Some Events in the History of U.S. Health Care

SOME HEALTH CARE TIMELINE HIGHLIGHTSThis timeline mentions some specific events which relate to what we know today as “health care” but does not include all such events. Most information included here is from a report by Linda Gorman, Ph.D., “The History of Health Care Costs and Health Insurance” which can be found on the website of the Wisconsin Policy Research Institute (www.wpri.org). Other sources of information include Maryland Public Policy Institute, Conservatives for Patient Rights, CATO Institute, www.freemarketcure.com, and government documents.1847 American Medical Association began. It gradually gained stronger control on schools, practices, etc. through the early 1900s, driving up costs and regulations.People were responsible for their own medical care and free market principles offered varied choices. Some employers offered insurance, but most sickness insurance was through mutual benefit associations, such as fraternities, societies, lodges, charities, trade unions, etc. Those groups policed their own plan members carefully to reduce misuse; the incentive was there.By 1910 AMA-inspired medical societies pressured licensing authorities and hospitals to deny doctors who accepted lodge contracts.1912 Progressive Party included national health insurance in its platform. It was defeated at the national level.1915 The Progressive strategy for government control and mandates shifted to state level. American Assoc. for Labor Legislation introduced state medical care insurance bills in 16 states.1926-27 AMA produced investigation and recommendations to reduce costs. Solutions were created by entities believing in egalitarian social justice, demanding central planning and group-oriented methods.Even Dr. William Mayo of Mayo Clinic and others successful in the medical profession disagreed with the central/national method. His clinic and others ran successfully without government interference.AMA increased doctor licensing regulations, driving up costs and not always improving actual care.1930s With financial problems in the banking industry, hospitals banded together in groups to offer pre-paid coverage to citizens, assuring that they would not find themselves billing people later and not receiving payment. Physicians then followed suit, offering prepaid coverage.TAKE NOTE: The purpose of these plans was to ensure that hospitals and doctors got paid. The plans were not for ensuring that consumers/patients would have the means to pay their medical bills.1939 American Hospital Association ruled that hospitals offering plans that met the AHA standard could come within a Blue Cross network, using the name and logo.State legislatures agreed not to treat BC plans as insurance, since they were owned by hospitals. The BC plans operated as non-profits, not being required to pay the additional 2-3% that private companies had to pay and the non-profits were not required to keep reserves in place to cover future risk or pay-outs. The 2-3% of gross revenues does not sound like much, but it actually calculates to 50-60% of net revenues. Obviously the BC plans had a great advantage over private insurers and by 1945 BC had 59% of the health insurance market.1942 Stabilization Act imposed price controls on employers by limiting employee wage increase, so employers sought a loophole to offer pre-tax fringe benefits to attract workers.1943 There was an administrative tax ruling that employer-paid premiums were not taxable as wages, and was clarified in the 1954 Internal Revenue Code.By 1945, BC had 59% of the health insurance market.1946 Physicians, whose plans were under the Blue Shield name, affiliated with BC to become BCBS.1965 The Democrat-controlled Congress passed Medicare and Medicaid programs.1973 Sen. Ed. Kennedy’s HMO Act1974 ERISA: (federal) Employee Retirement Income Security Act freed up larger employers that could create their own self-insured plans from complying with state laws. Small businesses had to participate within the small group market with related regulations.1980s Some health care policy experts began considering the feasibility of individual self-insurance and health savings ideas. Some states did not allow individual policies.1983 Medicare calculation and method of payment (DRG: Diagnosis Related Group of the service provided) established fees paid regardless of individual services provided in each case. This was to hospitals and during the Clinton admin., was extended to physicians.CONTINUED LAYERS OF REGS: RIDICULOUS EXAMPLE: Medicare used the # of falls of residents in nursing homes as an indicator of quality of care. Many nursing homes responded by not allowing residents to get up and move around without supervision. Alarms go off in some cases if they try to get up. People are discouraged from moving, which harms their health, but OUTCOMES are met (fewer falls).Late 1980s, early 1990s Foundations like Robert Wood Johnson Foundation promised states cash grants in exchange for enacting model legislation forcing employers to insure employees for virtually every medical expense, driving costs up.Into the early 1980s, the RAND Health Insurance Experiment assessed costs/use/health condition in different types of plans, from free to plans in which the patient pays up to 95% (and levels in between). Among other findings, per capita costs where people received free care were 45% higher than costs where consumer paid 95%, with out sacrificing health.1986 Emergency Medical Treatment & Active Labor Act ensured that anyone will receive emergency room treatment regardless of ability to pay.2002 Health Savings Accounts, which have caps of allowable tax-free deposits into them (2006 was $2750/ind and $5450/family).CURRENT LEGISLATION (as of 7-20-09)The current bill: HR3200 Affordable Health Choices Act of 2009 in committees:House Ways & Means, House Energy & Commerce, House Education & LaborSenate Finance, Senate HealthAnother: Quality Affordable Health Coverage for All AmericansMany bills have been written, but have not gotten a hearing in committee.As I read HR2520 Patients Rights Act, I saw that it refers to meeting the outcomes and complying with Healthy People 2010. Checking that, I learned that the Surgeon General and the Dept. of Health & Human Services have created statements of outcomes which must be met, and which give viability to each successive government grab of private lives. The Surgeon General’s report is “Healthy People”, and successive sets of standards include Healthy People 2000, Healthy people 2010 and Healthy People 2020. Every 10 years the Dept of H & HS evaluates and makes new outcomes, including some which adjust to changing public health priorities. (www.healthypeople.gov)SOME SUMMARYOverall, as employer-provided plans arose and BCBS increased its share of the market, free market principles were not free to operate: Special legislative treatment and network regulations prevented outside-the-network facilities from competing. This limited product innovation through tax disadvantage and higher care costs for non-covered patients. Those consumers in the BCBS plans were careless as to costs because it did not affect them directly.We need to begin disconnecting health insurance (therefore health care) from the employer. Though this came about through employers’ free choice originally (1942, 1943), it is now expected or threatened to be required and it no longer serves market principles well. Businesses are heavily encumbered by having to supply the insurance connection and health care consumers do not behave like normal consumers. The employer connection is also the culprit in the need for so-called portability.Another piece of the solution: We need to selectively dismantle regulations and promote more consumer-driven options, some of which are being tried and are successful. Think of some medical needs as opportunities for a more normal “retail” experience, like Target’s in-store clinics. This storefront approach encourages some individual interface and cash payment at time of service, a first step toward individual responsibility for those who have been taught that health care will be given to them by someone else.

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