A History of American Medical Insurance

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Medicare health insurance card and benefits
Medicare health insurance card and benefits

Today we are surrounded by so much high-tech medical apparatuses and procedures that we take them for granted. For example I recently had laparoscopic inguinal (groin) hernia surgery. No scalpel slashing, just 3 punctures. All the work was done microscopically and I was on my feet withing 3 hours.

But it wasn’t always that way. More than 90% of commonly-accepted medicine did not even exist in the 1950s. One of the consequences is that people, average people, not just the monied upper-crust, are living longer. A greater understanding about things like controlling high blood pressure adds years and quality of life.

The Cost of Modern Medicine

It should come as no surprise that all this progress comes with a cost. In fact, it has been rising faster than any other expenditure when looked at on a national level. Flash back if you will to 1930–we spent $2.8 billion on health care. That equates to 3.5% of the gross domestic product (GDP) or only $23 per person.

In 2015 that rose to $3 trillion. That’s $9,536 per person or 15% of GDP. During the 1980s medical expenditures rose by 117%. Of that, 43% can be attributed to inflation. 10% can be attributed to the rise in population and longer life expectancy. 23% was due to new technology, medicines, and treatment innovations. The remaining 24% is due to another instance of inflation that resides totally within the medical community. This last number tells us that there is a lack of oversight and cost transparency. There is no financial propping up as with the banking, agricultural, and auto-building industries.

The Transformation of Hospitals

It was only in the 1850s that the medical community realized that diseases were caused by microorganisms. This became known as the germ theory of disease and it was indeed revolutionary. It led to research that was to begin to focus on preventative rather than just curative treatment. Rabies was banished from human population in 1885. Diphtheria and whooping cough were brought under control. When milk began to be pasteurized the death rate of children went from 125.1/thousand to 15.8/thousand in 1925.

In 1873 hospitals, of which there were only 149 in the country, were more like hospices; the poor and and deathly-ill went there to die; those institutions were little more than petri dishes, not at all sanitary. But that changed because of the changes brought about by germ theory.

By 100 years later the number of hospitals had increased to over 7,000 and their role had morphed into medical research and clinical medicine. Exciting times. But… they cost a lot to operate and the number of patients could not be reliably estimated. The solution? Late in the 1920s hospital insurance was introduced in Dallas, Texas to stabilize cash flow. For a premium of $6 per year Baylor University Hospital would provide 21 days of care to subscribers.

Soon other hospitals adopted this model and formed confederations so that patients could choose a treatment facility. This was the business model for Blue Cross which launched in California in 1932. These were rudimentary insurance plans; they did not include co-pays or deductions, just fixed premiums meant to stabilize cash flow. One consequence is that patients gravitated toward hospital stays (expensive) rather than outpatient treatments (cheaper).

This insurance was paid directly to the hospital and not to the individual. This eliminated any opportunity to “shop around.” Since the money was not coming itemized out of the patient’s pocket, why should he or she care what the price tag was?

The Government Fails to Regulate Medical Insurance

During the mid to late 30s Blue Cross was spreading rapidly. The states moved to try to regulate them to the same standards as other types of “insurance.” But the American Medical Association and the American Hospital Association lobbied to be exempt, claiming an exception due to operating on a non-profit basis. The IRS agreed and ruled that they were also exempt from federal taxation. Blue Cross and other insurance companies emerging in the field operated on a cost-plus basis. Now there was zero incentive to control costs an strive for efficiency.

Hospitals began to compete not on price but by wooing doctor referrals. Doctors were being paid “reasonable and customary” charges. If Dr. C began charging a bit more, Dr. A and Dr. B would follow suit and the standard of “reasonable and customary” inched up. No oversight.

The Modern Medical Insurance Paradigm

When World War II drew us in, two things happened. One, the labor market got tighter since more workers enlisted in the military. Two, price and wage controls were implemented. In order to attract the best employees, companies began offering employer-paid health insurance as a fringe benefit which the IRS recognized as a business expense.

The National Labor Relations Board imposed collective bargaining on health insurance plans so unions began to demand more and more, driving prices up. But a consequence was that the patient became further distanced from the medical system and they lost many choices; one must take what is offered.

In 1965 the government waded into the medical market with Medicaid and Medicare. Initially, hospitals and doctors resisted but when they began to reap the dividends they quickly changed their tune. Now state governments largely controlled the purse strings of most major hospitals and thus could influence policy.

More recently a major factor in driving up medical costs is litigation. Medical malpractice suits have exploded. Cases have increased by a 1:300 ratio in the years from 1969 to 1990 alone. A special class of lawyers have even emerged to take advantage of this low-hanging fruit; these are your ambulance-chasers and your class-action law firms where actual plaintiffs make pennies while the lawyers walk away with the bulk of the settlements.

This short history of American medical insurance should serve to put things into perspective as we have a national debate over how it really should be handled. Should we stay on our present course or model our system on Britain or Canada? Should we believe in a socialist “free for all” system as Bernie Sanders advocates? (Hint: there’s no such thing as free.) Should we adopt an Obamacare model complete with a Jacobin death panel? This will continue to be an evolving national debate.

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About the Author:

Photo of Kelly R. SmithKelly R. Smith is an Air Force veteran and was a commercial carpenter for 20 years before returning to night school at the University of Houston where he earned a Bachelor’s Degree in Computer Science. After working at NASA for a few years, he went on to develop software for the transportation, financial, and energy-trading industries. He has been writing, in one capacity or another, since he could hold a pencil. As a freelance writer now, he specializes in producing articles and blog content for a variety of clients. His personal blog is at I Can Fix Up My Home Blog where he muses on many different topics.

