The Healthcare Breakdown No. 024 - Breaking down the origins of health insurance and how it makes your life suck today

Ben H.

Hatched by Ben H.

Jan 05, 2024

3 min read


The Healthcare Breakdown No. 024 - Breaking down the origins of health insurance and how it makes your life suck today

Let's travel back in time to a small town called Dallas, Texas in 1929. During this period, the realities of the Great Depression were starting to kick in, and one astute vice president at Baylor Hospital named Justin Ford Kimball noticed some troubling trends in the hospital's finances. Revenue and admissions were down, while unpaid bills were on the rise. As the VP of important things, Kimball knew he had to take action.

In an effort to boost revenue and collections, Kimball devised a plan that seemed reasonable and innovative at the time. He created the Baylor Health Plan, which offered coverage for a 21-day hospital stay at a cost of $0.50 per month. Any days beyond the 21-day mark would cost $5.00 per day. Interestingly, the Baylor plan took pride in dealing directly with each group, without the involvement of sales agencies or middlemen, ensuring that all fees paid would be used solely for hospital care and not for personal profit.

This marked the beginning of the framework for our modern health insurance system, with Blue Cross for hospital coverage and Blue Shield for medical coverage. The introduction of the 1942 Stabilization Act, utilizing emergency powers to freeze wages, further propelled the adoption of health insurance by employers as a means to entice workers with benefits beyond monetary compensation.

By 1950, half of Americans had employer-sponsored health insurance, and this number increased to 66% within a decade. This journey through history highlights three major step changes that have brought us to where we are today:

  • 1. Hospitals needed to secure revenue and improve collections.
  • 2. Physicians wanted to prevent unchecked hospital power, and employers needed to attract and retain talented workers.
  • 3. Wages were frozen, prompting large companies to use health insurance as a way to lure talent.

While profit is not inherently bad, leveraging legal and statutory mechanisms to generate excessive personal and organizational profit without adding value is certainly problematic. Currently, employers collectively spend $1.2 trillion on healthcare each year. Imagine the impact if every employer decided to eliminate middlemen from the equation.

The government also plays a significant role in healthcare spending, with an annual expenditure of $1.6 trillion. To truly support workers and the labor that has made the US a global leader, it is crucial to decouple health coverage from employment. This would free individuals from being shackled to jobs that may mistreat them simply because they need access to healthcare. The artificially inflated cost of healthcare further exacerbates this issue. A prime example is the ongoing strike by nurses at Robert Wood Johnson, who are about to lose their benefits and may be forced to return to unsafe working conditions due to the historical twists and turns of the healthcare system.

In conclusion, it is evident that the origins of health insurance and its evolution over time have had a profound impact on our lives today. However, it is essential to recognize the flaws and inequalities within the current system and strive for change. Here are three actionable pieces of advice to consider:

  • 1. Advocate for healthcare reform that promotes universal access and decouples health coverage from employment.
  • 2. Support initiatives that aim to reduce the cost of healthcare and address the underlying factors contributing to its artificial inflation.
  • 3. Stay informed and engage in discussions surrounding healthcare policy and its implications for individuals, employers, and the overall economy.

By taking these steps, we can work towards a healthcare system that is fair, accessible, and prioritizes the well-being of individuals over profit-driven motives.

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