The battle over whether the Patient Protection and Affordable Care Act of 2010 (PPACA) is constitutional, unconstitutional, or something more complicated is just one new attention-getting chapter in the long history of health care finance.
We prepared a history of the topic to try to give you, our readers, the background you need to come up with your own response to PPACA, Supreme Court action on PPACA, and all of the other legislative, regulatory, enforcement, medical community, corporate, scholarly, consumer and patient activity revolving around health care finance.
People have battled for many years over who should pay for health care; what, if any, obligation physicians and other health care providers have to provide free or discounted care for patients unable or unwilling to pay the full price; whether some patients are more worthy of getting free or reduced-price care than others; whether private health insurance programs are sustainable; and whether government intervention in health care markets helps matters or only makes the situation worse.
The history of this topic is about as old as history.
The Europeans organized voluntary “friendly societies” that could minimize underwriting risk by serving fellow community members of good character. The American colonists financed their early hospitals with funding streams almost as complicated as the funding streams going to American hospitals today.
For U.S. leaders of the 1800s, one key question was how much authority the U.S. Constitution gave the federal government over health care.
The Germans established a universal health insurance program in the 1880s, and U.S. leaders spent decades debating whether they should follow suit.
Hillary Clinton beat her head against a wall built by Harry and Louise.
Barack Obama came along and passed a bill over the wall by backing a long, complicated bill that has been creating endless work for federal agencies ever since.
Before we start our history, one important point to make is that it’s difficult to write a reasonably clear sentence about health care finance without using words that will infuriate someone.
For starters, many doctors hate the term “health care provider.”
Another challenge is finding an even-handed term to refer to efforts to make the health care delivery or health care finance systems work better.
Supporters of a change measure might refer to it as a “health reform” or “health care reform” measure. Opponents might refer to the measure with terms unfit for use on a family website.
At LifeHealthPro, we try as much as possible to use the term “health system change,” rather than “health reform,” outside direct quotes, because of a sense that one reader’s “health reform law” is another reader’s “health system destruction law.” Calling a law a health system change law feels more neutral than calling it a health reform law or “that terrible law,” but it’s also awkward.
LifeHealthPro began to refer to the 2010 change law as “PPACA” immediately after it became law.
President Obama then signed a PPACA “fixer” bill, the Health Care and Education Reconciliation Act (HCERA), and the Obama administration soon began referring to the two-bill package as the Affordable Care Act (ACA).
Opponents often call the law “Obamacare.” The Associated Press calls the law “President Obama’s health care law,” even though members of Congress developed the law and Obama started out objecting to some of the provisions.
At LifeHealthPro, we stuck with PPACA because it seemed more neutral than most of the alternatives and easier to use than others as an Internet search keyword.
Health care finance unplugged
No one knows how the first medicine men (and women) billed the first patients. Maybe those patients paid for care with polished shells entirely out of their own leather pouches, or with promises to turn over a portion of the berries they gathered over the next few months.
Historians tell us that the civilizations with written records that we know how to read have been struggling with health care finance since they developed health care.
Pliny the Elder (Courtesy Prints and Photographs Division, Library of Congress)
The Egyptians had a body of government-paid physicians operating 11 centuries before the birth of Christ, according to a history of medicine that Von Friedlander published in the Westminster Review.
Friedlander says the ancient Egyptian physicians seem to have received payments from at least some of their patients in addition to payments from the government.
In place of hospitals, the Egyptians had temples that, in some cases, would try to persuade the gods to help the sick. In Egypt, religion was a government institution. The pharaohs financed the temples and other public institutions with requirements that residents provide free labor, portions of their herds and crops, and other “in-kind taxes.”
The Egyptians and the Babylonians also used an early, low-tech version of medical information crowdsourcing: They had the caregivers of people who were seriously ill set the patients out on the street. Passersby were supposed to look the patients over and tell the caregivers whether they recalled any treatments helping patients with similar conditions on other occasions, Minnie Goodnow wrote in a history of nursing published in 1916.
The Greeks seem to have tried a number of different approaches to health care finance. In some places and times, the Greeks managed the need for catastrophic care by requiring families to set patients who seemed likely to die outside the city walls.
But Friedlander says that Athens had government-paid physicians 500 years before the birth of Christ, and that the Roman empire required every city to have a minimum ratio of government-paid physicians to residents.
In Rome, doctors seem to have applied a sliding-rate scale, with some patients getting free or cheap care and the wealthy paying exorbitant rates.
Pliny the Elder complained in the fifth volume of his Natural History of doctors who made “rapacious bargains” with their patients while the patients’ fate was “trembling in the balance.” He said Emperor Claudius exiled a physician, Alcon, to Gaul, for charging too much for care.
As the Roman Catholic Church grew and became an official part of medieval European societies, Catholic institutions set up hospitals financed with a combination of government money, church money, private contributions and patient fees.
In the middle ages, many Europeans formed voluntary, exclusive “friendly societies” that served, in effect, as nonprofit clubs that provided medical insurance.
U.S. health finance battles: The early years
Franklin Pierce (National Archives)
The struggle over health care finance continued in the New World.
