Vocabulary Flashcards: History and Structure of U.S. Health Care (Video Notes)

Introduction

• Knowledge of the history of health care is essential for understanding today’s medical delivery system.

• Historical foundations explain why the U.S. did not adopt a government-run national health care system as in Canada or Great Britain.

• The United States has predominantly a private health care industry with substantial government financing.

• Historical forces shaping U.S. health care delivery:

  • Cultural beliefs and values: Self-reliance; Welfare assistance for the needy.

  • Social makeup: Demographic shifts; Immigration; Health status; Urbanization.

  • Technological advances: Scientific research; New treatments; Training of health professionals; Facilities and equipment; Information technology.

  • Economic constraints: Health care costs; Private and public health insurance; Family incomes.

  • Political opportunism: President’s agenda; Political party ideology; Political maneuvers; Power of interest groups; Laws and regulations.

  • Ecological forces: New diseases; Drug-resistant infections; Global travel and transport.

• The agents of change interact in complex ways (example): President Obama’s political agenda helped enact the Affordable Care Act (ACA) in 2010 via ideological and political maneuvering, despite economic constraints.

• American beliefs (capitalism, self-reliance, limited government) have shielded the system from a full government takeover; compromises produced Medicare/Medicaid and other public programs for defined groups.

• Advancements in science and technology increased specialization in medicine, with primary care given secondary importance.

• This chapter traces evolution through four historical periods, each marking a major structural change:

  • Preindustrial era (mid-18th century to late 19th century)

  • Postindustrial era (late 19th century)

  • Corporate era (started ~1970s, continuing into the 21st century)

  • Era of health care reform (politically motivated reforms like the ACA; ongoing debates about repeal/replace)

Four Historical Periods of U.S. Health Care Delivery

• Preindustrial era: mid-18th century to late 19th century

• Postindustrial era: late 19th century onward

• Corporate era: developments starting around 1970 and continuing into the 21st century

• Era of health care reform: politically motivated reforms (e.g., ACA); ongoing uncertainty about future direction

Medical Services in Preindustrial America

• From colonial times to the late 1800s, U.S. medical education and practice lagged behind Britain, France, and Germany.

• Medicine had a domestic, not professional, character; procedures were primitive.

• Few hospitals; no health insurance (private or public); care paid out of pocket; free market in delivery of services.

• Main characteristics (Exhibit 3.2):

  • Medical training not grounded in science; primitive procedures; intense competition because almost anyone could practice medicine.

  • People relied on family, neighbors, and publications for remedies; physicians’ fees paid out of personal funds; health care delivered in a free market.

  • Hospitals few, in big cities; poor sanitation; unskilled staff; almshouses served destitute and disruptive elements; pesthouses quarantined contagious diseases.

  • Dispensaries provided outpatient charity care.

• Medical training (until ~1870): apprenticeship with practicing physicians; few medical schools; many schools formed by small groups of physicians.

  • 42 such schools in operation in 1850.

  • MD degree often conferred without high school prerequisites; curriculum low in science; laboratories non-existent; clinical observation limited.

• Medical practice: viewed as a trade rather than a profession; no rigorous training, residency, licensing, or board exams; primitive therapies (bleeding, emetics, purgatives, enemas).

  • Mental illness treated with inhumane methods; Dr. Benjamin Rush advocated bleeding, purging, hot/cold baths, mercury.

  • Surgery limited (no anesthesia or antisepsis); stethoscope, X-ray, clinical thermometer not yet available; diagnosis based on senses and experience.

  • Clergy and tradesmen (barbers, tailors, etc.) often provided medical services; free entry led to intense competition and lower physician status.

  • Rural self-reliance: families used folk remedies; paying for care out of pocket limited access; long travel times to reach physicians.

Medical Institutions in Preindustrial America

• Before the 1880s, the U.S. had only a few isolated hospitals in major cities; general hospital expansion occurred earlier in Europe.

• U.S. hospitals: deplorable sanitary conditions; nurses unskilled; care often riskier in hospital than at home; hospitals seen as places of last resort.

• Almshouses (poorhouses) were the forerunners of hospitals and nursing homes; provided food, shelter, and basic nursing care for the destitute and disruptive.

• Asylums (lunatic asylums) were for untreatable, chronic mental illness; early psychiatric care included physical and psychological techniques (e.g., tranquilizer chair, spinning gyrator).

• Pesthouses isolated contagious diseases to contain spread.

• Dispensaries functioned as outpatient clinics offering free basic care and drugs to ambulatory patients; staffed by young physicians/students for clinical experience; later evolved into today’s free/charitable clinics (approx. 1,400 nationwide).

