A Short History of Healthcare Reform

I’m going to take you on a little journey through the history of health care in the U.S., so we can better understand how the system we have today 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 by today’s standards was practically medieval. I’m not exaggerating.

There was this dude, Dr. John Brinkley, who had a health advice radio show. His prescription for basically everything? Transplant a goat gland into your body. This was real life people!

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. 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 sucks.”

Instead, most people had what was called “sickness” insurance, which provided income to replace the wages you lost when you were sick.

In addition to that, insurance companies didn’t want to offer private health insurance policies. They thought insuring health was far too risky and volatile.

Ok remember, we’re still in 1920. As medical technology advanced and new medicines were discovered, treatment started moving from the home to the hospital. As a result, people demanded better quality healthcare and more of it. So health care got way more expensive.

Then, in the 1930’s, something big happened (other than the Great Depression and the start of WWII… damn the 1930’s were rough).

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 (around $6.00, yes I said six dollars) to the hospital each year.

In exchange, they would get 21 days of hospitalization to use throughout the year if needed. Both hospital and patients were equally pumped about this: the hospital could make sure they were paid, and patients could afford hospital care.

Other hospitals saw this, said “oh hell yeah, we should start that!” and began adopting these types of plans. Community hospitals started organizing into groups, and offering insurance coverage that gave patients access to all hospitals in that 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.

Blue Cross plans also got a major boost from a little something called legislative action. The state of Texas passed a law allowing Blue Cross to act as a non-­profit. That meant Blue Cross didn’t have to pay taxes, and avoided the usual regulations slapped on insurance companies.

The state was so keen to help out Blue Cross because these plans served the most vulnerable, low-income people who needed healthcare the most.

Alright, so quick review:

We’re now in the 1930’s with pre­paid healthcare insurance plans, where you pay an annual fee that allowed you stay at a hospital for free during the year (with limits).

Enter “Blue Shield”.

It was the same kind of pre­paid plan, but instead of covering hospital stays during the year, it covered doctor visits.

Docs were nervous about health insurance to begin with. They feared it 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.

This is important, because it helps us understand why government attempts at healthcare reform get so much pushback from physician organizations.

Ok moving on…

Blue Cross plans were becoming so popular that doctors knew they had to get on board this insurance train eventually.

The first Blue Shield plan launched in Cali in 1939. Eventually, in the 80’s, Blue Cross and Blue Shield merged to form the Blue Cross Blue Shield Association.

Together, Blue Cross Blue Shield was the first to really enter the health insurance market as the only entity providing health insurance to groups of employees.

Once other insurance companies saw how well Blue Cross Blue Shield plans were working they followed suit, and in the 1940’s the health insurance market exploded.

One really important note: Blue Cross and Blue Shield were under a system of community rating (because they were technically non-profits). That meant that they *had* to charge sick people the same premium as healthy people.

But for-profit companies didn’t have to use a community rating system, so they could make insurance for sicker/older people more expensive. This meant they also could offer cheaper health insurance to healthy people, leading to a boom in the commercial insurance market in the 50’s.

But something else contributed to the success and popularity employer-sponsored health insurance (which by the way is how the vast majority of American have gotten health insurance for the past six decades).

During WWII, the government controlled the salaries of employees and the price 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, and a virtual fist bump 👊 for endeavoring to learn about the history behind our nation’s healthcare system 👏

You are rewarded with this Beyonce gif:

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

We’re heading into the 1960’s.

Ideas about having a national health insurance program had been floating around for a while, but it was still very controversial. President Truman was really the first to try to pass a national health insurance program, but it was shot down Dikembe-style.

Then in 1963, 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 decided it’s now or never baby, let’s try to pass us some health care reform.

LBJ signs Medicare/Medicaid into law

And he did! Medicare and Medicaid were passed, providing a safety net for people who couldn’t afford health insurance. Medicare is a federal program, and Medicaid is jointly-funded by both the state and the federal government.

In the 70’s, healthcare costs escalated rapidly, due to:

In the 1980’s, healthcare became further privatized with more corporations getting involved in consolidating control of hospitals and hospital systems.

In the 1990’s healthcare costs starting growing really, really fast. Congress tried and failed (again) to pass healthcare reform.

In 2010, the Affordable Care Act (Obamacare) was passed.

Aaaaaand that’s the short history of healthcare reform! You crushed it 👏



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Rebecca Harris

Entrepreneur and Creative Product Leader, recovering political junkie