The story of Medicare

August 6, 2009

Elizabeth Schulte chronicles the battle to establish a government health care program for seniors--and considers the lessons of that struggle for today.

IF YOU listen to the current debate in Washington over proposals for some kind of national health care reform, the arguments that raged in the lead-up to the founding of Medicare--the government health care program for the elderly, which celebrated its 44th birthday on July 30--echo through to the current day.

When the administration of John F. Kennedy discussed a plan for government health care that would cover people of Social Security age, the American Medical Association (AMA) fought back, along with the insurance and pharmaceutical industries, with a well-funded campaign--complete with a commercial featuring actor Ronald Reagan, who was determined to talk to America about an "imminent threat":

Now, back in 1927, an American socialist, Norman Thomas, six times candidate for president on the Socialist Party ticket, said the American people would never vote for socialism. But he said under the name of liberalism, the American people would adopt every fragment of the socialist program...

One of the traditional methods of imposing statism or socialism on a people has been by way of medicine. It's very easy to disguise a medical program as a humanitarian project...Now, the American people, if you put it to them about socialized medicine and gave them a chance to choose, would unhesitatingly vote against it.

Lyndon B. Johnson signs Medicare into law in July 1965
Lyndon B. Johnson signs Medicare into law in July 1965

The someday-Governor-and-later-President Reagan finished his appeal by asking listeners to write their members of Congress with the warning:

And if you don't do this, and if I don't do it, one of these days, you and I are going to spend our sunset years telling our children, and our children's children, what it once was like in America when men were free.

Are you shivering in your boots? During her doomed vice presidential campaign, Republican "maverick" Sarah Palin brought Reagan's views back into the national debate--nearly half a century on.

Of course, the danger of creeping socialism is a much less compelling argument today among ordinary people than it was during the Cold War. If anything, socialism is becoming a preferred alternative to the mess that capitalism has made of working-class living standards.

Still, one of the familiar arguments from right-wing politicians--and many liberal politicians, for that matter--against a government-run health program is that people don't want the government controlling their lives. Americans, the argument goes, want to make their own decisions about their health care. And they all agree that the free-market system is the best way to guarantee we get the best care possible.

Not only are these conceptions wrong, but they've succeeded in confusing and misleading people about exactly what kind of health care is even being proposed today. The Washington Post recently reported on a health care town hall meeting in Simpsonville, S.C., where a man stood up and told Rep. Robert Inglis (R-S.C.) to "keep your government hands off my Medicare."

"I had to politely explain that, 'Actually, sir, your health care is being provided by the government,' " Inglis told the Post. "But he wasn't having any of it."

That's a pretty drastic example. But it shows just how successful the politicians and the media have been at confusing the national discussion on health care.

IN THE decades before the founding of Medicare in 1965--alongside the Medicaid program that provided coverage to the indigent--the health care debate centered around a more all-encompassing government-run national health care plan. The Roosevelt and Truman administrations both saw several failed attempts at implementing some sort of compulsory national health care program--all of which were opposed by the AMA and the American Hospital Association (AHA).

According to the Physicians for a National Health Program's (PNHP) Karen Palmer, the AMA assessed its members an extra $25 each to resist national health insurance, and in 1945, it spent $1.5 million on lobbying efforts, which at the time was the most expensive lobbying effort in American history. An AMA pamphlet warned, "Would socialized medicine lead to socialization of other phases of life? Lenin thought so. He declared socialized medicine is the keystone to the arch of the socialist state."

Unions largely focused on negotiating health care benefits for their members in individual contracts with companies, devoting fewer resources to the larger fight for national health care.

In 1961, there were 800 commercial health carriers and 40 million individuals enrolled, according to John Geyman in The Corporate Transformation of Health Care. However, only a quarter of the population had health insurance. Two-thirds of people over 65 years of age had no hospital insurance. These statistics spoke to the overwhelming need for Medicare.

In the context of the growing civil rights movement in the South, a national spotlight was cast on Black poverty--and poverty generally--in the United States. At the same time, for its own self-preservation, the Democratic Party was being forced to refashion itself from the party of racist Dixie to a "party of the people." The Johnson administration's launching of its War on Poverty and Great Society programs fit into this transformation.

As Lance Selfa explains in his book The Democrats: A Critical History:

The Democrats won the White House and Congress with overwhelming majorities. The booming economy produced revenue that underwrote an expansion of social welfare spending. Increased welfare spending offered the Democrats the opportunity to throw the Dixiecrats overboard and reconfigure the party.

Johnson's endorsement of the 1964 Civil Rights Act and the 1965 Voting Rights Act pushed the Dixiecrats further toward the Republicans. The administration needed a formula to accomplish two tasks simultaneously: replacing racist votes with Black votes and undercutting Black militants. Johnson's 1964-65 Great Society initiative seemed to offer the appropriate formula.

When Johnson signed Medicare into law on July 30, 1965, he said, "For the first time in the history of America, every senior citizen will be able to receive hospital care--not as a ward of the state, not as a charity case, but as an insured patient."

