The Evolution of Medicare

Chapter 3: The Third Round 1943-1950

THE Shock of the Japanese attack on Pearl Harbor transformed America overnight, as the President put it, "Old Dr. New Deal" became "Dr. Win-the-War."

The energies of the Nation were poured into the greatest military conflict in American history.

Even before the outbreak of hostilities, the Social Security Board had become deeply immersed in home-front mobilization. However, health issues were not entirely set aside.(1) During the war years, in fact, the groundwork was laid for yet another effort to win enactment of Government health insurance.

Beginning in 1939, the annual reports of the Social Security Board had begun to include lengthy discussions of health issues and summaries of the National Health Program. In 1942 the Board expressed support for a unified and comprehensive social insurance system, including health benefits. Also in 1942, Congress authorized a system of emergency he.alth services for the dependents ,of servicemen in the lower four pay grades. Known as EMIC (for Emergency Maternity and Infancy Care), the program seemed to some to be a precedent that could ease the passage at war's end of a health insurance system for the general public.

By 1943 the tide of bat'tle had turned in favor of the Allies, and postwar reconstruction problems began to receive increasing attention. President Roosevelt, in his state of the Union message that year, for the first time called for a social insurance system that would extend "from the cradle to the grave." His plea followed closely the publication by t,he British of the famed "Beveridge Report." This report, advocating a comprehensive social welfare system for postwar Britain, caused considerable excitement in the United Skates and spurred the Roosevelt administration to release a similar high-level report by the National Resources Planning Board. Shortly afterward, Sir

William Beveridge, chairman of the commission that had drafted the British report, came to the United States for a lecture tour, and his tour stimulated further public discussion of health insurance and other social security issues.

President Roosevelt evidently felt the time was not yet appropriate for a Presidential endorsement, but he was amenable to Senator Wagner's introducing a bill for broad improvements and additions to the Social Security Act, including health insurance measures. Accordingly, the Social Security Board drafted a bill which was introduced on June 3,1943, by Senator Wagner and Senator James Murray of Montana (S. 1161)and Representative John Dingell of Michigan (H.R. 2861) (2) As its drafters and sponsors had expected, the Wagner-Murray-Dingell bill signaled the beginning of the political debate that would come to a climax in the postwar years.

In the ensuing months, the battle lines began to form. Organized labor, the National Farmers Union, and several other organizations declared their support; the AMA-linked "National Physicians' Committee for the Extension of Medical Service" began organizing against it. (The AMA opened a Washington office in September 1944 "to keep in close contact with political developments on the national scene.") The physicians were joined by a revitalized Insurance Economics Society of America (one of the organizations that had been in the forefront of the opposition to Government health insurance in the early 1900's), the Pharmaceutical Manufacturers' Association, and other groups.

Without official Presidential support (and pressure), and with the war still far from being won, the first Wagner-Murray-Dingell bill died in committee. There were times during the war years when the President indicated interest in advancing health proposals. But each time he postponed a commitment. Then, during the election campaign of 1944, he began to move toward an endorsement. He urged an "Economic Bill of Rights" for the American people, including "the right to adequate medical care and the opportunity to achieve and enjoy good health" and "the right to adequate protection from the economic fears of old age, sickness, accident, and unemployment." Following his reelection (and with the end of the war in sight), Mr. Roosevelt began setting the stage for personal sponsorship of the proposal. In his budget message of January 1945, he called for an "extended social security, including medical care." And in his 1945 state of the Union message, he promised : "I shall communicate further with the Congress on these subjects at a later date."

Presumably, Mr. Roosevelt intended to press ahead with the health insurance issue as soon as the war was over; a special Presidential message on health matters had been drafted by the Social Security Board several months earlier and merely awaited the President's pleasure. But the President would never deliver the message; he died in April 1945.

