The History of Health Insurance In the US: Part 1

This will take more than one post because it's a long history and believe it or not it's actually quite interesting. The concerns and problems relating to health insurance haven't changed in the past 100 years. Here we go.

• National health care systems started in Europe with insurance laws put into effect in Germany in 1883.
• By 1912, most European nations had passed national health care legislation.
• By the end of the 19th century, medical care in the US shifted from the home to the doctor’s office and the hospital raising the cost of health care thus increasing the need for a system to pay for medical care.
• In the 19th and early 20th centuries, there were six forms of health insurance available. They were fraternal societies, contract physicians, private physician plans, county medical bureau plans, hospital service plans, and group insurance plans offered by private insurance companies. At that time, a very small percentage of the population purchased any health insurance.
• In 1913, the American Medical Association (AMA) stated that only about 10% of America’s doctors were making a comfortable living.
• In the early 20th century, the general opinion of the American people and the AMA was that some form of mandatory health insurance was necessary but for different reasons. The American people needed a way to pay for medical care because the majority of the population couldn’t afford treatment. The AMA wanted to raise physician’s income.
• During this time the general belief was that the federal government was responsible for providing for the betterment of the masses.
• The drive for mandatory health insurance didn’t come from the government. It came from the American Association of Labor Legislation (AALL). The AALL was formed to address the dangerous working conditions in many industries. After successes in their legislative attempts, the AALL turned their attention to mandatory health insurance. The AALL suggested a health insurance plan that was supported by the employer (40%), employee (40%), and the government (20%).
• In 1916, the AMA formed the Committee on Social Insurance that supported health insurance legislation.
• In 1916, the AALL chose to attempt to pass health insurance legislation at the state level. They selected Massachusetts, New York, and New Jersey as trial states. The bill proposed in New York was opposed by the medical community because it opposed the fee-for-service principle, patients couldn’t choose their own physician, and the plan put the state rather than the physician in control. The problems were resolved and an insurance bill was passed by the state legislator.

Doesn't some of this sound familiar?

Health Insurance in the US

I had decided to write a post describing how we became a country where most of us have employer paid health insurance. In fact, the entire development of the health insurance industry and the start of employer paid insurance is quite interesting so I will post the history here soon. But before I do, I thought you would enjoy this three minute video that's a great metaphor for the entire history and how well it operates today. To see the video, please click here.

Please watch to the end. Only at the end will you appreciate how well we're served today.

I just couldn't pass up this opportunity. Thank you for watching.

No More Bullies in the Playground?

My purpose for starting this blog site has changed from telling my friends and family about the trials and tribulations of getting my book published to promoting a fair and just society where we all respect our fellow man. I started with health care reform. It might not sound like a big deal but it is to me. Do you all remember the bully in the playground? I do.

I remember him well because even though I often wasn’t the target I lived my life in constant fear. I had polio as a child and walked with braces on my legs and crutches under my arms. Often bullies didn’t pick on me because they weren’t sure whether I could hurt them with my crutches. The times a bully found out they weren’t very effective I got to experience the pain a bully can inflict. Well now we’re all grown up and there aren’t any bullies anymore, right?

Guess again. The bullies have grown and become more sophisticated. Now they aren’t just a person they can be a company or an entire industry. Any time a person or organization takes their interest over your interest or the common interest, they’re displaying all the characteristics of a bully and if it quacks like a duck and waddles like a duck, it’s a duck. Recently Warren Buffett the billionaire founder of the investment firm Berkshire Hathaway Inc. asked Congress not to cut his taxes. Specifically he urged the Senate Finance Committee not to repeal the estate tax which is scheduled to come up for a vote by the Senate.

If you want to see a man who thinks like me, a man who believes in a fair and just society and is willing to do something about it click on this link http://abcnews.go.com/GMA/Story?id=3869458&page=1 .

If this video doesn’t make you angry, then get out of the playground because we don’t want your kind here.

