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For over 100 years after the birth of this nation, healthcare in America was a completely self-pay system. We all have visions of the local country doctor and his black bag making house calls- which were paid for either in cash or by trade. The system worked reasonably well for a century. However, as medicine advanced and the cost of care began to increase, the possibility of a two-tiered system started to become more likely. The wealthy would get care because they could afford the advances-the working class would not. In 1910, one of the earliest examples of health insurance was created. The Western Clinic in Tacoma, Washington, provided a wide variety of healthcare services to the employees of local lumber mills. The cost was 50 cents per month. In 1929, Dr. Michael Shadid created something like the model in Tacoma. Dr. Shadid created a healthcare cooperative in rural Oklahoma where farmers could pay a predetermined monthly fee for which he would provide all their care. These two early examples were driven by healthcare providers without the middle man-known later as the insurance company.
In 1929, the Ross-Loos Medical Group was established in Los Angeles. The medical group offered its services to county and city employees for a premium of $1.50 per month. Baylor Hospital in Texas started its own plan in 1929 for about 1500 teachers. This plan eventually became what we know now as BlueCross and Blue Shield (BCBS). The seeds of the insurance industry were planted and quickly took root.
In 1933, Dr. Sidney Garfield and several of his associates started another pre-paid care delivery model in southern California. The model contracted with the LA Workers Compensation Insurance companies to care for job site injuries while the workers themselves contributed out of their pocket for routine medical issues. A few years later, Dr. Garfield connected with Henry Kaiser and formed both the Kaiser Foundation Health Plans and the Permanente Medical Group, which many people have come to know as Kaiser Permanente-the first HMO. This development led to an explosion of similar local or regional delivery systems and plans. Group Health Association, Health Insurance Plan, and Group Health of Puget Sound were all formed during this time frame. In 1933, the first BCBS-covered...