How Medicare started and history of Medicare historic events
Year 1965
Medicare and Medicaid were enacted as Title XVIII and Title XIX of the Social Security Act, providing hospital, post-hospital extended care, and home health coverage to almost all Americans aged 65 or older (e.g., those receiving retirement benefits from Social Security or the Railroad Retirement Board), and providing states with the option of receiving federal funding for providing health care services to lowincome children, their caretaker relatives, the blind, and individuals with disabilities. At the time, seniors were the population group most likely to be living in poverty; about half had health insurance coverage.
To implement the Health Insurance for the Aged (Medicare) Act, the Social Security Administration (SSA) was reorganized and the Bureau of Health Insurance was established on July 30, 1965. This bureau was responsible for the development of health insurance policy. Medicaid was part of the Social Rehabilitation Service (SRS) at this time.
1966
Medicare was implemented and more than 19 million individuals enrolled by July 1.
1967
An Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) comprehensive health services benefit was established for all children getting Medicaid. Medicare was also given authority to conduct demonstration projects
1970’s
1972
Medicare eligibility was extended to individuals under age 65 with long-term disabilities and to individuals with end-stage renal disease (ESRD). Medicare was given additional authority to conduct demonstration programs. Medicaid eligibility for elderly, blind and disabled residents of a state was linked to eligibility for the newly enacted Federal Supplemental Security Income (SSI) program.
1973
The HMO Act provided start-up grants and loans for the development of health maintenance organizations (HMOs). HMOs meeting federal standards relating to comprehensive benefits and quality were established and under certain circumstances had the right to require an employer to offer coverage to employees. The Medicare statute was also amended to provide for HMOs to contract to provide Medicare benefits to beneficiaries who choose to enroll.
1977
The Health Care Financing Administration (HCFA) was established to administer the Medicare and Medicaid program
1980’s
1980
Coverage of Medicare home health services was broadened. Medicare supplemental insurance, also called “Medigap,” was brought under federal oversight.
1981
Freedom of choice waivers and home and community-based care waivers were established in Medicaid. States were required to provide additional payments to hospitals treating a disproportionate share of low-income patients (called “disproportionate share hospitals,” or DSH).
1982
The Tax Equity and Fiscal Responsibility Act made it easier and more attractive for health maintenance organizations to contract with the Medicare program providing for Medicare payments on a full risk basis. In addition, the Act expanded the Agency’s quality oversight efforts through Peer Review Organizations (PROs).
1983
An inpatient acute care hospital prospective payment system for the Medicare program, based on patients’ diagnoses, was adopted to replace cost-based payments.
The Medicare hospice benefit was established as an option for beneficiaries to receive all-inclusive care to relieve pain and manage symptoms in a home setting rather than an institutional setting.
1986
The Emergency Medical Treatment and Labor Act (EMTALA) required hospitals participating in Medicare that offer emergency services to provide appropriate medical screenings and stabilizing treatments. Medicaid coverage for pregnant women and infants (up to 1 year of age) up to 100% of the Federal Poverty Level (FPL) was established as a state option.
1987
The Omnibus Budget Reconciliation Act of 1987 (OBRA 1987) strengthened the protections for residents of nursing homes.
1988
The Medicare Catastrophic Coverage Act of 1988 was enacted, which included the most significant changes since enactment of the Medicare program, improved hospital and skilled nursing facility benefits, covered mammography, and included an outpatient prescription drug benefit and a cap on patient liability. The Medicare Catastrophic Coverage Act also provided for Medicaid coverage for pregnant women and infants up to 100% of the FPL was mandated; special eligibility rules were established for institutionalized persons whose spouses remained in the community to prevent “spousal impoverishment.” The Qualified Medicare Beneficiary (QMB) program was established to pay Medicare premiums and cost-sharing charges for beneficiaries with incomes and resources below established thresholds. The Clinical Laboratory Improvement Amendments (CLIA) of 1988 strengthened quality performance requirements for clinical laboratories to ensure accurate and reliable laboratory tests and procedures.