Communities set up “friendly societies,” or mutual aid societies, early on, and they organized some of the first hospitals and clinics in the 1700s.
In Pennsylvania, for example, the Pennsylvania Provincial Assembly provided the appropriations needed to set up the Pennsylvania Hospital in Philadelphia in 1751.
Over the next few decades, the assembly supplemented the hospital’s sources of revenue by awarding it unclaimed shares of prize money, tax payments that came in late, unclaimed dividends on bankrupts’ estates, and penalties on illegal exports of bad boards and timber, according to Thomas George Morto’s history of the Pennsylvania Hospital.
The hospital also received funding from private sources, such as gifts of land and money from the Penn family; proceeds from the exhibition of a painting, Christ Healing the Sick; and proceeds from Noah Webster’s lectures on the English language, Morto says.
In the 1750s, some people passed their Sundays by going to hospitals and looking at people who were mentally ill. The Pennsylvania Hospital began raising revenue in 1767 by charging visitors who wanted to look at mentally ill patients an admission fee of 4 pence.
The physicians could charge fees, but Morton says the hospital staff decided in 1783 that the physicians could not impose fees on patients who were in the almshouse.
In 1808, Thomas Jefferson said he had turned over some of the buildings acquired from the French in connection with the Louisiana purchase to operators of hospitals, according to a copy of a message to Congress collected by Gerhard Peters and John T. Woolley for The American Presidency Project at the University of California at Santa Barbara.
In 1854, the U.S. Congress sent Franklin Pierce a bill calling for the country to give states public lands they could use “for the benefit of indigent insane persons.” Pierce vetoed the bill, according to a copy of a veto message collected by Peters and Woolley.
In the veto message, Pierce said he had deep sympathies for the intentions of the lawmakers who drafted the bill.
But “it cannot be questioned that if Congress has power to make provision for the indigent insane without the limits of [the District of Columbia], it has the same power to provide for the indigent who are not insane, and thus to transfer to the federal government the charge of all the poor in all the states,” Pierce says in the veto message. “It has the same power to provide hospitals and other local establishments for the care and cure of every species of human infirmity, and thus to assume all that duty of either public philanthropy, or public necessity to the dependent, the orphan, the sick, or the needy which is now discharged by the states themselves or by corporate institutions or private endowments existing under the legislation of the states.”
Pierce said Congress would have no answer when asked why it was not taking care of every other type of human infirmity.
“The question presented, therefore, clearly is upon the constitutionality and propriety of the federal government assuming to enter into a novel and vast field of legislation, namely, that of providing for the care and support of all those among the people of the United States who by any form of calamity become fit objects of public philanthropy,” Pierce said.
Pierce said he could not find any authority in the Constitution for “making the federal government the great almoner of public charity throughout the United States.”
Pierce argued in a later veto message that the Constitution does not authorize the government to build hospitals or engage in other general-purpose public works projects, such as the construction or repair of turnpikes and bridges.
Germany makes waves
C.D. Babcock (National Underwriter file photo)
The German empire influenced policymakers throughout the world, including the United States, by implementing a sickness-related income protection program Jan. 1, 1891, and a sickness program that paid for people to get care through local “clubs” in 1893.
Benjamin Harrison’s Labor Department sent a long report on German compulsory social insurance programs to the Senate on Feb. 14, 1893.
Many Americans admired the German experiments with social insurance. Others viewed the programs as frightening examples of socialism run amok.
In 1912, Theodore Roosevelt’s Progressive Party included a worker sickness insurance proposal in its campaign platform.
In February 1915, C.D. Babcock, secretary of the Insurance Economics Society, warned in an article published in National Underwriter that readers must confront a “proposal for “compulsory health insurance” that “came upon us full-flowered and unheralded out of the depths of that mysterious vacuum from which college professors, socialists and all the vast horde of unassorted and unclassified dreamers derive their mezzo-tints of the millennium.”
Babcock noted that a compulsory health insurance constitutional amendment would be on the November ballot in California, and that compulsory health insurance bills were likely to come up in the legislatures in Massachusetts, Maryland, New Jersey and New York.
Most of the proponents “have had no practical knowledge of, or experience with, the burdens of the business man, the hardships and difficulties of the laborer, or the problems of the practitioner of medicine,” Babcock wrote.
Babcock argued that existing compulsory sickness insurance programs in Great Britain and Germany had done nothing to reduce poverty, mortality or the duration of sickness in those countries.
“On the other hand,” Babcock said, “we know that the compulsory system has demoralized medical practice in every country in which it has been placed in operation.”
In 1920, James Lynch of the New York State Industrial Commission called for creating a “universal health insurance” program that would pay for medical care and maternity care. Lynch recommended that workers pay half the cost of the health insurance program and that employers pay the other half.
Franklin Roosevelt is known for creating big social welfare programs, but he did not call for creating a large, federal public health insurance program. Instead, he recommended beefing up national preventive care programs and providing more support for state and local health departments.
Harry Truman did promote a broad federal health insurance program.
On Nov. 19, 1945, soon after World War II, Truman told Congress he was backing the Wagner-Murray-Dingell universal health insurance bill.
In 1946, Truman said the country should create a compulsory prepaid health care program that would be part of the social insurance system.