Our health care system has been built up over the years in a jury-rigged, ramshackle fashion. Before World War II, there was very little health insurance and what there was often was the product of labor union contracts. The early years were concerned with accident insurance and workers compensation laws.
The American life insurance system was established in the mid-1700s. The earliest forms of health insurance, however, did not emerge until 1850, when the Franklin Health Assurance Company of Massachusetts began providing accident insurance, to cover injuries related to railroad and steamboat travel. From this, sickness insurance covering all kinds of illnesses and injuries soon evolved, but the first modern health insurance plans were not formed until 1930.
The Baylor program for school teachers was the first in 1929.
Medical insurance took stride in 1929 when Dr. Justin Ford Kimball, an administrator at Baylor University Hospital in Dallas, Texas, realized that many schoolteachers were not paying their medical bills. In response to this problem, he developed the Baylor Plan – teachers were to pay 50 cents per month in exchange for the guarantee that they could receive medical services for up to 21 days of any one year.
In those days, the concern was lost wages more than hospital care.
In 1939, the American Hospital Association (AHA) first used the name Blue Cross to designate health care plans that met their standards. These plans merged to form Blue Cross under the AHA in 1960. Considered nonprofit organizations, the Blue Cross plans were exempted from paying taxes, enabling them to maintain low premiums. Pre-paid plans covering physician and surgeon services, including the California Physicians’ Service in 1939, also emerged around this time. These physician-sponsored plans combined into Blue Shield in 1946 and Blue Cross and Blue Shield merged into one company in 1971.
The modern insurance plans were very recent in origin. I was there for much of it. The commercial insurers fought the status of Blue Cross, which was not required to have reserves. Blue Cross asserted that it promised hospital care, not payment, so reserves were not necessary.
The 1940s and 1950s also saw the proliferation of employee benefit plans, and the included health insurance packages became more and more comprehensive as strong unions negotiated for additional benefits. During the Second World War, companies competing for labor had limited ability to use wages to attract employees due to wartime wage controls, so they began to compete through health insurance packages. The companies’ healthcare expenses were exempted from income tax, and the resulting trend is largely responsible for the workplace’s present role as the main supplier of health insurance.
The war produced much of this as wage limitations were in force but fringe benefits, like health insurance, were permitted. A lot of this history is contained in Paul Starr’s book The Social Transformation of American Medicine.
From the first, commercial insurers focused on employer plans while Blue Cross and Blue Shield (which was founded by the California Medical Association to pay doctor bills) were individual plans.
In 1954, Social Security coverage included disability benefits for the first time, and in 1965, Medicare and Medicaid programs were introduced, in part because of the Democratic majority in Congress. In the 1970s and 1980s, more expensive medical technology and flaws in the health care system led to higher costs for health insurance companies. Responding to higher costs, employee benefit plans changed into managed care plans, and Health Maintenance Organizations (HMOs) emerged. Managed care plans are unique in that they involve a particular network of healthcare providers that have been verified for healthcare quality and that have agreements with the insurer about price and related issues. HMOs were originally primarily nonprofit, but they were quickly replaced by commercial interests, and managed care only succeeded in temporarily slowing the growth of healthcare costs.
Two major changes came in the 1970s. In 1978, the federal government established what were called Professional Standards Review Organizations or PSRO. All doctors had to receive training in how to do these reviews and it was immediately apparent that cost was the only consideration, not quality of care.
I decided to educate myself and took a course from an organization called “The American Board of Quality Assurance and Utilization Review Physicians. I took the exam and passed, then attended the annual meeting. This was about 1986. People I met at that meeting informed me that the exams were graded by throwing them up in the air. Any that landed balancing on one edge were flunked. Nonetheless, the experience was valuable because I could see what was coming.
I was president of the Orange County Medical Association that year and had served for eight years on the Commission on Legislation of the CMA, now called The Council on Legislation. This gave me an opportunity to meet many legislators, many state level and some federal. The impression they made on me was that few knew anything about medicine and most were not very intelligent.
I have been conservative in political philosophy since the age of 19 when I took an Economics class. I enraged my Chicago family when I voted for Nixon in 1960. Kennedy was supposed to be a distant cousin but I had left my naive belief in government behind. Still, I recognized that medicine needed allies if it was to fend off the worst of the legislative assaults on our profession.
I wanted the local medical association to form our own “managed care program,” with members of the association eligible for membership. A friend, named Ed Zalta, was an ENT doc in the eastern LA area. He had had a sideline business of selling electronic medical office software and minicomputers so he was well educated in the necessary skills. I tried to get the OCMA to start our own PPO and Ed tried to do the same thing in the Los Angles County Medical Association. I didn’t have much luck and Ed stirred up a bunch of Neanderthals who insisted he be expelled from his position on the Board of Directors.
