The Evolution of Medicare

 Chapter 1: The First Round - 1912 to 1920

In a democratic political system laws represent the collective decisions of the community, and in this country, various legislative bodies--the Federal Congress, State legislatures, and the multitude of county, city, town, and village councils--are the principal instrumentalities through which we arrive at these decisions. The voters elect representatives to each of these institutions and charge them with making laws in our behalf. (1)

Government health insurance was a proposal requiring such a collective decision, for it was to be an undertaking of the community. A Government agency was to be established to collect insurance premiums from workers and employers in the form of taxes, and to pay out benefits according to a predetermined schedule. Thus, the proposal first had to obtain legislative sanction. And since social welfare matters were in 1912 still considered to be mainly the responsibility of the States, legislation had to be considered separately in each State legislature and, if approved, implemented on the State level.(2)

Legislation does not just happen, of course. It is the result of organized leadership--the second element of the legislative process. This leadership can come from either key legislators, elected officials (such as a governor or a President), prominent private citizens, interest groups in the community, or frequently from a combination of all four. In the case of Government health insurance, for example, the movement in the early 1900's was spearheaded by a private reform organization called the American Association for Labor Legislation. Founded in 1906 by a group of economists at the University of Wisconsin, the AALL represented no specific interest group or rank-and-file constituency. Rather, it was an informal coalition of about 3,000 reform-minded leaders from a spectrum of interest groups. Its roster included physicians, lawyers, businessmen, professors, labor leaders, politicians, and social workers, and the AALL's considerable influence in its early years derived in large measure from its illustrious and broadly representative membership.

The first major legislative campaign of the AALL was in behalf of State laws to require employers to insure their workers against industrial accidents--or workmen's compensation. To the delight of the AALL's leaders, there was considerable enthusiasm and relatively little opposition to the idea, and the drive for workmen's compensation was eminently successful. By 1915, 30 States had passed such laws.

Buoyed by its success with this program (and with other, less-publicized industrial reform proposals as well), the AALL set as its next major goal the enactment of Government health insurance on the State level.

The AALL's executive secretary and de facto leader, John B. Andrews, once described his organization's function as "legislative midwifery," and, indeed, it performed a variety of tasks that are often characterized (sometimes unfavorably ) as "lobbying," but which are essential, nonetheless, to the process of enacting legislation. (Similar midwifery would be in evidence during each subsequent round of the debate on the Government health insurance issue, although the actors would, of course, change.)

The AALL's first task was to draft the idea into a specific legislative proposal for introduction into the various State legislatures. Then as now, a sizable proportion of all legislation originated within private organizations, and, accordingly, one of the AALL's first moves was to set up a Social-Insurance Committee (in 1912) to define the needs and study proposed solutions.(3) Ultimately, in 1915, this work resulted in the publication of a "standard" health insurance bill, drafted into legislative language for the consideration of various State lawmakers. This "model bill," calling for the protection of all low-income workers and providing for cash compensation as well as broad hospital and medical benefits to both workers and their dependents, then became the focal point of the ensuing public debate.

The AALL's next task was to enlist political support for the proposal--the third element of the legislative process--and this proved to be a three-pronged effort. One prong was directed at the men who were best able to energize and influence the legislative machinery-key lawmakers and State governors. Attempts were made to persuade as many of them as possible to sponsor and work for the proposal and, in particular, to steer it through the relevant legislative committees and onto the floor for favorable action.

The second prong was directed at winning specific pledges of support from major private interest groups in the community. In particular, AALL leaders sought to have study groups set up within as many key organizations as possible, in the hope that such groups would stimulate discussion and produce a favorable consensus within the organization for a public declaration of support.

The third prong was directed at the general public, the mass of voters. The effort to win over public opinion involved a variety of activities: the health insurance issue was placed on the agenda for the AALL's quarterly meetings, which were covered by the press; the proceedings of these meetings were then published in the association's widely read quarterly review; the AALL sponsored large public conferences on the issue (sometimes in cooperation with other organizations); pamphlets were published and distributed; and AALL leaders and prominent supporters write articles, made numerous public speeches, carried on an extensive personal correspondence and held many private discussions with newspaper editors and other influential community leaders around the country. (Of course, these activities also tended to mesh with efforts to win the support of private interest groups and key legislators.)

