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The reason is that the industry was not considered to be profitable until the passing of the Social Security Act of 1965. The introduction of Medicare and Medicaid introduced millions of patients as paying patients. These millions of guaranteed dollars under a Fee-For Service reimbursement scheme caused the industry to explode. The more the industry spent, the more money providers received. Innovation took off and costs began rising. In order to battle rising costs, the government passed the HMO act of 1978. Introduction of Health Maintenance Organizations into the industry stopped rising costs with the ending of Fee-For-Service reimbursement system, but it was short lived...
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