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Health and Human Services Secretary Kathleen Sebelius testifies on Capitol Hill in Washington, Wednesday, June 24, 2009, before the House Health subcommittee hearing regarding health care reform. (AP Photo/Charles Dharapak)
This is the first part of a multi-layered series that will examine health care reform in the United States. A history of health care will serve to put the current crisis in context relative to challenges the country has faced when attempting to reform health care previously.
The next section will discuss the current debate over how best to address the nations skyrocketing health care costs. The following section will compare the single-payer and public options, which seem to be causing a rift among progressives who fear that reform will be watered-down in attempts to reach a bipartisan agreement.
Another section will explore the industries that have wielded the most influence in our health care system, serving to frame the debate between those who support universal care; and their critics, who believe government bureaucrats are unable to effectively manage such a system. The final section will offer concluding remarks, lessons, and further questions—particularly philosophical in nature—to determine what path should be taken going forward.
The Emergence of Health Insurance
According to Jonathan Cohn, author of Sick: The Untold Story of America’s Health Care Crisis (an indispensable source of information for this section), the idea of purchasing insurance to guard against illness took hold in the early twentieth century when advancements in the field of medicine placed a greater demand on these services.
Though available, medical services were out of reach for many; a problem that intensified with the onset of the Great Depression. In an attempt to address this disparity, the Committee on the Costs of Medical Care was created to conduct a study over the course of five years, which in 1932, ultimately concluded that “the largest expenses were concentrated among a small group of people, the ones with the most serious medical problems.” Consequently, the commission recommended a system that would rely on collective responsibility by creating health insurance.
At the same time, countries in Europe faced similar questions, and they settled on a remedy that involved government intervention, which effectively spread the financial risk among the entire population and regarded health care as a right, as opposed to a privilege.
However, on our side of the world, the fear of communism, fascism, and Nazism stoked antipathy toward government involvement in the economy, and private industry ended any near-future possibility of universal health care. Though some labor unions supported Harry Truman’s attempt at national health insurance in the 1940’s, they were satiated by their ability to include health care in their collective bargaining agreements, which allowed them to negotiate a low standard premium rate for all members.
Before Blue Cross/Blue Shield became a name that provoked ridicule, it was the first to widely apply the concept of insurance when it established a “community rate,” in which all group members paid the same amount for equal benefits. Furthermore, they practiced some form of what Cohn calls, “guaranteed issue,” which meant they agreed to provide coverage for anyone willing to pay the premiums, irrespective of preexisting conditions. The organization was nonprofit, charitable in nature, and received tax exemptions from the government due to their work on behalf of the elderly and indigent.
Though private entities, the “Blues,” as Cohn calls them, considered themselves devoted to serving the public good and did so, by following the earlier guidelines of the Committee on the Costs of Medical Care. Indeed, their success helped undermine Truman's case for national health insurance.
The Emergence of Commercial Health Insurance
The Blues’ efficiency in serving trade groups eventually extended to the advent of employer-sponsored coverage, which as Cohn points out, began to take hold during WWII. The government exempted fringe benefits from wage controls, thereby incentivizing generous health insurance, in order to attract prospective employees in a tight labor market. Consequently, demand for insurance increased, and as coverage expanded, more individuals took advantage of it, creating an emerging industry that caught the eye of for-profit interests.
Though commercial insurers had attempted to offer a form of voluntary health insurance in the past, they had found the business model inadequate to serve a for-profit goal. The sentiment of Prudential’s president was noted in the 1920’s, when he affirmed that such coverage could not “safely be transacted.” Cohn explains that such systems tend to attract those who are the greatest financial risks, deeming the service unprofitable.
Based on the success of the Blues, these insurers decided to enter the market of health care once again, but since their motive was not for the public good, but rather profit, they changed the Blues’ business model, and rather than basing premiums on community rates, they began using “experience rates.” Since the Blues’ plans relied on the healthy subsidizing the less healthy, commercial insurers were able to undercut the Blues’ premiums by offering groups different premiums based on their health status.
