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From There to Here: 55 Years of Medicare and Medicaid in the United States




By Cathy Massaro, MSW, CCM, ACM-SW, Candidate Specialist


Health insurance coverage in the United States has come a long way since Medicare and Medicaid were first established in 1965. Even prior to that time, presidential administrations were trying to come up some solutions to provide this important benefit to American citizens. Here is a rundown of some of the key milestones in health insurance history.


1935 - The New Deal

  • Franklin D. Roosevelt passed the Social Security Act but without a universal health insurance component due to politics, which is not so different than the world of healthcare today.

1948 - Presidential Efforts

  • National health insurance was advocated for by Harry Truman but was viewed as socialized medicine and never made it through Capitol Hill.

  • John F. Kennedy’s administration also tried to pass a more moderate form of national health insurance for the elderly; it also failed.

1965 - Birth of Medicare and Medicaid

  • The Social Security Amendments of 1965 gave birth to Medicare and Medicaid under Lyndon Johnson as Title XVIII and Title XIX. This new insurance program provided what we all know as Medicare Part A (hospitalization) and Medicare Part B (physician services). Medicare was developed for individuals 65 and older. Medicaid provided health care benefits for low income children and their adult care relatives.

  • The Bureau of Health Insurance was established from the reorganization of the Social Security Administration and was responsible for the development of health insurance policy.

1966 - Medicare by the Numbers

  • More than 19 million individuals enrolled

  • 1967 Early and Periodic Screening, Diagnosis and Treatment (EPSDT)

  • Established for all children receiving Medicaid and Medicare, was given authority to conduct demonstration projects.

1972 - Expanded Medicare Eligibility

  • Social Security Amendments in 1972 extended Medicare benefits to include people under 65 years of age who had long-term disabilities and end stage renal disease. The Professional Standards Review Organizations (PSROs) were also established to review the appropriateness of care.

  • Medicaid was expanded to include elderly, blind and disabled individuals if a state was connected to eligibility for the Federal Supplemental Security Income (SSI) program.

1973 - Health Maintenance Organizations (HMOs)

  • Development began on these organizations from money provided by the HMO Act.

  • Established for private insurance needs and Medicare replacement.

1977 - Health Care Financing Administration (HCFA)

  • Established to provide oversight of the Medicare program, the federal portion of the Medicaid program, and related quality assurance activities.

1980 - Expanded Medicare

  • Home health care services were broadened

  • Medigap, Medicare supplemental insurance, brought under federal oversight

1981 - Individual Choice Provided

  • Freedom of choice waivers and home and community-based care waivers established in Medicaid.

  • States were mandated to provide additional funds to hospitals that care for a larger share of low-income individuals, called disproportionate share hospitals (DSHs)

1983 - Inpatient Prospective Payment System (IPPS)

  • The Social Security Amendments establish the IPPS, thus fixing fees for each type of condition, determined in advance and created on average costs of hospitals nationwide.

1986 - Emergency Medical Treatment and Labor Act (EMTALA)

  • Mandated that hospitals participating in Medicare offer emergency services including appropriate medical screenings and stabilizing treatments.

1987 Nursing Home Safety

  • The Omnibus Budget Reconciliation Act (OBRA) established quality standards for Medicare and Medicaid certified nursing homes.

1988 - Prescription Benefits Added and Subtracted

  • Medicare Catastrophic Coverage Act introduced an outpatient prescription medication benefit along with a cap of beneficiaries’ out-of-pocket costs that was repealed in 1989.

1989 - Medicare, Hospice and Private Plans

  • The Tax Equity and Fiscal Responsibility Act added:

  • Hospice benefit

  • Patient choice of traditional Medicare or private health insurance plan

  • Limits to Medicare hospital payments per care

  • Development of Prospective Payment System

  • Replaced PSROs with Peer Review Organizations (PROs)

  • The Omnibus Budget Reconciliation Act (OBRA) changed the manner in which physicians were paid by Medicare to encourage more efficient care.

1990 - Expanded Medicaid

  • Started Medicaid coverage for children ages 6-18

  • Developed a low-income Medicaid eligibility group for Medicare to pay premiums for qualified participants (Specified Low-Income Medicare Beneficiary, SLMBs)

  • More federal standards for Medicare supplemental insurance were initiated

1991 - Medicaid Disproportionate Share Hospital (DSH)

  • Spending controls were established along with provider-specific taxes, and donations to states were capped

1995 - SSA and HHS Agencies Split

  • The Social Security Administration and the Department of Health and Human Services were separated

1996 - Welfare Reform

  • The Aid to Families with Dependent Children (AFDC) entitlement program was replaced by the Temporary Assistance for the Needy Families (TANF) in a block grant.

  • The welfare link to Medicaid was cut.

  • A new required low-income group not associated with welfare was added to Medicaid

  • Enrollment in/termination of Medicaid no longer automatic with receipt of welfare cash assistance.

1996 - Health Insurance Portability and Accountability Act of 1996 (HIPAA)

  • Provided new federal rules to improve continuity or portability of coverage for individuals in large groups, small groups and individual health insurance markets.

  • Passed with revisions to:

  • Public Health Service Act

  • Employee Retirement Income Security Act of 1974 (ERISA)

  • Internal Revenue Code of 1986

  • Created the Medicare Integrity Program which dedicated funds to and allowed Health Care Finance Administration (HCFA) to competitively contract for program integrity work.

  • Created national administrative simplification standards for electronic health care transactions.

