Deadly Spin

by Wendell Potter

  It shouldn’t be surprising how effectively this “paranoid style” continues to work in American politics. Pulitzer Prize–winning historian Richard Hofstadter coined this term in his 1964 book, The Paranoid Style in American Politics, which attempted to explain the McCarthy era. The message from our contemporary right wing is the same as the one Hofstadter wrote about nearly half a century ago. The view, he said, is that “old American virtues have … been eaten away by cosmopolitans and intellectuals; the old competitive capitalism has been gradually undermined by socialistic and communistic schemers; the old national security and independence have been destroyed by treasonous plots, having as their most powerful agents not merely outsiders and foreigners as of old but major statesmen who are at the very centers of American power. Their predecessors had discovered conspiracies; the modern radical right finds conspiracy to be betrayal from on high. Important changes may also be traced to the effects of the mass media.”

  HEALTH CARE IS DIFFERENT IN ISOLATION

  There is a strong element of historic reality supporting this schizophrenic American thinking. While Europe had had nothing but entrenched monarchies and/or strongly centralized, warmongering (or cowering) governments, America was coping with a totally opposite set of problems, most of them derived from its strongly decentralized government—namely slavery, secession, civil war, reconstruction, and unbridled expansionism—when the abstract idea of national health care reared its head in the late nineteenth century.

  Actually, as an infant republic, the United States had earlier mimicked European nations by starting one of the world’s first government health programs. President John Adams signed a bill in 1798 establishing the Marine Hospital Service, a federal network designed to care for seamen, who paid twenty cents a month to belong and have access to a group of hospitals in U.S. seaports. The MHS eventually evolved into today’s Public Health Service, a major part of the Department of Health and Human Services, headed by the surgeon general.

  But if you weren’t a seaman, organized health care simply didn’t exist for you during the next century—except for a few sporadic experiments that dot the history books, mostly as footnotes. For example, there was Massachusetts Health Insurance of Boston, organized in 1847 and usually credited as being our first “sickness” insurance; a French mutual-aid society (la Société Française de Bienfaisance Mutuelle) that in 1853 began offering prepaid hospital care in San Francisco, a system closely resembling that of HMOs today; and, in the decades following the Civil War, a number of mining, industrial, and railroad companies that began providing on-site doctors for workers who prepaid with deductions from their paychecks.2

  World health care changed abruptly and forever in 1883 when one of history’s most unlikely people, Otto von Bismarck, founder of the German Empire and known as the Iron Chancellor, ordained the world’s first “compulsory sickness insurance” as part of his political effort to develop a strong working class as the foundation of a strong Germany. Although he is remembered in this country mostly as the strong militarist and nationalist that he was, Bismarck also went on to create the world’s first social security retirement system in 1889—arguing that “people who know they are cared for are the best building blocks for a strong nation.”

  The irony today of detractors calling national health care “socialist” must certainly have Bismarck spinning in his grave. It is no paradox that he and those who followed in his footsteps established European health systems as extremely conservative antisocialists—they were catering to the working classes as leverage against their joining true socialist and labor movements of the day. Strong conservative governments in Europe called this “turning benevolence into power”—a strategy generally credited with creating the social welfare measures that actually kept Communism from becoming a dominant force.

  Similar health care systems followed in Austria in 1888 and in Hungary in 1891. After their success was evident, another round of reform brought compulsory sickness insurance to Norway in 1909, Serbia and England in 1911, Russia in 1912, and the Netherlands in 1913. France and Italy adopted different approaches, subsidizing mutual-benefit societies that workers formed among themselves. Others, like Sweden, Denmark, and Switzerland, chose instead to give strong financial assistance to voluntary funds, beginning in 1891.3