An Example of Waste of Oil Resources

If you didn’t read yesterday’s post, read it before you read this one. A wonderful example of waste of oil resources is the SUV. The original SUV’s were trucks with fancier bodies on the frame. Trucks were cheap because they were built on old technology that cost less to manufacture. Then Detroit put a healthy price on the SUV’s. They’re cheap to make and Detroit can charge a lot. The SUV was what Detroit needed. A vehicle with a high profit margin that the public wanted.

To make sure we wanted one, they marketed the SUV as the vehicle powerful, successful people drove. The minivan was mom’s car. I have a daughter that was exposed to that marketing and she still won’t buy a minivan even though she will admit they offer more space and convenience and they’re cheaper to own and operate. Do you feel manipulated? You know; bend me, shape me, any way you want me. If you didn’t recognize that verse, click here.

Is the Sky Falling ?

Why are we still so dependent on foreign oil?

Does anyone remember waiting in line for gas in 1973? The lines were long and we were all sure that the end had come for cheap and plentiful gasoline. It was caused by the Arab Oil Embargo. It scared us all and we were ready to do anything to avoid it again. We had gotten used to big, fast cars that consumed fuel like a forest fire in California blown by the Santa Anna winds. The scary part was that we weren’t ready for addressing the Arab Oil Embargo in 1973 or any oil embargo that might happen in the immediate future. Detroit especially wasn’t ready. We had less than spectacular small cars like the Chevrolet Vega, the Dodge Colt, and the Ford Pinto.

The American answer to small cars was definitely more efficient than the behemoths we had been driving but Japan had better cars. Detroit never took small cars seriously because the profit margin on small cars is…well…small. Detroit had a lot riding on its cars. One of the biggest burdens riding on small cars was all the benefits that the union workers were getting and that burden wasn’t going away. In fact, it would be getting worse as the population aged and a glut of workers would retire with all those benefits. It was a promise that Detroit made. It was a wonderful promise but Japanese car manufactures didn’t have that burden. They could make a greater profit on a small car. In fact, they made a better car that cost more and we bought them by the ship load.

We never did have another serious oil embargo so our government wasn’t about to do much about promoting the search for alternate fuels or finding ways to use significantly less oil. Now we’re facing a crisis that we didn’t see coming. The government, the Arab oil producers, and the oil companies have figured out that we don’t complain too much as long as prices don’t go up too fast and we’re not standing in line for gas but now we’re facing a serious problem with supply and demand for oil. The rate of increase in oil consumption by China and India will dwarf our needs. It’s already pushed the price of a barrel of oil to nearly a hundred dollars. We probably won’t see the price of a barrel of oil go down. Wait until we start buying home heating oil. We’ve just started to feel the pain and are we ready? No we’re not. Why aren’t we?

This can’t be said enough – greed and self interest. Business and government leaders should have accepted the responsibility of preparing for the day when oil becomes too expensive to use as our main source of energy. Our government leaders stood by unwilling to irritate the oil companies because the oil companies provided them with the money they needed to be reelected. Detroit needed to make money, a lot of money, to cover the debt they created. Could we have significantly reduced our dependence? Yes, we could have. Brazil did it with cane sugar. It’s not a perfect solution but its better than what we have. Will things get better soon? Watch the advertisements on television and you’ll see the oil companies advertising about the solutions they’re working on. If that’s not the fox designing the hen house, what is?

Have we been duped? You wouldn't think so. Everybody knows the sky’s not falling. Just ask those that could have taken steps to make us less dependent.

Hey, what was that? Some pieces of blue stuff just fell into my yard. Think I’ll get inside.

The Healthcare Fix or One Solution

There’s a new book out titled The Healthcare Fix: Universal Insurance for All Americans by Laurence Kotlikoff. Laurence is a professor of economics at Boston University and a leading scholar on the generational accounting of social security. Laurence has written extensively about the probability of a bleak economic future for the United States without tax reform, health care reform, and Social Security reform.

