Why Medicare Part A and Part B, as Well as Medicaid?

Robert J. Myers

In the years before the Medicare and covered by private health insurance. This Medicaid programs were enacted in 1965, restricted version of compulsory social various groups had strong ideas about their insurance became the foundation for what possible structures. At one extreme were is now Part A of Medicare. those who believed that Medicare should Proponents of the public-assistance-only be a social insurance program covering all approach, realizing that they could not health care for the persons covered, on a defeat a social insurance plan, supported, compulsory basis, financed by payroll as a counterproposal, the Byrnes Bill, a taxes, with a public assistance program as a compromise program that would cover all safety net. At the other extreme were those physician and other services but on a vol- who supported having only a public assis- untary basis (to accommodate the strong tance program. Also involved in the debate views of the AMA), financed partly by the was the American Medical Association enrollees, with the remainder of the cost (AMA), which opposed any program, coming from general revenues. And so whether social insurance or public assis- was born the foundation for Medicare Part tance, if the plan were compulsory, on the B, whose benefit and financing provisions grounds that this would eventually lead to were similar to those of the Byrnes Bill, socialized medicine. except that the hospital and related bene- The final legislative process was a matter fits were carved out (because they would of political compromise and was not by any be covered in Part A). means dictated by actuarial principles. Meanwhile, the AMA had sponsored a Those who believed in the full-social-insur- third proposal, popularly known as ance approach generally supported a plan Eldercare, that essentially would have called the King-Anderson Bill. They expanded the existing Federal-State attempted to gain the support of other Medical Assistance for the Aged Program groups by limiting their proposal in various and would have provided subsidized pri- ways. For example, it was proposed that vate health insurance for low-income per- physician services (other than those pro- sons and a partial-payment plan for others. vided by hospital staff) be covered only for This proposal became the basis for inpatient surgery. Also, coverage would, Medicaid. as a compromise, be limited to persons age The three separate health-benefits 65 or over. At no time was it provided that approaches were viewed by the various out-of-hospital prescription drugs would be groups as competing proposals. In order covered, primarily because, at that time, to get a broad base of support in the House such costs were quite low and were seldom of Representatives, however, Ways and Means Committee Chairman Wilbur D. The author was the Chief Actuary of the Social Security Mills proposed a new bill that would, inso- Administration (SSA) from 1947 to 1970. (SSA administered the Medicare and Medicaid programs before the Health Care far as possible, incorporate the essential Financing Administration [HCFA] was created in 1977.) The features of all three of the major pending views expressed in this article are those of the author and do not necessarily reflect the views of SSA or HCFA. proposals—the King-Anderson Bill, the

HEALTH CARE FINANCING REVIEW/Fall 2000/Volume 22, Number 1 53 Byrnes Bill, and Eldercare. This politically received, in essence, all that they wanted. logical approach took virtually everybody Part A provided for inpatient hospital ser- by surprise, including the sponsors of the vices, Part B provided virtually total cover- three approaches. Mills’ consolidated pro- age for physician services—because the posal eventually prevailed, thus resulting vast majority of persons who could be cov- in today’s Part A, Part B, and Medicaid, ered elected to do so—and Medicaid complete with the well-known disparities in served as the safety net. Thus, the coverage, benefit, and financing provi- Medicare and Medicaid programs were sions. not systematically designed and enacted In summary, those who favored a com- but were instead the direct result of long plete-social-insurance approach for the pro- years of evolution, debate, and political vision of all types of health care services compromise. for persons age 65 or over (along with a Reprint Requests: Robert J. Myers, 9610 Wire Avenue, Silver public assistance program as a safety net) Spring, MD 20901.

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