History of U.S. Health Care

I recently did an overview of the dangers of Medicaid Expansion, however, proponents of big government continue to loudly proclaim misinformation regarding the government expansion and media outlets with clueless “journalists” continue to amplify the lies from these politicians and activists. Due to this, I am going to be going into a deeper dive for the next few weeks to give a better understanding of the real issues with Medicaid—looking at health care in general today. I’m also not going to leave people hanging when it comes to solutions to the health care problem in Kansas. There are actual solutions that would benefit all Kansans without growing the government through Medicaid Expansion.

If you find any of this information helpful, for the love of Kansas, share it as it is important that as many Kansans have a solid understanding of the health care issue that we are facing. Share it with your friends, your family, your coworkers, and maybe most importantly, your state representatives.

Before we even talk about the creation of Medicaid, I think it’s important to understand what insurance was originally as well as what hospitals were originally, just to give us a base.

Insurance was first offered in the U.S. in 1850, but the insurance looked a lot different from what we know today. This insurance was intended to be used for injuries sustained in accidents and not just for anything as small as visiting a clinic like it is used today.

As for hospitals, these were places where people went to die. People were regularly treated in their home, including delivering children. Health care was very local and inexpensive. Most people were more concerned about missing work than paying for health care services because it was so cheap, however it wasn’t a great time for health care.

Up until 1910, they were still pioneering surgeries that we wouldn’t even really worry about today like tonsillectomies, so people would regularly just die from things that today we wouldn’t think twice about as being an issue. However, as we begin to see new drugs and technology develop, people began seeing opportunities. The 1910s are important because, while health care was only starting to get more advanced, it was also the time when regulation really started digging into the health care industry and medical groups started to develop to push for these regulations.

A committee on social welfare was created in 1912, and held its first national committee the next year. The committee was created by the American Association of Labor Legislation (AALL) who claimed they didn’t technically want to abolish capitalism, they just wanted to “reform” it into something that it wasn’t. There big focus was health insurance drafting a model bill in 1915 and the American Medical Association (AMA) loved this proposal so much that they started working with the AALL.

The AMA grew rapidly and used their new found power to lobby for anti-competitive government regulation in the health care field. They started lobbying for an increase in medical licensing to make it harder for people to become medical professionals—not because the people would not have the knowledge and skill to practice, but rather because they wouldn’t be able to afford to pay the government to offer their services legally.

This is something that is important to understand about any professional group lobbying the government for licensing. It’s a form of cronyism done in the name of public safety, but in reality, it just lessens competition so that those professional groups can charge more and make more money because of supply and demand, and this is a racist practice because this was also done to target communities they disliked from getting licenses and entering the market.

The Flexner Report, Medical Education in the United States and Canada, funded by the Carnegie Foundation and supported by the AMA was published in 1910, facilitating new standards for medical schools. The AMA lobbied for the closure of nearly half of the country’s medical schools and they used their new oversight to reduce the class size of medical schools as well to limit the entry of new doctors into the economy each year for the purpose of wanting to enrich themselves from a restricted market. So, from 1910 on, the health care system is not a free market and it only gets worse.

The 1920s saw an increase in prices and with new technologies, hospitals started marketing themselves as clean places to have babies and receive treatment before you get sick, but the hospitals saw a big issue for themselves: Their beds were going empty every night.

An official from Baylor University in Dallas, Texas decided they needed to find a way to get people to pay for health care the way people pay for lipstick (yes, this was the comparison made)—a little at a time each month.

This is where we started seeing health insurance being tied to our jobs. Baylor hospital started offering a plan to teachers to pay 50 cents each month (about $9.00 today) in exchange for Baylor picking up the tab for visits. By the time the Great Depression hit, the Baylor option became a huge hit due to hospitals seeing a major drop in patients, and this option became known as Blue Cross.

While medical advancements absolutely increased the price of health care, health care was still relatively inexpensive in the 1920s. However, the 1930s would come around and change this drastically, starting with the Blue Shield network. Blue Cross was more tied to hospitals, Blue Shield would be more tied to doctors.

Blue Shield was developed by employers in the lumber and mining fields where they paid monthly fees to medical service bureaus that were composed of groups of physicians.

These plans were facilitated by state legislation and these bills allowed Blue Cross and Blue Shield to operate as nonprofits that enjoyed tax exempt status and avoid insurance regulations that applied to other insurance providers. So, the government was really picking winners and losers for insurance companies with a special interest in these groups which absolutely goes against free-market capitalism. This is peak cronyism.

Franklin D. Roosevelt (FDR) was in the White House in the 1930s and was the first to push for nationalized health care. Sidenote: Most of the issues in the U.S. today can be traced back to the FDR Administration. The man was an absolute tyrant full of bad ideas that continue to screw us over today. What is interesting to note about FDR when it comes to the health care issue is that this is one issue where he can’t be blamed as much due to this being something he never got through in his major package deals.

In his 1940 campaign, FDR decided he would make nationalized health care his big thing. However, World War II (WWII) came about in 1939 and everyone’s attention focused on this.

Post-war inflation became a big concern for the U.S. economy and so the federal government decides to manipulate the economy. Wage and price controls get implemented under FDR’s Administration and labor groups prepare to strike in mass—a huge problem in a wartime economy. To ease the concerns of labor workers, the War Labor Board (WLB) exempted employer paid health benefits from wage controls and income tax. This means that employers received a 100 percent tax deduction while the benefits employees received were exempt from federal, state, and local taxation. This caused the number of people receiving employer health benefits to explode.

So, employment and health care being tied together really just happened through a series of bad policies and wasn’t actually thought out.