It was not going to be easy. Ed started his own organization, called CAPP Care and it became one of the largest PPOs in California. I helped organize it and became a member. Ed used to tell me that I should avoid getting into any kind of trouble with the state Medical Board because he always called up my profile when demonstrating the system IT features. As time went on, and the health care marketplace evolved, he sold it and is retired. Because we could not get doctors to see where all this was going and we allowed other forces to get stronger, physicians lost control of their destiny and many of the physician organizations became defunct. LACMA used to have a beautiful building on 6th street in Los Angeles with a large medical library. Many professional groups used the LACMA building for meetings. That building is now gone and the library dispersed between UCLA library and the Huntington Library in Pasadena. The portion of the library which concerns the history of medicine is now at the Huntington and the collection is called The George Dock Society. The rest of the LACMA library is at UCLA and is in storage. Thus the profession lost control of its own institutions. The AMA is useless and concerned only with the welfare of its own board.
Since 1972, the emphasis has been on cost control. Quality improvement, a concern of mine, is neglected. Some of the cost obsessions have resulted in more costly developments. For example, Blue Cross did not reimburse hospitals based on billing by services. The original program was based on hospital expenses and reimbursement followed the proportion of Blue Cross patients treated per year and the hospital budget. This was discovered by payers and was considered a scandal. Employers insisted that itemized bills be submitted and reimbursement depend on the bill. This is how we got $10 aspirin tablets. Hospitals don’t work that way. They have an emergency room, a lab, an xray department, an operating room and what are called “hotel services,” which means rooms and meals. Johns Hopkins Hospital, in 1895, began this concept and used hotel people to run that part of the hospital. How do you bill for the operating room and emergency room when some patients will have no insurance but must be cared for anyway ?
It is obvious that the paying patients pay for the care of all. These internal subsidies do not compute on spread sheets. It is a bit like the Army. They can’t be run like businesses because they aren’t businesses. Doctors operated much the same way. Many of us cared for patients and did not pay much attention to the financial situation with them individually. When I began in practice, I signed up for MediCal, the California version of Medicaid. My waiting room filled up with women who wanted varicose vein injections. I was a vascular surgeon and that was the only service I offered that interested them. My office staff finally convinced me that I lost money on every case. The material used cost about $15 or $20 and the state payment was $6 and took two years to arrive. After that, I dropped MediCal but would see patients referred by doctors I knew, and of course, trauma cases. I knew many primary care docs who did not even bill MediCal because the cost of billing exceeded the payment.
We are now in a situation where this ramshackle system of insurance has been destabilized, I think fatally. I have studied other health care systems and wrote some posts on my own blog about my ideas for reform. We are a large and diverse country. Solutions that might work in homogenous societies, like Scandinavia, are unlikely to be transferable. Sweden has had some trouble with physician incentives.
Despite the ability of the reform acts to control costs, quality of care was affected as rationing became a primary means of controlling costs . Waiting lists were becoming the biggest concern, especially for surgical procedures. A cause for the lack of quality care was a result of the poor leadership of politicians in control of the health care budget. “When asked about workplace problems, nurses cite the lack of leadership as the biggest concern, not the heavy workload. They see how budget cuts lead to the deteriorating quality of patient care. Politicians who know little about the actual situation in the hospital make cuts without realizing the consequences for the patients.”
At one point, Sweden’s tax rates were so high that senior doctors, those affected by taxes on high incomes, would take the last three months of each year off and go to warmer climates until the new year. Germany has similar issues where senior surgeons make the incision and leave the operating room to junior trainees while they work in the clinic for increased reimbursement. When the operation is about over, they return to close the incision.
The NHS has generated numerous scandals in recent years.
Those who do not work in the NHS may be surprised that the suppression of whistleblowing concerns still continues after Mid Staffordshire. Those who work in the NHS are not. Survey after survey since 2010, when the first Francis report was published, has confirmed the deep fear of many staff that raising concerns is asking for trouble. Less than half the staff who raised concerns last year were given feedback on whether changes were made as a result of errors, near misses and incidents. Widespread bullying makes matters worse; 24% of consultants reported that they were bullied last year.
These stories would fit right in with the Obama administration record.
What do we do now ? I don’t think Obamacare can be reversed now or delayed. It will collapse and maybe this will create an opening for intelligent reform. This would look like medical IRAs and high deductible catastrophic insurance for most middle class people. Those with serious pre-existing conditions should go into a risk pool. France handles this by paying for care for the primary diagnosis only. Thus, if you have cancer, treatment of the cancer is free. For other matters, the regular insurance program applies.
For the poor, we used to have big public hospitals and clinics until Medicaid destroyed them. They need to be recreated, possibly with incentives for new graduates to work there for loan forgiveness. Medical school has to be less expensive. In France, medical school is free but there is a steep pyramid system where low grades gets one expelled. When I began my college courses in engineering, the instructor told us to look at the person in front, next to and behind us. He said, “By the end of the year, only one of you will be here.”
Getting rid of PPOs will end the inequitable contracts that inflate “retail” fees while the insurance company pays the doctor and hospital a fraction of the “retail” price. The actual payments are trade secrets. Medicare is as bad or worse. If a doctor treats a patient for cash at a price less than “retail,” it is a crime. Doctors are being harassed daily by such insane regulations. Read Three Felonies A Day, which has a lot of doctor horror stories in it.
You could even read my book.