The Evolution of Medicare

Chapter 2: The Second Round-1927 to 1940

WITH the Presidential election of 1920, progressivism made its formal surrender to the postwar mood. Lulled by peace and industrial prosperity, Americans during the 1920's turned their backs on many social and political problems, preoccupying themselves instead with sports, fads, Prohibition, the latest technological novelties, and financial speculation. Social historian Frederick Lewis Allen described the 1920's as a sort of "Indian summer of the old order," when the business ethic reached its apogee and Wall Street was the axis of America. However, it was an Indian summer with a difference. As Allen noted:"The warmth of it was a false warmth because the values upon which it was founded were unreal and destined to be self-destroying. . . ."

At the height of the postwar prosperity, economists estimated that over half the American people had incomes below what was required to provide a modest level of living. As the decade neared an end, moreover, because the values upon which it was founded were unreal and destined to be self-destroying. . . ." As the decade neared an end, moreover, the booming stock market obscured a depression in agriculture, a lag in industrial production, and spreading unemployment.

Social workers were well aware of these conditions, but apart from an occasional legislative victory like the Sheppard-Towner Act (which provided Federal subsidies for State-run child and maternal health programs), reformers found that these were years of frustration on the legislative front. Professor Eveline Burns of Columbia University's School of Social Work recorded a vivid description of what it was like to be a social worker in that day. It was, she wrote, a period of "activity on a small scale: of addressing hundreds of dreary little meetings in small communities where the chairman apologizes for the absence of half the audience; of long hours spent in composing letters to the press that never get published; or preparing testimony for legislatures only to find one is allowed to speak less than 5 minutes; or organizing groups and individuals to bring pressure to bear on some local bigwig who, despite the convincing arguments one has mustered, votes the other way."(1)

But if few new social welfare measures were put on the books in the 1920's, the period was nevertheless a "seedtime of reform."(2) During these years, the reform impulse was kept alive by a multitude of private social welfare organizations, such as the National Consumers' League, the National Conference of Social Work, the National Child Labor Committee, the National Federation of Settlements, the American Association of Social Workers, and the American Association for Labor Legislation. These organizations tried as best they could to alleviate social distress. They developed leaders, kept politicians and other "influentials" aware of social welfare problems, conducted research, and devised legislative proposals that could be enacted in a more favorable season.(3)

Typical of the seeding and fertilizing that went on in those years was the work of the Committee on the Costs of Medical Care, which began the second major effort to meet the problem of financing adequate medical care. As already noted, the AALL had turned its attention away from health matters during the 1920's, concentrating instead on building support for other forms of social insurance. However, a number of people associated with the health field-public health officials, economists, educators, social workers, and businessmen-maintained a lively interest, in health issues. And, in the mid-1920's) a small group of activists undertook to persuade several private philanthropic foundations to underwrite a study of the Nation's health. Their efforts were successful; in 1927 the Committee on the Costs of Medical Care was established under the chairmanship of Dr. Ray Lyman Wilbur, president of Stanford University, a former AMA president, and a future Secretary of the Interior. The group's mandate: to conduct the Nation's first comprehensive study of medical economics.

During the next 5 years, the CCMC amassed a veritable library of research data. But more important, the committee produced a final report which recommended far-reaching changes in the organization and financing of medicine. The committee favored: (1) efforts to organize medical practice, with the hospital (preferably) rather than the solo medical practitioner, at the focal point ; (2) extension of public health services; (3) group payment for medical care, either through taxation (along the lines of the present Medicaid program, through private health insurance, or both; (4) large-scale planning and coordination of health services; and(5) numerous changes in medical education, both for physicians and for allied professions such as nursing and pharmacy. Today, these recommendations may seem commonplace, even conservative (although we have by no means fully implemented them), but at the time they seemed revolutionary.

However, it is significant that the CCMC did not recommend compulsory Government health insurance. As the organization neared the completion of its work, four different points of view began to emerge on this issue. Only a small minority of the committee members favored Government health insurance. Their basic argument was that European experiments with private, voluntary health insurance had failed to protect lower income groups adequately. Often the ones who needed insurance protection the most were the ones least likely to participate voluntarily. Also, compulsory Government insurance was viewed as being more "efficient,"since it would spread the economic risks more widely. Ultimately, European countries had opted for Government health insurance as a better vehicle for doing the job. Therefore, argued Government health insurance advocates, the United States should try to leapfrog the stage of experimentation with private insurance by going directly to a Government system.

A somewhat larger minority of the members, while accepting the general principle of insurance as a way of financing health care, felt the committee should take a neutral position on the relative merits of a Government versus a private system.

A majority, however, favored a specific endorsement of private insurance as the preferred mechanism. Their reasoning: The United States, with a higher standard of living than that enjoyed by European nations, had a better chance of making a success of a voluntary sys-tem. Furthermore, it was felt that a private system would be philosophically preferable in a nation that prided itself on freedom and private enterprise. Thus, the argument ran, the private approach should be given a fair trial.

