What have been the predominant patterns in Medicare politics since its enactment in 1965? That question defies easy answers. Medicare has been the site of both remarkable stability in its programmatic structure and extraordinary change in some of its core policies. It has seen the ascendance of federal regulatory power over payments to medical providers as well as the rise of private insurers (and their political power) within the program. Some reformers see Medicare as an efficient and equitable model of government insurance that should be extended to all Americans. Yet critics view it as embodying the inevitable failings of government-run programs and requiring fundamental restructuring. Medicare has often drawn bipartisan support while also at times triggering fierce partisan conflicts. And as different areas of Medicare policy come into focus—including benefits, financing, regulation of provider payments, and the role of private insurers—the patterns in Medicare politics shift (Oberlander 2003).
As we mark Medicare's 60th anniversary, this article explores the complex and sometimes contradictory patterns in the program's political history. I highlight five key themes in what has happened—and just as crucially, what has not happened—in Medicare: the rise, fall, and resurgence of Medicare for All; the stability of Medicare benefits; the transformation of federal policies regarding provider payments; the program's growing privatization; and the role of partisanship. This is hardly an exhaustive list of major developments or political dynamics across Medicare's 6 decades of operation. By focusing on these select themes, though, I hope to shed light on the politics of Medicare past, present, and future.
The Rise, Fall, and Resurgence of Medicare for All
When Congress enacted Medicare in 1965, its architects had a clear vision of the program's future. Medicare was to be the cornerstone of universal health insurance in the United States. That was a seemingly incongruous ambition given that Medicare itself embodied a turn to incrementalism, a retreat from broader national health insurance plans during the 1930s and 1940s. Such plans, including legislation endorsed by President Harry Truman in 1949, came nowhere close to passing Congress, a sobering political reality that led reformers to reconsider their strategy (Marmor 1973). By focusing on establishing federal health insurance just for elderly beneficiaries of Social Security retirement insurance rather than for all Americans, they hoped to tamp down the opposition of the American Medical Association (AMA), mollify public fears (fueled by interest groups) of socialized medicine, overcome congressional resistance to enacting a government health program, and leverage the popularity of Social Security.
The Medicare strategy took time to work; 14 years passed from Medicare's initial proposal in 1951 to its enactment. And while narrowing the scope of reform did boost Medicare's political fortunes, it did not pass until after the 1964 elections, which produced an overwhelming victory for Lyndon Johnson in the presidential contest and enormous congressional majorities for Democrats, thereby breaking the hold of the conservative coalition of Republicans and Southern Democrats that had stymied earlier legislation (Blumenthal and Morone 2010; Marmor 1973).
Program architects believed that Medicare's enactment represented a breakthrough in health politics that would render subsequent expansions of the federal government's role as a health insurer a less daunting proposition. There was, in other words, now a precedent for government insurance in the United States. Medicare had created a successful (or so they anticipated) platform that could be built on. Medicare would, they assumed, soon extend beyond its original limited focus on insuring the elderly to cover additional populations, starting with children and then encompassing other groups, eventually expanding into universal health insurance for all Americans. As Robert Ball (1995: 62–63), commissioner of Social Security and one of the program's designers, later acknowledged: “We all saw insurance for the elderly as a fallback position, which we advocated solely because it seemed to have the best chance politically. Although the public record contains some explicit denials, we expected Medicare to be a first step toward universal national health insurance.” Universalism was the goal, incrementalism the strategy to get there.
Medicare's Nonexpansion
Sixty years after Medicare's enactment, the program has not fulfilled that aspiration. Indeed, Medicare has not expanded eligibility much beyond its original focus on older Americans, with the important exception of 1972 reforms that added Social Security Disability Insurance beneficiaries and persons with kidney disease. Why has Medicare not fulfilled the universalistic ambitions of its architects?
By 1969, policy makers saw Medicare as a fiscal problem (Oberlander 2003). The program's initially permissive payment arrangements for medical providers drove large, unexpected increases in annual Medicare spending. Given the program's rising costs, federal policy makers focused on how to contain Medicare rather than on expanding it. The Johnson administration shelved plans to pursue “Kiddycare”—extending Medicare coverage to pay for the costs of prenatal and postnatal care for mothers and their babies—in 1968 amid concern about its price tag, given the growing costs of the Vietnam War (Oberlander and Marmor 2015).
Disillusionment with that war and economic shocks in the early 1970s eroded faith in government, setting the stage for a rightward turn in American politics reflected in the ascendance of Ronald Reagan—who in 1961 had made an anti-Medicare record for the AMA during debate over the program's enactment—to the presidency. As New Deal and Great Society liberalism gave way to the Reagan revolution and conservatism that sought to limit the growth of the federal government, the chances for Medicare expansion further diminished. Moreover, as the nation's politics moved rightward and market-based solutions gained currency, Democrats increasingly supported health reforms that relied on expanding access to private health insurance, a neoliberal model embraced by both the Clinton and Obama administrations.
