There was a time that doctors were paid in cash or some form of barter exchange.
“In 1900, the average American spent $5 a year on health care ($100 in today’s money). No one had health insurance, because you don’t need insurance for something that costs $5 a year.” (NPR)
Women had their babies at home. Jimmy Carter was the first President to be born in a hospital. Hospitals marketed themselves as safe and clean places for women to deliver their babies.
Insurance, paying a little each month for future unplanned medical treatment, grew out of the Baylor University Hospital in Dallas that eventually became Blue Cross. The insurance was marketed to groups of workers like school teachers. A pool of insured people spread out the financial risk.
Employer-based healthcare developed when companies needed a way to attract workers. After World War II wage and price controls were placed on businesses. To get around the restrictions, free health insurance was offered.
“In 1943, the Internal Revenue Service ruled that employer-based health care should be tax-free. A second law, in 1954, made the tax advantages even more attractive.” The legal ruling made it appealing to companies because the expenditure could be written off as a business expense, and employees who did not have to pay taxes on the value of the insurance they were receiving.
“By the 1960s,” economic historian Melissa Thomasson says, “70 percent [of the population]is covered by some kind of private, voluntary health insurance plan.”
As “health care became much more effective,” it also became “much more expensive. Clean hospitals, educated doctors and real pharmacological research cost money.”
What if we dropped all the government mandates and people only paid for the medical care they wanted with no middle-man? Could it work?
When Art Villa found out, after one too many boating accidents, that he needed a total knee replacement, he began asking around to see how much it would cost. The hospital near his home in Helena, Mont., would charge $40,000 for the procedure, he says. But that didn’t include the anesthesiologist’s fee, physical therapy or a stay at a rehabilitation center afterward. A 2015 Blue Cross Blue Shield study found that one hospital in Dallas billed $16,772 for a knee replacement while another in the same area charged $61,585.
It was in the midst of this confounding research that Villa, who’s 68, heard about the Surgery Center of Oklahoma, whose business model is different from that of most hospitals. There, the all-inclusive price for every operation is listed on the website. A rotator-cuff repair for the shoulder costs $8,260. A surgical procedure for carpal tunnel syndrome is $2,750. Setting and casting a basic broken leg: $1,925. . . . The catch is that the whole facility is cash-based. It doesn’t take insurance of any kind. (TIME)
The price for a full knee replacement would cost $19,000. That price includes “everything from airfare to the organization’s only facility, in Oklahoma City, to medications and physical therapy. If unforeseen complications arose during or after the procedure, the Surgery Center would cover those costs. Villa wouldn’t see another bill.”
The price would be lower if there more centers so patients would not have to travel far.