How Social Security and Medicare Transformed Aging in America

It took two years to overcome bitter opposition. Among other arguments, opponents said federal pensions would destroy the family unit since older adults would no longer depend on their children for support. After numerous compromises, the Social Security Act of 1935 left many retirees uncovered, including former public employees, agriculture workers and domestic workers. But over the next 90 years, the system grew to include almost every older American.

On the day he signed the bill, Roosevelt made clear that more needed to be done.

“This law ... represents a cornerstone in a structure which is … by no means complete,” he said. The major pillar missing from that structure was health care.

Roosevelt and Perkins had planned to include a medical insurance component in Social Security, but opponents — including the powerful doctors’ group, the American Medical Association (AMA) — successfully stirred up public concern about a federal “takeover” of health care. Roosevelt’s successor, Harry Truman, took up the fight, but he could not overcome the AMA’s campaign against “socialized medicine.” In the depths of the Cold War, that label suggested that anybody advocating a national health care system must be a communist.

When it became clear that any proposal for universal health care in the United States faced daunting political opposition, proponents instead targeted a narrower goal: guaranteed health insurance for those age 65-plus.

Retirees initially forgotten in health care plans

The need was clear. As post-World War II America moved toward a system of private health insurance sponsored by employers, retired people were often left out. Employment-based insurance generally covered workers’ spouses and children but not their parents. In the days when insurers could turn down anyone because of a preexisting condition, millions of older Americans couldn’t get health insurance.

AARP’s founder, Dr. Ethel Percy Andrus, was an important figure in the fight to create Medicare. In the 1950s, she persuaded insurers to offer a group health plan to members of the National Retired Teachers Association. In 1958, Andrus formed AARP, in part to extend group health coverage to all retired persons. Over the next several years, she testified before Congress as Medicare took shape.

In the 1960 presidential campaign, John F. Kennedy made health insurance for older adults a key part of his platform; in May 1962, as president, he held a giant rally at Madison Square Garden to promote the idea.

After Kennedy’s assassination, Johnson steered Medicare to passage in 1965. When the law was signed, AARP’s proposed change to make coverage available to all older persons — not just Social Security beneficiaries — was part of the law. A third program, Medicaid’s safety-net program to provide health insurance for people on limited incomes, also was part of the Medicare law.

With a nod to history, Johnson flew to Missouri to sign the bill at Truman's presidential library and handed the first two Medicare cards to the former president and his wife, Bess. 

Payments under Medicare didn’t begin until July 1, 1966, a date that was carefully chosen so the new system would not be overwhelmed at its start. “Respiratory illnesses have a low incidence in summer, and elective surgery is at a low ebb immediately before the July 4th holiday period,” explained Wilbur J. Cohen, an architect of the plan. 

Since then, “the legislation has shielded millions of families from the risk of financial ruin through hospital bills,” says Chappel, the historian.

Payment for prescription drugs — the Plan D that Dalrymple relies on — was added in the Medicare Modernization Act of 2003.

Today, Medicare is a standout among American health insurance plans, with higher customer satisfaction ratings than either employer-sponsored plans or Affordable Care Act marketplace coverage, according to survey data from the health policy research organization KFF. And Medicare “has been the leader in reforming the health care payment system,” the nonpartisan Center on Budget and Policy Priorities reports, outperforming private insurance in holding down the growth of health costs. 

The programs face an uncertain future

It’s hard now to imagine an America without Social Security and Medicare. 

Through a series of expansions that started in the late 1930s, Social Security benefits are available not only to retired people but also to their spouses (and ex-spouses), children and survivors, and to people with disabilities and their families. More than 69 million people are drawing some form of Social Security payment.

More than 22 million people rely on the program for at least half of their income, according to data from the AARP Public Policy Institute. For some 10 million, the monthly benefit is 90 percent or more of their income. 

In March 2025, the latest available data, 68.6 million people were on Medicare, and 90 percent of them are at least 65. Medicare was expanded in 1972 to cover younger people who have certain disabilities or chronic diseases. 

Your monthly Social Security payment is based on your history of work earnings and the age at which you start taking benefits. In June 2025, the average retirement benefit was $2,005 a month, or $24,060 a year. The highest amount any recipient can draw this year is $5,108 monthly, just over $61,000 for the year.

As the U.S. population ages, it’s clear that more Americans will need these programs in the future. And that poses a crucial question: Will Social Security and Medicare still be there in the same way for us?

