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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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.

Trey Gowdy on Trump’s Expected Impeachment Trial

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Harold Watson “Trey” Gowdy III is an American lawyer, television news authority, politician, and former federal prosecutor. He served as the U.S. Representative for South Carolina from 2011 to 2019. His home district included much of the upstate area of South Carolina, which includes Greenville as well as Spartanburg. In this video he discusses with Sean Hannity the Democrat’s ill-conceived impeachment attempt of President Donald Trump. The chances of any of this holding up in the Supreme Court border on nil.

Gowdy never lost a case as a prosecutor. During the House impeachment proceedings the Democrats were unable to find even one fact witness, only hearsay witnesses. It certainly looks like mighty thin ice.

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About the Webmaster:

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 and 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.


Impeachment in the United States: What is It?

President Bill Clinton Impeached Newspaper Headline
President Bill Clinton Impeached Newspaper Headline

The details of impeachment of government officials varies from country to country. This article will confine itself to how to process proceeds in the United States.

Impeachment, from Dictionary.com:

noun

  • The impeaching of a public official before an appropriate tribunal.
  • (In Congress or a state legislature) the presentation of formal charges against a public official by the lower house, trial to be before the upper house.
  • Demonstration that a witness is less worthy of belief.
  • The act of impeaching.
  • The state of being impeached.

    So, the popular assumption that impeachment means removal from office is simply not true. Rather, it is analogous to an indictment in criminal law, and so it is essentially a statement of charges against the official in question. Impeachment at the federal level is limited to those who may have committed “Treason, Bribery, or other high crimes and misdemeanors .”

    Article One of the United States Constitution gives the House of Representatives the single power of impeachment. The Senate’s responsibility is to try impeachments of officers of the U.S. federal government. On a state level, state constitutions include like measures which allow the state legislature to impeach the governor or other officials of the state government.

    If an official is impeached, he or she then faces a second legislative vote. This vote determines conviction, or failure to convict, on the charges specified by the impeachment. It is notable that this process does not involve the Supreme Court.

    Presidential Impeachment History in the United States

    As of this writing only two US presidents have been impeached. The first was Andrew Johnson. It began to unfold on February 24, 1868, when the House of Representatives resolved to impeach Andrew Johnson, the 17th president of these United States. Specifically, the allegations were high crimes and misdemeanors which were spelled out in eleven articles of impeachment. The main charge against Johnson was the violation of the Tenure of Office Act. This had been passed by Congress in March 1867 despite his veto. Why? He had removed Edwin M. Stanton, the Secretary of War, from office. The act had been designed to protect Stanton and to replace him with Brevet Major General Lorenzo Thomas.

    The second impeachment was President Bill Clinton. It was initiated on October 8, 1998 when the United States House of Representatives voted to begin the impeachment proceedings against Clinton who was the 42nd president of the United States for high crimes and misdemeanors. Specifically, the charges were lying under oath and obstruction of justice.

    Currently, the United States House of Representatives is holding hearings on the possible impeachment of President Donald Trump.


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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 and 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.