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Timeline of the Political History of Medicare
1951: The idea of a national health insurance program
for the elderly is proposed by Oscar Ewing, head of the Federal
Securities Administration. His proposal is based on
the data from the 1950 census showing that the percentage of
aged Americans had grown from 4 to 8% of the population from
1900-1950 and a growing realization that Social Security was
failing to protect them against "the single greatest cause of
economic dependency in old age- the high cost of medical care."
1958-1965: The House Ways & Means Committee and the
Senate Finance Committee hold annual meetings on providing hospital
insurance to the elderly. The hearing become a "battleground"
for groups with competing philosophies on the appropriate role
of the government in providing health care.
1964: Lyndon Johnson (D) wins the presidency in a landslide
victory and the Democrats take the House and Senate by the largest
majorities since 1936.
1965: A new Medicare program with two parts is enacted
under Title XVIII of the Social Security Act, with 'Part A'
covering hospital insurance and 'Part B' covering doctors visits
for the elderly. The bill is a compromise between the
Democrats proposal of a Universal health insurance system covering
only the costs of hospitalization, and the Republican proposal
for a voluntary program paid for by premiums paid by beneficiaries
and government subsidies. In the final version of the bill,
the Ways and Means committee drops the outpatient prescription
benefit proposed under the Republican plan on the grounds of
"unpredictable and potentially high costs." In fact, it is hospital
costs which are most unpredictable and expensive for the individual,
which is likely why they were considered by legislators first
(and have been covered by Medicare Part A since.)
1967-1969: At the request of President Johnson, Secretary
of Health Education and Welfare (HEW) John Gardner establishes
the Task Force of Prescription Drugs. In 1969 the task
force release their findings that expenditures on prescription
drugs have increased dramatically from 1950-1965, with much
of the cost falling "disproportionately on the elderly." They
report to HEW Secretary Robert Finch, recently appointed by
President Richard Nixon (R) that "a drug insurance program under
Medicare is needed by the elderly and would be economically
and medically feasible."
A review committee under John Dunlap, Secretary of Labor and former chair of President Nixon's transitional health team endorses many of the Task Force's recommendations and recommends that the President make a decision on the proposed prescription benefit.
1972: Instead of expanding Medicare to include a separate
prescription benefit, Congress extends benefits to two groups
with particularly high drug costs: the permanently disabled
and patients with end-stage kidney, or renal disease.
The change initiates a pattern of extending Medicare to cover
more groups and treatments, including physician administered
pharmaceuticals, under the existing program rather than expanding
the benefit itself to include prescription drugs which are not
dispensed in a hospital or doctor's office. By 2001 the program
covered 454 physician-dispensed drugs but still did not include
a separate prescription benefit.
1973: HEW Secretary Caspar Weinberger praises the Prescription
Drug Task force before the Senate Health Subcommittee and proposes
regulation to limit drug reimbursement under existing programs
by relying more heavily on generic drugs.
The proposal galvanizes the drug industry and pharmacists who oppose the plan and respond with a flurry of lawsuits. In 1983 the regulations are revised to set "upper-limits" for prescription reimbursement under Medicaid. The issue establishes the pharmaceutical industry as a major player in the debate over a prescription benefit under Medicare and what form it should take.
1976-1982: Despite Democratic control of the Presidency
and Congress, in the 1970's and early 1980's "more pressing
financial problem both inside and outside of health care" such
as the energy crisis, inflation, rising unemployment and spiraling
hospital costs preclude the introduction of a costly new prescription
benefit. Proposals by President Jimmy Carter (D) for
a universal health insurance plan in both 1977 and 1979 are
rejected by Congress as "excessively complex and regulatory."
1982-1983: Congress accepts proposals from the Reagan
administration to establish a new payment system for Medicare
hospital services in which likely costs are determined in advance
(a prospective payment system) and spends much of the rest of
the decade reforming how Medicare pays physicians.
1986-1988: The Republicans lose the Senate
after trying to reduce cost-of-of living adjustments on Social
Security benefits. In his 1986 Inaugural Address, President
Ronald Reagan (R) endorses a proposal from Health and Human
Services Secretary Otis Bowen to extend Medicare benefits to
cover 100% of treatment for serious illness after a $2000 deductible,
and to finance the plan by charging all beneficiaries an annual
flat-rate premium of $59. The President's one stipulation
is that no taxes be raised to finance the benefit. The plan,
an attempt by the Republicans to win back the senior vote, creates
a battle between the White House and the Democratic Congress
who claim that a "new, more expansive plan" is needed.
