1. Historical Overview of U.S. Health Care Delivery
Chapter 3
Historical Overview of U.S. Health Care Delivery

2. © 2010 Jones and Bartlett Publishers
Introduction
This chapter will discuss the main historical developments that have shaped the health care delivery system in the United States.
Health care’s evolution follows three distinct time periods
- Preindustrial era
- Postindustrial era
- Corporate era
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3. © 2010 Jones and Bartlett Publishers
Introduction
Historical factors that have shaped the U.S. health care delivery system:
Cultural beliefs and values
Social changes
Technological advances
Economic constraints
Political opportunism
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4. © 2010 Jones and Bartlett Publishers

5. © 2010 Jones and Bartlett Publishers
Introduction
U.S. health care is mainly a private industry, but receives a large amount of government financing.
-Government finances health care mostly for the poor (Medicaid) and the elderly (Medicare).
-The middle class must depend on private insurance.
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6. Medical Services In Preindustrial America (Overview)
Medical education was not grounded in science.
Practice of medicine had a domestic rather than a professional character.
Medical practice was more a trade than a profession.
Medical institutions were primitive.
A few isolated hospitals could be found in the largest cities.
Health insurance did not exist.
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7. Medical Services In Preindustrial America
Medical Training
Medical Practice
Medical Institutions
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8. Medical Services In Preindustrial America
Medical Training
Until about 1870, medical training was largely received through an individual apprenticeship with a practicing physician rather than through a university.
It was a two-year Doctor of Medicine degree.
There were only about 42 such schools in 1850.
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9. Medical Services In Preindustrial America
Medical Training
To train a larger number of students than was possible through apprenticeship,
Mainly out of economic necessity, American physicians began opening medical schools.
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10. Medical Services In Preindustrial America
Medical Practice
Medicine was a trade without today’s prestige.
It did not require a rigorous course of study, clinical practice, residency training, board exams, or licensing.
Anyone, trained or untrained, could practice as a physician.
E.g., barbers did bloodletting
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11. Medical Services In Preindustrial America
Medical Practice
The clergy often combined medical services and religious duties.
Many physicians had a second occupation because income from medical practice alone was inadequate to support a family.
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12. Medical Services In Preindustrial America
Medical Institutions
Almshouses (poorhouses) were run by the local government.
Hospitals were few and had deplorable sanitary conditions and poor ventilation.
State governments operated asylums for patients with untreatable, chronic mental illness.
Pesthouses were operated to isolate people.
Dispensaries were staffed by medical students or apprentices.
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13. Medical Services in Postindustrial America (Overview)
Development and growth of the medical profession.
Development and growth of hospitals.
Emergence of private health insurance.
Creation of public health insurance programs: Medicare and Medicaid.

14. Medical Services in Postindustrial America
Medical Profession
American Medical Association
Educational Reform
Development of Hospitals
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15. Medical Services in Postindustrial America
Medical Profession
Urbanization led to the concentration of medical practice in cities and towns.
Office-based practice began to replace house calls.

16. Medical Services in Postindustrial America
Medical Profession
Medicine became driven by science and technology,
Lay people could no longer deliver legitimate medical care.
Advances in
Bacteriology, antiseptic surgery, anesthesia, immunology and diagnostic techniques with new drugs helped make medical practice a legitimate profession.
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18. Exhibit 3.4 Groundbreaking Medical Discoveries
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19. Medical Services in Postindustrial America
American Medical Association
It helped galvanize the profession and protect the interest of physicians.
The concerted activities of physicians through the AMA is referred to as “organized medicine”:
Gained power by controlling medical education.
Supported states in establishing medical licensing laws.
Discouraged employment of physicians by hospitals and insurance companies.
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20. Medical Services in Postindustrial America
Education Reform:
Advances in medical science necessitated the reform of medical education.
Around 1870, medical schools began affiliating with universities.
Harvard revolutionized medical education, adopting the European model.
The academic year went from four to nine months.
Medical instruction went from two to three years.
Labs and clinical courses such as chemistry, physiology, anatomy and pathology were added.

21. Medical Services in Postindustrial America
Education Reform:
Johns Hopkins University opened in 1893 and required that medical education become a
Graduate training program.
Requiring a college degree as an entrance requirement.
Residency training was added.
The Flexner Report pointed to widespread inconsistencies in medical education.
Council on Medical Education created by the AMA:
Accreditation of medical schools.
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22. Medical Services in Postindustrial America
Development of Hospitals
The growth of hospitals came to symbolize the institutionalization of health care.
Advancements in medical science created the need to centralize expensive facilities and equipment in an institution.
Hospitals and physicians depended on each other.
Professionalization of nursing improved hospital care.

23. History of Health Insurance
Private health insurance is also called “voluntary health insurance.”
Publicly financed Medicare and Medicaid were created to meet the medical needs of the elderly and the poor respectively.

24. History of Health Insurance
Workers’ Compensation
Rise of Private Health Insurance
First Hospital Plan and the Birth of Blue Cross
First Physician Plan and the Birth of Blue Shield
Employer-based Health Insurance
Failure of National Health Care Proposals
Creation of Medicaid and Medicare

25. History of Health Insurance
Workers’ Compensation
Was the first broad-coverage health insurance in the United States.
Was originally designed to make cash payments to workers for wages lost because of job-related injuries and disease.
Later became compensation for medical expenses, and death benefits for survivors were added.
Was a trial balloon for the idea of government-sponsored health insurance.
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26. History of Health Insurance
Rise of Private Health Insurance
Private insurance began as
A form of disability coverage that provided income during temporary disability due to bodily injury or illness.
During the 1900s
Medical treatments and hospital care advanced, but medical care also became more expensive.
People could not predict their future needs for medical care or its cost.

