Professional Documents
Culture Documents
History of Health Care Reform in America
History of Health Care Reform in America
History of Health Care Reform in America
William R Cox
4075725
Dr. Mark Bowles
HIST 557, K001, Spring 2010
On March 23, 2010, surrounded by members of Congress, aides and citizens who
lacked health insurance coverage, President Obama signed into law the Patient Protection
and Affordable Care Act. The act mandates that by 2014 most individuals obtain and
carry health insurance coverage or pay a financial penalty. The legislation establishes
directives for the creation of Health Insurance Exchanges that will offer a marketplace for
individuals and small businesses to purchase affordable coverage and realize certain
premium subsidies offered by the federal government based upon income levels. It also
establishes tax credits and penalties to encourage businesses to provide their employees
with health insurance, as well as, expands Medicaid, the existing state based health
coverage for the poor.1 During the signing ceremony President Obama remarked that the
Patient Protection and Affordable Care Act would enshrine “the core principle that
everybody should have some basic security when it comes to their health care.”2 The
Patient Protection and Affordable Care Act, true to President Obama’s remarks,
established as its goal to provide affordable health care to all Americans and specifically
to reduce the number of uninsured in America by thirty two million over the first nine
Detractors of the Patient Protection and Affordable Care Act readily point out the
drawbacks and potential flaws in the plan. The first issue obtaining great opposition is
the cost of nearly a trillion dollars in the midst of mind boggling federal budget deficits.
1
The Henry J. Kaiser Family Foundation, "Focus on Health Reform," Kaiser Family
Foundation, Kaiser Family Foundation, April 28, 2010,
http://www.kff.org/healthreform/upload/8023-R.pdf (accessed 15 2010, July ).
2
President Barack Obama, "The White House Blog: "On Behalf of My Mother"," The
White House, Jesse Lee, March 23, 2010,
http://www.whitehouse.gov/blog/2010/03/23/behalf-my-mother (accessed August 15,
2010).
2
Secondly, the Act establishes punitive annual fines of up to $2000 per employee for
employers who fail to provide their employees coverage, yet most businesses are
struggling, due to the poor economic climate (a climate featuring over nine percent
unemployment), to maintain revenues to meet payroll much less add benefits. Insurance
companies are targeted in the act as well. The plan mandates that insurance contracts
must cover certain specified preventative services at zero cost to the insured, that by 2014
no one can be denied coverage regardless of preexisting conditions, that health insurance
premiums may only be based on age not medical conditions, and that insurance plan
premium increases will be subject to review and at least eighty percent of premiums
Finally, and perhaps the most dangerous flaw to the successful implementation of
the plan, is the constitutionality of the Federal government mandating that individuals
purchase a particular consumer product. The same day that President Obama signed the
act into law fourteen states attorneys general filed suit in federal court arguing that the
law was unconstitutional. Attorney General of Florida Bill McCollum argued that,
something when there’s no commerce, no action,” further arguing that the federal
mandates within the law also violated the sovereignty of the states.4 The State of
Virginia filed a separate suit in federal court due to a state law specifically blocking such
mandates from the federal government. The Virginia suit survived its first legal
roadblock on August 2, 2010, when the Obama administration petitioned a federal judge
3
The Henry J. Kaiser Family Foundation, "Focus on Health Reform.”
4
Ariane de Vouge and Devin Dwyer, "ABC News," States Launch Legal Challenge to
Health Care Law, ABC News, March 23, 2010, http://abcnews.go.com/print?
id=10178015 (accessed August 17, 2010).