However, the majority report, even though a compromise between Government health insurance and no insurance, failed to win the support of most physician representatives (including the AMA leaders), who opposed all forms of insurance to pay for health care. The debate became acrimonious, and in the end, the minority appended a sharply worded "dissent" which declared: "There are great dangers and evils in insurance practice which must be set over against the advantages of distributing the costs of medical care by this method." Furthermore, "any plan for the distribution of medical costs . . . must be under the control of the medical profession . . ." The minority report also condemned group practice.

It should be recalled that, up to that time, the practice of medicine had been a highly individualistic affair. Physicians were accustomed to being independent, and their profession enjoyed a high degree of self-regulation. The developments envisioned by the majority of the CCMC members, which would have tended to institutionalize medical care, represented a radical departure from the existing philosophy and practice. For this reason, the prospect was alarming to some doctors. When the majority report was published, it drew adverse reactions from within the medical profession. The AMA leadership denounced it and immediately undertook to refute it. The ultimate effect of the report (and the dissent), therefore, was to sharpen the cleavage between physicians and those outside the profession (as well as the minority of doctors) who advocated changes in the health care system. Any subsequent attempt to enact Government health insurance would take place within the context of this unresolved and fundamental conflict.

On the other hand, the CCMC created a vast body of research data and a rich lode of ideas that would profoundly influence thinking in the medical field for the next 30 years. In addition, the CCMC developed a nucleus of experts in medical economics--men like Edgar Sydenstricker, I. S. Falk, Michael Davis, and Nathan Sinai--whose talents and contributions would play a significant role later on.

Between the time the CCMC began work, in 1927, and the publication of its final report, in October 1932, the Nation had plunged into the worst economic disaster in its history--the Great Depression.

As the crisis deepened, the economic collapse did more than breed mass hardship and social dislocation. For the millions thrown out of work, there was a sense of bewilderment about the causes of the Depression, a feeling of helplessness to do anything about it, and a conviction that the Depression was not their fault. Wall Street's abdication of leadership further undermined faith in individualism and the business ethic, and Americans began to lose confidence in the system itself. In time, the economic crisis became a political and idea; logical crisis as well--The Crisis of the Old Order, as historian Arthur M. Schlesinger, Jr., characterized it in Part I of his multi-volume study of the Roosevelt years.

Thus, when Franklin D. Roosevelt was elected President in 1932, the political tide was ready to shift once again. Americans had begun to accept the idea of inter-dependence--the idea that they were "all in the same boat." When Mr. Roosevelt proposed a "New Deal" for the American people, the Nation was eager, even desperate, for change--for leadership, for new ideas, and for action that would "convert retreat into advance," as the President put it in his inaugural address.

To cope with the staggering problems created by mass unemployment (an estimated 13 million Americans were out of work in 1933) and the disorganization of the economy (industry was estimated to be operating at about one-half of capacity), the President began to preach and apply an activist view of government. For instance, during one of his radio "Fireside Chats," he declared : "We seek the security of the men, women, and children of the Nation . . . to use the agencies of Government to assist in the establishment of means to provide sound and adequate protection against the vicissitudes of modern life . . ."

On another occasion, his tone was even more philosophical: "One of the duties of the State is that of caring for those of its citizens who find themselves the victims of such adverse circumstances as makes them unable to obtain even the necessities for mere existence without the aid of others. That responsibility is recognized by every civilized nation. . . . To these unfortunate citizens aid must be extended by Government--not as a matter of charity but as a matter of social duty." (4)

The new President's words were matched with deeds, and his display of executive energy lifted the country's spirits. The early days of the New Deal saw the establishment of a number of agencies to combat the Depression. Among others, there was the Federal Emergency Relief Administration (FERA) (5), the Public Works Administration (PWA), the Civil Works Administration (CWA), the National Recovery Administration (NRA), and the Civilian Conservation Corps (CCC). Many of the New Deal agencies were stop-gap affairs designed only to deal with the immediate crisis. But eventually more permanent reforms were planned which represented a significant change in the character of the Government--and in the public philosophy. Perhaps the most important harbinger of the new order was the Social Security Act.

In the crucible of the Depression, reform thinking had crystalized on a number of issues, including social insurance. As Professor Chambers observed, a scheme that, when first proposed, seemed to some reformers as "outrageously radical," by 1933 had become part of a "new concordance" about what should be done to revitalize the Nation.(6) It came as no surprise, therefore, when President Roosevelt established a cabinet "Committee on Economic Security," in June 1934, with orders to "study problems relating to the economic security of individuals and . . . report . . . not later than December 1,1934, with recommendations concerning proposals which in its judgment will promote greater economic security."(7)

The cabinet committee was instructed to explore "all forms of social insurance," and the list of possible programs, compiled by the committee's executive director, labor-economist Edwin E. Witte, was sweeping: accident insurance, unemployment insurance, old-age insurance, retirement annuities, survivors' insurance, family endowments, maternity benefits, crop insurance (for farmers), and invalidity and health insurance. Consequently, the debate on health insurance shifted to Washington, D.C., where the Federal Government took over the role of legislative midwife.

To undertake the study of health insurance and related problems, the cabinet committee engaged two of the participants in the CCMC, Sydenstricker and Falk, and they, in turn, brought in other CCMC aides as adjunct staffers.

