How incremental healthcare reforms built the industries we're fighting today (Part One)

The history of American healthcare reforms contains an important message for the fight for Medicare for All: don't stop now.

Thanks for reading Health and Capital. Today’s post is drawing from some of the research Beatrice and I are engaged with for a larger project, but I wanted to begin to introduce it here because it points to a story that is underrepresented when we discuss the progressive reforms of the 20th century in America. As such this post will only draw from a few specific sources and tell a narrow version of this story, but I expect to return to parts of it in future posts and on the Death Panel podcast. This post is mostly intended to rally people who already believe in Medicare for All and feel like it’s escaped from the realm of political possibility. If this is you, know that the next few years are going to be more important than ever, as I’ll explain below. If you enjoy this post, you may enjoy the Death Panel as well; you can support that project on Patreon here.

[Image description: 1946 political cartoon from Polish Daily News - Chicago; lone figure wearing hat labeled “Politics” looms over a group of healthcare workers operating on a patient. Workers are connected to puppet strings held by the figure, with hardware connected to the strings reading “Socialized” “Medicine.”]

For many advocates of federal universal single payer, Bernie Sanders’ campaign suspension on April 8th of this year was a dire moment. After a Democratic Party primary filled with invectives over how the program would be paid for and deliberate attempts by multiple candidates to rebrand Medicare for All (as I wrote about in my previous post), the party had decided on the candidate with the least ambitious healthcare platform of all. In retrospect, even for supporters of any of the other candidates the message was clear: what had been pompously dubbed the “policy primary” had by its end resolved around the former vice president, whose campaign had never really engaged in foregrounding policy in the first place.

From this point on, I’ll leave the party primary retread to others; there’s a veritable cottage industry of people who want to tell you “why Bernie lost” or “why Biden won” or “I guess that’s that for Medicare for All,” and most of them basically just want to tell you to adjust your ambitions downward. What many of these accounts either miss or keep at arms length is that for many people who supported Sanders, he was viewed as a receptive vessel more than anything else. “Big structural change” does not happen by the purview of benevolent politicians, it happens because of mass movements and unrest. Put very simply, had Sanders won, the movement to establish Medicare for All would have still had a significant fight on its hands. When the campaign was suspended, that fight just became much harder.

But there’s no sense in playing counterfactual with recent history, so none of this matters. What does matter is what the preceding century’s healthcare fights can tell us about what to look forward to, and how we should plan accordingly. Most importantly, doing so shows that the next few years may be more important than ever. With this part of the cycle happening against the backdrop of a plague, these demands can be more urgent and more clear than in the past.

Our ‘non-system’

There’s a common joke among single payer advocates that America’s healthcare system is not a “system” at all, in that its pieces don’t function or connect to each other particularly well, and that it has come together relatively ad-hoc, rather than being intentionally designed. This is certainly accurate in some respects. When you think about it, from providers to insurance companies to drug manufacturers the majority of the actual provision of healthcare in the United States is done by an unaffiliated miasma of private companies. This miasma is constrained only by increasingly underfunded and deregulatory federal agencies only capable of disciplining each company retroactively through fines and litigation. If you want to understand how absurd this is, take a look at the below chart from the Drug Channels Institute looking at the companies involved in a relatively straightforward part of the healthcare system, filling a prescription. Keep in mind that for each industry listed below, a major driver of an individual company’s profitability is their ability to extract a surplus value from its business with companies in the other industries on this chart:

[Image description: Graphic depicting components of the U.S. health system and its private stakeholders, including the following industries: Third-Party Payer, Pharmacy Benefit Manager, Pharmacy, Manufacturer, Wholesaler, Patient.

Unfortunately, it would be more realistic to say that to the extent that our healthcare system was designed or developed, it happened at the confluence of a variety of overlapping interests in private industry. The horrible, shoddy, predatory healthcare system the United States enjoys today manifested itself through this history of collective action on the part of industry and the groups it could manage to draw in to assist it. While public outcry, unrest, and demonstrations have all produced significant health reforms, these industries have for more than a century managed to adapt and grow stronger. The industrialization and financialization of the health sector that produced the behemoth corporations we know today can be thought of as an agglomeration of scar tissue built up after each successive fight.

