Health care is a complex issue. Many aspects of the health care system in the United States are in the process of change, partially because of the enactment of new legislation that modifies aspects of health care insurance in the United States. This new legislation has a goal of increasing access to health care through providing greater access to health care insurance among Americans and will be discussed in more detail at the end of this entry.
I. History and Background of the U.S. Health Care System
II. Push for Health Insurance from the 1920s to 1965
III. Medicare, Medicaid, and Health Insurance for the Rest of the Population
IV. Recent Expansions of Publicly Funded Insurance: SCHIP and Changes in Medicare
V. The Need for Health Insurance Coverage and Obama Reforms
VI. Continuing Concerns and Unresolved Issues
History and Background of the U.S. Health Care System
At one point in time, the U.S. health care system was dominated by physicians who worked in private practice as independent practitioners and was even described as a cottage industry since many physicians had their offices in their homes (Starr 1982). During that time period (up to 1900 at least and probably later), most people who had other options tried to avoid hospitals, because hospitals were viewed as a place to go to die for people with no other option and for people who were too poor to be able to remain in their homes. In addition, during the same time frame, there was not much care that could be provided for a person in the hospital that could not occur in the homes of people of economic means. This worked as the system for some period of time. Most people paid doctors as they received their care, and health insurance was not important for most people to obtain care. By 1900, there began to be some types of health insurance policies that people could purchase, often as a mix of coverage for actual health care costs and coverage for being out of work. Gradually, sick leave policies and disability policies replaced those aspects of health insurance, and health insurance became coverage for the major health care costs. Discussions grew about the need for people to have coverage. This related to improvements in medicine and surgery, so that surgery became safer and less scary through the use of anesthesia and an understanding of the need to control infection to facilitate safe recovery from surgery. New technologies such as X-ray machines also made the use of hospital services desirable, and people then wanted a way to pay the higher medical bills. During the presidency of Theodore Roosevelt, the first major attempt to pass some type of heath reform and health care coverage for many Americans occurred. During the same period, the efforts of the labor movement in the United States and such groups as the American Association for Labor also began, with these groups pushing health insurance programs mostly through state government efforts prior to World War I.
Push for Health Insurance from the 1920s to 1965
In 1921, a partial effort to provide health insurance coverage to mothers and children was passed: the Maternity and Infancy Act (also known as the Sheppard-Towner Act). This was a grant to states in the area of health and was an early successful effort to expand the role of the federal government into the provision of health care assistance to specialized groups of citizens. Although the goals of this program may seem simple and not controversial today, the program was very controversial in the 1920s and generated great criticism from conservative political groups and from the American Medical Association. The criticism was loud, and the commitment to the program by the political powers of the time was fairly limited, so the act was not renewed in 1929 and the program ceased to exist.
The idea of a Medicare program, or provision of health care insurance for the elderly, was rejected as part of the Social Security legislation in the 1930s because of opposition from the American Medical Association. Franklin Roosevelt wanted to be sure that the essential Social Security legislation creating an old-age pension system was enacted and quickly backed off from a Medicare-type provision when it became clear that it would be more controversial than the rest of the program and could potentially threaten the passage of the overall Social Security legislation. Although Medicare-type legislation continued to be introduced into most sessions of Congress once World War II ended, these pieces of legislation had little chance of success in the late 1940s and 1950s. Medicare did eventually pass, of course, in 1965 as part of the Great Society legislative efforts of President Lyndon Johnson. This program was created as a federally administered program, with the same benefits for all Social Security recipients regardless of which state they resided in. The program was designed to be similar to the health insurance that most working Americans had through their jobs at that time (although the latter was privately contracted between employers and insurers). At the same time, the Medicaid program that provided health coverage to selected groups of the poor was also passed, though as a federal-state joint program rather than as a national program. Over the past 40-plus years, both of these programs have become the major efforts of the government in the provision of health care insurance and health care services to parts of the U.S. population. They have also grown to be very complex programs, with many detailed and specific provisions and many important limitations that have been the subject of much critique and many policy debates. Both programs have changed and evolved a great deal.