Meanwhile, in the long shadow of the failure of plans to add Kiddycare to Medicare, Medicaid instead emerged as Congress's preferred option to extend coverage to children and pregnant women. In contrast to Medicare's identity as a centralized federal program, Medicaid, with state administration and joint federal-state financing, proved to be a more appealing expansionary option to the conservatives and moderates who joined bipartisan congressional coalitions that broadened its reach to low-income families during the 1980s and 1990s (Brown and Sparer 2003). When Democrats enacted the Affordable Care Act (ACA) during the Obama administration in 2010, the act's expansion of insurance coverage did not rely at all on Medicare. The original Medicare strategy of extending the program's covered population to attain universal health insurance had long since been abandoned (Oberlander and Marmor 2015).
The Rise of Medicare for All
Despite that abandonment, the idea of “Medicare for All” has enjoyed a resurgence during the past decade. The 2016 and 2020 presidential campaigns of Bernie Sanders, who made enactment of such a plan a central priority, increased public attention to Medicare for All. While some reformers on the left had long backed single-payer national health insurance, the shift to Medicare for All reflected a recognition that Medicare's popularity and familiarity could boost the appeal of universal insurance plans that were explicitly tied to the program (Oberlander 2019a). Indeed, opinion surveys show that Medicare for All polls much better among the public than the more technical, less familiar label of single-payer health insurance (KFF 2020).
The return to the original aspirations for Medicare expansion is striking, although contemporary Medicare for All plans envision more of a “big bang” extension of the program's reach to nearly all Americans than the series of incremental expansions that program architects foresaw. The barriers to enacting Medicare for All—including intense health care industry opposition to disrupting the status quo in coverage for tens of millions of Americans, overcoming fears of rationing and socialized medicine, and replacing private financing with visible public taxes—remain formidable (Oberlander 2019a, 2019b, 2023). However, less ambitious reforms to expand insurance coverage also increasingly draw on Medicare and seek to capitalize on its popularity, giving rise to plans to lower its eligibility age (from 65 to 50, 55, or 60 depending on the plan) as well as proposals to establish a new government-administered public insurance option that is linked to Medicare (often in name; sometimes in provider payment rates and other policies). Notably, though, older Americans are less supportive of reforms to expand Medicare than younger persons are (Kavanagh, Campbell, and McIntyre 2024), perhaps in part reflecting anxieties about the potential impacts of such changes on current enrollees.
Stability in Benefits (with Intermittent Expansions)
Medicare was enacted in 1965 with a bifurcated structure. Medicare Part A (hospital insurance) covered hospitalizations and other related services, such as posthospitalization home health care, while Medicare Part B (supplementary medical insurance) covered physician and other medical services such as diagnostic tests. Medicare Part A and Part B had different financing mechanisms and cost-sharing requirements. That bifurcation reflected the program's origins. The first Medicare proposal, which sought to defuse AMA opposition, focused only on hospital insurance. Coverage for physicians’ services was added much later in 1965 before Medicare's passage and mirrored prevailing practices at that time; for example, Blue Cross and Blue Shield offered separate private insurance plans for hospital and physician services (Marmor 1973). Sixty years later this peculiar programmatic structure endures, despite the fact that it is “anachronistic and unnecessarily complex” (Blumenthal, Davis, and Guterman 2015: 485) and contravenes the contemporary emphasis on integration and coordination of medical care across inpatient and outpatient settings. This longstanding division of Medicare into separate parts, and the program's additional fragmentation when the subsequent addition of prescription drug coverage created another distinct component (Part D), are powerful reminders that the legacies of 1965 continue to shape Medicare.
Medicare has been stable in another key respect. Its core benefit package has not changed that much in 6 decades. When Medicare was enacted, beneficiaries were required to pay substantial amounts out of their own pockets for covered services via deductibles and coinsurance; there was no limit on the annual amount of medical expenses program beneficiaries could pay; and beyond a focus on covering acute care episodes in hospitals and physician services, the program's coverage was restricted. Medicare did not pay for long-term stays in nursing homes, or for hearing aids, eyeglasses, dental care, or outpatient prescription medications.
Still, there was reason to expect that Medicare benefits would be liberalized. Social Security, which provided the programmatic model for Medicare—the slogan was “health insurance through Social Security”—saw its benefits substantially and repeatedly increased during the 1950s–1970s (Derthick 1979). Like Social Security, Medicare embodies the principles of social insurance: universal coverage of enrollees regardless of income, eligibility established via workers’ mandatory payroll tax contributions, and federal (rather than state) administration. It thus has a constituency that spans socioeconomic classes—higher- and middle-income Americans join lower-income Americans as Medicare enrollees—and generations; today's younger persons are tomorrow's retirees and thus have a stake in a program that they will age into, in addition to having older relatives who are current enrollees. Brodie, Hamel, and Norton (2015: 134) note that Medicare “has nearly universal impact. . . . Most Americans either are enrolled in the program themselves, know someone in their family who is enrolled, or will enroll at some point in their lives.” Additionally, Medicare beneficiaries are, as a result of payroll tax contributions, commonly seen as having earned their benefits, in contrast to the stigma that often surrounds recipients of means-tested welfare programs that serve lower-income persons (Brown and Sparer 2003; Marmor 1973). As with Social Security retirement insurance, Medicare's primary population consists of older Americans, a group that historically has commanded public support as deserving of government assistance.
