program for specific low-income members, and paving the way for Medicare to pay doctors for high-quality services… instead of a high quantity.
•January 1, 2019: The “Medicare donut hole” closes. This meant the gap in coverage in your Medicare Part D benefit for prescriptions. It used to be your expenses could exceed your plan’s initial coverage limit, but hadn’t yet reached the level required for “catastrophic coverage.” Now, you’ll instead pay 25% of all your drug costs until you hit that level. Once reached, you’ll pay either 5% of your prescription’s cost, or $3.95 for generic prescriptions, or $9.85 for brand-name, whichever is higher.
•January 1 – July 24, 2020: During this period, Congress and President Trump make over 200 temporary emergency changes to Medicare legislation and regulations. One of the biggest lasting changes is the approval of “telehealth” visits conducted via video or phone call, allowing patients to receive care for non-urgent needs from the comfort and safety of their own homes. Other permanent changes thus far include increased flexibility for diabetes prevention program providers, opioid treatment program providers, and durable/reusable providers of medical equipment.
•January 1, 2021: Medicare Part B premiums continue to increase. Set at only $3 per month when Medicare Part B launched, the 2021 premiums were $148.50 per month. For 2022, the standard Part B premium cost is $170.10.
•October 31, 2021: As of this date, there are over 63 million active Medicare members. Though this number stayed steadily below 50 million for the early 2010s, the retirement of the Baby Boomer generation has skyrocketed the number of people enjoying the benefits of Medicare.
History of Medicare: Key Takeaways
Now that you know the full history of Medicare, you have a much better idea of what benefits you’ll enjoy as a member… and what to look out for, like uncapped out-of-pocket expenses for Parts A and B.
Next, you’d be wise to learn more about the pros, cons, and differences between various Medicare plans. You can learn all about your options and more by using our online Medicare coach.
Or, if you’re ready to learn more about enrollment, check out our handy calendar of Medicare enrollment periods. Now that you’ve learned all the important details of Medicare history, you’ll have a much easier time navigating the process of choosing your plan and enrolling! Still feeling a bit unsure? No worries—we’re your Medicare personal shopper. Just click here to get started!