1989
The Medicare drug benefit and other enhancements of Medicare coverage in the Medicare Catastrophic Coverage Act of 1988 were repealed after higherincome seniors protested new premiums. A new Medicare fee schedule for physician and other professional services, a resource-based relative value scale, replaced charge-based payments.
Medicaid coverage of pregnant women and children under age 6 up to 133% of the FPL was mandated; expanded Early and Periodic Screening, Diagnostic and Treatment (EPSDT) requirements were established.
1990’s
1990
Phased-in Medicaid coverage of children ages 6 through 18 under 100% of the FPL was established, and a Medicaid prescription drug rebate program was created. A specified low-income Medicare beneficiary eligibility group (SLMBs) was also established for Medicaid programs to pay Medicare premiums for beneficiaries with incomes at least 100% but not more than 120% of the FPL and limited financial resources. Additional federal standards for Medicare supplemental insurance were enacted.
1996
Welfare Reform: The Aid to Families with Dependent Children (AFDC) entitlement program was replaced by the Temporary Assistance for Needy Families (TANF) block grant; the welfare link to Medicaid was severed; a new mandatory low-income group not linked to welfare was added to Medicaid; and enrollment in/termination of Medicaid was no longer automatic with receipt of welfare cash assistance.
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) was passed. It had several provisions. First, it amended the Public Health Service Act, the Employee Retirement Income Security Act of 1974 (ERISA), and the Internal Revenue Code of 1986 to provide for new federal rules improving continuity or “portability” of coverage in the large group, small group and individual health insurance markets. HCFA implemented HIPAA provisions affecting the small group and individual markets.
Second, it created the Medicare Integrity Program which dedicated funding to program integrity activities and allowed HCFA to competitively contract for program integrity work. Third, it created national administrative simplification standards for electronic health care transactions. Fourth, it required HHS to issue privacy regulations if Congress failed to enact substantive privacy legislation.
1997
The Balanced Budget Act of 1997 (BBA): The Children’s Health Insurance Program (CHIP) was created; limits on Medicaid payments to disproportionate share hospitals were revised; new Medicaid managed care options and requirements for states were established. BBA also made changes to Medicare including:
• Establishing an array of new Medicare managed care and other private health plan choices for beneficiaries, offered through a coordinated open enrollment process.
• Expanding education and information to help beneficiaries make informed choices about their health care.
• Requiring HCFA to develop and implement five new prospective payment systems for Medicare services (for inpatient rehabilitation hospital or unit services, skilled nursing facility services, home health services, hospital outpatient department services, and outpatient rehabilitation services).
• Slowing the rate of growth in Medicare spending and extending the life of the trust fund for 10 years.
• Providing a broad range of beneficiary protections.
• Expanding preventive benefits.
• Testing other innovative approaches to payment and service delivery through research and demonstrations.
1999
The first annual Medicare & You handbook was mailed to all Medicare beneficiary households. The toll-free number, 1-800-MEDICARE (1-800-633-4227), became available nationwide. The Ticket to Work and Work Incentives Improvements Act of 1999 (TWWIIA) expanded the availability of Medicare and Medicaid for certain disabled beneficiaries who return to work. The law established optional Medicaid eligibility groups and allowed states to offer a buy-in to Medicaid for working-age individuals with disabilities.
The Balanced Budget Refinement Act of 1999 (BBRA) increased payments for some Medicare providers and increased the amount of Medicaid DSH funds available to hospitals in certain States and the District of Columbia. Other related legislation improved Medicaid coverage of certain women’s health services.
2000’s
2000
The Benefits Improvement and Protection Act (BIPA) further increased Medicare payments to providers and managed health care organizations, reduced certain Medicare beneficiary co-payments, and improved Medicare coverage of preventive services. BIPA created a new Medicaid prospective payment system for Federally Qualified Health Centers and Rural Health Clinics (FQHCs/RHCs) and modified the amount of Medicaid DSH funds available to hospitals. It also delayed for one year the sunset of transitional medical assistance provided to families eligible for welfare.
2001
Secretary Tommy Thompson renamed the Health Care Financing Administration (HCFA) the Centers for Medicare & Medicaid Services (CMS).
