A Healthier Tomorrow – The politics of health – part 1
Imagine a Healthier Tomorrow
By Alison H. Page
We are heading into a year of national political debate. Every presidential debate or interview will touch on the topic of health care. Why? America has a healthcare crisis. Our health care is too expensive, people do not have good access to basic preventive services, and the cost is creating a burden for businesses that provide much of the coverage.
I had considered writing this column on Medicaid expansion, the pros and cons of accepting the federal funding, and the impact of Wisconsin’s decision not to accept the funding (Note: The Affordable Care Act provides increased financial support to states that expand coverage for people earning up to 138% of the federal poverty level). But, as we try to understand issues like Medicaid expansion it is important to understand how we got here in the first place. Over the next few months we will discuss the history of health care and the possibilities of funding, and providing, health care services to the people of this country. So, let’s get started. First, we will tackle the beginning of health insurance. Understanding the history of healthcare insurance in the United States will help you understand how America got into the crisis we face today and how workplaces became the primary suppliers of health insurance.
Thinking about health care as a social responsibility is not new. There have been social contracts for the provision of health care services in place since the days of Hammurabi in Mesopotamia, where healthcare insurance began as a service performed in exchange for a fee under law.
But contracts on health care, or health insurance, truly became an issue of vital and controversial importance in the United States in the early part of the twentieth century, when medical care became institutionalized and more advanced, and the cost of services began to rise. Prior to that time, most health care was very basic and provided in the home.
The first of what could remotely be called individual health insurance plans became available in the United States during the Civil War when a Massachusetts company began providing accident insurance. The plans provided coverage for injury related to travel by railroad or steamboat.
The earliest forms of real health insurance emerged in 1850. Individual accident insurance proved a successful venture, so these kinds of early plans began to expand to cover a broader range of illness and injury.
The late 1800s and early 1900s were full of medical advances, from the identification of infectious agents, vaccines, and new medical technologies such as X-ray. The abundance of innovation transformed the public image of medicine, and people began to place more trust in medical institutions.
In the early years of the 20th century we saw the emergence of group health insurance plans when groups began developing relationships with health care providers. In 1929 a few Dallas-based teachers came together with a local hospital (Baylor) and proposed to receive a set amount of sick and hospital days for a fixed, prepaid rate. Prepaid hospital visits became very popular.
With the onset of the Great Depression in the 1930s, many other hospitals followed the model of the Baylor Plan, and medical insurance became much more widespread. Pre-paid health plans enabled consumers to be insured but also benefited hospitals by giving them steady income despite economic turmoil. However, these single-hospital plans also generated price competition, and to avoid this, community hospitals started to work together in creating health coverage plans.
In 1939, the American Hospital Association (AHA) first used the name Blue Cross to designate health care plans that met their standards. These plans merged to form Blue Cross under the AHA in 1960. Considered nonprofit organizations, the Blue Cross plans were exempted from paying taxes, enabling them to maintain low premiums.
Then, in the 1940s and 1950s we saw the beginning of the proliferation of employee benefit plans. During the Second World War, companies competing for labor had limited ability to use wages to attract employees due to wartime wage controls, so they began to compete through health insurance packages. The companies’ healthcare expenses were exempted from income tax, and the resulting trend is largely responsible for the workplace’s present role as the main supplier of health insurance.
The problem has been exacerbated over the years by two things: First, employee unions have successfully negotiated very good (and expensive) health plans, in many cases in lieu of increased wages. Secondly, increased technology has increased the cost of care delivery. Additionally, I would argue that competition in health care has also driven the cost up. It sounds counter-intuitive, but the redundancy of services we see in many communities, done in the name of competition, increases the overall cost of health care.
So, businesses have been left holding the bag. Meanwhile, the world of business has changed. In the 1940s American businesses primarily competed with other American businesses. Today, they compete globally, in many cases with businesses that are not burdened with the expense of providing health care benefits to employees. This is not sustainable.
Next month – how and when did the federal government get into the health insurance business?