July 29, 2015

Celebrating 50 years of Medicare

Kaiser Permanente member newsletter, 1965

Contributed by Bryan Culp, Former Heritage Archives director

On July 30, 1965, President Lyndon B. Johnson signed the Medicare Bill into law, immediately granting 35 million older and disadvantaged Americans access to the medical care they needed. He praised the country’s aging World War II veterans as the nation’s “prideful responsibility [who] are entitled … to the best medical protection available,” and thanked former President Harry S. Truman, one of the program’s original architects, for “plant[ing] the seeds of compassion and duty which have today flowered into care for the sick, and serenity for the fearful.”

Although “medical care as a right” was a boon to those who would receive coverage, the question of exactly how a national health insurance system would function in terms of administration, organization and approach of care delivery quickly enmeshed government and private sector, industry and commerce, in a heated debate that continues today. And Kaiser Permanente, as one of a number of private health plans established prior to Medicare’s inception, was swept up into a national health care tornado.

An aging population

Following 16 years of depression and war, 1946 was a turning point as America’s peacetime economy boomed. The workforce filled jobs and factories, and most workers received health coverage through their employers or unions. The aging and disadvantaged segment of the population, however, was falling behind. Accessibility and affordability of health care had quickly become out of their reach, yet their numbers continued to grow: A health care crisis was looming.

No one argued that there wasn’t an urgent need for large-scale care; however, the debate over how to structure and administer it was just ramping up, and would intensify over the next decade.

The Medicare proposal

The Medicare program was characterized by 1) government administration of the program and funding through payroll taxes, and 2) a continuation of the prevailing fee-for-service model of health care. This second characteristic directly conflicted with Kaiser Permanente’s model of prepaid health care. The organization saw the fee-for-service system not only as a challenge for its own structure to integrate, but maybe more importantly, as a faulty approach to delivering health care.

“Under the prevailing fee-for-service system, income of doctors and hospitals is directly related to the volume and price of the services they provide. Illness produces income,” read Kaiser Permanente’s 1965 annual report.

Scott Fleming, Kaiser Permanente attorney and executive, echoed that sentiment: “[T]he industry’s purpose is wrongly conceived; the industry should develop the capability of delivering comprehensive health care for people rather than merely providing episodic treatment for patients.”

Kaiser Permanente’s approach of total health — health care versus sick care — influenced the national debate early on. Other private and voluntary health plans also joined the fray, as they braced for the impact Medicare would bring.

Visitors at Kaiser Permanente Sacramento Hospital open house, 1965
Visitors at Kaiser Permanente Sacramento Hospital open house, 1965

Medicare enacted July 30, 1965

While key Kaiser Permanente personnel remained active in policy dialogue around Medicare’s structuring, the organization had been intensely preparing for the program’s integration into its own (very different) system. Its priority was to maintain its standard of excellent care for all members through the coming transition — a shift that would bring an influx of new Medicare beneficiaries and see the conversion of a portion of its existing members to Medicare covered. Kaiser Permanente’s health plan reached out to members, encouraging those who were eligible to enroll in Medicare, and adapted benefits and coverage to maintain best care for beneficiaries.

It also undertook a massive training effort in its facilities to ensure that staff was prepared and the integration was smooth. The effort paid off — implementation was a huge success. Life magazine’s Sept. 3, 1965, issue reported how catastrophic Medicare implementation was for most medical facilities, but spotlighted Kaiser Permanente as a success story.

An evolving program

Medicare has evolved greatly in the five decades since its enactment. It has seen major reforms, amendments, new legislative acts and bills, and has been the subject of ongoing scrutiny around budgetary, administrative and quality issues. The heated debate continues — how best to administer it, fund it, and ensure that it’s efficient yet effective.

That the argument continues isn’t surprising, given the mammoth, complex system that it is.

Today’s seniors benefit from early visionaries

In 1958, Kaiser Permanente consultant and health care economist Avram Yedidia voiced the imperative to “face the responsibility of providing health care or protection for [those] which we presumably show the most concern — the sick, the unemployed, the retired, and the aged.”

Despite Medicare’s growing pains over the last 50 years, older and disadvantaged Americans continue to benefit from accessible, affordable health care through the program. They receive resources and coverage, guaranteed, just as the program’s early architects envisioned.

As a participant in Medicare since the program’s inception, Kaiser Permanente has been influential in improving the program’s service model to deliver better coverage and care to seniors. For example, it pushed for a capitation model — resulting in Medicare Advantage — which serves as a substitute for fee-for-service, and it helped develop the Medicare Star Quality Ratings, which rewards health plans for excellent service and care.

Over the past five decades, Kaiser Permanente has delivered high-quality health care to millions of Medicare members throughout their lifetimes. As a recognized frontrunner of leadership and innovation in Medicare, Kaiser Permanente has and continues to build initiatives, programs and institutes for the improvement of health care and coverage for seniors. Its Medicare plans in California consistently receive top national ratings for excellence in care and service from the U.S. Centers for Medicare & Medicaid Services, and its health screening rates are among the best in the nation, according to the 2014 National Committee for Quality Assurance’s Quality Compass ® data set.

The bold call for compassion by Medicare’s early visionaries fundamentally changed the shape of health care for older Americans today and beyond — and at 50, Medicare continues to serve those who need it most.