Medical Training (Expanded)

• Apprenticeship dominated until ~1870; many preceptors themselves poorly trained.

• 1850: ~42 medical schools; low-cost operation; profitable; often affiliated with local colleges to confer degrees.

• MD program: 2 years of study; 3–4 months per year during first year, then largely repeating the same content in second year.

• Fees paid per course; low standards to attract students; limited scientific curriculum; no laboratories or research focus.

Medical Practice (Expanded)

• Early practice resembled a trade; lacks clinical standards, licensing, or formal residency.

• Therapeutics: bleeding, emetics, purgatives; mental illness misinterpreted as aberrant behavior; humane care limited.

• Surgery: limited by lack of anesthesia and antiseptic techniques; diagnostic tools scarce (no stethoscope, X-ray, microscope).

• Physicians relied on lay networks; many professions and tradesmen offered medical remedies; authority fragmented.

Hospitals and Health Care Institutions (Expanded)

• Almshouses: urban centers to care for the destitute; often housed various roles (infirmary, old-age facility, mental asylum, homeless shelter, orphanage).

• Asylums: state-run for chronic mental illness; used coercive techniques; aim to restore rational thinking.

• Pesthouses: quarantine contagious diseases to protect cities.

• Dispensaries: outpatient care for those who could not pay; staffed by young physicians/students; forerunners of modern free clinics.

Postindustrial America: Key Developments (Overview)

• Growth of medical profession aided by urbanization, scientific advances, and reforms in medical education.

• Private practice became dominant; physicians organized into a cohesive profession, moved toward specialization, gained power/prestige.

• Hospitals emerged as repositories for high-tech facilities and equipment; private and public health insurance began to take root.

• Notable developments (Exhibit 3.3):

  • Urbanization

  • Scientific discoveries and medical applications: advanced science-based treatments

  • Medical education reform

  • Rising health care costs; imbalance between specialists and generalists

  • Organized medicine: control over medical training; licensing laws; opposition to national health insurance; private entrepreneurship in practice

  • Hospitals becoming true medical care institutions; reform of mental health care; growth of private health insurance; creation of Medicare and Medicaid

Groundbreaking Scientific Discoveries (Exhibit 3.4)

• Anesthesia and its impact on surgery: nitrous oxide used around 1846; ether and chloroform followed; surgeons valued for speed and capability.

• Handwashing and aseptic technique: Ignaz Semmelweis (~1847) linked to puerperal fever; practice of handwashing reduced mortality.

• Germ theory and microbiology: Louis Pasteur (1860s) demonstrated sterilization and air exposure controls.

• Antiseptic surgery: Joseph Lister (1865) popularized antisepsis with carbolic acid.

• X-rays and radiology: discovered by Wilhelm Roentgen (1895); radiology became a medical specialty.

• Penicillin: Alexander Fleming (1929) discovered antibacterial properties.

Postindustrial Era: Benefits and Dilemmas

• Benefits: science-driven practice; increased specialization and availability of advanced technologies.

• Undesirable effects: overemphasis on technology and specialization; higher costs without proportional health status gains; underemphasis on primary care and continuity of care.

• Other nations’ emphasis on primary care (continuous care by PCPs and nurses) contrasted with the U.S. focus on specialization.

The American Medical Association (AMA)

• The AMA galvanized the medical profession and protected physicians’ interests; organized medicine united physicians against uncoordinated practice.

• Founded in 1847; strength grew by delegating power to county/state societies; controlled medical education; supported licensing laws; opposed national health insurance.

• In the postindustrial era, private practice remained dominant; employment by hospitals/insurance companies was discouraged to preserve physician independence.

• AMA’s influence helped raise physician incomes and consolidate professional power; laws restricted drug access to prescriptions by physicians.

Educational Reform (1870–Early 1900s)

• Reform began around 1870 as medical schools affiliated with universities.

• Harvard Medical School (1871): extended academic year (4 → 9 months); length of education (2 → 3 years); introduced lab instruction and clinical courses (chemistry, physiology, anatomy, pathology).

• Johns Hopkins University (1893): graduate-based medical education requiring college degree; residency training in teaching hospital; model for other schools.

• Flexner Report (1910): critical evaluation of medical schools; standardization, accreditation, and closure of substandard schools; AMA Council on Medical Education promoted licensing standards.

• Other milestones: Howard University School of Medicine (1869) and Meharry Medical College (1876) established to train Black physicians post-Civil War.

