How did we get here?

Healthcare in the US can seem like a complete mystery but history can help you understand how the system came to be. Better yet, it can help you navigate it. 

In 2018, almost half of Americans avoided getting necessary health care because of the cost. Even though the US spends far more on health care than other developed nations, it still ranks last in health care measures.

If you’re trying to understand the US healthcare system, keep reading. We’ll break down the history of healthcare in the US, from its beginnings to the present day. This guide will help you understand the history of the US healthcare system so that you can be confident in getting the care you need.

How It All Started?

As America began building itself as a nation, medicine was one of its first priorities. In 1756, America—then still a British colony—founded its first medical training program at the College of Pennsylvania. This was America’s first step towards weaving health care into the fabric of its society, but it would take until the 1900s for the new nation to start building its own health system.

The Turn of the Century

By 1900, the industrial revolution had transformed America. Most importantly, it changed the way that people worked. Instead of working for themselves on a farm or in a trade, people flocked to factories for employment.

The new factories used industrial machines that were dangerous to use. Injuries at work became common. That’s why workers began to expect employers to pay for their medical care if they were injured on the job. 

This new rule was common law, meaning that it was usual practice but it wasn’t actually on the books. Health insurance still didn’t exist. But it was the first step towards America’s unique healthcare model, which rests on private employer-based insurance.

The Insurance Movement Begins

By 1915, 32 states sought real worker’s compensation laws. They wanted employers to be financially responsible for on-the-job injuries. At first, doctors supported this move, because if employers paid their employees’ medical bills, it meant that more people could afford medical care, so they would garner more business.

Employers pushed back. None of the parties involved — the workers, the employers, and the doctors — could agree on how health care should be delivered and paid for. The situation stayed in a deadlock until a university hospital called Bayor had an idea.

Baylor’s Big Plan

It was 1930, and the Great Depression hit America hard. Money was tighter than ever. Americans struggled to pay medical costs.

That’s when Baylor University Hospital in Dallas, Texas came up with a plan. The hospital enrolled over 1,200 school teachers to pay 50 cents per month into a collective fund. Because each contributor gave a small amount, together they could purchase health services that they otherwise couldn’t be able to afford. 

This was the first successful collective Healthcare in US program, and it got a lot of attention. Over the next few years, many hospitals picked up Baylor’s big idea. The American Hospital Association (AHA) even established a committee to approve healthcare plans, which would later take the name Blue Cross, which is still synonymous with affordable health insurance today.

Baylor’s plan represented a turning point in health care history. Health insurance was no longer limited to compensation for individual injuries. Now, people could be financially covered for all their health needs.

From Baylor to Business

Baylor came up with the first health insurance plan in 1930. It only took until 1934 for third party businesses to start offering health care. This was the beginning of commercialized and privatized health care in the United States.

By the mid-30s, many working Americans had health insurance, but those who couldn’t work were left out. As the Depression made it hard to find work, President Roosevelt recognized that his country needed a unified health care bill.

Roosevelt hoped to establish a national health insurance system, but the medical profession resisted. They didn’t want their private practice to be subject to federally mandated laws. Eventually, their opposition defeated the bill.

However, Roosevelt did pass a landmark health insurance bill: the Social Security Act of 1935. This bill gave support to retired and elderly Americans, who couldn’t get insurance through work. It also paved the way for modern-day healthcare programs Medicare and Medicaid.

World War II

The energy of the war effort pulled America out of its economic slump. Suddenly, the economy was booming again, and healthcare began to flourish.

With so many men at the front, factories had to attract new employees to work, so they offered competitive healthcare plans. This was the first time that America normalized employers offering healthcare as a benefit with a job. Workers’ unions encouraged this change, and it was finalized in 1947 by the Taft-Hartley Act: employers were officially required to offer health insurance with employment.

The war dramatically changed the face of America’s insurance. In the 30s, a bare 9% of Americans had health coverage. After the war, 50% of Americans enjoyed health insurance. 

Modern Medicine, Modern Ideas

In the 60s, the health insurance movement picked up steam.

For the first time, the government counted how much money American citizens were spending on health insurance. When they compared that amount to the Gross Domestic Product (GDP) they realized that Americans were spending a disproportionally high amount on health care.

Again, Congress pushed to expand Social Security, and again, the American Medical Association pushed back. 

Still, the Johnson administration initiated the Hill-Burton program. This program gave grants to hospitals that agreed to provide services at a reduced cost to those who couldn’t afford health care. The program stopped in 1997, but 140 hospitals across the US still provide low-cost care because of it.

The Dawn of Medicare

But the Hill-Burton program was only the beginning. In 1965, Johnson signed the Social Security Act. This landmark bill established the two backbones of modern American health insurance assistance, Medicare and Medicaid.

Medicare ensured insurance to elderly Americans, who could not access employment-based insurance because they were retired. This built on the 1935 Social Security Act. Medicaid was something new: insurance for low-income Americans, who couldn’t afford medical services.

A Patchwork System

By the 1970s, health care insurance was a patchwork of private companies and government programs. It was clear that the disorganized system needed to be cleaned up. But the country couldn’t agree on what kind of system it should have. 

