History of Medicare

  • Medicare is a federally-funded national insurance program founded in 1965.
  • Parts A, B, C, and D offer coverage for a wide variety of medical benefits.
  • Medicare supplement plans, such as Medigap or Medicare Advantage, can additionally cover medical expenses.
  • As of 2018, Medicare has provided health insurance coverage to nearly 55 million people.

Medicare is the United States federal government’s national social insurance program. The program was officially enacted by Congress in July of 1965 under Title XVIII of the U.S. Social Security Act. Medicare has four parts. Part A covers hospital insurance. Part B covers medical insurance; it is typically used in outpatient or office visit settings. Most Medicare beneficiaries do not pay monthly premiums for Part A coverage. Part B coverage, on the other hand, requires a monthly premium in addition to co-pays and co-insurance fees in some cases.

Part C, also called Medicare Advantage, was formalized in 1997. It offers everything offered by Parts A and B, along with the option to add additional benefits if the enrollee wishes to purchase them. Part D is a prescription drug component that can work alongside Original Medicare to help seniors pay for their increasingly expensive prescription drug medications.

Medicare is primarily funded by a payroll tax as well as monthly premiums and charges to beneficiaries. It exists to provide health insurance for Americans 65 and older who have paid into the system via the payroll tax over the course of their working lives. Medicare also provides coverage to some beneficiaries who are under the age of 65 and disabled. The program covers an average of half of the healthcare charges incurred by its beneficiaries, who are then responsible for paying the difference either through supplemental insurance or out-of-pocket.

Medicare was instrumental in the desegregation movements of the mid-1960s. The program made payments to healthcare providers including physicians, hospitals, and waiting rooms conditional upon desegregation of facilities.

Medicare Changes Over The Years

The program has undergone several changes and expansions during its 50-year history. In 1972, the federal government expanded program benefits to include speech, physical, and chiropractic therapy. During the 1980s, the program added optional payments to Health Maintenance Organizations (HMOs) as well as coverage for people under the age of 65 with permanent disabilities. In 1980, Congress passed the Omnibus Reconciliation Act of 1980. This act expanded home health services and brought Medicare Supplemental Insurance (also called Medigap) under federal oversight. In 1984, the government added hospice benefits to Medicare. This came about because beneficiaries were living longer thanks to advances in medical science and technology.

During the 1990s, eligible beneficiaries received more coverage options on the private market thanks to Part C. Part C plans are sold and serviced by third-party companies under federal oversight and offer additional benefits beyond Original Medicare Part A and Part B. These include dental and prescription drug coverage. In 2003, the Medicare Prescription Drug Improvement and Modernization Act of 2003 was signed into law, adding an optional prescription drug benefit known as Part D to its list of services. Part D took effect three years later in 2006.

As of 2018, Medicare has provided health insurance coverage to nearly 55 million people. This number includes 51 million people over the age of 65 and nine million younger individuals with disabilities. The program currently faces many financial challenges because of rising healthcare costs and a decreasing number of workers per each enrollee. Medicare enrollment is predicted to rise from its current total to nearly 80 million people in 2030, while the number of employees is expected to decline.

by Lindsay Malzone, Lindsay Malzone is the Medicare expert for Medigap.com. She's been contributing to many well-known publications as an industry expert since 2017. Her passion is educating Medicare beneficiaries on all their supplemental Medicare options so they can make an informed decision on their healthcare coverage.