Paying for medicare: Benefits, budgets, and Wilbur Mills's policy legacy

Medicare features an unusually complex financing design. The Hospital Insur ance Trust Fund pays for Part A of Medicare (hospital stays), while the Sup plementary Medical Insurance Trust Fund finances Part B (doctor visits, out patient care. and certain home health services). At a time when Medicare po licy is generating debate, this article takes a new analytical look at the origins and consequences of the program's peculiar bifurcated structure. Ad dressing historians of the U.S. welfare state as well as contemporary healt h policy reformers, the article focuses on the crucial role of legendary Wa ys and Means Committee chair Wilbur Mills in Medicare's enactment in 1965. The central theme of the article is that fiscal conservatism and a commitme nt to budgetary restraint constitute important elements of Medicare's origi nal political understanding. Contrary to analysts who argue that Medicare's financing design has produced "perverse" effects, we argue that it has ser ved a valuable social function by encouraging policy makers to confront per iodically the costs of one of the largest and fastest-growing federal progr ams. An argument can be made that Medicare's original division requires mod ification in order to integrate health care delivery changes of the past fe w decades. It is crucial, however, for reformers not to lose sight of the p olicy goals, including fiscal rectitude, that motivated the adoption of Med icare's bifurcated structure in the first place.