3
to dismiss the suit. Federal District Judge Henry Hudson ruled that, “unquestionably, this
regulation radically changes the landscape of health insurance coverage in America” and
Those who support the Patient Protection and Affordable Care Act correctly point
out that Congress maintains authority to regulate health insurance under the commerce
clause of the Constitution. Both proponents and detractors of the Act will likely pursue
their side of the cause all the way to the Supreme Court; however, historically Congress
has received great leeway from the Court when it concerns the commerce clause. In fact
from 1937 to 1995 the court did not overturn any acts of congress that were based on the
commerce clause; however, the Robert’s court may prove to be less content with
time will tell, which side in the health care debate will prevail; however, the ideological
argument over the Patient Protection and Affordable Care Act, is seen as early as the
Progressive movement of the first two decades of the twentieth century and has continued
The ideological debate over health care has raged throughout the twentieth
century and has consisted in the simplest terms as a contest that pitted individual
responsibility versus the general societal desire for an adequate social safety net;
however, over the last three decades the debate has come to represent America’s desire to
have less government while at the same time having more government services. We
5
Michael Felberbaum, "The Associated Press: Va. Health Care Reform Lawsuit Clears
First Hurdle ," Google News: The Associated Press, August 2, 2010,
http://www.google.com/hostednews/ap/article/ALeqM5jIYk-
9I_3l_9vZpcpalaAhOGdUdgD9HBHHH00 (accessed August 20, 2010).
6
Linda R Monk, The Words We Live By: Your Annotated Guide to the Constitution (New
York: Hyperion , 2003), 196.
4
want the government to guarantee our health care, yet we refuse to allow the government
The history of this debate, in many ways, has shaped the culture of America
during the last century. The progress of the American health care system has provided
American health care has improved and progressed with society, the cost of the system
has become devastatingly expensive. In 1897, the first year of its operation, St. Francis
Hospital in Hartford Connecticut charged an average of fifteen dollars per week to treat
patients revealed an average total cost of $17,734 for hospital services.8 Health care
spending has spiraled out of control over the last half of the twentieth century increasing
from around five percent of American gross domestic product in 1960 to almost fifteen
percent by 2002, or $1.6 trillion.9 Americans revel in the benefits of a rapidly advancing
health care system; however, its costs leave most terrified and asking the question, “What
if I lose my insurance?” This is the context within which we must examine the history of
health care financing in America, specifically the attempts that have been made to reform
the financing system, set the stage for the 2010 Patient Protection and Affordable Care
Act.
7
Mark Bowles, Saint Francis Hospital and Medical Center: Our Healing Mission
(Cleveland, OH: History Enterprises, 2003), 14.
8
National Center for Policy Analysis, "Daily Policy Digest: Length of Stay and Hosptial
Cost," Daily Policy Digest, NCPA, October 9, 2000,
http://www.ncpa.org/sub/dpd/index.php?Article_ID=9413 (accessed August 19, 2010).
9
Cathy Cowan, Aaron Catlin, Cynthia Smith and Arthur Sensenig, "National Health
Expenditures, 2002," Health Care Financing Review (Centers for Medicare and Medicaid
Services) 25, no. 4 (Summer 2004).
5
The history of health care financing emerges in the years prior to the Great
Depression in the form of the Progressives. The Progressives emerged into their
reconciliation of democratic ideals with the political, social, and economic realities of the
new urban and industrialized America.”10 The generation known by the label
Progressives attempted to bring order to the chaos that surround a society dominated by
industrial monopolies with names like Heinz, Swift, and Singer. They sought justice,
equality and economic opportunity, not only for themselves, but also for future
generations of Americans.
Theodore Roosevelt sought election, that castigated the chaotic nature of the new
unrestrained industrial economy stating “this country belongs to the people who inhabit
it” and “its resources, its businesses, its institutions and its laws should be utilized,
maintained or altered in whatever manner will best promote the general interest” in short,
“it is time to set public welfare in the first place.”11 One of the methods for setting the
public welfare first was pledging to “work unceasingly in State and Nation for . . . the
protection of home life against the hazards of sickness, irregular employment and old age
through the adoption of a system of social insurance adapted to American use.”12 The
Progressive party did not win the election and therefore did not have an opportunity to
implement its program of Social Insurance; however, they would see many of their other
10
Ernst Breisach, Historiography Ancient, Medieval, and Modern, 3rd Edition (Chicago,
IL: University of Chicago Press, 2007), 313.
11
Progressive Party 1912, "Progressive Party Platform 1912," The American Presidency
Project, John Woolley and Gerhard Peters, November 5, 1912,
http://www.presidency.ucsb.edu/ws/index.php?pid=29617 (accessed July 8, 2010).