As a result of these political dynamics, Medicare has long enjoyed very favorable public opinion (Blendon and Benson 2011; Brodie, Hamel, and Norton 2015; Cook and Barnett 1992). Moreover, the enactment of Social Security and Medicare catalyzed older persons’ capacity to participate in politics as well as the mobilization and growth of groups such as AARP (formerly known as the American Association of Retired Persons) that advocate for the interests of the elderly (Campbell 2003). Christine Day (2017: 4) observes that “in a political system dominated by business and corporate interests, AARP is one of the few consumer groups that pop up in lists of most powerful, most influential, and big-spending advocacy groups, big enough to be dubbed, frequently, a political ‘800-pound gorilla.’” Furthermore, older persons vote at higher rates in US elections than younger persons—a gap that is even larger in midterm congressional elections than in presidential election years (Skelley and Kondik 2017). Thus, seniors are commonly perceived as a “politically dominant group” who have “disproportionate . . . influence on electoral politics and policymaking” (Campbell 2003: 139, 146).
In short, there would appear to be strong political incentives for Congress and presidential administrations to push for expansion of Medicare benefits. Additionally, as the costs of medical care have risen, the gaps in Medicare's benefit package have imposed a greater financial burden on program enrollees. And as employer-sponsored insurance plans added coverage for services such as prescription drugs and dental care, the gap between Medicare and the private insurance standard widened. Moreover, as the population aged, the need to address chronic illness among Medicare enrollees grew (Schlesinger and Wetle 1988). The limitations in Medicare coverage meant there were ample opportunities for politicians to sponsor and claim credit for policies that would address those gaps. They could presumably reap the accompanying electoral and political benefits, especially given favorable public attitudes toward Medicare benefit expansions (although there also has long been substantial public confusion regarding Medicare's actual benefits) (Brodie, Hamel, and Norton 2015; Oberlander 2003).
To be sure, Medicare has generally eluded benefit cuts, a testament to its strong political foundations. Yet benefit expansions were relatively uncommon in Medicare's first 6 decades. Only a year after Medicare's implementation, the Johnson administration started developing plans for adding prescription drug coverage, but those plans never came to fruition (Oliver, Lee, and Lipton 2003). Access to home health benefits expanded after 1980 as eligibility rules were liberalized as a result of congressional action as well as a class-action lawsuit that overturned restrictions Medicare administrators had imposed on the benefit (Fishman, Penrod, and Vladeck 2003). Over the years, the program also added coverage for an array of preventive services such as pneumococcal vaccine (1980), Pap smears (1989), screening mammography (1990), influenza immunization (1993), prostate and colorectal cancer screening (1997), a one-time “Welcome to Medicare” physical exam (2003), and shingles vaccine (2023) (Lister and Collelo 2010). The 2010 ACA removed Medicare beneficiary copayments from some of these preventive services, and the 2008 Medicare Improvement for Patients and Providers Act reduced beneficiary cost-sharing for outpatient mental health services.
However, new services categories have only been added infrequently. In 1983, a hospice benefit was added to Medicare. In 1988, Congress enacted the Medicare Catastrophic Coverage Act (MCCA), the most significant change in program benefits since Medicare's enactment. The MCCA established an outpatient prescription drug benefit, removed limits on covered inpatient hospital days, and capped enrollee cost-sharing for other services. But 16 months after enacting the MCCA, Congress repealed it amid intense controversy and rampant confusion among many Medicare enrollees about its benefits and financing provisions (Himmelfarb 1995). In 2003, a short-lived budget surplus helped propel Medicare benefit expansion back onto the agenda. Congress, with support of the George W. Bush administration that believed embracing such an expansion would usher in a period of Republican electoral dominance, again added outpatient prescription drug coverage (Medicare Part D) to the program (Oberlander 2007, 2012; Oliver, Lee, and Lipton 2004). The 2010 ACA filled in some of the gaps in that coverage. In 2022, as part of the Inflation Reduction Act, and in response to concerns about rising medication costs, Congress further enhanced Medicare's drug coverage, including adoption of a cap on enrollees’ out-of-pocket costs.
Still, even with these intermittent enhancements, the predominant pattern has been stability in Medicare benefits, as evidenced by the myriad gaps in program coverage that persist today. Medicare still lacks coverage for long-term stays in nursing homes, hearing aids, eyeglasses, and most dental care. Traditional Medicare still requires substantial patient cost-sharing, which in 2025 included a deductible of $1,676 for each inpatient benefit period; copayments of $419 a day for hospitalizations that last 61–90 days, and $838 a day for hospitalizations of 91–150 days; $210 a day for short-term stays in skilled nursing facilities; and a 20% coinsurance payment for physician and other medical services covered by Medicare Part B (CMS 2025). There is no total annual limit on how much beneficiaries can pay out of pocket for Medicare-covered services (however, since 2011 such a limit has applied to the private Medicare Advantage plans that participate in the program).
Why has expansion of Medicare benefits not been a more frequent occurrence, given its ostensible political appeal? As noted earlier, Medicare spending increases became an issue soon after the program's implementation. As concern mounted about rising program costs—and later, a growing federal budget deficit—policy makers focused on reforms that aimed to constrain Medicare spending rather than to make its coverage more comprehensive. Program beneficiaries also obtained other sources of coverage to address Medicare's gaps, including individually purchased private Medigap policies and supplemental insurance sponsored by employers. Other beneficiaries had their Medicare premiums and cost-sharing paid for by state-run Medicaid plans. As alternative sources of supplemental coverage developed, the pressure for Congress to expand program benefits diminished because most beneficiaries did not rely on Medicare alone.
