Paying for Medicare: Benefits, Budgets, and Wilbur Mills’s Policy Legacy

Abstract

This chapter examines the origins and consequences of Medicare's peculiar bifurcated structure, focusing on the role played by former House Ways and Means Committee chair Wilbur D. Mills. It shows that fiscal conservatism has been no less central to Medicare than the commitment to social insurance principles. The chapter first reviews the scholarly literature on Medicare finance and welfare state before discussing the logic of Mills's financing design. Three aspects of Medicare's legislative design are analyzed: the financing scheme chosen for Hospital Insurance; the financing scheme chosen for Supplementary Medical Insurance; and why Medicare's financing came to be divided in the first place. The chapter concludes with an assessment of recent Medicare reform proposals that featured competing financing approaches.