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US Health Care: History and Reform

Updated on August 27, 2014
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Kim is licensed in mental health and addiction counseling. Her education is in business, counseling, and health administration.

Health, Health Care, and the Health Care System

Health is often incorrectly defined as the absence of disease. According to the World Health Organization, health is defined as a “state of complete physical, mental and social well-being; not merely the absence of disease or infirmity.” Illness is the state of poor health. Health care involves the prevention and treatment of illness.

The health care system involves all of the organizations that provide health care. It includes hospitals, outpatient offices, residential facilities, and individual providers and workers in various health care positions. It includes public and private facilities, and “for profit” and “not for profit” facilities. Hospitals make up 1% of the health care system, and employ 35% of all health care workers. The US health care system is one of the largest systems in the US, employing 14.3 million workers in 2008.

History of US Health Care

In the early 1900s, health care was very cheap, and not very good. The average American spent five dollars a year on health care, which would be equal to a hundred dollars today. Health care was provided in the patient’s home or in the doctor’s home. As doctors became more educated, health care improved and hospitals began to emerge. Private hospitals were often part of the doctor’s home. Public hospitals were known as “alms houses,” and provided shelter for the poor. In the 1920s, medical technology began to advance, and health care moved from home to hospitals.

Right before the start of the Great Depression, hospital care was becoming too expensive, and most people stopped going to the hospital. In 1929, Baylor Hospital in Dallas tried an experiment. They offered free hospital days to teachers in exchange for a monthly payment. Twenty one hospital days were given to 1500 teachers for a fee of six dollars a year or fifty cents a month. The Great Depression began, and hospitals were losing patients. They heard about the Baylor plan, which became known as Blue Cross, and that it had been successful. Similar plans began to follow. Enrollments grew throughout the 1930s and by 1937 one million people were covered. In 1939, Blue Shield emerged to provide coverage for physician services according to negotiated rate schedules. In 1945 the non profit company, Blue Cross Blue Shield covered 19 million people in nearly every State.

During WWII most American workers were overseas, unemployment rates were very low, and employers were desperate to find ways to attract workers. Employers were not allowed to raise wages because of price and wage controls set by the government during the war, so they began to provide health insurance as part of a benefit plan to attract workers. The cost of health care was spread out among a large group of people, and the healthy paid for the sick. Those without health insurance either paid cash or didn't see a doctor.

In the 1940s Unions became stronger, and health insurance became a common benefit. In 1946, the Hilburton Act was passed, which allowed federal money to be used to construct hospitals. In the 1950s laws were passed that allowed employers to provide insurance benefits tax free. This set up the expectation that health insurance was to be provided by employers. In the 1950s, penicillin was widely available to treat conditions that could not be treated before. Americans began to expect more pills to treat more conditions. Demand for health care increased and the costs of health care increased.

This is the health care system that is in place today. Health insurance is provided by employers. People who are self employed or unemployed, can pay cash for health care, buy plans on the open market, or may be eligible for government plans for disabled or elderly persons.

Angela F. Braly, former president and chief executive officer for WellPoint, Inc., the largest health plan company in the Blue Cross and Blue Shield Association. WellPoint, Inc. was formed when WellPoint Health Networks, Inc. merged into Anthem, Inc., with the surviving Anthem adopting the name, WellPoint, Inc.

Health Insurance Industry

Since 1945 the insurance industry has not been regulated by the federal government. Responsibility for regulation was turned over to each State’s insurance commissioner who determines how rigorously the industry is regulated in that State. The insurance industry consequently is not subject to federal antitrust laws that apply to other businesses. Antitrust laws promote fair competition and regulate anti competitive practices. They prevent large companies from monopolizing the market and protect citizens from threats to democracy and the free market system.

There is concern that private, “for profit” insurance companies are monopolizing the competition and have a great deal of economic and political power. In the beginning, premium rates were based on the average rates of medical services in an area. Later competitive practices based premiums on claims of individuals and groups, and began to adjust premiums according to the individual or groups’ health status. These practices allowed insurance companies to “cherry pick” for the healthiest employees and offer lower premiums. It increased the premium costs to other employees. Premium costs increased. Employees began paying high premiums and getting less coverage for the premium dollars.

While Blue Cross Blue Shield grew as a “non profit” company, other “for profit” insurance companies were started. “Non profits” are perceived as loyal to their communities and the people they serve, while “for profits” strive to increase profits for stockholders and CEOs, and are perceived as uncaring about the people they serve. There is a great deal of concern that a “for profit” company will make decisions in favor of profit and against human well being in health care, and that insurance premiums are being used to fund CEO salaries, bonuses and retreats. Most, if not all, Blue plans are now owned by the “for profit” company, Wellpoint. An apparently benevolent “for profit” company, Wellpoint controls a large share of the market.

Health Care Reform

Because of increased individual and federal spending on health care and an exploding federal deficit, the federal government has identified that it needs to reduce health care expense and spending. Healthcare reform efforts have focused largely on understanding the health insurance industry and how health insurance impacts the cost of health care. The Health Care Reform Law consists of some relatively minor changes that will be implemented in the practices of insurance companies.

Essentially self employed and unemployed people will be able to buy insurance at “exchanges” and some “holes” in insurance coverage will be filled. Everyone will be required to possess health insurance in order to offset the costs of the very ill and to reduce the cost of premiums to individuals. More people will be covered by Medicare and taxes will be increased. The federal deficit will be reduced, but it will still be in the trillions.

In summary, health insurance was created because health care costs were increasing in 1929. Health care costs have continued to increase. The solution to rising health care costs in 2011 is to regulate the health insurance industry that was created because health care costs were increasing in 1929. Health care costs will continue to increase, but now there is a federal advisory board that can make recommendations on other ways to deal with rising health care costs.