Medicare's limited benefits had another crucial effect. The persistent gaps helped set the stage for the subsequent explosion of private Medicare Advantage plans that would transform the program, a subject I explore later in this article.
Transformation of Provider Payments
At its inception, Medicare sought to bring the elderly into the mainstream of American medicine and ensure that they had broad access to health care providers. As Robert Ball (1995: 67), one of Medicare's architects, later wrote: “We did not propose a program to reform the health care delivery system. We proposed assuring the same level of care for the elderly as was then enjoyed by paying and insured patients; otherwise, we did not intend to disrupt the status quo. Had we advocated anything else, it never would have passed.” That intention to leave the status quo undisturbed was encoded into the law that created Medicare, which at its outset announced in a section titled “Prohibition Against Federal Interference” that “nothing in this title shall be construed to authorize any Federal officer or employee to exercise any supervision or control over the practice of medicine or the manner in which medical services are provided . . . or over the compensation of any officer or employee of any institution, agency, or person providing health services; or to exercise any supervision or control over the administration or operation of any such institution, agency, or person” (Oberlander 2003: 109).
To that end, Medicare emulated the permissive payment policies that private insurers such as Blue Cross used at the time, including retrospective reimbursement of hospitals’ costs. Medicare's initial payment arrangements for physician services, based not on a fee schedule but instead on a formula of customary, prevailing, and “reasonable” charges adapted from the commercial insurer Aetna, effectively had “no cost controls” (Ball 1995: 69). These generous payment terms were designed both to enhance Medicare's legislative prospects and to help assure a smooth takeoff (Feder 1977) for Medicare by forestalling a provider boycott and securing broad hospital and physician participation in the program. Administrative decisions made during Medicare's implementation, including paying hospitals a bonus above their reported costs, boosted payments even higher (Feder 1977). Medicare, then, not only lacked mechanisms to restrain health care spending but also actually adopted policies that incentivized providers to raise their costs and fees.
Not surprisingly, Medicare spending surged during the program's early years. But a corollary to the axiom that health care spending is somebody else's (health care providers’) income—which makes it politically challenging to slow such expenditures (Marmor, Wittman, and Heagy 1976)—is that Medicare spending is the federal government's money. The political history of Medicare demonstrates that once the federal government starts paying for a medical service through the program, eventually it will try to control the price of those payments.
From its start, Medicare spending increases triggered alarm in Congress. In 1969, only 3 years after its implementation, the chairman of the Senate Finance Committee, Russell Long, warned that Medicare had become a “runaway program” (Oberlander 2003: 47). The federal government's initial forays into reforming Medicare's payment policies, though, were largely tepid and ineffective. But as Medicare costs soared ever higher, federal policy makers’ willingness to confront the medical industry and adopt more stringent policies strengthened. Hospitals were the first target as Congress enacted the Prospective Payment System in 1983. Next came physicians, with the 1989 adoption of a fee schedule, the Resource Based Relative Value Scale. In 1997, Congress extended prospective payment to home health services (Mayes and Berenson 2006).
In this transformation of Medicare provider payments, four themes stand out. First, budget deficit politics helped drive the adoption of new payment systems during the 1980s and 1990s. As concerns intensified about rising federal deficits, Congress and presidential administrations looking to curb government spending found Medicare to be an irresistible source of budgetary savings. Indeed, the connection between Medicare and fiscal politics was underscored by the inclusion of Medicare payment reforms as part of broader budget reconciliation bills (Jost 1999; Smith 1992). Because of Medicare's size and predicted future increases in program expenditures, tightening its reimbursement policies generated sizable projected reductions in federal spending. Budgetary imperatives and deficit politics thus broke the hold that medical providers had previously exerted on Medicare payment systems.
Second, fiscal motivations for reforming Medicare payment policies have been amplified by intermittent bankruptcy crises in Medicare. Because Medicare Part A (hospital insurance) is paid for almost entirely out of earmarked payroll taxes that are credited to a trust fund, if the fund's assets are projected to be insufficient to meet all expenses at a future date, the program is said to be approaching insolvency. Politicians commonly translate that into dire (and misleading) warnings that Medicare is “going broke” or faces impending “bankruptcy.” There have been multiple periods when program actuaries have projected that insolvency in Medicare's Part A trust fund is 7 or fewer years away: 1970–72, 1982–84, 1993–97, and 2019–21 (Hahn 2021). During three of these four periods, Congress has enacted major reforms in Medicare payment policies (the exception is 2019–21, although a 2022 law did, as elaborated below, contain payment reforms). Thus, the financial vicissitudes of Medicare's hospital insurance trust fund have fueled a cycle of crisis and reform in Medicare politics that has propelled substantial changes in Medicare policy (Oberlander 2003).
Third, the changes in Medicare payment policies adopted in the 1980s and 1990s constitute a regulatory revolution. By replacing retrospective reimbursement with prospective payment systems, the federal government has gained the power to limit what hospitals, physicians, and other medical providers are paid (Brown 1985; Mayes and Berenson 2006; Smith 1992). Major reforms in payment policies pave the way for subsequent incremental adjustments that can advance cost containment. Once established, prospective payment systems provide policy makers with a powerful and convenient tool to reduce growth in payment rates in future years to wring more savings out of Medicare—which is exactly what the 2010 ACA did to great effect, contributing to a historic slowdown in Medicare spending growth (Buntin and Graves 2020; Buntin et al. 2022; Swagel 2023). The notion that Medicare spending is “uncontrolled” (Miller and Wilensky 2020) is belied by the reality that Congress has repeatedly taken measures to control spending, which in turn have reduced the rate of growth in program spending.
