The Past Struggle of US Health Insurance

Did you know that the American system of health insurance was inspired from European countries? In Europe, during the 1800 and 1900, concern about the protection for workers gave birth to what is known as sickness insurance. Not all the European countries, however, had the same insurance system. While France's was more linked to health of employees, Germany was lucky enough to have a nationally mandatory one. Attempt was made to have similar national insurance in US, but it never went anywhere. The step was first taken by the Socialist Party in 1904. The main group, however, was American Association for Labor Legislation (AALL) which simply wished to give a revamp to capitalism instead of killing it. In 1912, a social insurance structure crafted from the European one received endorsement from Theodore Roosevelt, candidate of Progressive Party. But he ended up losing to Woodrow Wilson and that left the insurance without a strong promoter.

In 1915, AALL proposed another model of insurance system to help the working people and their family members get medical treatment and sick pay followed by benefits connected to maternity and death. According to the model, the insurance was to be mandatory and the fund for it were to be generated from the employers, workers and states. American Medical Association partially supported it, but doctors lost their interest in it because it threatened their earning and rights. American Federation of Labor was already against it because they feared that it would not allow the workers to be economically independent. Compensation back then was already expensive for which even the employers began to reject the model. It still had some support from handful of physicians. But once World War I began, many of them joined the army which finally obscured the debate, killing the model. Reform could still happen, but there was just one problem: Germany, with whom the war began, already had the mandatory national insurance system, hinting that it would be disgraceful to have something similar to it in the US. That was enough to end the debate.

In the end, the private groups came forward to fulfill the medical payment needs of people. Blue Cross was the first one to start the hospital insurance system according to which the company agreed to cover 21 days of hospital care of 1,500 teachers of Baylor University. For this, they charged $6 per individual. During the Depression, the support for such health insurance plans gained popularity among the hospitals. It was their way of having payment cushion from medical services.

In 1939, another attempt was made to start the mandatory national health insurance system. To prevent it from turning into reality and also to slow down the control of average Americans from prepaid plans, Blue Shield took birth offering physician based insurance plans. But it was mainly during World War 2 when employers began getting more aggressive about offering insurance to employees. The main reasons were freeze in wage and WWII drafting which lessened workers in the job market. The plans worked as great attraction factors. But once the war ended, because of the unions' power to bargain better, employer based insurance plan began to grow across the nation. By 1954, Internal Revenue Service declared that employers could use pretax money to make payment for their employees' health insurance premiums, making insurance system more attractive to employers.

So when did federal government get involved in the system? It was during 1965. The entry was made through Medicaid and Medicare mainly to help those who were left out by the private insurance companies. They were the people with risky preexisting conditions, disabled, senior citizens and underprivileged population. But introduction of the programs were a tug of war. Various proposals of how they were to look like were brought to table by the politicians and medical associations. American Medical Association liked the idea of federal and state governments subsidizing the policies of private insurance for the senior citizens so they could get physicians, prescription medications and go to hospital for care. Meanwhile, John W. Byrnes, Republican representative from Wisconsin rejected state's participation in the program. Another proposal came from Johnson Administration according to which social security was to be used to cover hospital insurance for the senior citizens. Then came New York Republican Senator Jacob Javitz who endorsed federal funding for states to provide medical care to underprivileged and senior citizens. Eventually, all these ideas became part of the bill of Medicare and Medicaid. In other words, federal government funded the Medicare program and Medicaid became a program of state and federal governments.

In the 70's a new crisis showed up in the form of skyrocketing healthcare expenditure due to rise in price of medical treatments and large number of Medicare, and Medicaid patients. On the contrary, back then, the insurance system was based on fee-for-service according to which payment was made for each service the medical professional provided to a patient. Eventually, the government began feeling its heat. Healthcare expenditure rose to $28 billion.  In 1973, to fight it, Health Maintenance Organization Act was passed. It worked to establish Health Maintenance Organizations, slowly replacing fee-for-service with managed care. The fund for the program came from federal loans and grants, and policy which required employers to offer HMO option to employees if they are 25 or more in their companies. Managed care did not, however, get a warm welcome from Americans. Only in the 90's its popularity grew.

During this time, Clinton Administration began pushing for another healthcare reform in the form of Health Security Act. It aimed to make it possible for all Americans to have insurance through universal health care system without the use of any government fund. At the same time, it made no attempt to take away the power of private insurance companies. It merely formulated a plan of utilizing managed competition by using factors of market competition and manged care. That said, through the Act, National Health Board was to limit federal and local spending and control the increase in premiums. Health alliances were to offer a wide range of health plans to employees and those without work in each region of the country. Competition was to be created through these options. As for the structure of the plans, they were to provide some promised benefits and their cost sharing accounting was supposed to be fixed. Employers with 5,000 or less employees were to to buy plans from health alliances. But yes, Health Security Act required all employers to give their employees a great amount of benefits. Assistance was available for the small businesses and low income families. There were many other provisions within the bill and one of them was to decrease the payment going to providers.

Health Security Act turned controversial. Sure it faced challenges from employers, health insurance companies and Republicans, but also the Democrats. Soon even the Americans turned away from it. Much of the blame for the failure of the bill was placed on its incomprehensible nature. The bill had 1,342-pages. Yet it was difficult to understand the expenses and regulations laid out by it.

Policies are made to respond to crisis. Patient Protection and Affordable Care Act of President Obama had the same aim. Arrival of 2000 began showing new problems in healthcare. Throughout the next 8 years, research studies began to show Americans' dissatisfaction with the health insurance companies. More and more bankruptcies began to have link to medical expenditures. It turned out to be 50 percent. Premiums rose dramatically, but quality of medical treatment still was poor. It is believed that Bush administration had no time to pay attention to them because of war on terror.

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