  Because of its uniquely decentralized government and lack of any need (yet) for antisocialist political paranoia, the United States simply rode out this period of health care history, no one pushing the agenda. Instead, another American phenomenon, for-profit life insurance, gained ground, with a boom in the sale of weekly-premium policies that provided lump payments at death, which could be used to pay for final care and burial. Exploiting the fear of a “pauper’s burial,” these policies were sold by aggressive people who also collected the cash premiums—ten, fifteen, or twenty-five cents a week—to fuel a highly profitable industry that boasted a staggering 60 percent administrative cost (yes, only 40 percent of premiums actually went to benefits). Thus was a new American personage created, the insurance agent. Metropolitan Life and Prudential Insurance Company led an explosion so great that by 1911 Americans were spending about as much ($183 million) for this product as Germany did for its health system that year.4

  AMERICA’S FIRST “EUROPEAN INVASION”

  It wasn’t until 1906 that the first national noises were made in the United States for actual health insurance. That year, the American Association for Labor Legislation (AALL) was established at the University of Wisconsin by a group of academic reformers that included prominent economists of the Progressive Era. Among their chief supporters on the political side was President Theodore Roosevelt, who often paraphrased Bismarck by saying that “no country could be strong whose people were sick and poor.” But Roosevelt had his political agenda full with reforming basic capitalism in the Progressive mold—a far bigger necessity at that time—and he never got around to health care before leaving office in 1909, thus becoming the first president (of many) in that category.

  Health insurance advocates got a major boost when Roosevelt came out of retirement, bolted from the Republican Party, and ran as a candidate for the Bull Moose Party in the election of 1912. Many historians say it was the high-water mark for Progressivism, arguing that Roosevelt’s defeat by the conservative Democrat Woodrow Wilson left a void in the kind of presidential leadership needed to enact social welfare programs. Perhaps so, but AALL tried to carry out an ambitious reform strategy—and, in so doing, became the first reform victim of its own political naïveté, not to mention the first reform casualty of the same fearmongering propaganda that has been echoing ever since.

  AALL and its allies from the Progressive Era did have one major textbook success with their efforts during the years of the Wilson administration and World War I. They lifted the abstract idea of universal health care to an unprecedented level of popular acceptance in this country and provoked a feeling by many citizens that it was imminent—only to be savagely frustrated and thwarted. This familiar cycle would be repeated four more times during the twentieth century—the next time, during Franklin Roosevelt’s New Deal era; after that, under President Harry Truman; in the early 1970s, when Watergate killed more than a presidency; and lastly, during the Clinton health-plan debacle of 1993–94.

  All five efforts emerged from different political circumstances. But if all five were recast as Law & Order or CSI: Miami episodes, despite there being five different victims, five different sets of fingerprints, and five different murder weapons left at the scene, the motive would be the same. And the only possible conclusion would be that they were all “done in” by the same “perp”: America’s free-market health care system, which walked away scot-free each time.

  Because it was the first victim, the AALL effort is worthy of study. In short, the group comprised about three thousand reform-minded members, mostly upper- or upper-middle-class leaders in their communities or regions, giving AALL considerable influence. As an “elitist org
anization,” AALL was anything but liberal. In fact, most of its members were vigorous opponents of Eugene Debs, leader of the Socialist Party, who was on a tear at the moment. AALL members sought to neutralize these Socialist Party inroads by using “scientific methods” to aid the working classes while also eliminating the abuses of capitalism—loosely imitating the earlier conservative, nationalistic European successes.5

  As part of the Progressive Era, and enlightened by their own pragmatic backgrounds, AALL members recognized from the outset that the strongly decentralized government of the United States required an approach radically different from the social welfare systems in Europe. It would be more difficult to install as well, because all programs would have to be legislated at state and local levels rather than at the federal level, as on the other side of the Atlantic. President Wilson’s general opposition to any federalized social legislation further mandated this route.