Medicare, Medicaid, and Health Insurance for the Rest of the Population
Once Medicare was passed, the elderly had access to a health insurance plan that resembled what many working-age Americans had through their jobs, because a central goal of Medicare was to bring the elderly into the mainstream of U.S. medicine. Another basic assumption was that Medicare would provide all elderly with the same health insurance coverage, whatever a person’s income level before retirement or after retirement. A third assumption of the architects of the basic Medicare legislation was that Medicare was the beginning of a government role in health insurance, perhaps a first step toward a more universal health insurance system. This did not really happen, with a few small exceptions such as adding coverage for people with kidney disease and then the extension of coverage to more children under the State Child Health Insurance Program (SCHIP) in the 1990s.
The basic coverage of Medicare was hospital coverage, known as Part A of Medicare, In addition, most people 65 and older also purchased Part B coverage for physician’s fees. Social Security recipients pay for the Part B coverage, although the amount is deducted from their Social Security checks before they are issued so that some elderly do not know how much they pay for this coverage each month. The general premium in 2009 was $96.40 per month for most people, although the premium can be higher if the income of the person or couple is high enough. The costs of Medicare were higher than early estimates, and they continued to increase as the costs and complexities of health care increased and as the absolute numbers of people aged 65 and over increased. By the end of the first year of the operation of Medicare, 93 percent of the elderly (about 19 million people at that time in the United States) had enrolled in Part B. Beyond enrollment, usage of the program grew rapidly. By the end of the first year of operation, one in five of the elderly had entered a hospital using their Medicare benefits, and 12 million of the elderly had used Part B services. On average, about 80 percent of the hospital expenses of the group using hospital services were paid that year by Medicare.
There were some early implementation problems such as delays in payment to providers, especially during the first summer of operation. Fears about overcrowding of hospitals did not occur. Despite physician opposition to the program before it was passed, Medicare benefited physicians after its passage. Physicians initially received substantial income supplements from the Medicare program, and most physicians ended up being reimbursed for services they previously provided for free or at a reduced cost to the elderly before Medicare. In a variety of ways, costs ended up being higher than expected. In its early years, Medicare costs exceeded the actuarial projections that were made at the time of its passage. One explanation is that both hospital and doctor fees rose, partially because the arrangements for paying physicians were quite generous. There are estimates that physician fees initially rose 5 to 8 percent, and physician incomes went up 11 percent (Marmor 2000). Similar problems, perhaps even more serious, existed in the area of hospital prices. The Labor Department’s consumer price survey showed that the average daily service charge in U.S. hospitals increased 21.9 percent in the first year of operation of Medicare. In 1968 and 1969, Medicare costs rose around 40 percent each year, leading to Medicare acquiring a reputation, both in Congress and in the administrative branch, as a program with a potential to be an uncontrollable burden on the federal budget.
One clear result of the first two years of experience was that the rise in medical costs did initially lead to increased interest in national health insurance. For example, in 1968, an organized labor–supported Committee for National Health Insurance was created, and the American Hospital Association announced that it planned to study the feasibility of a national health insurance plan. From 1965 to the present, the U.S. health care system has had a number of important changes, but one thing that has not changed greatly is that, except for people whose health insurance is provided through a government program such as Medicare or Medicaid, most people obtain their health insurance through their jobs.
Having good health insurance coverage has been one of the most basic indicators of access to health care in the United States since the end of World War II. Although estimates vary regarding the numbers of people uninsured and underinsured in the United States from the early l980s to the present, most sources agree that there was an increase in the numbers of uninsured from the late l970s to the early 1990s. In the late l970s, the best estimates were that 25 million to 26 million people in the United States were without health care insurance, or about 13 percent of the population under 65. The numbers of uninsured grew in the l980s. Estimates ranged from a low of 22 million to a high of 37 million by the late 1980s. In a review of statistics from 1980 to 1993, one source estimated that the uninsured population increased from 13 percent to 17 percent in that time period (Andersen and Davidson 1996). Medicaid coverage increased (from 6 percent to 10 percent) as part of some of the expansions already discussed, but coverage by private health insurance decreased (from 79 percent to 71 percent). The proportion covered by private health insurance decreased for every age group, and the decline was especially noticeable for children under 15.