In the first 2 years of the campaign, the AALL's lobbying efforts seemed to be bearing fruit. By 1917 sponsors had been found to introduce the standard bill in 12 State legislatures, and eight of these legislatures had also appointed study commissions. The first three commissions to report--those in California, Massachusetts, and New Jersey--came out in favor of the proposal.(4)

The leaders of several important interest groups--notably the American Medical Association," the National Association of Manufacturers, and the American Hospital Association--seemed open-minded, if not favorably disposed. They agreed to set up study commissions within their organizations. Some of the Nation's most prominent governors, in particular Samuel McCall of Massachusetts and Hiram Johnson of California, strongly endorsed the measure (as did New York's Governor Alfred E. Smith in 1919). Former President Theodore Roosevelt, Senator William Borah, and a number of the Nation's leading newspapers also lent their support.

Furthermore, when President Woodrow Wilson shifted to a more liberal stance on several other issues shortly before his reelection in 1916, the spirits of the bill's proponents were lifted. Nor was their optimism diminished by America's entry into World War I, in 1917. On the contrary, the war produced a surge of idealism and patriotism. At least one major war measure, the War Risk Insurance Act (which established a comprehensive system of benefits--including health insurance--for servicemen and their dependents), seemed to augur well for the postwar period of reconstruction.

However, this hopeful outlook for the proposal proved short-lived; between 1918 and 1920 the tide was reversed. As sociologist Odin W. Anderson has observed: "It was naively assumed by AALL leaders that a reform which they thought should be deemed good by everyone would triumph on its own merits. As long as medical care insurance was discussed without relation to specific and concrete actions, the potential opponents apparently were not aware of its implications."

The more the proposal was publicized and discussed, the more opposition it inspired and, significantly, the better organized and effective became the lobbying against the proposal.

Between 1918 and 1920, several State-appointed study commissions reported unfavorably on the issue. A California voter referendum on Government health insurance in 1918 was defeated by a 2-to-1 margin. And a key test of strength in the New York State Legislature ended in April 1919 when a move on the floor of the State Assembly to discharge the bill from committee (after it had already passed the Senate) was beaten decisively. Soon afterward, the campaign for Government health insurance collapsed, without a single State's having adopted the measure. The AALL then turned its attention to unemployment insurance and, later, to old-age insurance, and the movement for health insurance was not revived until the late 1920's.

The failure of this first attempt to enact Government health insurance in the United States can be attributed to many interlocking factors, and in noting several of the more important ones, we will be able to identify some of the forces that can affect the outcome of the legislative process--and, therefore, the social welfare policy-making process as well.

THE PUBLIC PHILOSOPHY-

Political scientists recognize that a nation's political ideology--or what Walter Lippmann many years ago called "the public philosophy,"(7) can materially affect the shaping of national policy. By conditioning public attitudes toward what is expected of the individual and what is the responsibility of the government, the public philosophy can influence the way in which a nation responds to its social and economic problems.

Throughout American history, our political dialogue has been enlivened by two contrasting views of the role government should play in the life of the community. Some historians (most notably Herbert Croly, whose book Promise of American Life greatly influenced progressive reformers) have labeled these the "Hamiltonian, and "Jeffersonian", philosophies, after two of the earliest and most prominent advocates of each view. Alexander Hamilton, the first Secretary of the Treasury, took an "activist" view, conceiving of government as a tool for promoting economic development. On the other hand, Thomas Jefferson, author of the Bill of Rights and third President, felt America would best prosper by remaining a Nation of individualistic small farmers. Jefferson, who was wary of governmental power, felt an agrarian society would be better able to avoid the necessity for a strong and active government. One of Jefferson's most famous sayings was: "That government is best which governs least."

