Mills turned to Johnson’s representative, Wilbur Cohen, and asked why
they “could not put together a plan that included the Administration’s
Medicare hospital plan with a broader voluntary plan covering physicians
and other services?”^23 Cohen later recalled, “The federal government was
moving into a major area of medical care with practically no review of
alternatives, options, trade-offs, or costs.”^24 After a few months of
deliberations, both the House and the Senate passed the bill, known
colloquially as “Mills three-layered cake,” but formally as amendment
Titles XVIII and XIX of the Social Security Act. Title XVIII was
comprised of two parts, Parts A and B, outlining hospital and
supplementary medical coverage (like physician’s office visits),
respectively. Medicaid was established through passage of Title XIX, but
has never been referred to as “Part C;” that would come thirty years later
with the passage of the Balanced Budget Act of 1997, formalizing
managed capitated-fee health plans, initially called “Medicare+Choice,”
and later called “Medicare Advantage.”
Understanding the history of the “baking of the cake” explains many of
the confounding details of Medicare and Medicaid. For instance, why is
hospital coverage defined as “Part A?” Because hospital coverage was
defined under “Part A” of the Medicare Act (that had originally been the
King-Anderson bill). Why is physician coverage reimbursed under “Part
B?” Because doctor visits are processed through “Part B” of the Act
(officially Amendment Part B of Title XVIII of the Social Security Act).
Why is Part A funded through Social Security taxes? Because the bill was
passed, from the beginning, as an add-on to Social Security, and explains
why Part A costs are reimbursed from the Social Security bucket.
Conversely, Part B payments come from general tax revenues, as was
originally proposed.
After years of wrangling, a full half-century since Theodore Roosevelt
had proposed universal coverage, Medicare was signed into law by
President Lyndon Johnson on July 30, 1965, while sitting in the Truman
Library in Independence, Missouri. Sitting next to him was the first-ever
recipient of Medicare, Harry S Truman, who received his official
Medicare card that day.
Civil rights activism had fundamentally reshaped the way America
thought about health care for the poor, unemployed, and seniors.
“Medicare, the result of a landslide election propelled by the passage of