There are many accounts of this history, but for this post I’m going to be primarily drawing from a great 2004 paper by sociologist Jill Quadagno called Why the United States Has No National Health Insurance: Stakeholder Mobilization Against the Welfare State, 1945–1996, which you can read in full here. Quadagno also published a book on the same topic, but I’m going to stick to the earlier paper because it’s available online as a free PDF.

With every loss, the health industries cemented their power

In Why the United States Has No National Health Insurance, Quadagno lays out a concise history of the various movements for health reform in the 20th century in a way that makes the dialectics at work in reform periods abundantly clear. The arc of events here is one that any supporter of Medicare for All should take to heart, and that in my opinion has lessons for other social movements in terms of resisting co-optation, and understanding that some policies which seem like victories for justice can actually lead to counterproductive acquiescence. Most importantly, instead of seeing the healthcare system as non-existent, chaotic, or unstructured in the United States, it demonstrates how the development of the private health industries was quite intentional. Most of this resolves around private health insurance, which is merely one aspect of the health industries, but also happens to be the specific target of Medicare for All. For this reason in this post, and in Part Two, I’m also going to be expanding a bit on Quadagno’s analysis and take it into the present moment. Looking to this history it’s key to emphasize that single payer advocates should free themselves to think much bigger than Medicare for All to what else is required, and toward fully re-envisioning the political economy of health.

The AMA and physician sovereignty

The part of this story that contemporary single payer advocates recall most frequently and remember the best is the actions taken by the American Medical Association (AMA) from the 1930s on. What’s important and relevant here is to recognize the AMA as not just a special interest group, which we might understand them as in a contemporary sense, but as a form of organized labor. In the 1930s, American physicians saw the welfare reforms happening in European countries and grew increasingly concerned that they would lose their labor autonomy if any third parties became involved as financiers for the provision of healthcare. This extended to the state itself: the AMA was so concerned that the United States would adopt a role as financier that it lobbied—successfully—to assure healthcare would be omitted from the Social Security Act of 1935.

An aspect that is often overlooked here is that, while powerful, the AMA was but one labor group. Around the same time the American Hospital Association (AHA) helped to create Blue Cross Blue Shield, the first of a more contemporary strain of health insurers, in response to the dire state of hospital financing during the Great Depression. In its initial formulation, Blue Cross operated without imposing restrictions or controls over providers (in other words, insurers hadn’t yet developed today’s labyrinthine sets of formularies or preferred drugs), making them appear relatively little threat to physician autonomy.

By the time national health insurance re-emerged for national debate after Truman’s election, the AMA formed an alliance with Blue Cross, the American Hospital Association, and other health industry groups to lobby the public against “socialized medicine” and explicitly for the bolstering of the private insurance markets. This is the time period best represented in our general understanding of the healthcare fight in the 20th century, when the AMA wielded PR firm Whitaker and Baxter to saturate the messaging that “socialized medicine” would increase the “drift to socialization and despotism all over the world.”

Again, despite the class implications it’s still important to understand the AMA as a labor organization. As such its national leadership effectively had the leverage to execute grassroots organizing and agitation by its members throughout the nation. Some of this became, as you might expect, ethically suspect. As Quadagno writes:

The AMA also actively entered electoral politics, organizing against Democratic candidates who supported national health insurance. In Pennsylvania, just three weeks before the 1950 election, physicians created a “Healing Arts” committee composed of doctors, nurses, dentists, and office assistants who mailed over 190,000 letters, ran newspaper ads, hung more than 500 posters in doctors’ offices, and posted notices in waiting rooms. Physicians also sent personal letters to their patients, explaining that there were “evil forces creeping into this country” (Cunningham 1951:53–54) and asking them to vote for Republican candidates. On election day, spot radio announcements were made every hour on the hour.

Physicians also ran half page ads of a photo showing Senator [Claude] Pepper with the African American singer, Paul Robeson, who was a member of the Communist party.

