The CMS was founded in 1965 to run the new Medicare and Medicaid programs that Congress had just created

When President Lyndon B. Johnson signed Medicare and Medicaid into law in 1965, the federal government needed an agency to actually run them. The Centers for Medicare and Medicaid Services (CMS) — originally called the Health Care Financing Administration — was created to handle enrollment, payments to hospitals and doctors, and the day-to-day work of keeping both programs running. Before CMS existed, there was no single federal office managing health coverage for seniors and low-income people. CMS filled that gap.

The agency started small. Its first job was to get Medicare off the ground on July 1, 1966, when the program began covering hospital and doctor bills for people 65 and older. Medicaid launched the same day, covering low-income individuals and families through a partnership between federal and state governments. CMS had to build the infrastructure from nothing: enrollment systems, payment rules, provider networks, and the staff to oversee it all.

Key Takeaways

  • CMS was created in 1965 specifically to operate Medicare and Medicaid after Congress passed both programs into law.
  • Before CMS, there was no federal agency responsible for managing health coverage for seniors and low-income Americans.
  • The agency began operations on July 1, 1966, when Medicare and Medicaid coverage actually started.
  • CMS now oversees not just Medicare and Medicaid, but also the Children's Health Insurance Program (CHIP) and parts of the Affordable Care Act.

What problem did Medicare and Medicaid solve?

Before 1965, most seniors had no health insurance. Many had retired and lost the coverage their employers provided. Medical bills could wipe out a lifetime of savings. Hospitals and doctors often treated patients who could not pay, and those costs got passed along to everyone else. Medicaid did not exist at all — states had no coordinated way to help poor families pay for medical care.

Congress decided the federal government should step in. Medicare would cover seniors regardless of income. Medicaid would cover low-income people of any age, run jointly by states and the federal government. But creating two new national programs meant creating a federal agency to run them. That agency was CMS.

How CMS got started in 1966

The first Medicare enrollment period happened in the months before July 1966. CMS had to sign up millions of seniors, many of whom had never had insurance before. The agency set up Social Security offices as enrollment sites and trained staff to explain the program. On the first day of coverage, hospitals and doctors across the country began submitting claims to CMS for payment.

The early years were chaotic. Payment systems were manual. Hospitals submitted paper claims. CMS staff had to process them by hand, check them against rules, and issue checks. Mistakes were common. But the system worked well enough that both Medicare and Medicaid survived their rocky start and became permanent parts of American health care.

CMS expanded as health programs grew

For the first 30 years, CMS mainly ran Medicare and Medicaid. Then in 1997, Congress created the Children's Health Insurance Program (CHIP), and CMS took that on too. CHIP covers children in families that earn too much for Medicaid but cannot afford private insurance. CMS now manages enrollment and payments for CHIP in all 50 states.

In 2010, the Affordable Care Act created new responsibilities for CMS. The agency began running the Health Insurance Marketplace — the website where people can compare and enroll in private health plans. CMS also oversees the subsidies that help lower-income people pay premiums. These additions made CMS responsible for a much larger share of the nation's health coverage.

What CMS does today

CMS is now one of the largest federal agencies. It oversees coverage for more than 150 million Americans — everyone on Medicare, Medicaid, and CHIP, plus people who use the Marketplace. The agency sets payment rates for hospitals and doctors, writes the rules that providers must follow, and investigates fraud. It also collects data on health care costs and quality.

The agency is part of the Department of Health and Human Services. It has regional offices in every state and a headquarters in Baltimore, Maryland. CMS employs thousands of people, from claims processors to policy experts. When you call Medicare with a question about your coverage, you are reaching someone who works for CMS.

Why CMS matters to Medicare beneficiaries

CMS decides what Medicare covers and what it costs you. The agency sets the monthly premium for Part B (doctor coverage), the deductible you pay before coverage kicks in, and the copayments for specific services. CMS also negotiates drug prices for Part D (prescription coverage) and decides which hospitals and doctors can participate in Medicare.

When you have a problem with your Medicare claim or coverage, CMS is ultimately who handles it. If your claim was denied, CMS has an appeals process. If you think your provider is overcharging, you can report it to CMS. The agency also publishes information about which hospitals and doctors have the best quality ratings, which can help you choose where to get care.

How CMS is organized

CMS has several main divisions. The Center for Medicare handles all Medicare policy and payments. The Center for Medicaid and CHIP Services runs those two programs. The Center for Clinical Standards and Quality sets rules for hospitals, nursing homes, and other providers. The Innovation Center tests new payment and delivery models to see if they reduce costs and improve care.

Each division has regional offices that work directly with states, providers, and beneficiaries. If you live in California, there is a CMS regional office in San Francisco. If you live in New York, there is one in New York City. These offices handle complaints, answer questions, and make sure Medicare and Medicaid rules are followed in their region.

Frequently Asked Questions

Is CMS the same as Medicare?

No. Medicare is the health insurance program for people 65 and older. CMS is the federal agency that runs Medicare, along with Medicaid and CHIP. You have Medicare coverage; CMS administers it.

Can I contact CMS directly with a Medicare problem?

You can reach Medicare (which is run by CMS) by calling 1-800-MEDICARE. For specific complaints about fraud or quality of care, you can contact your state's CMS regional office. Medicare's website has contact information for your region.

Why did it take until 1965 to create Medicare?

The idea of government health insurance for seniors was debated for decades. Opponents worried about cost and government control. Support grew as medical bills for elderly people became a bigger problem. The 1964 election gave President Johnson and Congress the votes needed to pass it.

Has CMS changed how it works since 1966?

Dramatically. Early CMS processed paper claims by hand. Today the agency uses computers and electronic systems. Payment methods have changed, rules have been updated hundreds of times, and CMS now manages programs that did not exist in 1966. But the basic mission — running federal health coverage — has stayed the same.

What happens if CMS makes a mistake on my claim?

You can file an appeal. The process has multiple levels: first a review by Medicare, then an independent review, then a hearing before an administrative judge if needed. You can represent yourself or hire someone to help. Information about appeals is on Medicare.gov.