His successor's views on health insurance were not known in advance, but it soon became apparent that the new President, Harry S. Truman, would support the proposal enthusiastically and make it a key item in what he later labeled the "Fair Deal" program. On November 19, 1945, after the Japanese surrender, Mr. Truman sent a revised health message to Congress along with a re-drafted Wagner-Murray-Dingell bill. Thus, for the first time, the Congress had before it an official administration proposal for a general program of Government health insurance (sponsors called it National Health Insurance).

The next 5 years of conflict over this issue, which ended in yet another defeat for the proponents of Government health insurance, featured one of the notable political debates of modern times. And, as such, it was a singular example of the fifth element in the social welfare policymaking process-public debate and voter referenda. It is appropriate, therefore, to make use of that episode for illustrative purposes. This discussion will also point out some of the reasons why a program operating successfully in virtually every other industrialized country failed once again to be enacted in the United States.

When the revised Wagner-Murray-Dingell bill was first introduced, its supporters felt the time was propitious for passage. America had just won a great war. The United Nations was being born in a mood of optimism about the postwar world. The incumbent President had committed himself to press the health insurance issue vigorously. In addition, wartime public opinion polls had indicated broad public support for Government health insurance. A 1942 poll by Fortune magazine had found no fewer than 74 percent of the respondents in favor, and in the following year a nationwide Gallup poll recorded 59 percent in favor.

Yet appearances were deceptive. For one thing, the new President did not command the prestige enjoyed by his predecessor. Historians have come to admire President Truman's performance, but in the beginning the plain, blunt-spoken man from Missouri was widely regarded as an accident of history, and his opinions carried little weight. (In 1946 the President's popularity sagged to a record low of 32 percent.)

Another factor was the conservative tone of the postwar Congress, especially the House of Representatives and its key Ways and Means Committee. This was in part due to technical considerations: the malapportionment of many congressional districts in favor of rural areas; the existence of one-party States, coupled with the seniority system in Congress, which favored Representatives from "safe districts"; and the fact that American political parties are loosely structured and locally based, giving leaders relatively little power to impose "discipline" on party legislators. But there was also a war-delayed reaction to the New Deal--to the high taxes, regimentation and control imposed by the Government during the war years, and to big government in general. This reaction was exacerbated by the strains of conversion to a peacetime economy, which included a spurt of inflation and a wave of strikes.

Taken alone, these factors would not have posed an insurmountable obstacle to a health-insurance measure had there not also been a deep cleavage on the issue between major interest groups in the community.

One of the key elements in political decisionmaking involves bargaining or negotiations between various interest groups. But what if bargaining fails to produce agreement? What if there is an irreconcilable conflict? This is where the fifth element--public debate and voter referenda--enters the picture.

From time to time, political writers in this country have asserted the well-meaning but idealistic notion that America's Government is, or should be, controlled by public opinion--that legislators should behave as though public opinion polls are instructions on the part of the voters. Thus, if 59 percent of the electorate favor Government health insurance, the argument runs, it should be passed forthwith. But what if the 59 percent are only mildly in favor of the proposal, while the other 41 percent are strongly opposed?

The answer is that highly controversial legislation must be treated as a special case. No system of representative government can truly be equitable--nor can it survive in the long run--unless it takes into account the intensity with which opinions are held. Although the principle of majority rule is deeply ingrained in the Nation's political tradition, Americ.ans are equally committed to the principle that the majority must not tyrannize the minority, or deprive the minority of basic rights. As columnist Tom Wicker noted recently in The New York Times: "One of the features of the American political system, in fact, has been the restraints it exercises on 'pure' democracy--or what some call mob democracy. Allowing each state two senators, regardless of size and population, and interposing the electoral college between voters and candidates are only two examples." (3)

Characteristically, our political system responds rather quickly in situations where a strong popular and interest-group consensus exists. Conversely, when there is a serious split among major interest groups, politicians tend to proceed cautiously.