None of this comes as a surprise to most of us. What do we do to change our future? We go to Starbucks, order a coffee, and sit down with our friends and lament about the future. We do that because we feel confident that our leaders will take care of the problems. Meanwhile lobbyists are feeding the self interest giant in Washington at a rate that will crush us all. Our leaders don’t know we’re paying attention because, for the most part, there are no repercussions for their actions.

That’s why we have the right to vote. If our political leaders thought someone was actually holding their feet to the fire, they might respond appropriately but we don’t understand the problems and we don’t know who’s telling the truth. Therefore, we don’t know which solution makes sense. Many of us vote but for the most part we’re not informed voters.

We can also reach business leaders if we stop buying their products. Unfortunately there are some products important to us that you and I don’t personally buy but we pay for. Health insurance is an example. For those of us who work for a company that provides health insurance as a benefit and most of us do, the company purchases our insurance. Those of you who think you don’t pay for that benefit, please raise your hand. If your hand is in the air, you need a reality check soon.

If you think health insurance is too expensive, you’re right. Employers are looking for ways to cut back on insurance costs but their hands are tied. We don’t respond well to fewer benefits or no benefits any better than we respond to our employer reducing our pay or not giving us an annual raise. The best way to reduce the cost of something is to switch to another product. For an employer with many employees, that’s a daunting effort. For us as individuals, it’s much easier. If we were buying our own health insurance, the GEICO gecko would be selling health insurance and many of us would be switching.

Part of the GEICO philosophy is “We keep costs as low as possible so we can pass the savings along to our customers. We're always looking for better, faster, more efficient ways to conduct our business.” Imagine having a health insurance company that operated with that philosophy. I know the health insurance companies don’t keep their costs low because the administration costs in the health insurance industry are higher than the administration costs in Canada and we know how efficient bureaucracies are.

Okay, back to the book, The Healthcare Fix: Universal Insurance for All Americans. Kotlikoff recommends that we kill Medicaid and Medicare and use the money to provide us all with vouchers to buy our own insurance. I haven’t read the book yet so I’m not sure if he’s talking about just the people on Medicare and Medicaid or if he’s talking about dismantling the entire employer based system. I’ll let you know.

I do know Kotlikoff advocates drastic measures. He says we like incremental changes but we don’t have time to make incremental changes. The only way we will get drastic changes is if our leaders in business and government get the courage to do it; the courage to do what’s right for this country. I’m not advocating any particular fix but I can’t wait to read his book. You might want to do the same. After all, you wouldn’t want to be uninformed.

Controlling the Rising Costs of Health Care

The report I referenced on November 2nd and yesterday, The Challenge of Rising Health Care Costs — A View from the Congressional Budget Office, is from the November 1st issue of the New England Journal of Medicine (NEJM). Yesterday I listed the three reasons given in the report for the rising costs of health care. The November 8th issue has a continuation of the report. The November 8th report addresses how we could control the rising costs. The report mentions several methods but they all come back to one approach and that’s the first one mentioned. I’ve excerpted the following from the report.

“One approach that could reduce total health care spending (rather than simply reallocating it among different sectors of the economy) involves generating more information about the relative effectiveness of medical treatments and enhancing the incentives for providers to supply, and consumers to demand, effective care.”

The reality is that we have documented evidence about the effectiveness of less than half of the medical treatments in use today and little documented evidence whether the additional costs for expensive treatments justify their additional costs. Let’s look at how “generating more information about the relative effectiveness of medical treatments” would affect the three reasons given for the rising costs.

1. The bulk of the spending for health care is from the development and diffusion of new medical technologies and therapies.
   
   The effectiveness of new medical technologies and therapies are typically documented by the companies that developed the technologies and therapies. Their studies may be accurate but at this time we don’t know for sure because no independent research is done. Independent studies could certainly assist the doctors in making informed decisions.
   
   
2. The fee-for-service (rather than managed care) reimbursements to health care providers creates an incentive to provide additional or more expensive services.
   
