Progressive Influences on the Healthcare Industry in the United States

A comment on an earlier post about the origins of social work asked about this topic. Specifically what happened to make hospitals which were founded by Christian denominations and as charities become more worried about the bottom line and in bed with the health insurance industry? I discovered some interesting things about the history of the healthcare industry and health insurance, and the progressives have their fingerprints all over it.

Up until the late nineteenth century medicine was a low tech profession. The practitioners of medicine were just learning about germs and sterilization. There were no X-rays. DNA was unknown. Home remedies and cure-alls were the main form of medication. Pain killers were readily available and widely prescribed. Scientists began to develop cures for devastating diseases like tuberculosis, typhoid, and diphtheria which were prevalent in the rapidly growing cities.

After the end of the Civil War in 1865, many universities were founded in the United States, and higher education expanded by leaps and bounds. As we have seen in my earlier posts, many of the professors in these universities had a progressive mind set. These academics believed that they knew what was best for society which included a desire for control over society through the government and big business. These educators in these new universities pressured for high professional standards for doctors, to protect society from quacks and scam artists. Practitioners in the medical field as well as other professions such as lawyers began to have to be licensed. This gave the government control over how many practitioners were in the profession at any given time and limited competition. It also gave the universities control over who entered the professions because a degree was required for licensing by the state. (Tindall & Shi)

Hospitals were originally set up in the colonies to give aid to indigent people who required medical care. These were institutions that were given a charter from the Crown of England and a certain amount of funding for start up costs. To receive the charter the hospital had to match the money from the government with private donations. As medical technology and science advanced, hospitals became a place to go to get specialized treatment that a family practitioner could not give. This drove up the price of medical care

Thus, health insurance was born in 1929, the year of the stock market crash. Baylor University Hospital in Dallas, Texas began a plan where 1,500 school teachers paid into a plan provided by the hospital in case they needed services from the hospital. This non-profit company became the model for Blue Cross Blue Shield, America's first and non-profit health insurance company. Hospitals had fixed expenses that gave them less flexibility when it came to making allowances for patients who could not pay right away. Health insurance gave them that flexibility. The insurance companies would pay the hospitals a regular income for the patients’ treatments.

During World War II, employers started offering health insurance as a fringe benefit to attract new employees due to the drain of the labor force to wartime industries. Wage controls that had been instituted by the government kept employers from attracting employees with higher salaries, so they would pay health insurance premiums up to 5% of their salary. This gave health insurance companies a great deal of revenue because enrollment grew from about 7 million to approximately 26 million from 1942 – 1945. The IRS also started allowing businesses to deduct the premiums for their employers as a business expense on their taxes. This gave another incentive for employers to offer health insurance as a benefit. Union participation in health insurance plans also grew during the same period. By 1955 12 million union workers were covered through collective bargaining agreements.

Now for the kicker on why medical care is so expensive. Blue Cross Blue Shield began a reimbursement procedure called cost-plus. This procedure was adopted by other insurance companies and Medicare. Physicians were reimbursed according to “reasonable and customary” charges, and hospitals were reimbursed on a percentage of their costs plus a percentage of their working capital. This allowed doctors in private practice to charge whatever they wanted because they knew the health insurance companies would reimburse them for what they charged. Hospitals have also inflated their costs and dictate to doctors who are employed by them what they can charge to increase their income as well. (Wasley)

        
Many patients are also out of the loop when it comes to pricing as well. Employers pay most if not all of their premiums. Doctors’ visits are usually covered by a co pay which is about one-fourth to one-third of the amount that is billed to the insurance company. Out of pocket expenses for emergency room visits and hospital stays are covered by a small deductible, most of the time. Of course self-employed patients and business owners are more concerned about pricing because their premiums and deductibles are usually much higher than the average employee in the country.

Instead of allowing a free market to develop, progressives have been regulating it through the universities and the government from the beginning of the modern era. Insurance companies have government regulations to follow as well which keep the natural free market from being exercised in this industry. In an ideal capitalistic system insurance companies would be allowed to compete without government regulations. Bad companies that provide poor service would naturally go out of business. Hospitals would be forced to run more efficiently. Competition would eventually drive medical costs up or down based on the law of supply and demand.

I am still on the fence about licensing of medical professionals. A free market would weed out bad doctors and nurses, but at what cost to public safety. There are many doctors who don’t look out for their patients even with a medical degree and license. However, progressive faculties and universities would still be in control of which individuals will be successful and achieve a medical degree.

In conclusion, this article is a snap shot of how we got where we are in the health care industry in the United States. Scientific research and innovation have driven the advancements that we have made over the last century and a half. The government, insurance companies, and universities have regulated who participates in the medical marketplace. Charitable hospitals and for-profit hospitals work to maximize their bottom line rather than working with patients to keep costs down.

One final point: health care is not a right. It is a product that must be paid for like electricity and a mortgage. Progressives and socialists have worked to mutate it into a natural right. I may sound insensitive, but according to the Hippocratic Oath, care givers must ethically work with patients who cannot pay their bills right away and should not send people down the street because they have no health insurance. However, it is still the patient’s responsibility to pay the bill. We as a people need to take back responsibility for medical costs rather than letting doctors and hospitals overcharge for services simply for the reason that the patient is not paying for it out of his or her own pocket.

Book source:

Tindall, George Brown and David E. Shi. America: A Narrative History. Fifth edition, Volume 2. W.W. Norton & Company, New York. 1999.