However, the announcement of plans to consider Government health insurance drew immediate protests from members of the medical profession. Telegrams "poured in upon the President," according to Executive Director Witte. An editorial criticizing the exclusion of physicians from the committee's deliberations appeared in the Journal of the American Medical Association. A copy was sent to the committee's chairman, Secretary of Labor Frances Perkins, along with a letter from the Journal's editor, a prominent AMA spokesman, stating: "It would seem to us highly desirable that the medical profession be adequately represented in any studies of the need for sickness insurance. . ."

These protests, some of which came from intimates of the President, caught Mr. Roosevelt's attention. He decided to take a hand in the matter, and the events that followed provide a classic illustration of the Presidential role in the social-welfare policymaking process--and of the part that personality, personal relationships, and personal perceptions can play in politics.

The President found himself surrounded by conflicting advice and pressures. In addition to the growing public agitation from organized medicine (which was beginning to be heard on Capitol Hill), the President's closest advisors were divided among themselves.

One point of view was presented by Harry Hopkins, who was director of the Federal. Emergency Relief Administration (FERA), as well as a member of the cabinet Committee on Economic Security and a close friend of the President. Hopkins felt strongly that health insurance was the most urgently needed of all social insurance measures. His views, which he discussed privately with ,the President, grew out of his previous experience: He had once been the New Orleans director of the Red Cross and director of the New York Tuberculosis and Health Association; he also had close ties with those who had spark-plugged the work of the CCMC; finally, as FERA director in Mr. Roosevelt's administration, he had set up emergency medical care programs for the millions of workers on relief.(8) Hopkins therefore argued a compelling case for assigning priority to health insurance. He was backed by two of the stand-in representatives to the committee, Rexford Tugwell (for Secretary of Agriculture Henry Wallace) and Josephine Roche (for Secretary of the Treasury Henry Morgenthau, Jr.), as well as by the committees health staff.

However, a different point of view was argued by President Roosevelt's Secretary of Labor, Frances Perkins (who was also chairman of the cabinet committee), her Assistant Secretary, Arthur Altmeyer, and by Executive Director Witte. Their experiences had been predominantly in the labor field, and they had long been associated with the unemployment insurance movement. They argued that, under the existing economic circumstances, unemployment insurance should be given priority. Furthermore, they doubted that health insurance could be enacted over the vocal opposition of the medical profession, and they feared that the opposition of the AMA might jeopardize the entire social security package. Because the President had so much to lose, the AMA's leverage was therefore increased (9); in effect, the doctors could hold the whole social security bill a "hostage." Nor was any other major interest group--such as organized labor--prepared to mount a campaign to counter the resistance of the physicians. The AALL, while working diligently for unemployment compensation, shied away from a return match on the health insurance issue.

Mr. Roosevelt was also besieged with advice from within his own family circle. His personal White House physician, Dr. Ross McIntyre, warned him of the deep anxiety of physicians on the health insurance issue. The President's wife, Eleanor, was greatly concerned about the possibility that the quality of medical care might be undermined; through a close personal friend in the medical field, Mrs. Roosevelt had become convinced that the medical facilities of the country were at that time inadequate to handle such a program. (10) Finally, there was the father-in-law of the President's son James--the eminent neurosurgeon, Dr. Harvey Cushing. Dr. Cushing thought some compromise might be arranged, but he warned the President and his cabinet committee against any attempt to ram health insurance down the doctors' throats. (11)

Faced with the confiding pressures, the President responded by trying to accommodate both sides while, at the same time, keeping his options open as long as possible in the hope that an agreement could be worked out through negotiations. This brings us to a discussion of the fourth element of the legislative process.

It has already been observed that in American society, power, influence, and "property" (in the broadest sense) are widely distributed (some say, fragmented) through-out the system. This is inevitable in a pluralistic nation. As a result, public policies cannot simply be dictated. On the contrary, a major policy decision in this country usually represented an elaborate structure of compromises and accommodations that has been laboriously pieced together in discussions with various contending (or complementary) interests--and with due regard also for public expectations, personal "reputation," and for the "judgment of history." At the heart of American politics, therefore, is a sometimes bewilderingly complex process of bargaining or negotiation between the various participants in the political system, with a public agency frequently being a party to the negotiations.

We are accustomed to thinking of policy decisions in terms of formal roll-call votes. But often the final vote merely ratifies the less visible, often private discussions through which a coalition of support has been erected and/or crucial disagreements compromised. Often the role of political leadership more nearly resembles that of a broker between contending interests, and the politician's own interest and point of view may be only one of several that he must balance. (12)

This does not mean that public opinion plays no part in the shaping of public policies. On the contrary. However, the role of public opinion is subtle and complex. Instead of a rigid, cause-effect relationship, there is rather an "open-interplay",(13) between public opinion and political decision-making. Our customs, ideals, values, "rules of the game, and political institutions together form a relatively stable (though evolving) set of boundaries for political action. These boundaries have been likened to a system of dikes,(14) which set limitations upon what public officials may do. But within these dikes, politicians have considerable freedom of action. On some issues, the voters may be largely indifferent. On others, the voters may support some general course of action, ,but it will still be left to public officials to work out the details. Political leaders may, in fact, have considerable discretion for bargaining, striking compromises, weighing technical considerations, and exercising personal judgment. Such was the case with the Committee on Economic Security in 1934-35.

