First of all I want to impress on you that in the last 5 to 10 years there has been literally a revolution in the delivery and financing of health services in this country. I have been in the field since 1950, so the perspective on this issue is not a short one. We have moved from a more regulated environment with a stated emphasis on and an avowed interest in access, quality, continuity of care, with a minor accent on cost reimbursement to a more competitive environment with much greater emphasis on cost containment and on incentives.
A point that is deeply familiar to everyone from the United States, which I would like to underscore for those of you who are from overseas, is that the shift that took pIace in the late 70s and early 80s was not ideological or the result of party politics. It came about for a couple of reasons which I think will be of interest to you.
In 1981, the US started to hemorrhage badly. The Blue Cross plans which are pervasive lost more than $300 million, commercial insurance companies lost $1.5 billion, Medicare lost $2 billion, Medicaid lost some as yet undocumented amount. The problem lay in the fact that the projections on hospital use made in 1980 badly missed the mark. Hospital use significantly exceeded the projections laid down by the actuaries of both the public and private sectors and therefore, deficits resulted. But what really troubled the country was that there seemed to be no end to the rise that was underway and if one were to extrapolate the trend, there would indeed be serious problems ahead. It was out of this sense of frustration that the country started, in both the public and private sectors, to become more aggressive in purchasing health care.
The question that ordinarily follows a shift of this sort is whether the shift is transitory -is it a blip in an otherwise steady evolution toward national health insurance in the United States, or does it have more permanence to it than that? In regard to that question, I would like to elaborate. Two other forces were at play at the same time the hemorrhaging was taking place. One force is subtle but nevertheless important. That is to say, the health market was maturing. Keep in mind, that in the states and in many countries in the 30s and 40s, we had too few beds, too few doctors, too little demand, very little prepayment or insurance, research was lacking, and medical schools were lacking. Every gain to be made in those years was at nobody else's expense. It was wide open, it simply invited all types of initiatives among which Blue Cross was a notable one.
In 1986, we find ourselves with too many doctors, too many beds, too much demand and at some points in the system producing too many doctors. Under these circumstances, clearly different dynamics are set in notion. Every gain made is at somebody else's expense. In such an environment it is bound to be more competitive. It is bound to involve more sophisticated buyers who have had 20