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The Evolution from Patients to Consumer - Part 2 of 3

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CEO @ Affective Health

Healthcare in the US from 1950-2000 was a time of rapid change where the 1 to 1 Doctor-Patient relationship became subsumed by the emerging duality of Providers and Third-Party Payers Systems. This was driven by the increasing use of technologies that allowed for new procedures, especially in the area of heart surgeries and cancer treatments.

Rising Cost of Healthcare

After WWII there was a combination of factors impacting the delivery of healthcare that drove the cost of providing care to US citizens from <3% of GDP to >15% by the turn of the century. Many of these factors were new services now available to patients.

During World War II, employers began to offer health insurance coverage to compensate for wage controls placed on employers. This is the beginning of the employer-based system we have today. President Harry Truman proposes a nationalized health care system that includes mandatory coverage however it is ostracized by the American Medical Association whose members deem Truman’s plan “socialized medicine.”

Vaccine Success

The 1950s saw amazing progress in both disease detection and cures for illnesses. One of which being Polio, a terrible and debilitating disease that included President Franklin Roosevelt as a victim. Added to that, Polio was particularly hard on children, and the rapidly growing television network allowed the country to witness children in iron lungs and braces.

Jonas Salk’s polio vaccine was administered by injection. Even though it was only partially effective, it was considered a godsend. Due to the massive awareness of the scourge of Polio, Salk became the decade's most celebrated scientist-researcher.

Almost immediately after the Salk vaccine, Albert Sabin announced that he had developed a more advanced vaccine. Polio, a disease whose mere mention resulted in shudders among the general population, was dramatically decreased as a threat to public health.

In addition to the advancements in vaccines, there were new surgical procedures developed that would revolutionize the available treatment for common diseases. One significant step was giving heart surgeons the ability to stop the blood flow within the human body, allowing them to repair faulty hearts.

This led to artificial valves and electronic pacemakers that could control the pace of the heartbeat, and by the end of the 1950s open-heart surgery was performed regularly. The success rate of such procedures increased steadily.

mortality from major cardiovascular diseases

While great strides were made in understanding and treating cancer, there were no cures found; most of the decline in cancer cases was due to lifestyle changes. This should have been a learning moment for the healthcare community that preventative efforts worked, but unfortunately, they couldn’t create the same revenue as procedures like surgeries, radiation, and chemo, so there was no investment in that area.

At the same time, a definite and deadly link between cancer and cigarette smoking was established and publicized, much to the dismay of those in the tobacco industry. In response, they had tried to discredit the researchers who connected cigarettes and cancer.

New Pharmaceuticals Hit the Market

Many new pharmaceuticals were life-saving additions to existing medical science. Some members of the medical profession were concerned, however, about the overuse of other new drugs. In particular, tranquilizers, whose ingredients reduce anxiety and nervous tension, became wildly popular when they were first marketed early in the decade.

Patients were requesting these uplifting drugs, and doctors readily prescribed them among growing concerns of abuse. Meanwhile, the growth of television as an advertising medium led to an increase in advertising (usually false claims) by drug makers that the over-the-counter medicines were amazing new cures.

In one of the darker stories in modern healthcare, minimal efforts were made to assist the mentally ill. Earlier in the century thousands were left to die in understaffed, underfunded facilities. In the 1950s, the movement towards deinstitutionalization and outpatient treatment began, facilitated by the development of a variety of antipsychotic drugs.

Health Insurance Premiums Rise

The 1990s were a time of large year-over-year increases in health insurance premiums, accelerating the rise in the cost of health care. Millions were without health insurance; a serious illness that struck an uninsured family could cause financial ruin.

What good were all the advances in medicine if no one could afford them? The debate continued towards the end of the last century between those who felt the federal government should take over the healthcare profession and those who believed it should remain a for-profit business.

real per capita expenditures

2 Reasons for Healthcare Cost Spike

The most important explanation for the increase in real per capita health expenditures is the availability of new medical technology and the increased specialization that accompanies it. Between 1974 and 2010 alone, the number of U.S. patents for pharmaceutical and surgical innovations increased by a factor of six.

Second in importance is the spread of public and private health insurance, which diminishes the effect of health care prices on demand. There is a positive-feedback loop between new technology and the spread of health insurance: new technology stimulates the demand for insurance, and the spread of insurance stimulates the demand for new technology.

A bit of the increase, typically 0.1 or 0.2 percentage points per year, is attributable to the aging of the population. It's not possible to estimate how much of the increase in expenditures reflects higher health care prices and how much reflects greater quantities of care because the content of a day in the hospital or a visit to a physician keeps changing.

personal health care expenditures

Splitting the Healthcare Market Revenue

Throughout the period since 1950, health expenditures have gone primarily to hospitals, physicians, and drugs. As a rule of thumb, the ratio 3:2:1 does a fairly good job of describing the relative importance (in dollar terms) of hospitals, physicians, and drugs. These areas haven’t all grown at the same rate. Spending for hospitals and physicians received a boost between 1950 and 1980 from the introduction of Medicare and Medicaid. Spending for drugs accelerated sharply after 1980 following the introduction of a host of new products for treating heart diseases, mental illness, gastrointestinal disorders, and cancer and a large increase in private and public insurance coverage for drugs.

Hospitals’ ability to maintain their high share is particularly noteworthy because between 1950 and 2009 the industry had several large shocks. Psychiatric hospitals virtually emptied out. Admission rates to acute care hospitals (“community” hospitals) dropped precipitously after 1970, as did the average length of stay. As a result, the average daily census, adjusted for population growth, has decreased by almost 50% over the past four decades.

Hospitals have maintained and increased their revenues in part through more intensive treatment of inpatients. Despite shorter stays, the cost per case (in 2009 dollars) jumped from $6,600 in 1997 to $9,200 in 2009. Hospitals' total incomes were also preserved through the expansion of outpatient services, including same-day surgery, magnetic resonance imaging, and computed tomography along with outpatient clinics for diagnosing and treating cancer, heart disease, and other illnesses.

Coming soon...

In the third and final part of our series on U.S. Healthcare from 1900-2050, we will talk about the events of the first decade: the ACA, the flood of TV ads for specialty drugs, and the decreasing lifespan of some types of individuals. We will then talk about the future: Value-Based Care, the potential of mRNA vaccines and treatments, and the huge potential locked up in every person to take better care of their health with the help of technologies that are designed to lower the cost of care, a new paradigm for reducing suffering and lost lives.

If you missed the first two installments you can find them here: Part 2 | Part 3

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