12
Ibid.
6
concerns addressed to one degree or another by the new President, Democrat Woodrow
Wilson, who being very politically astute, offered every incentive for the Progressives to
follow him.13 Wilson negotiated the enactment of his New Freedom plan that included
social provisions such as workers compensation programs for any government work and
labor legislation that stipulated an eight-hour workday, giving labor unions a long
anticipated victory.14 Government in the Progressive era was bringing order to society
and establishing that it had a role in the economic and social life of America.
Although the Wilson Presidency did not enact national health insurance, a group
known as, the American Association for Labor Legislation, notably comprised of future
Supreme Court Justice Louis Brandeis among others, began an investigation into the
possibility of compulsory health insurance. The committee studied the issue of national
health insurance in conjunction with several other groups, most notably the American
Medical Association, and after two years they drafted a bill for compulsory sickness
insurance that would become known as the Standard Bill and would be introduced and
studied by more than twelve states within two years. The movement for national
companies, organized labor and the American Medical Association.15 The proponents of
the Standard Bill were influenced and encouraged by Europeans, specifically, Great
Britain who had adopted the National Insurance Act of 1911, “which brought government
sponsored health insurance to five sixths of the families in the nation and established the
13
James Cooper, Pivotal Decades: The United States 1900-1920 (New York: W.W.
Norton, 1990), 218.
14
Ibid., 214-215.
15
Joseph Hirsh, "The Compulsory Health Insurance Movement in the United States,"
Social Forces (The University of North Carolina Press) 18, no. 1 (October 1939): 106-
108.
7
precedent of state concern for the physical welfare of the individual citizen.”16 On the
eve of America entering World War I, following years of reform from President
Theodore Roosevelt and President Woodrow Wilson, Americans were not ready for that
level of government involvement in their lives, and in reality the demand for health
insurance was low because the prices of medical care were to that point, reasonable. The
greatest cost associated with injury and illness during this period was being unable to
work. The Bureau of Labor Statistics studied 211 families in Ohio in 1918 and
discovered that “only seven point six percent of their average medical expenditures” were
for hospital care. Americans were suspect of compulsory insurance and some, albeit with
national health insurance “un-American.”17 With such a small economic incentive for
reform, proponents of national health insurance would have to wait; however, the
economic crisis just around the corner would offer President Franklin Roosevelt an
By 1929, the American health care system had completed its transformation into
an industry based on science and business principles. For certain curing illness and
recovery from sickness remained the goals; however, the increased demand for medical
services during the previous decades necessitated great expansion of facilities and with
that expansion and technological advance, came larger and larger expenses that were
passed on to the patients. The first International Hospital Congress meeting in June of
16
Bentley Gilbert, "The British National Insurance Act of 1911 and the Commercial
Insurance Lobby," The Journal of British Studies (The University of Chicago Press) 4,
no. 2 (May 1965): 127-148.
17
Hirsh, "The Compulsory Health Insurance Movement in the United States," 106-108.
18
Melissa Thompson, "Health Insurance in the United States," Economic History
Services, April 17, 2003, http://eh.net/encyclopedia/article/thomasson.insurance.health.us
(accessed August 5, 2010).
8
1929 offered a chance for European hospital staffs and Americans to compare notes.
Guenter Risse, in Mending Bodies, Saving Souls, points out the European observations
that, even though subject to competition, “both administrative and care cost were much
higher in America,” that there was pressure to create semi private and private rooms in
American hospitals, that “American hospital staffs were also found to be, on average, 10
times larger than those serving comparable European Establishments,” that “in the eyes
was truly staggering,” and “in America, food, furnishings, and service resembled those of
first-class hotels.19” By this time many of the Europeans had operated under compulsory
national health insurance for years. In the context of hospitals being seen by Europeans
as luxury hotels, the 1930 American Hospital Association convention speaker Julius
Rosenwald, offered a prophetic vision of the future of health care finance when he stated
that considering the current economic conditions, “free care was to be curtailed further in
favor of fee for service,” “the pay as you go method of medical care was more in accord
with current American ideals,” and that “for those who could not afford medical services,
either the state would have to assume this responsibility or interested individuals and
groups had to find other ways to provide good medical care at a fair price.”20 As
Hospital developed another way to obtain good medical care at a fair price.
