Kids and Health Care: The Nuts and Bolts
Most American families get their health insurance through a family member's job.
Health insurance first became an employee benefit in the U.S. during World War II. Companies found that offering health care coverage was an effective way to attract scarce workers without violating the wartime freeze on salaries. After the war, full health care coverage became an expected benefit of big-business jobs.
Through most of the decades after WWII, people could go to any doctor they wanted. If your general practitioner decided you needed to see a specialist, you could see one. If you needed medicine, you'd go to any pharmacy and get exactly what the doctor prescribed. If you had insurance, you'd bill the doctor's fees to the insurance company. If you didn't, you'd simply pay the bills yourself. Just about everyone paid for prescription drugs on his or her own.
Once large companies started making health insurance a standard benefit, a significant de-linking started. Most of the people who used medical care and prescription drugs no longer paid for them directly. So, over the course of several decades, they became blissfully unaware of what medical care cost.
Third parties (either their employers or their insurance companies) took care of the costs, including the cost of prescription drugs, in most cases. The end-users just focused on the quality of the care they got.
As a result, medical costs rocketed.
According to the Washington Insurance Council, the average annual per capita expenditure for health care in the U.S. was $268 in 1969; by 1990, the figure had increased to $2,567. During the same 20-year period, health expenditures grew from 5.3 percent of the Gross National Product (GNP) to 12.2 percent.
As a percentage of Gross Domestic Product (GDP), health care spending was 15.3 percent in 2003, up from 14.9 percent in 2002, according to a report published by the journal Health Affairs.
By 2013, health care spending in the United States is projected to reach $3.4 trillion and 18.4 percent of GDP. From 2002 to 2013, health care spending is projected to grow 7.3 percent per year on average.
These costs grew faster than inflation, interest rates, the Dow Jones Industrial Average and just about any other economic indicator. The job security and potential to make good money as a doctor resulted in flourishing medical schools. But from an economics perspective, the surging costs had to cut into how medical care was delivered -- and how doctors got paid. And they did.
