3. Learning Objectives
• To discover historical developments that have
shaped the US health care delivery system
• To evaluate why the system was resistant to
national health insurance reforms during the
1900s
• To explore developments associated with the
corporatization of health care
• To provide a historical perspective on health
care reform under the Affordable Care Act
4. The U.S. Health Care Delivery System
The US health care system has been shaped by
anthro-cultural values (discussed in Chapter 2)
and the social, political, and economic
antecedents.
5. The U.S. Health Care Delivery System
• A national health care program has failed to
make inroads
–Although compromises have been made
(e.g., Medicare, Medicaid)
• The ACA was passed without broad consensus
from Americans
6. The U.S. Health Care Delivery System
• Medical science and technology have played a
major role in shaping US health care by:
– influencing medical education
– making it possible to deliver medical services in
settings other than hospitals
– promoting corporatization of medicine, both
nationally and globally
7. Four Main Eras in US Health Care
Evolution
• Pre-industrial – consumer sovereignty
• Post-industrial – professional dominance
• Corporatization – corporate dominance
• Health care reform – government dominance
8. Pre-Industrial Era: 1700s to 1800s
• Medical practice in disarray
– a trade, not a profession
• Primitive medical procedures
– bleeding, emetics, purgatives
• Missing institutional core
– almshouses and pesthouses
– dispensaries
– mental asylums
• Unstable demand
– self reliance
• Substandard medical education
– apprenticeship
– college-based education lacked scientific training
9. Post-Industrial Era: Late 1800s to Mid
1900s
• American physicians gained professional
sovereignty and resisted national health care
• Transformation due to:
– Urbanization
– Science and technology
– Institutionalization
– Patient Dependency
– Autonomy and Organization
– Licensing
– Educational Reform
10. Post-Industrial Era: Professional
Sovereignty
• Urbanization
– People distanced from families
– Women entered the workforce
– Reduced opportunity cost for physician services
– Increased physicians’ productivity
11. Post-Industrial Era: Professional
Sovereignty
• Science and Technology
–Cultural authority
• general acceptance of and reliance on the
judgment of members of a profession
–Increased demand for professional services
–Decreased reliance on familial treatments
13. Post-Industrial Era: Professional
Sovereignty
• Institutionalization
–Medical technology, professionalization,
and urbanization necessitated the pooling
of resources
–The hospital became the institutional core
of health care delivery
• Dependency created by:
–Society’s expectation that the sick obtain
medical care to get well
–The profession’s cultural authority
14. Post-Industrial Era: Professional
Sovereignty
• Autonomy and Organization
– Independence of physicians from hospital and
corporate control—corporate practice doctrine
– Organized medicine
• Concerted activities of physicians through the
AMA
• Licensure
– Medical Practice Acts of the 1870s
– Dent v West Virginia (1888)
– Necessitated upgrading of medical education
– Relieved the intense competition in medical practice
15. Post-Industrial Era: Professional
Sovereignty
• Educational Reform
– Harvard and Johns Hopkins reformed medical
education
– Laboratory instruction and science were added to
the curriculum
– Medical education became a graduate training
course
– Proprietary schools closed as they could not comply
– The AMA’s control over medical education [Council
on Medical Education]
– The Flexner Report – 1910
16. Specialization in Medicine
• A hallmark in American Medicine
– 58:42 - specialist to generalist ratio
– Specialized fields in allied health professions
• Unlike Britain, the structure of medicine in the
US did not develop around a nucleus of
primary care, but
– The gatekeeping model can be seen in HMOs—
initial contact with general practitioner required
for a referral to a specialist
17. Community Mental Health
• National Mental Health Act of 1946
– Funding for education and research
• NIMH
– Early treatment of mental disorders
• Community Mental Health Centers Act of
1963
– Reduction in state-run psychiatric beds
• Olmstead v. L. C.
