On the evening of May 18, 1964, President Johnson and his congressional relations liaison Larry O'Brien∇ discussed the progress of the administration's Medicare bill, which would expand the Social Security system to include health care coverage for the elderly. O'Brien had just discussed the legislation with Wilbur Mills, the influential chairman of the House Ways and Means Committee, which controlled the legislation's fate in the House of Representatives. Representative Mills had fought Medicare legislation since it had first been proposed by President Kennedy in 1961, citing concerns about the consequences of increasing the Social Security payroll tax to fund the coverage, the costs that would be entailed in such a program, and the long-run fiscal soundness of the system. During the spring of 1964, however, Mills still claimed that his committee would report a package of amendments to Social Security that would include a Medicare program, but he had not yet supplied the details of such a plan. Much of the conversation between Johnson and O'Brien involved the question of whether Mills would attempt to bypass Medicare when he finally presented his plan. Mills' maneuvers would defeat the legislation in 1964, but would contribute significantly to its eventual passage in 1965.
In this conversation excerpt, domestic policy advisor John Ehrlichman∇ briefed President Nixon on what he viewed as the advantages of relying on Health Maintenance Organizations as a key component of the U.S. health care system, using Edgar Kaiser's Permanente as an example. True HMOs at the time had been devised by health care reformers who hoped to control costs, improve patient care, and facilitate coverage for the uninsured. For Ehrichman, however, the HMO idea represented an opportunity to develop a private sector-based, profit-driven alternative to a national health care proposal offered by Senator Edward "Ted" Kennedy (D-MA).
Nixon succinctly endorsed the idea in this conversation, and his administration soon made it the core of what would eventually become the Health Maintenance Organization and Resources Development Act of 1973.