Medicare Past, Present, and Future: A Cost Analysis

Medicare Costs Past and Present

Out of Pocket Costs Medicare
Medicare may not leave as much money in your wallet as you want. Image Source/Image Source/Getty Images

Medicare is a federal health insurance program that has been in effect since 1966. Over the past 50 years, it has provided a valuable resource to Americans who may not have otherwise been able to afford private health insurance based on their age or disabilities. Did it make a difference?

Looking at statistics from the years preceding Lyndon B. Johnson’s passage of Medicare into law, we see the struggle for seniors – past and present.

Medicare in the Past

The Social Security Administration released a report in 1963, The National Survey of the Aged, that gives us a glimpse of medical expenses for Americans 65 years of age and older.

For married couples in 1962:

  • Had health insurance: 64%
  • Stayed in a hospital: 23.7%
  • Average hospital costs: $938
  • Stayed in a non-hospital medical facility: 24.7%
  • Average non-hospital medical costs: $173

For unmarried men in 1962:

  • Had health insurance: 37%
  • Stayed in a hospital: 15.1%
  • Average hospital costs: $820
  • Stayed in a non-hospital medical facility: 24.5%
  • Average non-hospital medical costs: $61

For unmarried women in 1962:

  • Had health insurance: 49%
  • Stayed in a hospital: 13.9%
  • Average hospital costs: $703
  • Stayed in a non-hospital medical facility: 20.4%
  • Average non-hospital medical costs: $89

Today, many of these numbers seem like a great buy but it is all a matter of perspective. According to the U.S. Census Bureau, the average income in 1962 for men was $4,400, $1,300 for women, and $6,000 for families.

 Those numbers drop significantly when you look closer at Americans over age 65 who were more likely to have retired by then. The median income for non-working men 65 and older was $1,910 and for women $920.

All too easily a single hospital stay could cripple a household. Using the numbers above, a single man could pay as much as 43% of his annual salary towards a short hospital stay in addition to 3% for other health costs.

A woman could pay as much as 76% for a hospital stay and 10% for other medical expenses!

Many seniors in the 1960s had to rely on free care. As many as 40% of married couples and 64% of single seniors received care for free either from their doctors or from public assistance dollars.

Seniors were struggling to survive and deferring health care when they may have needed it most. The way I see it, Medicare came at the right time if a little too late.

Medicare in the Present

With medical advancements and improved access to care, Americans are living longer. In 1962, life expectancy was 66.8 years for men and 73.4 years for women. In 2015, that has improved to 76.3 and 81.3 years, respectively.

With added years comes added wear and tear on the body. Added wear and tear can lead to health problems. More than half of Americans over 65 years old have 2-4 chronic medical problems. Those chronic medical problems increase the risk of complications and hospitalization. With complications and hospital stays come increased costs.

Health care costs for American seniors have been on the rise. In 2010, the average senior spent $4,734 on healthcare costs, including premiums and costs for Medicare-covered services, both in and out of the hospital.

The average income in 2010 for this age group was $20,139. This estimates 24% of annual income is spent on health care in the modern day.

The ratio of healthcare spending to income may be better than in the pre-Medicare 1960s, at least for those who required hospital stays. There is limited data for direct comparison. It suggests the program has helped seniors save on costs over the years. There is also overall better access to care, prescription medications, and preventive services.

Medicare in the Future

Can Medicare do better? Of course.

Medicare is in evolution. With changes to how the program pays doctors, hospitals, and nursing homes amid other reforms, there could be more cost savings in years to come.

It will be interesting to see a decade from now how much seniors are paying for their health care. 


Centers for Disease Control and Prevention. Fast Facts - Life Expectancy. Updated April 29, 2015. Accessed June 23, 2015.

Cubanski J, Swoope C, Damico A, Neuman T. Health Costs - How Much Is Enough? Out-of-Pocket Spending Among Medicare Beneficiaries: A Chartbook. The Henry J Kaiser Family Foundation. Published July 21, 2014. Accessed June 23, 2015.

Langford, E. Medical Care Costs for the Aged: First Findings of the 1963 Survey of the Aged, July 1964 Bulletin. Social Security Administration. Accessed June 23, 2015.

U.S. Census Bureau. Current Population Reports – Consumer Income, Series P-60, No. 40. Published June 26, 1963. Accessed June 23, 2015.

U.S. Census Bureau. Income - Historical Income Tables: People. Accessed June 23, 2015.

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