The AMA again mobilized at once, eventually calling an emergency meeting of its House of Delegates (only the second in its history), which denounced any effort to “socialize” medicine by establishing prepayment plans and taking health care decisions out of the hands of physicians. The siege had begun, with AMA members and staff bombarding members of Congress with letters, postcards, and phone calls decrying any form of compulsory health insurance. Edwin Witte, executive director of the CES, recalled that the committee was “at once subjected to misrepresentation and vilification.”10
The pressure continued unabated, publicly and privately, for a year—and included the president’s own personal physician lobbying Eleanor Roosevelt.11 The president responded by appointing physicians to the CES and seeking a middle ground that would be acceptable—but the AMA would have none of it, and the pressure continued until an evening in June 1935, when Roosevelt privately concluded to his administration that it should proceed with a Social Security bill on its own merits, not risking its defeat by including health care provisions.
For the next seventy-five years, scholars would debate whether the president was unduly cautious about health insurance. But all sides agree that the decision was Roosevelt’s alone—and no one will ever know what would have happened had he committed to battling personally for health insurance in the overall Social Security Act, which he signed into law on August 14, 1935—a major milestone for the nation on its own. The victory was so huge, in fact, that Roosevelt’s administration was consumed with other political battles spawned during its enactment period. This and other depression-era legislation—coupled with the rise of Blue Cross–type insurance for companies and their workers (eventually endorsed by the AMA)—placed public health care on the back burner again.
In July 1938, a National Health Conference was held in Washington to bring together (some say for the first time ever) all the disparate interest groups—including doctors, unions, farmers, and civic leaders—to discuss the health needs of the nation at that point. The conference concluded with a series of recommendations that featured increased public health services in general, aid for the medically indigent, grants-in-aid for hospital construction, and grants to states to encourage (but not compel) statewide health insurance plans.
The AMA called another emergency session of its House of Delegates—but this time it adopted a more conciliatory position, opposing only any language that might result in compulsory insurance. Several discussions on the matter ensued at the White House before Roosevelt abandoned the issue for that election year—which turned out to be prophetic. A conservative resurgence at the 1938 polls, led by Dixiecrats and Republicans, made things “righter” in Washington and effectively put an end to New Deal legislation.12
Health care came up again with Roosevelt in the White House. The following year, Senator Robert Wagner (D-N.Y.), a personal friend of the president, introduced the National Health Act of 1939. Roosevelt never put his weight behind Wagner’s legislation, although it was endorsed by big labor (it was opposed by the AMA), and it was still in committee on September 1—the day Germany invaded Poland.
For the second time in the life of many Americans, military action in Europe put an end to any real talk about national health insurance—except for tax exemptions allowed for health benefits so that companies could attract and maintain private-sector workers during the war years. Many employers took advantage of the exemptions, bolstering the nonprofit Blue Cross–type coverages already in the market and leading to the uniquely American employer-based health insurance system.
Wagner’s bill evolved and was reintroduced in 1943 as the Wagner-Murray-Dingell Bill, which would have funded compulsory national health insurance with a payroll tax. Opposition was overwhelming, with the AMA adopting a question it’s been asking us ever since: “Do you want medical care for the sick to be provided by bureaucrats or doctors?” Although now just a footnote in history, the bill remains interesting because it was introduced and defeated in every congressional session for the next fourteen years.
TRUMAN’S EFFORT PLANTED THE SEEDS
In 1945, Roosevelt died, the war ended, and Harry S. Truman became the first president in the nation’s history to openly endorse a single universal comprehensive health insurance plan. Mincing no words, Truman’s first major peacetime address to Congress, in November 1945, stunningly laid out this agenda. Noting that during World War II, nearly five million Americans had been classified as unfit for military service for health reasons, and that another three million had been treated or discharged for physical or mental problems that had existed before their induction, Truman introduced bills in both the House and the Senate, telling Congress, “In the past, the benefits of modern medical science have not been enjoyed by our citizens with any degree of equality. Nor are they today. Nor will they be in the future—unless government is bold enough to do something about it. We should resolve now that the health of this nation is a national concern; that financial barriers in the way of attaining health shall be removed; that the health of all its citizens deserves the help of all the nation.”13
Once again, the AMA issued its call to arms, this time using to its advantage the cold war to cast Truman’s “socialized medicine” as an extension of feared Russian communistic control of the world. “[If this] Old World scourge is allowed to spread to our New World, [it will] jeopardize the health of our people and gravely endanger our freedom,” shouted the AMA Journal.14
Heeding the AMA’s call, Republicans in the House blocked the bill from even getting a hearing, and they were joined in this opposition nationally by the American Bar Association, the American Hospital Association, and most of the nation’s press—who parroted the AMA argument that the legislation would make doctors “slaves.” Truman countered by pointing out that it allowed doctors to choose their own form of payment, but these words fell on deaf ears. The bills didn’t advance in 1946—and furthermore, the Republicans used them as proof of Truman’s “socialism” to tailor a GOP sweep back into control of Congress in that fall’s elections.
