Must read!---A Short History of American Medical Insurance - Imprimis

A Short History of American Medical Insurance - Imprimis:
"Perhaps the most astonishing thing about modern medicine is just how very modern it is.
More than 90 percent of the medicine being practiced today did not exist in 1950. 
Two centuries ago medicine was still an art, not a science at all.
As recently as the 1920s, long after the birth of modern medicine, there was usually little the medical profession could do, once disease set in, other than alleviate some of the symptoms and let nature take its course.
It was the patient’s immune system that cured him—or that didn’t...
...But hospitals had a financial problem from the very beginning of scientific medicine.
By their nature they are extremely labor intensive and expensive to operate.
Moreover, their costs are relatively fixed and not dependent on the number of patients being served. To help solve this problem, someone in the late 1920s had a bright idea: hospital insurance.
The first hospital plan was introduced in Dallas, Texas, in 1929.
The subscribers, some 1,500 schoolteachers, paid six dollars a year in premiums, and Baylor University Hospital agreed to provide up to 21 days of hospital care to any subscriber who needed it...
...The second dislocation was that hospital insurance did not provide indemnity coverage, which is when the insurance company pays for a loss and the customer decides how best to deal with it.
Rather than indemnification, the insurance company provided service benefits.
In other words, it paid the bill for services covered by the policy, whatever the bill was.
As a result, there was little incentive for the consumer of medical services to shop around.
With someone else paying, patients quickly became relatively indifferent to the cost of medical care.
...There is no price competition to keep prices in check.
Predictably, the medical profession began to lobby in favor of retaining this system.
In the mid-1930s, as Blue Cross plans spread rapidly around the country, state insurance departments moved to regulate them and force them to adhere to the same standards as regular insurance plans. Had hospital insurance come to be regulated like other insurance, those offering it would have begun acting more like insurance companies, and the economic history of modern American medicine might have taken a very different turn.
But that didn’t happen, largely because doctors and hospitals, by and for whom the plans had been devised in the first place, moved to prevent it from happening.
...In recent years, hospital use has been falling steadily as the population has gotten ever more healthy and surgical procedures have become far less traumatic.
The result is a steady increase in empty beds.
There were over 7,000 hospitals in the U.S. in 1975, compared to about 5,500 today.
But that reduction has not been nearly enough.
Because of the cost-plus way hospitals are paid, they don’t compete for patients by means of price, which would force them to retrench and specialize.
Instead they compete for doctor referrals, and doctors want lots of empty beds to ensure immediate admission and lots of fancy equipment, even if the hospital just down the block has exactly the same equipment.
The inevitable result, of course, is that hospital costs on a per-patient per-day basis have skyrocketed..."
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