Since the early days of the Nation, these two views have remained a part of our public philosophy--sometimes at odds and at other times complementing each other.(8) On balance, though, the individualistic strain has been relatively stronger in this country than elsewhere, especially in the field of social welfare, where Americans of all classes have characteristically looked-upon Government action as a "last resort."(9)

Particularly significant for this analysis is the fact that, during the latter part of the 19th century and the early 20th century, a Jeffersonian tide was running strongly. This was the very time, paradoxically, when America's transformation to an industrial society was proceeding most rapidly. As the historian Richard Hofstadter has noted, the more the rural way of life faded, the more exalted became the agrarian ideal. (10)

The predominance of the Jeffersonian view of government in this era (at least with regard to social welfare) was reinforced, moreover, by two other ideas that were fashionable in the 19th century. One was the economic theory known as lassez faire, which held that economic progress is best achieved if competitive forces are given free play. The responsibility of government, accordingly, was only to ensure the maximum of freedom for private enterprise, which, of course, foreclosed government activity in the area of social welfare.

The other idea that reinforced the public philosophy of the time was Social Darwinism--the application of Charles Darwin's theory of biological evolution to social relations. Social Darwinism found in the theory of evolution a vision of life as a relentless struggle for "survival of the fittest." In effect, they saw in it a scientific justification for the doctrine of "every man for himself." While this was admittedly a harsh doctrine, its defenders claimed that it was nonetheless the mechanism by which society progressed. By implication, of course, government must not undertake to ameliorate hardship or protect the citizens against economic hazards for fear of frustrating the "natural" evolution of society.

In addition to this "steel chain of ideas" (to use historian Eric Goldman's phrase), the progressives were divided among themselves over what kind of measures the Government should take to bring about reforms. For the most part, the reformers advocated only those measures which, it was hoped, would do away with industrial abuses and restore the older way of life. In fact, a significant debate over the Jeffersonian versus the Hamiltonian approach took place in the Presidential election of 1912. Woodrow Wilson, in his New Freedom campaign, advocated measures intended "to sweep away special privileges and artificial barriers to the development of individual energies and to preserve and restore competition in business."(11) One of his opponents, Theodore Roosevelt, called for a broad range of positive social welfare programs--for the vigorous application to welfare of the Hamiltonian philosophy. Mr. Roosevelts' New Nationalism, as it was called, was "savagely attacked" by Mr. Wilson, and the latter's victory ensured that the White House would be occupied during the remainder of the progressive era by a man whose reform impulses were antagonistic to measures such as social insurance (although later he did embrace some of Mr. Roosevelt's other proposals).

In sum, the principles embodied in Government health insurance were out of tune with the public philosophy and the prevailing reform impulses of the progressive era. This made the task of winning support for the proposal all the more difficult, and rendered it more vulnerable to the attacks of its opponents.

THIS PARADOX OF THE FEDERAL SYSTEM

Prior to the New Deal, Congress, the Supreme Court, and leading constitutional lawyers had generally interpreted the Constitution in such a way that the principal responsibility for social welfare matters was left to the States. Yet State governments proved to be extremely reluctant to undertake costly social welfare measures on anything less than a nationwide basis, for fear of imposing economic burdens on locally based industries that would put them at a competitive disadvantage in the national market.(12) The result was a major political paradox--a built-in block against social welfare legislation by the States. As a practical matter, the Federal Government was the only instrument by which broad social welfare programs could be achieved.(13)

However, any such action by the Federal Government had to await the great shift in the public philosophy that would accompany the New Deal.

THE ATTITUDES OF ORGANIZED INTEREST GROUPS

Another factor contributing to the defeat of Government health insurance was the way in which various interest groups reacted to the proposal. An important characteristic of a democratic system is that political power is relatively widely diffused throughout the community--through several layers of government, numerous interest groups, political party organizations, and the news media. In American society, organized interests not only have the right to make representations to the legislatures on public issues but may try in a variety of ways--including public relations campaigns-to influence the voters and through them their representatives. And because in our society private groups are relatively powerful, an important element in the success of any legislative campaign is to ensure the support, or at least the acquiescence, of major interest groups-particularly those most likely to be directly affected by the proposed legislation. In the case of Government. health insurance, however, the issue created a profound cleavage, with some of the most important interest groups becoming adamantly opposed.