Critical to understanding how some groups of people have no health insurance in U.S. society is the realization that most private health insurance in the United States is purchased through employer-based group insurance policies, representing 75 percent to 85 percent of all private coverage. One major factor in the increase in the number of uninsured during the l980s and early 1990s was the growth in unemployment in the early l980s and again in the early 1990s, as well as in the last few years. Those with a history of serious medical problems comprise another group of people with no insurance. Many people with serious health problems do maintain health insurance coverage as long as they keep their jobs. If they lose their jobs due to the general economy or their health but can still work, they may experience problems in finding employment due to their health. People who are medically uninsurable are a small part of those without health insurance, but they are important because they are very high utilizers of health services.
These kinds of issues have led at different points to calls for national health insurance reform. As various political issues shifted in the 1970s, no major national health insurance reform was passed. From the 1970s on, there have been a number of times when health care reform was a major topic of discussion and when expectations for the passage of some type of program were high, but the efforts did not succeed. In the Nixon administration, there was a major attempt to pass health insurance legislation, and many expected it to succeed, but Watergate and the political fallout from that scandal blew apart the attempt to create a Republican-Democratic consensus on reform legislation. When Jimmy Carter was elected president, there were planks in the Democratic party platform that called for major health care reform, but economic issues took center stage, and no program that had any realistic chance to pass was ever introduced into Congress at that time. The last major push for major health care reform before the Obama administration’s current effort was the failed attempt by the Clinton administration to pass health care reform at the beginning of Bill Clinton’s first term as president in 1993. After this, the Clinton administration focused on expanding coverage for children, which resulted in the passage of the SCHIP program. The only major health care coverage expansion during the George W. Bush administration was the expansion of Medicare to include drug coverage.
Recent Expansions of Publicly Funded Insurance: SCHIP and Changes in Medicare
Some important expansions have been passed in the last decade, especially the State Child Health Insurance Program, which has expanded the provision of government-provided health care insurance to the children of the working poor, and the drug coverage provision of the Medicare program, which has dealt with one major criticism and weakness of the Medicare program, the lack of inclusion of coverage for drugs.
In fall 1997, Congress passed the joint federal-state SCHIP as part of the Balanced Budget Act of 1997, which began in fiscal year 1999. As an expansion, this program focused on providing coverage to children, a group that previous surveys found was viewed by most of the public as an important group to have coverage for health care. When SCHIP was passed, around 10 million children under the age of 18 were estimated to be without health insurance coverage in the United States, or about 12 percent of children under the age of 18. Children in some parts of the country and some population groups were more likely to be without health insurance. This included children living in the South and the West, children living outside metropolitan areas, and Native American and Hispanic children, as well as the main target group of the legislation, children in lower income brackets. SCHIP represented the largest expansion of health coverage since the passage of the Medicare and Medicaid Program.
SCHIP has had some success in improving the insurance levels of children. By 1999, 23 percent of children were covered by public programs such as Medicaid and SCHIP, compared to only 11 percent in 1987, before SCHIP and some of the Medicaid expansions (Federal Interagency Forum on Child and Family Statistics 2001). SCHIP grew to be a major program, with the expenditures for the program totaling $2.1 billion in fiscal year 2000, or 0.8 percent of total state health care spending and 0.2 percent of all state spending. The program has continued growing. Estimates are that, since SCHIP was created in 1997, the number of uninsured low-income children in the United States has decreased by one-third. In 2006, 91 percent of children who were covered by SCHIP had incomes at or below 200 percent of the federal poverty level ($20,650 for a family of four in 2007). Combined with the Medicaid program that covers children in families with the lowest incomes, SCHIP and Medicaid provide health insurance coverage to one-quarter of all children in the United States and almost half of all low-income children.
There are important differences between SCHIP and Medicaid. Medicaid is a joint federal-state entitlement program in which federal funding increases automatically as health care costs and caseloads increase. In contrast, SCHIP is a block grant with a fixed annual funding level. The initial program was authorized for 10 years, and, to continue, the program needed reauthorization. There was a debate over this, and eventually only a continuing resolution let the program remain in place by the end of the Bush administration in 2008. Once Barack Obama became president, the reauthorization of the SCHIP program was the first piece of health legislation passed, signed on February 4, 2009. The signed bill reauthorized and expanded SCHIP to an additional 4 million children. In the new legislation, children in families with incomes of up to three times the federal poverty level will qualify for the program. The legislation also requires states to offer dental care through SCHIP and to provide equal coverage of mental and physical illnesses.
