Health Care

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Health care and jobs
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Healthcare, the government, and the rest of us
When does the surplus disappear?

Life Issue History

Before World War II, people paid for their own medical care if they could.

In 1929, Blue Cross became the first private insurer and a contract with Blue Cross required teachers and hospital workers in Dallas to be part of the insurance pool. During the depression of the 1930's when so many people were out of work, people often paid the doctor by barter with a chicken or carpentry or other services.

Health care and jobs

During World War II, the federal government put a freeze on wages to prevent inflated prices when there were so few non-military products on the market. In order to pay for and keep valued employees, American corporations began to include health care as part of an employee's pay package. In this way, the cost of health care was reported as a business expense and, therefore, reduced taxable corporate income.

Many American workers became accustomed to thinking of health care as part of their pay and expected it. Retirees believed that they had paid for their health care over the many years that they worked for a particular company, that is, they received lower wages in order to pay for health benefits. Loyalty to the company, they believed, was rewarded with lifelong benefits.

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In 1960 all employees of the federal government became part of the Federal Employees Health Benefits Program. Under this plan today nearly 400 insurance plans are offered to about 9 million people.

Once a year (in November/December) there is "open season" in which each employee chooses an insurer for the next year. Insurers must accept all applicants regardless of pre-existing conditions and the federal government pays 75% of the actual premium of each person's chosen plan. Employees pay the difference. People who retire from government service continue to receive their medical benefits.

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When Lyndon Johnson became President, he declared a war on poverty. As part of his desire to "finish the American dream" he proposed that the elderly and the poor should have health insurance guaranteed by the federal government.

The Medicare program, instituted in 1965 for everyone over 65, has two parts: Part A pays for care in institutions such as hospitals and nursing homes; Part B, added later, pays for doctor's services, including tests.

Medicare is funded by a payroll tax that is set aside as a "Hospital Insurance Trust Fund." Even in 2001 there was more money in that fund than needed because the baby boomers (those age 38 to 56) are not yet 65.

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There has been continuing disagreement about the size of the Medicare surplus and exactly when there would not be enough money to cover those over 65. The Clinton administration estimated the date as 2002. The Bush Administration said that there was a deficit in 2001 if one counts all expenses, not just those in Part A.

The rising costs of non-hospital services, Part B, are centered in the cost of medicines and high technology testing for diagnostic purposes. These medicines and the tests keep people out of the hospital, but Parts A and B are currently set up the way it was in the 1960's.

A federal/state Children's Insurance Program (SCHIP) exists for providing health insurance for children of low income working people. These parents make too much money to qualify for Medicaid and too little to buy health insurance. They may work part time or for employers with less than 20 employees, who are therefore, not required to provide health insurance.

Each state that establishes its own SCHIP under federal guidelines is matched by federal tax dollars. In some states the money paid by tobacco manufacturers has been allocated to SCHIP, although the states are free to use that money as the legislature chooses.

Since the 1970s a type of prepaid medical service has developed to keep costs down and focus on prevention. Providers of these services are called health maintenance organizations (HMOs). At the beginning the hope was that by paying doctors in advance there would be incentives to focus on keeping patients well and preventing hospitalization. However, keeping costs down by limiting a patient's choice of doctors and hospitals and a doctor's choice of medications and procedures have proved to be problematic.

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