Why Trump’s Border Wall Must be Built

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Trump's Border Wall
Trump’s Border Wall

This post was updated on 12/29/18.

The proposed border wall between the southern border of the United States and the Northern Border of Mexico has enjoyed a back-and-forth history. For the most part, the Republicans favor it and the Democrats waver one way or the other depending on the political wind of the moment. At the moment the vacillators are against it. Why? Because President Trump is for it, of course. For them, it’s all about political posturing, not national security.

Nancy Pelosi has gone so far as to cal the wall “immoral.” This from the supposedly Catholic woman that champions abortion on demand? That’s rich. And consider Chuck Schumer. Factcheck.org has this to say of the Secure Fence Act of 2006, “Sen. Chuck Schumer and then-Sens. Barack Obama, Joe Biden, and Hillary Clinton were among a bipartisan majority that voted in favor of the legislation, and it was signed into law by President George W. Bush.” Uncle Chucky just can’t seem to be able to think for himself; not consistently, at least.

But let us not forget that the wall is for the benefit of the average taxpayer, not these high-and-lofty politicians that live in crime-free gated (and with WALLS!) communities. They don’t have to scrabble with illegal immigrants for social services, healthcare, and public schools like the mass of taxpayers. The American Royalty can afford to poo-poo the wall and national sovereignty but there are a plethora of reasons for building it.

Open Borders are Dangerous

The Department of Homeland Security tells us that it apprehends an average of 10 known or suspected terrorists every single day that are entering the United States. And despite claiming to support border security, Democrats in practice have blocked all efforts to secure our southern border and protect our communities.

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FBI Data Shows Terrorists are Sneaking in Through Mexico

Leaked FBI data obtained by Breitbart Texas has revealed that there were 7,712 terrorist encounters in the US  in just the past year. In the time between July 2015 and July 2016, the majority of terrorist encounters (defined as interactions with known or suspected terror watch list suspects by law enforcement) unsurprisingly happened in the southern border states. Texas, California, and Arizona ranking among the highest.

A Wall is a Physical Barrier that Hinders Human Trafficking and Drug Smuggling

Although there are some portions of wall constructed, huge gaps in other areas act as funnels through which illegal aliens, drugs, and other forms of contraband pass unhindered.

Of course Trump’s wall won’t stop everything; nothing will. But it will create such a hindrance that the Border Patrol can more easily manage the situation. Augmenting the scenario with drones and wall-mounted cameras will help to round out border security.

Rising Cost of Illegal Immigration

Border wall deniers (such as the current crop of Democrat Socialists) love to wail about the cost of construction but perhaps it is time for a reality check. Estimates vary but it is safe to say that $70 billion would get it done. Is this too much? The Center for Immigration Studies says, “if a border wall stopped a small fraction of the illegal immigrants who are expected to come in the next decade, the fiscal savings from having fewer illegal immigrants in the country would be sufficient to cover the costs of the wall.”

Currently, Illegal immigration is estimated to cost the United States millions of dollars, and according to President Trump, $113 billion each year in lost income tax revenue. Illegal immigration is recognized as a strain on government spending by overburdening social welfare, health, and education programs.

Another thing to consider is remittances, that is, money sent back to Mexico from illegal aliens to family and friends. Much of these wages come from under-the-table jobs (untaxed) meaning that these individuals are taking these jobs out of the American job pool. The inherent greed of some employers is denying jobs from some U.S. citizens while at the same time denying revenue to the government to pay for defense and public services.

But the end result is that although these illegals are consuming public services, they are taking their wages out of circulation rather than contributing back to the system. Those that think the amount of money is a pittance might be surprised.

nbcnews.com says, ” Mexico’s central bank reported Mexicans overseas sent nearly $24.8 billion home in 2015, overtaking oil revenues for the first time as a source of foreign income. Remittances were up 4.75 percent from 2014 when they totaled $23.6 billion, the Bank of Mexico said. They had never before surpassed petroleum since the Bank of Mexico began tracking them in 1995.”

In other words, American hard currency that should have been at least partly spent here is going to support the infrastructure of Mexico. The next time you go to the polls and the open border-types are soliciting your vote, remember that those they are inviting with open arms are building roads, bridges, and hospitals in Mexico while yours crumble.

These are just a few reasons why Trump’s border wall must be built. There are many others. The problem is that although the Democrats supported it when it was politically expedient to their careers, they have been on the fence since 2006 as they try to reshape America, Mexico, and Canada into a facsimile of the EU. We know how well that’s working.

End of 2018 Border Update

The assault on our border by Central American invaders seems likely to continue. A new caravan originating out of Honduras is planned for January 15, 2019. At the outset is is estimated to be comprised of 15,000 people with more expected to join as they make their way north.

This puts Mexico in a bad position. They have always been content to get flush and fat with all the money generated, both legal and illegal, counting on former U.S. administrations to just open the floodgate that is our mostly unprotected border. The fly in the ointment now is That President Trump is having none of it. That puts the onus on Mexican authorities to feed, house, and provide social services and possibly work for the invaders.

Now that their social services are being stretched and their jobs are going to invaders, the Mexican citizens are getting fed up with the situation. “Well, now the government does something. That work is for Mexicans that need it,” said Anna Pérez from Palenque, Mexico, on Facebook. “Opportunistic people who just want to take advantage of the Mexicans.” That reeks of sour grapes to U.S. citizens that have lost their jobs over the years due to the opportunistic policies from the likes of Pelosi and Schumer.

Meanwhile, the U.S. government remains in a state of partial shutdown as the Democrats refuse to protect our borders. And rather than doing her job to work on a solution to Trump’s wall, Nancy Pelosi continues to party down in Hawaii. For shame.

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