User:Doc Tropics/United States health reform under FDR

U.S. health reform under President Franklin Delano Roosevelt (FDR) began with efforts to include national health insurance in the original Social Security bill. However, FDR ultimately removed it due to concerns that fierce opposition from the American Medical Association would jeopardize enactment of Social Security. Although the record suggests FDR planned to return to this issue after World War II, his untimely death in early 1945 precluded this, so it was left to Harry S. Truman to fight this battle.

The first proposal for federal compulsory health insurance was introduced in 1943 by Senators Robert F. Wagner (an original sponsor of the Social Security bill), Murray and Rep. John D. Dingell, Sr.. The 1937 decision of the Supreme Court upholding Social Security removed doubts about whether national health insurance would pass constitutional muster. Thus, the FDR period moved the push for universal coverage forward even though no legislation was enacted.

The issue

Background

The Committee on the Costs of Medical Care (CCMC), which began its work in 1926, issued a report in November 1932 documenting the difficulties many families had in paying for medical services. By that time, private health insurance was a very nascent industry, having begun in late 1929 when Baylor University Hospital began offering 1,500 school teachers up to 21 days of hospital coverage for an annual payment of $6 (Starr 1982: 295).

During the 1940s employers were unable to compete for workers on the basis of higher salaries due to a wartime freeze on wages. Instead, employers offered attractive health benefit packages to entice workers as the freeze did not apply to benefits (Graig, p.15). This was truly the beginning of American business as the predominant health insurance sponsor. While other large nations with national health insurance have employment-based health care insurance systems, such as Germany and Japan, their systems include an employer mandate. This mandate is absent from the US system and has been since the 1940s. If Roosevelt had been able to establish an employer mandate as opposed to this incentive system, we might have been able to solve the problem of national health insurance long ago.

How the issue got noticed

Even though the CCMC did not endorse compulsory health insurance, its report, especially coinciding with the depths of the Great Depression, was enormously influential in quantifying the magnitude and extent of unmet medical needs and the burdens faced by families in paying for needed medical services.

How the issue was framed

In contrast to the Progressive Era, which focused more on the income losses related to illness, the concern during this period was centered more on the actual cost of medical care and how this could be financed. The CCMC calculated the need for medical care using disease incidence data in combination with expert judgment about appropriate treatment for each type of illness. The results were extraordinarily high estimates of needs, with the final report suggesting that "even among the highest income groups, insufficient care is the rule." (Starr 1982: 263).

The policy stream

Policy communities

CCMC was an independent body created by 15 economists, physicians and public health specialists who had met in 1926 at a medical economics conference in Washington DC. The group eventually numbered almost 50 individuals and was funded through a consortium of 8 foundations (Starr 1982: 261). The committee studied the problem of paying for healthcare for five years and eventually produced a 27-volume report that contained two very controversial recommendations among its members. First, the report said that medical care could be more effectively provided in groups; second, costs of healthcare could be better met through a voluntary prepayment plan. The physicians on the committee vehemently opposed these views and issued a minority report that called a voluntary prepay plan communistic and that healthcare should remain a fee-for-care individual service (Quadagno 2005: 21).

The Committee on Economic Security was appointed by FDR in 1934 and consisted of four Cabinet members and the federal relief administrator; it was chaired by Secretary of Labor Frances Perkins. It ultimately developed the design for Social Security and national health insurance. The CES, while not presenting a specific health insurance plan, did recommend a system of national health insurance mediated by the Federal government and designed and instituted on a State-wide basis. The report allowed for the continued private practice of medicine, but this was not enough to appease physicians (Economic 1935: 53). When the AMA heard that national health insurance was called for in the CES's preliminary report, it began a campaign against national health insurance immediately; members of Congress found themselves swamped with postcards, letters, and phone calls denouncing national health insurance. Even the president's personal physician, Dr. Ross McIntyre, told Mrs. Roosevelt, "National health insurance would be very bad for the country" (Quadagno 2005: 23).

