The History of Medical Billing

Early doctors charged a simple fee for their visits. Today, we live and work in an electronic era with medical codes so complex that they require degrees in medical billing.

Background

• In the early 1900s, doctors started to organize into the American Medical Association and local boards. A doctor was paid when called out, and hospitals were separate entities. Doctors were no longer expected to provide free hospital service and the first health insurance policies were offered in 1910.

  Unlike in Europe, where various national health care systems were being set up, the government did not consider insuring people for medical costs. If people had insurance at all, it was issued through industries such as the railroads.

  In 1913 the American Association for Labor Legislation held a conference about "social insurance." Progressives wanted health insurance, but World War I and resistance from doctors shelved the idea.

Government Involvement

• In 1908, the government established a workmen's compensation program for its civilian employees. Wisconsin began the first successful state system in 1911. The 1935 Social Security Act ignored health insurance. Roosevelt and Truman both wanted government insurance, but Congress refused.

  By 1940, the first prepaid group healthcare plans were introduced, later named HMOs (health maintenance organizations) by Nixon. In the 1950s, Lyndon Johnson signed Medicare and Medicaid into law; a decade later there were more than 700 private health insurance companies.

Changes

• Early health insurance claims were made on paper. Billing required complex forms like the CMS-1500 from the Centers for Medicare and Medicaid Services. Billing was a long, drawn-out process, with many errors made.

  In the 70s and 80s there was a fee-for-service model whereby a service provider would charge for each individual service. Insurance companies negotiated fees and would pay based only on those fees. Doctors often charged more, leaving the shortfall to the patient.

  In the mid-1980s the government introduced a fixed-payment method along with complicated diagnosis codes. Private insurers followed suit: By charging per diagnosis rather than per service they could make more profit.

HIPAA

• Among its many stipulations, the 1996 HIPAA act tried to streamline billing by requiring electronic billing and updated technology.

  HIPAA's requirements have spawned at least one new industry, the HIPAA consultant, while vastly increasing the number of software companies involved in billing. Medical billing is now a career which requires at least an Associate's degree.

  Even so, some states still run their Medicaid systems manually, somewhat negating the effects of HIPAA.

Future

• In the mid 2000s the Healthcare Financial Management Association (HFMA) unveiled a "Patient-Friendly Billing" project to help healthcare providers simplify billing for their patients.

  As of 2009, the Obama administration is trying to push through healthcare reforms, like many before him. Only time will tell what kinds of change will come.