The Baylor University Plan was the first prepaid hospital plan that emerged
during the Great Depression. The plan stipulated that for a fixed payment amount the
hospital agreed to provide a certain number of days hospitalization. Plans like the Baylor
19
Risse Guenter, Mending Bodies, Saving Souls: A History of Hospitals (Cary, NC:
Oxford University Press, 1999), 472-474.
20
Guenter, Mending Bodies, Saving Souls, 475.
9
plan grew during the Depression as a way for individuals to pay their bills, arguing that
most people could afford a few cents a day all year but not a large bill after being
adopt similar payment schemes and ultimately organize them under the association to
become what we know today as Blue Cross. Doctors would eventually adopt their own
prepayment service out of fear that they could lose the revenue stream of prepayment to
the hospitals if they developed a prepayment plan for doctors’ services. The plan for
doctors was also developed out of a fear of potential compulsory health insurance from
the Roosevelt administration, which had successfully implemented social security. The
physicians ultimately followed the example of the American Hospital Association and the
Administration, to the Wagner Act, to the Lend Lease Act. Faced with the economic
ease the plight of the poor and unemployed in America. Certainly the most famous
legislative achievement of the administration occurred in 1935 with the passage and
implementation of the Social Security Act. Congress created it as “an act to provide for
the general welfare by establishing a system of Federal old-age benefits, and by enabling
the several States to make more adequate provision for aged persons” and funded the
measure with over forty nine million dollars the same year.22 The implementation of
21
Thompson, "Health Insurance in the United States."
22
Congress of the United States, "Transcript of Social Security Act (1935)," Our
Documents, 1935, http://www.ourdocuments.gov/doc.php?
flash=true&doc=68&page=transcript (accessed August 4, 2010).
10
Social Security represented a new era where the government recognized that it had a
responsibility in providing a social safety net.23 Neither the Social Security Act nor the
of the financial insurance for the aged was the primary purpose; however, Roosevelt did
form the Interdepartmental Committee, and tasked them to examine public health issues
in America. The Committee eventually conducted health surveys of the country and
established the Technical Committee of Medical Care and in 1938 published its report, A
National Health Program. In 1939 Senator Wagner proposed a National Health Bill;
however, the bill never left the committee level, meanwhile the modern Department of
Health and Human Services was created to unify all the federal agencies that dealt with
health, welfare and social insurance programs.24 The creation of additional social
programs by the Roosevelt administration was interrupted by World War II; however,
due to wage and price controls implemented during the war many employers indirectly
sponsored health benefits. The Wage Labor Board ruled the practice of providing health
benefits appropriate in 1943, thereby; firmly establishing employer provided health care
as a norm in American economic life. With D-Day looming in less than six months, in
his state of the Union message to congress, Roosevelt called for them to establish an
American “economic bill of rights” that included “the right to adequate medical care and
the opportunity to achieve and enjoy good health” and “the right to adequate protection
from economic fears of old age, sickness, accident and unemployment.”25 The President
23
Alonzo Hamby, Liberalism and Its Challengers: From F.D.R. to Bush (New York:
Oxford Univeristy Press, 1992), 24.
24
The Henry J. Kaiser Family Foundation, "Focus on Health Reform."
25
Franklin D. Roosevelt, "State of the Union Message to Congress: January 11, 1944,"
The American Presidency Project, John Woolley and Gerhard Peters, January 11, 1944,
11
urged congress to “explore the means of implementing” these rights, because “all of these
rights spell security” and “after this war is won we must be prepared to move forward . . .