As mentioned, one major change in Medicare occurred during the Bush administration. There was growing concern about the rising costs of health insurance, but the major health-related effort in the second half of 2003 was a push for a Medicare reform bill. This passed at the end of November 2003 as, in some ways, a political compromise between Democrats and Republicans so that both sides could claim some success in improving Medicare as they ran for reelection. The law provided a new outpatient prescription drug benefit under Medicare beginning in 2006. In the interim, it created a temporary prescription drug discount card and transitional assistance program. The Part D drug option was a major addition to the Medicare program and partially dealt with what had been a major criticism of Medicare, the lack of drug coverage. Prior to the enactment of the Part D drug benefit, around one-third of seniors had no drug coverage. People without drug coverage generally had higher out-of-pocket costs and were less likely to fill prescriptions.
Medicare Part D is a prescription drug insurance plan that provides beneficiaries with prescription drug benefits. To receive these benefits, people must pay a monthly premium as part of enrolling in the plan and continue to pay it each year, or else they will have an interruption of coverage. People must choose among available plans in their state. The costs for the plans vary, as do the specific drugs that are covered. This potentially makes the choice confusing to consumers, and this was an initial concern. Because not every plan will cover the same drugs, people must search current medications for coverage under the Medicare Part D plans available to them. Although consumers were confused initially, most are now choosing to enroll in a plan (unless they have supplemental coverage through a retirement work-based plan or other supplemental plan that provides drug coverage that is as good as the typical Part D plan).
One concern about the plan is that there is a coverage gap; during this portion of spending, plans are not required to provide any coverage to beneficiaries. The gap, or doughnut hole, was created as a way to provide a large amount of coverage (75 percent) to most Medicare beneficiaries after the modest deductible but to hold down the cost of maintaining it throughout the year. For those with extremely high drug costs, catastrophic coverage resumes (once a person has spent over $4,550 on drug costs as of 2010) and covers the rest of one’s drug expenditures in that year. The doughnut hole became one of the most controversial aspects of the Part D plan. One study found that, for the 12 percent of people who reached the Part D coverage gap, there was a decrease in essential medication usage. Zhang and colleagues (2009) found that those lacking coverage for drugs in the doughnut hole period reduced their drug use by 14 percent. The proportion of beneficiaries reaching the doughnut hole increased as the number of chronic conditions that a person has increased.
Both of these new programs or extensions to existing programs have been successful efforts at expansion of the role of the federal government in the provision of health insurance coverage to Americans. But both also have created new complexities in the case of drug coverage for those on Medicare and new variation in coverage across states in the case of SCHIP, since the program, as with the Medicaid program, is jointly administered at the federal and state levels and has some differences in eligibility and some differences in coverage across states.
The Need for Health Insurance Coverage and Obama Reforms
The lack of health insurance among a substantial group of Americans is not a new issue, but as the recession hit and more people lost jobs and younger people had trouble finding jobs initially, the issue of the link between employment and health care became clearer and problematic. Also, there were concerns for older people who either planned an early retirement before the age of 65 or who lost a job in their fifties and discovered how difficult it was, in a time of recession, to find new jobs with health insurance or to be able to purchase a private health insurance policy. For people who already had health problems, many insurance companies would not provide coverage for preexisting conditions.
There were also discussions about how programs such as Medicaid did not cover all of the poor and about the groups of people with low incomes who nevertheless earned too much or had too many assets to qualify for Medicaid in many states. The percentage of people in poverty has been increasing and was 13.2 percent in 2008, up from 12.5 percent in 2007. The number of people without health care insurance has been increasing over the past decade. About 39.8 million people had no insurance in 2000, and this increased to more than 45 million people with no coverage in 2005, a 13 percent increase from 2000. The number of people without health insurance coverage continued to rise, though not as rapidly, from 45.7 million in 2007 to 46.3 million in 2008, while the percentage of uninsured remained unchanged at 15.4 percent (DeNavas-Walt, Proctor, and Smith 2008). In addition, during this period, there was a decrease in employer-provided health care coverage, from 69 percent of employers providing coverage in 2000 to 60 percent in 2005. The number of people covered by all types of private health insurance continued to decrease from 2007 to 2008, with absolute numbers decreasing from 202 million to 201 million. The number covered by employment-based health insurance declined from 177.4 million to 176.3 million. Numbers of uninsured overall did not increase more, because the number covered by government health insurance climbed from 83 million to 87.4 million. These figures and concerns are the backdrop for some of the renewed push for health care reform after the election of Obama.
