On American Healthcare
Part 1 of 6: A Brief History
“…the United States is exceptional: we spend a higher percentage of national income on medical care (and more per capita) than any other OECD country, and our government finances a smaller fraction of that spending than all countries except Korea.” — Milton Friedman, How to Cure Health Care
When you rank the healthcare systems of modern industrialized nations, America’s healthcare system ranks among the worst. America spends more on healthcare than other nations, yet the quality of healthcare is generally poorer than that of any other industrialized nation and many people still aren’t covered. And, of those who are covered, the majority have insurance and coverage that is either inadequate or unsatisfactory. Even with ObamaCare, about 30% of Americans aren’t covered. ObamaCare was an improvement upon the previous arrangement, but it was by no means an ideal solution. The failure to procure the public option, the overturning of the individual mandate, and the Republican Party’s determination to cut protections for pre-existing conditions rendered ObamaCare almost impotent.
The Republican Party’s opposition to ObamaCare demonstrates the extent of partisan bias in America. The Affordable Care Act (ObamaCare) is largely based on a plan from the conservative think-tank, The Heritage Foundation, which was first outlined in A National Health System for America by Stuart Butler and Edmund Haislamaier. The least popular aspects of ObamaCare, such as the individual mandate, were actually first put forth in this book published by the conservative Heritage Foundation. The proposal was even supported by Newt Gingrich at the time. And ObamaCare was intentionally modeled after Mitt Romney’s healthcare reform in Massachusetts, which was in turn based upon this Heritage Foundation plan. When conservatives bash ObamaCare, it’s important to realize that they are bashing their own plan and that their opposition to it is mostly the result of partisan bias and an irrational hatred of the Democrats and any policy supported by their party. The Republican bias is so strong that they will abandon their own proposals if Democrats start supporting them.
This series of articles will include a thorough discussion of the history of American healthcare, the problems with the American system, and the possibilities for reform. I will not put forth the solution to the healthcare problem. There is no single solution to the problem. The only acceptable solution is universal healthcare, but most countries that have decent healthcare systems don’t have a single healthcare system. Almost all countries that have a universal healthcare system have a mixed system. The UK is unique in having mostly socialized medicine, whereas Canada and Australia are unique in having mostly single-payer healthcare. Most countries with universal healthcare, however, have mixed systems, where the healthcare system in one region or location within the nation is different from the healthcare system in another region.
I will start with a brief history of the American healthcare system (in this article), then (in subsequent articles) we will look at the various options for healthcare reform, including socialized medicine, single-payer health insurance (aka Medicare-for-All), as well as a variety of libertarian and conservative proposals for healthcare reform.
Historically, most healthcare and health insurance was provided by fraternal societies―you know, those clubs like the Freemasons, Elks, and Moose with their lodges. Fraternal societies were especially popular among immigrants and ethnic minorities (just Google “ethnic fraternal orders”). Such fraternal orders weren’t just social clubs; they also provided affordable access to life insurance, health insurance, and other services and benefits. Most fraternal societies offered life insurance, disability insurance, and a lodge practice for healthcare.
The lodge practice was similar to direct primary care or concierge medicine. Your local lodge would hire a doctor for its members and pay the doctor an annual salary. Each member of the fraternal order would pay an annual fee for healthcare and the doctor would be paid his salary. The members of the order would then go to the lodge practice for medical care whenever they needed it. They would not be billed per item, as everything would be covered by the annual fee. The lodges tended to ensure that the lodge practice was not abused, as the members did not want their premiums to increase. This system worked extremely well for people who happened to belong to such a fraternal organization. The average member of such a fraternal order would have access to healthcare for an annual fee equivalent to the market price of a single doctor visit for someone not lucky enough to belong to a fraternal order. In addition to lodge practices, large corporations who employed workers in professions that were hazardous sometimes hired company doctors. This was another form of retainer or concierge medicine that functioned much like the lodge practice model. Lodge practices, however, were far more common than company doctors.
As noted above, fraternal orders were popular among immigrants. When Theodore Roosevelt and other “Progressives” decided that immigrants needed to be Americanized, they decided to wage war against fraternal organizations, which is why fraternal societies aren’t as prominent in modern America. Additionally, doctors who were not hired by such fraternal societies found that their practices were suffering as a result of the competition coming from lodge practices, which were much more efficient. The prevalence of lodge practices and concierge medicine was forcing healthcare costs down. In America, the American Medical Association (AMA) was granted control of medical licensure. They used this privilege to snuff out lodge practices, sanctioning doctors who signed contracts with fraternal societies.