2003
The Medicare Prescription Drug, Improvement, and Modernization Act (MMA) made the most significant changes to Medicare since the program began. MMA created a new optional outpatient prescription drug benefit, effective in 2006, provided through private health plans allowing for competition among health plans to foster innovation and flexibility in coverage, covered new preventive benefits, and made numerous other changes. For the period prior to 2006, MMA created a temporary prescription discount card program.
Beneficiaries with incomes less than 150% of the FPL became eligible for subsidies under the new Part D prescription drug program. MMA also required beneficiaries with higher incomes to pay a greater share of the Part B premium beginning in 2007.
2005
Enrollment started for Medicare Prescription Drug coverage.
2006
Medicare prescription drug coverage (Part D) began Medicare for 39 million beneficiaries. Numerous MMA provisions were implemented, including a number of new preventive services for Medicare beneficiaries.
2010’s
2010
The Patient Protection and Affordable Care Act (ACA), commonly known as the “Affordable Care Act,” was signed into law by President Barack Obama on March 23, 2010, for the first time prohibiting health insurance companies from denying or charging more for coverage based on an individual’s health status, providing for expansion of the Medicaid program, and subsidies for insurance purchased through State-based Marketplaces to ensure that private insurance is affordable. The ACA also provided a variety of other insurance reforms, like new preventive benefit requirements and prohibitions on dollar limits, and expanded Medicare drug and preventive services benefits.
2011
3.6 million people with Medicare saved $2.1 billion on their prescription drugs thanks to the Affordable Care Act. More than 25.7 million beneficiaries in Original Medicare received at least one preventive service following a cost-sharing waiver in the Affordable Care Act.
2013
The Health Insurance Marketplace opened on October 1, 2013. For the first time ever, all Americans were able to shop for affordable quality health coverage, and couldn’t be denied or charged more because they had a pre-existing condition. An estimated 37.2 million Medicare beneficiaries received at least one free preventive service including an estimated 26.5 million people with Original Medicare. 4.3 million seniors and people with disabilities saved $3.9 billion on prescription drugs, or an average of $911 per beneficiary.
2015
The Medicare Access and CHIP Reauthorization Act (MACRA) changes the way Medicare pays physicians. It replaced the Sustainable Growth Rate (SGR) methodology with a method that’s more predictable and speeds up participation in alternative payment models. These models encourage quality and efficiency. MACRA also extended CHIP for two years, through fiscal year 2017
Medicare Establishment history
For 50 years, Medicare has accomplished its two key goals: ensure access to health care for its elderly and disabled beneficiaries, and protect them against the financial hardship of health care costs. As the single largest source of health insurance in the United States, with 55 million covered through the program, Medicare has both shaped the U.S. health system and responded as needs have demanded. But rising costs, affecting the federal budget and beneficiaries, are an ongoing challenge that will need to be addressed. As the Medicare population continues to age, better strategies also are required to serve the increasing number of beneficiaries with complex care needs and chronic conditions. To control Medicare’s costs while enhancing the quality of its coverage and care, policymakers must continue to identify and spread promising payment and delivery system reforms that can help the program achieve success over the next 50 years.
EXECUTIVE SUMMARY
As Medicare prepares to mark its 50th anniversary in July 2015, there is a lot to celebrate. For 50 years, Medicare has accomplished its two key goals: ensure access to health care for its elderly and disabled beneficiaries, and protect them against the financial hardship of health care costs. Before Medicare, 48 percent of Americans 65 and older had no insurance; today, that figure is just 2 percent. Today, older Americans pay 13 percent of their health care expenses directly out-of-pocket, compared with 56 percent in 1966. By ensuring access to care, Medicare has contributed to a fiveyear increase in life expectancy at age 65. Medicare covers 55 million Americans, about 17 percent of the U.S. population. Its beneficiaries are the nation’s oldest, sickest, and most disabled citizens. Three-quarters of them have one or more chronic conditions, and one-quarter rate their health as fair or poor. Today nearly 30 percent of beneficiaries are either over age 85 or disabled and under age 65.