Development of Hospitals and Mental Health Reform

• Hospitals: centralization of expensive technology; hospitals became core centers for diagnosis, treatment, and education of personnel.

• Sanitation improvements and professionalization of nursing contributed to better patient outcomes.

• Physicians largely dictated hospital affairs; hospital employment of physicians remained relatively limited historically (hospitalists as a modern phenomenon).

• Mental health reform: federal policy promoted psychiatry education/research; by the 1960s, community mental health and deinstitutionalization emerged, aided by new drug therapies.

• Olmstead v. L.C. (1999): required states to provide community-based services where appropriate for people with mental illness; today mental health care emphasizes community-based services except for severe cases.

History of Health Insurance: Private Roots and Public Programs

• Early private insurance emerged during the industrialization era; private voluntary health insurance expanded as care costs rose.

• Kerr-Mills Act (1960): federal grants to states to extend welfare health services to low-income elderly; faced implementation challenges and stigma concerns; deemed ineffective after 3 years.

• Medicare/Medicaid birth: Lyndon Johnson’s Great Society (1964) led to three-part system in 1965: Medicare Part A (hospital/nursing home), Part B (physician/outpatient), Medicaid (means-tested; state-administered with federal matching funds).

• Emergence of private insurance: Blue Cross/Blue Shield (hospital coverage via nonprofit plans) and Blue Shield (physician services) emerged during/after the Great Depression; AMA initially endorsed hospital plans but opposed physician-only plans; the private system evolved with hospital-based and physician-based coverage.

• Blue Cross (1929 Baylor University Hospital plan) and Blue Shield (1939 California Medical Association plan) laid the groundwork for employer-based coverage and a larger insurance market.

• 1940–1950: dramatic rise in hospital insurance coverage (from about 9% to 57% of the population) as employers offered insurance as a fringe benefit during wage controls and tax policies.

• 1974: Blue Cross and Blue Shield plans began merging; today they function as joint entities or closely aligned organizations.

Employment-Based Health Insurance

• Three key factors behind employer-based coverage:

  • World War II wage freezes pushed firms to offer health insurance to attract/retain workers.

  • 1948 Supreme Court ruling made employee benefits a legitimate part of union-management negotiations.

  • 1954 Internal Revenue Code amendment made employer-paid health coverage tax-exempt, making it an attractive fringe benefit.

• Over time, employment-based coverage became the primary vehicle for health care financing in the U.S.

Failure of National Health Insurance in the United States (Exhibit 3.5)

• Key reasons for failure:

  • Labor and political stability differences: Europe had more labor unrest; the U.S. decentralized system provided less federal control.

  • Decentralization limited direct federal regulation of social policy.

  • The German system was condemned during World War I; the term socialized medicine became a pejorative label for national health insurance.

  • AMA opposition and political lobbying opposed broad government involvement; other groups also resisted.

  • Middle-class American beliefs in capitalism, self-determination, and distrust of big government.

  • Tax concerns: willingness to support tax-funded universal coverage was lacking.

Medicare and Medicaid: Creation and Differences (Exhibit 3.6)

• Before 1965: private insurance dominant; the elderly, unemployed, and poor relied on scarce public programs or charity.

• Forand Bill (1957) initiated momentum to include hospital and nursing home care with Social Security; Kerr-Mills Act provided federal grants to extend services but implementation lagged; deemed ineffective.

• 1964–1965 Great Society enacted Medicare and Medicaid:

  • Medicare: Part A (hospital insurance) and Part B (physician/ outpatient); no means test; uniform nationwide program attached to Social Security.

  • Medicaid: means-tested, state-administered with federal matching funds; varies by state; stigma of public welfare.

  • Part C (managed care) and Part D (prescription drugs) added later (Medicare 1997 Part C; 2003 Part D).

• Key distinctions:

  • Medicare: nationwide, federal program; eligibility is elderly or certain disabled/ ESRD individuals; funded by payroll tax, general revenues, and premiums.

  • Medicaid: state-run with federal funding; eligibility based on income; supports low-income individuals.

Medicare and Medicaid: Expansion and Impact

• Soon after inception, Medicare/Medicaid coverage expanded rapidly:

  • By 1970: roughly $20.4\%$ of Americans on Medicare and $17.6\%$ on Medicaid.

• Costs and regulation:

  • Expansion increased government regulation of health care delivery and reimbursement; the regulatory reach of federal programs grew over time.

• Administrative structure:

  • Health Care Financing Administration (now Centers for Medicare & Medicaid Services) created in 1977 to manage Medicare/Medicaid separately from SSA.