When the AMA raised objections to health insurance, President Roosevelt's first move was to bring the doctors into the deliberations of his cabinet committee. To this end, he approved a staff plan to set up a Medical Advisory Committee composed of leading physicians. Mr. Roosevelt personally supervised the selection of members for this committee, and his choices included the leaders of the three major medical organizations and several other prominent doctors, including Dr. Cushing. Presumably, the President was hoping that this move would not only quiet the public attacks by the physicians, but that the Medical Advisory Committee could also become the vehicle through which negotiations would be carried on between the administration and the medical profession.

It was soon apparent, however, that the medical profession, or at least its more vocal members, was not assuaged. When the public attacks on the cabinet committee continued unabated, the President--at the urging of Secretary Perkins, Altmeyer, and Witte--took further steps to try to calm the fears and check the antagonistic publicity. The day before the Medical Advisory Committee was due to hold its first set of discussions, the President invited Dr. Cushing to a private luncheon at the White House. The President is reported to have given him assurances that the administration intended to proceed slowly on the health insurance issue: Whatever program was eventually devised, it would not in any way undermine the quality of American medicine; and if the medical profession wanted more time in which to study the question, health insurance could be separated from the rest of the social security bill and delayed until there had been ample time to discuss the issue.

The President's private assurances to Dr. Cushing were then reinforced by a public hint in a speech delivered by the President that same afternoon. "Whether we come to this form of insurance sooner or later," Mr. Roosevelt declared, "I am confident 'we can devise a system which will enhance ,and not hinder the remarkable progress which has been made in the practice of medicine and surgery in the United States, (italics added).

These conciliatory gestures succeeded beyond the administration's expectations, and, for a time, an atmosphere of cordiality and cooperation prevailed. The first of two sets of discussions between the doctors' representatives and the health staff resulted in definite forward movement. Dr. Edgar Sydenstricker reported to Secretary Perkins that the physicians had agreed to support preventative public health measures, tax support for the construction of rural, mental, and tuberculosis hospitals; the use of Federal funds to improve care of the indigent at home, in clinics, and in hospitals; and "health protection of relief clients." On the issue of Government health insurance, however, the committee decided to take up the President's offer and requested more time in which to study the issue. A dead-line of March 1, 1935 was then agreed to.

During the next few weeks, while other battles raged on unemployment and old-age insurance, both sides refrained from public campaigning on the health insurance issue, and the AMA's top technicians cooperated with the cabinet committee.

But, as the December deadline approached for the Committee on Economic Security to submit its major report to the President, health insurance partisans, both inside and outside the administration, became increasingly restless. There were fears that the President might back away from Government health insurance altogether. For this reason, pressure mounted for the cabinet committee to include in its report a statement to the effect that a health insurance plan would be forthcoming and setting forth its general principles.

Not only would such a statement reassure Government health insurance supporters, but it would also serve as a trial balloon of current opposition. The health staff further hoped that once the basic principles were defined, the fears of the medical profession would be allayed. The cabinet committee agreed to the suggestion and consulted with the President, who gave the idea his approval. In so doing, the President was able to placate the pro-health-insurance forces within his administration. But more important, it was a major step toward an open Presidential endorsement of health insurance.

When the final report of the cabinet committee, including the statement on health insurance, was published in mid-January 1935, it provoked a great furor in medical circles. Wavering among physicians on the issue ceased. Critical editorials appeared in medical journals, and the barrage of letters and phone calls to Washington resumed. The AMA called an emergency session of its House of Delegates (the first such meeting since World War I) and passed a resolution declaring "unyielding opposition" to Government health insurance. (15) When the Medical Advisory Committee held its second round of discussions in February 1935, the session was marked by sharp discord.

Despite the renewal of hostilities, the health staff proceeded to draft a final report and a legislative proposal (l6) which, they hoped, could be introduced as an amendment to the social security bill--then under consideration in Congress.

In mid-March 1935, the cabinet committee met to make a final, irrevocable decision on the issue. The question was: Should the administration endorse and introduce Government health insurance, or should the issue be set aside until after the social security bill was safely through the Congress? The cabinet committee was sharply divided on this issue, and in the end, the question was put directly to the President for decision.

President Roosevelt concluded that health insurance should not be injected into the debate at that point, nor should the final report on health be made public as long as the social security bill was still in the legislative mill. (17)

Evidently, the "balance of pressures" had ultimately militated against health insurance. The renewal of AMA pressure against the measure (which was felt acutely by the Congress (18) contrasted strikingly with the lack of strong pressure in favor of it from either the public at large or any major interest group. Moreover, the social security bill had run into difficulties in Congress, just as its supporters had feared. Professor Schlesinger noted that, in the early months of 1935, the bill "seemed hopelessly bogged down in the House of Representatives."(19)

In the final analysis, the decision to postpone health insurance legislation reflected the personal judgment of the President himself, based on his perception of the situation and what he thought Congress and the country were ready to accept. For the next 30 years, scholars and, indeed, some of the participants themselves, would continue to debate whether the President had been unduly cautious in 1935. But all sides agree on one point: the decision was $the President's own. Nobody can be certain what would have happened had he decided to commit himself to battle for health insurance. Without his support, though, there was no hope of success. Presidential support, while not necessarily sufficient to ensure the passage of a major piece of legislation, is, with rare exceptions, a prerequisite.