Racism and the Red Scare provided a potent framework for defaming national health insurance and demonizing its proponents. In 1945, 75 percent of Americans supported national health insurance; by 1949 that figure had declined to only 21 percent. In the 1950 elections six Democratic Senators who had supported national health insurance were defeated. (Emphasis added)

Ironically, the AMA was in essence building up a separate industry to take on the exact functions it had been worried about and lobbied so fiercely against in the 1930s. While we often speak about this as historically important because the AMA both held and used unique power and leverage, in fact the story is a bit more complicated. The AMA was able to be so successful in its lobbying campaign to stymie the passage of a national health insurance program only by allying itself with other industry groups who would later emerge as even more prominent special interests, compounded with mass American hysteria over communism.

[Image description: Early Blue Cross Blue Shield advertisement. Text reads “Preferred Hospitalization and Medical-Surgical Protection by Blue Cross-Blue Shield”]

Wilderness years

It’s here where some of the biggest issues begin to emerge. While the health industries were successfully thwarting Truman’s proposed national health insurance, the Congress of Industrial Organizations (CIO) used similar sentiments and the mechanisms of the recently passed Taft-Hartley Act to purge communist-led unions from its membership. This led to a major overall shift in organized labor opposition and the ability to rally public demands for broad social welfare programs. As Quadagno explains:

The purge of communist unions from the CIO dramatically narrowed the scope of political debate within the labor movement (Stepan-Norris and Zeitlin 1995; Stepan-Norris and Zeitlin 2002).

To surmount new obstacles to recruitment invoked under Taft-Hartley, the trade unions made bargaining for fringe benefits a top priority. Collectively-bargained benefits obtained on union terms were viewed as the “virtual equivalent of a closed shop,” that is, a unionized workplace (Brown 1997–1998:653). Although pensions involved more money, health insurance was the benefit for which unions bargained most actively. As a result, between 1946 and 1957 the number of workers covered by collectively bargained health insurance agreements rose from one million to 12 million, plus an additional 20 million dependents (Klein 2003).

In other words, from the mid-1940s and into the 1950s the American labor movement explicitly shifted its efforts further away from agitation for broader social welfare and solely toward seeking to meet the needs of its membership. In some ways this mirrors earlier sentiments within the American labor movement’s approach to welfare issues, like the development of unemployment insurance as a public good as financed by employers. It suggests an overall fundamentally flawed, reformist logic that the equitable distribution of welfare could be achieved by forcing the owner and managerial class to bear responsibility for the labor force, in turn bestowing new and problematic power onto employers.

This also had another effect: as organized labor increasingly won private health insurance benefits for its membership, it effectively siloed the labor force into a separate sphere with different material demands. The aims, struggles, time, and resources of organized labor were focused explicitly away from any kind of universal healthcare benefit or similar welfare demand. By not focusing on broad, universal programs, organized labor set itself up to promote patchwork policies aimed at plugging holes in the existing social safety net. One such band-aid policy was the popular program contemporary single payer advocates are attempting to rebuild and expand: Medicare.

As Quadagno explains:

Collectively bargained health insurance plans had one significant gap: They generally excluded retirees. Whenever a union attempted to include health insurance for retirees in a collective bargaining agreement, that drove up costs and resulted in concessions on wages and other issues. Thus, organized labor had an incentive to support a public health insurance program for the aged. Health insurance for old people appeared to be an achievable political objective, one that could resolve the problem of negotiating retiree health benefits and prove what a recently united labor movement could achieve (Berkowitz 1986).

Beginning in 1956 the AFL-CIO wrote model bills and drummed up legislative sponsors, held annual conferences to educate union members about the issues, and worked to develop a broad base of political support. To win over the public, the AFL-CIO created a separate “grassroots” organization of retired trade unionists, the National Council of Senior Citizens (NCSC). The NCSC staged demonstrations, organized mass protests and rallies, prepared flyers and newsletters, and bombard- ed elected officials with letters and phone calls.

The AFL-CIO also seized the initiative in defining Medicare, using publicity materials to characterize the aged as a deserving group (Quadagno [2005]).
Hoping to regain control of the national debate, the AMA released its own statistics, contending that the aged were not “universally frail and feeble, constantly ill, and doddering from one visit to the doctor to the next.” Rather the vast majority were in good health. Only 4 percent of people 65 or older were confined because of chronic illness. Nor were the aged especially needy.

