I’m giving a talk tomorrow to the first year medical students about financing health care. This is a talk I give every year, takes about an hour and a half, and it will be all of the information they get on this topic from our medical school for the next 3 1/2 years. The talk tracks health care financing from no insurance to the development of private “insurance,” public payment,and proceeds to the system as it is evolving as a consequence of the Affordable Care Act.

If you’re interested in why things are as crazy as they are, I refer you to The Social Transformation of American Medicine. This book, written in the 1980’s, is still the best resource for this subject matter. Written with attention to context, Paul Starr discusses the transition from a cottage industry which relied on patients paying cash (or other medium of exchange) into, well,  a cottage industry where large swaths of the population did not have access to care. For those who were not independently wealthy, it became clear early on that they would need to pool their money so that when the odd really bad thing happened, there was sufficient money from those to whom bad things had not happened to cover the costs. This was how private insurance came about. For some reason, major population groups were given access to alternative types of care (veterans, railroad employees).

The elderly were a special case. It was clear that every elderly person would need the service (at the time of Medicare’s passage 1 in 6 elderly went into the hospital on an annual basis) and they voted. Congress reported more mail on the subject of elderly access to health care than any other subject. The AMA, according to Mr Starr, was loath to give up the cottage industry aspect for this population. As a consequence, the law accommodated the needs of the elderly (access) and the desires of organized medicine (maintenance of the status quo) for this group. I refer you to the CMS website if you want to see the convoluted consequences of these compromises.

The poor were also a special case. Under the cottage industry model, the poor were the responsibility of the community. Care was delivered in public hospitals, by religious orders, by physicians delivering charity care, or more likely not delivered at all. Congress felt that the care was needed but was unwilling to take total control away from the states. As a consequence, Medicaid developed with a minimum level of services but allowed states to provide more services. Payment was a state-federal partnership. Medicaid thus has no long-term constituency (no one sees themselves as poor forever although many see themselves as old forever) and tends to be targeted for cuts by every governor, regardless of political affiliation.

All of these programs were tweaked over the intervening half century. Medicaid began to focus more on children and mothers-to-be in most states. As more illness moved outside of the hospital and the elderly couldn’t afford the medications, prescription drug coverage was added to Medicare. Cost containment has been a problem from the start, both in government programs as well as the private programs.

The New Republic has an amazing series about how the sausage was made to put together the Affordable Care Act, found here (subscription required). It turns out it was no different from the passage of Medicare or Medicaid—with one notable exception. When Medicare was being considered, the elderly were mobilized to assure its passage. The Affordable Care Act, by contrast, is focused on those who currently have no coverage and are unlikely to vote. It is disliked by seniors, possibly due to deliberate mis-information, and they vote. Interestingly, despite a rough start 45 years later Medicare is very popular and performs very well (although somewhat more expensively than it needs to). It may be that once the smell and taste of sausage is in the air the Affordable Care Act will be popular as well.

When I give the talk to the students, they politely listen. Although I am not old enough to have cared for sick elderly folks that were hidden in the attic for fear of exposing the family to medical bankruptcy, I am old enough to have cared for elderly  folks who were hospitalized because they could not afford life-saving medication. I still care for folks who have no insurance, and I have to game the system to get them needed care. I don’t know that the students appreciate how much easier Robert Kennedy and Lyndon Johnson (Medicare, Medicaid), George W. Bush (Medicare prescription coverage, expansion of the Community Health Centers) and Barack Obama (Affordable Care Act) have made their lives.

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