Policy entrepreneurs

Professor Edwin Witte of the University of Wisconsin was staff director of CES; its subcommittee on medical care was headed by Walton Hamilton, and its technical study was directed by Edgar Sydenstricker, both of whom had dissented from the CCMC majority decision not to endorse compulsory health insurance. Witte supported the idea of a national health insurance program and even offered up Wisconsin as a guinea pig to test a compulsory health insurance system that would cover every citizen regardless of financial status (Fishbein 1939: 501). Abraham Epstein, a leading figure in the Social Security movement, publicly advocated in an article published in October 1934 that the administration be politically realistic and go slow on national health insurance due to the opposition that would be expected.

Origin of the idea of national health insurance

The proposals for national health insurance debated during this period were similar to the proposals discussed in the Progressive Era. The original Social Security bill contained one title that effectively revived Meyer London's 1916 resolution by creating a Social Insurance Board that would be responsible for making recommendations on old-age insurance and health insurance (Chapman and Talmadge 1973: 8).

The Committee on Economic Security drafted the Social Security Bill. The group intended to increase social protection, and attempted to weave unemployment insurance, insurance for the elderly, and health insurance into the original bill. The final part - health insurance - was heavily debated and President Roosevelt was skeptical of its ability to pass into legislation. (Mayes 2004: 17) Furthermore, he feared a national health care plan would threaten the passing of Social Security as a whole. FDR signed Social Security into law without provisions for universal health care because of this doubt. FDR seems to have originated the idea for a national plan for health insurance, but by leaving it out of a strong piece of legislation like the Social Security Act of 1935, he set up an issue that would be debated "for the rest of the century." (Mayes 2004: 17)

The political stream

The national mood

The country was devastated by the Great Depression and the crisis it created paved the way for dramatic social policy changes that might not have been contemplated in less distressed times. Even though FDR ran on a conservative platform in 1932, circumstances forced him to dramatically alter the commitments he had made in that election, ultimately contemplating a far more expanded role for the state.

Organized political interests

Physicians. During this period, the AMA continued to be vocal opponents of national health insurance, continuing their position from the early 1920s. FDR's experience with the power of doctors while he served as New York's governor ultimately convinced him to remove national health insurance from his Social Security bill in 1935 rather than risk defeat of the entire package in the face of heated opposition to NHI from the doctors (Mays 2004: 21). As Dr. Morris Fishbein put it, "We have tried for many years to keep politics out of medicine, and we have done our utmost to keep medicine out of politics. . . . no people can exist with a medical profession enslaved to make a politician's holiday (Fishbein 1939: 498, 504)." The AMA attacked national health insurance from every angle. First, it was called a first step on the road to socialism and a "political weapon" not truly meant to improve the welfare of the people (Fishbein 1939: 498). Second, it was claimed that the "medically indigent" could never be truly defined or put into one classification. The cost of living varied too much from state to state. Third, physicians pointed out that the high standard of medical care in the United States was due to the current system, and any nation that tampered with that system experienced a deterioration of health care standards (Fishbein 1939: 502).

The AMA adopted multiple resolutions in June of 1934 on the issue of health care and a national insurance plan. They decreed that all aspects of medical care should be under the control of the medical profession and that no other body, political or otherwise, could exercise control over the medical practice. The AMA also declared that any "third-party" involvement was not allowed as it detracted from the overall character and responsibility of the medical profession. Patients should be allowed to choose any doctor they desire and not be confined to a handful of options (Principles 1934: 368).

Not only did physicians oppose national health insurance but they also opposed insurance plans such as Blue Cross. Physicians who agreed to be under the Blue Cross plan were ostrasized in the medical community and threatened with a loss of professional privileges (Quadagno 2005: 25).

Health insurance industry. The Baylor Hospital plan ultimately grew to become the non-profit Blue Cross with support of the American Hospital Association (AHA); commercial health insurance was relatively undeveloped during this period. In 1938, however, all local Blue Cross plans were organized into corporations and required to join the national Blue Cross Association. The local Blue Cross plans could then advertise nationally and have the exclusive rights to provide medical care in their local area, while plan subscribers could easily move locales and remain in the Blue Cross system. The AHA managed to lobby for exemption from state laws that regulated commercial insurance companies and state taxes. The IRS followed the states and exempted Blue Cross from federal taxes as well for two reasons: first, Blue Cross made each subsriber pay a flat rate for its benefits rather than a rate based on age and health status like commercial companies did; second, the monthly Blue Cross fee provided hosptial care at no extra cost, while commercial companies still required a copayment or deductible. Physicians, opposed to Blue Cross, formed their own medical care plan and denounced any doctor who was a part of the Blue Cross plan. In 1943, the AMA began to coordinate these physicians' plans, calling the new national organization Blue Shield (Quadagno 2005: 25).