They applied the same logic to individuals, and being well-aware that individuals who voluntarily seek out health insurance are likely those with the highest risks, they created strict guidelines that allowed them to deny coverage, thereby absolving them of any responsibility to the truly needy. Not surprisingly, the Blues and other nonprofit providers were forced to adapt, or else fade into oblivion. They chose the former, and their tax exempt status was promptly revoked.
The Emergence of Medicare/Medicaid
According to Cohn, by 1961, only 7% of the aging population’s expenses were covered through health insurance. National health care advocates, realizing their failures in the past, decided that changes to the system could only be made incrementally, so they began shifting public attention toward the elderly and needy, who lacked adequate care.
In 1965, President Johnson signed the Medicare-Medicaid bill into law—the latter receiving very little fanfare—which at its inception, only covered hospitalization. Though the bill served to swell the insurance rolls, and played a hand in reducing poverty, its cost was quickly exceeding projections. In part, this was owing to the fact that the program had met its goal of bringing more of the elderly and poor into mainstream health care. However, in order to garner enough support to pass the initiative in the first place, the bill was initially designed to pay providers any fee that was “reasonable and customary,” which left the government with relatively little control over fees.
Even the staunchest purveyors of anti-government rhetoric began calling for price controls by the government, and in the 1980’s, Ronald Reagan did just that, first introducing a payment system based on diagnosis, and finally, uniform fees. With all of the lip service Reagan paid to the government minimalists, he was a fan of the elderly, and the expensive, deficit-generating government programs geared toward their care. However, his entitlement generosity was limited to the elderly, and he effectively called for more stringent guidelines for the Medicaid program.
The Emergence of Health Maintenance Organizations (HMO’s)
Cohn describes early cooperatives that popped up around the country during the Depression-era, in which employers set up clinics with salaried physicians—a radical idea, since the pay scheme had traditionally focused on a fee-per-service—and employees paid a fixed monthly fee to fund them. They focused on preventative care and more effective treatment for disease.
With the expansion of health care, came expansions in technology and medical improvements, which inevitably drove up costs as more individuals sought care. The idea of cooperatives was pitched to President Nixon, who needed a solution to controlling health care costs without national insurance. The Nixon administration was intrigued; and with some crucial diversions from an authentic cooperative, they ran with it.
HMO’s were intended to be voluntary. They were intended to encourage free-market participation by better controlling prices, they could offer lower premiums as a result, and lead the charge in the market for greater efficiency and quality care. Another distinction between a co-op and the HMO as envisioned was to keep the old fee structure in place, but negotiate deeper discounts with providers.
They would also cut costs by creating treatment guidelines and injecting themselves into the medical decision-making process; they would determine whether care was necessary, and participants would be limited to a preapproved network of doctors, prior approval for referrals, and preauthorization for certain procedures.
Such cost-cutting methods effectively allowed the new managed-care plans to undercut the previous plans and largely consolidated power with insurers to make key medical determinations for a growing number of Americans. Indeed, in keeping with their promise, and through their own corporate bureaucratic maneuvering, HMO’s managed to offer more comprehensive care—including some preventative care—while offering still lower prices than competitors. As Cohn notes, this is likely due to their greater ability to control costs. They were certainly profitable, as indicated by the fact that they composed just 12% of the for-profit market in 1981, but 65% in 1997.
But the shifting focus from quality care, irrespective of ability to pay, was beginning to swing violently in the opposite direction; and the health care system that had long appeased the population - if not entirely satisfying them - was beginning to unleash the worst excesses of capitalistic venture on the most vulnerable and needy among us.
While the first part of this series focused on what could largely be considered breakthroughs in health insurance, the second part will describe how unforeseeable consequences have lead to the eventual decline of adequate, private stewardship over health care and will conclude the first section on the history of health care in the United States.
Read Part 2: A history of health care in the U.S.
Become a Subscriber (link above) to receive notification when the next part of the Health Care Reform Series is published.
*If you would like to submit a health care story, with the possibility of seeing it published here, please send me an email message at jennyk1981@gmail.com.
Copyright ©2009 Jenny Kakasuleff
Comments
Thanks. I shared...important to know how things got so messed up, I think.
