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Medicare is the nation’s social health insurance program for American ages 65 and above and disabled younger persons. It consists of four parts ranging from A to D. Part A covers all the hospital care services to persons above the age of 65. Part B covers for the outpatient medical services. Part C deals with the services offered by private health centers, and part D covers outpatient drug prescriptions. This paper intends to discuss the history of Medicare up to 2003 and changes that it is likely to cause in the social security program and the US citizens as a whole.

History of Medicare until 2003. On 19 November 1945, Harry S. Truman, the US President, proposed a prepaid medical insurance plan for all people through the Social Security System. He called it National Health Insurance plan. He proposed further that the medical insurance benefits for the deprived persons were to be financed by federal revenues (Baicker, 2012).

Later, the legislators together with other stakeholders in the health sector suggested that the broad National health insurance recipients be brought down to social security beneficiaries. A national survey conducted before the implementation of the Medicare Health Act showed that only 56% of the Americans aged 65 and above were not under the insurance health cover (Institute of Medicine, 2009).

President Truman’s proposal pleased President John F Kennedy who, in his capacity, pressed lawmakers to legislate the health insurance for the aged persons. It is not until 1965 that president Lyndon B. Johnson launched a Medicare bill known as H.R. 6675 (The Social Security Act of 1965; PL 89-97). It was an act signed to provide health insurance to persons aged 65 and above. On July 30, 1965, Johnson signed the Medicare and Medicaid Bill (Title XVIII and XIX of the Social Security Act). In that same year, about 19 million Americans aged 65 or older enrolled in the new health insurance program (Medicare). On the other hand, Medicaid began providing health care services to low income earners.

In 1972, the Medicare Bill was expanded to provide coverage to disabled persons and persons suffering from end-stage renal disease. They were receiving cash benefits for 24 months under the social security program. The congress further expanded Medicare Social security in 2001 to younger persons suffering from amyotrophic lateral sclerosis (ALS, or Lou Gehrig’s disease) (Wilensky, 2012). In 2003, the former President George W. Bush placed a seal on the Medicare Prescription Drug Improvement and Modernization Act. It provides aged persons and people with disabilities with a prescription drug benefit and more healthcare services (Arneson et al, 2012).

Financial History of Medicare. Medicare has been funded through various sources since it began. At the beginning, it was being financed by revenues from a 2.9% payroll tax which was levied on employers through Federal Insurance Contributions Act (FICA) and Self-employment Contributions Act of 1954. In January 1994, the compensation limit was removed and self-employed persons were to pay the entire 2.9% on his or her net income earnings (Wolfe, 2012).

Medicare payments mechanisms have also undergone some legal changes, since their beginning. During the first years of its initiation, payment mechanisms were more simular those of major private insurers of the late 1960s (Wolfe, 2012), when payments were based on the costs incurred. The major big change has occurred on the ways Medicare health providers were compensated. In 1984, the inpatient service compensations were transformed from retrospective to the prospective basis. Watnick et al (2012) cited that in 1992, legislators and lawmakers launched a concern over the amount of money that physicians were earning. They demanded an increase in the pay given to general practitioners and a decrease in pay for the specialists.

In 1985, the Tax Equity and Fiscal Responsibility (TEFRA) Act of 1982 was reviewed and changes were made to allow for the prepaid risk contracts (McGuire & Joseph, 2011). As a result, many aged people enrolled for the Medicare health maintenance organization (HMO). With the enactment of managed Medicare plan, many tremendous enrollments have been witnessed. By June 1995, the contracting plan arose to 250 while enrolling 3.2 million Medicare members.

The Impacts of the Medicare Program in United States. The Medicare Health program in the US at the moment is the largest insurance program in the world. Medicare health insurance program in the U. S accounts for about 17% of the health expenditures, an eighth of the federal budget and 2% of the Gross Domestic Production (McGuire & Joseph, 2011). Since 1965, Medicare has marked the largest improvement in the social security insurance coverage.

The Rand Health Insurance Experiment (HIE) and Finkelstein estimates show that the spread of health insurance caused an increase in the total health expenditure (McGuire & Joseph, 2011). Though, this is a negative impact, it is evident that Medicare has provided better health and risk reduction to the elderly and disabled. The mortality on the elderly has greatly gone down and their constant health expenditure has gone down. Cooper (2012) cited that Medicare has also led to the adoption of new cardiac technologies. In addition, length of stay in hospitals has reduced. This has reduced the inpatients health risks and related charges in hospitals. In future, Medicare is likely to experience a reduction in the spending with an increased healthcare providence.


Though, the Republicans have opposed the Medicare health insurance program, many U.S citizens have appreciated its introduction. The introduction of the Medicare social security health insurance program has led to tremendous change in the U.S health sector. The full implementation of Medicare requires continued vigilance and careful oversight.

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