This regulatory regime and shift to prospective payment does not mean that Medicare has solved its spending challenges. Policy makers have been more successful at constraining price increases than in restraining the volume and intensity of services provided to program beneficiaries (indeed, changes in the volume and intensity of services are a major driver of increases in Medicare spending). Nor does it mean that providers have lost all influence over Medicare policy. There is a lot of money on the line in Medicare spending—more than $1 trillion and counting in annual expenditures—and the implementation of payment policies offers myriad opportunities for the health care industry to pursue revenue. For example, physician associations have successfully shaped updates in the Medicare fee schedule in their favor, resulting in a bias toward more lucrative procedures (Laugesen 2016). Medicare is also the site of geographic particularism, where members of Congress often seek to advance the parochial financial interests of health care institutions in their state or district (Vladeck 1999). In addition, some Medicare policies that have sought to curb provider payments have been canceled after years of not being enforced, such as the Sustainable Growth Rate (SGR) formula for physician fee updates, or were repealed without ever being implemented (the ACA's ill-fated Independent Payment Advisory Board). Congress was unable in such cases to resist the “siren song” (Laugesen 2009: 157) of provider groups that implored lawmakers to spare them from payment cuts.
The “Medicare industrial complex,” as Bruce Vladeck (1999: 24) terms it, consists not only of hospitals, doctors, and private insurers but also home health agencies, companies selling durable medical equipment, and many other suppliers of services and goods that Medicare pays for and that depend on program payments for their livelihood. These interests have a strong stake in maintaining (and increasing) Medicare payments that is perennially in tension with policy makers’ desire to restrain spending growth in Medicare and the federal budget. Their concentrated efforts to influence policies that are highly technical and largely invisible to the public often succeed.
Nonetheless, during the past 6 decades Medicare politics has trended toward greater cost containment. Moreover, regulatory reforms have reduced cost growth in Medicare and produced substantially lower prices in the program than those paid by private insurers (CBO 2022). The case of prescription drugs illustrates the broader political dynamic (Oberlander 2024). When Congress added Medicare outpatient prescription drug coverage in 2003, it prohibited the federal government from negotiating drug prices, a concession to the pharmaceutical industry that echoed Medicare's original accommodation of hospitals and physicians in 1965. But once again, the rule that sooner or later Medicare will eventually intervene to control its payments was borne out. In 2022, the Inflation Reduction Act (IRA) empowered Medicare to negotiate prices for a select number of medications while also setting limits on the maximum prices the federal government will pay and requiring manufacturers to pay a rebate if prices for their drugs rise faster than inflation (Oberlander and Dusetzina 2022). After decades of relative political invulnerability, PhRMA (the trade association representing pharmaceutical companies) could no longer block Medicare from regulating drug prices, although the program's regulatory reach in drug pricing is circumscribed by the IRA's limits.
In the 21st century, another theme in Medicare payment politics has emerged: Medicare has increasingly embraced payment and delivery reforms that advance value-based purchasing. Such arrangements encompass a diverse array of organizational and reimbursement innovations such as accountable care organizations (ACOs), pay-for-performance schemes, and bundled payment. These reforms seek to link Medicare payments to measures of health care quality; create financial incentives for medical providers to deliver more coordinated, higher-quality care that improves health outcomes; and reduce program costs. The 2010 ACA accelerated Medicare's move toward value-based payment with its promotion of ACOs and other policies. The Medicare Access and CHIP Reauthorization Act of 2015 continued the trend by replacing Medicare's despised (at least among organized medicine) and rarely implemented formula for updating physician fees with a new Merit-Based Incentive Payment System based on measures of quality (providers can choose instead to participate in alternative payment models like ACOs) (Oberlander and Laugesen 2015).
Such reforms reflect the aspiration to move Medicare from paying for volume to paying for value and the belief, anchored in disenchantment with fee-for-service compensation, that “payers should do more than pay for services” (Tanenbaum 2016: 1033). The appeal is powerful: by getting the incentives right, creating innovative organizational forms, and adopting new payment policies, Medicare can, in theory, simultaneously reduce health care spending, enhance the quality of medical services delivered to its enrollees, and improve population health.
Yet the enthusiasm for value-based payment in Medicare elides difficult questions about how to define and operationalize quality. For example, soon after Congress replaced the dreaded SGR formula for updating physician fees with a payment scheme premised on quality and rewarding high-value care, the commission that advises Congress on Medicare policy warned that the new system was “profoundly flawed” and “will not succeed at its stated goals” (MedPAC 2018). Reforms such as Medicare's pay-for-performance system for hospitals and ACOs have often produced mixed or disappointing results in cost savings and quality improvements (Kruse et al. 2012; Spivack, Murray, and Lewis 2023). The rhetorical appeal and theory of such policies obscures the more daunting and often sobering realities of their actual performance as well as the immense challenges of making good on the ambitious promises of value-based purchasing, although that disconnect has not dented their political traction in Medicare (Spivack, Laugesen, and Oberlander 2018). Because such initiatives have yet to generate large savings, value-based purchasing has not so much supplanted Medicare's regulatory payment regime as it has been layered on top of it.
