Market Dominance: How Firms Gain, Hold, or Lose It and the Impact on Economic Performance

By David I. Rosenbaum | Go to book overview

10
Blue Cross: HEALTH INSURANCE

Erwin A. Blackstone and Joseph P. Fuhr


INTRODUCTION

Blue Cross began in the depths of the Great Depression as a device to try to maintain the financial solvency of the nation's voluntary hospitals. It rapidly rose to dominance in the provision of hospital insurance. Blue Cross maintained that position for many years. Eventually a number of factors led to its loss of dominance. However, Blue Cross still remains a major provider of health insurance.


BACKGROUND

In the 1920s, the period immediately before the Great Depression, hospital capacity increased as a result of philanthropic giving. For example, between 1921 and 1931 hospital capacity as measured by beds grew by 55 percent.1The rise in capacity created a concomitant rise in operating costs which had to be covered by patient charges or charitable contributions. The higher charges resulted in a decline in occupancy by the end of the 1920s. For example, occupancy rates at New York City voluntary (non-profit but not public) hospitals declined to 50 percent in 1928.

The Great Depression hit hospitals hard. Occupancy declined from an average rate of 71 percent in 1929 to 64 percent in 1930.2Over the same period revenues per patient declined from $236.12 to $59.26. Even before the Great Depression, Americans faced great difficulty in paying for anything but a very short hospital stay. There was essentially no hospital insurance. The president of the American Hospital Association (AHA) stated that the organization's basic goal was to provide "hospitalization for the great bulk of people of moderate means . . .

-175-

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Market Dominance: How Firms Gain, Hold, or Lose It and the Impact on Economic Performance
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Illustrations vii
  • 1 - Introduction 1
  • Notes 9
  • 2 - Dominance in the Oil Industry: Standard Oil from 1865 to 1911 11
  • Notes 33
  • 3 - Tobacco: Predation and Persistent Market Power 39
  • Notes 51
  • 4 - Alcoa and the U.S. Aluminum Industry 55
  • Notes 66
  • 5 - Dow Chemical and the Magnesium Industry 69
  • Notes 86
  • 6 - Eastman Kodak in the Photographic Film Industry: Picture Imperfect? 89
  • Notes 107
  • 7 - The Rise and Fall of Ford and General Motors in the U.S. Automobile Industry: A Tale Twice Told 109
  • Notes 126
  • 8 - The Rise and Fall of IBM 131
  • Notes 150
  • 9 - Microsoft 153
  • Notes 172
  • 10 - Blue Cross: Health Insurance 175
  • Notes 190
  • 11 - AT&T's Grand Design for Dominance in the Global Information Age 195
  • Notes 224
  • 12 - Conclusion 227
  • Notes 254
  • Bibliography 257
  • Index 267
  • About the Author 273
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