Those who defend the "go-slow" approach argue that when an issue is controversial, delay often proves beneficial. First, it meets the moral criterion that the contending parties be given a fair hearing. It may also force both sides to document their cases in a more convincing way, impel them to respond to one another's arguments, encourage both sides to exhaust alternative solutions, and it may lead to significant technical improvements in the original proposal. Furthermore, delay increases the pressure for compromise; it tests the staying power and determination of the contenders (or, in other words, the intensity of their commitments); but, most important, a delay permits both sides to appeal their cases to the voters. (4)

What happened on the issue of Government health insurance was that when the two sides could not resolve their conflict through bargaining and compromise, they appealed to the electorate as a sort of jury. The contending factions sought to arouse public support for their positions and ultimately carried the issue to the polls. Such an appeals process was clearly in evidence during the 5-year debate over the Wagner-Murray-Dingell bill.

The story of that debate is far too long and complicated to recount in detail here, but there are several benchmarks worth noting.

In 1946, the first year of serious national debate on the issue, (5) proponents were unable even to obtain hearings in the Ways and Means Committee. There were hearings in the Senate Committee on Education and Labor, but these were marked by acrimonious debate. The heated controversy was probably harmful to the proponents' cause.

That same year, Senator Robert A. Taft of Ohio introduced a counterproposal to the administration's bill. The so-called Taft-Smith-Ball bill (S. 2143), authorizing some $200 million in Federal matching grants to the States to subsidize private health insurance coverage for the medically indigent, was favorably received (unofficially) by the American Medical Association. However, the administration opposed it, arguing that its passage might delay an insurance-based program for the general public, that $200 million would not do the job, and that a State-operated, "means-test" program would, in effect, subsidize the insurance industry. Thus, this potential compromise solution failed to resolve the conflict. (6)

Also in 1946, a new coalition of Government health insurance proponents, including Michael M. Davis and the leadership of many of the interest groups that were supporting the Wagner-Murray-Dingell bill, organized the Committee for the Nation's Health as a vehicle for carrying the issue to the public. (7) Like the old AALL, which had passed out of existence in 1942, the CNH concentrated on publicity and lobbying. Research, and the drafting of specific proposals fell, once again, to the technicians of the Social Security Administration.

Equally important, organized labor began to play a more active role in the health insurance movement. In 1944 the American Federation of Labor created a Social Security Office (later Department) to coordinate the Federation's efforts in this area. However, in the early postwar years, labor channeled much of its activity, and financial contributions, through the Committee for the Nation's Health.

In the 1946 congressional elections, with the New Deal-Fair Deal programs the major issue (the Republicans used the slogan "Had Enough?"), the voters elected the first Republican Congress since 1932. Health insurance was not a major campaign issue, but the election results were interpreted as a repudiation of the Democratic administration; not surprisingly, the new Congress was antagonistic to the administration's program, including its high-priority health insurance proposal. One prominent Democratic Senator even suggested that President Truman resign.

Thus, 1947 proved to be a year of political reaction against Government health insurance. President Truman sent the Congress a second message on health, and the Senate held another set of hearings on health insurance, but to no avail. Meanwhile, the labor movement, a bulwark of the health insurance coalition, became preoccupied with a major threat to its prerogatives. (Indeed, anti-labor sentiment came to a head in the 1947 Congress. After a bitter fight, the Taft-Hartley law, imposing numerous restrictions on unions, was enacted over the President's veto.) During this same period, domestic issues were eclipsed by the cold war and the problem of "containing" foreign adversaries. There was the struggle for Greece, the promulgation of the Truman Doctrine, the launching of the Marshall Plan, Czechoslovakia's fall in a Soviet-supported coup d'etat, and the Soviet blockade of Berlin.

Doubtless it was this confluence of events that led the President to conclude (according to press reports in early 1948), that Government health insurance would probably have to be considered an "ultimate aim" rather than an immediate possibility. There was also speculation that the President might support a voluntary, decentralized and even privately run plan, perhaps along the lines of the Taft-Smith-Ball bill. Significantly, in his 1948 state of the Union message, Mr. Truman omitted his previous pleas for health insurance. Shortly thereafter, the President asked his new Federal Security Administrator, Oscar Ewing, to draw up a 10-year health plan for the American people, and in May of that year, Ewing convened a National Health

Assembly reminiscent of the 1938 National Health Conference. This time the administration took a conciliatory attitude toward the AMA, and the Assembly reached a consensus on a number of health issues. (8)

Throughout most of 1948 it was widely assumed that the President had no chance of election on his own in November. However, Mr. Truman staged a memorable upset, not only winning the election, but restoring his party's control of Congress.

