On July 30, 1965, 50 years ago this coming Thursday, President Lyndon Johnson signed Medicare and Medicaid into law, creating some of the biggest changes in social programs in America’s history.
The politics surrounding Medicare and Medicaid remain contentious. Several red states are still refusing to expand Medicaid under the Affordable Care Act, claiming it constitutes yet another excessive expansion of government.
While Republicans backed away from Wisconsin Rep. Paul Ryan’s plan to radically overhaul Medicare, GOP candidate Jeb Bush just brought the issue right back into the campaign by telling a Koch brothers event in New Hampshire that Congress should phase out the program. “We need to make sure we fulfill the commitment to people that have already received the benefits,” he said, “that are receiving the benefits. But we need to figure out a way to phase out this program for others and move to a new system that allows them to have something, because they’re not going to have anything.”
Faced with an immediate backlash that he was veering far right, Bush backed off and said his statement was taken out of context.
Bush was picking up on Ryan’s claim that Medicare won’t have enough money to pay for benefits by 2026, which ignores the fact that adjustments can be made to the revenue stream of the program that would keep it solvent (there have been many times since 1965 when projections indicated a shortfall and Congress and the president resolved the problem through adjustments to taxes and benefits, such as when Ronald Reagan was president in 1983).
It also ignores the fact that the recent report by trustees of Medicare includes much more favorable projections than the one on which Bush and Ryan are relying. Whereas in 2005 they projected that spending on Medicare would increase to 13% of gross domestic product by 2080, now, as a result of a number of factors including Obamacare, the projections are down to 6% of GDP in 2090.
On the anniversary, Americans should take this moment to look at some lessons from the history of those policies.
Fifty years ago, liberals were optimistic the passage of Medicare and Medicaid would transform health care. The program’s founders hoped to end one of the biggest policy problems of the post-World War II period: the fact that, as health care costs started to skyrocket for older Americans with advances in medicine and technology, a huge percentage of the elderly lacked access to adequate insurance.
Besides tackling this immediate problem, liberals hoped the passage of Medicare would create an opening wedge for national health care insurance, a proposal that had been defeated several times as a result of the fierce opposition of the American Medical Association.
Though liberals fell short of their ultimate goal, with the political fallout from Vietnam getting in the way, Medicare and Medicaid did significantly remake America’s health care system, and in ways that were not even anticipated by the creators.
Medicare covers almost 54 million Americans and constitutes 14% of federal spending; Medicaid covers 70 million people.
Today, defenders of President Obama’s signature legislative achievement remain anxious about the future of the program. Although the constitutional threat to ACA seems to have passed with the Supreme Court’s ruling last month, there is still a lot to be worried about: Will the ACA evolve into a robust program like Social Security or will it become a fragile policy such as the welfare program Aid to Families with Dependent Children (dismantled in 1996) that might come undone over time?
Will public opinion eventually become more supportive of ACA or will Republican attacks on “Obamacare” gradually win over the hearts and minds of the electorate? Will Republicans, if they capture the White House, be able to start retrenching the policy? Will Democrats and moderate Republicans be able to address some of the structural flaws in the design of the program, including the inadequate price control mechanisms?
Fortunately for ACA, the 50-year history of Medicare and Medicaid offers some encouraging answers.
Public policies can be improved over time
One of the big flaws in the Medicare legislation Congress enacted in 1965 was the failure to impose almost any regulatory mechanisms on medical decision-making and the payment of physicians. This hands-off approach had been seen as essential to neutralizing the opposition of the American Medical Association. In the middle of the conference committee deliberations over the final bill, House Ways and Means Committee Chairman Wilbur Mills engineered a crucial compromise whereby hospitals and doctors would determine what the “reasonable and necessary rate” would be for billing the government for their services.