  • Required HHS issue privacy regulation if Congress failed to enact substantive privacy legislation

1997 - Expansion of Payment Changes

  • Balanced Budget Act of 1997 (BBA) included several healthcare provisions:

  • Children’s Health Insurance Program (CHIP) gave states financial support to expand coverage to uninsured children who are not eligible for Medicaid

  • New Medicaid managed care options and requirements were established

  • The Prospective Payment System for Outpatient services was implemented, and Medicare Part C was established

  • New Medicare managed care and private health plan choices offered through a coordinated open enrollment process

  • Education and information expanded to assist individuals with informed choices

  • Slowed rate of Medicare growth spending and extended the life of the trust fund for 10 years

  • Included wide range of beneficiary protections and expanded preventive benefits

  • Developed innovative approaches to payment and service delivery with research and demonstrations

1998 - Medicare.gov Website Launched


1999 - Medicare Communication

  • “Medicare and You” handbook was mailed to all Medicare beneficiaries

  • Medicare toll free number, 1-800-633-4227 (1-800-MEDICARE) available nationwide

  • Ticket to Work and Work Incentives Improvements Act of 1999 (TWWIIA) expanded Medicare and Medicaid for working-age individuals with disabilities

  • Balanced Budget Refinement Act of 1999 (BBRA) increased payments for some Medicare providers, increased the amount of Medicaid DSH fund to certain hospitals and improved Medicaid coverage of certain women’s health services

2000 - Benefits Improvement and Protection Act (BIPA)

  • Increased Medicare payments to providers and managed health care organizations

  • Reduced certain Medicare beneficiary copayments

  • Improved Medicare coverage of preventive services

  • New Medicaid prospective payment system for Federally Qualified Health Centers and Rural Health Clinics (FQHCs/RHCs)

  • Modified the amount of Medicaid DSH funds available

  • Imposed a one year delay on the sunset of transitional medical assistance provided to families eligible for welfare.

2001 - Centers for Medicare and Medicaid Services (CMS)

  • Health Care Financing Administration (HCFA) is renamed the Centers for Medicare and Medicaid Services by HHS Secretary Tommy Thompson

  • Balanced Budget Act provided for telehealth services under Medicare funding

2003 - Medication Benefit

  • The Medicare Prescription Drug, Improvement, and Modernization Act, signed by President George W. Bush, established:

  • Medicare Part D, the outpatient prescription drug benefit

  • Development of the Medicare Advantage Program

  • New preventive benefits

  • Subsidies for beneficiaries with incomes less than 150% of the Federal Poverty Level

  • Increased share of Part B premiums for beneficiaries with higher incomes

2005 - Medicare Prescription Drug Coverage enrollment begins


2006 - Medicare Prescription Drug Coverage (Part D) begins for 39 million beneficiaries


2008 - Medicare Recovery Audit Contractor

  • Developed to fight fraud, waste and abuse

  • Recovers improper Medicare payments paid to healthcare providers for Fee For Services (FFS) Medicare Plans

2009 - Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA) signed by President Barack Obama

  • Provided states with significant new funding

  • New programmatic options

  • New incentives for covering children through Medicaid and Children’s Health Insurance Program (CHIP)

2010 - Better Coverage, Better Care, Lower Costs

  • The Patient Protection and Affordable Care Act, also known as Affordable Care Act (ACA) signed by President Barack Obama strengthened Medicare coverage for preventive care, reduces beneficiary liability for medication costs, initiates reforms of payment and delivery systems and created the Center for Medicare and Medicaid Innovation

  • Bans preexisting condition exclusions, established health insurance marketplaces for small businesses and individuals to purchase affordable health insurance

  • Requires states expand eligibility for Medicaid (Supreme Court later made optional)

2011 - ACA Roll Out

  • 3.6 million people with Medicare saved $2.1 billion on prescription medications due to ACA

  • More than 25.7 million Medicare beneficiaries received at least one preventative service related to cost sharing waiver of the ACA

  • Accountable Care Organization (ACO) model launched by CMS: an entity that will be “held accountable” for providing comprehensive healthcare services to a population

2012 - ACA Rollout Continues

  • 6.8 million beneficiaries saved an estimated $1.2 billion on health insurance premiums due to rate review provision of ACA

  • 3.5 million beneficiaries saved $2.5 billion on prescription medication for an average savings of $706 per individual.

2013 - Health Insurance Marketplace

  • Individuals were able to shop for affordable quality health coverage and could not be denied or charged more because of pre-existing conditions

  • 37.2 million Medicare beneficiaries received at least one free preventive service including 26.5 million who were with Medicare

  • Value Based Programs reward health care providers with incentive payments for quality care given to Medicare beneficiaries

  • End Stage Renal Disease Quality Incentive Program (ESRD QIP)

  • Hospital Value-Based Purchasing Program (HVBP)

  • Hospital Readmission Reduction Program (HRRP)

  • Value Modifier Program (Physician Value-Based Modifier) (VM or PVBM)

  • Hospital Acquired Conditions Reduction Program (HAC)

2014 - Health Insurance Marketplace

  • Open enrollment for the first time saw 8 million people register for coverage

  • 3 million young adults received coverage through their parents’ insurance

  • Registration continues to increase

  • 129 million individuals with pre-existing conditions received coverage without high premiums

  • Lifetime limit removed

  • Medicaid expansion to 133% of the poverty line including adults without children in states that receive federal funding

2015 - Changes in Physician Payments

  • Medicare Access and CHIP Reauthorization Act (MACRA) changes Medicare payments to physicians

  • Replaced the Sustainable Growth Rate (SGR) methodology with one more predictable and quicker

  • Encourages quality and efficiency

  • Extended CHIP for 2 years

2018 - Bundled Payments for Care Improvement (BPCI) Initiative

  • Bundles payments for care improvement

  • Changes reimbursement for healthcare providers

  • Encourages hospitals to improve communication and care for patients

  • Engages patients and caregivers in discharge plan

  • Decreases avoidable readmissions



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