This is not going to be the full story as I just don’t have the time right now but there are a few items that I will try to add as I go along. The fee-for-service system served us well until about 1950. Paul Starr’s book, The Social Transformation of American Medicine, does a good of of telling the history. We must remember that doctors were unable to do much to influence the course of disease until 1900. Surgery came ahead of medicine here and, by 1867, a surgeon did more good than harm in most cases. That was the year that Lord Lister published his revolutionary paper on the prevention of infection. In 1905, John B Murphy published a chapter in WW Keen’s American Textbook of Surgery that defined the condition of acute appendicitis and explained how to make the early diagnosis.
I had a patient one time whose appendix had been removed in 1905 when he was 15. He complained to me about the appearance of the scar. I told him to just be grateful for a surgeon in Denver (where he lived at the time) who knew enough to get him through.
By 1945, antibiotics, first sulfa drugs, then penicillin, had cut the mortality rate of pneumonia from 30% to 5% in England. In 1948, Waksman had discovered that streptomycin cured tuberculosis. That was as great a triumph as that of Fleming and Florey, who discovered and purified penicillin. Consumption (tuberculosis) was the great scourge of civilization dating back to the invention of agriculture. Now medicine could really do something and the value of medical care, as opposed to health care, was rising.
When I was a medical student in 1962, the coronary care unit was not a feature of medicine. The Massachusetts General Hospital did not have a surgical ICU. There were no total hip replacements and no coronary bypass surgeries. In 1967, one of the great heroes of medical care (and unknown) Rene Favaloro performed the first coronary bypass surgery in man. Five years later, when I was a cardiac surgery trainee, it was becoming a common operation and ten years later, there were 70,000 performed in the US. By 2002, there were 657,000 CABG procedures in the US in spite of the fact that an alternative procedure, angioplasty and stenting, had appeared. Technology was racing ahead of any attempt to control it. CABG made people live longer. Total hip replacement, followed by total knee replacement, made the life more enjoyable. The level of medical care intensified. Cost quickly followed.
Fee-for-service medicine had a fatal flaw once it was combined with health insurance. Health insurance appeared during the 1930s. In Dallas, in 1929, the school teachers contracted with Baylor University to provide health care for their members. This was the beginning. In the 1930s, California doctors formed a group plan to provide medical care in return for a monthly fee of two dollars. The hospital associations had already followed the Dallas initiative and formed Blue Cross. Both of these programs were in response to the Depression when people had less money to spend on health care and the concept of insurance became more attractive. When combined with fee-for-service, a serious problem resulted.
In the new system, the patient was not responsible for the cost of his own health care. The doctor had a relationship with the patient but, until about 1978, the insurance companies were passive partners. This was true for several reasons. One, Blue Cross was owned by the hospitals and Blue Shield was owned by the medical associations. They were non-profit corporations, different in each state, and the boards of directors were dominated by providers, doctors or hospitals. Large insurance companies had also entered the business of health care in the late 1940s but they dealt with large corporations that bought coverage for their own employees, or with unions that had coverage for members, paid by employers. The employers and union officers were powerful as customers. For years, little scrutiny was devoted to the details of the care provided and increased costs were handled by increasing premiums. High technology and an aging population would shatter this complacency.
The advent of Medicare in 1965 brought a new player to the table. Lyndon Johnson, in order to assuage the fears of doctors about government medicine, adopted the solution of Aneurin Bevan, who wrote the legislation for the National Health Service in England in 1945. Beven said “He filled their mouths with gold,” referring to objections of hospital specialists to the NHS. That link, by the way, has an excellent summary of the issue of single payer health care. Johnson followed Bevan’s advice and made physician compensation generous. That would not last and it aggravated the problems but, initially, everybody was happy with Medicare. By 1978, that impression no longer applied to the government which was seeing double digit inflation everywhere, including health care.
In 1978, a new program called Professional Standards Review Organizations, or PSRO, appeared and the government was funding what were called “Peer Review Organizations” to oversee Medicare. They were everywhere advertised as concerned with quality but quality was always measured by cost so the physicians were completely cynical about their focus. We were obliged to participate and we quickly noticed that they attracted many critics of fee-for-service medicine. Some of them had failed to find success in caring for patients so they sought bureaucratic positions, some were idealists and some were political zealots.
The honeymoon was over.
More to follow.
Previous posts on this topic are under “Health Reform” in the right side column.