The answer turns on the basic economics underlying both systems.

The importance of the trust funds

Social Security is self-funded, mainly by a dedicated payroll tax. Today, the Social Security tax is 12.4 percent of gross wages from salaried work, up to the payroll tax cap ($176,100 in 2025), with half paid by the worker and half by the employer. Self-employed people pay the full 12.4 percent on net income from their business but get a partial credit back on their income tax return.

Medicare has multiple funding sources, including monthly premiums, a 2.9 percent payroll tax also split between employee and employer for salaried workers and paid in full by the self-employed, and a higher tax for workers earning $200,000 or more.

These tax revenues — now running to $1.6 trillion each year — are poured into trust funds, which have been accumulating through the years. Any reserve funds not used to pay benefits are invested in U.S. Treasury bonds. The funds are large: In 2025, the government reported more than $2.7 trillion in the Social Security trust funds and about $408 billion in the Medicare funds at the end of the previous year.

But those big funds are not big enough.

After running a growing surplus for decades taking in more in tax income than they paying out in benefits, both federal insurance plans are now spending more than they earn. Every year since 2021, Social Security has been drawing down its trust funds to help pay benefits. Medicare has been more sporadic. 

The future looks challenging. The 2025 annual report from the Social Security Board of Trustees says that the combined Social Security trust funds — one for retirement and survivor benefits, the other for disability benefits — will run short of money in 2034, nine years from now and a year earlier than projected in 2024. Medicare trustees say the Hospital Insurance Trust Fund, which finances Medicare Part A, will run short in 2033., just eight years from now and three years sooner than projected last year. 

‘We need to save them’ 

The depletion of the trust funds would not mean an end to the programs. They would still have their annual revenues from payroll taxes.

But the tax revenues will not be enough to cover all the costs. If Congress does not find a way to replenish the trust fund surpluses, Social Security benefits will be cut by a projected 19 percent in 2034. Medicare would be able to cover only 89 percent of hospitalization costs, meaning beneficiaries might have to pay more of their medical bills.

This threat is a major concern for AARP, says Nancy LeaMond, the organization’s chief advocacy and engagement officer.

“These two programs have protected the quality of life for older Americans,” she says. “So, we need to save them. Job One is ensuring the solvency of the programs for current beneficiaries but also for future generations. To do that, we have to ensure that the trust funds are stable.”

One worry is that “we tend to go up to the brink in dealing with major issues,” LeaMond says. So AARP is highlighting the problem now. 

“We think the 90th anniversary [and Medicare’s 60th anniversary] is the time to expand awareness of the need to solve the funding issues,” she says. “We would love to see bipartisan leadership work on this. And there has to be presidential leadership as well.”

Bipartisanship in the 1980s brought a solution

For those concerned about the depletion of Social Security and Medicare funding, it may help to know we’ve been here before. 

The Social Security Administration publishes a historical table showing the trust funds' income and costs over the decades. It shows that the funds were generally in the black from their inception until the mid-1970s. 

Then, with economic conditions impairing tax revenues, the trust funds began paying out more than they were taking in, as they are doing today. In 1977, Social Security spent $5.2 billion more than it took in, covering the shortfall from the trust funds. By 1983, the trust funds were within months of hitting zero — a more acute crisis than we face today.

The early 1980s was a time of fairly sharp partisan division, with a conservative Republican, Ronald Reagan, in the White House and a liberal Democrat, House Speaker Thomas P. “Tip” O’Neill Jr., the dominant force in Congress. But facing the need to save this essential program, the president, on the right, and the speaker, on the left, came together in the middle. 

Their plan to shore up Social Security's finances — through provisions such as gradually raising the retirement age, accelerating an increase in the payroll tax, bringing federal employees into the program and making upper-bracket taxpayers pay income tax on their Social Security benefits — passed the divided Congress in 1983 with bipartisan support and has kept the program solvent for more than 40 years.

But the trust funds are facing challenges again. In this year of major anniversaries for both Social Security and Medicare, it’s clear that political action will be necessary to keep these programs strong enough to guarantee the earned benefits — and the financial and health security — they have provided for decades.

That will require the kind of political compromise that isn't common today, and that has some Americans concerned. 

“I’ve never been political,” says Haupt in St. Louis. “But now I’m worried. A lot of us depend on Social Security and Medicare. Will the people in charge take care of us like they promised?”