Between 1917, when hopes for passage were still high, and 1920, when the proponents finally admitted defeat, there was in fact a dramatic polarization of opinion among key interest groups, a polarization that would persist largely unchanged throughout the subsequent 45 years of national debate on this issue.(14 ) Despite a favorable attitude on the part of the AMA leadership and early signs that the group might eventually extend its official support,(15) grass-roots sentiment within the medical profession turned increasingly against the proposal as time went on. A number of State medical societies came out against it and, by 1920, the AMA's leadership (symbolized by Association President Dr. Alexander Lambert) was formally repudiated when the AMA's House of Delegates passed a resolution expressing unequivocal opposition to the idea. Likewise, the National Association of Manufacturers' Committee on Industrial Betterment reported favorably on the proposal in 1916, but in mid-1917, the same committee, with new personnel, declared that "sickness is not a problem for the community as a whole" and that Government health insurance was not "necessary, wise, or desirable."

Somewhat the converse of this situation existed within organized labor. The prestigious president of the American Federation of Labor, Samuel Gompers, became an early and impassioned opponent of Government health insurance. Among other things, he saw in the proposal a threat to the prerogatives and influence of the labor movement, and he campaigned vigorously against it, despite a growing groundswell of support within his unions. (By the end of 1918,21 international unions and 18 State federations of labor had endorsed the proposal.) However, this rank-and-file support was insufficient to offset Gompers' widely publicized opposition. (In fact, the AFL did not officially endorse the principles of social insurance until 1932, after William Green had succeeded to the national presidency, although individual unions and State federations continued throughout the 1920's to press for social legislation on the State level.)

Perhaps the most forceful opposition, (though, arose within the two interest groups which, outside of then medical profession, were most directly affected by the legislation. One was the insurance industry, with the Insurance Economics Society of America (and, in particular, Frederick L. Hoffman, a vice president of the Prudential Insurance Company of America), as chief public spokesman; the other was the Pharmaceutical Manufacturers' Association. Both of these groups not only opposed the measure in private but launched public campaigns designed to counteract the lobbying efforts of the AALL and to mobilize public opinion against the proposal.

Thus, the proponents found themselves confronted with the determined opposition of key interest groups. The political consensus that had existed for other reform measures, such as workmen's compensation, broke down on this issue. Symbolic of the collapse of support were some of the defections from the AALL coalition. Both Gompers and Hoffman resigned their AALL memberships "in protest," and Dr. Lambert, rebuffed by his constituents, lapsed into public silence on the issue.

Several years later, social insurance pamphleteer Abraham Epstein concluded that the initial effort to enact Government health insurance was, in the end, "more in the nature of a philanthropic reform movement than a powerful economic struggle between more or less equally powerful forces."(16) Unlike Europe, the United States in the early 1900's experienced no great pressure for social legislation from either a radical political party or a militant labor movement. Yet most countries seem to have achieved broad programs of social legislation only with the help of "a hard push from below."(17) In America, the hard push from below would not come until the Great Depression of the 1930's.

LACK OF PRESIDENTIAL LEADERSHIP

One of the axioms of American politics concerns the potential power of the President to mold public opinion and influence the fortunes of a piece of legislation.(18) Not only does he occupy a unique publicity platform (the "bully pulpit," Theodore Roosevelt called it), but he also has several weapons of leadership at his command--from patronage and Government contracts to the well-known "coattails effect" through which the electoral fortunes of members of the President's political party are linked to his personal success or failure as a leader. The degree of Presidential influence over legislation tends to vary, however, depending upon the mood of the country, the temperament and "charisma"of the President himself, and the particular issue at stake.

However, as noted above, Mr. Wilson opposed social insurance (though, as governor of New Jersey, he had favored a State workmen's compensation law). Reluctantly, shortly before his 1916 reelection campaign, he consented to endorse a bill to expand workmen's compensation benefits for Federal employees--but only after there had been widespread public acceptance of the idea.