But the existence of the programs changed the dynamics of what was possible. As hospital costs rose in the coming decade and placed pressure on the federal budget, political support emerged for establishing government rates on what hospitals and physicians could charge for specific services. In 1984, the government introduced a payment system for hospitals where the government used a stronger hand in setting prices and eight years later launched the use of a similar system for compensating doctors.
Despite all the fire directed against the program, Medicare spending has grown at a somewhat slower annual growth rate than private health care between 1969 and 2012 (7.7% annual rate compared to 9.2% annual growth rate in the private sector).
Benefits that are initially fragile can become strong
When Johnson signed the Social Security Amendments of 1965 into law, Medicaid seemed like a minor program compared to Medicare. Medicaid was a means-tested program akin to welfare, designed to provide health care to the poor. The states would retain a big role in administering the benefits, and in a number of states there was resistance to implementing the program. There were 12 states that hadn’t signed up for Medicaid as late as 1969 (Arizona would finally join in 1982).
But this changed dramatically over time. Today, many Americans consider Medicaid to be an entitlement. Once the program was up and running, states like New York vastly expanded benefits and eligibility beyond all expectations. Over the coming decades, the courts took an aggressive position toward inscribing Medicaid as a right, a benefit that certain Americans were entitled to receive and not a privilege.
Although the liberal hope that Medicare and Medicaid would be the basis for a single-payer national health insurance program did not become reality, the existence of the programs did serve as a foundation for the Affordable Care Act and became the mechanism through which to enroll millions of uninsured.
As a result, Medicaid is now considered an entitlement for those who are eligible to receive benefits, and it is a program that is hugely popular. While Medicaid began as a program modeled on welfare that was highly vulnerable to political attack as a program that just benefited “the poor,” this is no longer the case.
Health care providers and the states became dependent on the federal funds that were attached to the program. Other constituencies such as children were gradually brought into coverage in 1997. Health care providers and state governments became dependent on the federal funds that were attached to the program. Medicaid, like Medicare and Social Security, can be seen as a third rail in American politics. In many red states that still have not expanded Medicaid under ACA, Republicans have been split as governors from the GOP are pushing their state legislatures to lay down their arms and accept the federal funds.
Policies can create strong constituencies
Although Medicare and Medicaid started in a highly contentious environment, with opponents like Ronald Reagan branding the programs as “socialized medicine,” the policies stimulated strong public support and interest groups that would defend the programs from attack in the future. Unlike civil rights, these two programs did not have a massive grass-roots movement pushing for the programs to be created. Organized labor was the most important lobbying force in 1965.
After Medicare and Medicaid were in place, however, the benefits changed public opinion drastically. According to the political scientist Andrea Campbell, opinion shifted toward support of these federal benefits and an expectation that they would continue. Interest groups formed to protect the programs.
While health care had been one of the most contentious issues of the 20th century, Medicare and Medicaid commanded overwhelming support by the time the 21st century began. According to a recent poll by Kaiser, the public, by a whopping margin of 2 to 1, believe in keeping Medicare in its existing form and opposing any wholesale reform. 90% of those polled who use Medicare or Medicaid reported favorably about their experiences.
Many people laughed when some conservatives attacked the proposed savings to Medicare by saying, “Take your government hands off my Medicare,” but the comment was not that ironic. Total opposition to health care had been rendered impossible.
Government can work
The most important accomplishment of Medicare and Medicaid was to solve the original problem that fueled its creation. Whereas about half of elderly Americans had health insurance in 1965, in 2015, there was only a minute percentage of the population who faced this problem.
The programs have been far from perfect and there is considerable room for reform. The pressures of an aging population and fast growing health care costs will strain the system. The Congressional Budget Office projected that Medicare spending will increase from 3% of GOP in 2014, Kaiser reported, to 4.7% by 2040 and 5.5% in 2015.
But the bigger message from the history of these programs is that government can be incredibly effective in tackling health care problems, and policies that start in controversial fashion can gain strength over time. While conservatives like Bush still like to argue that government doesn’t work, Medicare and Medicaid did.