– Deinstitutionalization
18. Development of Public Health
• Public health in the US developed in response
to deadly outbreaks of communicable
diseases
• Separate from private practice of medicine
–due to physician’s skepticism of controlling
private medical practice
–private practice’s focus on the individual
(not community)
19. Health Services for Veterans
• After World War I
• Moved from mainly private contracting to
facilities owned by the Department of
Veterans Affairs
20. Workers’ Compensation
• 1914
– Work-related injuries and illnesses are the
responsibility of employers, regardless of fault
– Used as a trial balloon for government-sponsored
health insurance in US
– But, the rise of private health insurance prevented
a national health program
21. Three Forces Created the Need for
Health Insurance in America
• Technology
– Advanced treatments became available, but they
were expensive
• Social
– Desirability of medical treatments
• Economic
– Unpredictability of medical needs and costs of
treatment
22. Rise of Private Health Insurance
• 1911 – blanket insurance policies became available
(life, sickness, accidents, nursing care)
• 1916-1918 – state employer mandates failed
• 1929 – Modern health insurance was born (Baylor
Plan)
– established by J.F. Kimball for school teachers
– at Baylor University hospital in Texas
– a prepaid plan
– became the model for Blue Cross
• 1939 – The California Medical Association started the
Blue Shield plan to cover physician services
23. Private Health Insurance Became
Employment Based
• WWII caused wage freezes
– Employers started offering health insurance in lieu
of wage increases
• 1948 Supreme Court decision
– legitimized health insurance as a negotiable item
in union-management bargaining
• 1954 tax ruling
– Employer contributions for health insurance
became exempt from taxable income for the
employee
24. National Health Insurance: Actions
Taken in the U.S.
• 1914
– Workers compensation
• 1917
– The American Association of Labor Legislation
attempted to expand its social agenda by
advocating national health insurance
• 1935
– Franklin Roosevelt era, New deal
• 1940s
– Franklin Roosevelt: Bills on national health
insurance failed to pass
25. National Health Insurance: Actions
Taken in the U.S.
• 1940s (cont’d)
–Harry Truman: First US President to propose
national health insurance
• 1992 - Clinton and Bush proposals -
–rising costs of health care and
–polls showed significant fear of loss of
coverage and problems with receiving
services
26. Reasons for Defeated NHI Proposals in
the U.S.
1. Political Inexpediency
2. Institutional Dissimilarities
3. Ideological Differences
4. Tax Aversion
27. Reasons for Defeated NHI Proposals in
the U.S.
1) Political Inexpediency
– No threat to US political stability
• unlike Germany and England where social
insurance was a way to get worker loyalty
– US was decentralized
• insurance matters were left to local and state
governments
– WWI
• a blow to NHI because of anti-German feelings
• seen as a menace inconsistent with American
values
28. Reasons for Defeated NHI Proposals in
the U.S.
2) Institutional Dissimilarities
– Germany sickness funds not as developed in US
– American hospitals mostly private
• Private hospitals not consistent with national
financing
• Physicians saw a threat in shift from private to
government pay
• Those opposed national health insurance
–American Medical Association
–Insurance companies
–Pharmaceutical companies
–American Federal of Labor (AFL)
29. Reasons for Defeated NHI Proposals in
the U.S.
2) Institutional Dissimilarities (cont’d)
– Pharmaceutical companies feared government as
a monopoly buyer
– Retail pharmacies feared being replaced by
government established pharmacies
– Labor unions feared loss of influence in workplace
• AFL was the largest, most powerful union at
one time
30. Reasons for Defeated NHI Proposals in
the U.S.
3) Ideological Differences
– American beliefs and values
• Individualism
• Self-determination
• Distrust of government
• Reliance on private sector
– Middle class support needed for broad reforms
31. Reasons for Defeated NHI Proposals in
the U.S.
4) Tax Aversion
–Middle class already insured
–Middle class favor helping others
• but not willing to pay increased taxes to
cover it
32. Creation of Medicare and Medicaid
• Before 1965, only private insurance was widely
available
• Politicians believed there would be less opposition
for programs targeted at the underprivileged
– Only the working middle class had private
insurance
– The poor and elderly had to rely on own resources
or charity
– Private payers charged more to offset charity (cost
shifting)
– Social Security Amendments, 1965 created
Medicare and Medicaid
33. Creation of Medicare and Medicaid
• Precursors
– Amy Forand’s bill (1957) to expand Social Security
to include hospital and nursing home care for the
elderly
– Kerr-Mills Act (1960) gave federal grants to states
to provide health care to low-income elderly
– Rep. Byrnes’ proposal—Bettercare—premium cost
sharing between the elderly and the federal
government
34. Creation of Medicare and Medicaid
• Medicare
–Title XVIII of the Social Security Act (SSA)
–Part A
• Hospital and limited nursing home
coverage (based on Forand’s bill)
–Part B
• Covers physician bills (based on Byrnes’
