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The History of Health Care, Insurance, and Managed Care in the U.S

Info: 1113 words (4 pages) Nursing Essay
Published: 11th May 2021

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Tagged: health insurance


 The cost of health care has created divisions in the U.S health delivery systems this has hence caused all sectors to analyze what the delivery of the system means to an average American who is underserved and uninsured. The rapid growth of the insurance company has cause public health professionals to question why a profitable industry yet expensive to access. Managed care which is an insurer-owned managed plan is used by most U.S citizens,  others like the health maintenance organizations (HMOs) is also used, these managed care plans have been in exitance for may years as this paper will delve into the history of insurance from fee for service to managed care insurance.

Keywords; HMO, Managed care, the fee for service, insurance, Health delivery

How the Insurance industry originated

Health insurance was known as prepaid health care in the 20th century which was a way of paying for healthcare services, however, from 1910 to mid-1940s it changed from patient paying for service to providing and paying for health care. In 1970  the process of providing and paying was now term as health maintenance organization( HMO) which relied on an organization charging a preset amount per member per month which provided services directly through its facilities and personnel,” thereby combining financing and delivery. Later came Blue Cross and Blue Shield plans which contracted community doctors and hospitals to serve patients’ needs.

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In 1910 Western Clinic in Tacoma started prepaid medical group practice by offering a broad range of service in return for premium payment of $0.50 per member per month to lumber mill owners and employees. Then in 1929,” Doctor Donald and H.Clifford Loos established a comprehensive prepaid medical plan that covered physicians and hospitals and that was considered to be the real HMO”. which got them expelled from the local medical society for their actions. Despite the “opposition from American Medical Association(AMA)” these forms of prepaid options grew. Then came Kaiser Construction Company which offered medical care to workers and families who were building in Southern California. In 1937, The Group Health Association(GHA) was started in Washington to reduce mortgage defaults that came from medical expenses.(Fox & Knogstvedt, 2013).The Blue Cross (BC) was created in Baylor Hospital in Texas that provided a large sum of teachers with prepaid patient care. This program ten years later changed into the Blue Cross Association(BCA) after the American Hospital Association(AHA) adopted their emblem. Blue Shield(BS) originated in the Northwest to provide care for injured lumber workers. BC and BS relied on private practices other than employing physicians with a dedicated medical group. The BC plan differed from the BS plan because they created cost based charge lists rather than developing payment rates for defined procedures. The BC plans only provided coverage for hospital-associated care while BS plans covered physician and professional services. BC plans eventually merged to become BCBS.

The turning point for Managed Care

Due to the rising cost of health care after World war II, there was a favorable tax treatment and exemption from wages which fueled the growth of commercial health insurance and an increase in health benefits from 10% to 70% which many of these plans covered inpatient care, then came Health Insurance Plan (HIP) of Greater New York in 1944, the McCarran -Ferguson  Act in 1945 which exempted insurance companies from federal regulation causing the regulation of insurance companies and premium becoming state responsibilities

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Then in early 1960’s President, John F. Kennedy proposed The Now Part A of Medicare for hospital service which was financed through taxes on earned income, then Republicans In Congress proposed to cover physician services with Part B Medicare for person age 65 and older, and Congress established Medicare for elderly and Medicaid for low-income population, these contributing to high health cost inflation, attributed to third party payment systems, advance in medical science and increase in demand by consumers. These created the growth of HMOs and an increase in health expenditure of GDP which rose from 7.4 to 8.6 %. Then came the HMO ACT of 1973  which was attributed to, the fee for service given providers incentives to increase utilization and fees as HMO growth increased. This growth led to another type of managed care plan the preferred provider organizations (PPO) which hospitals granted discounts in return for improving access to and quality of care, managed care has also helped to contain Medicaid cost



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Health insurance is a type of insurance coverage that typically pays for medical, surgical, prescription drug and sometimes dental expenses incurred by the insured. Health insurance can reimburse the insured for expenses incurred from illness or injury, or pay the care provider directly.

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