  The first national AALL campaign was for states to legislate that employers form government-run pools to insure their workers against industrial accidents—providing “workmen’s compensation.” This campaign met with very little resistance and a great deal of enthusiasm. Thirty-three states eventually passed such laws. Encouraged and inspired by this and other local successes (and even buoyed by Roosevelt’s impact on the 1912 election), AALL upped the ante and set its sights on its major Progressive goal: government health care at state levels in America.6

  An AALL national conference in 1913 eventually led to formal input from the AMA, and in 1914 the two groups formed an actual partnership of sorts that led to the drafting in 1915 of a bill that was thought to be acceptable to all. Limited to the working classes, the proposed bill would have provided coverage for physicians, nurses, and hospitals, plus sick pay, maternity benefits, and a fifty-dollar death benefit for burial costs. Hopes were at their highest.

  But 1917 saw the house of cards come tumbling down. Big labor, spearheaded by Samuel Gompers, denounced compulsory health insurance as an unnecessary, paternalistic reform. State and local medical societies objected to the AMA’s support of the legislation, which led to the national group’s denying that it had ever sponsored it in the first place. And—surprise, surprise—also joining the opposition were the for-profit life insurance companies, which vociferously objected to the legislation’s “intrusion” into their market, despite the fact that none of them offered health insurance.

  This sudden, unforeseen groundswell of opposition probably would have been enough. But another major event, the U.S. entry into World War I in April 1917, engulfed the entire debate in a fierce anti-German fever. Opponents labeled the effort “un-American” and the “Prussian menace” and claimed it was part of a plot designed by German dictator Kaiser Wilhelm II “the same year he started plotting and preparing to conquer the world.” Prudential Insurance executive Frederick Hoffman called the reformers’ proposal for a European-like compulsory insurance program a “German plot.”7

  California was the only state to go ahead with a public referendum, in 1918, but it was vigorously opposed by the state’s physicians, who were joined by the major life insurers’ group, led by Prudential and Metropolitan, and the Pharmaceutical Manufacturers’ Association, which financed a campaign to galvanize public opposition.

  The referendum became the first overt effort by special interests in the United States to defeat health care by using propaganda—and by then the Russian Revolution had occurred, so the by-now-familiar epithets “Bolshevik” and “Communist” joined “Hun” and “Prussian” in pamphlets as descriptions of people who supported the plan, which lost overwhelmingly at the ballot box.

  THE FREE-MARKET “SOLUTION” CONTINUES

  The Red scare continued after the end of the war and brought public hysteria to new levels in America. Triggered by a wave of inflation, a series of violent labor strikes, race riots, lynchings, and other forms of vigilante justice, the United States entered a period of political unrest that changed little throughout the 1920s. In this panicky climate, further proposals for “socialist” public health care reform simply did not happen.

  Free-market, prepaid health insurance began creeping into existence, though, with the introduction of company group plans, like one offered by Montgomery Ward & Company in 1910, and labor union plans, like one offered by the International Ladies Garment Workers Union in 1913. Such plans covered less than 2 percent of the workforce by 1929, when the nation’s first real public prepaid-hospitalization plan was unveiled in Dallas.

  The focus of the plan was narrow, specifically a single institution—the nonprofit Baylor University Hospital—where the administrator, Dr. Justin Ford Kimball, devised a strategy to deal with the hospital’s mounting expenses. His idea was to have groups of local residents, beginning with Dallas teachers, pay fifty cents a month and receive up to twenty-one days of hospital care—if needed—during any year. Called the Kimball Plan, it made everybody happy, subscribers and cash-strapped hospital officials alike. Other nonprofit hospitals quickly began mimicking it, but all these early plans mandated that enrollees use only the hospital initiating each scheme.

  “Free choice” plans that allowed subscribers to choose their own “participating” nonprofit hospital when ill soon began popping up. Some of these plans were killed quickly in states that saw this as selling insurance without a license, infringing on the free market. But this, in turn, prompted the American Hospital Association to lobby states to permit the sale of hospital insurance by nonprofit corporations, like hospitals—an idea approved first in New York in 1934 and then by thirty-five other states during the next eleven years.