Excellent information, Jenny! We do need to know how we reached the point where profit trumps the health and lives of human beings!
Debbie Jordan, Phoenix Progressive Examiner
The Right won't be satisfied until our children are working 20 hour days in dirty factories and our elderly are dragging their half-dead starving carcasses to the soup kitchens for a shot at some bone soup. Then they'll tell us what they tell us now which is that "no one is starving in America." They'd love to see us clawing each others eyes out, licking our chops just for the chance to work for rotten scraps. The proponents of social Darwinism will never give up until they've made their sick capitalist utopia a reality. Therefore we, the People, can never give up. Get off the couch and fight against them today or be prepared to fight for your very life come 20 years from now.
Once i read a biography on the life of Dostoyevsky. His father was a doctor, and he decided to go into writing because he couldnt handle the shame of being a doctor, or atleast that was the public attitude towards the medical profession at the time. Labels like "quack," and "sawbones" were frequently tossed around. Personally, ive full healthe coverage for the past year, and i never use it, even though i pay sixty dollars a month for massage therepy. Doctors need to get past their own arrogance, if they intend to be of real service to the community
@Hillary- The left will not be satisfied until we have equal, marginal, below adequate healthcare for all (and we will be working a lot of hours for this mess). Hillary if you believe that the government or heavy government oversight is going to improve healthcare please share your decision logic for this-The more government has gotten involved in healthcare the more the cost have sky-rocketed-
One of the things that I doubt Obama will deal with is the Trial Lawyers (who own a lot of the Democratic party) who have driven premiums into 6 figures for some doctors which get passed on to the tax payer or people who are paying their the premium. A good friend of mine who is a heart surgeon told me what he was paying and I was floored-
The number of huge lawsuits has driven up the cost of the Pharmaceutical companies as well, but this is rarely mentioned by the left as the trial lawyer associations are in bed with them.
Jenny, I look forward to you bringing this part of the problem u
We already have a marginal or below adequate healthcare system. this is not a political issue, it is a survival issue. It starts with the doctors themselves. Mark, you need to tell your quack doctor friend(yes they are all scam artist, snake oil salesmen in my book) that he needs to quit being such an arrogent s.o.b and quit whining and crying about his own problems and re-dedicate himself to the general well being of the community. Doctors need to get over themselves, the truth of the matter is that most modern medicine will soon be dismissed as quakery, and that folk wisdom, will always prevail.
Mark: Then you would be disappointed. In the research I've done, Medicare/Medicaid--the two government-sponsored health programs--have contained costs better than HMO's, or any other type of health insurance for that matter. So your argument that government does nothing right, is actually quite the opposite in this case. That will be later in the series, but more to come...
Also, caps on lawsuits won't fix the problem. Conservatives and in your case, independents, need to stop spreading this lie. Tort reform would bring down costs by less than 5%.
Joe, he is a top-notch Doctor that works up to 80 hours a week and they deserve to get compensated-They are underpaid in my estimation and it is not up to you to determine what anyone else's makes-
Of coarse you have a big problem with Doctors who put it in the line to make 200K, but seem to have little issue with the sleazy trial lawyers making sometimes in the 7 figures who own the Democratic Party-
The reason our healthcare system has gotten much worse is government intervention-It does not take a rocket scientist to figure that out.
Joe (your comment sounds eerily like something the character "Brad" would say) just stick with the chicken soup, stay away from doctors and you will be just fine-
So Jenny, The trial Lawyers are untouchable? I mean we need to address the entire problem don't we?
No Jenny, It is very real what Doctor's have to pay in premiums and there was an article not to long ago in the LA Times I believe where they discussed that General Practitioners are having difficulty staying open for business-
If I were a Doctor I would consider forming a professional union and taking up for themselves and not get rolled over and give the left a dose of their "own medicine" pardon the pun-
There is so much hypocrisy on the left who get angry over doctors compensation, but who are silent when it comes to what the trial lawyers rake in-really sad-
Ive seen estimates that state that the administrative costs in healthcare can be as high as twenty five percent, while in the single payer system like they have in canada, the admin. costs are down around the five to ten percent range. Im not exactly sure where lawyers factor into this discusion, but i do believe that doctors should be subject to the same liability standards as any other proffesion.
