Healthcare in the United States is expensive. While a great deal of legislation has been aimed at keeping those costs down, looking at how it got so expensive in the first place is the key to reducing the costs. The employer-based health insurance model has disconnected patients from prices, removing a check on rising costs.
The nature of insurance is to protect against unforeseen and expensive problems. However, today, health insurance also covers routine care, such as essential check-ups that are neither unforeseen nor bank-breaking. This would be akin to expecting your auto insurance to cover oil changes you know are coming.
Because a significant part of the insurance cost is paid by their employer, most consumers don’t even know the total price of their healthcare. Combined with the growth of the scope of health insurance, there is little market pressure on healthcare providers to control their costs, even for routine services.
Health insurance and employment were not always intimately tied. The connection has grown due to legislation and regulations that facilitated health insurance expansion beyond covering catastrophic events.
The first health insurance program in the United States was started in 1929 by Baylor University’s hospital to help local teachers unable to pay their medical bills during the Depression. For 50 cents monthly, the teachers could get up to 21 days in the hospital when needed.
In 1932, a collection of hospitals in Sacramento, Calif., copied Baylor’s idea but included all participating hospitals. By the following year, there were 26 hospital service plans overseen by a group that would later become Blue Cross.
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Justin Leventhal is a senior policy analyst for the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit www.TheAmericanConsumer.Org or follow us on Twitter (X) @ConsumerPal.