Last time I wrote an entry in the plague diaries, it was the end of the work week. This time, it’s the end of the weekend. Was it an exciting and action packed weekend? Hardly, those are in abeyance for the duration but I had a few minor triumphs. In the harsh light of day, I decided the cat hair on the rug was not a lived in, but a sloven look so I broke out the vacuum cleaner and the duster and cleaned the main floor of the house. I also finished sorting the DVD collection for discards and entered all the ones I’m keeping into an app database so I’ll know what I’ve got next time I look for a physical copy of something. I played three very long games of Civilization VI on the Xbox and lost every time to my AI opponents. I read a dozen chapters in the book my sister gave me for Christmas (a zombie apocalypse in Seattle told from the point of view of a tame crow and the pets left behind). I took two long neighborhood walks. And I ‘attended’ on line church with a sermon on the non-canonical gospels entitled ‘The Heretic in the Pulpit’ – let it not be said that we UUs have no sense of humor.
On one of my walks I encountered my old friend Angela Forbus Pruitt and we called a few pleasantries to each other across the street. While we were talking I had a brain flash about what to write this evening. One of the themes I’ve seen as friends have been posting about Corona Virus is the common fear of being stranded without health insurance due to job loss. We are the only advanced society that ties health care and employment together. As most of us grow up in this system, it seems normal to us while most of the rest of the world considers it bizarre. How did we get here and why do we do it?
To answer that question, we have to go back to the 1920s and 30s. In the 1920s, the average American family spent a greater portion of their wealth on cosmetics than on health care. For the most part, you didn’t access the system. Doctoring was done by mom or granny and the vast majority of illnesses were handled at home. The doctors, almost exclusively men, were mainly general practitioners who were part of a community that supported them in a symbiotic relationship: this is where all the stories about paying the doctor in chickens came from. If the doctor had an office, it was often part of his home and he spent most of his time making the rounds in the donkey cart or the model T calling on the sick at home, providing advice and succor as he could. There were hospitals, but they were small and generally used for a few specific purposes: surgery, separation of those who might be dangerous to the greater community (the asylum and sanitarium), teaching, and as a carer of last resort for those without intact family structures who were medically ill. They were owned predominantly by public or religious institutions with a charitable mission to provide care for the ill and were non profit in nature.
Health insurance, as we understand it, was invented in 1929 in Dallas, Texas. Baylor University had constructed a large new hospital and was having difficulty filling the beds. The vice president for health services at Baylor, Justin Kimball, had connections with the Dallas school teachers union and hit upon a plan. If the teachers would pay Baylor a fifty cents a month, they would then be eligible, should they require hospital treatment, to enter Baylor’s hospital free of charge for up to twenty one days. This ensured Baylor a steady stream of income, and a steady stream of patients over the next decade or so.
This original plan morphed over time, as it grew, into Blue Cross: an amalgam of local plans which over the next couple of decades, grew into the organization that those of my generation all remember from my childhood. Blue Shield, which eventually merged with it, had a different origin. It came from a banding together of workers in the logging and mining camps of the Pacific Northwest into fraternal organizations that paid doctors fees if one of their number became ill. Blue Cross and Blue Shield grew piecemeal throughout the 1930s due to the state of the economy.
In the early 1940s, with the United States now at war, many of the heavy construction jobs, especially in the shipyards and airplace factories were taken by women as the men were fighting overseas (the days of Rosie the Riveter). It didn’t take long for the titans of industry to figure out that if these women fell ill, or if their children fell ill, they could not come to work and productivity would be hindered. It started to become the smart business decision for a company to begin thinking about the health of its employees and their families. The leader among the heavy industry types was Charles Kaiser, head of Kaiser alumnium. He led the way in making sure his employees had access to good and timely health care and that the bills would be paid.
In the latter half of the 1940s, after the end of the war and the return of the men to the workforce, heavy industry faced another problem. While the economy was gearing up to meet fifteen years of pent up US consumer demand, not to mention helping the rest of the world rebuild shattered infrastructure, there were still laws on the books left over from the Great Depression, which controlled wages – it wasn’t possible for company A to offer more money than company B for the same job. Corporate America found something else to make up the gap – the benefits package which did not fall under these rules. Health insurance, as it had already taken root in heavy industry quickly became a carrot for getting employees to sign on the dotted line. By the late 1940s, industrial American lobbied congress to change to tax code so that it became advantageous to the owners of industry to offer a health benefit and, before anyone knew it or thought about the consequences, employer tied health insurance was born.
Through the 1950s and 60s, the system worked relatively well. Hospitals were not for profit by both custom and law. Physicians were small independent businesses. There wasn’t much money in the health sector of the economy and, as employment was relatively easy to get in the booming post war economy, everyone was happy. Things started to change with the introduction of Medicare and Medicaid in 1965. They were created to give populations who were not employed or employable access to the health care system – Medicare for the elderly and disabled and Medicaid for the impoverished. But what ended up happening, was a sudden influx of federal dollars into the health care system. Money always catches the eye of the businessperson and this was no exception.
It was Charles Kaiser who went to his old friend Richard Nixon in 1973 and persuaded him to sign a piece of legislation known as the HMO (Health Maintenance Organization) Act. It was in order for him to spin off his health organization into a free standing company (Kaiser Permanente). The unintended consequence was that the language of the act made health care, up to then a not for profit enterprise, into a for profit business. Wall Street took notice and corporate America arrived in health care starting in the late 1970s, determined to remake medicine into a business, one that manufactured hospitalizations and patient encounters, and using the same business principles that had served it well in other sectors of the economy. By the mid 1980s, the field of medicine was very different as we evolved from a health care system, whose goal was to heal the sick and injured, to a health care industry whose goal is to create profit for the owners of industry. These trends have continued over the last four decades (coinciding with my time in medicine – I entered medical school in 1984) and now there is an enormous stress on the system wrought by Covid 19. What will the ultimate outcome be? I don’t know, but I don’t think the health system will look the same or operate the same when we emerge on the other side.
And there you have it. More than you ever wanted to know about the history of American health insurance in seven paragraphs.