Privatization
At Medicare's inception, private insurers were relegated to a secondary role. While some Republican members of Congress proposed alternatives to the social insurance model whereby older Americans would receive coverage from private plans rather than government insurance or choose between private options and a government plan, those ideas were rejected when Medicare was enacted in 1965 (Berkowitz 2005). Medicare did contract with private insurers, mainly Blue Cross and Blue Shield plans, to handle billing and payment, an arrangement meant to accommodate hospitals and physicians by providing a familiar administrative entity to work with and thereby buffering them from direct government control. Still, Medicare beneficiaries were joining a government-sponsored insurance plan. Medicare allowed prepaid group plans like Kaiser Permanente, which at the time had only a small share of the US insurance market, to participate in the program. But the terms under which they could enroll program beneficiaries were so restrictive that there was very limited enrollment in private health maintenance organization (HMO) plans within Medicare (Oberlander 1997).
The original Medicare vision was health insurance operated by the federal government. As noted earlier, program advocates’ expectation was that Medicare would eventually expand to all Americans. Thus, it is a stunning development, as Jim Morone points out elsewhere in this special issue, that in 2024 54% of Medicare beneficiaries were enrolled in Medicare Advantage plans offered by private insurers. Medicare insurance has effectively been privatized for a majority of beneficiaries. The alternative vision of Medicare that lost out in 1965 now prevails, and the private insurance industry holds a majority (and growing) share in an erstwhile public program. Medicare is no longer a hybrid program with a larger public component coexisting with a smaller private sector; it has become a hybrid increasingly dominated by private insurers that are crowding out the public program. Medicare for All embodies an aspiration to replace private coverage with government health insurance, but Medicare itself is now predominated by private insurance (McIntyre et al. 2023; Oberlander 2023).
This transformation has been a long time coming, proceeding in slow motion for many years before accelerating greatly during the past 2 decades. It reflects, in part, changes in American health insurance. The rise of managed care plans in employer-sponsored insurance and their initial success in taming cost growth generated pressures on Medicare to expand the role of such plans in the program (Oberlander 1997, 2003). And as more Americans enrolled in managed care plans during their working years, their willingness to join them as Medicare beneficiaries increased, and employers who offered retiree health insurance benefits became more interested in funneling their former employees into such plans to limit their costs.
The ascendance of private plans also reflects public policies that have advantaged such plans. In particular, the 2003 Medicare Modernization Act boosted the fortunes of private insurers by increasing federal payments (McGuire, Newhouse, and Sinaiko 2011; Morgan and Campbell 2011). Indeed, overpayments to private plans are a long-established feature of Medicare policy making. According to MedPAC (2024: 373–74), which advises Congress on Medicare policy: “Over a 39-year history, the many iterations of full-risk contracting with private plans have never yielded aggregate savings for the Medicare program. Throughout the history of Medicare managed care, the program has paid more than it would have paid if beneficiaries had been in FFS [fee for service] Medicare.”
Above all, the privatization of Medicare represents a triumph for conservatives whose long-term project has been to convert a public program into a market dominated by commercial insurers. In 2003, that project reached a milestone when the new Medicare prescription drug benefit enacted by Congress was made available exclusively through private plans. For the first time in Medicare's history, an entire category of program benefits was privatized (Morgan and Campbell 2011; Oberlander 2007). Privatization had achieved a beachhead within Medicare—but that was for a newly covered benefit. Forcing Medicare beneficiaries to exit traditional Medicare for private plans to receive all of their medical care was a much more controversial aim (Oberlander 2014, 2024). The alternative was to induce beneficiaries to exit traditional Medicare.
Over time, a series of changes to Medicare payment policy, adoption of new rules that opened the program to a broader array of private plans beyond HMOs, and insurers’ continuing ability to secure higher payments (for example, by aggressively coding beneficiaries’ medical diagnoses to take advantage of a formula that pays plans more for sicker enrollees) culminated in a large-scale shift away from traditional Medicare. As the gap grew between what beneficiaries could receive from private plans, whose extra benefits were subsidized by federal policies, and what they could get from traditional Medicare's much more limited coverage, so too did enrollment in Medicare Advantage plans, which also provide beneficiaries with one-stop shopping instead of having to purchase separate Medigap and Part D prescription drug plans on top of traditional Medicare (Berenson 2004). It is no wonder that more and more program enrollees are choosing Medicare Advantage plans. On average, they receive more than $2,100 annually in extra benefits from such plans relative to traditional Medicare (MedPAC 2024). The dice have been heavily loaded in favor of private insurers in Medicare. In 1995, Speaker of the House Newt Gingrich famously predicted that traditional Medicare would “wither on the vine” as beneficiaries voluntarily left it (Chen 1995). Three decades later, his prediction has come to pass.
The ascendance of private plans has reshaped Medicare politics. As Andrew Kelly (2015, 2016) has chronicled, the private insurers that participate in Medicare are now a potent force in the program. Their interest in maintaining excess payments is matched by the majority of program beneficiaries who are now enrolled in Medicare Advantage plans and thus receive extra benefits as a result of federal largesse. The growing constituency for Medicare Advantage means that in Congress it is not simply pro-privatization Republicans who defend and promote private plan interests (and profits); some Democrats, too, have joined the coalition, reflecting the reality that a growing number of their voters are Medicare Advantage enrollees (Kelly 2015, 2016). As Andrea Campbell and Kimberly Morgan observe in their article in this issue, “there is a mass constituency for the program that crosses the partisan divide.”
