Health Insurance: How something so good has gone so bad

The Origins of Health Insurance

On July 16, 1798, President John Adams signed the first Federal public health law, "An act for the relief of sick and disabled Sailors." This assessed every seaman at American ports 20 cents a month. This was considered the first prepaid medical care plan in the United States.

During the 1920s, individual hospitals, such as Baylor Hospitals in Dallas, Texas, began offering services to individuals on a pre-paid basis, eventually leading to the development of Blue Cross Health Insurance. By 1930, healthcare plans were offered to teachers for a pre-paid monthly fee of fifty cents. The program was well received by teachers across Dallas leading thus expanding to schools across the nation, thereby giving birth to the nonprofit Blue Cross/Blue Shield. Private insurers took notice, inspiring a host of them to enter the market and enroll people. This in turn enabled hospitals to generate a steady stream of revenue.

Increasing prices

As these health systems grew to encompass entire counties or states, they gained a huge advantage in negotiations with insurance companies. Coverage became widely available for services beyond the hospital and emergencies. Health coverage was sold in tiers and packages for different fees allowing for outpatient care and diagnostics. As these changes were implemented, there was a shift in monthly premiums, the advent of copay and large deductibles to be met before coverage begins. UnitedHealthcare, developed in the1970s, is today one of the largest health insurance providers in the Nation followed by Aetna.

Fair Pricing or Not

A fair market price for a knee replacement is roughly $30k; this covers the hospital’s cost of labor and materials plus a fair profit margin. If you get a knee replacement within a huge health system, they'll probably try to bill your insurance company over $100k. If the insurance company complains, the hospital will offer them an amazing deal: a massive 50% discount! The insurance company happily agrees to pay $50k—but they’re still paying $20k more than the market price. Over time, prices drift upwards as insurance companies get accustomed to paying ever higher prices.

In recent years, this phenomenon has reached a point of absurdity.

Here are some examples of real medical bills:

A $17 Tylenol pill in the hospital.

$98 ice pack applied during physical therapy

$70 additional “mileage charge” for a 15-minute ambulance ride.

$10,000 “trauma team activation fee,” when a triage nurse summoned surgeons to the emergency room.

$1000 “rooming-in charge” to a mother who opted to keep her newborn in her room, rather than having him admitted to the new-born nursery.

This is the largest contributor to the last 10 years of rising healthcare costs: huge, consolidated, corporate health systems continually charging more for the same services, because they can.

My Story

I was an ER provider who suddenly became violently ill during my shift while caring for very sick patients. Here's the kicker...

-I had good (expensive) insurance but had a $200 copay

-I was given iv fluids (1L) that I had to unblock on my own multiple times; although I was now a paying customer, everyone ditched me and I essentially took care of myself in the room

-received almost 1 bag of saline, a vomit bag, and no blood work

-never had blood work or was assessed by anyone and checked myself out (oh yeah and lost wages that night because this all started before my shift ended)

Total bill after paying a copay: $1500.00

My colleague who needed 7 sutures on another occasion had a bill for $3000.00!!


DPC Difference

-DPC evolved out of doctors fed up with the business of medicine; no longer direct patient care, 10 mins or less with patients, insurance companies telling them how to treat their patients, endless bureaucracy

The Difference

-no copay, no deductible, personalized and high quality care

-access to your provider, unlimited every day, including evenings and weekends

-one patient at a time means you always get a minimum of 30 mins

-labs and medications at cost

-exams and minor procedures included or at cost

Example of Lab Fee Difference

Complete blood count, comprehensive metabolic panel, lipid panel, TSH and a HgA1c

Cost to patients min. >$100 DPC practice $15

Medications: Comparing DPC with Retail and Hospitals/Insurance


1. Rosenthal, E. (2017)

2. AHP (2020)

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