Module Components

• Overview
• Assignments

Topics

• The Imperfect Health Care Market
• Market Failure, Government Regulation, and Public Policy
• Public Health Insurance - Medicare
• Public Health Insurance - Medicaid

NDNP 803 - Executive Leadership and Healthcare Economics

Module 6: Role of the Government in Health and Medical Care

History of Governmental Involvement

The push for increased government involvement in the administration of health care in the United States dates back to 1912, when presidential candidate Theodore Roosevelt, campaigning on the Progressive Party ticket, called for the establishment of a national health insurance system modeled on what already had been established in Germany.

The proposal languished until the Great Depression, when a 1932 a governmental panel known as the Wilbur Commission reported that millions of Americans were unable to afford adequate medical coverage and recommended the expansion of group medical practices and group prepayment systems wherein the financial risks associated with potential illness or disability could be shared by many people who were covered by the same insurance company.

In 1934, President Franklin Roosevelt's working groups on Social Security and unemployment insurance devoted some time to discussing the feasibility of a national health insurance program that would cover every American. But because of the financial crisis that continued to grip the nation and because the American Medical Association (AMA) was strongly opposed to proposals for government-run health care, efforts to promote legislation toward that end failed to generate any traction.

In November 1945, President Harry Truman called on Congress to initiate a ten-year plan to transform the existing American health care system into one where coverage would be compulsory for all people. The American Medical Association warned that such “socialized medicine” would be detrimental to Americans' health care, and the plan ultimately stalled in Congress.

With the outbreak of the Korean War in June 1950, the Truman administration and Congress were forced to turn their attention away from the health care debate. Nonetheless, the issue of government-provided medicine was now an established part of the political dialogue in America. And the simple fee-for-service relationship whereby patients had paid doctors out of pocket was being replaced by insurance coverage.
By 1951, some 77 million U.S. residents had purchased some type of voluntary accident or sickness insurance -- an increase of 11 million over the previous year's total, and nearly 40 million more than World War II-era levels.

In a televised speech to nearly 20,000 people at New York's Madison Square Garden in May 1962, President John F. Kennedy advocated legislation to provide health benefits to Social Security recipients. Said Kennedy: “This bill serves the public interest. It involves the government because it involves the public welfare. The Constitution of the United States did not make the President or the Congress powerless. It gave them definite responsibilities to advance the general welfare, and that is what we're attempting to do.” The plan, however, stalled in Congress once more.

On July 31, 1965, President Lyndon Johnson signed legislation creating the Medicare and Medicaid programs to provide comprehensive health care coverage for people aged 65 and older, as well as for the poor, blind, and disabled. By 1968, these new government programs had caused healthcare-related spending nationwide to skyrocket and to become a major political concern. America's $50 billion in medical expenditures for that year was 25 percent higher than the corresponding figure for 1965; 500 percent higher than the figure for 1948; and 1,250 percent higher than the 1929 total.

In 1971, President Richard Nixon backed a proposal requiring employers to provide a minimum level of health insurance for their workers while also maintaining competition among private insurance companies. By contrast, Senator Ted Kennedy championed the so-called Health Security Act, a universal single-payer health reform plan directed and financed entirely by the federal government. This marked the start of a career-long effort by Kennedy to overhaul the country's health care system.

When Jimmy Carter was elected U.S. President in 1976, he promptly called for “a comprehensive national health insurance system with universal and mandatory coverage.” But when the nation fell into a deep recession soon after Carter took office, health care was relegated to the “back burner” of Congressional concerns.

In 1986 Congress passed the Emergency Medical Treatment and Active Labor Act, which required hospitals to screen and stabilize all emergency-room patients. It also proposed a test of the Consolidated Omnibus Budget Reconciliation Act, better known as COBRA, which allows employees to pay for coverage by their group health plan for up to 18 months after losing their jobs.

In July 1988, Congress passed (and President Reagan signed into law) the Medicare Catastrophic Coverage Act (MCCA), the most significant health legislation since 1965. Designed to protect older Americans from financial ruin due to illness or disability, the MCCA, financed entirely by a surtax imposed upon the nation's 33 million Medicare beneficiaries, set ceilings on Medicare patients' expenditures on hospitals, doctors, and prescription drugs. But within a few months after the bill's passage, many hundreds of thousands of affluent senior citizens grew resentful over having to pay a surtax to help finance a program that merely duplicated benefits which many of them had already been receiving prior to MCCA's enactment. Increasingly large numbers of protesters began to assail members of Congress at town hall meetings in virtually every congressional district, and, in a dramatic legislative reversal, Congress overwhelmingly repealed the program in December 1989.

In 1993 President Bill Clinton launched an effort to provide universal health care coverage based on the idea of “managed competition,” where private insurers would compete in a tightly regulated market. The plan called for everyone, whether or not they were employed, to carry health insurance and to contribute to its cost, though government subsidies would be made available for the poor. Moreover, the plan required employers to bankroll 80 percent of all policy premium costs for workers and their families.

In 1997 President Bill Clinton signed legislation to create the State Children's Health Insurance Program (SCHIP), an initiative designed to provide federal matching funds (to states) for health insurance covering children whose family incomes were modest but too high to qualify for Medicaid. Because SCHIP's funding formula gave states an incentive to add middle-income youngsters and even adults to its rolls, the program's costs spiraled out of control. By 2008, the SCHIP program covered not only 7 million children but also 600,000 adults in fourteen states; in six states, more SCHIP money was being spent on adults than on children -- even as the program had still failed to enroll almost 2 million children who qualified financially.

In December 2003, President George W. Bush signed the Medicare Modernization Act, which expanded Medicare to include prescription drug coverage. Democrats derided the President's legislation as a sham that inevitably would destroy Medicare, and maintained that theirs was the only political party that could be trusted to protect the program. “Who do you trust?” Senator Edward Kennedy shouted. “The HMO-coddling, drug-company-loving, Medicare-destroying, Social Security-hating Bush administration? Or do you trust Democrats, who created Medicare and will fight with you to defend it -- every day of every week of every year?”

During his 2008 presidential campaign, Democrat Senator Barack Obama promised to bring about sweeping health-care reforms for the estimated 47 million Americans he claimed could not afford health insurance. Obama had long advocated the creation of a federally administered, government-run, “single-payer” health care system.

The House of Representatives passed the Affordable Health Care for America Act on March 21, 2010. The margin of victory for the legislation was 220 to 215. In the final tally, 219 Democrats voted for the bill, and 39 voted against it.