The birth of Medicare and Medicaid in 1965 was a feat of legislative mastery. Before Medicare and Medicaid, the federal government had no direct involvement in healthcare other than for members of the armed services and veterans. An invisible political and policy wall had prevented federal participation in providing healthcare for individual US citizens. If one admires bold legislative achievement, overcoming that barrier was it. The enactment of Medicare was a significant attainment because it breached the wall that had existed between the federal government and the medical care system. But consistent with the process of health policymaking discussed in this text, the birth of Medicare and Medicaid also was built on some elements of health policy already in place.
There were two main actors in this legislative and political triumph. The first is the thirty-sixth president of the United States, Lyndon B. Johnson. President Johnson had been majority leader of the US Senate earlier in his career. He was elevated to the presidency upon the assassination of President John F. Kennedy, for whom Johnson was vice president. Johnson had an outsized personality and an uncanny ability to foresee others’ political interests and ambitions. Those characteristics gave him a remarkable ability to bend others to his will. He knew the details of the legislative process and was unabashed about pushing it to the limit to get what he wanted. The other major player in this drama was Congressman Wilbur Mills (D-Ark.). Mills was an innately conservative man from a conservative state. Legend has it that the Harvard Law School graduate spent many evenings at home reading the tax code. Not only was he an expert in the legislative process, but he had a unique and broad understanding of the Internal Revenue Code. As chairman of the Ways and Means Committee, Mills stood as a titan in the legislative process. At the time, Congress was dominated by Democrats from Southern states. In this respect, Mills was not only in the mainstream but a leader.
When Mills and Johnson began their alliance, which would ultimately produce Medicare and Medicaid, the debate about governmental involvement in healthcare was not new. The concept went back as far as President Theodore Roosevelt’s era in the first part of the twentieth century, as he advocated for a number of health-related initiatives during his career. President Franklin Roosevelt had decided against including healthcare in the original Social Security Act in 1935 because he thought it would be too controversial. When President Harry S. Truman proposed national healthcare in 1949, the proposal was blasted as “un-American” by conservative opponents.
Throughout most of the 1950s, employer-sponsored insurance grew because of (1) favorable tax treatment in the Internal Revenue Act of 1954 for companies that provided insurance, and (2) demands for better healthcare coverage from organized labor in negotiations with employers. The combination of these events had a chilling effect on the idea of national health insurance. But as some members of Congress in the second half of the decade observed, people over 65 required nearly twice the amount of hospital care than younger people. They became proponents of an idea to provide hospital care for Americans over the age of 65. That population—then and now—mostly lived on a fixed income, and many could not afford the high cost of hospitalization. Further, the liberal proponents at that time put their proposal under the Social Security Administration so they could argue they were merely expanding an existing program using the Social Security payroll tax. Thus, the concept of “Medicare” became part of the lexicon in the debate.
In 1960, responding to political pressure to provide healthcare coverage for elderly Americans and in an effort to forestall the drive for Medicare, Congress enacted the Medical Assistance for the Aged Act, a plan named for its two sponsors, Mills and Senator Robert Kerr (R-Okla.). Kerr-Mills was a fairly modest program: it provided insurance for elderly Americans who were also poor. The program’s benefits were administered by the states to avoid direct federal engagement in medical services. The federal government provided modest matching funds to supplement state funding and support state management, thereby enabling the states to provide care for the indigent elderly. Indeed, the program was so very modest that some considered it ineffectual. Only 28 states adopted it and only a small fraction of the nation’s elderly actually received any benefits (Fine 1998).
The larger Medicare proposal languished for several years during the late 1950s and into the early 1960s, despite the fact that President Kennedy campaigned in support of it as part of his campaign in 1960. When he proposed it, however, even with his energetic support, conservative southern Democrats in Congress led by Mills defeated it. Mills was steadfast in refusing to allow various Medicare proposals to come up for a vote in his committee. The demise of the Kennedy administration proposal was facilitated by the American Medical Association (AMA), which hyped that Medicare would come between patients and hospitals. The alliance between the AMA and Mills was strengthened by the chairman’s innate fiscal conservatism. He was concerned about potential runaway costs of the program.