Truman retaliated by making public health care part of his own reelection platform in 1948, which mortified the AMA and other opponents when the feisty Missourian staged one of the biggest upsets in election history, also leading the Democrats back into power on Capitol Hill. Thinking that Armageddon had arrived, the AMA assessed each member an additional twenty-five dollars, hired a public relations firm (Whitaker & Baxter), and mounted an anti-Truman campaign in 1949 that cost $1.5 million—the most ever spent on a lobbying effort in the United States at that time.15
Part of the PR effort was a poster and a pamphlet distributed to patients in doctors’ waiting rooms across America that urged, “The Voluntary Way Is the American Way.” Insurers and employers were also enlisted as allies to the campaign, with the AMA in return urging its own members to ask patients to purchase private, voluntary insurance to head off the attempt to enslave them. The U.S. Chamber of Commerce pitched in, printing a pamphlet, “You and Socialized Medicine,” that urged member companies to endorse and purchase private group-insurance plans for their workers to eliminate any need for a public plan. Racist Southern politicians also joined the opposition by preaching at home that the dangers of “socialized” medicine included an end to racially segregated hospitals and the enforcement of staff privileges for black doctors. By the end of 1949, the nation had witnessed its first-ever all-out paranoid-propaganda blitz by the country’s for-profit, free-market health care sector.16
But the crowning blow once again came from overseas, where in late 1949 the Soviet Union announced the establishment of a Communist government in East Germany and Mao Tse-tung’s Communist party established the People’s Republic of China. Despite the now-raging cold war, Democrats retained control of Congress in the 1950 elections, but the GOP made enough gains to slam the brakes on any further effort by Truman to get national health insurance back on the agenda.
“I cautioned Congress agains
t being frightened away from health insurance by the scare words ‘socialized medicine,’ which some people were bandying about. I wanted no part of socialized medicine, and I knew the American people did not,” Truman wrote later in his memoirs. “I have had some stormy times as President and have engaged in some vigorous controversies. Democracy thrives on debate and political differences. But I had no patience with the reactionary selfish people and politicians who fought year after year every proposal we made to improve the people’s health.”17
The AMA’s opposition to Truman, and its successful partnership with business and private-pay insurance companies, put into motion the market forces that eventually took control of American health care. Companies like General Motors, for example, began paying for health insurance and pensions for their workers in 1950, igniting a shift that continued for decades—eventually leading to the takeover of health care by large for-profit insurance providers. Union leaders like Walter Reuther of the United Auto Workers foresaw this outcome when he expressed relief that his own insurance was being covered but ruefully acknowledged that this was not the strongest solution possible, which would be a system that covered everybody and spread the costs to all.
And sure enough, commercial insurers soon began cherry-picking young and healthy premium-payers by offering them lower prices. An increasing number of large employers realized, too, that they could self-insure by cutting their own deals with insurance companies, thus no longer needing to belong to the broader nonprofits. By the end of the 1950s, insurers were “experience rating” firms to base premium charges on a company’s usage of services. All of these forces produced a golden age for the idea of free-market insurance. By 1963, nearly 80 percent of Americans were employer insured, and health care costs had largely been contained by market conditions.
FINALLY, GOVERNMENT-RUN HEALTH CARE,
BUT NOT FOR ALL
By the 1960s, though, the nation’s elderly were an increasing problem for the free-market solution because of their health care demands. Company health plans with benefits to retirees—mostly through unions—suddenly had to jack up current workers’ premiums in order to cover rising costs. The rest of the elderly, mostly poor and uninsured, were creating larger demands on state and local charity suppliers. The “success” of America’s health care solution had dramatically showed its Achilles heel.
The earliest reaction came in 1958, when legislation was introduced that would cover hospital costs for people on Social Security. As expected, the AMA swung into action—employing the same paranoid attacks as before—but this time the debate did not evaporate. By concentrating their focus on problems of the aged, proponents eventually passed a bill, in 1960, called the Kerr-Mills Act, which provided states with federal grants to pay for health care for the elderly poor. However, only twenty-eight states signed on to the plan, and many of these didn’t set aside enough state money to trigger the federal response—plus doctors and hospitals rejected payments because they were “below the prevailing rate.”18
So, for the first time in the nation’s history, a groundswell of authentic grassroots support for a tougher law began rising. By 1962, polls were showing that 69 percent of Americans favored such a measure—by now called Medicare—and President John F. Kennedy joined in the support, making it a legislative priority. The frightened AMA this time created a political action committee, AMPAC—which recruited the personal doctors of members of Congress to lobby against the effort—as well as running familiar newspaper, radio, and TV ads decrying Medicare as socialized medicine. The legislation lost by narrow votes in the first round (by only 52–48 in the Senate), which gave Kennedy encouragement to introduce it again the following year, when it was stalled in the House Ways and Means Committee, but by the narrow vote of 13–12.