Shortly after the election, discussion began about health care reform. One initial approach of the Obama administration was to try and have Congress work through and develop the legislation. Partially, this was a reaction to the failure of the Clinton plan and the consensus that the administration in that case had become too involved in the details and Congress did not feel invested in the plan being developed. During 2009, some criticism of this approach arose, with people arguing that, to pass controversial, major legislation, the president had to become more involved. At one point, there was a feeling that Obama and the Democratic party would have the votes available to pass major legislation, especially given the conversion of the formerly Republican senator from Pennsylvania, Arlen Specter, to the Democratic party, which gave the Democrats a veto-proof majority in the Senate. Things moved slowly, however, and no legislation had been passed by the time of the elections in November 2009, when the Democratic Senate seat held for decades by Ted Kennedy in Massachusetts was open due to Kennedy’s death. A shock occurred in that election, with a Republican capturing the seat. This meant that passage of the bill might not be possible without use of the so-called reconciliation approach, which required only a majority of votes (the Democrats still had 59 seats in the Senate). The initial Senate version of the bill was passed in late 2009. The U.S. House of Representatives passed the bill to reform health care in March 2010 by a vote of 220 to 211. The House also passed a bill, which then was sent back to the Senate to modify some versions of the Senate bill. That bill was also passed in March 2010. The bill was signed by President Obama on March 23, 2010.
When fully phased in, the legislation will cover around 32 million Americans who are currently uninsured. Major coverage expansion begins in 2014, with exchanges being created and the requirement that most people have health insurance. Beginning in 2010, insurers must remove lifetime dollar limits on policies, and some subsidies to small businesses to provide coverage to employees will become available. Insurance companies will be barred from denying coverage to children with preexisting conditions. Children will be allowed to stay on their parents’ insurance policies until their 26th birthday.
Gradually, a number of other changes will be put into place. Medicaid will be expanded, the doughnut hole in the Medicare drug plan will gradually disappear, and certain preventive services in Medicare will be available without a copayment. There will be reductions in Medicare advantage plan payments that will help to extend the life of the Medicare trust fund. An independent advisory board will be created to make recommendations for other cost savings. The legislation will establish the Community First Choice Option, which will create a state plan option under section 1915 of the Social Security Act to provide community-based attendant supports and services to individuals with disabilities who are Medicaid eligible and who require an institutional level of care, to try and begin to deal with some of the needs of the elderly and disabled for less intensive community-based services. There will be the creation of some demonstration programs for certain types of home care and modifications to some of the rules for nursing homes that receive Medicare payments. A number of new taxes and fees—some on people through Medicare taxes and others on drug makers and employers—will begin in various years, such as 2011 for drug makers and fines on employers mostly beginning in 2014. Taxes on high-cost health plans will not begin until 2017.
Continuing Concerns and Unresolved Issues
Although there are high hopes that the new reforms in health insurance—a more accurate description of the Obama changes than “health care reform”—will lower the rates of the uninsured, many problems were not dealt with. In much of the discussion, there was talk of a public option, a way to be sure that there was an affordable option for everyone. This did not end up in the legislation, and, while insurance companies will have to offer coverage to a person and there will be health care exchanges, there is not a limit on what can be charged, so costs of health insurance may not be well controlled. In addition, the bill has few mechanisms in place to control rising costs of health care and of drugs, so that some experts fear that, as happened with the passage of Medicare and Medicaid in the 1960s, costs will increase and there will be need for additional reforms to deal with costs. Some issues in Medicare were dealt with (the doughnut hole in the drug plan and some beginnings of experimentation with aspects of long-term care), but the major issue of long-term care for the elderly, a growing program as the large baby boom group in the population begins to age, is not really covered. How the new taxes will actually work and how fines and mechanisms to ensure that all people purchase coverage remain to be seen as the different provisions of the Obama plan come into effect in future years.
Jennie Jacobs Kronenfeld
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