The History of Health Insurance, Rashomon-Style

rashomon_poster_2In Akira Kurosawa’s 1950 film Rashomon, the story of a crime is told three times from the perspective of three different witnesses/participants. Due to the biases of each storyteller, the details of the three accounts fail to align, ultimately leaving the film’s narrator – and the viewer – unsure about what truly happened in the central incident. Historians have their own version of the Rashomon effect, filtering past events and organizing historical narratives according to their own beliefs, whether the influence is subtle or overt.

In an attempt to offset any such potential bias in his Regis J. Fallon Lecture at the University of Chicago, health law expert Timothy Jost of Washington and Lee University School of Law chose to present three parallel narratives in his discussion of the history and future of American health insurance. Despite a relatively brief run as a major player in our country’s health care system (“there are many people alive today in Chicago who were born before modern health insurance arrived,” Jost said), health insurance has quickly risen to a place of great importance, as demonstrated by the industry’s role in last year’s passing of the Affordable Care Act. The goal of that legislation to make sure that all American citizens have health coverage will likely be a key turning point in the story of American health insurance. But to understand which direction health insurance will travel after the ACA is fully implemented, you need to understand how it got there in the first place, for which Jost offered three tales.

1. A Failure of Socialized Medicine

In this tale, the public’s push for universal government health care was repeatedly rebuffed by special interests and conservative politicians throughout the 20th century. Though incremental victories were achieved, from the push by labor unions for employer-provided health benefits to the passage of Medicare and Medicaid during the Johnson Administration, the century ended with a whimper for socialized medicine advocates thanks to the doomed health care reform of the Clintons. Opposition from organized medicine, small-government Republicans, and an increasingly powerful private insurance industry thwarted the push to join other developed countries who had switched over to government-run health care after World War II – “for two decades, we saw no progress,” Jost said.

2. A Failure of Market-Driven Medicine

But according to the second narrative, this lack of progress was good news. From this perspective, Americans are “overinsured…because of misguided government policies that have encouraged private insurance for routine as well as catastrophic medical costs,” Jost said. By placing the cost burden on employers and government programs, the American health insurance system has severed consumers from the true price of their own health care – the main culprit, many economists believe, for the exponential rise in medical spending over the last century. Under this narrative, the steering wheel of health care should be handed back to the market with a strategy of tax credits, vouchers, and the roll-back of Medicare – key components of the current Republican budget plan.

3. A Messy Compromise That Kind of Works

Mixing the two narratives together creates a third storyline, one that Jost seemed to prefer despite describing it as “muddling through to moderate success.” In this history of health insurance, the industry grew haphazardly over the 20th century, incorporating elements of both government- and market-driven approaches according to the fickle political winds of different eras. From the birth of modern health insurance as “health services plans” (guaranteeing coverage of hospital costs) in Dallas in 1929, through the expansion of coverage to all types of care including routine visits, pharmaceuticals, and even dental, the unlikely bedfellows of consumer demand and labor union pressure combined to nurture the explosive growth of the industry. And for a while, this worked, Jost said – 82.4 percent of the population held private heath insurance in 1980, the peak of such coverage.

“The United States seemed to have solved, through private initiative supplemented by public programs…the problem of health security that other nations had addressed through social insurance or public provision,” Jost said.

But even in those heady days of success, this slapdash American health care system was beginning to unravel, he said. As costs spiked over the 80s, 90s, and 00s, insurance gaps were opened up and employers sought new ways of sharing the cost of coverage with their employees. Into this crisis stepped last year’s PPACA legislation, with the dream of providing health care coverage for all Americans. Even if those efforts succeed (Jost quoted CBO estimates that 32 million uninsured Americans will receive coverage, but 20 million will still be left without), the bill should not be viewed as a victory for either the socialized medicine or market-driven perspectives, he said, but as a continuation of the third storyline.

“In the end, the Affordable Care Act is best understood in terms of the long American tradition of expanding private health insurance coverage and filling caps with public coverage,” Jost said. “It thus fits within the narrative of the quest for universal coverage, and can also be understood as an attempt to use market forces to control health care costs. But it’s best understood as one more chapter in the ongoing story of keeping our patchwork private/public health insurance hobbling along. In spite of the claims of both it’s supporters and detractors, it is not a revolution, but rather one more chapter in the ongoing histories of American health insurance.”

About Rob Mitchum (525 Articles)
Rob Mitchum is communications manager at the Computation Institute, a joint initiative between The University of Chicago and Argonne National Laboratory.
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