At the 1964 Democratic national convention in Atlantic City, NCSC members arrived by the busload. Fourteen thousand senior citizens marched for 10 blocks down the boardwalk to the convention hotel. Then during the months leading up to the election, the NCSC worked to ensure that no Medicare supporters were defeated at the polls. The Democrats won the Senate and the House by a wide margin, and no incumbent, Republican or Democrat, who supported Medicare lost (Zelizer 1998).

It’s hard to overstate the tragic irony at work here, so it’s important to restate this. Feeling that universal, national health insurance was a political impossibility, organized labor had retreated into a fight which ultimately reinforced the primacy of health insurance companies in American life. But when employers wouldn’t budge on expanding health benefits to the retired, labor organized an extremely effective campaign that tipped the scales to see Medicare passed in order to protect the aged and retired. (To add insult to injury, the structure of Medicare eligibility and monthly benefit amount is hinged on prior labor force participation, but this is a subject for another day).

In Medicare, a significant and crucial expansion of the American social safety net was produced, but in so doing yet another crucial political bloc was splintered off and dissuaded from organizing for common purpose. This is a theme that emerges when you examine the arc of the welfare reform battles of the 20th century, and it’s important we take note of them for the future. As I wrote in a prior post, incremental fixes, exactingly targeted programs, and flexible reinterpretations of policy demands don’t tend to give way to anything but opportunities for industries to further entrench themselves. To this end, Quadagno offers this extremely relevant re-examination of our understanding of the initial passage of Medicare:

Medicare was a victory for reformers but also a victory for providers and insurers. The American Medical Association and the American Hospital Association won concessions guaranteeing that the government would not control doctors’ fees or hospital charges and that federal authorities would not administer Medicare directly. Rather, private insurance agencies would handle claims, review billed costs and reimburse providers (Jacobs 1993; Fein 1985). Medicare also left a considerable number of health care needs uncovered, ensuring that private insurers retained a share of the market for “Medigap” policies while shifting the riskier, less predictable costs to the government.

With the federal government pouring virtually unlimited public resources into financing care for the aged and the poor, health care became a profitable enterprise for physicians, hospitals, and insurance companies. In 1965 alone hospital daily charges jumped 16.5 percent, average fees for office visits to general practitioners jumped 25 percent, and fees for internists jumped 40 percent (Marmor 2000).

Spiralling costs provided fuel for reformers who argued that the problem could only be solved by entirely revamping the health care system and placing responsibility in the hands of one purchaser, the federal government. However, cost increases also made the reformers’ task more complex by diminishing the clarity of the message. (Emphasis added).

I’ve bolded this last bit because anyone who followed public discourse around Medicare for All since the 2016 primary cycle will recognize this as, still, very much the rhetorical bind we can’t seem to dispose of. (I touched on elements of this in my very first post). As health industries have grown and become entrenched, enormous costs of care are levied not only as a clear reason why you would want a single payer in the first place, but also as a moralizing reason why somehow the federal government “couldn’t afford it.” While the latter is obviously blinkered, what both usages of this argument might have to ultimately contend with is this: if health is such a central component of the political economy that by the 20th century “health insurance was the benefit for which unions bargained most actively,” then probably the real discussion we should be having is how we can fully disentangle health from capitalism, and whether capitalism would really be able to survive without it.

This should be a major part of our understanding going forward. While many may feel the movement is stalled out, it’s incumbent on us to continue to press for health justice and single payer until the machine completely breaks. But some of the health industries’ current entrenchment comes out of retreats of the past. We can’t keep allowing incremental reforms to further fragment the material needs of different groups, which ultimately amounts to policies that embed and engender anti-solidaristic sentiment.

In Part Two, I’m going to continue this story by looking to the proposal called “Health Security” and the bungling of the Medicare Catastrophic Coverage Act. These in particular have extremely valuable lessons in particular for how we should exert political demands if a Biden-Harris white house attempts healthcare reforms.

Thank you for reading Health and Capital. As I mentioned in my introductory post, if you enjoyed this and would like to support my ability to produce future posts, please subscribe, share links to it, tell me what you think, and become a patron of the Death Panel on PatreonDeath Panel is a podcast I co-host with Beatrice Adler-Bolton, Philip Rocco, and Vince Patti, and if you enjoy Health and Capital you will probably enjoy it as well.


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