Health Care History

Over the course of the past 50 years, health care benefits costs and coverage have become a dominant force in almost everyone’s life. By 1990, 186 million Americans were covered by health insurance (Kinner & Pellegrini, 2009). Even with that extremely high number, many people are still left out not possessing any insurance coverage because either they can’t afford it or they just don’t have it. With health care expenditures reaching an all-time high, the public people are left wondering where is all the money going. This has been a question that has raised many concerns, unanswered questions, and a re-look at how health care evolved.

In the early 20th century health insurance was seen as a way for the people to prepay for their medical needs. During this period, Americans were having trouble being able to pay for their healthcare. Physicians would make pay arrangements for the patients who could not afford care. Unfortunately, during this time, the hospitals were not able to make such arrangements. Between 1929 and 1930, average hospital receipts plummeted from more than $200 per patient to less than $60 (Wasley, 1993). With this dramatic drop in revenue, insurance plans were the only way for the hospitals to guarantee their cash flow.

In 1929, Baylor University Hospital devised a plan that permitted teachers to pay a monthly fee that would cover the cost of any medical care they may need. Once other hospitals heard of what Baylor was doing, they too created insurance plans that allowed for patients to have a physician of their choice. At this point, medical insurance had changed the entire health care system by making sure that the hospitals remained in business and their incomes were secured. It was at this point when the foundation was made for the Healthcare insurance market.

In 1965, a reimbursement procedure called Cost-plus caused a devastating hit to health care cost. Cost-plus allowed physicians to be reimbursed according to “reasonable and customary” charges, and hospitals were reimbursed on a percentage of their costs plus a percentage of their working and equity capital (Wasley, 1993). Doctors were charging patients high prices for services because the doctors knew they would receive reimbursements for the charges by the insurance companies. Hospitals also increased their cost so that their income would increase as well.

Additionally, third parties were being billed for services; the patients were using the medical services to their advantage causing the health care cost to sky rocket. During the late 1960s, elderly, poor, and unemployed Americans did not have any health care coverages. The government had to devise a plan that could provide coverage to these people. After careful consideration, the government implemented the Medicare and Medicaid Program funded by state and federal funds, thus leading to the government to become health care’s largest purchaser. The rate of increase in hospital spending, which had averaged 8.

8 percent between 1960 and 1965, almost doubled, approaching an average annual increase of 15 percent from 1965 to 1970 (Kinner & Pellegrini, 2009). Under the Medicaid and Medicare plan, services were either greatly reduced or free. Patients did not care anything about what the doctors were charging and therefore required the use of more services. In 1992, the Resource Based Relative Value Scale (RBRVS) replaced the usual customary and reasonable charges. According to RBRVS, doctor’s fees were determined based on the effort and time the doctor spends with the patient.

Also RBRVS regulates the price that doctors can charge above Medicare for services rendered. The concept of comparable worth or the RBRVS is alien to a free market system, where supply and demand have always been the best instruments by which to determine prices, including the price of labor (Wasley, 1993). According to Kinner and Pellegrino (2009), in the 10-year interval before September 11, 2001, federal public health expenditures averaged a modest 0. 05% of GDP. In closing, despite the best governmental efforts to try to and find ways to correct the healthcare budget, many Americans are still without healthcare insurance.

Here it is 2011 and healthcare cost has spiraled so far out of control. History has repeated itself because Americans are turning to using home remedies because of the cost for healthcare services. The government is tackling healthcare cost aggressively and is diligently finding ways to accommodate all classes of people. Just like with the creation of healthcare, looking into the funding and discovering where the money is going and how to reallocate those funds appropriately is the path the our government is currently taking, thus, creating a step towards securing healthcare cost and insurance for all Americans!

References Getzen, T. E. , & Allen, B. H. (2007). Health care economics. Hoboken, NJ: John Wiley & Sons. Kinner, K. , & Pellegrini, C. (2009). Expenditures for public health: assessing historical and prospective trends. American Journal Of Public Health, 99(10), 1780-1791. doi:10. 2105/AJPH. 2009. 142422 Wasley, T. P. (1993). Health Care in the Twentieth Century: A History of Government Interference and Protection. Business Economics, 28(2), 11-16.

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