© 2011 Kim Harris


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    • kimh039 profile imageAUTHOR

      Kim Harris 

      6 years ago

      Thanks Healthexplorer. I like your hub about urgent care too. I think it's helpful to understand how health insurance impacts the system.

    • kimh039 profile imageAUTHOR

      Kim Harris 

      7 years ago

      thanks for your comments, conradofontanilla. I hope you found the information here helpful. There are a lot of positives to the US healthcare system, but there are some problems waiting for solutions such as a focus on prevention and wellness and less cost as you mention. Our health insurance also doesn't cover procedures that are experimental. It makes sense to share research. Thanks for your comments, and I hope every country gets the best healthcare possible:)

    • conradofontanilla profile image


      7 years ago from Philippines

      I am interested in the health care system of America because it is being copied in my country. I want the positives; I dislike the negatives. One negative is that our public health insurance is rejecting support for "experimental" or alternative. Our medical research is still weak that we adopt most of research results in the West. But I believe the West have been immersed in reductionist science and allopathic medicine that it does not suit our situation well. We ought to explore alternatives, preventive measures, less cost, more effective treatments and cures. A big concern is that those in the position to make policy has been schooled in the West who ape their tutors.

    • kimh039 profile imageAUTHOR

      Kim Harris 

      8 years ago

      Thanks for addendum, Jon! Anytime I hear about a new administrative position or "advisory board" being added, I think increased admin costs and decreased benefit. The upcoming election will be even more heated than the last over the health care reform issue. It's a good idea to be informed. Thanks again, for taking the time to read and post a comment, Jon. I appreciate it.

    • JON EWALL profile image

      JON EWALL 

      8 years ago from usa


      ‘’but now there is a federal advisory board that can make recommendations on other ways to deal with rising health care costs.’’

      The board will decide what services you will receive rather than you, insurance provider and your doctor. The board will decide how much your doctor will receive for a service. This board was not to have been formed until 2012. The board is active today. Medicare was cut $500 million to pay for the behind the scenes ( government control ) EXPENSES. Healthcare providers are refusing to take Medicare patients due to the new Healthcare regulations.

      Obama said that Healthcare cost would go down if the Healthcare reform bill was passed. Barack Obama said that unions would not be exempt from the new law. Obama said that government paid abortions are not in the law. All of the above was a Obama lie, none of the above is true.

      The Stimulus package passed in 2009 included $19 billion for electronic health records mostly to be an incentive for Medicare providers. Speaker Pelosi’s statement ‘’ we must pass the bill to find out what’s in it ‘’ apparently is true. The Obama administration is adding more information as time goes forward.

      Check your insurance premiums, ours went up 25% in 2010 , 25% in 2011 and now we have received a notice that premiums will rise another 25% with higher deductibles.

      The Republican controlled House of Representatives recently has voted to appeal Obamacare.

      The first regulations are set to go into effect in Oct. 2012.

    • kimh039 profile imageAUTHOR

      Kim Harris 

      8 years ago

      Thanks for pointing out that even though we're paying far more than ever for insurance premiums, we are getting very little. It occurs to me that a lot of individuals are making decisions not to get treatment rather than to survive a devastating disease only to face health care costs they'll never be able to pay off! Thanks for reading, rating and commenting Happyboomernurse....and for working in this very ill system since the 1970s! I too hope the real problems with the system will eventually be addressed.

    • Happyboomernurse profile image

      Gail Sobotkin 

      8 years ago from South Carolina

      Excellent and comprehensive hub highlighting the history of our health care system, much of which I've lived through since becoming a nurse in the early 1970's.

      I agree that the health care reform law will make health care coverage more accessible, especially to those who have pre-existing medical conditions that insurance companies have traditionally refused to cover or if covered, the rates charged were so astronomical that no-one could afford them.

      But the problem I currently see and believe will only get worse in the future is that having insurance coverage no longer means you can afford health care because the base cost of the insurance, combined with ever higher co-pays and deductibles for ever costlier medications and treatments still makes the cost a hardship or unreachable, especially for workers or retirees who have incomes that put them in the middle class. The poor have been covered by Medicaid for free or almost free for many years, but the middle class earns too much to be eligible for public assistance, yet not enough to pay their medical expenses as stated above. Healthy workers tend to believe they're covered by their insurance but don't understand just how high their co-pays and deductibles can get if they develop a cantastrophic illness such as cancer where a single chemo treatment may now cost $20,000 and the person may have to pay $2,000 to $6000 for the co-pay and/or deductible. Some policies do have catastrophic out of pocket limits, but some don't.

      Hopefully, I'm wrong and the new law will address the above issue once it's fully implemented, but I fear that's still the coming trend.

      Am voting this hub up and useful because you've done a great job clearly explaining where we've come from and bringing us up to the current threshold of change.

    • kimh039 profile imageAUTHOR

      Kim Harris 

      8 years ago

      Thanks for reading and commenting, HSchneider. It almost seems "un-American" to rely on an employer for health insurance, especially in today's market. Still, I think too much attention was given to health insurance, and the real problem of rising health care costs has not been addressed. I just hope it's not forgotten, and we eventually get back to it! I saw that the courts in Cincinnati upheld the constitutionality of health care reform.

    • profile image

      Howard Schneider 

      8 years ago from Parsippany, New Jersey

      Awesome Hub and a very comprehensive history. I agree with you that the insurance companies greatly skew costs. It is a shame that our healthcare industry grew up around being employed to get one's insurance. It is terribly unfair and way overdue for an overhaul. The state run exchanges were a compromise that I hope works in the new Healthcare Reform law.


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