The signing of the Social Security Act on August 14, 1935 represented a milestone in our history. With this measure, the Roosevelt administration supplemented (and eventually replaced) its clutch of temporary relief programs with a structure of permanent social welfare institutions. Since then, a broad and continuing role in social welfare matters has become accepted as part of the responsibility of the Federal Government.(20)

The Government's expanded role, moreover, went beyond the routine administration of programs already on the books. In Section 702 of the Social Security Act, Congress authorized the Social Security Board (later Administration) to play a creative role by "studying and making recommendations as to the most effective methods of providing economic security through social insurance and as to legislation and matters of administrative policy concerning old age pensions, unemployment compensation and related subjects." In other words, the Board was permitted to become a locus of leadership in the social welfare field. (21)

Henceforth, the Social Security Board would carry some responsibility for the technical aspects of developing social insurance legislation. The Board undertook to gather statistics, conduct background research, plan program improvements, and draft legislative proposals.

Some of the Board's activities also contributed to the public debate. Government agencies are not permitted to lobby, of course, but they can make public recommendations, provide technical assistance to a Senator or Congressman, testify at public hearings, conduct seminars and conferences, and prepare and publish research reports and explanatory literature. Such activities on the part of the Social Security Board and other Government agencies would play a significant role in subsequent debates over Government health insurance.

In the first months after the passage of the Social Security Act, the new Social Security Board concentrated its energies on the staggering job of implementing not one but three major programs of nationwide scope (old-age insurance, unemployment insurance, and public assistance or "welfare") (22) It was a turbulent and exciting period, and Altmeyer, who moved over from the Department of Labor to become a member (and later, chairman) of the Board, recalled recently : "There were a lot of people, including myself, who weren't sure Social Security would get off the ground."

In his personal memoir, The Formative Years of Social Security (23) Altmeyer wrote : "Because of its preoccupation with the task of putting into operation the various programs included in the Social Security Act and because of the strong opposition of the American Medical Association to health insurance, the Social Security Board as a Board did not give much attention to this subject [during the first few months]." Altmeyer pointedly observed, however, that "if the President had indicated that he wanted to press for a health insurance program, there is no doubt that the Social Security Board would have given the subject more attention." In September 1935, Secretary Perkins had conferred with the President on how to proceed with the issue, and was told he wanted no action in Congress the next year (a Presidential election year).

Although the subject had relatively low priority, it was not shelved. President Roosevelt directed that the cabinet committee's final report on health, Risks To Economic Security Arising Out of Illness, be sent to the Social Security Board with instructions to undertake "further research" on the subject. Accordingly, in January 1936, Altmeyer arranged for Falk to join the Social Security Board's Bureau of Research and Statistics, to work on health insurance. But more significantly, the day after the Social Security Act was signed, President Roosevelt announced the formation of an Interdepartmental Committee to Coordinate Health and Welfare Activities, under the chairmanship of Josephine Roche of the Treasury Department (which then included the Public Health Service) and with Altmeyer as a member. (24) Thus, it was the Interdepartmental Committee that became the focal point of leadership on Government health insurance and other health issues during the next few years.

In a letter to Sydenstricker in April 1935, Witte had commented that there did not appear to be sufficient public interest or pressure at, that time to make Government health insurance a reality. Witte thought an educational process would be necessary in order to create a "climate of support" for the measure. During the next few years, the proponents of Government health insurance addressed themselves to this task :

Following the passage of the Social Security Act, health insurance became a major topic of public debate. Advocates made numerous public speeches; articles appeared in magazines and journals of every description; and, by 1938, some 15 books had been published on the subject.

In 1935-36, the Federal Government completed them first large-scale study of the Nation's health--the National Health Survey. Among the survey's widely publicized findings: The poor get sick much more often than the rich (47 percent more for acute illness and 87 percent more for chronic illness), and stay sick longer (63 percent longer for those on relief) ; the poor also get less adequate medical attention ( for relief families, 30 percent were not receiving care for disabling illnesses of a week or longer, compared with 17 percent among families with over $3,000 in income) ; and upper income families also benefitted from 46 percent more doctors' visits per case. The survey also revealed that annual mortality from accidents exceeded that of any other civilized country, as did the rate of infant mortality, and the researchers concluded that a large proportion of the population had no financial cushion to pay for the cost of medical care.

Dr. Michael M. Davis, another alumnus of the Committee on the Costs of Medical Care, established a Committee on Research in Medical Economics in 1936, to conduct research and publicize health issues. At about the same time, Abraham Epstein's American Association for Social Security began to lobby for Government health insurance.