The initial legislation, drafted from 1987-1988, includes an outpatient prescription benefit proposed by House Speaker Jim Wright (D-TX), who sees the benefit as "a way to put a Democratic stamp on what had been a Republican initiative." Chairman of the Senate Finance Committee Lloyd Bentson (D-TX) accepts a drug benefit for catastrophic coverage under which Medicare will cover 80% of drug costs after $600 is met.
1988: Reagan signs the Medicare Catastrophic Coverage
Act (MCCA), including an outpatient prescription benefit, into
law. P.L. 100-360 is the first major expansion of Medicare since
the creation of the program in 1865. To finance the
expensive benefit, legislators raise the monthly Part B premium
for $4 for all beneficiaries and create a progressive payment
system in which individuals who owe more that $150 in Federal
Taxes "would pay a 'supplemental' premium of 15 percent on the
amount of tax they owed, capped at $800 for individuals and
$1600 for couples."
The AARP finds "opposition to the bill among all income
groups," because it fails to cover long term nursing home care,
see by many as "the leading cause of catastrophic medical expense
for elderly people." The progressive system of financing the
MCCA is a major source of opposition. Wealthy seniors
oppose the bill because it meant that one third of the population
would pay more than 2/3 of the cost of the benefit. Retirees
receiving outpatient prescription coverage from employer pension
plans or Medigap policies complain that because the plan is
mandatory they are being forced to pay again for coverage that
they have already paid for directly or indirectly (through money
deducted from their wages throughout their working years.) Those
who would have benefited most from the benefit, the poor and
uninsured elderly, lacked the organization and political clout
to fight to save the act.
1989: Amidst widespread public criticism of the MCCA
led by powerful and well financed interest groups like the Committee
to Preserve Social Security and Medicare, Congress repeals most
of the bill, including the outpatient prescription benefit.
1993: A task force under First Lady Hillary Clinton
releases a 1,342 page long bill known as Clinton's Health Security
Plan, which emphasizes a cost-controlling strategy of "managed
competition" combined with some regulatory measures such as
incentives to use generic drugs. The plan proposes
a guaranteed national benefits package for Americans under 65
and a prescription benefit under Part B of Medicare. The new
benefit would be financed by adding $11 per month to the premium
for Part B and by allowing Medicare to use its power as the
world's largest drug purchaser to negotiate prices from competing
suppliers. Everyone in a geographic area would be in the same
risk-sharing pool with private insurance companies competing
to offer health insurance.
1994: Clinton's Health Security Act dies in the face
of growing public opposition and criticism from opponents that
it is too complex and will create excessive government bureaucracy.
The Health Insurance Association of America immediately
opposes the plan and famously launches a $3 million dollar ad
campaign featuring a married couple named Harry & Louise to
convince older Americans that they will lose control over their
healthcare. There was concern that the planning meetings were
held behind closed doors rather than open to the press and the
public.
1997: The Balanced Budget Act cuts projected Medicare
spending, and creates Medicare+ Choice (Part C), under which
beneficiaries are asked to choose between traditional fee-for-service
Medicare, Health Maintenance Organizations (HMOs) and preferred-provider-organizations
(PPOs). Designed to offer coordinated care, and lower
the overall cost of Medicare by fostering private competition,
many HMO's have not found it profitable to continue participating
in Medicare; from 1999-2003 the number of private plans participating
in the program went from 309-188, causing remaining plans to
increase premiums and reduce premiums and leading to 2.4 million
people with Medicare to lose their HMO coverage between 1999
and the beginning of 2004. A positive result of the bill is
a reduction in fraud due to payment reforms and leading to an
overall reduction in Medicare spending. The Balanced
Budget Act also establishes the National Bipartisan Commission
on the Future of Medicine. Unable to get the necessary
vote on any recommendation considered, they disbanded without
issuing a report or recommendation-the first for a committee
to do so in modern history.
1999: Senators John Breaux (D-LA) and Bill Frist (R-TN)
and Congressman Bill Thomas (R-CA), who served together on the
Bipartisan Commission on the Future of Medicine, propose legislation
creating a "'competitive' Medicare premium system," under which
private HMO's would compete with the traditional fee-for-service
program to provide coverage to Medicare beneficiaries.
While the Breaux-Frist proposal offers a prescription benefit
as a "inducement" for beneficiaries to switch to private plans,
more liberal members of Congress and President Clinton (D)--
in his 1999 State of the Union address-- introduce proposals
for an independent drug benefit under traditional Medicare.
2000: The idea of a Medicare prescription benefit is
an important issue in the 2000 presidential campaign with Al
Gore (D) proposing a voluntary benefit under Medicare to protect
the poor and chronically ill against catastrophic costs and
George W. Bush (R) proposing a federal subsidy to assist poor
seniors in buying coverage through private companies.
Both these plans and proposals by other candidates are based
on projected budget surpluses before the economic downturn of
2001.
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