© lunamarina/Shutterstock CHAPTER 2 How We Got Here: U.S. Health Policy History This chapter is designed to give healthcare leaders an understanding of U.S. health policy history by covering the following topics: ■ The history of health policy ■ How the U.S. health system developed ■ How selected major components of the Patient Protection and Affordable Care Act developed practice of medicine lacked standardization, ▸ History of Health with almost anyone who desired to practice medicine being able to open a practice and Policy and assume the title of doctor. With the rise of sev- eral alternative options to allopathic medicine, Development of the including homeopathic (1796), osteopathic U.S. Health System (1874), naturopathic (1895), and chiropractic (1895) medicine in the 1800s, the public was he history of health policy development not always certain about what they were get- in the United States had its beginnings ting when receiving treatment from a “doctor.” at the state, as opposed to federal, level, Doctors of Medicine were concerned about Twith few exceptions. These exceptions, begin- distinguishing themselves from alternative ning with the Sailors and Marines Act of 1798,1 practices with the establishment of licensing addressed the narrowest of constituencies. laws based on ensuring the quality of treatment State-level action began with a series of medical received from individuals claiming the title of licensing laws passed circa 1800, abolished circa “doctor.” While ensuring quality is the claim 1830, and re-established post-Civil War. Prior every trade group uses when seeking licensure, to post-Civil War era licensing regulations, the economists view licensure as a restraint of trade 1 This laid the foundation for what would become the U.S. Public Health Commissioned Corps. 22 Chapter 2 How We Got Here: U.S. Health Policy History or a legal method for keeping the “ undesirables” Insurance Law (1883) established sickness out of the business (AMA, 1847). Ironically, funds paid for by the employee (2/3) and there were legal disputes among the alternative employer (1/3); the Accident Insurance forms of medicine, such as the 1907 lawsuit in Law (1884) was employer-funded and pre- Wisconsin in which a chiropractor was jailed cursor to workers’ compensation laws; and for practicing osteopathic medicine (State of Old Age and Disability Insurance (1889) was Wisconsin v. Morikubo). an old-age pension plan and precursor to The Bill for the Benefit of the Indigent Social Security in the United States. About Insane in 1854 was the second recorded fed- 40 years later, British Prime Minister David eral healthcare legislation. This bill’s intent Lloyd George sponsored the enactment of was for the federal government to provide several social service policies, including the land for the establishment of asylums for National Health Insurance Act (1920) that the insane, deaf, and dumb. It was passed by provided laborers protection against illness both houses of Congress but vetoed by Pres- costs and unemployment. ident Franklin Pierce (D), who viewed this as a federalism issue. He claimed that the states, not the federal government, should be responsible for social welfare concerns. ▸ Brief History of Little, if anything, happened in the United Payment States for another 70 years, with the next mention of federal involvement in healthcare In the United States, health insurance had its provision being Theodore Roosevelt’s presi- beginnings in the 1860s through the late 1920s dential platform in 1912. The third piece of in a series of disability insurance offerings federal healthcare legislation was the Pro- (sickness funds) by a variety of insurance com- motion of Welfare and Hygiene of Maternity panies that were designed to protect laborers and Infancy Act (1921). Also known as the from loss of wages, as opposed to payment Sheppard-Towner Act, this progressive piece for medical costs.2 The Baylor Plan, estab- of legislation, which passed both houses of lished in 1929, was the first organized health Congress and was signed by President Wood- insurance plan, cost 50¢ per month or $6 per row Wilson (D), provided federal funding for year, started so university professors could maternal and child care. pay their hospital bills. The Baylor Plan was During this same 70 years, Germany soon followed by a flurry of similar plans that and Britain enacted social support legis- were ultimately chartered by state laws as Blue lation that would eventually be replicated Cross plans. A decade later in 1939, physician by the modern industrial world and would payment was organized in a similar manner ultimately influence the United States. In under Blue Shield plans. While it may seem an effort to gain the support of labor, Ger- intuitive to assume that physicians would wel- man Chancellor Otto von Bismarck was the come these insurance products that ensured first to propose social support legislation payment, the opposite was what actually hap- and have it passed into law. The Sickness pened. Physicians were vehemently opposed 2 The average length of illness during this era