Assignment: Compulsory Health Insurance
prompted some employers to pay providers directly for the care received by their employees. The second-party system also created bad-debt concerns because some patients sought emer- gency care and could not afford to pay the bill after the care was provided. This latter concern in 1929 prompted Baylor University Hospital in Dallas, Texas, to offer schoolteachers prepaid hospital care for $6 per year. Over the next few years, several other hospitals offered similar arrangements to remain competitive with the Baylor plan, which later became the first Blue Cross plan. In 1933, Dr. Sidney Garfield began to provide prepaid medical care to employees who worked on the California aqueduct system, and in 1938 he provided prepaid medical care to workers on the Grand Coulee Dam. Garfield’s plan evolved into the Kaiser-Permanente health plan; Henry J. Kaiser was the employer who contracted with Dr. Garfield (Starr 1982).
The Great Depression in the 1930s made it difficult for employers to pay providers directly for the care received by their employees and for hospitals like Baylor to accept the risk associated with offering prepaid plans. The AMA softened its position on voluntary health insurance during the mid-1930s, but the organization stipulated that hospital ben- efits (such as the charge for the hospital room) and medical benefits (such as the doctor’s fee) be separate. For example, Blue Cross provided hospital benefits, and Blue Shield later provided medical benefits. The AMA remained adamantly opposed to compulsory health insurance and helped defeat proposals to include compulsory health insurance in President Franklin Delano Roosevelt’s Social Security Act in 1935.
growtH of HeAltH InsurAnce
The defeat of compulsory health insurance in 1935 under President Roosevelt and again in the late 1940s under President Harry S. Truman meant that health insurance in the United States would be largely voluntary and private. The type of early plan offered by Baylor University Hospital and Henry J. Kaiser was called a direct service plan (employers prepaid specific hos- pitals and physicians to provide care to their employees) and was characteristic of most health insurance plans through the 1940s. Direct service plans were really an extension of second-party payment, in that the employer prepaid the provider on behalf of the employee (see exhibit 5.3).
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