How Did Health Insurance Get Started?
Health insurance in the United States consists of a confusing array of premiums, networks, co-pays, deductibles and regulations. People get coverage for their medical bills from a mix of public and private payers, and regulations vary from state to state. You may wonder how we arrived at this system to pay doctor bills. The history of health insurance in the United States is a patchwork of events, much like health insurance itself.
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Pre-Insurance
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Before the 1930s, people paid for healthcare as they did other services, with cash or bartering for goods. In rural areas, people didn't always have access to doctors and relied on local healers or patent medicines. The doctors who were practicing weren't always well paid. In a story on the history of the U.S. health system, National Public Radio reporters Alex Blumberg and Adam Davidson noted that in 1900 the average American spent $5 a year on healthcare, equivalent to about $100 in today's money. Most people didn't need health insurance to cover that amount.
Hospitals Step In
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As health care improved, costs rose. Hospitals noticed beds going empty, especially as the depression hit. Baylor Hospital in Dallas, Texas came up with a plan to make their services more affordable to people. They approached a teachers group with the idea that if each teacher paid 50 cents a month to the hospital, if they got sick their bill would be covered. Other hospitals began to offer similar plans to groups of workers. This eventually became Blue Cross.
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Employers Offer Insurance
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As the economy improved and the war effort fueled the U.S. economy, employers competed to lure workers. But the government restricted wage increases, so companies had a tough time competing with salaries. One way to attract people to a job was to offer extra benefits, including health insurance. In 1940, NPR reports, only 9 percent of people had health insurance. By 1953, this rose to 63 percent.
Government Programs
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In 1965, as part of President Johnson's war on poverty, the government instituted Medicare and Medicaid to pay for health care for the elderly, disabled and the poor. This was followed in 1997 by the creation of the State Children's Health Insurance Program, commonly known as CHIP, to provide insurance for children who weren't eligible for Medicaid but whose families couldn't afford private health insurance.
Variations
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The 1970s brought the advent of managed care plans. Doctors designated as primary care physicians were paid a flat fee each month to take care of basic medical care for patients. Seeing a specialist required a referral from the primary care physician. HMOs were an attempt to control health care costs, but they have continued to rise. By 2004, health care costs accounted for 16 percent of U.S. gross domestic product, compared to 5.1 percent in 1960, according to Pomona College. Congress introduced health savings accounts coupled with high-deductible health insurance policies in 2003 as an attempt to rein in health care costs by shifting more up-front costs to consumers.
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