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Medicare History, Part I: How Costs and Benefits Have Changed

January 25, 2019

I am fascinated with Medicare, especially in today’s charged political climate with health insurance. But health insurance has always been a charged debate. From Teddy Roosevelt’s desire to create a national healthcare system at the start of the 20th Century to the compromises that led to Medicare passing in 1965 (did you know Medicare Part A was the original Democratic-led Medicare and the only way it got passed was LBJ arranged a compromise with Republicans to give them what they wanted: Medicare Part B?) to today’s discussions of “Medicare for All,” I find it interesting.

And since Medicare is my one business, I felt it was my responsibility to learn a bit of its history. So with a little library research, I managed to obtain a copy of the Year One Medicare Handbook from 1966. Fascinating reading! You know what’s most fascinating? The costs in 1966 and how they compare to 2018 dollars. Every year, clients say Medicare takes more money from them and they just can’t keep up. But is Medicare really raising their rates or just making cost-of-living adjustments? Or, GASP, has Medicare become more of a bargain?

In the first of a three-part series, I want to take a look at how 1966 Medicare charges compare with 2018 costs. This part will cover highlights from Medicare Part A (or, as it was called then, “Hospital Insurance”), Part II will cover Medicare Part B (originally titled “Medical Insurance”), both costs and some coverage differences, and Part III will take a look at premiums and some miscellaneous costs from back then and compared to now. If these articles are to your liking, I can stretch even further by discussing Medicare Supplement insurance back then (a little harder to do, but still possible).

For this article, I used the assistance of the quite handy and non-profit to help calculate the value of a dollar’s purchasing power from 1966 to 2017. I used their number of the CPI, but they break down the value of a dollar from many other perspectives and it is a very handy site if you are looking for how much a dollar is worth in one era vs. another.

Today, Medicare covers the first 60 days in a hospital except for a deductible. That deductible this year is $1,340. But back in 1966, the Medicare deductible the first 60 days was $40/day. Today, that $40 would be $302. Medicare of ’66 was a bit less costly.

After 60 days, Medicare charges days 61-90 a copay of $335 today. In 1966, it was $10/day or $75.50/day in 2017 dollars. Looks like Medicare increased that one more over time.

Medicare did not cover beyond 90 days; today it will go an additional three months once in a lifetime. No matter how you cut it, today’s Medicare is a great deal on that.

Today, there’s Skilled Nursing Facility Benefits on Part A, but in 1966 there was “Extended Care Benefits.” And just like today, Medicare paid all of the first 20 eligible days. But for the next 80, today’s copay from Medicare is $167.50/day. In 1966, it was $5/day. Today, that would be $37.80/day! Medicare appears to have increased that actual cost significantly over time.

There was limited home health in Part A, just like today. And just like today, Medicare Part A would cover the bill, but in 1966 it capped coverage for one year (subject to exclusions).

Outpatient Hospital Diagnostic Benefits isn’t even a part of the Medicare Part A program of 2018, but in 1966 it had a whole page to itself. Medicare allowed doctors to order a diagnostic study for a 20-day period, provided you were in the same hospital as an outpatient that you went to as an inpatient. Here’s where it gets interesting: According to the Medicare booklet, you paid a flat copay of $20 (or $151 in 2017 dollars) that would apply to your Part B deductible (more on that in part II) but then Part A would pay coinsurance of 80%, leaving you with 20% of the bill! I can barely equate that with the Medicare of today. Today, Part B pays 80% of many diagnostic testing services, both as an outpatient in a hospital and in a physician’s office (which has taken over many of the duties outpatient hospitals used to have exclusive domain over).

Mental Health Hospital coverage (called “psychiatric hospital coverage” in 1966) today covers 190 days in a lifetime. In 1966, it covered the same 90 days as the main benefit with no lifetime limit BUT if you went to a psychiatric hospital after a general hospital admission, the benefit carried forward: 20 days in a general hospital meant there was only 70 days left of your benefit for the psychiatric one.

Those are the highlights. Stay tuned for Part II in the next newsletter: Medicare Part B. Be sure to let me know if you find this interesting.