  Eventually, these tax-exempt efforts were united under a common name, Blue Cross, and a common trade group, the Blue Cross Association (later renamed the Blue Cross and Blue Shield Association),8 which by 1945 had about two thirds of the nation’s health insurance market locked up, in what undoubtedly is by far the biggest consumer-driven success story in America’s history of open-market health insurance. The fact that it was accomplished by government-shielded nonprofits doesn’t deter today’s talking point propagandists from extolling its “free-market” approach.

  Unfortunately, in 1929 something bigger than the birth of what would become Blue Cross also happened: the Wall Street crash and the Great Depression.

  Although serious health care issues went unaddressed at any political level in the 1920s, the process of thinking about them didn’t stop. A productive result was the Committee on the Costs of Medical Care, founded in 1927 and led by Dr. Ray Lyman Wilbur (president of Stanford University, a former AMA president, and a future secretary of the interior) to attempt the first-ever serious study of U.S. health care and how to change or improve it.

  Made up of fifty high-level economists, physicians, and public health specialists, the CCMC, in a report it released before disbanding in 1932, called for far-reaching changes in the organization and financing of American medicine, although stopping short of asking for compulsory insurance. Its primary recommendations were for medical practices to organize with hospitals as their focus rather than solo practitioners; for public health services to be extended; for group payment for medical care to be established through taxation, private health insurance, or both; and for there to be large-scale planning for and coordination of the nation’s health services.

  Although these proposals may seem rather reasonable and tame—even conservative—in today’s world, they were deemed totally unacceptable by a majority of physicians at the time. The AMA, now ever vigilant, denounced them as “an incitement to revolution.” Other health providers attacked them as an attempt to “institutionalize” and, of course, “socialize” American medicine, which up to that point had been a highly individualistic, largely self-regulated affair. Instead of illuminating a well-reasoned path to the future, the CCMC’s 1932 report helped underscore the sharp divide between doctors and the rest of society that still echoes today.9

  It was into this cauldron that Franklin Ro
osevelt tumbled that year by being elected president to deal with the greatest economic crash in the nation’s history. A quarter of the population was unemployed, banks were collapsing, industries were bankrupt, there was panic in the streets, and Roosevelt assumed a national presidency that gave him little executive power to do much but watch the suffering. Understandably (and supported by everyone but the radical right), Roosevelt immediately began legislating ways to obtain and centralize the executive power needed for someone in his position to deal with these staggering issues. Also understandably, health care just wasn’t on that list—yet.

  SOCIAL SECURITY, YES; HEALTH CARE, NO

  The first two years of Roosevelt’s New Deal were a whirlwind of activity that led to the establishment of a great many agencies to combat the depression, many of them stopgap or emergency measures but all of them reflective of a never-before-seen level of executive energy coming from an extremely activist central government. Coupled with his Fireside Chats over the radio, Roosevelt’s actions served to lift America’s spirits, while changing the very nature of government and public policy. Eventually, during one of his famous chats, he said, “One of the duties of the state is that of caring for those of its citizens who find themselves the victims of such adverse circumstances as makes them unable to obtain even the necessities for mere existence without the aid of others. That responsibility is recognized by every civilized nation … To these unfortunate citizens aid must be extended by government—not as a matter of charity but as a matter of social duty.”

  It was in this vein—citing the vast inadequacies of state-run programs—that Roosevelt appointed a Committee on Economic Security (CES) in June 1934. Chaired by Secretary of Labor Frances Perkins, it was to study all forms of national “social insurance” and to make recommendations by the end of the year. Although Roosevelt said in a June 8 address to Congress that he was particularly interested in old-age and unemployment insurance, he opened the door for explorations of accident insurance, retirement annuities, survivor’s insurance, family endowments, maternity benefits, crop insurance—and health insurance.