Even when Johnson became president in November 1963, despite his determination to pass Medicare, Mills and the conservative Democrats in Congress remained intransigent. The election of 1964, however, changed everything. The Democrats enjoyed a sweeping landslide victory that resulted in more Democrats in Congress, and those new members of Congress were more liberal—amenable to things like Medicare. So large was the new majority that the leadership changed the ratio of party membership on committees, including Ways and Means. With 295 seats in the house (of 435) and 68 (of 100) seats in the Senate, the balance of power had shifted significantly. This changed the political circumstances in which the Medicare debate would take place. Mills, ever the reader of political tea leaves, saw he would need to change his position or be left on the sidelines. He knew his own party would be able to pass Medicare without him.
Doubts as to whether Mills was really on board persisted because he had previously opposed expansive proposals. He had a long, very clear, record of opposing any form of Medicare. His previous position had been that Kerr-Mills helped states address the needs of the indigent elderly, which was sufficient. Thus, for a time, there was discussion about how to pass the Johnson administration bill over the objections of the Republican minority and even over the objection of Mills himself. The speaker of the House, Carl Albert, told the president he had the votes to simply pass the bill on a party line vote.
Fresh from the glow of that sweeping victory, President Johnson was certain this was the time for Medicare—with or without Mills. He would put the issue on the national agenda. The “with or without Mills” predicate was Johnson’s public position. As it turns out, the president and Mills had been engaged in private conversation about how to pass Medicare. Out of public view, the two longtime masters of the legislative process were plotting the “what” of Medicare and how to get it passed. In 1965, the Johnson administration proposed Medicare to the Congress as a program that would provide for hospital coverage for all of the nation’s elderly. It was one of the first items of business following the inaugural. Pointedly, that proposal was limited to hospital coverage. But the proposal brought several forces into play.
The AMA, fearful that Johnson’s Medicare proposal would create a web of “socialized medicine,” sought to temper the proponents’ ardor by proposing a voluntary system of insurance that would provide coverage for physician services. The scheme would be financed through insurance premiums subsidized by appropriations from the federal government. This proposal was sponsored by a Republican congressman from Wisconsin named James Byrnes, the ranking minority member on Ways and Means. This fact was critically important. The idea of a voluntary system was attractive to the more conservative members of Congress, who wanted to prevent, or at least limit, the federal government’s involvement in healthcare.
Second, some of the more liberal voices in Congress were concerned about the Johnson administration’s proposal: It provided only hospital coverage, and some were afraid of a political backlash from the elderly when they realized how limited the benefits were.
The administration’s proposal would displace the existing Kerr-Mills. There would be no need for a state-administered health insurance program that covered indigent elderly residents of those participating states, since hospital coverage would be provided to everyone over 65 in the Medicare proposal.
This was the foundation, in part, for the enactment of legislation creating Medicare Parts A and B and Medicaid. All of these initiatives represent elements of the Longest model described in chapter 4; they are the products of masterful legislative bargaining between Johnson and Mills. The steps taken by these two men represent agenda setting in the changed political circumstances presented by the 1964 election and a solution to the problem of providing healthcare for the nation’s elderly population. It was, indeed, a window of opportunity.
As the longtime chairman of the House Ways and Means Committee, Wilbur Mills understood the legislative process as well as anyone. Likewise, President Johnson understood the ways of Congress and knew how motivate others to come to his side. The two of them made for a powerful alliance; both knowledgeable about the issue, both experts in the legislative process, and both committed to producing a major legislative win for the new Democratic majority. As history would later reveal, the two of them had prearranged much of what was to take place. Johnson was assiduous in giving credit to Mills, and the process moved ahead as Mills moved his previous position to the affirmative (Blumenthal and Marone 2010).
