HSA 4321 Lecture Notes - Lecture 2: Tax Expenditure, Managed Care, Medicare Part D
Chapter 1- continued
Early Growth
- The 1940s
o World War II, 1941-1945
▪ Wage and price controls
▪ Health Insurance not subject to controls
▪ Two million subscribers added per year
o Taft-Hartley Act, 1947
▪ Health insurance is condition of employment, subject to collective
bargaining.
- Industry Issues in the 1940s
o Blue Cross Issues
▪ Reciprocity and commercial insurance competition
▪ Restructuring of Blue Cross Commission to give majority of seats to plans,
not hospitals.
- The Tax Code
o 1943 IRS special ruling holds that health insurance benefits provided by an
employer are not subject to federal income tax.
o Contradictory special rulings over the 1940s and early 1950s created uncertainty
o In 1954 Congress enacts legislation exempting employer-sponsored health
insurance from federal taxation of income
▪ I 200, this resulted i tax expeditures of $208. illio.
- The Industry in the 1950s
o Blue Cross-national contracts problematic
o Accelerating hospital costs and utilization
o Blue Cross Association formed
o Experience rating begins
▪ 1952- 3.7 percent of Blue Cross subscribers in experience-rated plans
Changing Times
- Medicare & Medicaid
o FRD did not propose a national health insurance program with Social Security
due to ongoing physician resistance
o In 1945 Truman proposed a national program that covered everyone
▪ Paid with a 4% payroll tax on first $3,600 of wages.
o Resulted in 1946 Hill-Burton Act with subsidized construction of hospitals &
nursing homes.
▪ i.e., the AMA proposal
- Medicare & Medicaid: 1950-1960
o Advocates redirected attention to coverage for the elderly.
▪ Concern that linking this to Social Security would undermine the program
with much high costs.
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Document Summary
The 1940s: world war ii, 1941-1945, wage and price controls, health insurance not subject to controls, two million subscribers added per year, taft-hartley act, 1947, health insurance is condition of employment, subject to collective bargaining. Industry issues in the 1940s: blue cross issues, reciprocity and commercial insurance competition, restructuring of blue cross commission to give majority of seats to plans, The tax code not hospitals: 1943 irs special ruling holds that health insurance benefits provided by an employer are not subject to federal income tax, contradictory special rulings over the 1940s and early 1950s created uncertainty. In 1954 congress enacts legislation exempting employer-sponsored health insurance from federal taxation of income. I(cid:374) 200(cid:1009), this resulted i(cid:374) (cid:862)tax expe(cid:374)ditures(cid:863) of . (cid:1010) (cid:271)illio(cid:374). The industry in the 1950s: blue cross-national contracts problematic, accelerating hospital costs and utilization, blue cross association formed, experience rating begins, 1952- 3. 7 percent of blue cross subscribers in experience-rated plans.