There would continue to be pushes for nationalized health care from the 1940s into the 1960s, with the biggest thing to note being Harry S. Truman’s Fair New Deal. Truman became President in 1945 after the death of FDR and was also a big proponent of growing the government bigger in order to nationalize health care. However, with the start of the Cold War, communism became a huge scare and Truman’s plan failed. However, this doesn’t mean he didn’t make health care worse.

In 1946, Truman got the Hospital Survey and Construction Act (aka Hill-Burton Act) passed and this became a major piece of legislation. The law gave grants and loans to hospitals, nursing homes, and other health facilities for the purpose of construction and modernization on the agreement that these facilities provide “a reasonable volume of services to people unable to pay and to make their services available to all persons residing in the facility’s area.”

The private market really starts disappearing as the health care system starts becoming more and more government run and the Internal Revenue Service (IRS) is starting to get hungry for tax dollars. The IRS and the courts begin to chip away at the tax exempt status of many of the health insurance plans, but President Dwight D. Eisenhower’s Administration doesn’t approve of this, putting legislation into place to lock the system in place.

So, it’s now the 1950s, health care costs are rising with the inflated demand and the restricted supply, many Americans are receiving insurance through their employers, and this created a really big problem for people who were retired and not supposed to be working anymore. Elder care was now the big worry.

Enter President John F. Kennedy who makes a joke about his father being richer than the President after his elderly father suffers a stroke and needs health care. This joke strikes a chord with the American people and Kennedy becomes obsessed with passing Medicare. However, he is assassinated before he can bring it to fruition.

Lindon B. Johnson (LBJ) becomes President and LBJ has an absolute hard on for government. He’s worked in government for most of his adult life and he doesn’t believe there is an issue that government can’t solve. On top of this, he is dedicated to Kennedy’s ideas and so he knew how important Medicare was to him and he was set on seeing it through, which he did.

LBJ gets Medicaid and Medicare passed in 1965 and to understand the difference between the two Medicare is government health insurance that focuses on people of a certain age while Medicaid is a joint state and federal program that focuses on people with a limited income. There are general rules that Medicaid programs must follow that are provided at the federal level, but states run their own individual programs otherwise.

These programs greatly inflate the demand for the services while not helping to increase the supply in anyway. In 1965, before Medicaid and Medicare, health care costs were rising at about 8.95 percent a year. However, after Medicaid and Medicare, that rate increases to 11.9 percent a year.

In 1970, with President Richard Nixon in the White House and inflation skyrocketing, Nixon was ready to implement some really bad policy. Just like FDR, Nixon created wage and price controls to respond to the inflation before he tries implementing and experimenting with other forms of government intervention.

In 1972, the Nixon administration decides to restrict the supply of hospitals, creating certificate of need laws (CON laws) which are still implemented for hospitals in 35 states—thankfully not Kansas—but it also still exists at the federal level. He also authorizes Health Maintenance Organizations (HMOs) the next year to cut costs. The next year after that he passed the Employee Retirement Income Security Act (ERISA) which led to more cronyism.

From 1974 to 1982, health care prices rose at an average rate of 14.1 percent a year. The 80s and 90s were also a blur of bad policy by both Republicans and Democrats. There was the Consolidated Omnibus Budget Reconciliation Act (COBRA) in 1985 which provides “temporary continuous coverage for certain employees, retirees, and family members at group rates when coverage is lost under qualifying events.” The next year saw the passing of the Emergency Medical Treatment and Labor Act so even if someone can’t pay for services or has no health insurance, hospital emergency departments must still provide care. Other bills made it so health care providers would still have to work without pay and while Medicaid kept expanding, health care providers stopped accepting Medicaid or would redistribute these unpaid bills onto other patients who could pay their bills, inflating the price of health care.

Medicaid and Medicare started struggling in the mid-90s due to how many people were dependent on the government programs now that the government had inflated the price of health care for decades. So, in 1997, Congress passes the Balanced Budget Act which forced many medical care providers out of business, limiting the supply and again increasing prices.

Paying for administration also became a huge cost because billing became so complicated due to all of the different types of payers which also increased the cost of health care for consumers. Doctors started choosing other fields because they weren’t being compensated, so they weren’t incentivized to continue.

Eventually, we get to Obamacare, which has had unquestionably terrible repercussions. Obamacare did a number of things including force people to get on health insurance, whether they wanted it or not; expanded Medicaid eligibility so more people would rely on government insurance; created a health insurance marketplace that basically padded the pockets of crony health insurance companies; prevented insurance companies from denying preexisting conditions; removed lower price plans by requiring plans to come up with a list of “essential health benefits” which forced people to pay for services they did not need in order to subsidize others; instituted tax credits and cost sharing reductions on plans for low income Americans; and allowed people to stay on their parents’ insurance until they were 26 years of age.

Despite Obamacare, and all the other times government intervened in the market, Americans are still struggling to pay for health care and are actually paying more than ever. Nevertheless, Americans are still pushing for more government, never learning from the mistakes of the past.

Conclusion

I hope this overview of the U.S. health care system has been enlightening and that you have learned something valuable. I will end this by saying that, while I disagree with the Democrats continued push to nationalize health care, I can, at the very least, understand their concern and even agree that it is a valid concern that needs to be addressed sooner than later. I don’t believe Republicans have zero blame in where we’re at as they do not offer any meaningful solutions. They regularly just say “No” to Democrat’s bad ideas and then they get attacked for “not caring.” While I understand that Republicans continuing to say no is them protecting people from bad policy, they absolutely need to do more in the fight to lower health care costs. In a couple of weeks, I’ll be coming out with a couple of ideas of my own that I would propose if I were a Kansas Legislator. However, until then, again, if you found any of this helpful, please share and help get people educated on this issue.