In 1937 a Technical Committee on Medical Care was established on an "exploratory" basis under the wing of the administration's Interdepartmental Committee, with Dr. Martha Eliot of the Children's Bureau as chairman and Falk and three officers of the Public Health Service as members. Then, in the summer of 1937, a half-dozen top administration officials, including Miss Roche, Altmeyer, Surgeon General Thomas Parran, and FERA Director Harry Hopkins, held a private conference at the Brookings Institution to discuss what should be the next steps in the health field. No definite conclusions were reached, but it was decided that it would be desirable to formulate a comprehensive National Health Program. Consequently, the Technical Committee on Medical Care was enlarged and given the job of working out such a program.(25)

By early 1938, the report of the Technical Committee on Medical Care was completed and approved by the parent Interdepartmental Committee. On February 14, 1938, Miss Roche and Altmeyer met with President Roosevelt to discuss how the report should be handled. The President decided that the first part of the report, dealing with the Nation's health needs, should be made public immediately and that a public conference should be convened later in the year to discuss and publicize the five-point program of action which the report recommended. The health needs section of the report was published shortly thereafter.

The climax of the climate-building process came in July 1938, when a 3-day National Health Conference, sponsored by the Interdepartmental Committee, was held at Washington's Mayflower Hotel. For the first time, official representatives of major interest groups--including editors, civic and industrial leaders, and representatives of medicine, labor, agriculture, welfare, education, and foundations--had been brought together to discuss the health needs of the Nation, and the National Health Program.

The National Health Program, calling for Federal expenditures of about $850 million a year, consisted of five legislative recommendations : (1) Expansion of the maternal and child health and public health programs included in the original Social Security Act ; (2) Federal grants-in-aid for hospital construction; (3) grants to the States for direct medical care programs for two categories of citizens, those on public assistance rolls and those who were "medically indigent" (ordinarily self-sufficient but unable to meet the additional burden of paying for medical care--an estimated one-third of the population); (4) grants to the States to encourage (but not compel) the establishment of statewide health insurance programs financed either through general revenues or through social insurance taxes; and (5) Federal initiative to provide cash payments for disability due to illness. (It was suggested that temporary disability be established in a manner similar to unemployment insurance and that permanent disability be provided through the old-age insurance system.)

Many of the representatives to the Conference endorsed the National Health Program; even the AMA's position seemed conciliatory. Editorial reaction to the Conference was also favorable. At the conclusion of the meeting, Miss Roche, in a cabled report to the President (who was away on a vacation cruise), exulted: CANNOT RESIST SENDING YOU WORD AMAZING PUBLIC SUPPORT AT NATIONAL HEALTH CONFERENCE FOR NATIONAL HEALTH PROGRAM AND WHICH IS MOUNTING DAILY AS EVIDENCED BY PRESS COMMENT, TELEGRAMS, AND LETTERS. OUR TECHNICIANS ARE WORKING WITH ALL SPEED TO DEVELOP SPECIFIC PROPOSALS WHICH WE EXPECT TO HAVE READY FOR YOU ON YOUR RETURN. The final sentence of the cable, however, was revealing: MEANWHILE WE ARE FOLLOWING YOUR INSTRUCTIONS TO MAKE NO PUBLIC COMMITMENTS AS TO FUTURE PROGRAM.

The National Health Conference seems to have made three significant contributions: First, it generated widespread and favorable, publicity for the National Health Program.(26) Second, it put pressure on leading interest groups, including the AMA, to take a public position. Third, and most important, it resulted in another private confrontation between AMA leaders and members of the Roosevelt administration.

Immediately following the conference, a delegation of AMA leaders requested a meeting with members of the Interdepartmental Committee (Miss Roche, Altmeyer, and other administration officials attended). The AMA representatives offered to support the other four recommendations in the National Health Program if the administration would drop plans for Government, health insurance. However, the officials declined to accept; Altmeyer later explained that they did not feel the AMA was offering a genuine quid pro quo. "We felt we could get our other four points anyway," he said. It was believed that the AMA would not in any event oppose the four recommendations not related to health insurance.

After the President returned from his vacation, Miss Roche and Altmeyer went to the White House to discuss the next step. Miss Roche described the reaction to the National Health Conference in glowing terms, and Altmeyer recalls Mr. Roosevelt's reaction. "He was so impressed that I remember very distinctly. He said: "We'll make that an issue this fall in the campaign."

But no more had he said that before he said : "No. I think it would be better to wait for a Presidential year." (Whether or not the President was preparing even then to run in the 1940 election for an unprecedented third term was unclear, according to Altmeyer.)

Although President Roosevelt did not explain why he decided not to raise the issue in the 1938 congressional elections, it can be guessed from the larger political context what might have been in his mind. In 1938 the New Deal was nearing its nadir. The political climate had been affected by a wave of violent strikes. The President had suffered a humiliating legislative defeat the year before in the Supreme Court "packing" fight, and in the course of that defeat, conservative Democrats in the Congress had joined forces with Republicans. This new "conservative coalition," once formed, became a continuing obstacle to further New Deal legislation; a number of the President's reform measures were defeated in subsequent months. Another blow was dealt the President's prestige in the spring of 1938, when his personal attempt to "purge" anti-New Deal Democrats in the party primaries failed. But worst of all, in 1937-38 the economy had slumped back into another recession; 10 years after the Wall Street crash, there were still nine million people out of work. The President, therefore, had good reason to feel that he was politically vulnerable in the upcoming mid-term elections and may very well have decided that it was unwise to invite the antagonism of the medical profession on the eve of the elections.(27)