Historically, there was a lot of quackery and malpractice. Doctors would regularly prescribe opium for headaches, while cocaine was promoted as a cure for shyness. Clearly, there needed to be stricter standards for both physicians and pharmaceutical companies. This is why legislators got on board with licensing requirements. The AMA and the new American healthcare system that came along with it really did fix a lot of problems, but it also caused many problems. The AMA not only destroyed lodge practices but also imposed licensure rules that limited the number of doctors in general, restricting supply in order to keep costs artificially high―the purpose of imposing licensing restrictions was explicitly to curtail competition and drive up prices. And they sanctioned doctors that worked for lodges and companies on the concierge model. Thus, the AMA made healthcare unaffordable.
Not long after the AMA came onto the scene, concierge medicine was dying and conventional health insurance was unheard of. Doctors were generally paid directly by consumers. Artificially restricted supply had driven up prices and now most American families simply couldn’t afford healthcare at all. When Franklin Delano Roosevelt was pushing for Universal Healthcare in the 1930s, the AMA opposed socialized medicine on the grounds that it would make healthcare cheaper and, therefore, physicians would make less money. Since the AMA had destroyed concierge medicine and prevented the implementation of “socialized medicine,” healthcare became unaffordable for most working-class Americans. Private insurance emerged on the scene in an attempt to profit by offering a partial rectification. It made healthcare affordable again, sort of. Early health insurance was not employer-based but rather available on the free market, to be purchased directly by individual consumers. But, of course, insurance companies started arguing that concierge medicine ought to be banned altogether, since the fees associated with it are effectively insurance and doctors are not licensed to sell insurance.
More conventional health insurance was now a thing, but it was not employer-sponsored. The modern system of employer-sponsored healthcare emerged as the result of government policy. Hyperinflation in the Weimar Republic had laid the foundation for the rise of Hitler and the Nazi Party. Economists and politicians were afraid that wage increases would cause inflation. In the Stabilization Act of 1942, the government restricted competition amongst employers, preventing them from offering higher wages. Thus, employers began looking for new and creative ways to incentivize people to come work for them rather than for their competitor. Companies began offering benefits instead of higher wages as an incentive. Thus was born employer-sponsored health insurance. Finally, unions got on board with this idea of employer-sponsored benefits and began demanding health insurance as a condition of employment. The labor movement effectively solidified the employer-sponsored health insurance model.
Since employer-sponsored health insurance was now the norm, retirees found it nearly impossible to find affordable healthcare. If you were not currently employed, affordable insurance was simply not available. If your employer didn’t offer health insurance, you were pretty much out of luck. In 1965, Medicare and Medicaid were created to address this problem. Medicare would provide health insurance for retirees, while Medicaid would offer affordable health insurance to low-income individuals whose employers did not offer health insurance. Nevertheless, many Americans were left behind, without access to affordable healthcare. At some point, health maintenance organizations (HMOs) did start offering “open-access plans” but the costs remained too high for most people to afford. Throughout the years―from the 1960s to the 2010s―legislators fought for healthcare reform. Some reform proposals were more conservative, like Clinton’s Health Security Act and Obama’s Affordable Care Act, while others were more moderate, like Ted Kennedy’s single-payer national health insurance proposal. To my knowledge, no legislator in America, with the exception of Mike Gravel, ever argued for government-run hospitals or actual socialized medicine.
In 2010, the Affordable Care Act (ObamaCare) was passed. Like the establishment of licensure rules, this was a mixed bag. Some aspects of ObamaCare were good, while others were bad. Insurance works by pooling resources. The more people that are insured, the cheaper the insurance can be and better the coverage can be. ObamaCare’s individual mandate would have reduced insurance costs by increasing the number of people insured, but it also would likely have been the final death blow to concierge medicine and direct primary care. Furthermore, ObamaCare further solidified the normality of employer-sponsored health insurance, a system that places a third-party in between patients and doctors and drives up costs. If you have to buy conventional health insurance anyway, concierge medicine is no longer more affordable than the alternative. However, Trump and the Republicans have successfully nixed the individual mandate. And a federal judge in Texas ruled ObamaCare’s ban on denying coverage for preexisting conditions unconstitutional. The judge’s ruling is clearly bullshit. This is just an activist judge attempting to legislate from the bench. The Republican Party has fought hard to nullify ObamaCare, fighting hardest against the individual mandate and coverage for preexisting conditions, which are arguably the best parts of ObamaCare. ObamaCare was clearly better than the previous status quo, so it would have been better to let ObamaCare stand until a better reform could be passed, but right-wing extremists are hellbent on making everything worse. It appears that the Republicans have effectively nullified the good parts of ObamaCare but have also let the worst parts remain in effect. What we had before ObamaCare was worse than ObamaCare, and what the Republicans have given us now is actually worse than that!
Since Republicans have been fighting hard against ObamaCare, the Democrats have been moving slightly further to the left on healthcare. Millennial progressives, like Alexandria Ocasio-Cortez, are advocating single-payer national health insurance (not socialized healthcare but socialized health insurance). The fight for healthcare reform is raging again.
