In the Beginning, Health Benefits Covered Basic Services • Hospital care was major focus of early plans • Deductibles, instead of co-pays • Limits of plan, limits of available medical care This module will start with the most common health benefit designs of the 1940s. Though there were hospital pre-paid plans in the 1930s, these plans were not widespread. The 1930s plan offered by the Baylor University Hospital in Dallas Texas cost 50 cents per month and covered up to 21 days of semi-private hospitalization per year. Other single-hospital plans were offered throughout the country. The Great Depression overshadowed the 1930s. Group health insurance did not really take off until the 1940s, when World War II led to wage controls. The 1940s health plans, like the early prepaid hospital plans, also concentrated on paying for hospital care. The hospital was where the most expensive care was given. Plans were usually referred to as “Major Medical”. The kinds of care that people could get at a physician office were limited to physical exams and taking samples for laboratory tests. Even as late as 1966, only 37.9 percent of the population had health insurance that covered a physician office or home visit. In a 1967 Social Security Bulletin, Louis B. Reed describes “the main types of personal health care, [as] including at, a minimum: hospital care ; physician services for surgery, in-hospital medical visits, out-of-hospital X-ray and laboratory examinations, and office and home visits; dental care ; out-of-hospital prescribed drugs; visiting-nurse service; private-duty nursing; and care in extended-care facilities and/or nursing homes.” Reed estimated that 85 percent of all persons under age 65 had coverage for hospital care and 78 percent were covered for surgical expenses. Although 40 percent had some coverage for office and home visits and 36 percent had benefits for out-of-hospital prescribed drugs, plans typically had a deductible on these services. Deductibles were set high enough that few people collected a benefit for these. (Private Health Insurance: Coverage and Financial Experience, 1940-66 Louis B. Reed, Social Security Administration Bulletin November 1967) Many Blue Cross/ Blue Shield (BCBS) plans covered physician office or home visits only if it was a follow-up to a hospital stay or surgery. Otherwise, the visit was not covered. Physician services for a patient occupying a hospital bed BCBS plans had a limit on the number of hospital days of care covered. The most popular option was the plan that covered 120 days per year; 47 percent of its enrollees had this level of benefit. Eight percent chose the 21 – 69 days of care level; eighteen percent had coverage for 70 – 119 days; eighteen percent had some combination of full or partial benefits for 120 days or more. BCBS plans commonly paid for nursing home care, if it occurred directly after a hospital stay. Similarly, visiting nurse and home health services were covered if the member received them as follow-up care to a hospital stay.
People could buy supplemental plans that would cover certain services that the “major medical” plan did not.
Supplemental plans generally covered X-rays, laboratory exams, physicians’ office and home visits, drugs, private duty nursing, and visiting nurse services. Unlike the major medical plan, the supplemental plan did not require that these all be related to a hospital stay. A few even covered nursing home care.
By 1966, an estimated 81 percent of the U.S. population had health insurance covering hospital care. In 1940, only 9.3 percent had this benefit. People with surgical benefits grew from 4 percent in 1940 to 74.3 percent in 1966. “In-hospital medical benefits” lagged behind both of these: in 1940, only 2.3 percent had coverage for physician care in the hospital. In 1966, only 59.8 percent had this benefit. The need to control costs was not prominent in the 1940s and 1950s. The design of health insurance plans – with relatively high deductibles and limited benefits for hospital care – naturally curbed the use of services. People did not overuse physician office visits, because most insurance plans imposed a deductible on these. In addition, there was not a vast amount of expensive medical care available in this era. The American Hospital Association surveyed its members in 1947 and found the average daily rate most commonly charged to private patients is $8.57 per day. The amount of medical care available was fairly limited also. For example, the kidney dialysis machine was invented in 1945. Until then, kidney patients simply died young.
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