Medicare’s Birthday: A Failed Centralized Program Turns 50

Fifty years ago, President Lyndon Johnson traveled to Independence, Mo., to sign legislation creating Medicare and Medicaid in the presence of fellow Democrat and former President Harry Truman, who during his presidency led unsuccessful efforts to establish a national health insurance system.

The battle over the legislation was long and bruising, with conservatives including then-General Electric spokesman Ronald Reagan warning it would lead to socialized medicine.

So on this 50th anniversary of Medicare and Medicaid, as our nation struggles with its latest effort at health reform, it’s a good time to reflect on the programs’ successes and failures.

Medicare and Medicaid passed with broad bipartisan support. Medicare was a new federal program designed to provide health coverage to senior citizens over age 65. Medicaid, something of an afterthought, would be a joint federal-state program to assist the poor.

The legislation passed the Senate with 57 Democratic and 13 Republican votes and the House with 237 Democrats and 70 Republicans. So both parties had a stake in fixing the program problems that inevitably arose.

Proponents saw the programs as major steps forward in expanding access to health coverage — moving toward their ultimate goal of a single-payer national health care system. They certainly have made progress toward that goal.

In 1965, only about half of seniors and very few poor Americans had health coverage. Today, Medicare covers 46 million seniors and 9 million disabled Americans, and Medicaid covers nearly 70 million lower-income people.

Critics of the 1965 legislation warned that both programs would spend much more than supporters predicted, that price controls and rationing of care would follow and that the quality of care would eventually suffer. All of the warnings have proved correct.

Take Medicare. In 1965, the House Ways and Means Committee estimated that Medicare Part A, which covers hospital bills, would cost $9 billion a year by 1990. But the actual cost after the first 25 years was $67 billion, and that didn’t include Medicare Part B, which primarily covers outpatient costs.

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About the author

Grace-Marie Turner is president of the Galen Institute, a public policy research organization that she founded in 1995 to promote an informed debate over free-market ideas for health reform. Full biography