In retrospect, it was perhaps fortunate for Mr. Roosevelt that he did not press the controversial issue in that campaign. As it was, the President fared so poorly that, to all intents and purposes, the New Deal was dead. As Professor Leuchtenburg noted: "The consequences of the elections were disastrous for the New Dealers. Without enough leverage to carry the President's program through Congress before November, they now faced the prospect of a greatly strengthened Republican-conservative Democratic coalition. . . . Roosevelt's political career seemed all but ended. . . . By 1939 Congress was moving aggressively to dismantle the New Deal."(28)

Clearly, the tide of reform was ebbing once again. At this point,, near the end of 1938, Miss Roche and Altmeyer went again to the White House to sound out the President on the next step for the National Health Program. The President's decision was to send the report to Congress for careful study, without specifically calling upon the legislators to act on its recommendations. Instead, the President decided to press ahead with improvements in the social security programs already on the books. (29)

The denouement for the advocates was not long incoming. In mid-January 1939, the National Health Program was transmitted to Congress for study. Then, on January 30, Senator Robert F. Wagner of New York (a close friend of the President) announced that he would, on his own initiative, introduce a bill incorporating the National Health Program. Three days later, reporter Paul Mallon wrote in The New York Times: "Mr. Roosevelt's health program has been caught in a legislative draft. . . . The chill imposed upon it will undoubtedly give it a cold which will incapacitate it for this session of Congress-and possibly permanently."

On February 28, 1939, Senator Wagner introduced what became known as the Wagner bill (S. 1620) (30) which was referred to the Committee on Education and Labor. Shortly thereafter, a group of AMA leaders announced the formation of a "National Physicians' Committee for the Extension of Medical Service" to lobby against the bill.

Senator Wagner was able to arrange for 11 days of hearings on his bill, beginning in April 1939. But Altmeyer recalls that the hearings were conducted in an atmosphere of pessimism. Organized labor and several civic, welfare, and agricultural groups testified in favor of the bill; the AMA, the American Hospital Association, and American Dental Association, among others, testified against it. A few clays later, the AMA House of Delegates passed a resolution condemning the bill by an overwhelming majority. Finally, in August., the Senate committee reported that it wished to "give this legislation additional study and to consult further with representatives of lay organizations and of the professions concerned," although it expressed the intention of reporting out "an amended bill at the next session of Congress."

Time had run out, however. On September 1, 1939, Germany invaded Poland and World War II began. The President soon became preoccupied with the war and with the problem of gearing up the American economy for defense; it became increasingly difficult to get his attention on purely domestic matters. When Miss Roche and Altmeyer went to the White House in the late fall to ask what health measures the President would be willing to include in his legislative package for 1940, Mr. Roosevelt approved only hospital construction. Altmeyer later commented that "this indicated [the President] had changed his mind about making the National Health Program an issue in the Presidential campaign."

Without a Presidential push, and in a climate of war mobilization, the Wagner bill died in committee. Some argue that it was a mercy killing-that, even if the President had decided to fight for it, the bill would have been defeated. Altmeyer thinks not: "I believe we would have been able to secure favorable congressional action if the President had actively supported Senator Robert F. Wagner's bill. . . ." Be that as it may, once again, the President's decision proved to be the death sentence.

Footnotes to Chapter 2

(1) Eveline M. Burns, "Social Welfare is Our Commitment," Public Welfare, Vol. 16, No. 3 (July 1958)) pp. 147-154.

(2) This is how historian Clarke A. Chambers characterized the decade, in the title of his definitive study of voluntary social welfare in the 1920's, Seedtime of Reform (Minneapolis: University of Minnesota Press, 1963).

(3) Indeed, toward the end of the decade, there was some halting progress in the State legislatures with programs for old-age assistance (or pensions) enacted through the efforts, notably, of the AALL, the Fraternal Order of Eagles, and the AFL.

(4) For moral support, Mr. Roosevelt invoked Lincoln's words. Government, Lincoln had said, should "do for the people what they cannot do for themselves or cannot do so well for themselves."

(5) One of FERA's programs provided emergency medical care to the needy.

(6) Symbolic of this philosophical change was the new label by which reformers identified themselves. During the 1920's, the term "progressive" had been dropped in favor of "liberal."

(7) The President called the resulting proposals the "Economic Security Bill," but Congress, on its own initiative, changed the title to "Social Security." The term social security is used throughout the remainder of this discussion.

(8) Hopkins had also been instrumental in the promulgation of the landmark Federal Rules and Regulations No. 7 of 1933. Worked out with the participation of the AMA, this rule gave official recognition for the first time to the idea that medical care should be considered a basic human right, along with food, clothing, and shelter.

(9) The AMA's opposition was not to be taken lightly. Though small in numbers, the medical profession was a high-status group, whose members were frequently to be found among the leadership of local communities around the country. Also, one must appreciate the psychological climate at that time. In a period of great insecurity, when some of the pillars of society had been undermined, people tended to cling all the more to those that remained. As professionals and public servants, doctors had immense prestige, and Mr. Roosevelt could well have damaged himself politically had he publicly fought with the medical profusion.

(10) In 1935 it was estimated that only one-fourth of all the counties in the United States had full-time health departments and only one-half of all our cities had the minimum essential health services. (Ida C. Merriam, "Social Welfare in the United States, 1934-34," Social Security Bulletin, October 1955, p. 5.)

