Medicare at Age 50: Building on Its Success

By Nancy Altman

Medicare — signed into law fifty years ago, on July 30, 1965 — was supposed to be just the first step.

For the fifty years before Medicare’s enactment, progressives had fought unsuccessfully for universal, government-provided health insurance. In 1912, President Theodore Roosevelt’s Progressive Party platform advocated universal, government-sponsored, health insurance, but he was defeated in his quest for another term as president. In 1917, the California legislature approved universal health insurance, and the governor supported it, but a 1918 ballot resolution defeated the measure after a massive, well-financed business and physician-fueled campaign against it. President Franklin Roosevelt seriously considered including national health insurance in his 1935 Social Security legislation, but decided against it out of fear that it would bring down the entire legislative package. President Harry Truman made universal health insurance a top priority, but got nowhere.

The five-decade long history of defeat convinced activists to shift to an incremental approach. They decided to start with a sympathetic group and debated which one that should be. The top candidates were seniors and children. On the one hand, covering children was relatively inexpensive and could lead to a lifetime of better health. On the other hand, seniors were most in need of health insurance and were already used to and supportive of Social Security’s government-sponsored wage insurance. And they voted.

So the decision was made to start with them. The expectation was that, after Medicare was enacted, children and others would be quickly added. And, indeed, just seven years later, in 1972, President Richard Nixon signed into law legislation which extended Medicare to people with serious and permanent disabilities.

But then came Watergate, distrust of government, and President Ronald Reagan’s famous declaration, “Government is not the solution to our problem; government is the problem.” Expansion of Medicare to children or other demographic groups disappeared from the public agenda. But the need for universal high-quality health care, efficiently provided, did not.

Conservatives and centrist Democrats, increasingly in control, looked for alternative approaches. Inclined toward private sector solutions but recognizing that some limited government role was essential, they favored private sector health insurance and savings supported by favorable tax treatment. For those who fell through the cracks and who were deemed worthy, they favored means-tested health insurance provided at the state level, with federal support.

Those are the solutions that have dominated since 1972, despite the obvious advantages of simply expanding Medicare. Means-tested Medicaid, included in the same 1965 legislation that enacted Medicare, was expanded every few years, most recently as part of the Affordable Care Act in 2010. The means-tested State Children’s Health Insurance Program (CHIP) was enacted in 1997. And, the Affordable Care Act authorized state exchanges offering private health insurance subsidized with income-tested, government subsidies. During these decades, the tax expenditure on health care insurance grew from the fourth largest tax expenditure in 1986 to the largest today — at a loss of revenue of over $200 billion a year. And during this same period, conservatives amended Medicare to include private health insurance and means-tested elements.

But these methods of providing health insurance are vastly inferior to universal, government-sponsored health insurance — essentially, Medicare for All. Universal, government-sponsored insurance is the most effective and efficient way to cover everyone. Insurance is least expensive when it covers the most people; the large size of government-sponsored health insurance provides economies of scale and the greatest ability to negotiate over prices and control costs. Moreover, unlike private health insurance, a government plan has no marketing costs and no high CEO salaries. It can provide health care less expensively and more efficiently for everyone. For these reasons, every other industrialized country provides universal coverage, spends less as a percentage of GDP, and produces better health outcomes.

But we don’t have to look to other countries to see the advantages. Medicare covers seniors and people with disabilities, people who, on average, have the worst health and the most expensive medical conditions, requiring the largest numbers of doctor and hospital visits with the concomitant largest number of health care claims. Yet, Medicare’s administrative costs are the lowest around. Medicaid, whose administrative costs vary from state to state, is less efficient than Medicare, because its coverage is statewide, not national, and it must impose complicated and expensive means testing, Even with that, both Medicare and Medicaid are significantly more efficient than private health insurance. Compared to Medicare’s administrative costs of just 1.4 percent, the administrative costs of private health insurance sponsored by very small firms or purchased by individuals can run as high as 30 percent. Even the administrative costs of health insurance sponsored by large companies typically run around 7 percent. Read More of this story.