• Economic impact (1965–1970): GDP growth $7.6\%$ per year, while health care expenditures grew at much higher rates: federal $30\%$, state/local $12.5\%$ (relative to GDP growth).

Health Care in the Corporate Era

• Late 20th century to early 21st century: rise of large corporations, rapid advances in communications/transport/trade; globalization affected health care delivery.

• Corporatization of health care delivery:

  • Managed care becomes primary source of insurance and delivery; huge purchasing power enables cost containment with discounts and care-controls.

  • Providers consolidated into larger integrated delivery systems (IDSs) to offer full service arrays: inpatient, outpatient, primary care, multispecialty outpatient, home health, long-term care, rehabilitation.

  • Hospitals and physician groups consolidate; physicians often become employees of hospitals/large corporations; physicians’ autonomy challenged by corporate structures.

• Information revolution:

  • Telemedicine and e-health transform care delivery; distant examinations, telesurgery, online access to information and services.

  • Patients gain more decision-making power via Internet access to information.

• Globalization:

  • Cross-border trade in health services includes four modes (Mutchnick et al., 2005):

  • Cross-country telemedicine and outsourcing of certain services (e.g., teleradiology) with US-licensed radiologists overseas.

  • Medical tourism: patients travel abroad (e.g., India, Thailand) for procedures at lower costs.

  • Foreign direct investment in health services: U.S. providers and equipment/services operate internationally (e.g., Chindex in China; Johns Hopkins Medicine International; Cleveland Clinic; Duke Global Health).

  • Health professionals migrate to higher-demand economies, improving access in some places but creating shortages in others.

• Consequences: increased complexity and consolidation; tension between corporate interests and professional autonomy; global interdependence in health care provision.

Era of Health Care Reform (ACA and Beyond)

• ACA (2010) marked a major reform aimed at expanding health insurance to the uninsured; politically contentious and widely litigated.

• Political dynamics:

  • ACA had broad support within the Democratic coalition; the AMA supported the legislation, though the AMA’s influence has waned since its heyday.

  • Supreme Court decisions shaped ACA implementation: 2012 upheld individual mandate as a tax; 2012/2013 decisions limited federal coercion over state Medicaid expansion.

• Religious liberty issues and contraceptive mandate:

  • Burwell v. Hobby Lobby Stores, Inc. (2014): for closely held corporations with religious objections, ACA contraceptive mandate violated Religious Freedom Restoration Act.

  • 2017 exemptions to contraceptive mandate expanded for certain entities with religious/moral objections; challenged by states; Little Sisters of the Poor v. Pennsylvania (2020) upheld the exemptions.

• Repeal/replace attempts and litigation:

  • 2017 executive order to suspend individual mandate penalties; 2019 repeal of the individual mandate penalty under the Tax Cuts and Jobs Act; Texas v. United States and California v. Texas addressed constitutionality; 2021 California v. Texas (SCOTUS) dismissed challenges while preserving ACA provisions.

• Ongoing efforts and innovations:

  • Association health plans (AHPs) expansion efforts; short-term health plans sourced to bypass some ACA requirements; court rulings in 2019 affected AHP rules; some states limited plans to 3 months.

Health Care Reform in Flux

• ACA led to a substantial reduction in the uninsured, especially among low-income individuals who gained Medicaid expansion and private tax credits.

• Despite gains, millions remain uninsured; long-term policy direction uncertain.

• Post-ACA era saw renewed debates about expanded coverage versus cost containment; political dynamics continued to shape reform prospects.

• COVID-19 (starting 2020) imposed new public health priorities and highlighted gaps in coverage and access; ongoing policy considerations focus on expansion, costs, and system resilience.

Conclusion

• Over a little more than a century, U.S. health care transformed from a primitive, family-based craft to a technology-driven industry and the largest sector in the economy.

• Private and public insurance mechanisms evolved, yet eligibility criteria constrain access for many.

• Medicare, Medicaid, and other public programs cover only those who meet criteria; attempts to create universal national health insurance repeatedly failed.

• The late 20th and early 21st centuries are characterized by a corporatized health care landscape: large managed care and integrated delivery organizations, with a growing information revolution enabling telecommunication-powered care.

• Globalization introduced cross-border care, outsourcing, foreign direct investment, and professional migration, adding both opportunities and ethical questions about resource distribution and equity.

• The ACA inaugurated a new era of health care reform, but political, legal, and financial challenges persist; the future direction of U.S. health care remains uncertain and is likely to be shaped by ongoing reforms, technological advances, and evolving values about health care as a social good.