was 4–6 weeks, resulting in no income for the employee during this period of illness and convalescence. Thus, the need for income stability or disability payments was provided through sickness funds costing employees 1% of their wages. When the first sickness (medical) insurance was offered through Baylor University Hospital to help university professors pay their hospital bills, it also cost employees approximately 1% of their wages. Brief History of Payment 23 to these plans, fearing the payer’s interven- non-cash wage benefits in the form of health tion between them and their patient, and fre- insurance coverage. In 1949, the Supreme quently cited that they were “… opposed to Court upheld a National Labor Relations rul- anything that intervened between the physi- ing allowing benefits to include in collective cian-patient relationship.” bargaining, and in 1954, health insurance There was quite a bit of administrative premiums were declared a tax exemption for and legislative activity during the Franklin businesses. Roosevelt (D) and Harry Truman (D) pres- During the decades of the 1940s and idencies that sought to enact national health 1950s, the public became aware that health- insurance legislation. However, none of it care needs of the elderly were often not was fruitful. Both Presidents faced consider- addressed, or addressed in a limited fashion, able and aggressive lobbying efforts against due to their lack of financial resources. Thus, national health insurance by the American the Kerr-Mills bill (1960) was passed to pro- Medical Association (AMA), who continued vide funding for states to care for the poor with their campaign regarding the sacredness elderly, and although the bill was helpful, it of the physician−patient relationship saying was incomplete. The major healthcare legis- that no one should intervene in that relation- lation that came from the 1960s is Medicare ship. President Roosevelt (D) was concerned (1965) and Medicaid (1965). The battle for enough about the aggressive physician lob- these two bills was legendary, with the AMA bying that he dropped his consideration of opposing them until after their passage, and including health insurance as a part of Social was remarkable and exemplary for how Pres- Security legislation, for fear of it causing the ident Lyndon B. Johnson (D) managed the legislation to go down in defeat. The quest for legislative and implementation processes. national health insurance received its final This legislation ushered the United States into blow with the defeat of President Truman’s (D) the provision of national health insurance Fair Deal (1949). With this defeat, the Dem- for the general population, albeit to limited ocrats realized they needed to change strate- populations. gies and, while pursuing the ideal of national The 1970s and 1980s continued to wit- health insurance in some format, they began ness a flurry of legislative and administrative to do so on an incremental basis. Three sig- activity, with the result of the activity primar- nificant healthcare laws passed under Presi- ily being incremental increases in programs dent Truman (D): the National Mental Health ensuring access and legislation addressing Act (1946) established the National Institute the increasing cost of healthcare services. of Mental Health, the Hospital Survey and The most significant of these legislative Construction Act (1946), also known as the actions was the Social Security Act of 1983 Hill-Burton Act, had a goal of establishing 4.5 (Prospective Payment Act) that ushered in beds per 1000 people and required participat- bundled payments based on diagnostic and ing hospitals to provide uncompensated care, historic data. The hospital prospective pay- and the Federal Water Pollution Control Act ment system was introduced as Diagnostic (1948) provided federal funds for the elimina- Related Groups (DRG) in 1983; the Outpa- tion of waste from tributaries. tient Prospective Payment System consist- Due to post-World War II wages and price ing of Ambulatory Payment Classifications freezes, employers were unable to provide (APC) for hospital-based outpatient services their employees with additional cash wages. In and Current Procedural Terminology (CPT) an effort to provide some type of pay increase, for other outpatient-based services were employers began providing employees with launched in 2000. 24 Chapter 2 How We Got Here: U.S. Health Policy History One federal law enacted in the 1970s—not the National Committee on Quality Assurance often associated by the public with health care, (1990) that broadened the federal govern- although it has had profound, long-term effects ment’s list of concerns from access and cost to on state-level healthcare reform efforts—is the include quality. Employee Retirement and Income Security Act One of the healthcare system’s greatest (ERISA). ERISA was intended to accomplish obstacles has been defining quality. Providers (in addition to many other goals) two health- do not seek to provide poor care, yet they have care goals: to establish a legal requirement for trouble defining quality care.