The Medicare program was to take effect a year after the law was passed in the summer of 1965. Like most federal legislation, the provisions of the new law had to be backed up by provisions attached to statutory language in which the congressional committees explain what they wanted. And then regulatory language must be drafted by the government agency authorized to implement the new program.
The principal draftsman of the Medicare law and its subsequent implementation was Wilbur J. Cohen, the undersecretary of the Department of Health, Education, and Welfare. Mr. Cohen had favored the American Hospital Association (AHA) provisions that defined radiology, pathology, and anesthesiology as hospital services. So had President Lyndon Johnson. Their broader concept was to start with the three specialties as part of hospitals and broaden the program to include all other medical disciplines as hospital services in future years.
Medicare was defined to apply to people age 65 and beyond who were already qualified for Social Security benefits. So the federal bureaucracy started with the Social Security Administration and rapidly expanded into a new agency. With the encouragement of the AHA, the American Medical Association, most of the medical specialty groups, Blue Cross and Blue Shield, and a growing number of private insurance companies, the Medicare administrators were directed to franchise Blue Cross and Blue Shield and some private insurance companies to manage the payment mechanisms in Medicare. Until detailed federal regulations could be written, the blue plans were told to record Medicare beneficiaries and to treat their claims the same as the companies paid their own subscribers. That worked OK for hospitals and their independently practicing internists and surgeons. It had some problems for radiology.
In September 1965, the American College of Radiology (ACR) Board of Chancellors met in Washington with Medicare as a primary topic. By then, the ACR board had adopted a policy calling on all radiologists to separate their finances from their contracted hospitals. That posed some large questions for all of those to be involved. During the ACR meeting, the board invited Wilbur Cohen to meet with them for lunch and get acquainted. He accepted the invitation and agreed to bring along several of the top executives he had chosen to run the Medicare program.
Recall that the thrust of the legislative language and implementation defined that a distinction had to be made between the technical costs incurred and charged by hospitals, and the professional fees of radiologists, who previously had hospital contracts allowing the hospital to bill the total fees and pay radiologists according to terms of their contracts.
This was part of the conversation because Wilbur Cohen did not understand about radiologist‒hospital contract details nor did he expect that most radiologists would want to change their relationships.
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