The American Health Care System with Ezekiel J. Emanuel, MD, PhD


[MUSIC PLAYING] To understand the structure
of American health insurance, we also need to go back
to the 19th century. It was then that in
remote, rural locations employers began to offer
their workers coverage. Loggers out in the
woods of the Northwest, miners in various rural areas,
got their health insurance from their employer. And then in the early
part of the 20th century the depression
forced a real change. Because of the depression
lots of Americans were not able to
afford health care. Use of the hospital went down. In 1929, Baylor University
in Dallas, Texas, offered teachers a deal. They would provide 21 days
of hospital care per year for a $6 premium. Many people date the founding
of health insurance in America to this action by Baylor. Many people considered the
Baylor experiment in Dallas the birth of health
insurance in America. The idea quickly spread to
other cities and other hospitals across the country. Actually, many
hospitals in the city would combine and offer
an insurance product so the individual patient
could decide and choose between the hospitals. This idea led in 1939 to
the creation of Blue Cross. They were tax exempt insurance
plans based at the state level. The states actually
provided them an advantage in that they didn’t
require financial reserves, because the insurance plan
would guarantee service at a hospital. And in return the Blue
Cross plans community rated. They charged everyone,
regardless of their health condition or their
age, the same price. Health insurance
than proliferated because commercial
insurance got into the game. They had traditionally
avoided health insurance for a variety of reasons. The first is they were worried
that only the sick would buy. The second is they could not
figure out how to define health and how to define sickness in
a way that would make sense and would not open
up them up to fraud. Blue Cross plans showed the way. In addition, the commercial or
for-profit insurance companies had several advantages. First, they could offer one
stop shopping to an employer. They could package
health insurance with life insurance
and other products. Second, they weren’t tied to a
particular state or geography. They could give it national
coverage to big companies. And most importantly, they
did not community rate. They offered lower
prices to employers that had healthy, low risk workers. And this created a tension
between the commercial for-profit insurers and the not
for profit Blue Cross plans. A third way of getting
private insurance was managed care
organizations like Kaiser. Henry Kaiser was
an industrialist who made ships and steel out in
the West coast for the United States during the war. And in 1942 he set up a health
insurance plan for his workers. The plan actually provided
comprehensive health care services to all the employees. Actually, Kaiser Health plans
owned its own physicians, employed them, and actually
own its own hospitals. So they provided comprehensive
managed care for its workers. Doctors were very suspicious
of all of this insurance, and actually when Blue Cross
started doctors resisted. But several things made
them change their mind. The first and most important was
the depression and the decrease in their income. Second, the commercial
insurers came in and they packaged
payment to the hospital with payment to the doctors
who worked in the hospital, such as surgeons. And this made the
doctors worried that they would be cut out. Finally, doctors had
figured out a way so that the insurer would not
come between the doctor and the patient, that the
payment would go directly to the patient who would
then pay the doctor. So physicians, through their
state medical societies, came up with Blue Shield
plans, and this physicians controlled those plans. Over the 1940s and
’50s health insurance became much more
important for two reasons. First, health care
costs were rising. With greater use of hospitals,
the more things hospitals could do, costs at hospitals
became more important. Second, as we mentioned,
the tax exclusion encouraged employers to
provide health insurance to their workers. In 1942 the wage and price
controls were set in place, but the government ruled that
employers could provide health insurance to their workers
equal to 5% of wages and it not be considered a
violation of the wage limit. Employers began using
health insurance to attract more workers. Employer sponsored coverage
then got a big boost in 1954 when Congress ruled that
health insurance was not to be considered part of
income for determining taxes. In this way it became
advantageous for employers to give their workers
health insurance because they would not be
taxed on that health insurance, and so it became a very
valuable fringe benefit. If health insurance is
tied to your employer, who gets left out
of that system? Next, we’re going to look at
public payment for health care, and covering all those people
not covered by employer sponsored health insurance. [MUSIC PLAYING]

Daniel Yohans

1 thought on “The American Health Care System with Ezekiel J. Emanuel, MD, PhD

  1. Palani Raju says:

    Good to know the history of health system of America, Even i have done research and written a hand book of US healthcare system

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