A Brief History of Health Care in America

Managed Care as we know it today has its roots in a number of prepaid healthcare arrangements in the early 20th century. The earliest example of this dates back to 1910, when the Western Clinic in Tacoma, Washington provided a wide range of medical services to lumber mill owners and employees for a monthly premium of 50cents.

In 1929, a managed care pioneer by the name of Dr. Michael Shadid began a cooperative health plan for rural farmers in Elk City, Oklahoma. The members who enrolled in his plan paid a predetermined fee and received medical care from Dr. Shadid. In the same year, the Ross-Loos Medical Group was established in Los Angeles, and it provided prepaid services to county employees and employees of the city's department of Water and power. Its members paid a premium of $1.50 a month. In 1982, the Ross-Loos Medical Group came to be known as CIGNA Healthcare.

Also in 1929, the Baylor Hospital of Dallas, Texas initiated a prepaid system that provided medical care to about 1500 teachers. This was the birth of the health care company we know today as Blue Cross. Because Blue Cross only provided coverage for hospital services, the Blue Shield plans were created to cover doctor services, hence the name Blue Cross/Blue Shield. The premiums for this coverage were subsidized through government tax breaks, keeping them reasonably low.

Dr. Sidney Garfield and several of his associates ran a similar prepaid health plan in 1933. Together, they provided medical care to 5,000 construction workers at an aqueduct project in LA. Workers compensation insurance companies contracted with them to cover accident cases, while the construction workers contributed from their own wages for other medical services.