Some pushed for a socialized system, to which every American would contribute from their taxes. Others wanted the system to stay individual and privatized. Divided along party lines, America seemed deadlocked in its messy healthcare system.

But Republican president Nixon surprised America by supporting a more socialized health care model. He wanted to create a system that built on the existing employment-based health insurance model, with added subsidies to help Americans who still struggled with healthcare costs.

Nixon’s idea brought the parties together. It still depended on employment, which satisfied the Republicans’ commitment to individual responsibility. And it even satisfied the American Medical Association because it didn’t infringe on private medical practice.

Unfortunately, the Watergate scandal unfolded in the early 70s. America quickly lost interest in Nixon’s initiative. For a few more decades, America would stay in its health insurance deadlock.

Chaos, Crisis, and COBRA

After the Nixon administration, the chaos of the healthcare system had reached a point of crisis. Fortunately, President Nixon had passed a few healthcare bills, including the Health Maintenance Organization Act. This Act helped to consolidate medical services and bring them under the auspices of a single organization and brought some order to the chaos of American healthcare.

Still, Healthcare in US expenditure continued to eat up more and more of its GDP. The problems continued to worsen. The 1980s saw a few more federal amendments to the patchwork system. 

One important change was the Consolidated Omnibus Budget Reconciliation Act, or COBRA. This act allowed employees to keep their health insurance for a limited time even after they lost a job, or a spouse who held employment-based health insurance died. Although they had to keep paying the health care premium, this act offered a bridge to individuals who were between jobs and could not afford health insurance.

HIPAA and Hillarycare

Finally, the 1990s arrived. After decades of deadlock, the US healthcare system began to change.

With national health expenditure taking up an ever-bigger piece of the average American’s pie, President Clinton proposed the Health Security Act in 1993. The bill earned the nickname “Hillarycare” because the first lady led the task force which recommended it. 

The Health Security Act drew on the same principles as Nixon’s health care reforms. It combined privatized insurance with state-level cooperatives to support for anyone who couldn’t find employment-based coverage. It seemed to have all the ingredients to satisfy Americans of all political stripes.

However, the bill was complicated. It died a slow death in Congress debate without achieving any of its potential.

Meanwhile, Clinton passed the Health Insurance Portability and Accountability Act (HIPAA) in 1996. It made health insurance “portable,” meaning that employees could retain their insurance even when switching jobs. And it made reduced the premiums which employees had to pay for insurance if they had pre-existing medical conditions.

HIPAA also established mandatory privacy standards for health information and is still in force today.

Coverage for Kids

Even though Clinton’s bid at national health insurance was dead in the water, his administration succeeded in one final amendment. It passed the State Children’s Health Insurance Program (S-CHIP).

With S-CHIP, states could expand Medicaid to cover low-income children. Moreover, states could use their discretion in how they chose to roll out these new benefits, which gave them control over how this new program was applied.

The program was popular, and it is still in use today. But states had trouble getting children insured. By 2009, less than half of eligible children were insured. Clearly, there was still more work to be done.

The New Millenium

In the 2000s, the Bush administration expanded Medicare. Before this, Medicare had consisted of two parts: Medicare A, which covered inpatient hospital services, and Medicare B, which covered some outpatient services. In 2003, President Bush added Medicare Part D, which covered prescription drugs.

Medicare Part C is more complex. Also called Medicare Advantage, this option offers more flexible health coverage and more ways to pay the Medicare premiums.

However, many Americans on Medicare still have gaps in their care. Private health insurers offer plans to supplement Medicare. Medical supplemental insurance, or Medigap, comes in many varieties.

There’s a whole alphabet of Medigap options. Even though they are sold by private companies, they are standardized so that every company includes the same features in each option.

If you’re overwhelmed by all the options, you’re not alone. Two of the most popular are Medicare Supplement Plan G versus Plan N. These plans cover the main gaps that Medicare leaves.

Affordable Care Act

The 2010 Patient Protection and Affordable Care Act has the nickname Obamacare. The Democrat president finally passed a bill that resembled Nixon’s attempt at healthcare reform almost 40 years earlier.

The Affordable Care Act has many benefits. For instance, it prevented employers from denying healthcare to their employees based on pre-existing conditions.

However, its complexities made it hard to roll out. As well, many Americans questioned whether it was constitutional to require employers to cover Americans to have insurance and for employers to provide it. 

History in the Making

The 2020s have just begun, and the drama of the US healthcare system continues. The Trump administration has systematically chipped away at the Affordable Care Act, citing unmanageable healthcare costs. Meanwhile, America’s healthcare system continues to rank last among developed nations, despite how much it costs.

The story is far from over. With new bills and laws constantly changing the face of American healthcare, the US healthcare system is history in the making.

Making Healthcare in the US Simple

In 2017, 28.5 million Americans (almost 9% of the population) lacked health insurance. America continues to stand out among developed nations as a high spender on health care, while still ranking low in results. 

History shows that political and financial struggles have always dramatized healthcare in the US. With this guide, you’ll be able to understand how the system was formed and be prepared for the next decade of health reforms.

Interested in more health insights? Check out the rest of our blog to learn more about current health and lifestyle topics.

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