In subsequent rounds of the Government health insurance debate there would be a gradual change in the position of the President--from being opposed (Wilson), to being friendly but noncommittal ( Franklin Roosevelt), to being an active supporter (Truman, Kennedy, and Johnson).

THE POLITICAL CLIMATE

Perhaps the most elusive and changeable influence over the fortunes of a specific social measure is the overall political context, that is, the mood or climate within which a particular legislative issue is debated.

In part, this climate is a reflection of the other factors already mentioned--the public philosophy, the responses of various interest groups, and Presidential leadership. But it is also powerfully shaped by events and emotions that are unrelated to the particular issue under consideration, especially more general economic and social changes. (19)

Poets and historians alike have used the ocean tides as a metaphor to explain how the public mood can shape events. "There is a tide in the affairs of men", Shakespeare wrote, "which, taken at ,the flood, leads on to fortune: Omitted, all the voyage of their life is bound in shallows and in miseries."(20) More recently, historian Arthur M. Schlesinger, Sr., postulated that the political "tides" in this country are subject to more or less regular changes; he discerned in our history alternating periods of liberalism and conservatism (or progress and consolidation) in the character of our public policy.(21) Whether or not such tide changes are as sharply delineated as Professor Schlesinger suggested, or recur with cyclical regularity, there is no doubt they do occur and that such a change took place during and just after World War I, at the very time when the first Government health insurance debate came to a climax.

Several factors contributed to this "sea change." One was the war itself, which shook Americans out of the sense of security fostered by their long-standing geographic and political isolation from Europe. Another factor was the Russian revolution of 1917. Proclaimed as the vanguard of a worldwide revolt against capitalism, the "Bolshevik" triumph seemed to present a direct challenge to the American economic system; for a time, there was a sense of alarm in some quarters.

Professor Hofstadter argues that President Wilson himself unwittingly contributed to the changing tide. At first, public opinion on the war was decidedly mixed, and Mr. Wilson set out to build support for it--picturing the war to the public as a moral crusade to "reconstruct"the world in accordance with democratic and progressive ideals. The enemy, then, became Autocracy, as symbolized by Germany. Officially sponsored war propaganda inflamed hatred of Germany and fueled a "virulent jingoism."(22) Public fervor was further aroused by descriptions of the millenium that was to come when America had succeeded in making the world "safe for democracy." Great exertions, especially when suffused with idealism, are often followed by a letdown. And, as Professor Hofstadter observed, President Wilson, by transforming the war into a moral crusade and by linking it to progressivism at home ensured that "the reaction against progressivism would be as intense as it could be." (23)

Signs of the reaction were evident in the 1918 mid-term elections when the President called for a vote of confidence, only to have his party repudiated at the polls. This was followed, in 1919, by Senate rejection of the peace treaty Mr. Wilson had personally negotiated in Paris.

By the end of 1919, the current of reaction had become a tidal wave, though now its focus was Soviet "Bolshevism" rather than the defeated "Hun." Inflation, a wave of violent strikes, and some highly publicized political agitation by a "rag-tag-and-bobtail"assortment of radicals aggravated the already unstable political climate and finally triggered a small-scale "reign of terror."(24) This brief aberration was marked by race riots, bombings, lynchings, and other forms of "vigilante justice," as well as a "witch-hunt" for "Bolsheviks," "radicals, and "aliens" under the official sanction of the Attorney General of the United States.

In this panicky climate, proposals for social innovation-such as Government health insurance--took on "overtones of revolution."(25) Social insurance was linked by its opponents both to the forces of the extreme "left" and the extreme "right" and labeled alternately "Bolshevism" and "made in Germany." Professor Hofstadter concluded: "Progressivism had been founded on a mood, and with the reaction that followed the war, that mood was dissipated."(26)

Footnotes to Chapter 1

(1) Of course, no system of representative self-government perfectly fulfills the ideal. But on the other hand, if the system were not reasonably representative of the actual power relationships in the community, it would not have survived. Moreover, throughout its history the American system has gradually become more representative of the entire community, a trend that continues even today.