Although it had stalled the Medicare bill, the AMA (for the first time ever) began losing some of its partners—notably the American Hospital Association and some of the now-powerful for-profit insurance companies, who agreed to the need for a government program to pay health costs for the elderly because it was affecting their own bottom lines. With support from big labor, too, and universal support from elderly Americans, the Medicare idea was gaining steam when, in November 1963, Kennedy was assassinated and Lyndon Johnson assumed the presidency.
Aided by the shock of Kennedy’s death and the landslide victory of Johnson and the Democrats in 1964—much of it the result of Kennedy’s unfulfilled domestic agenda, which LBJ had reframed as his own Great Society—Medicare was shoved across the finish line in 1965, though not before some final tweaks and compromises.
Realizing its losing position, the AMA lobbied for what it called Eldercare, an amplified version of the Kerr-Mills Act. Insurance companies, led by Aetna, pushed for another version, called Bettercare, which would provide federal money to be used for private health insurance premiums for the poor and elderly. In the final showdown, Wilbur Mills, House Ways and Means Committee chairman, combined all three ideas into the final Medicare bill, which he called his “three-layer cake”: Part A, which covered hospitals; Part B, which covered doctors and was optional; and Medicaid, a separate program for the states. Prescription drugs were not covered, nor were eyeglasses, dentists, and long-term care, but the final bill emerged as the largest expansion of health care coverage in American history.
In a special homage to Truman, LBJ signed the bill on July 30, 1965, in Independence, Missouri, with Truman at his side.
Johnson said, “No longer will older Americans be denied the healing miracle of modern medicine. No longer will illness crush and destroy the savings that they have so carefully put away over a lifetime so that they might enjoy dignity in their later years. No longer will young families see their own incomes, and their own hopes, eaten away simply because they are carrying out their deep moral obligations to their parents, and to their uncles, and their aunts.”19
MEDICARE DIDN’T TOTALLY SOLVE
THE PROBLEM
The implementation of Medicare and Medicaid consumed enormous attention in government and the health care world for the next several years, but by 1970 growing health care costs and increased numbers of uninsured among the non-elderly renewed the debate about more drastic health care reform. It was President Richard Nixon who helped sound the alarm, saying, “We face a massive crisis in this area. Unless action is taken within the next two or three years … we will have a breakdown in our medical system.” He was supported by the normally conservative media, including BusinessWeek and Fortune magazines, which had cover stories and special issues declaring that American medicine stood “on the brink of chaos.” Polls also showed that 75 percent of American households agreed there was a “crisis.”20
Senator Ted Kennedy (D-Mass.), chairman of the Senate Health Subcommittee, opened fire in 1971 with renewed promotion of national health insurance. Nixon responded with his own plan, which would mandate employer health coverage for all working Americans and would require employers offering traditional indemnity coverage to also offer a prepaid group plan called, for the first time, a health maintenance organization (HMO). By July of that year, there were twenty-two different bills in Congress—ranging from Kennedy’s comprehensive single-payer plan to a complicated but conservative scheme called Medicredit, supported by the AMA. It was an amazing time in politics—hardly imaginable today, the period from 1970 to 1974 was vividly alive with proponents for changing a system they all deemed to be in collapse.21
But because of the number of proposals, and the constantly shifting political alliances, Congress took no action on any of them in 1971 or 1972, an election year. The only plan to find common ground and get passed in 1973 was Nixon’s Health Maintenance Organization and Resources Development Act (HMO Act), which required companies with twenty-five or more employees to provide an HMO option.
Despite all the fervor, the result had been “cycling negative majorities” of adherents to each plan, with the result that none could get majority support. Kennedy and Mills ev
entually joined in a compromise bill that had the best potential, but (a) Mills was brought down by a sex scandal (remember Fannie Fox?), and (b) Nixon resigned after Watergate.
Recession, inflation, the loss in Vietnam, the Arab oil embargo, and eventually the Iranian hostage crisis dominated the rest of the 1970s, stifling attempts at further reform. That period was followed by the conservative Reagan years, during which Nixon-era HMO enrollment grew fourfold as private managed care plans flourished in their new environment. By 1991, even longtime advocates for national health insurance like the New York Times were suggesting that private managed care (rather than public policy) should continue leading the way.
But under the surface—waiting to boil over again—was the fact that millions of American families were going without health insurance and therefore not part of any managed care solution.
Something else was boiling, too, by the time Bill Clinton was elected to the White House in 1992: the dominance of a handful of for-profit insurance providers that had consolidated their control over the health care system even more successfully than the AMA.
The Reagan years produced no meaningful debate over health care, but they produced several changes in response to employer concerns about selection bias and HMO pricing. In October 1988, Congress enacted some pro-business amendments to the HMO Act that relaxed regulations of federally qualified HMOs, basically freeing employers to negotiate HMO rates and coverage more easily—and lifting federal equal-contribution requirements for companies.
This political period, in fact, merely solidified the control of our health care system in the hands of a very few large corporations under the broad category of “managed care,” which I’ll explain further in the next chapter.
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