The privatization of Medicare has continued apace under both Republican and Democratic presidents, not slowed even by supposedly substantial cuts in payments to private plans such as those adopted as part of the ACA during the Obama administration (which in fact were partially offset by other policies that raised payments) (Skopec et al. 2019). The larger Medicare Advantage becomes, the higher the political costs become of taking on such plans. Meanwhile, there are no signs, at least for now, that enrollment in Medicare Advantage is decreasing.
Partisanship
Partisan divisions emerged in the debate over Medicare's enactment in the 1950s and 1960s. Democratic presidential administrations developed and fought to enact Medicare, and most of the program's key congressional supporters were Democrats. However, partisan lines were less sharply drawn than they would be much later in the struggle over the ACA's enactment. Opposition to Medicare in Congress came from Southern Democrats as well as Republicans. And when Medicare was enacted in 1965, the final vote indicated a strong degree of bipartisanship. Thirteen Senate Republicans joined 57 Democrats in voting for Medicare, while 17 Republicans and 7 Democrats voted against it. In the House, 237 Democrats and 70 Republicans voted in favor of Medicare, with 48 Democrats and 68 Republicans voting no (SSA n.d.). That tally's apparent ratification of broad bipartisanship was somewhat exaggerated. After the 1964 elections, Medicare's enactment was a fait accompli, and some Republicans who had previously opposed it supported the final bill when the program's passage was assured; just months before its passage, Medicare had cleared the House Ways and Means committee on a strictly party-line vote. Still, Medicare emerged in 1965 with a bipartisan imprimatur.
The bipartisan politics of Medicare strengthened in the program's early years. What is most striking is what did not happen postenactment: there were no serious legislative or legal campaigns to repeal Medicare (Patashnik and Oberlander 2018). The program's popularity with the public and beneficiaries entrenched Medicare into the status quo. A de facto bipartisan consensus governed the program during its first 3 decades (Oberlander 2003). Democrats and Republicans alike supported Medicare, and policy making focused on adopting incremental changes, a rationalizing politics (Brown 1983) that sought to address problems in Medicare without radically restructuring the program.
Bipartisanship has been a regular, if sometimes surprising, feature of Medicare politics. The first major (albeit short-lived) expansion of program benefits, the 1988 Medicare Catastrophic Coverage Act (MCCA), was supported by a Republican president, Ronald Reagan, who had come to office promising to shrink the size of government. It passed Congress with broad bipartisan majorities, and when Congress repealed the law the following year, that too was done with bipartisan majorities. The fact that two major expansions of Medicare benefits—the 1988 MCCA and 2003 Medicare Modernization Act—were supported by Republican presidents is a reminder that political and electoral incentives can produce outcomes that defy partisan expectations.
Meanwhile, reform of Medicare payment policies mobilized bipartisan coalitions with Republican presidents (Reagan and George Herbert Walker Bush) joining Democrats and Republicans in Congress to adopt new regulatory systems of administered pricing for hospitals and doctors. Both parties agreed, in the context of rising federal budget deficits, on the need to curb Medicare spending growth. Fiscal imperatives trumped ideology in the bipartisan embrace of prospective payment, a transformation abetted by the association of administered pricing and regulation with market-friendly language about efficiency and incentives as well as with technocratic formulas that promised to rationalize reimbursement metrics and outcomes (Brown 1985; Morone and Dunham 1985; Oberlander 2003).
The bipartisan, incremental character of Medicare policy making, though, was also a product of a particular political environment: during 1966–1994, Medicare operated almost exclusively under Democratic-majority Congresses (with the exception of a GOP Senate majority during 1980–86). The 1994 elections, which gave Republicans control over both the House and Senate for the first time since 1954, shattered the consensus that had governed the program and transformed Medicare politics. Since then, the parties have clashed more frequently on Medicare policy, and program restructuring has been a recurrent topic of debate. Incrementalism increasingly has been supplanted by existential debates over the program's philosophy and core policies.
In 1995, the new GOP majority, led by Speaker Gingrich, proposed to make substantial cuts in federal Medicare spending and impose a cap on it while also transforming the program into a competitive market of private insurance plans. Those proposals triggered a partisan fight with President Clinton and congressional Democrats, and Gingrich's plan was ultimately defeated. The congressional vote on the 2003 law that created Medicare's prescription drug benefit largely split the parties; most Democrats opposed its policies promoting private insurance in the program, while Republicans embraced those same features (Oliver, Lee, and Lipton 2003). In the debate surrounding the ACA's enactment during 2010–12, Republicans charged that reforms that slowed program spending growth amounted to cutting Medicare to fund Obamacare. And during 2011–15, Congressman Paul Ryan, then chair of the House Budget Committee, proposed converting Medicare into a modified voucher (“premium support”) system that would substantially raise costs to beneficiaries and increase Medicare's eligibility age to 67. These proposals again divided Democrats and Republicans largely on partisan lines.