(11) In a letter to Witte, for example, Dr. Cushing wrote: "Whatever the Committee on Economic Security decides to do ultimately in the way of making a proposal to the President for legislation, no legislation can be effective without the good will of the American Medical Association which has the organization to put it to work."

(12) There can be no denying that such a method of decision-making is inefficient and somewhat untidy; nor can we claim that the resulting policies are necessarily the "best," the most efficient, or most economical that human ingenuity could devise. But we accept these shortcomings as part of the price that must be paid for what we judge (consciously or unconsciously) to be higher values: the basic stability of the system, the cohesion of the social fabric (no small achievement in such an immense and variegated society), and the maximum degree of autonomy and power for private interests consonant with the larger public interest.

(13) The phrase is Professor Harold Lasswell's.

(14) V. 0. Key, Public Opinion and American Democracy (New York: Alfred A. Knopf, 1965), p. 522.

(15) Professor Witte later wrote: "I recall vividly the effect which the resolutions of the American Medical Association produced in Congress. The Social Security Act was then under consideration in executive sessions of the Ways and Means Committee. On the morning following the adoption of these resolutions, I was besieged by members of this committee who wanted to know: 'What is there about health insurance in this bill? Are you putting something over on us?' "

(16) The report recommended: (1) Federal financial aid for local public medical facilities and services, (2) cash benefits for temporary disability due to illness, (3) further study of the need for permanent disability benefits, and (4) Federal subsidies for State-run health insurance programs that met "basic" Federal "safeguards."

(17) In fact, the final report has never been made public, although a summary of the health staff's recommendations was published in 1962. (Edwin E. Witte, The Development of the Social Security Act, (Madison: University of Wisconsin Press, 1962, pp. 205-210.)

(18) An incident during the period when social security was under consideration in the Ways and Means Committee illustrates how sensitive Congress was to the opinions of physicians. The incident was recorded in a handwritten progress report to Secretary Perkins from legislative counsel Thomas Eliot, who had been assigned to bird-dog the bill through Congress for the Department of Labor. Eliot wrote: "The Ways and Means Committee received a telegram today from the American Medical Assn. requesting that 'health insurance' be stricken from the bill, even though the words were mentioned only as a subject of research for the [Social Security] Board. The Committee agreed by a large majority to strike out all mention of health insurance."

(19) Arthur M. Schlesinger, Jr., The Politics of Upheaval, 1935-1936 (Boston: Houghton Mifflin Co., 1966) p. 211.

(20) Of course, social security was not the only Federal measure of that period to make a lasting contribution to social welfare in this country. For example, the National Labor Relations Act and the Fair Labor Standards Act underpinned collective bargaining rights and established a minimum wage and maximum hours for workers.

(21) The inclusion of Section 702 was in recognition of the fact that the Social Security Act was only the "cornerstone in a structure which is being built but is by no means complete" (as President Roosevelt remarked when he signed the bill into law) land that the structure would inevitably need to be modified with experience and with changing economic and social conditions.

(22) Among the many provisions of the Social Security Act, only two related to health. Aid to the States for child and maternal health services (in Title V) represented a revival and expansion of the Sheppard-Towner Act's programs (which had expired in 1929), while the $10 million authorization to strengthen the Public Health Service (in Title VI) was looked upon by many physicians as a move that might forestall Government health insurance.

(23) Madison: University of Wisconsin Press, 1968.

(24) The original suggestion for such a committee seems to have come from Dr. Cushing. At the end of its first year, the committee was formalized with the above title by executive order.

(25) The Technical Committee received its new assignment on September 28, 1937, at a 2-hour conference chaired by Miss Roche. All those present agreed that the Federal Government should assume a larger role in the improvement of medical care, but the participants were sharply divided on how best to proceed. Some of their differences were to echo down through the years. For example, the minutes of the meeting record that "Dr. Parran further expressed the thought that the first group to be considered for health insurance coverage should be the beneficiaries of the Social Security Act and then others medically indigent who would not come under the social security provisions."

(26) The public seems to have been well-disposed on the issue for some time. A poll by Fortune in October 1936 found almost three-fourths (74 percent) of those questioned were in favor of letting the Government provide free medical care to the one-third of the population that could not afford to pay for it. In June 1938, two Gallup polls found 53 percent of the public and 70 percent of the members of the medical profession in favor of the health insurance principle (although no distinction was

made in the polls between private and Government insurance).

(27) The AMA's House of Delegates in effect issued a warning to the President early in September by passing a strongly worded resolution opposing Government health insurance.

(28) William E. Leuchtenburg, Franklin D. Roosevelt and The New Deal (New York: Harper Torchbooks, 1963) p. 272.

(29) Since 1937 an advisory council had been working on possible amendments to the Social Security Act. However, the advisory council's work had been separated from the work of the Technical Committee on Medical Care, in part to insulate the advisory council from the controversial health insurance issue.

(30) The first Government health insurance bill to be introduced in Congress was the so-called "Epstein bill," drafted by Abraham Epstein and sponsored by Senator Arthur Capper of Kansas in 1935 (S. 3253) and again in early 1937 (S. 855). However, these bills attracted little notice. They had not been sponsored by a key legislative leader, nor were they associated with the administration.