A Brief History of Health Care Reimbursement in the United States

Pre-Civil War Beginnings Through Reconstruction

Prior to the Civil War, options for health care insurance were all but non-existent. Insurance could be purchased from Massachusetts Health Insurance of Boston as early as 1847, but the insurance offered was often limited in scope and coverage. Several years later in 1860, the Franklin Insurance Company expanded the range of private insurance available for purchase.[1] It is unlikely that either of these types of insurance coverage were accessible to all socioeconomic groups, particularly to immigrants, rural Americans, the poor, and enslaved individuals. Patients often paid what they could, if they were able to pay at all. Those who were unable to pay obtained medical services on credit. Others bartered with their doctors, paying them not necessarily in cash, but “in-kind” in produce, livestock, dairy items, dry goods, or other items or services of value. Thus, a physician’s salary was unpredictable as best.[2]

The Reconstruction era was heralded by the growth of the health insurance industry with over 60 companies offering options for health insurance. These expanded options for coverage were greatly needed, as rapid industrialization and immigration throughout the late 1800s and into the early 1900s also brought a greater need for health care services. Dangerous working conditions on railroads, mines, and factories were prevalent, and the immigrants and poor who worked in these industries were frequently in suboptimal health. Company doctors treated these patients and received compensation from workers’ earnings. Later, the Blue Shield program in California, which compensated physicians via Medical Service Bureaus, was established to provide additional health care options for mine workers.[3] The advent of worker unions, beginning with the International Ladies Garment Workers Union, also aided in providing medical care. [4]

Raised Awareness of Health Care inequities in the Teddy Roosevelt Era

Later, relief for federal workers occurred when President Theodore Roosevelt backed worker’s compensation legislation, which evolved into the Federal Employees’ Compensation Act (FECA). Slowly, other politicians recognized the need for pushing the cause of health insurance, and the Progressive Party political platform included this issue in 1912. The American Association for Labor Legislation (AALL) – with the support of the American Medical Association – lobbied for the adoption of health insurance legislation, but the effort was unsuccessful. Organized and prepaid health plans materialized in the early 1920s with the establishment of formal contractual arrangements between doctors and hospitals. The first Blue Cross policy was started in 1929 through Baylor University Hospital in Dallas by a consolidated group of employees.[5] [6]

Dorkina Myrick, MD, PhD, is a physician-scientist and pathologist trained at the National Institutes of Health. Dr. Myrick also previously served as a Health Policy Advisor in the United States Senate and the United States House of Representatives.

 

References

[1] Green, Michelle A.; Rowell, Jo Ann C. Understanding Health Insurance: A Guide to Billing and Reimbursement. 10th Edition. Introduction to Health Insurance. Chapter 2. Table 2-A: “Comprehensive history of health care reimbursement.” 18-25. Delmar Thomson Learning (Cengage Learning). Print. 2011. Web. 27 October 2012. www.delmarlearning.com/companions/content/…/chapter%202.pdf.

[2] Starr, Paul. The Social Transformation of American Medicine. Chapter 2: “Expansion of the Market.” 63. Basic Books. Print. 1982.

[3] Green, Michelle A.; Rowell, Jo Ann C. Understanding Health Insurance: A Guide to Billing and Reimbursement. 10th Edition. Introduction to Health Insurance. Chapter 2. Table 2-A: “Comprehensive history of health care reimbursement.”18-25. Delmar Thomson Learning (Cengage Learning). Print. 2011. Web. 27 October 2012. www.delmarlearning.com/companions/content/…/chapter%202.pdf

[4] “PBS Newshour-The Uninsured in America.” 30 March 2007. Web. 27 October 2012. http://www.pbs.org/newshour/indepth_coverage/health/uninsured/timeline/index.html

[5] Green, Michelle A.; Rowell, Jo Ann C. Understanding Health Insurance: A Guide to Billing and Reimbursement. 10th Edition. Introduction to Health Insurance. Chapter 2. Table 2-A: “Comprehensive history of health care reimbursement.” 18-25. Delmar Thomson Learning (Cengage Learning). Print. 2011. Web. 27 October 2012. www.delmarlearning.com/companions/content/…/chapter%202.pdf

[6] “Timeline-History of Health Reform in the U.S.” Kaiser Family Foundation. Web. 31October 2012. http://healthreform.kff.org/flash/health_reform-print.html

 

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