Making healthcare for-profit has been steadily destroying its integrity.
Those that argue for it have obviously not had a long term illness. Everyone I know that has have been financially ruined, insured or not. A friend with cancer, has the best plan available, but due to very expensive tests, treatments, surgeries and medications her co-pays and deductables over 5 years are now well over $100,000. The purpose of insurance is to (supposedly) protect you from financial ruin.
A single payer system will weed out doctors that are in it for the money moreso than patient care.
Costs of advertising, sales and marketing spent by ins. companies every year are in the billions. The cost of staff, investigators and attorneys, their sole purpose to deny claims, are somewhere between 20-30% of premiums.
And then there are the multi-million dollar salaries to high level executives, considerably more than doctors, and we've all seen the lavish structures that house them.
Mark - the premiums are so high because of the number of lawsuits where the awards are primarily punitive. A single payer system would weed out the doctors that are in it for the money, and create opportunity for those that want to enter medicine for the sole purpose of healing the sick but don't because of the high cost.
Better doctors would result in patient need driven care and fewer lawsuits. Doctors are not only at the mercy of, but in co-hoots with (receiving kickbacks from)insurance and pharmaceutical companies and many lawsuits are the result of not providing needed tests and treatments which leads to missed or under diagnosed problems, which results in more lawsuits.
Every other life sustaining service like fire and police have been very successful without the profit motive.
Mark - You said that government intervention is what has led to higher costs. Can you provide examples? If you are referring to the politicians that are bought and paid for by the insurance companies on both sides of the aisle, then a single payer system would eliminate that as well.
Mark wrote: "The reason our healthcare system has gotten much worse is government intervention-It does not take a rocket scientist to figure that out."
Please - enlighten us.
After reviewing your posts I see no even somewhat credible references to back any of your assertions. For example, what exactly do you mean by "much worse"?
Your arguments may be taken seriously if you provided some type of sensible explanation other than "It does not take a rocket scientist to figure that out" or simply repeating the overly redundant left-right thing. This is not nor should it be a political issue.
And I fail to understand the need to insult those who disagree with you. This is a serious issue that is costing lives and rather than stand up for any principle you mock and ridicule those that do while failing to offer any idealogical solutions.
Mark: Comparing trial lawyers and doctors is apples to orsnges. In the vast majority of cases, they are entirely dissimilar.
Doctors take the hippocratic oath; they are supposed to be attracted by the social and moral incentives of caring for others as the economic incentives--and most are. If you want to compare it to anything, compare it to a priest, who can either lead his denomination the way he envisions God would lead it, (those creating vaccinations weren't doing it primarily for the pay-off, but also because of the immense social and moral benefits from doing so) or he can be a televangelist--preaching the word of God for the sake of profit. Docs serve people who get ill, in many cases through no fault of their own, and whether they have the ability to pay should not determine whether they die.
Lawyers are paid obscene figures to defend people who most of the time, are guilty of a crime. If not prison, at least the economic punishment may serve as a deterrent to crime.
Ive had close relatives who were prescribed oxycontin, for migrain headaches, whenever i tell another doctor or nurse of this happening, they pretty much accuse me of lying, but ive know of atleast two or three other cases of that happening. I have also been in a circumstance where i was left to care for an elderly relative, and had dealt with both doctors and physical therepist. when left in the care of doctors, and most of the doctors i dealt with were absolutely worthless, or even dangerous, leaving my elderly relative at the edge of death, or atleast in a state of extreme discomfort(there also seemed to be a plague of nurses, that were so loaded up on pills that they could hardly walk straight) i found in my experience that massage therepy, and propper nutrition, is the only way to go. there is a reason that the medical proffesion was looked down upon until it became a means to achieve wealth and power.
