What Problem Was the Medicare Program Created to Solve?

Ensuring access to inpatient and outpatient medical care, a wide range of specialists and diagnostic services, Medicare insures nearly 66 million Americans in 2024.

Medicare’s coverage continues to expand to give beneficiaries access to the latest testing and treatment options for various conditions. But who thought of Medicare and when did Medicare start? Take a trip into history to learn about Medicare’s inception.

Why Did Medicare Start? 

The government’s response to the financial ruination occurring throughout the country’s older adult population, Medicare was established to provide coverage for both in-hospital and outpatient medical services.

Medicare extended health coverage to adults aged 65 and older, which meant Americans would now be financially protected when seeking medical care. 

What Year Did Medicare Start?

Medicare officially began once President Lyndon B. Johnson signed it into law on July 30, 1965. At nearly 60 years old, Medicare has grown and changed in the attempt to meet the needs of its growing population of older and disabled adults.

President Johnson’s final approval of Medicare marked the culmination of decades of debate and analysis as lawmakers focused on addressing the gap in coverage many Americans faced at the time. 

Who Created Medicare? 

Though President Johnson signed Medicare into law, former President Harry Truman initially proposed a federal health insurance initiative decades prior.

In honor of his contributions to the development of Medicare, the first Medicare recipient was President Harry S. Truman, who was 81 years old at the time. 

What Came Before Medicare? 

Prior to Medicare, Americans who had any form of health insurance accounted for less than half of the population. Citizens and, eventually, every level of government became concerned about the problem unfolding in the country.

Americans who did have some form of insurance through their employer could not afford to continue coverage during retirement and, also due to retirement, struggled to manage basic expenses on a fixed income. 

Simultaneously, older adults without coverage (or with hospital-only coverage) found themselves needing to access more health services, resulting in higher medical expenses left unpaid.

Before Medicare, there was some funding available for low or very low-income Americans, but the problem reached further into the middle and even upper class. Not just a problem for low-income individuals, large medical bills quickly depleted someone's life savings and earned assets, such as homes or businesses. 

When Did Medicare Part C Start? 

Medicare of the Johnson Administration was divided into two sections: Parts A and B. Medicare Part A was designed to cover inpatient hospital services, while Part B offered coverage for outpatient services, such as visits to a physician or diagnostic testing.

Though Parts A and B still exist, Part C plans – which are privately sold Medicare health plans that offer Part A and Part B benefits and may offer additional benefits that Original Medicare doesn't cover – wasn’t created until 1999, more than 40 years after Medicare became law.

The Balanced Budget Act of 1997 (BBA) officially launched Part C, which allowed private insurance companies to contract with Medicare to provide enhanced benefits to beneficiaries. 

Medicare Today 

Today, Medicare is a broad term that can be used to describe Parts A and B, Part C or Medicare Advantage plans, or standalone Part D plans that offer prescription drug coverage. There are also Medicare Supplement policies designed to cover a recipient’s cost share for medical services (usually 20% of the allowed charge).

As companies offering Medicare Advantage and Part D plans compete for business, benefits offered under some Medicare plans resemble coverage traditionally available through an employer-sponsored or individual health insurance policy.