After winning a solid majority in the 1964 election, congressional Democrats were poised to easily pass anti-poverty legislation like Medicare and Medicaid. But even though they had the big majority and public support they needed for Medicare to sail through--just like today--the Democrats made many compromises to Republicans and the health care industry.

The legislation ended up as a three-layer construction of proposals that included: A) comprehensive hospital insurance covered under Social Security that was proposed by Democrats; B) the Republicans' proposal for a voluntary insurance program for physicians' bills subsidized by federal revenue; and C) an expanded medical welfare program for the poor administered by the states, or Medicaid.

Medicare's impact was immediately felt by poor people around the country, who previously had been cut out of some of the most basic health care services.

And while civil rights were deliberately never discussed during the debate over the legislation, according to Social Security Administration (SSA) commissioner Robert Ball, Medicare also struck a blow against segregation.

Stories of African American patients being denied life-saving services at white-only hospitals, often with deadly results, were routine in the segregated South, even after the landmark Brown v. Board Supreme Court decision. Southern hospitals used the excuse that they were private institutions to avoid the 14th Amendment's equal protection clause.

Civil rights activists had targeted segregation in Southern hospitals. But with the passage of Medicare, hospitals and nursing homes that wanted to receive federal funding would no longer be able to discriminate. A staff of 1,000 SSA and Public Health Services staff people were immediately trained and sent throughout Southern hospitals to inspect hospitals for discrimination, according to Jill Quadagno and Steve McDonald in The New Deal and Beyond.

Undersecretary Wilbur Cohen said 20 years later:

On the day before Medicare went into effect, every hospital in the South, over every drinking fountain, over every bathroom, over every cafeteria, there were signs reading "Whites" and "Colored" for separate and presumably equal facilities. On the day that Medicare went into effect in the South, all those signs and separate facilities began to come down. In one day, Medicare and Medicaid broke the back of the segregated health services.

Cohen is likely exaggerating the immediacy of Medicare's impact on the Jim Crow South, but the story illustrates the undeniable link between poverty and racism in America--and why the challenge to discrimination couldn't be left up to the "states to decide."

The passage of Medicare gave credence to the idea that care for the aging and the poor is society's responsibility. The civil rights and anti-poverty movements infused American society at large--from the streets to the halls of government--with this attitude.

Of course, there was a gap between the rhetoric and the reality of Medicare.

Medical fees were still decided by providers, not the federal government, so costs were allowed to soar. And of course, there were those who found ways to profit off the new program--such as 1992 independent presidential candidate Ross Perot, whose Electronic Data Systems won a contract to computerize Medicare records that made Perot into a millionaire.

Medicare itself was a compromise in that it provided guaranteed health care for only a very targeted--and typically expensive, from the point of view of the medical inustry--group. It could never seriously challenge the power of the industry or offer an alternative to the millions of people whose health was at their mercy.

THIRTY YEARS later, during the Clinton years, the Democratic Party's promise of a "social contract" had faded away, and a new sun rose on the ideas of "personal responsibility" and "belt-tightening." The Clinton-era attacks on anti-poverty programs like Medicare and welfare were more harsh than Ronald Reagan could have dreamed of.

After its botched and half-hearted attempt at health care reform, the Clinton administration went along with the Republicans' 1997 Balanced Budget Act (BBA), spearheaded by House Speaker Newt Gingrich (R-Ga.). In a sharp reversal of Clinton's campaign promise to expand Medicare, the BBA put in place caps on "discretionary spending" for items like Medicare. 1999 saw a decline in Medicare spending for the first time.

The Clinton administration also further privatized Medicare by handing over the delivery of care to private insurance companies, HMOs, with the claim that seniors would supposedly get more care for less money. This, of course, turned out not to be the case. Some 2.4 million seniors were forced to find new coverage, and often to change doctors, when many Medicare Plus Choice plans left the market because they weren't making enough profit.

All this set the stage for the Bush administration's further "modernization"--privatization--of Medicare and the Medicare drug program in 2003.

According to a PNHP study in 2002, Medicare is administered with an overhead of 3 percent, compared to overhead costs for private insurers that are five to nine times higher. Medicare gives a glimpse at the possibility of what a health program would look like that was concentrating on providing health care, not corporate profit.

As single-payer supporters John Geyman and Malinda Markowitz pointed out last year, on Medicare's 43rd birthday:

Amidst this deteriorating landscape, original Medicare stands as a shining example of a needs-based program that has consistently served the public interest. Despite being weakened by privatizing, it gives us a solid foundation for real health care reform, when access to necessary health care is even more difficult than in the 1960s.

It is time to expand Medicare as a social insurance program for all Americans through a single risk pool of all 300 million of us.

Today, millions go without care, and millions more who actually have health insurance live in fear of getting sick enough that their insurance is put to the test. The same outcry in the 1960s that demanded something be done for sick people can be heard today.

We shouldn't have to settle for compromises. That's why our demand is Medicare for all.

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