3 Part Series,
Past, Present, Future
Past
The current American healthcare system is an evolution of concepts and ideas that originated in the 1920s when a group of Dallas, TX teachers formally contracted with Baylor Hospital for healthcare. Teachers would prepay a portion of their salary into a “community chest” held by Baylor Hospital. Participants could get needed hospital care (which eventually began to be called Blue Cross). The years 1938-1939 proved to be pivotal in healthcare. The combination of the discovery and acceptance of “germ theory”, vaccines, and hospitals becoming safer with the potential use other than emergencies resulted in public awareness of the value of health care which increased demand. During this time, patients paid their doctors and pharmacies whatever they could afford, sometimes even bartering services or goods for their healthcare needs.
Americans were suffering from the effects of the Depression which included inflation. President Franklin Roosevelt and Congress passed the 1942 Stabilization Act to address this crisis, designed to limit employers’ freedom to raise wages. So, employers could no longer compete based on pay, they began to offer health benefits as an incentive. Thus, the birth of an employer-based health system became very popular with employers and employees and placed a monetary equivalent value on healthcare. Several types of employer-based healthcare included an onsite physician, contracting with local physicians, and hospitals with a set price (which supported and encouraged physicians and hospitals to settle in communities where there were large companies). Healthcare began to grow in urban and industrial areas.
The next step in this evolution was in 1943 when the IRS ruled that employer-based healthcare should be tax-free and by 1954, a very popular concept with employers and employees alike. By the 1960’s’, 70% of the population from just 9% in 1940 were covered in some kind of health insurance plan. With the expansive growth, health insurance companies grew expeditiously as separate companies eventually extended their services to include prescription drugs, well-patient visits (preventive care), obstetrics, and many other healthcare services.
To address the healthcare needs of those that were not employed (seniors, disabled, and or no employer insurance plan was available), President Harry Truman (in 1945) called for a national insurance plan open to all Americans. It was another 20 years after unsuccessful attempts to pass legislation by President John F. Kennedy, a national study showed that 56% of Americans over the age of 65 were not covered by health insurance. In 1965, President Lyndon Johnson signed legislation for Medicare and Medicaid coverage with President Richard Nixon (in 1972) expanding health coverage to include individuals under 65 with long-term disabilities and those with end-stage renal disease. In the 1980s Congress passed the Omnibus Reconciliation Act which expanded health services and brought in Medigap (also known as Medicare Supplement Insurance).
Continued Part 2, Present
Health insurance companies have grown in numbers with an estimate of 907 as of 2017 data with the top 5 largest by membership, currently, being United Health Group, Anthem, Aetna, Cigna, and Humana. Policies and coverage are varied and negotiated between employers and insurance companies usually every year. Insurance companies negotiate pricing with healthcare providers such as physicians, health services, pharmaceuticals, and hospitals referred to as In-Network pricing. Deductibles, copays, and out-of-network pricing to be paid by consumers are established, also every year. This system is individualized and negotiated among business professionals which leads to a lack of transparency for the consumer. With the growth of the healthcare industry, there has been growth in supportive and ancillary services such as Pharmacy Benefit Managers (PBM) that specialize in negotiating with pharmaceutical manufacturers on behalf of the pharmaceutical insurance companies, consultants, and a host of spin-off companies creating many levels engaged in the system.
The United States healthcare system is referred to as a hybrid system since there are a wide variety of medical services which come from several sources. The mix of private and public, for-profit and nonprofit insurers and healthcare providers are managed and paid for by states in which there are no standards across the states. This complicates the public perception of the affordability and quality of healthcare due to the vast variations. Private insurance primarily is provided by employers that contract with private health plans that are premiums paid for by the employer and employee with some employers offering premiums fully covered as a benefit. Over the last decade, increased out-of-pocket and health insurance have resulted in large employers paying about 67% of the premiums and reducing the number of American workers covered to 55% (increasing contract, gig workers, reduction in hours qualifying as part-time workers, small business employees). Although the economy grew from 2016-2019, the number of uninsured increased, none, due to job losses. As a result of changes in employment status, such as contract, reduction of hours to part-time and small business, self-employed, and temporary positions, only 49% of workers received employer-sponsored health insurance. Recent statistics (in 2020), there are around 31 million uninsured. Interestingly, for those that do receive employer-covered insurance, there is a huge disparity with 13% of those making less than $25,000 per year and 82% of those making more than $150,000 per year. Midwestern states have higher employer health insurance coverage than those of the South and West, with most uninsured being low-income, nonelderly adults, people of color, and in working families. Job losses during the pandemic (by June 2020) approximately 7.7 million workers lost their employer-based insurance.
Public insurance includes Medicare, Medicaid, CHIP, and Military which comprise approximately 34% of all insured according to U.S. Census Bureau, Current Population Reports, November 2019. By April 2022, there are nearly 64.5 million people receiving health coverage through Medicare. The services associated with public plans are also widely varied with no nationally defined benefits.
Until the enactment of the Affordable Care Act in March of 2010, there was no law requiring employers to provide health coverage. The goal of the ACA was to provide affordable insurance to more people by providing subsidies that lowered costs to households that did not have coverage through private insurance or qualified for Medicaid, expand Medicaid Coverage, and encourage innovative medical care methods to lower costs. The ACA Act did require employers with 50+ full-time employees to provide healthcare benefits to at least 95% of employees or pay a penalty to the IRS. (Currently, health insurance premiums are 100% tax deductible as an ordinary business expense.) Under the ACA, marketplaces within states with participating health insurance companies could be made available to people. The availability of participating companies and pricing varies from state to state. (Participating insurance companies in the ACA marketplaces are required to spend at least 80% and large group insurers 85% on direct medical care.) ACA is considered to be an option available as a safety net. In 2019, 7 of 10 people have been uninsured for over a year with 73.7% stating that health coverage was not affordable. As of 2021, U.S. government statistics reveal that 91.7% of the population is covered by private or public insurance (with varying coverage levels) and 8.5% (approximately 30 million) are uninsured. A recent report (August 2022) by Health and Human Services revealed that the uninsured rate has dropped to 8% as a result of the American Rescue Plan’s enhanced marketplace subsidies, continuous enrollment provision in Medicaid, several state Medicaid expansions, and enrollment outreach.
In 2020, an employee with employer-provided insurance paid approximately 11.6% of their median income for premiums and deductibles. Non-covered health expenses such as co-pays, out-of-network services, and healthcare products result in Americans spending an average of $12,500+ per person a year on healthcare resulting in a $4.1 trillion industry. Factors regarding accessibility, costs, and quality vary according to the state in which one resides.
The current U.S. Healthcare System is a piecemeal evolution created over a 100-year span of time. At the center of this structure are two opposing views of health care… is it a human right or a privilege (a consumer good or universal right)?
In 2020, an employee with employer health insurance paid approximately 11.6% of their median income for premiums and deductibles only with co-pays and not covered services and products at an additional cost. Americans spend an average of $12,500+ per person per year on healthcare resulting in a $4.1 trillion industry. Factors regarding accessibility, costs, and quality vary according to the state one resides in.
The current U.S. healthcare system has developed and grown in a piecemeal fashion over 100 years. At the center of our healthcare system structure is the result of two opposing views by our citizens….is it a human right or a privilege (a consumer good or a universal right).
Brenda Kennedy Sellers 