Business. Both large and small businesses played almost no role in the debates about universal coverage during this period.

Labor. Labor played an important role in enactment of Social Security, but its power was too small to overcome the strong opposition of AMA to national health insurance. The trade unions greatly supported Blue Cross, as the Great Depression revealed the holes in their health benefit plans for workers. Many unions could not afford to pay for workers' health bills, so they formed agreements with Blue Cross to cover the expenses (Quadagno 2005: 24).

Government

The Presidency. FDR was strongly interested in national health insurance, but made an explicit decision to remove compulsory health insurance from the Social Security bill because he was concerned that the entire bill would be jeopardized by opposition of physicians. In her report to Congress on the bill in January of 1935, Secretary of Labor Frances Perkins stated that, although the President would like to see a definite plan for national health insurance, the issue was dropped from the present bill. The President would, however, like to see an extension of health services of the States under the guide of the United States Public Health System (Economic 1935: 175). Congress did appropriate $10,000,000 a year to be spent by the United States Public Health Service in grants made to individual states (Fishbein 1939: 496). Roosevelt again sent a message to Congress in 1938 recommending that the issue be studied, but did not suggest immediate action.

Congress. The midterm elections of 1934 gave FDR a lopsided party majority in both the Senate and the House. That, combined with the upcoming 1936 Presidential election, in which FDR claimed he could not face without something to show the American people in the way of an old-age insurance program, prompted FDR to put forth his Social Security Bill in early 1935. The bill was at first opposed by Democrats and Republicans alike; some Democrats, like Senator Robert Wagner (D, NY), favored much more generous handouts then FDR called for, while most Republicans deemed the bill an extravagance, saying the bill hurt those who were already working hard to feed themselves (Milbank 2005: A13). Wagner introduced a bill on February 28, 1939 to create the National Health Act of 1939. This Act called for compulsory national health insurance for virtually all employees. The proposed benefits included physician's services, hospitalization, drugs and laboratory diagnostic services. Costs were to be covered by both employer and employee contributions. However, ultimately no final action was taken and the Bill died on committee (www.cms.hhs.gov). Wagner tried again in 1943 to pass healthcare legislation. Senator Wagner teamed up with Senator James Murray of Montana and Representative John Dingell of Michigan. Together they formed the "Wagner-Murray-Dingell bill" which sought a "cradle-to-grave" system of healthcare (Starr 280). This change to the Social Security Bill also failed. In 1943 Senator Claude Pepper of Florida established the Committee on Wartime Health and Education and was disturbed to learn that thousands of young men and women had been turned away from the armed forces due to poor health. After looking at existing health plans, the committee decided that national health insurance was the only way to correct this national problem and ensure all people had access to health care. However, the fate of the "Wagner-Murray-Dingell Bill" that same year derailed any chance that Pepper's committee could produce a similar piece of legislation (Quadagno 2005: 26).

State government. In contrast, several states engaged in highly vocal debates on this issue, but none ultimately enacted any sort of legislation. The opposition of state medical societies was far too powerful to resist.

Attempts to promote a form of state health insurance date back to 1918 in California. Resistance by doctors, and private insurance companies quickly gathered. After being elected as the governor of California, Earl Warren had ideas of a health insurance plan. Under his plan, there would be a 3% payroll tax, split between employer and employee, on the first $4000 of income. But the CMA, the business community, and the CIO all denounced the plan. Despite Warren’s efforts to broadcast his ideas to the public, his first attempts at state health reform failed (Mitchell).

Warren tired to revise his plan and came back with a second plan of reform. He scaled back by only covering hospitalization up to 30 days for employees and dependents did not include doctor bills, and only needed a 2% payroll tax split between employer and employee. However, this plan also failed mainly because the CMA feared that hospitals might later offer state-subsidized medical serves in competition with doctors (Mitchell).

