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September 2013
A Brief History of Health Reform Efforts in the U.S.

The Kaiser Family Foundation has put together a brief history of health care reform efforts in the U.S. that is quite interesting and in large part excerpted here.

 

     The country has been on the verge of national health reform many times before. In the early 1900s, smaller proposals began to pave the way. In 1912, Roosevelt’s Bull Moose Party campaigned on a platform calling for health insurance for industry; and as early as 1915, Progressive reformers ineffectively campaigned for a state-based system of compulsory health insurance.

     The prominent reformers of the 1920s, the Committee on the Costs of Medical Care, proposed group medicine and voluntary insurance—modest ideas, but enough to raise opposition, and the term “socialized medicine” was born.

     Over the years the American public, as measured in opinion polls as far back as the 1930s, has generally been supportive of the goals of guaranteed access to health care and health insurance for all, as well as a government role in health financing. However, support typically tapered off when reforms were conditioned on individuals needing to contribute more to the costs.

     Historians debate the many reasons national health insurance proposals have failed, including the complexity of the issues, ideological differences, the lobbying strength of special interest groups, a weakened Presidency, and the decentralization of Congressional power. However, major health reforms have been enacted in the latter half of the 1900s that have proven to be broadly popular and effective in improving access to health care for millions through Medicare, Medicaid and the Children’s Health Insurance Program.

     Important lessons can be gleaned from how these major reforms were accomplished. As the nation prepares for the rollout of marketplace exchanges under the Affordable Care Act (ACA), it is helpful to understand the economic and political context in which prior reforms were enacted and the key reasons they fell short of universal coverage.

 

1934 – 1939: The Depression and the New Deal

     The Great Depression (1929-1939) had been preceded by a period of growing income inequality and a shrinking middle class. The worst years were 1933-34 with unemployment as high as 25 percent. Income disparities in access to health care had grown much worse, medical costs were rising, and sickness became a leading cause of poverty. More physician and hospital care went unpaid and welfare agencies began to help pay for medical costs for the poor.

     The Social Security Act was introduced and passed in both houses with a wide margin in 1935. By 1938, southern Democrats aligned with Republicans to oppose further government expansion, in part to protect segregation, making additional New Deal social reforms nearly impossible to pass.

 

World War II and After

     During World War II, The War Labor Board ruled in 1943 that certain work benefits, including health insurance coverage, should be excluded from the period’s wage and price controls. Using generous health benefits then to draw workers, employers began to bolster group health insurance plans.

     The economy expanded greatly following WW II, building and responding to the needs of growing families, in an era when American capitalism flourished. Large American businesses (e.g., U.S. Steel, GM, AT&T) faced little competition and were sufficiently profitable that unions could successfully negotiate for greater fringe benefits, including health insurance.

 

1960 – 1965: The Great Society: Medicare and Medicaid

     Productivity swelled in the 1960s as did the middle class, with a well-educated workforce financed by the G.I. bill and following the peak of labor union membership in the 1950s. President Kennedy sought to accelerate economic growth through increased government spending and decreased taxes. From this base, Johnson followed and began to build his “Great Society.”

     When the House Ways and Means Committee began its work on the Medicare proposal from the White House in 1965, there were two other proposals on the table as well: an expansion of Kerr-Mills (“Eldercare” supported by AMA) and a proposal for federal subsidies to purchase private coverage (“Bettercare” from the insurer Aetna).

     Elements of each were eventually merged into a single bill with three layers: Medicare Part A to pay for hospital care and limited skilled nursing and home health care, optional Medicare Part B (paid in part by premiums) to help pay for physician care, and Medicaid, a totally separate program to assist states in covering not only long-term care for the poor but also to provide health insurance coverage for certain classes of the poor and disabled.

     After Johnson’s landslide election in 1964, he made Medicare his highest legislative priority and acted quickly. Both Medicare and Medicaid were incorporated in the Social Security Act as it was signed by President Johnson in July 1965. The confluence of presidential leadership and urgency, Johnson’s political skills in working with a large Congressional Democratic majority, growing civil rights awareness, public support, and the support of hospitals and the insurance industry contributed to the achievement of the most significant health reform of the century.

 

1970 – 1992

     In 1971, President Nixon instituted wage and price freezes in an effort to curb inflation. With the implementation of Medicare and Medicaid, health care costs had grown rapidly from 4 percent of the federal budget in 1965 to 11 percent by 1973, while millions of those under age 65 still had no health coverage. An era of health care regulation began, leading to certificate-of-need programs, state hospital rate-setting, requirements on HMOs (in return for support to help them expand) and health planning to control growth.

