According to Uwe E. Reinhardt, an economics professor at Princeton, about half a century ago, organized medicine and the hospital industry in this country struck a deal with Congress.
In retrospect, it was as audacious as it was incredible: Congress was asked to surrender to these industries the keys to the United States Treasury.
In return, the industries would allow Congress to pass a 1965 amendment to the Social Security Act, described as “an act to provide a hospital insurance program for the aged under the Social Security Act with a supplementary health benefits program and an expanded program of medical assistance, to increase benefits under the Old-Age, Survivors, and Disability Insurance System, to improve the Federal-State public assistance programs, and for other purposes.”
We have come to know it as Medicare.
As Wilbur Cohen, a chief architect of the law and subsequently secretary of health, education and welfare, later described the deal:
The sponsors of Medicare, myself included, had to concede in 1965 that there would be no real controls over hospitals and physicians. I was required to promise before the final vote in the executive session of the House Ways and Means Committee that the federal agency [to be in charge of administering Medicare] would exercise no control.
Medicare was supposed to not interfere in any way in the physicians’ treatment of Medicare patients – through what we now know in private health insurance as “managed care.” Nor was Medicare allowed to influence the way hospitals were constructed and operated. Finally, the deal called for a completely one-sided payment system.
Obviously, things haven’t gone according to plan.
Check out the rest of Reinhardt’s blog post on The New York Times