proposal to share the cost of premiums)
35. Creation of Medicare and Medicaid
• Medicare
– No class distinction
– Uniform national standards for eligibility and
benefits
– Physicians could balance bill
• charge patient above set fees to recoup difference
36. Creation of Medicare and Medicaid
• Medicaid
– Title XIX of SSA
– Federal matching funds to the states (based on
Kerr-Mills Act)
– For the indigent
– Based on a means test developed by each state
– Expanded to include all age groups, not just the
elderly poor
37. Creation of Medicare and Medicaid
• Medicaid
– Class distinction
– Stigma of public welfare
– Eligibility and benefits vary from state to state
– Physicians cannot balance bill; limited
participation from physicians
38. Prototypes of Managed Care
1) Contract practice
2) Group practice
3) Prepaid group plans
39. Prototypes of Managed Care
1) Contract practice
– Capitation
• a contract with independent physicians and
hospitals at a flat rate per worker per month
(PMPM)
– Salaried physicians
• Both capitation and salary payments replaced
fee-for-service
– The AMA approved contract practice only in
remote areas (railroad, mining, and lumber
enterprises)
40. Prototypes of Managed Care
2) Group Practice
– Bringing physicians together with business
managers and technicians in an elaborate division
of labor
– Seen as a threat to general practitioners and
specialists in solo practices
– Met with resistance by solo practitioners, but
sharing of expenses and other economic
advantages led to their growth
41. Prototypes of Managed Care
3) Prepaid Group Plans
– The AMA opposed the first plan in Washington,
DC, but was found in violation of the Sherman
Antitrust Act
– Soon, several plans started offering
comprehensive services through organized
general and specialist physicians
– One main limitation: It required sponsorship of
large organizations
42. The HMO Act of 1973
• Increasing health care expenditures especially
in the public sector (Medicare and Medicaid)
• Federal funds were made available to
establish and expand HMOs (prepaid medical
plans)
• The Act failed to achieve its objective, mainly
because of apathy from employers
43. Corporate Era: Late 1900s to Present
• General Agreement on Trade in Services (1995)
– To remove barriers to international trade in
services
– In health care services, it may affect:
• Health insurance
• Hospital services
• Telemedicine
• Medical treatment abroad
• Three main features of the corporate era
– Corporatization
– Information revolution
– Globalization
44. Corporate Era: Late 1900s to Present
• Corporatization—medical care has become the domain of
large corporations
– High tech care in comfortable surroundings
– But, cost control has remained unrealized
– Managed care has become the primary vehicle for
insurance and delivery
• Consolidation of purchasing power on the demand side
– Integrated health care organizations
• To counteract managed care’s power
• Hospitals expanded services in other areas to recoup
lost revenues from reimbursement cuts in the 1980s
– Physicians have consolidated into large clinics or hospital
partnerships
45. Corporate Era: Late 1900s to Present
• Information revolution
–Telemedicine and telehealth
• Integration of telecommunication
systems into distant caregiving
• Improves access in rural areas
–E-health
• Information and services over the
Internet
• Has empowered consumers
46. Corporate Era: Late 1900s to Present
• Globalization
– Telemedicine
– Medical tourism
– Foreign direct investment in health care
enterprises
– Migration of health professionals
– Overseas operations of US corporations
– Overseas demand by US providers
– Cross-border collaborations
48. Era of Health Care Reform
Small incremental reforms:
• Children’s Health Insurance Program (CHIP) –
1997
• Medicare Prescription Drug, Improvement,
and Modernization Act, 2003, added Part D to
Medicare
49. Affordable Care Act:
State Precedents
• Oregon Health Plan – late 1980s
– Expansion of Medicaid
– Supply side rationing
– Medical insurance pool to cover preexisting medical
conditions
– Employer mandate
• Massachusetts Health Plan – 2006
– Individual mandate
– Employer mandate
– Government subsidies to low-income people
– Insurance clearinghouse (Connector)
50. Passage of the Affordable Care Act
• Patient Protection and Affordable Care Act, 2010 and
Health Care and Education Reconciliation Act, 2010
• Partisan legislation: Not a single Republican voted in
favor
• President Obama united his own party behind the
legislation
• Backroom deals were made with waffling members
and interest groups
• The AMA reversed its historic stance in supporting the
legislation
• The American public was kept in the dark about the
details
• Legal challenges pushed the legislation before the
Supreme Court
51. The Supreme Court’s Ruling
• The majority of ACA provisions were ruled
constitutional under the Congress’ power to
tax (the individual mandate)
• However, the federal government could not
coerce the states to expand their existing
Medicaid programs
52. The Aftermath
• Opposition to the law continues
• The Obama administration delayed
implementation of the employer mandate
until 2015
• Several provisions of the law have been
implemented since 2010, however, major
implementation challenges continue
• The future remains uncertain
