Medicare and Medicaid Act

When Congress passed Medicare in the summer of 1965, the argument over it was twenty years old. Harry Truman had asked Congress for a national health insurance plan, opponents attacked it as socialized medicine, and by the end of his presidency he had backed away from universal coverage. Planners in the Social Security system turned to a narrower target: insurance for Social Security beneficiaries. Their case grew stronger each year. The aged population rose from about 12 million in 1950 to 17.5 million in 1963, hospital costs climbed about 6.7 percent a year, several times the rise in the cost of living, and private insurers treated older people as a bad risk.

Between 1960 and 1965 dozens of proposals came before Congress, with testimony from the American Hospital Association, the American Medical Association and the AFL-CIO. The law that emerged added Title XVIII to the Social Security Act, with hospital insurance for people 65 and older (Part A) and supplementary medical insurance (Part B). Medicare was funded by a tax on employees' earnings, matched by employers. Medicaid, paid for by the states and the federal government, offered health insurance to people with limited income; at first it covered people who received cash assistance.

Lyndon Johnson chose to sign the bill at the Truman Library in Independence, Missouri, to credit Truman's early effort. On July 30, 1965, he flew there with Mrs. Johnson, AFL-CIO president George Meany, Health, Education and Welfare Secretary Anthony Celebrezze, Governor John Connally of Texas, 13 senators and 19 representatives. After brief remarks he signed the amendments and gave the first pen to Mrs. Truman and the next to the former president.

More than half of older Americans had no health insurance when the law passed, and nearly 20 million people enrolled in Medicare in its first three years. Medicare also forced change inside hospitals. Hospitals had to comply with Title VI of the Civil Rights Act to receive Medicare payments, and a 2005 review in CMS's Health Care Financing Review reports that racial segregation in hospitals ended within four months of the program's start in July 1966. Elderly Black patients had been less likely to be hospitalized; the gap narrowed and within a decade had largely closed. In 1972 Congress extended Medicare to people with disabilities and to people with end-stage kidney disease who needed dialysis or a transplant.