Various permutations of Medicare had been wafting through the halls of Congress since 1957. While Mills never allowed a vote on any of those proposals, his committee had held extensive hearings. Indeed, by the time the Ways and Means Committee concluded hearings on the Johnson administration proposal, the committee had heard from more than 640 witnesses (Blumenthal and Marone 2010). The concept was pretty well understood: as part of the Social Security Administration, the federal government would finance hospital care for the elderly using a payroll tax.
After the last hearing on the Johnson administration proposal, Mills turned to the Republican Byrnes and said he liked the voluntary approach. Supplementing the voluntary physician practice coverage with the mandatory hospitalization insurance would result in nearly comprehensive health insurance coverage. As if that was not surprising enough, Mills went on to explain that he wanted to marry the two bills and amend the existing Kerr-Mills program. Of course, such a linkage would result in massive new spending. Mills’s concerns were partly assuaged by the fact that the physician portion would be paid for by premiums and general tax revenue, thereby partly dampening the prospects of costs spinning out of control. (Remember, this was 1965; Mills could not have foreseen the runaway costs we experience today.) The cost was not a concern to Johnson, who was committed to finishing the work begun by President Roosevelt’s New Deal.
Conjoining the two pieces of legislation and the existing, amended Kerr-Mills program created Medicare Part A (hospitalization coverage taken from the Johnson administration bill), Medicare Part B (voluntary insurance coverage of physician services taken from the AMA/Republican bill), and Medicaid, drawing from the existing Kerr-Mills, to finance health coverage for the poor on a state-by-state basis.
Even if the plan was expensive, it was a brilliant legislative strategy. Combined into one legislative package, the federal government was committing to providing healthcare coverage for America’s elderly as well as for much of the nation’s indigent population. Seldom are legislative victories so dramatic or so sweeping. Importantly, the inclusion of the Byrnes bill brought a large number of Republicans on board, so the entire package passed with a substantial bipartisan majority, 313 to 115 (five not voting). The Senate passed the bill with several amendments (68–21, 11 not voting) that were dispatched subsequently by Mills in the House–Senate Conference Committee.
President Johnson now gleefully led the implementation process. He had been uncharacteristically quiet publicly during the groundbreaking Medicare debate but active behind the scenes. Now he would lead in establishing these new programs. While Medicare certainly was not universally popular, the broad bipartisan support had endowed both Medicare and Medicaid with a strong air of political legitimacy. The Republican opponents had been prevented from attacking the plan because their ideas were coopted into it, and, consequently, many of them voted for it. Opposition interest groups such as the AMA were cowed into acceptance if not support.
The debate at the time was every bit as acrimonious as the debate over the Affordable Care Act that would occur some 55 years later. The ACA also was a product of a Congress and White House controlled by the Democrats. However, while the views of each side in the Medicare debate were as intensely held then as they were for the later ACA debate, there was a greater sense of comity and a willingness to find some measure of common ground around which a larger consensus would yield a far stronger degree of political legitimacy, thereby establishing a positive legacy. Mills’s ability to incorporate the Republican proposal was shrewd politics to be sure. Because of that, it also resulted in a policy—and a program—that has become a part of the fabric of American healthcare.
Consistent with the process of policymaking described in this section and throughout the text, Medicare and Medicaid will be amended and expanded many times over the decades. For what was intended at the time, both programs can be considered successful. In our current era of seemingly out-of-control costs, however, policymakers, as discussed in the chapters that follow, will once again revisit both of these programs, as well as the ACA.
Blumenthal, D., and J. Marone. 2010. The Heart of Power: Health and Politics in the Oval Office, 2nd ed. Los Angeles: University of California Press.
Fine, S. 1998. “The Kerr-Mills Act: Medical Care for the Indigent in Michigan, 1960–1965.” Journal of the History of Medicine and Allied Sciences 53 (3): 285–316.