A Badass History of Healthcare

Via Purple

We’re going to take you on a little journey throughout the history of health care in the USA so we can see how health insurance was created. So hop in the Delorian and gun it to 88, because we’re going back in time.

Before the 1920’s, medical technology was so primitive that in today’s terms that comparing it to modern medicine is like comparing a record player to an iPod (nothing against record players, vinyl rocks). Hospitals weren’t sterile, treatment could get weird (leeches… ew), and doctors didn’t have anything close to the kind of training they have today. As a result, most patients were treated in their homes. Because medical technology was super lame before 1920, spending on healthcare and medical procedures was low and therefore not a big deal to most people.

The most expensive thing about medical care wasn’t even the care itself, it was the money that you lost by not being able to work while you were sick or injured (and it’s not like people were throwing a packet of EmergenC into their water bottles and battling through). So it’s not a surprise that most people were like“healthcare insurance, why the hell would I need that? Healthcare spending isn’t even that bad. It’s the not being able to work when I’m sick part that hurts me.” Instead, most people had what was called “sickness” insurance, which provided income to replace wages lost when someone was sick.

The reason we didn’t have healthcare insurance wasn’t only because there wasn’t a large demand for it, but also because insurance companies didn’t want to offer private health insurance policies. Why? They thought insuring health was way too risky and volatile.Think about it: A sick person could lie and say that they’re healthy and sign up for cheaper insurance. OR someone who was healthy could change their behavior ­ start drinking heavily, or get really sick down the road, or engage in risky activities ­ after they purchase insurance.

Ok, so back to 1920. As medical technology advanced and new medicines were discovered, people started being treated less at home and more in hospitals. As a result, more people wanted and needed medical care, and health care gotWAY more expensive as people expected better quality of care from doctors and hospitals. At that point in time, better care plus better medicine and medical instruments led to a rise in health care costs.

Then, in the 1930’s, something big happened (other than the Great Depression and the outbreak of WWII… damn the 1930’s wereROUGH). At Baylor University Hospital in Dallas, a little experiment was conducted that would change the future of health insurance. The hospital tried out a system with a group of Dallas teachers where the teachers would pay a certain amount a year (around $6.00, yes that’s right we said SIX DOLLARS) to the hospital and in exchange would get 21 days of hospitalization to use throughout the year if needed. Hospitals AND patients were equally pumped about this: It meant that hospitals could ensure that they were paid, and patients could afford hospital care.

Other hospitals saw this and said ‘ohhell yeah we should start that!’ and began adopting these types of plans. Community hospitals began to organize into groups that offered insurance coverage that allowed you to go to the entire group. Hospitals that offered these plans were be marked with a blue cross on the outside, giving rise to the name Blue Cross plans.

As Blue Cross plans grew, the American Hospital Association (AHA) developed guidelines for them. For example, people who paid for these plans had to be able to go to any doctor or hospital they wanted.

Blue Cross plans also got a major boost from a little something we like to call legislative action: The state of Texas passed a law letting Blue Cross act as a non-­profit which meant they didn’t have to pay taxes and didn’t have the usual regulations slapped on insurance companies. The state was so keen on helping Blue Cross out because the plans were seen as in the best interest to society because it helped out low­oincome individuals.

Alright, so quick review. What we have now in the 1930’s are pre­paid healthcare insurance plans where you pay a yearly amount that allows you stay at a hospital for free during the year (with limits).

Enter Blue Shield, the same kind of pre­paid plan but instead of letting you stay in hospitals during the year, it let you see individual doctors. Docs were worried that Blue Cross plans would limit their autonomy and were afraid that having a third party (the insurance company) pay them instead of the individual would restrict their ability to charge certain amounts. But Blue Cross plans were becoming as popular as Regina George so they had to get on board eventually, and created their own version of the plan called Blue Shield. The first Blue Shield plan was founded in Cali in 1939. Then in the 80’s, Blue Cross and Blue Shield merged to form the Blue Cross Blue Shield Association.

Together, Blue Cross and Blue Shieldwere the first to really enter the heath insurance market because everyone else was too scared too. At this time, Blue Cross and Blue Shield was only giving health insurance to groups of employed workers. Once other insurance companies saw how well Blue Cross Blue Shield plans were working, they followed along and in the 1940’s the health insurance market exploded.

One thing to note that is super important and will come into play later: Blue Cross Blue Shield were under a system of community rating(because they were technically ‘non­profits’ remember), which meant that they had to charge the same premium to sick people as they did to healthy people.

BUT commercial companies (other insurance companies who started offering health insurance after BCBS) did not have to have a community rating and could then charge sicker people, older people, and pretty much anyone they thought would be expensive to take care of MORE than everyone else. This meant that commercial companies could offer cheaper health insurance to healthy people leading to a boom in the commercial market in the 50’s.

Something else contributed to the success and popularity of offering health insurance to groups of employees. During WWII, to keep inflation down, the government controlled the salaries of employees and the prices of goods to keep inflation low during the war. Without a company being able to say “come work for me I can pay you $50 more than that other company,” it was hard for employers to attract new workers. SO, to fix the problem, companies started offering health benefits. Now, instead of saying “Hey come work for me I can pay you more than that guy,” employers could say, “Hey come work for me I can give you a great health insurance plan.”

Ok time for a little break. Have some coffee, watch this video of puppies:

K, ready to roll again? Cool, things are about to get REALLY interesting.

We’re heading into the 1960’s, the time of hippies, weed, the Beatles and Led Zeppelin (aka the best decade ever). But also the time of the Vietnam war, MLK, JFK, and LBJ, pretty much all of the important initial’d leaders. Ideas about having a national health insurance program had been floating around for a while, but it was still really controversial. President Truman was really the first one to try to pass a national health insurance program, but it was shot down. By the time 1963 rolled around, a Democrat from Texas (yeah, those existed at one point) named Lyndon B. Johnson became President of the United States. He was feelin’ pretty good with the new, strong Democratic majorities in both the Senate and the House and decidedit’s now or never baby, let’s try to pass some health care reform.

So Medicare and Medicaid came along, providing a safety net for people who couldn’t afford health insurance. Medicare is a federal (national) program, Medicaid is funded partly by each state and partly by the federal government. We eplained more about these two policies above.

In the 70’s, healthcare costs are escalating rapidly, partially due to unexpectedly high Medicare expenditures, rapid inflation in the economy, expansion of hospital expenses and profits, and changes in medical care including greater use of technology, medications, and conservative approaches to treatment.

In the 1980’s, health care became more privatized and more corporations got involved in consolidating control of hospitals and hospital systems.

In the 1990’s health care costs starting growing really, REALLY fast. Congress tried and failed, again, to pass health care reform.

And then, in 2010, the Affordable Care Act (Obamacare) was passed.

I’m out of breath. Hope this guide was helpful!