Resident Roundup: Matthew Geisz, M.D.

Monday, June 10, 2019

Matthew Geisz, M.D.
Matthew Geisz, M.D.

Health Insurance: A Brief History

It’s complicated.

Health insurance in the United States is complicated. Consider your own health insurance plan: Is it employer-based, government program, or self-insured? Is your plan an HMO, PPO, or managed care plan? Do you have a high premium and low deductible or a low premium and high deductible? Do you have an HSA? Phew… . It is enough acronyms and clumsily named programs to give me a headache.

US Health Care Ranks Last Among Wealthy CountriesWhy does it matter?

As the 2020 U.S. presidential election draws near, health insurance stands to be at the center of the debate yet again. While a divisive topic, most can agree that our patchwork system is seeing ever-rising health insurance costs with relatively poor health outcomes. Not to mention the uninsured or underinsured populations. America’s health insurance system is now a stitch work of programs — both public and private — born out of necessity rather than design.

How did it start?

In the late 1800s to early 1900s patients paid out-of-pocket for their medical care — a model known as fee-for-service. During this time, care outside of the hospital was mostly bizarre panaceas such as Hamlin’s Wizard Oil, William Radam's Microbe Killer, and Clark Stanley’s Snake Oil Liniment. This model worked as this limited medical care was inexpensive. However, by the late 1920s with advances in medicine such as the advent of antibiotics, health care became more effective and expenses began to rise. In response to this rise in health care expense, a hospital in Dallas began offering 21 days of hospital stay in exchange for $6 per year to a group of teachers in the area. Thus, the first insurance plan was created.

Clark Stanley's Snake Oil LinimentThe plan was then extended to other employee groups and became known as Blue Cross which later combined with another insurance plan to become Blue Cross Blue Shield. This model quickly spread to other hospitals across the country and was modified over the years to add dependent and maternity care, becoming more like the health insurance we have today with one major exception: each plan was paid for completely by the employee.

What happened next?

Around this time, other countries such as England and Germany were developing their own insurance plans; however, instead of hospital-based private insurance they were focused on government-based national health programs. Even in the early 1900s, there was discussion about a national health program in the United States.

In 1945, President Truman called for Congress to create a national health insurance program, but was ultimately derailed largely due to the xenophobic feelings stemming from World War II. The American Medical Association led a large campaign against the legislation, even popularizing the term “socialized medicine.” Thus, a national health insurance program was deemed contrary to the “American Way.”

Additionally, World War II drew a large portion of the American workforce overseas, causing a worker shortage. In response, the United States passed legislation limiting wage growth to prevent inflation. This spurred employers to offer health insurance benefits to their employees, thus creating the employer-based health insurance we have today.

A timeline:

"Unfinished Journey — A Century of Health Care Reform in the United States"

What about everyone else?

As the private health care industry flourished in America from the 1940s to 1960s, the employer-based health insurance plans left gaps in coverage. By the early 1960s, health insurance for older adults cost three times as much than for younger people, leaving close to half of people over the age of 65 years old uninsured. In 1965, President Lyndon B. Johnson created Medicare and Medicaid, to combat the rising inequalities in the elderly and lower income populations respectively.

What do we do now?

The United States government has attempted to cover the gaps in care of our current employer-based health insurance plans including Medicare, Medicaid and, more recently, the Affordable Care Act. However, with over 28.9 million uninsured and over $3.5 trillion in health expenditures an overhaul of our current system is long overdue. Despite the highest per-capita health expenditure, the United States ranks 26th in life expectancy and 29th in infant mortality rates, common measures of health system’s quality.

Perhaps it is time to let go of antiquated sentiments stemming from WWII and the Cold War. Modern medicine requires a modern approach to health insurance rather than the reactionary system we have in place today. Regardless of our political values, the health insurance system will certainly remain a top issue for years to come at least now we understand how it formed.

Matthew Geisz is a first-year resident with the Duke Family Medicine Residency Program. Email with questions.
Editor’s note: Duke Family Medicine residents guest blog every month. Blogs represent the opinion of the author, not the Duke Family Medicine Residency Program, the Department of Family Medicine and Community Health, or Duke University.