US National Health Insurance

History of public option in the U.S.

The concept of national health insurance has been around for a long time. Almost 100 years ago European governments began to pay for the health care of their citizens. In the United States a small group of liberal professionals started the fight for NHI in 1912. But by 1920 the idea had been killed by insurance companies, AMA doctors and conservative labor leaders.

A second round of NHI discussion began with the social security legislation of the 1930s. At least ten proposals reached Congress between 1939 and 1950. In 1949 the AMA, fearing government control over doctors' fees, hired the public relations firm of Whitaker and Baxter to wage a nationwide advertising campaign. Building on the intense McCarthyism of the period, Whitaker and Baxter equated NHI with socialism and placed full-page ads in newspapers and magazines that pictured Government destroying the sacred doctor-patient relationship. The AMA shelled out $5 million in successful advertising and lobbying, and NHI remained a dead issue throughout most of the 1950s.

In spite of inaction on national health insurance, the health care system as a whole changed markedly by 1960. Through the Forties and Fifties, a giant private health insurance industry came into being, composed of Blue Cross, Blue Shield and commercial companies such as Aetna, Occidental and Connecticut General. These companies offer considerable hospital protection to working families who can afford to buy policies and are in a generally healthy age group. But the companies fail to pay most medical bills outside the hospital. And people who fall chronically ill or lose their jobs lose their insurance as well.

Low-income people, of course, can't afford insurance, and the companies don't want to insure the elderly because of their high rate of illness. So a new drive for national health insurance began around 1960, concentrating on the poor and the elderly. In 1965 Congress passed Medicare for those over 65 and Medicaid for people unable to work.

Medicare takes money from people's paychecks, under Social Security, and uses it to pay medical bills of the elderly. Medicare is limited, paying on the average only half of these bills. Though a step forward for people who pile up thousands of dollars in hospital costs, it ignores a sizeable portion of the bills charged in doctors' offices. People over 65 pay an average of $400-500 each year in medical bills not covered by Medicare. With the rise in medical costs over the last decade, that is more than the average senior citizen paid in total health costs before Medicare was passed.

Medicaid must also be judged harshly, for it has failed to meet the needs of the 40 million poor people in the country (the government defines "poor" [in 1974] as a family of four earning less than $4,300). More than 20 million of them are not covered at all. Those who are covered receive limited services. And Medicaid patients have a hard time finding doctors and dentists who will see tliem. In one Los Angeles county hospital, 23 percent of outpatients switched to private doctors right after Medicaid was passed, but 12 months later most of these patients chose to come back to the county hospital. Other studies confirm that private medicine has failed to care for many of the poor even when paid to do so. Yet city and county hospitals, which used to treat people free, increasingly are charging for their services. Thus low-income people may actually have a harder time finding care than they did before Medicaid arrived.

Medicare and Medicaid have been principal causes of skyrocketing medical costs. Hospitals, doctors and nursing homes are allowed to decide how much to charge, and they are paid through private insurance intermediaries, usually Blue Cross and Blue Shield, who make no attempt to control these charges. The first year after Medicare and Medicaid started, hospital costs were up 19 percent and doctor fees 7 percent. In the first six years of the programs, medical prices increased by over 40 percent compared to an increase of 20 percent in the six years before the programs started. And the fees didn't go up just for Medicare and Medicaid patients: they rose for all of us.

Medicare and Medicaid were a financial shot in the arm for the health industry. Doctors' average incomes now top $40,000, with many specialists earning over $100,000 [in 1974]. The insurance intermediaries expanded their business by $10 billion a year, including several hundred million for "administrative expenses." This means high executive salaries (Blue Cross President Walter McNerney earns $80,000 [in 1974]), new buildings, newspaper and radio ads and Congressional lobbying. Medical equipment and drug companies increased their sales and profits. Nursing home stocks boomed. Hospitals added on new beds at a rate three times greater than the population increase. As a result, 25 percent of hospital beds are now [in 1974] empty, upping tlie rates to all patients.

In short. Medicare and Medicaid — our country's first taste of national health insurance — though designed to help the patient, have largely profited doctors, hospitals and medical businesses.

For health or profit

Of the $94 billion that Americans spent for health in 1973, 10 percent — more than $9 billion — went for profits. Drug companies earn over $600 million in profits each year and spend $1.5 billion more in advertising. The health insurance industry collected $25.7 billion in premiums in 1972 and paid out only $21 billion in health care benefits. The companies kept $4.7 billion for administration, advertising and profits. With doctors making an average of $10,000 per year more than highly trained professionals in other fields their total excess earnings are $2 billion. Nursing homes, proprietary hospitals and medical supply companies together earn $600 million in profits.

And that's only the financial part of the picture. What about the two million needless operations performed each year that serve only to bring more income to surgeons? What about the 30 percent of days spent in the hospital that are unnecessary, costing $100 per patient per day and leading to the expensive overbuilding and overequipping of hospitals? What about the 60 percent of drug prescriptions that have no therapeutic value at all, prescribed because doctors receive most of their postgraduate education from drug company representatives and advertisements? According to testimony by Melvin Glasser of the United Auto Workers before the Senate Finance Committee in 1971, "Approximately 20 percent of the total national expenditures for health, personal health services, is wasted, down the drain of unnecessary hospitalization, needless surgery, duplication of facilities, fragmentation and duplication of administrative costs." Twenty percent means close to $20 billion in 1973.

Not only are these profit distortions expensive, they actually cause many people to die. At least 10,000 people die each year from operations that should never have been performed; tens of thousands die from the side effects of drugs that should never have been prescribed. Both of these excesses are closely linked to the profits of surgeons and drug companies. Profit-making in health care is an extremely risky activity, and those of us who take the risks don't reap the benefits.

National health insurance is no cure for harmful profits. In fact, most of the plans are designed to increase profits. "If the Administration's bill passes … two years after implementation starts … health insurors could collect double their present annual premium income," estimates Business Week. The Wall Street Journal quotes a spokesman of William Witter and Company, "Medical stocks should be a prime benefit of health insurance in the 1970s as they were in the 1960s with Medicare and Medicaid."

excerpted from National Health Insurance: The Care and Feeding of Medi-Business by Ronda Kotelchuck and Thomas Bodenheimer, in Ramparts Magazine, July 1974, pp. 26-28. http://www.unz.org/Pub/Ramparts-1974jul-00026

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