   Obviously fee-for-service has built-in incentives for the health care providers. It’s very difficult to control costs when five tests can be performed or an expensive procedure done when three of the tests may have been all that was necessary or a less expensive procedure performed but there’s little data to support the use of specific tests or procedures. I’ve had experience with this. I heard about a test for diabetics that I was interested in. I mentioned it to my doctor and he told me the benefits of the test versus another test I was having. I was suggesting both because my insurance pays for both. He convinced me that the second test wasn’t beneficial. Another doctor may have said yes without any thought to the cost versus benefit. In this case, the test has been available long enough for the doctor to have some experience with its effectivenes.
   
   
3. The declining out-of-pocket costs paid by recipients for services. Consumers ask for more when they pay less.
   
   The example above applies here as well. When patients ask, typically doctors deliver. If the doctor has data to support their lack of recommendation for a test, drug, or procedure, they’re more likely to speak up.

I think we would all be more comfortable if some organization was “generating more information about the relative effectiveness of medical treatments.” There is another approach which I advocate and additional study information would help here as well. The other approach is for health care providers to do the right thing. Greed and self interest is almost encouraged by the public. So many people treat those with wealth as hero’s or royalty. It’s a power that can intoxicate anyone. Having the strength of character to do the right thing is rare. Providers would be more likely to find the strength of character if they know that the payer is going to question a treatment based on an unbiased study. The payers could provide a strength of character quotient for providers. A 10 means avoid because they cost us too much money and a 1 is very effective at controlling costs.

Three Reasons for the Rising Costs of Health Care

On November 2nd I said I would summarize a report titled The Challenge of Rising Health Care Costs — A View from the Congressional Budget Office written by Peter R. Orszag, Ph.D., and Philip Ellis, Ph.D. Dr. Orszag is the director of the Congressional Budget Office (CBO). Dr. Ellis is a senior analyst at the CBO. The CBO is a nonpartisan agency that provides budgetary and economic analyses to Congress.

The report describes three reasons for the rising costs of health care.

1. The bulk of the spending for health care is from the development and diffusion of new medical technologies and therapies.

2. The fee-for-service (rather than managed care) reimbursements to health care providers creates an incentive to provide additional or more expensive services.

3. The declining out-of-pocket costs paid by recipients for services. Consumers ask for more when they pay less.

A fair question here is what does rising health care costs have to do with the desire for universal health care? The answer is simple. If we want to have equal health care for all, we need to be sure we don’t break the bank. Next let’s talk about how to control costs.

Let's Meet the Health Care Challenge

"Why is it that we spend more than $6,000 per person per year for health care in this country and still have close to 47 million people with no coverage, while Canadians spend about half of what we spend, yet have longer life expectancies, lower infant mortality rates, and all their people have equal care available to them?”

This is one of the questions submitted to AARP for AARP’s two presidential forums. The question was sent in by Dan Kanoza a retired industrial engineer. The question is the same one many of us in this country are asking. Unfortunately there’s still a lot of us who are satisfied with our health insurance and our health care to ask the question. It won’t stay that way forever. The rising cost of health care ergo the rising cost of insurance is changing the state of insurance coverage every day and it’s not for the better. We’re getting less and it’s costing us more.

At the rate employers are dropping insurance coverage, raising the cost of coverage, and reducing options, in a decade we will have one third of our population without insurance, one third underinsured, and the last third asking why the other two thirds are complaining. We’re all afraid of the Canadian health care system because of the horror stories we’ve heard but Dan Kanoza is right. Canadians do spend about half of what we spend, have longer life expectancies, lower infant mortality rates, and all their people have equal care.

The horror stories of long waits for treatment are the result of a shortage of medical staff and under funding. The shortage of medical professionals is the result of a study performed in Canada in the early 90’s demonstrating a reduction in the need for medical services in the next decade in Canada. Rather than allow the system to find its own level the Canadian government reduced the number of slots available in their medical schools. This has affected all the medical professions in Canada. The Canadian government has also been unwilling to tax their population enough to meet their needs. Even small increases aren’t possible because politicians are afraid to be honest.