Medicare, then, reflects the broader currents of hyperpartisanship and polarization that shape contemporary American politics. Still, Medicare's recent history does not offer a straightforward story of partisan conflict. In this polarized era, Democrats and Republicans have reached agreement on reforms to pursue value-based purchasing in Medicare, including ACOs and the program's new merit-based payment system for updating physician fees. As noted previously, the parties have also sometimes found common cause in protecting the burgeoning Medicare Advantage program. Moreover, President Donald Trump has upended the GOP's position on Medicare. Trump came to the presidency in 2016 criticizing Ryan and other budget hawks who wanted to slash entitlement spending. He derided Ryan's Medicare plan as “political suicide for the Republican party” (Corn 2016). While Trump did support congressional Republicans’ unsuccessful efforts to repeal the ACA during his first term as president, the GOP did not pursue any significant Medicare reforms or measures to reduce program spending growth during his presidency. And during Trump's successful 2024 bid to return to the White House, he again promised to “always protect” Medicare (Shear and Gold 2025).
The Future of Medicare
How could Medicare politics change in coming years? It is not clear if Republicans’ hands-off stance toward Medicare, which has generated renewed bipartisan support for the program, will endure past Trump's presidency or even continue throughout his second term. It is possible that the administration will try to make Medicare Advantage the default enrollment option for new beneficiaries, further diminishing traditional Medicare. Furthermore, the GOP's deep, long-term commitment to tax cuts could lead them back to Medicare as a way to offset the costs of reducing taxes (although Medicaid has emerged as a comparatively more alluring, albeit still politically challenging, funding target for Republicans in recent years).
Moreover, although policy makers’ concern with deficits has abated during the past decade, given the sizable gap between federal revenues and expenditures a resurgence of deficit politics is not hard to imagine (especially if a future Democratic president finds themselves with a Republican-majority Congress). If, or perhaps when, reducing the federal deficit becomes a prominent issue again, Medicare figures to be a prominent target for savings as a consequence of its size and projected growth. That could mean more reliance on Medicare's prospective payment systems to slow spending growth. Curbing provider payments has long been federal policy makers’ preferred option to improve program finances, and it offers a more reliable route to achieve savings than the value-based purchasing initiatives currently in vogue. Budgetary pressures and a future shortfall in Medicare's hospital insurance trust fund could also reignite partisan divisions over more contentious proposals such as raising the program's eligibility age, increasing beneficiary copayments and deductibles, or converting Medicare into a full-fledged premium support (voucher) system.
However, such proposals confront a formidable political arithmetic. Medicare has about 70 million enrollees, and that number will continue to increase in coming years. Any policies that seek to reduce Medicare benefits or raise beneficiaries’ costs could thus trigger a broad backlash. It also could be tempting for politicians to propose benefit expansions as both parties vie to attract older voters. Could the 2022 Inflation Reduction Act's enhancement of the program's drug benefit and Vice President Kamala Harris's 2024 campaign plan to broaden Medicare home benefits be the harbingers of a new era where expansion of Medicare benefits is a more common topic of congressional and presidential attention?
Regardless of whether any benefit expansions occur, as Medicare spending rises in the context of US fiscal challenges, claims of its alleged unsustainability are likely to resurface. This is despite the fact that we are almost through the period when the baby boom generation's retirement will have the largest impact on Medicare's enrollment. Even with population aging, which critics had warned would make the program unsustainable, growth in Medicare spending has been remarkably modest in recent years (Buntin et al. 2022).
Still, the chances are good that the rhetoric of crisis, bankruptcy, and entitlement reform will surround Medicare at some point soon. Meanwhile, the standard payroll tax contribution for Medicare has remained at 1.45% since 1986, although the maximum limit on earnings subject to that tax was removed in 1994, and since 2013 higher-income workers pay an additional .9% payroll tax. Medicare has been caught in the antitax politics that has predominated American politics over the last half century. While almost all of the attention is on Medicare's costs, its long-term financial stability and capacity to avoid a funding “crisis” hinge crucially on America's willingness to raise revenues (Vladeck 2004).
The shape of Medicare's future depends on the answers to additional questions. If Medicare Advantage—which is now projected to enroll 64% of program beneficiaries by 2034—keeps expanding, what will be the fate of traditional Medicare as it erodes in size and perhaps political influence? Will fiscal imperatives and continued growth of private plans lead to a dramatic reversal of federal overpayments, or will Medicare Advantage's political strength prevent such a shift? Will rising concerns about Medicare Advantage plans’ upcoding patient diagnoses to maximize revenue and use of prior authorization and other tools to manage (and sometimes restrict) beneficiaries’ care trigger policy interventions to reform Medicare's burgeoning market? Will Medicare's new system of regulating prescription drug prices expand over time, or will it be weakened? Could persistent dissatisfaction with America's expensive, fragmented insurance arrangements build momentum for lowering the Medicare eligibility age and expanding Medicare to more Americans? Will the rise of Medicare Advantage paradoxically boost the fortunes of Medicare for All by creating a more politically palatable hybrid model of universal insurance (Schlesinger and Hacker 2007)?
Given the current volatility in American politics and the unexpected twists and turns that Medicare's journey has taken to date, it is far easier to identify questions than to provide any definitive or even good answers. After 6 decades of operation, Medicare's centrality to American health care is indisputable, but its future path and political trajectory remain uncertain.
