Cost of Care: How Americans Have Paid for Healthcare Throughout History


Today, health care remains a divisive, hot button issue in American society.

Understanding why it is such a difficult issue to resolve opens the door to explore the original models for healthcare in our country, as we work to resolve the current issues at hand.

Pre-Colonial America

Very few trained physicians existed in pre-colonial America. Society expected women to handle most healthcare needs within the family. Local “bone-setters,” who had no formal training, took care of treating broken bones or dislocated limbs.

If people lived near a major city in the colonies, they generally had access to a trained doctor for treating serious illness, but childbirth almost always involved a midwife rather than a physician.

Home or folk remedies served the pharmaceutical needs of the day. Many of these were unguents and oral medicines that either came from Native American sources or remedies passed from older generations. Doctors, bone-setters and midwives usually received payment in trade rather than money.

Rise in Fee for Services

Around the mid-to-late 1700s, medical schools began to graduate trained doctors, leading to the arrival of some of the first hospitals. European doctors who had immigrated to the colonies opened these schools to establish the profession and give it the same status it enjoyed overseas. By the late 1700s, schools and local governments began licensing doctors, and medicine soon became a fee-for-service industry, rather than one that was paid in trade goods.

Subsidized Medicine

Subsidized medicine, implemented by local municipalities, responded to a rise in epidemics due to population growth. Tuberculosis, yellow fever, and other illnesses thrived in densely populated communities, and poor city sanitation compounded the problem. Cities created “dispensaries” where the poor and less fortunate could obtain free medicines and consult with a doctor.

Mid-1800s through the 1920s

The increase in the number of trained physicians and the subsidized medicine locations eventually resulted in the construction of the first hospitals around urban centers.

Following the Civil War, nursing as a profession entered the mainstream. Advances in chemistry, epidemiology, instrumentation, and pharmaceuticals led to better-trained and better-equipped doctors, who started to demand larger fees for their services.

First Medical Insurance

Just prior to World War I, private health insurance emerged. The cost of medical care had risen significantly due to the scientific and technological advances in medicine. By the 1920s, Blue Cross had established a name for itself as a major health care insurer.

These new insurance providers paid hospitalization and physician costs for members, which was still a fee-for-service system. The HMO (Health Maintenance Organization), familiar to most of us today, started as a private system established during World War II to cover the employees working for Henry J. Kaiser, a prominent American industrialist. The cost of healthcare continued on an upward trend during the 1950s and 1960s, due to the continued advancement of life-saving methods and medicines.

That led to specialization within the healthcare field that is so common today. The healthcare profession no longer included only doctors. Lab technicians, nurses, and therapists became part of the expected level of care. These additions also increased the cost of care.

Lyndon Johnson’s contribution

Private insurance plans spread through the U.S. from the 1930s to the 1960s. When Lyndon Johnson took office, he enacted Medicare, an addition to the Social Security Act, which provided medical treatment for those already receiving Social Security, without further cost.

He included Medicaid, a subsidized medical payment assistance for the disabled or poor, and funded it all through taxpayer dollars. This arrangement, along with the development of HMOs and more sophisticated — and costly — medical insurance plans, continued for many decades.

Attempts at Change

By the latter half of the 20th century, congressional leaders and the American people desired a simpler, less expensive system that ensured that everyone had access to the same level of care, regardless of their socio-economic status.

The latest attempt, the Affordable Health Care Act, (ACA), enacted by President Obama’s administration, tried to correct some of the inequities in the healthcare system. However, the well-intended law sparked alleged controversial results, which led the Republican party to demand repeal and/or change.

The Current Debate

Although the debate continues, most Americans are hopeful that, despite the polarizing issues, our government can find a way to come together and provide the best plan for taking care of its citizens.