(2) Social insurance, including health insurance, did receive national attention briefly, in 1912, when it was espoused by former President Theodore Roosevelt and adopted as part of the platform of his Progressive Party campaign that year.

(3) Some historians date the beginning of the health insurance movement in this country from a speech by Louis D. Brandeis (later a Supreme Court Justice) in 1911. Others point either to the Progressive Party's platform in 1912, to the establishment of the AALL's Social-Insurance Committee that same year, or to the First American Conference on Social Insurance (under AALL sponsorship) in Chicago in 1913. The debate did not begin in earnest, however, until 1915.

4) In a spate of election-year fervor, Congress during 1916 also held brief but unproductive hearings on the subject.

(5) In 1916 a Social Insurance Committee established by the AMA endorsed the principles of the AALL bill.

(6) Odin W. Anderson, "Compulsory Medical Care Insurance, 1910-1950," Annals of the American Academy of Political and Social Science, Vol. 273 (1951), pp. 106-111.

(7) Lippmann used the term to apply to a particular set of political ideas, but political scientists have since borrowed the term to designate any operative political ideology.

(8) For instance, historian Clarke Chambers has observed that the mercantilist, or "Whig," tradition of government combined support for government action to promote business with opposition to social welfare measures, on the ground that the individual should be self-reliant and responsible for his own welfare.

(9) One factor that contributed to this attitude was the widely held, though not necessarily correct, belief among 19th century thinkers that the availability of free land on our Western frontier provided a kind of "escape valve" for the unemployed.

(10) Richard Hofstadter, The Age of Reform (New York: Random House, Vintage Rooks, 1955), p. 30.

(11) Arthur S. Link, Woodrow Wilson and the Progressive Era (New York:Harper & Row Publishers, Inc., 1954) p.20.

(12) Indeed, one reason why the original 13 States accepted the Federal Constitution was to eliminate some of the mutually destructive forms of economic rivalry existing between them under the Articles of Confederation.

(13) The Federal Government has several options. It can establish direct Federal or Federal-State cooperative programs, subsidize State-run programs, or simply compel the States to act individually but in unison.

(14) The most important exception was the American Hospital Association, which endorsed the proposal in 1917 but later, without apparent inner strife, withdrew its endorsement. In the 1940's, it would oppose National Health Insurance. Then, in the late 1950's and in the 1960's, it would become ambivalent about Government health insurance for the aged.

(15) In 1917, for example, the AMA adopted a resolution outlining the principles that should be embodied in any Government health insurance program.

(16) Abraham Epstein, "Social Security-Fiction or Fact?", The American Mercury, Vol. 33, October 1934, p. 135.

(17) Gaston V. Rimlinger, "Social Security and Industrialization: the Western Experience with Possible Lessons for the Less Developed Nations," in Everett Kassalow, ed., The Role of Social Security in Economic Development, Research Report No. 27, Office of Research and Statistics, Social Security Administration (Washington:U.S. Government Printing Office, 1968).

(18) See, for example, Louis W. Koenig, The Chief Executive, (New York : Harcourt, Brace & World, Inc.), 1968.

(19) Likewise, when this Nation is at war, social legislation has tended to languish. Even if military crises do not necessarily preclude social measures, they have, if nothing else, given opponents a fiscal argument for postponing domestic action.

(20) Julius Caesar, Act IV, Scene III.

(21) Arthur M. Schlesinger, Sr., Tides of American Politics," Yale Review, Vol. 29 (1939) pp. 217-30.

(22) William E. Leuchtenburg, The Perils of Prosperity, 1914-1932 (Chicago:University of Chicago Press, 1958) p. 46.

(23) Hofstadter, op. cit., p. 278.

(24) Frederick Lewis Allen, Only Yesterday (New York: Bantam Press, 1957) pp. 32-33.

(25) John Kenneth Galbraith, The New Industrial State (Boston: Houghton Mifflin, 1967) p. 290.

(26) Hofstadter, op. cit., p. 282.