Disgusted, you seem really thin-skinned & emotional-If you are referring to the comment I made regarding Joe's post then you need to read Joe's post (calling my doctor friend a quack??)- If you are referring to my comment I made toward Hillary it was in the same tenor that she made hers so I would take a breath-
Disgusted-Are you serious? You can't see the correlation between government intervention and health care cost? I wish I had the time to go and look up charts and crunch numbers for you(I work 65+ hours a week)-but if you start around the early 60's and work your way up to today you will see more and more government intervention into the healthcare system.
I disagree with you completely regarding Doctor's compensation- I believe if you are going to sacrifice that much of your life in school paying outrageous insurance premiums you should be better compensated that a “school teacher” (who are in it for the good-they just always complain about their money many earn 6 fig. in
Disgusted, you want me to write you a complicated document on how Gov. Intervention has hurt healthcare-I challenge you to point out where it has been successful? Not in Europe where they are trying to unravel this mess and are turning to the right (i.e.: Germany and France)-Not in Massachusetts where it has been a disaster- You refuted me with 3 vague sentences that doesn't cut it my friend- This is a left blog who hopefully is trying to sway conservatives and moderates to their cause-if you are preaching to the choir you can get away with that - That is blame "profit motive" and Greedy Doctors" for our problems-while ignoring left-wing social engineering disasters, trial lawyer associations, inefficient government agencies etc.
A lot of you think Doctor’s salaries or pharmaceutical cost are a problem, but ignore the enormous premiums they themselves have to pay (in some cases equal to their salary) to protect them against predatory lawyers-Jenny can’t bring herself to include them
Mark: Apparently you ignored my earlier statement, b/c I provided you an example where government contains costs better than private industry--Medicare. Oh yeah, and the fact that we spend twice as much as Canada and the UK--but don't even cover everybody--that's screams efficiency to you? Since you don't have the time to crunch numbers, let me link you to an article by a private physician in CA who addresses your questions directly.
Bureaucracy is in private industry, my friend. They're the ones imposing rules, referral requirements, preauthorizations, network limitations, etc. Private insurers are the handlers of inefficiency...but I know you will ignore the facts in favor of your misconceived position.
www.dailykos.com/story/2008/12/7/670037/-Tales-of-a-Family-Doctor
In regards to the "greedy" doctor issues. Wouldnt it be a good idea for the government to pay for medical training. i dont know the figures, but i have to imagine that the educational cost that come with the pursuit of a medical degree would have to be in the mid six figure range.
Brad, let government pay for everything-wait a minute-who's paying for government? It seems better to me to eliminate the middle man-
Jenny, Please do not make comparisons to Canada where people have had to wait months to get serious treatment in some cases and many Canadians end up coming to the U.S.-Back to the drawing board on that Jen-
Mark: Please don't talk about hospital waits as if systems that offer universal care are the only one's that ration medicine--case in point, the U.S.
Those who are uninsured can go to an emergency room, and they will wait until all of the "paying" customers are helped. Did you read the articles? People are waiting in ER's for more than two days, and when it comes to being uninsured, those people wait indefinitely for their care if it is not an emergency. And how about all those who are insured, who can't receive the services they need b/c some private insurance bureaucrat decides he is better qualified to determine medical necessity than a doctor--those people NEVER get the care they need either.
Mark, you obviously need to apply your balanced news consuming skills to health care, b/c you look very uneducated in this area. I recommend the book in the article: Sick: The Untold Story of America's Health Care Crisis. Yes Mark, it is a crisis.
Jenny, excellent insight and well written, thanks. I agree with Hillary Smith.
Mark said: "Disgusted, you want me to write you a complicated document on how Gov. Intervention has hurt healthcare-I challenge you to point out where it has been successful?"
Actually, I asked for ONE example - not a "complicated document". You obviously do not have an answer because you are avoiding the question. To SIMPLY answer YOUR question -Medicaid has contained admin costs to between 4-6% - For profits are in the 15-20% range due to marketing, sales, executive salaries, profits, tax paid on profits, etc. - I pointed this out in my previous post. Now, I will CHALLENGE YOU, AGAIN - can you provide ONE, SIMPLE example of how government intervention has hurt the healthcare industry?
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