Once the war was won, the veterans returned home to put the nation on a path to
world wide economic hegemony while creating a society that with the highest standard of
living in the world. America during the Truman and Eisenhower administrations faced
the threat of communist expansion and nuclear catastrophe yet national health insurance
lurked in the background as an issue both would address. Truman, in some measure to
complete Roosevelt’s legacy, attempted to revive the goal outlined in the economic bill of
that sought to provide funding for states to provide medical care for the poor in 1946 and
in 1947 he sent another message congress asking for a reintroduction of the bill. In 1954,
President Eisenhower proposed a fund to help private insurers offer coverage to groups
they had so far refused to cover and he signed the Revenue Act, which excluded from
income any employer contributions towards employee health plans.27 This provision of
the tax code provided employers with an incentive to provide better benefits to
employees and it incentivized employees to accept benefits rather than taxable cash. In
1956, a preview occurred for national health care with the adoption of programs that
provided government health insurance for the dependents of those serving in the Armed
forces.28
12
the Social Security Act was amended to include Medicare, health insurance for the aged,
and Medicaid, health insurance for the poor. Medicare, which is seen as one of the
program for medical care of the aged. President Kennedy and ultimately President
Johnson faced an uphill battle from opposition forces some who, lamented the plan would
“sap the individual self-reliance of Americans.”29 Kennedy rebutted the critics in a New
York speech in 1962 stating that, “the fact of the matter is that what we are now talking
about doing, what most of the countries of Europe did years ago” and that the
what has made this country great—and we shall continue as long as we have the
himself, . . . felt a deep empathy for the poor,” and he used his skill as a legislator to
secure the passage of the Economic Security Act of 1964, the Civil Rights Bill and the
legislation to establish Medicare and Medicaid.31 Johnson’s empathy for the poor and his
Johnson expressed the wonders of his Great Society as outlined in the bill during the
Truman, stating “the benefits under the law are as varied and broad as the marvelous
modern medicine itself . . . no longer will older Americans be denied the healing miracle
29
John F Kennedy, "Address at a New York Rally in Support of the President's Program
of Medical Care for the Aged," The American Presidency Project, John Woolley and
Gerhard Peters, May 20, 1962, http://www.presidency.ucsb.edu/ws/index.php?
pid=8669&st=&st1 (accessed August 5, 2010).
30
Ibid.
31
Hamby, Liberalism and Its Challengers, 258.
32
Ibid., 259.
13
of modern medicine” and “no longer will illness crush and destroy the savings . . . put
away over a lifetime.”33 Barry Goldwater lost the election to Johnson; however, a new
politician was waiting in the wings that purported the same individualism, Ronald
Reagan.
The years between the Johnson and Reagan Presidencies experienced rampant
inflation with the cost of living increasing at an average annual rate of over eight percent.
The large-scale inflation, a result of increased government spending during the Vietnam
War, pent up consumer demand and a middle-eastern oil crisis resulted in economic
terror for many Americans. These decades also saw bracket creep for many Americans
the state legislature on all tax increases, signaled that progressivism had reached too far
in American society.34 These decades also treated Americans to the further expansion of
government into health care with the expansion of Medicare to cover those with long-
term disabilities, the enactment of Employee Retirement Income Security Act, and the
establishment of, the Health Care Financing Administration.35 Ronald Reagan took
advantage of America’s growing distrust, dislike, and suspicion in 1980 with a campaign
that focused on the competent individualism of the American citizen and the equality of
Reagan summarized the feeling of many Americans in his first inaugural address
33
Lyndon Johnson, "Remarks with President Truman at the Signing in Independence of
the Medicare Bill," Lyndon Baines Johnson Library and Museum, Lyndon Baines
Johnson Library and Museum, July 30, 1965,
http://www.lbjlibrary.org/collections/seelctied-speeches/1965/07-30-1965.html (accessed
August 2010).
34
James Patterson, Restless Giants; The United States From Watergate to Bush V. Gore,
ed. David Kennedy (New York: Oxford University Press, 2005), 65-66.
35
The Henry J. Kaiser Family Foundation, "Focus on Health Reform."
