How Obamacare Will Impact Reproductive Health

Paul R. Brezina; Anish A. Shah; Evan R. Myers; Andy Huang; Alan H. DeCherney

Disclosures

Semin Reprod Med. 2013;31(3):189-197. 

In This Article

Health Care in the United States: A Historical Perspective

Creation and Integration of the Employer-based Health Insurance System

The current employer-based health care insurance system began in the early 20th century. At this time in history, medicine was changing from a field with doctors claiming to cure many problems to actually being able to diagnose, treat, and cure disease. As the effectiveness of health care improved, the price of such care rose. In the early 1920s, hospitals began to go unfilled as fewer people could afford these rising costs. With health care becoming a luxury only afforded by the rich, hospitals quickly realized this would be a fiscally nonsustainable model. A hospital administrator at Baylor Health in Dallas, Texas, realized that they needed to once again target the middle class; this simple idea gave birth to our current health insurance system.[12,13] He proposed to factory employers that for a small monthly fee from each of their employees, the employers could offer a certain number of physician visits and days free in the hospital. The nonprofit company that was created to sell the health insurance was named Blue Cross Blue Shield (BCBS). Employers liked the idea because it did not cost them money, and it was another added benefit to give to their workers. BCBS benefited because their fees were guaranteed through the wages of employees by the employer. In addition, by targeting workers, they would have a relatively healthy population to manage, which meant utilization of services would be manageable.[12]

The nonprofit health insurance model began to take hold as a viable model in the early 1930s. The Great Depression resulted in many hospitals having significant drop in revenue and health care bills that were left unpaid. The success of BCBS persuaded commercial insurers, who initially considered medicine an unpromising market, to enter the field. In a time when most businesses were failing, the BCBS model was a guaranteed revenue stream through employers, which made it very attractive in very uncertain times. By the start of the 1940s, 9% of the market was using employer-based insurance.[14] However, although it had a foothold in the economy, employer-based insurance did not take off until World War II. In the rationing wartime economy, the U.S. government limited direct wages. The result was that employers had very few options to attract employees who were at a premium during wartime. Thus employers started to offer more fringe benefits such as health insurance. As a growing industry, the Internal Revenue Service (IRS) needed to clarify tax policy around employer-based insurance and in 1943 ruled it as a tax deduction for employers. This simple clarification in tax policy was enough to convince employers to offer widespread health insurance. The U.S. Congress in 1954 then made the IRS ruling a law solidifying the employer-based health insurance system's place in the U.S. economy.[15] The proportion of people with employer-based health insurance went from 9% in 1940 to 63% in 1953 to 70% in the 1960s.

Evolution of the Employer-based Health Insurance System

The various state BCBS organizations in the 1940s were all quasi-philanthropic organizations created by hospitals and therefore were interested in signing up potential hospital patients. To do so, BCBS initially charged everyone the same premium regardless of age, sex, or preexisting condition. Thus when a national health insurance paid through a payroll tax was proposed in Congress in the 1940s, opponents argued that the nonprofit sector (i.e., BCBS) would be able to provide for all citizens based on this philanthropic model. The argument was convincing, and the bill failed. Unfortunately, as more private for-profit insurers entered the market, premiums started to be calculated by risk, and companies avoided the riskiest potential populations.[12,16] To survive, BCBS had to follow suit and today, it is virtually indistinguishable from other for-profit health insurers. The result is that 45 million people in the United States were estimated to have no health insurance in 2010.[8,13]

Creation of Medicare and Medicaid

With the majority of the U.S. population on employer-based health insurance by the 1950s, two large demographics of the U.S. population, by default, did not have health insurance because they did not work: the nonworking poor and the elderly. In the 1950s, Congress attempted to improve access of health care to the poor who were on public assistance. They achieved this goal by funding states that then funded hospitals that provided care for people on public assistance. In 1960 Congress passed legislation titled "Medical Assistance to the Aged" to bring health care coverage to the elderly.[17] These two pieces of legislation became the groundwork that ultimately developed into passage of the Medicare and Medicaid programs established as Title XVIII and XIX of the Social Security Act of 1965. Medicare was created to address specific needs of the elderly with updates to also include the disabled and renal failure population in 1973. Medicaid was to formally address the health welfare of the needy in America.[17]

Rising Cost of Health Care

Health care spending increased rapidly in the United States from $27.4 billion in 1960 to $921.3 billion in 1993.[10] Much of the increase in expenditure was due to increase costs in medical technology and health care inefficiencies. Fortunately, health spending began to stabilize between 1993 and 1999, increasing at an annual rate of 5.7% of U.S. GDP from a peak of 13.8% in the previous decades.[10] Stabilization occurred due to a movement to lower cost managed care plans such as the health maintenance organization (HMO), lower general and medical-specific inflation, excess capacity of some health care providers that drove up competition and lowered prices, and finally, GDP growth that matched the slower rate in health care spending.[10]

However, health spending began to once again increase from 1999 to 2002, averaging 8.2% annually.[10] The rise was due to multiple factors. First, cost-saving measures such as gatekeeper model HMOs or predefined lengths of stay proved to be highly unpopular with patients and providers. This led to legislative mandates prohibiting some of these measures[18] and, in the tight labor market of the mid-1990s, purchasers willing to pay more for plans that were less restrictive. Second, consolidation of health care insurers and hospital systems created an even less competitive market perpetuating increased cost. Although health spending slowed between 2002 and 2009 to 5.9%, actual costs reached $2.5 trillion, or $8086 per person, in the United States.[10] The result was health care that rose to17.6% of GDP in 2009 with it projected to be 19.8% of GDP by 2020.[10]

The unorganized employer-based health insurance system started in response to growing costs of care in the early 20th century. It has evolved into a "system" that spends far more than any other developed country while covering less of our citizens and providing outcomes according to many estimates that are no better than, and in many cases worse than, those seen in other countries.[19–22] The alternatives of universal health care or a completely privatized system have been argued by many economists as a more viable system compared with the current system.

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