27. History of Health Insurance
Rise of Private Health Insurance
Hospital Plan and Birth of Blue Cross
The Great Depression made hospitals economically unstable.
And individuals faced the loss of income from illness and the debt of high health care costs.

28. History of Health Insurance
Hospital Plan and Birth of Blue Cross (cont.)
In 1929, Justin Kimball began
A hospital insurance plan for teachers at Baylor University Hospital in Dallas, Texas.
It became the model for Blue Cross plans around the country.
The American Hospital Association (AHA) supported group hospital plans and coordinated them into a Blue Cross network.

29. History of Health Insurance
First Physician Plan and the Birth of Blue Shield
In 1939, the California Medical Association started the first Blue Shield plan.
It was designed to pay physician fees.
By 1974, Blue Cross and Blue Shield merged.
Today they are a joint corporation, and are in almost every state.

30. History of Health Insurance
Rise of Private Health Insurance
Employer-based Health Insurance
During World War II, employees accepted employer-paid health insurance to compensate for the loss of raises.
The US Supreme Court ruled in 1948 that employee benefits were a legitimate part of union-management negotiations.
In 1954, Congress made employer-provided health coverage nontaxable.
This was equivalent to getting more salary without having to pay taxes.

31. History of Health Insurance
Failure of National Health Care in the US
Relative political and labor stability in the US.
Anti-German feelings and criticism of social insurance during World War I in 1917.
Rhetoric that equated national health insurance to socialized medicine—large-scale government-sponsored expansion of health insurance.
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32. History of Health Insurance
Failure of National Health Care in the US (cont.)
Opposition from the AMA
American beliefs and values:
Capitalism
Self-determination
Distrust of big government
Tax aversion
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34. History of Health Insurance
Failure of National Health Care in the US
The most recent failure was initiated by the Clinton Administration in 1993.
Polls confirmed that health care reform was a major issue.
Americans endorse a tax-supported plan to help the needy, but they are unwilling to pay higher taxes.

35. History of Health Insurance
Creation of Medicaid and Medicare
Before 1965, private health insurance was the only widely available source of payment for health care.
It was available primarily to middle-class working people and their families.
A three-part program was adopted to serve two distinct populations.
Medicare Parts A and B, and Medicaid

36. History of Health Insurance
Creation of Medicaid and Medicare
Medicare Part A
Was designed to use Social Security funds to finance hospital care.
Medicare Part B
Was designed to cover physicians’ services
Through government-subsidized insurance.
The elderly would pay part of the premiums.

37. History of Health Insurance
Creation of Medicaid and Medicare
Although adopted together, Medicare and Medicaid reflected sharply different traditions.
Medicare was upheld by broad grassroots support and, being attached to Social Security, had no class distinction.

38. History of Health Insurance
Creation of Medicaid and Medicare
Medicaid benefits vary from state to state.
It is means-tested.
Confines eligibility to those below an income level.
Medicare has uniform national standards for eligibility and benefits.
It covers anyone over the age of 65.
In 1972, the program was expanded to include the disabled on Social Security and those with ESRD, regardless of age.
Look at Exhibit 3.6 for a comparison of the two programs
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40. History of Health Insurance
Creation of Medicaid and Medicare
The Medicare and Medicaid programs are financed by the government.
Beneficiaries receive health care services mostly from private hospitals, physicians, and other providers.

41. Is National Health Care on the Horizon?
The Patient Protection and Affordable Care Act was signed into law in 2010.
Some provisions of the law have gone into effect. The main provisions dealing with the expansion of health insurance are scheduled to be implemented in 2014.
Passage of this law presents a classic example of political opportunism.
Constitutionality of the law has been challenged before the U.S. Supreme Court.

42. The Corporate Era Late 1900s to Present
Three main features of the corporate era
Corporatization
Information revolution
Globalization

43. Corporate Era
Corporatization—medical care has become the domain of large corporations.
Managed care has become the primary vehicle for insurance and delivery.
Consolidation of purchasing power.

44. Corporate Era Corporatization To counteract managed care’s power.
Integrated delivery systems
To counteract managed care’s power.
Hospitals expanded services in other areas.
Large integrated health care organizations can provide a full array of health care services.
Physicians have consolidated into larger group practices and hospital partnerships.

45. Corporate Era Information revolution Telemedicine
Integration of telecommunication systems into distant care giving.
E-health
Information and services over the Internet.
Empowered consumers.

46. Corporate Medicine
Globalization: Various cross-border activities (information exchange, goods and services, interdependence of economies)
Cross-country telemedicine
Receiving health care abroad (medical tourism)
Foreign direct investment in health care enterprises
Migration of health professionals

47. Conclusion
The health care industry in the U.S. evolved from a primitive, family oriented craft to the largest industry.
The Patient Protection and Affordable Care Act of 2010 promises to expand health insurance coverage, but it faces both legal and political challenges.
The corporate era of medical care delivery is characterized by large corporations, the information revolution, and globalization.