14
when he addressed the growing place of government in society stating that, “in this
present crisis, government is not the solution to our problem; government is the
especially in realm of health care. During the Reagan administration, the political
rhetoric focused on the cause of a small government, yet Medicaid expanded three
different times, in 1986 the Emergency Medical Treatment and Active Labor Act, which
mandated that hospitals must treat emergency patients regardless of ability to pay, and the
Consolidated Omnibus Budget Reconciliation Act (COBRA) was signed into law,
eighteen months after they left a job.37 The era of small government did not apply to
health care reform and the government became more intimately involved in the regulation
of health care through COBRA than perhaps anytime since the 1960’s. Americans had
developed an unhealthy trend, they desired less government intervention and intrusion;
within the first weeks of his Presidency a task force was created to develop a plan of
health care reform. The Clinton administration ran on a platform that espoused the value
“putting government back on the side of working men and women,” and that the party
36
Ronald Reagan, "Inaugural Address January 20, 1981," The American Presidency
Project, John Wolley and Gerhard Peters, January 20, 1981,
http://www.presidency.ucsb.edu/ws/index.php?pid=43130 (accessed July 16, 2010).
37
The Henry J. Kaiser Family Foundation, "Focus on Health Reform.”
15
believed in “an activist government;” however, the party contradictorily stated the desire
to restore “the basic American values that built this country and will always make it
positions, the political rhetoric illustrated the reality, that Americans wanted less
government yet more services. The Clinton administration’s Health Security Act was
plagued by poor political calculations and was never implemented; however, due to rising
medical cost and possibly in response to the threat of nationalized health care most
insurers adopted managed care business models.39 The adoption of managed care slowed
the rapid growth in insurance premiums throughout the Clinton years and reduced the
growth of hospital expenditures significantly to less than four percent between 1993 and
1998. Ironically, a by product of managed care was a decrease in out of pocket expenses
for individuals, this decrease in out of pocket expenses eliminated any consumer restraint
in utilization of medical services thereby increasing the demand and ultimately prices.
The consumer was insulated from this increase in medical inflation due to the limited out
of pocket expenses offered under managed care. This ticking time bomb was set to
The premium cost for the Baylor plan was a fixed six-dollar payment for a benefit
of twenty-one days per year of hospitalization in 1929.40 Eighty years later the average
cost for a family to purchase private health insurance coverage was $13,375 per year.41
38
Democratic Party, "Democatic Party Platform of 1992," The American Presidency
Project, John Woolley and Gerhard Peters, July 13, 1992,
http://www.presidency.ucsb.edu/ws/index.php?pid=29610 (accessed August 20, 2010).
39
The Henry J. Kaiser Family Foundation, "Focus on Health Reform."
40
Thompson, "Health Insurance in the United States."
41
The Henry J Kaiser Family Foundation, "Employer Health Benefits 2009 Annual
Survey," The Kaiser Family Foundation, The Kaiser Family Foundation, 2009,
http://ehbs.kff.org/?page=charts&id=2&sn=16&p=1 (accessed August 20, 2010).
16
The health care debate has continued throughout the last century and initially focused on
adequate safety net; however, an ideological shift has taken place over the last three
decades that places American’s in a contradictory position of wanting more for less. The
Progressive party of 1912 offered Americans “protection of home life against sickness,”
Franklin Roosevelt offered an economic bill of rights, and President Johnson finally
provided protection for the aged. Americans a century later are seeking a solution to the
nightmare of, “What if I lose my insurance?” However, the proponents and detractors
remain, almost six months after President Obama signed the Patient Protection and
Affordable Care Act the country remains almost equally divided between those who
favor compulsory health insurance and those who oppose it.42 The debate will continue
all the way to the Supreme Court by way of the ballot box in November.
42
Opinion Reseach Corporation, "CNN Opinion Research ," CNN Opinion Research ,
August 2010, http://i2.cdn.turner.com/cnn/2010/images/08/19/rel11g.pdf (accessed
August 20, 2010).
17
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de Vouge, Ariane, and Devin Dwyer. "ABC News." States Launch Legal Challenge to
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Hirsh, Joseph. "The Compulsory Health Insurance Movement in the United States."
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18
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19
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20