The resilient Warren made a third attempt after an overwhelming win for the gubernatorial seat in California in 1946. This plan was designed to cover only major hospital expense. However, the window of opportunity for health care reform was closing quickly. His third attempt produced the same, ineffective result as the previous two (Mitchell).

Consensus-building

During this period, New York probably came closest to enacting legislation to achieve universal coverage. The strong and persistent leadership of the governor was instrumental in pushing opposing parties in the direction of trying to compromise. But again, ultimately, the power of the state medical society trumped the best efforts of state policymakers to get reform enacted.

Individuals. One individual who had a major impact on FDR was John T. Flynn, a writer and editorialist. He published numerous articles vehemently opposing FDR, to the extent that FDR had Flynn fired from one of his jobs. He firmly opposed the New Deal as well as US interventionist policy.

The policy window for health reform

Why the window of opportunity for health reform opened

The CCMC offered an opportunity for compulsory health insurance to get onto the national agenda, but only a minority of the committee agreed with this approach. The Social Security bill provided another opportunity, but language related to national health insurance was stripped from the bill before it was overwhelmingly passed by Congress in 1935. In addition, a ruling by the IRS on October 26, 1943, permitted the exclusion of employer-provided health insurance from taxable income. Since this ruling provided an incentive for employers to give health benefits to their employees, it also opened up the possibility of enacting health reform at this time.

Why the window of opportunity for health reform closed

National efforts. The American Medical Association opposition was too threatening to Social Security for FDR to permit compulsory health insurance to be included in that bill, so he had it struck before sending it to Congress.

The decision of the U.S. Supreme Court in Steward Machine Co. v. Davis in early 1937 to uphold Social Security cleared away doubts about whether compulsory health insurance could withstand constitutional muster on 10th Amendment grounds (i.e., reserving powers to the states if they were not included in the Constitution. The Court ruled that Congress had the authority to spend money to protect the general welfare, along with the prerogative to shape the concept of general welfare depending on circumstances (Chapman and Talmadge 1973: 8).

State-Level Efforts. Virtually all of the efforts to pursue compulsory health insurance were at the national level during this period, as lack of coverage was viewed as a largely national problem, by this time.

References

"Centers for Medicare and Medicaid Services: History of Medicare and Medicaid," [www.cms.hhs.gov/about/history/ssachr.asp], Accessed Sept 5, 2005.
Chapman, Carleton B. and John M. Talmadge. "Historical and Political Background of Federal Health Care Legislation." Law and Contemporary Problems 35 (Spring 1970): 334-347. Reprinted in Congressional Research Service. Resolved: That the Federal Government Should Enact a Program of Comprehensive Medical Care for all United States Citizens. A Collection of Excerpts and Bibliography Relating to the Intercollegiate Debate Topic, 1972-73, Pursuant to Public Law 88-246. Compiled by the Congressional Research Service, Library of Congress. Washington, DC: U.S. Government Printing Office, 1973: 1-12.
"Economic Security Act: Hearings Before the Committee On Ways and Means, House of Representatives, Seventy-Fourth Congress, First Session, on H.R. 4120." Washington: United States Government Printing Office, 1935.
Fishbein, Morris. "American Medicine and the National Health Program." The New England Journal of Medicine, Vol. 220, No. 12, p. 495-510.
Graig, Laurene A. "Health of Nations: Third Edition - An International Perspective on US Health Care Reform." Washington, DC: Congressional Quarterly, Inc., 1999.
Harris, Richard. A Sacred Trust. New York: New American Library, 1966.
Mayes, Rick. Universal Coverage: The Elusive Quest for National Health Insurance. Ann Arbor: University of Michigan Press 2004. ISBN 0-472-11457-3 (paper).
Milbank, Dana. "Social Security Debate Has Echoes of 1935." Washington Post, April 26, 2005, p. A13.
Mitchell, Daniel J. B. “What Might Have Been: Earl Warren’s Alternative to Employer-Based Health Insurance.” [1]
"Principles Adopted by the American Medical Association." Journal of the American Medical Association, June 30, 1934.
Quadagno, Jill. "One Nation, Uninsured." Oxford University Press, 2005.
Starr, Paul. The Social Transformation of American Medicine. New York: Basic Books, 1984. ISBN 0-465-07935-0 (paper).

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