As the single largest source of health insurance coverage, Medicare has both shaped the U.S. health care system and responded as needs have demanded. In 1972, coverage was added for people of any age with end-stage renal disease and those who are disabled for two years or more. In 1997, Medicare Part C—which has evolved into Medicare Advantage—was created to enable beneficiaries to choose an HMO-style Medicare plan instead of traditional Medicare. Prescription drug benefits were introduced in 2003, and preventive services without copayments were added under the Affordable Care Act in 2010.
Medicare performs well compared with private insurance coverage. Medicare beneficiaries are less likely to report not getting needed care, less likely to experience burdensome medical bills, and less likely to report negative insurance experiences than those under age 65 insured by employer plans or individual insurance.
Rising costs, affecting both the federal budget and beneficiaries, are an ongoing challenge. The average beneficiary spends 15 percent of income on health care, compared with just 5 percent for those under age 65. And because Medicare covers only a portion of medical expenses, most beneficiaries supplement Medicare with other coverage, adding to complexity and administrative cost.
Additional challenges facing Medicare include the need for more comprehensive benefits in traditional Medicare, improved financial protection for low- and modest-income beneficiaries, and reduced complexity in coverage. Better strategies also are needed to serve the expanding number of beneficiaries with complex care needs and multiple chronic conditions—symptoms of an aging population.
To control Medicare’s costs while enhancing the quality of its care, policymakers must continue to identify and spread promising payment and delivery system reforms—many of which are now being tested by the new Center for Medicare and Medicaid Innovation. The success of these changes will be critical to ensuring that beneficiaries will continue to reap the benefits modern medicine has to offer.
MEDICARE: 50 YEARS OF ENSURING COVERAGE AND CARE
On July 30, 1965, President Lyndon Johnson signed into law the nation’s first comprehensive government-sponsored program to provide health insurance for older Americans. Called Medicare, the program had been about 20 years in the making. After signing the Medicare bill into law, Johnson presented the first Medicare card to the former president who had first championed the idea: Harry S Truman, then 81 years old.
As Medicare prepares to mark its 50th anniversary, there is a lot to celebrate. In its first 50 years Medicare has unquestionably achieved its two basic goals: to ensure that Americans 65 and older have access to health care, and to protect them and their families from severe financial hardship from medical bills. In 1972, coverage was added for people with certain disabilities and those with end-stage renal disease. Along the way, Medicare also has helped to change medical technology
and the health care delivery system. It has helped accelerate progress by indirectly financing medical education and teaching hospitals, and has ensured access for its beneficiaries to the latest medical advances.
Medicare: Meeting Important National Goals
For five decades, Medicare has met a growing number of important goals for the nation. Today, it serves 55 million Americans in a number of important ways.
Providing Health Insurance Coverage
When Medicare was established, 48 percent of Americans 65 and older were uninsured.1 Many people lost their health insurance when they retired, and private insurance companies, concerned about adverse risk, were reluctant to write comprehensive policies for older adults. Policies that were available often limited coverage, exempted pre-existing conditions, and offered inadequate protection (Exhibit 1).2 After Medicare was enacted, the number of uninsured Americans plummeted from 71 million in 1953 to 23 million in 1976. Today only 2 percent of adults 65 and older are uninsured.3
Reducing Financial Risk
Prior to Medicare, older people and their adult children faced a high risk of financial burden because of medical bills. In 1966, older Americans paid 56 percent of their medical expenses directly out-of-pocket.4 Medicare was designed to eliminate this financial pressure and ensure access to needed care.5,6 Today, older Americans pay just 13 percent of their health care expenses directly.7
Improving Access
The enactment of Medicare had an immediate and dramatic impact on access to health care services for beneficiaries.8 Reduced financial barriers resulted in increased demand and use of services. From 1963 to 1970, the hospital admission rate for older Americans increased from 18 percent to 21 percent. Additionally, the proportion of elderly Americans seeing a physician rose from 68 percent to 76 percent.9
