In the early 20th century, doctors started offering all inclusive care. For $1 a month you get all medical needs provided. The AMA didn’t like the incentives this created for doctors to lower costs/service in order to make profits, so if a dr was caught offering these all inclusive plans, they would lose license.

But there was too much demand, so the AMA relented, but would only allow it if a different company offered the payment plan, and doctors would just bill the company…but there was another catch, the company could never say no to whatever the doctor charged. As you can imagine, fraud ran rampant.

Eventually, the federal government stepped in and told the AMA that they had to come up with something different than doctors can charge whatever they want to the insurance company, and they came up with this crazy system that we have now.