Healthcare Decoded- The Rise Of Health Insurance

We know that 200 years back Hospitals existed, but treatment was still done at the home of the patient in most cases, even child birth happened at home. But now not only are there Hospitals but you also have a Healthcare Insurance company and along with them you have so many claim forms 😊. To understand how this Healthcare Industry reached to the current stage, we need to deep dive into some history and you might find this very interesting, so read on.

Interchangeables

To understand the current some aspects of Health Insurance we need to go back in Time to around 1800’s. Around 1801 Eli Whitney demonstrated the concept of “Interchangeable Parts” specifically for Firearms. You might be wondering what are Interchangeable Parts, well in simple words they are components (Example: nuts & bolts) which are identical to each other and can replace another similar part. This is the time when coal power and machine production were changing the world. Peter cooper in 1830 designed and developed the 1st Steam powered Locomotive (called as Tom Thumb) in the US and in 1850 we saw a rise of the Manufacturing Industry, mass production of goods (using the concept of Interchangeable Parts). So where is the link with Healthcare here?

Locomotive

Well, It is interesting to note that one of the 1st Health Assurance’s was primarily given for Accidents which could happen while building railroads and steamboats and this was provided by “Franklin Health Assurance Company of Massachusetts”. It is also important to note that at this point doctors did not have a fixed fee, in most parts of the world they were paid as “honorarium” which is more like a thank you gift. For all you know they might have also got grains and pulses for their services 😊.

The Sliding Scale

The situation in US was slightly different as here you could buy Drugs/Medical services as you would buy something from a grocer’s store. In some cases, the doctors would charge you based on what you could afford. If you were rich you would be charged more, if you were poor the cost of treatment would be less. This concept was known as Sliding scale. Some might argue that this method was correct, and some might say this is incorrect. The Doctor’s argued that this way they were providing healthcare to all patients rich and poor equally. But when you compare this situation currently, it is completely opposite (The scale has turned) and people having health insurance pay less while those who do not have a health insurance will have to pay more.

The advent of the 19th Century saw Industrial Revolution and the 1st Moving Assembly line (Ford in 1913) and the people working on shop floors. Accidents were common in organizations on the shop floor and employers were liable for injuries due to negligence. To defend such cases organization argued in multiple ways one being the risk was part of the contract other it was the workers fault.

Reforms

One reform which came in between 1910 to 1915 (enacted by 32 states) was “Workers Compensation” where employers could buy insurance coverage by their state. An interesting change at this point was that was employers started to hire physicians to provide care and due to this there was a decline in volume of work for local physicians.

The end of 1929 saw the beginning of “The Great Depression” causing a reduction in demand of goods and services worldwide and obviously affected Local Hospitals causing occupancy rates to drop and charity to increase. Patients were unable to pay their hospital bills, and hospitals needed money, one such Hospital was Baylor University Hospital.

Insurance

To come out of this situation, Justin Ford Kimble (Administrator at Baylor hospital) offered a plan for providing 21 days Hospital Services to around 1200 University Teachers of Dallas for 50 cents per month. This plan was limited to only one hospital and can be compared to a PPO (Preferred Provider Organization) Plan in current times. By 1932, other hospitals started coming out with similar plans but not limited to one hospital. Hospitals started working with American Health Association (AHA) to approve Hospital Approved Plans. In 1946, this came to be known as the Blue Cross Commission.

States did not view this concept as Insurance, but as advance payment of services (Like a Prepaid Card). The New York State commissioner in 1933 ruled that this needs to be viewed as “Insurance” because the hospital is taking an advance to provide services in the future. So, what does this imply? Simply that the plans need to start complying with Insurance Laws. After this in 1939 came Blue Shield which was similar to Blue Cross only difference being it was to provide Insurance for Physician Services.

After World War II in 1945 there was a focus on creating a National Health Insurance Plan (Medicare and Medicaid), and in 1964 we saw the enactment of Health Insurance for the elderly known as Medicare in current times. This Medicare Plan has over the years evolved in 4 parts, Medicare Part A (Inpatient), Part B(Preventive), Part C (Medicare Advantage: A + B & vision, dental) and Part D(Prescription Drugs).

In parallel there was also a focus to standardize the billing process and to use one single form for reimbursement. Thirteen different forms were developed Jointly by AHA and HFMA (Healthcare Financial Management Association) and rejected between the years 1968 to 1972. The 14th version of the form (UB-16-78) was developed, updated field tested in Georgia and later piloted in 5 states. In 1975 NUBC (National Uniform Billing Committee) was formed to maintain and develop this form. Finally in 1982 UB-82 was finalized and now has evolved from UB-82 to UB-92 to UB-04 which is the latest version of the claim form.

Albert Einstein mentioned that “Necessity is the mother of all invention” and Overall if we look at the journey which started around the 1800s, it is interesting to note that somewhere down the line the Idea of an Health Insurance rose from a Hospitals need to survive. For now, I will leave you with this thought, hopefully you enjoyed the gist of this long journey 😊.