Johnson and Wilbur Mills on Medicare

This audio clip is of the June 11, 1964, telephone conversation between President Lyndon Johnson and Rep. Wilbur D. Mills (D-Arkansas), the powerful chairman of the House Ways and Means Committee - the committee in charge of income taxation and Social Security. In the conversation, Johnson attempts to persuade Mills to bring legislation establishing government funded health insurance for the elderly - dubbed "Medicare" by the press -- to committee vote.

Medicare represented another stage of the long-term incremental expansion of social insurance begun with passage of the Social Security legislation of the New Deal. Beginning in the 1950s, social insurance advocates envisioned expanding Old-Age and Survivor's Insurance (OASI) to include hospitalization and nursing home benefits for the elderly. Medicare advocates argued that large numbers of elderly lacked medical coverage because insurance companies excluded them from coverage or charged exorbitant premiums.

But powerful members of the tax community, led by Mills, objected to the creation of Medicare benefits, proposed in legislation known as the King-Anderson bill. They believed that the high cost of health care would lead to unacceptable increases in the social security payroll taxes that would be used to fund the benefit. Mills feared that "skyrocketing [medical] prices combined with constituent pressure for liberalized benefits - once recipients discovered that Medicare did not include the cost of physicians - would force Congress to raise Social Security taxes beyond reasonable levels" and lead to "a constituent and corporate revolt against Social Security." --- Julian Zelizer ("Taxing America," p.213-14)

Mills was also sensitive to the fierce opposition of the American Medical Association and the private sector to any federal involvement in private medicine. Opponents viewed Medicare as the first-step to socialized medicine. Most importantly, Mills was protective of the fiscal soundness of the Social Security Tax system. Because the King-Anderson Bill would fundamentally alter the relationship between taxes and benefits of that system, Mills viewed the legislation as doomed to fail.

By June, 1964, Mills and the supporters of King-Anderson had seemingly hammered out a compromise that was satisfactory to both sides. President Johnson, an avid supporter of medical care for the elderly, was doing all he could to persuade Mills to bring the compromise legislation to Committee vote. Johnson's phone conversation with Mills on June 11, recorded by the taping system in the Oval Office (controlled by Johnson himself), reflects Johnson's legendary powers of persuasion.

The conversation opens with Johnson asking Mills about his wife's health and then remarking to the representative from Arkansas how proud he would have been of "a little Negro girl" from his home state who had visited the White House the day before. He then discusses the results of a recent opinion poll taken by Democratic pollster Oliver Quayle of voters in the key electoral state of Michigan. (At first Johnson erroneously states the poll is of voters in Vermont.) After first reciting the numbers showing his popularity against three potential Republican challengers in the upcoming November election, Johnson laments that the poll indicates an unfavorable view of his efforts on behalf of the elderly.

Mills and Johnson go on to talk about strategy in passing Medicare. Johnson agrees with Mills's plan to find compromise legislation that could be endorsed by legislators who had repeatedly rejected the King-Anderson bill. Mills tells Johnson of his plans regarding the timing of bringing the legislation to vote. Johnson calls Medicare legislation the single most important accomplishment they could achieve that year. Johnson urges Mills to move forward once he had 13 of the 15 Democratic votes on the 25-member Committee and tells Mills not to expect Republican support. Mills responds that Republicans won't be against Social Security for political reasons and Johnson says they will also come to support hospitalization insurance. Mills talks about his strategy of combining the Medicare benefits with other, less controversial provisions in a "three-pronged approach" to passing the legislation. Johnson expresses concern that only the acceptable provisions will pass while the House would "murder" Medicare even thought it had the most "sex appeal." Johnson again talks about when the bill could come up for vote and its prospects for passage which Johnson tells Mills would be "the biggest day you ever had" and "the best you did for your country."

Shortly after this conversation, however, the compromise collapsed. With the approaching election, Democratic representatives on the committee who supported Medicare convinced Mills to wait until after the elections before proposing legislation so that they wouldn't have to take a definitive stand on the controversial legislation. Later in June, Mills announced that he would not support the bill. Medicare advocates dubbed Mills the "One-Man Veto on Medicare."

Eventually though, Medicare did pass, in large measure due to the influence of Mills. The November 1964 election resulted in a Democratic landslide. Changes in committee ratios and House rules then favored supporters of Medicare who gained a significant majority, giving them the ability to pass the legislation. The Johnson administration, as it had been doing since 1963, continued to work with Mills on the funding aspect of this bill, readjusting provisions to reduce the burden on payroll tax as much as possible. Last minute compromises during conference committees, such as changing the legislation to allow hospitals and doctors to continue to set their rates rather than having the government do so, weakened remaining opposition to the legislation.

Finally, in a famous last minute surprise, Mills reconfigured the Medicare bill and proposed the "three-layer cake" that split the bill into three parts. In Part A, hospital insurance would be covered by the Social Security tax. In Part B, physician's cost would be covered by monthly premium for beneficiaries matched by government money from general revenue, not from the Social Security tax. (Although this part of the proposal is voluntary, most people opt to take part.) Part C of the compromise created "Medicaid" which covers the medically indigent, the poor who can't afford health care but don't fall under Social Security coverage. "This compromise is crucial. Not only is it politically powerful because it incorporates the Republican and AMA-sponsored proposals, but it protects the Social Security tax from the cost of doctors and taking care of the poor." - Prof. Julian Zelizer.

As chairman of the committee from 1958 to 1974, Mills played a critical role in setting the agenda for federal tax and spending policy and passing Medicare legislation. But in 1974 Mills suffered a spectacular fall from power that began when the U.S. Park Police stopped his car on October 7, 1974 at 2 a.m. near the Tidal Basin in Washington D.C. He emerged from the vehicle, bleeding and intoxicated and his companion, a 38 year-old stripper who performed as "Fanne Fox, the Argentine Firecracker," jumped out of the car and into the Tidal Basin. She was arrested and taken to the hospital with two black eyes that she had received in a scuffle with Mills when he tried to stop her from leaving the car. She later admitted to a sexual relationship with the married, sixty-five-year old congressman that had begun the year before when they met at a nightclub where she was performing. Although he was reelected that November, a month later he staggered onstage at a Boston strip club where Ms. Fox was performing. Soon after the incident he was forced to step down from his chairmanship. He did not run for reelection in 1976, sought treatment for his admitted alcoholism, and, once recovered, spent the rest of his life as a lawyer and tax consultant in Washington D.C.

To listen to the telephone conversation, click here.

Background information compiled from Professor Julian Zelizer's book "Taxing America: Wilbur D. Mills, Congress, and the State, 1945-1975," Cambridge University Press, 1998.