Brief History of Medical Insurance
Injury and illness have always posed financial risks to people, and the idea of moderating the risks by spreading them out over time and over groups of people has been around since the days of the Roman Empire, when artisans organized rudimentary forms of medical insurance. The craft guilds in medieval England (the medieval period lasted from about 500 to about 1500) also insured members against losses due to illness and injury, and the practice eventually led in the nineteenth century to English mutual aid societies (voluntary organizations that collected dues and assisted members in need). The idea of mutual aid spread through Europe alongside industrialization, though participation was low and the organizations were not able to pay adequate benefits. Germany passed the first national compulsory medical insurance law (under which the government was required to make health care accessible to everyone) in 1883. By 1920 many European countries had nationalized medical insurance (governments used taxes to run hospitals and pay doctors) in place. Today more than 60 countries have compulsory governmental medical insurance programs.
In the United States the first mutual protection association was established in San Francisco in 1851. In the 1870s railroad and mining industries began hiring company doctors to treat workers. The department store chain Montgomery Ward developed one of the first group medical insurance plans (in 1910). Before 1920 most Americans spent relatively little on medical treatment. A household’s main illness-related expense was lost wages from missed work. Private companies did not offer medical insurance. Proposals for universal health care were defeated by physicians and pharmacists, who feared their businesses would suffer, and by a lack of perceived need on the part of the population.
An increased demand for medical care in the United States in the 1920s coincided with advances in medical science and higher standards for physician licensing; medical costs began to rise. In 1929 Blue Cross established the first prepaid hospital care plan for Dallas public school teachers, who paid 50 cents a month for a guarantee of 21 days of hospital services. These plans became more common during the Great Depression (which lasted from 1929 to about 1939), when patients and hospitals both had less income. The first prepaid plan that covered physicians’ services was established in 1939 by physicians hoping to fight both hospital control of insurance and those who promoted compulsory insurance. The American Medical Association lobbied to defeat nationalized medical insurance proposals, including one made by President Harry S. Truman (1884–1972), in 1935 and 1949.
During World War II (1939–45) the U.S. government began providing tax benefits to employers and workers who participated in private medical insurance plans. The number of employers offering medical insurance through the workplace grew, and through these plans insurance companies targeted a relatively young, healthy population that would be profitable to work with. The number of people with medical insurance rose from fewer than 20,000 in 1940 to more than 120,000 in 1960. By 1959 more than 75 percent of Americans had medical insurance. In his 1960 presidential campaign John F. Kennedy (1917–63) supported the Medicare program, which, along with Medicaid, was signed into law by President Lyndon B. Johnson (1908–73) in 1965. Former president Truman was the first to enroll in Medicare.