     In 1974, President Nixon expanded upon his own proposal. His Comprehensive Health Insurance Plan (CHIP) called for universal coverage, voluntary employer participation, and a separate program for the working poor and the unemployed, replacing Medicaid. Requiring employers to contribute 65 percent of the premium cost was controversial, but fundamental to the plan’s financing. This package failed.

    Senator Ted Kennedy proposed that private insurance plans compete for customers who would receive a card to use for hospital and physicians’ care. The cost of the card would vary by income and employers would bear the bulk of the cost for their workers, with the government picking up costs for the poor. Insurers would be paid based on actuarial risk, and payments to providers set through negotiated rates.

     President Carter released his own plan one month after Kennedy’s plan, proposing that businesses provide a minimum package of benefits, public coverage for the poor and aged be expanded, and a new public corporation created to sell coverage to everyone else. Neither the Kennedy nor Carter proposals had much of a chance.

     Debate on hospital cost-containment during this period however laid the foundation for the Medicare Prospective Payment System enacted in 1983 which changed the way the government paid for hospital care in a major way—from a charge-based system to a predetermined, set rate based on the patient’s diagnosis.

     Under the Reagan administration’s policies in the 1980s—that included substantial tax cuts, large increases in defense spending and moderate cuts in domestic programs—federal debt reached record levels. Health care costs continued to escalate rapidly up to and through this period. Even some in the business sector came to accept that fundamental health reform was needed as the health care sector grew to comprise 12 percent of the nation’s GDP in 1990.

     A large and varied mix of proposals surfaced: market-oriented reforms expanding the private system, public single-payer plans, employer mandates (play-or-pay), and from President Bush, health care tax credits and purchasing pools.

 

The Clinton Years

     Newly elected President Clinton initially hoped to send Congress a health reform plan within one hundred days of taking office. Clinton’s plan, the Health Security Act, called for universal coverage, employer and individual mandates, competition between private insurers, and was to be regulated by government to keep costs down. Under managed competition private insurers and providers would compete for the business of groups of businesses and individuals in what were called “health-purchasing alliances”. Every American would have a “health security card.”

     Support for the complex Clinton plan from key stakeholders was often conditional and eventually waned. Some labor unions and other public health advocacy groups did not want to be seen as opposed to Clinton’s plan, yet backed the single-payer bill.

    In 1997, with a Republican Congress and bipartisan support, the Children’s Health Insurance Program was enacted, building on the Medicaid program to provide health coverage to more low-income children

 

The 21st Century Begins

     The Medicare Modernization Act (MMA) passes, creating a voluntary, subsidized prescription drug benefit under Medicare, administered exclusively through private plans, both stand-alone prescription drug plans and Medicare Advantage plans.

     Medicare legislation creates Health Savings Accounts which allow individuals to set aside pre-tax dollars to pay for current and future medical expenses. The plans must be used in conjunction with a high deductible health plan.

     Medicare Part D Drug benefit goes into effect in January 2006.

     Massachusetts passes and implements legislation to provide health care coverage to nearly all state residents. Legislation requires residents to obtain health insurance coverage and calls for shared responsibility among individuals, employers, and the government in financing the expanded coverage. Within two years of implementation the state’s uninsured rate is cut in half.

     Census Bureau estimates 45.6 million uninsured (15.3 percent of the population) in 2007.

     Mental Health Parity Act is amended to require full parity. Insurance companies must treat mental health conditions, including substance abuse disorders, on an equal basis with physical conditions when health policies cover both.

     The House of Representatives passes the Senate bill, the Patient Protection and Affordable Care Act (voting 219-212) and sends it to the President for signature. House also passes the Health Care and Education Reconciliation Act of 2010 that amends the Senate bill to reflect House and Senate negotiations and also includes reform of the nation’s student loan system.

 

March 23, 2010

     President Obama signs the landmark legislation, the Patient Protection and Affordable Care Act, into law. The historic health reform legislation requires that all individuals have health insurance beginning in 2014. The poorest will be covered under a Medicaid expansion. Those with low and middle incomes who do not have access to affordable coverage through their jobs will be able to purchase coverage with federal subsidies through new American Health Benefit Exchanges. Health plans will not be allowed to deny coverage to people for any reason, including their health status, nor can they charge more because of a person’s health or gender. Young adults will now have the option of being covered under their parents’ plan up to age 26.

     It is expected that many more changes will be implemented as voters instruct and the government responds over time.

 

Source: Kaiser Family Foundation, National Health Insurance—A Brief History of Reform Efforts in the U.S. (March 2009), http://kaiserfamilyfoundation.files.wordpress.com/2013/01/7871.pdf

 

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