in the hands of proprietors, the smallest ones having
an average of 68 percent of the total beds in the
country. Thus, in 1986, there were 16,000 nursing
homes, 90 percent of which had 100 beds on the av-
erage. Yet, 56 percent of the nursing homes received
government subsidies, in contrast to only 20 percent
in 1960, spurred by the baby-boom generation.
During the 1980’s, the federal government pro-
vided 56 percent of the health budget, the remain-
ing 44 percent coming from state and local govern-
ments. Beginning in 1982, the government imposed
strict limits on Medicare reimbursements to hospi-
tals. It also insisted on using diagnosis-related
groups (DRGs) with minimal governmental inter-
ference as the best way to cut costs. By 1989, however,
health care costs and doctors’ fees continued to rise,
despite a law mandating that charges be based on
the “customary, prevailing, and reasonable” prac-
tices of the health care system. (Physicians, pharma-
ceuticals, health facilities, and insurance compa-
nies, seen as part of the market, determined what
was “customary, prevailing, and reasonable.”) At the
same time, physicians and nurses determined pri-
marily all referral pathways and were encouraged
to channel patients to the supposedly most cost-
effective care available—making doctors, in fact,
case managers.
In addition, health care malpractice suits in-
creased, forcing insurance companies to increase
their premiums and thus making it difficult for peo-
ple to afford health insurance. The situation was ex-
acerbated by an oversupply of doctors by 25,000,
which was 50 percent above the commonly agreed
need during the late 1970’s and the 1980’s.
In 1986, 2 million poor people and the severely
disabled relied on Medicaid. The number rose to 31
million soon thereafter. Concomitantly, in 1984,
there were 15,000 private clinics, but only between
15 and 20 percent were government-run. Health
centers had increased tremendously since the 1920’s,
but only 1,000 of them received special subsidies
from the government. Unlike in other developed
countries, public hospitals in the United States are
primarily designed to serve the poor; the rich go
to private clinics or to specialized health facilities
owned by groups of physicians or by private corpora-
tions.
Since the 1980’s, the pharmaceutical companies
have become the major sponsors of drug research,
along with some universities that have a medical
school or a school of public health. Pharmaceutical
companies are often the source of the research dol-
lars that go into the manufacture of expensive brand-
name drugs, with 25 percent of resources dedicated
to advertisement. This situation accounts for the fact
that, during the 1980’s (and thereafter), most pa-
tients’ expenditures went into drug purchases. Dur-
ing that decade, twenty corporations controlled the
whole drug manufacturing industry.
Impact The 1980’s were a time of major changes in
the health care system. In 1940, only 9 percent of
Americans were medically unprotected, but, at the
dawn of the 1980’s, close to 80 percent were pro-
tected through insurance, mainly by Blue Cross/
Blue Shield. By 1986, however, the number of in-
sured had been reduced to 37 million, and states be-
gan to implement health care policies that increased
the burden on patients. In the name of the free mar-
ket forces, deregulation, and a social and political
environment that espoused the philosophy that med
icine should not be government business, the United
States witnessed the commercialization of the health
care system, in which drug prices and insurance pre-
miums were solely determined by the pharmaceuti-
cal complex and by physicians and lobbyists in Wash-
ington, D.C. For some analysts, the introduction of
HMOs resulted in misery for the sick public, espe-
cially the poor and lower middle class, and in un-
scrupulous profiteering. The outcry against HMOs
grew so loud that, by 1987, less than 15 percent of the
population was covered by the new health plans.
Further Reading
Fuchs, Victor R.The Health Economy. Cambridge,
Mass.: Harvard University Press, 1986. One of the
best sources illustrating how health care systems
are affected by economic systems and policies. Is-
sues of deregulation, cost effectiveness, competi-
tiveness, and the powerlessness of the population
are highlighted.
Ludmerer, Kenneth M.Time to Heal: American Medi-
cal Education from the Turn of the Centur y to the Era of
Managed Care.New York: Oxford University Press,- A historical account of the evolution of
medical education and the impact of managed
care entrusted to market forces.
Maillet, Pete, and Steve Halterman. “The Consumer-
Driven Approach: Defining and Measuring Suc-
cess.”Benefits Quarterly, 2004, 7-15. Highlights the
impact of consumerism in health care, which
450 Health care in the United States The Eighties in America