Reducing Disparities
In its early years, Medicare was a major force for the racial desegregation of health care facilities, dramatically reducing disparities in access to care by making vigorous enforcement of the Civil Rights Act a condition of hospital participation in the program. Hospitals integrated their medical staffs, waiting rooms, and hospital floors in a period of less than four months.10 Between 1961 and 1968, hospitalization rates for whites age 65 and older rose 38 percent, while rates for blacks 65 and older jumped 61 percent.11 As a result, disparities in access to hospital services for people of all ages narrowed, with the difference in hospitalization rates between whites and blacks falling from 30 percent in 1961 to 17 percent by 1968.12
Supporting Advances in Care and Delivery
Medicare has given beneficiaries access to the latest advances in medical research and has helped finance medical progress through its indirect support of graduate medical education and payments to teaching hospitals.13 Gains in life expectancy at age 65 accelerated after enactment, increasing by 15 percent between 1965 and 1984, compared with 5 percent between 1950 and 1965.14 Life expectancy of Medicare beneficiaries is now five years longer than it was when Medicare started. Annual death rates of those age 85 and older dropped by 18 percent between 1960 and 1970, compared with just 2 percent between 1950 and 1960.15 While these gains undoubtedly owe much to advances in clinical care and medical research, Medicare ensured access to high-quality care for its beneficiaries.16 Medicare has been both a leader and an innovator, helping to set quality standards and supporting both medical advances and innovation in health services delivery.17
Providing Peace of Mind
Among voters of all ages, Medicare is one of the most widely supported government programs. Medicare beneficiaries are more satisfied with their Medicare coverage than adults under age 65 are with private health insurance.18
Medicare’s Enrollment and Benefits Have Continuously Expanded
When Medicare was launched, it covered 20 million people. In 2015, Medicare covers 55 million people, or 17 percent of the U.S. population.19 Eighty percent of beneficiaries are age 65 or older (and eligible for Social Security); the remaining 20 percent comprise individuals with serious disability (and covered by Social Security Disability Insurance) or end-stage renal disease.20
Expanding Medicare’s benefits over the years has been a challenge. In 1988, prescription drug coverage was added through the Medicare Catastrophic Coverage Act (MCCA), as well as limits on beneficiaries’ out-of-pocket expenses. The higher premiums necessitated by these reforms, however, were unpopular, and in 1989 Congress repealed its actions. Nevertheless, the will to increase benefits persisted, and in 2003 a voluntary prescription drug benefit was introduced as part of the Medicare Modernization Act. In 2013, Medicare Part D drug coverage provided benefits to 39.1 million beneficiaries.21
In 1997, Medicare Part C—now called Medicare Advantage—was created to give beneficiaries the option of choosing an HMO-style Medicare plan instead of traditional Medicare. Currently, about 30 percent of beneficiaries have opted for this program.
Medicare enrollment is expected to grow rapidly as members of the baby boom generation, born after World War II, become eligible. An estimated 81 million people will be enrolled by 2030, after which enrollment is projected to increase more slowly, reaching 111 million by 2080 (Exhibit 2).
Demographics of the Medicare Population
Medicare covers the oldest and most disabled portion of the population. Today, 30 percent of beneficiaries are age 85 and older or disabled under age 65 (Exhibit 3). The majority of enrollees are women (55%). About one-fourth (23%) have less than a high school education, and less than half (47%) have some college or more. About half (49%) live with a spouse; 29 percent live alone; 5 percent live in institutions (primarily nursing homes); and 18 percent report other housing arrangements (such as living with a family member).
Incomes of Medicare beneficiaries are lower than those of working families. Social Security provides a base income that keeps most elderly out of poverty. Poverty rates for Medicare beneficiaries (14%) are lower than for children (22%). Forty-two percent of Medicare’s beneficiaries 65 and older have incomes at 200 percent of the poverty level or below. Only one-fourth (27%) have incomes over four times the poverty level.
Modest incomes combined with a greater need for medical care put beneficiaries at financial risk of burdensome medical bills. Even with Medicare, some beneficiaries are faced with substantial out-of-pocket costs.22
