Since the end of World War II, the United States has been working to provide health insurance coverage to all Americans. But the history of health insurance goes back much further than that. In the 1890s, Washington State's lumber companies began providing care to their employees, paying a couple of doctors to reduce free time and increase productivity. This was the first sign of what would become health insurance. As employer-sponsored health care became the cornerstone of the American health system, health costs were subject to inflation and retirees were unable to afford private coverage.
To protect themselves from competition with Blue Cross and offer an alternative to compulsory insurance, doctors began organizing prepaid plans that covered medical services. This created a tax advantage that generated enormous demand for employer-provided health insurance plans compared to individual health insurance. In 1945, the Kaiser Foundation health plan was founded to provide prepaid health benefits to workers at Kaiser shipyards; it has become a model for HMOs. In 1965, Lyndon Johnson created the Medicare and Medicaid systems to address the issue of health care for retirees and those in low-paying jobs for companies that didn't offer health care benefits. As interest in employer-sponsored health benefits continues to wane, Health Reimbursement Agreements (HRAs) offer employees more flexibility to meet their unique needs. Public health insurance programs tend to have more bargaining power due to their larger size and generally pay less for medical services than private plans, leading to slower cost growth.
However, public program costs have also been growing at a rapid pace. With the ability to compare plans and get quotes, people can now access affordable health insurance. Under President Nixon, Health Maintenance Organizations (HMOs) became the new name for group health plans. Since their creation in 1966, Medicare and Medicaid spending has grown as a percentage of total national healthcare spending (see Figure 3).
