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by Causes | 7.30.17

On July 30, 1965, President Lyndon B. Johnson signed the Social Security Amendments of 1965 into law, which created America’s first federal health insurance programs — Medicare and Medicaid. They were part of LBJ’s Great Society, a collection of domestic policies and programs his administration pursued which set a goal of eliminating poverty. Medicare was conceived to provide health insurance for people over age 65, while Medicaid offered coverage to poor families.

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After more than a half century of service, Medicare is in need of an overhaul as spending on insurance under the program is expected to outpace incoming tax revenue. Given the distance between Democratic and Republican proposals on the issue, it’s likely that safety net programs such as these will remain the political flashpoint well into the future.

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Why Medicare and Medicaid?

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Social insurance programs had been a source of debate in U.S. politics long before LBJ advanced these particular proposals. When Theodore Roosevelt unsuccessfully ran for president in 1912 as the Progressive Party candidate, he included a social insurance program for “sickness” in the party platform. His cousin, Franklin D. Roosevelt, tried to add public health insurance to the bill that created Social Security during his first term as president but it was ultimately left out due to the objections of groups representing healthcare providers.

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FDR’s successor, Harry Truman, became the first president to endorse universal health insurance, but he, too, failed in enacting legislation to make it happen. The Kennedy administration did create a program that allowed states to receive matching federal funds to provide health insurance to the elderly, but not all states participated in it.

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LBJ greeted by Harry Truman in Kansas City before signing Medicare at Truman Library, tomorrow 1965: #LBJL pic.twitter.com/Nzj36hslNw
— Michael Beschloss (@BeschlossDC) July 29, 2016\n

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What did it do?

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Following landslide victories in the 1964 elections that expanded their congressional majorities even further, Democrats introduced LBJ’s Medicare proposal when Congress convened in 1965 as the first bill of the session in both the House and Senate. Johnson’s proposal faced competition from a Republican proposal that would have been optional for the elderly, and separate legislation drafted by a healthcare industry trade group, but LBJ’s preferred policies ultimately won out.

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Medicare was to be funded by the federal government and offer support to seniors age 65 and up through two parts — Part A provides hospital insurance for the elderly while Part B offers supplementary medical insurance. Medicaid directed states to create welfare programs that would provide health insurance to low-income Americans. It provides federal funds to match the money put forward by states to cover those costs. Funding for both programs primarily comes through payroll taxes.

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After the House and Senate approved the Social Security Amendments by wide margins despite some residual opposition, Medicare and Medicaid headed to LBJ’s desk for signature. Only it didn’t exactly go to his desk. Johnson arranged for a special signing ceremony to be held in Independence, Missouri — the hometown of former president Harry Truman — whom LBJ credited with “planting the seeds of compassion and duty which have today flowered into care for the sick and serenity for the fearful.” For his efforts, Truman was enrolled as the inaugural Medicare beneficiary at the ceremony, and LBJ signed as the witness on his Medicare card.

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Photo 📷 flashback: LBJ signs #Medicare & #Medicaid into law at @TrumanLibrary, July 30, 1965. pic.twitter.com/Q9zOM5jOr7
— LBJ Library (@LBJLibrary) July 30, 2016\n

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What impact has it had?

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When Medicare went into effect in 1966 it covered 19 million Americans and by 2015, over 55 million Americans were covered by the program. Medicaid has experienced similar growth in enrollment over time, jumping from 4 million in 1966 to about 70 million today.

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According to data from our partners at USAFacts, a non-partisan civic data initiative, Medicaid spending nearly doubled from 2004 to 2016 alone, climbing from about $291 billion to $566 billion. The growth in Medicare spending was even more pronounced, more than doubling from $311 billion to $672 billion over that period which reflects the aging U.S. population.

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Medicare/Medicaid together, in FY 2015, totaled about $864 billion - approx 24% of federal spending - growing rapidly as baby boomers retire
— West Wing Reports (@WestWingReport) July 30, 2016\n

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There’s a bipartisan recognition of the need for Medicare reform to keep the safety net program alive for future generations, and Congress has taken action on some modest changes.

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But in terms of the two parties’ long-term visions for Medicare, a significant gap exist, as evidenced by the their 2016 platforms. Democrats called for an expansion of Medicare to give people the choice to opt-in at age 55 rather than waiting until 65, and for caps on Americans’ monthly prescription drug costs. On the other side of the aisle, Republicans are advocating for structural changes to the program and a “premium support” option that’d allow beneficiaries to use their benefits to buy private Medicare plans.

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— Eric Revell

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(Photo Credit: White House Press Office / Public Domain)

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