Granted there are problems in Canada but the problems aren’t as bad as we’ve heard. The truth is there are too many in this country that have a self interest to maintain the status quo. There is so much misinformation being distributed about other health care systems and what would happen if we made significant changes to our system that the average person is afraid to even suggest there’s a problem. We have the talent to make changes. We have the ability to make our system better but we have to be willing to do it.

We spend too much. Tomorrow I’ll talk about the rising costs of medical care. We have shorter life expectancies and higher infant mortality rates. How could that be? Simple, almost 20% of our population has no health insurance and another 20% are underinsured so they don’t go to the doctor or hospital when they should. I have had a less than optimal insurance plan and I have heart disease. I’ve had two heart attacks and bypass surgery.

A year after the bypass surgery I started having indigestion after exercising. For three days I questioned whether to go to the hospital. I wasn’t feeling the severe pains I felt from a heart attack but I was concerned. Finally I decided to go to the hospital. I waited because I knew it would cost a lot of money to meet my deductible. Just walking into the emergency room was going to cost me a $100. The doctor found two of the bypasses blocked. The bypassed arteries were less blocked than when I had the surgery thanks to my diet. What I didn’t know was that veins behave differently and can block within days after bypass surgery. I needed a stent in one of the bypassed arteries.

How many people wait too long?

I think we’ve waited long enough!

Universal Health Coverage Provided by United States War Funding

As you saw on the map yesterday, Iraq and Afghanistan have universal health coverage provided by United States war funding. In Iraq alone we spent $950 million to establish a universal health care system. The first year after the fall of Saddam Hussein's government Iraq exported $6 billion in crude oil. They couldn’t afford their own universal health care system. Might we be able to afford our own system some day?

Universal Health Insurance Where? OR What's Wrong With This Picture!

Today I've been writing what amounts to four posts. I couldn't decide which one to finish and then in the process of finishing the fourth one I came across this map.

http://upload.wikimedia.org/wikipedia/en/c/c5/WORLDHEALTH2.png

I found it on the Wikipedia free encyclopedia web site when I did a search on universal health insurance in Google. Note the two red countries (you should be able to enlarge the map by clicking on it or holding your cursor over the map and waiting for the size selection icon to appear on the lower right corner of the map). Any comments?

The Health Care Industry and the Pharmaceutical Industry

Wednesday I directed you to an article in the Health section of Consumer Reports’ (CR) web site. The article I found on the CR Internet site Health page is titled 10 medical 'gotchas'. The article the link took you to is titled Overview. As I pointed out, there are a number of other articles you could read. One is titled New drugs, big dollars. This article is about the Pharmaceutical industry. The writer calls them Drugmakers. The Pharmaceutical industry has produced drugs that significantly improve our lives and in fact I would die in a few days if I stopped taking one of the drugs produced by a Drugmaker. I believe they are a blessing but I also believe there are abuses in the industry. Excising those abuses is one of the many challenges we need to address to lower the cost of health care.

One of my Son-In-Laws works for a Pharmaceutical company so I feel very sensitive about this subject but it can’t be ignored. I’m not suggesting that we should restrict Pharmaceutical companies from marketing to their customers or making a profit but I believe that the relationship between the health care industry and the Pharmaceutical industry needs to be scrutinized. There’s another article on the New England Journal of Medicine (NEJM) web site titled Doctors and Drug Companies — Scrutinizing Influential Relationships by Eric G. Campbell, Ph.D. Click on the title to read the article. The article talks about the efforts to require manufacturers of pharmaceuticals and medical devices to disclose how much money they give to doctors. The money can be in the form of dinners, trips, or consulting fees.

Soon I’ll be posting an overview of another article on the NEJM web site. It’s a great article titled The Challenge of Rising Health Care Costs — A View from the Congressional Budget Office written by Peter R. Orszag, Ph.D., and Philip Ellis, Ph.D. Dr. Orszag is the director of the Congressional Budget Office (CBO). Dr. Ellis is a senior analyst at the CBO. The CBO is a nonpartisan agency that provides budgetary and economic analyses to Congress. You have to subscribe to the NEJM magazine to read the article so I can't link you to the article.