Among other things, this brightened the outlook for health insurance. In fact, Mr. Truman had revived the health insurance issue in the course of his campaign. It was included as a plank in his party's platform, pressed by the President at a post-convention session of Congress, and frequently mentioned in his campaign speeches. His opponent, on the other hand, declared himself unequivocally against it.

It is not surprising, therefore, that some health insurance supporters claimed that the election results represented a mandate. Altmeyer, for example, later wrote: "Political events in 1948 gave some reason to believe that at long last the need for a more adequate and integrated Social Security system was coming to be recognized. . . . President Truman made the action of the Republican Congress . . . the major issue in his campaign, along with his continued advocacy of a National Health Insurance System. Therefore, his election, and the election of a Democratic Congress, constituted something of a mandate for Social Security Legislation."

Likewise, Ewing, in a public statement, claimed "victory" for the issue and asserted that health insurance now had a "green light" from the voters. Senator Murray, one of the chief sponsors, concurred. He had been decisively reelected and promised to redouble his efforts on behalf of the Wagner-Murray-Dingell bill. However, once again the administration was unable to get the bill reported out of committee for a floor vote. (9)

Several factors contributed to this failure. In 1949 the economy had entered a period of deflation and unemployment, the first since World War II. Domestic anti-Communism surfaced to &become a national preoccupation, focusing on the espionage trials of Alger Hiss and several Communist Party leaders. When China fell to the Communists, deep emotional tremors were felt. But these were mild compared with the near-hysteria that greeted the announcement that the Russians had exploded their first atomic bomb, several years before they were expected to do so.

Another factor was the inconclusiveness of the 1948 election, despite the claims of health insurance supporters. In retrospect, historians have concluded that President Truman's victory was not so much a mandate for change as a mandate for the status quo--as well as a personal victory for a courageous and combative underdog. Health insurance per se had not in fact become a pivotal issue. Moreover, the President's victory, while returning the Democratic Party to control of Congress, was not sweeping enough to break the long-standing conservative coalition. There was no clear majority for the proposal within the 81st Congress. (10) As a correspondent for The New York Times noted in February 1949, many members were at that point "in the middle and they say frankly that they do not know which way they will jump when the time of decision finally arrives."

In this wait-and-see atmosphere, the publicity and lobbying efforts of each side took on added importance. And it is significant that, at this juncture, the ardor of one of the key proponents, organized labor, was diminishing. More and more, the unions were trying to win private health insurance coverage directly from the employers, through collective bargaining. While this approach was second best, from labor's point of view, itdid protide at least partial protection for employed union members.

Labor's lukewarm attitude contrasted sharply, moreover, with that of the medical profession. On the heels of President Truman's election victory, an "Armageddon" psychology set in within the AMA. In December 1948, the AMA's House of Delegates met, in an atmosphere of crisis and voted a special assessment of $25 per member to resist "the enslavement of the medical profession." A prominent public relations firm was hired and a $4.5 million fund was deployed to wage a "national education campaign" against the Wagner-Murray-Dingell bill. The campaign included publicity through the mass media, nationwide distribution of pamphlets, a vast speechmaking effort, and a drive to win and publicize specific pledges of support for the AMA's position from the press and other private organizations.

The AMA pressed several arguments against the bill. It asserted, first, that the United States already had the highest standards of medical care the world had ever known; great strides had been made in the preceding decades and, while there still were deficiencies, these were being greatly exaggerated. Second, it was claimed that National Health Insurance would lead to Federal control of medical care, which would undermine the existing system and help destroy free enterprise. Third, it was maint,nined that a universal health insurance program would be exhorbitantly costly to operate. And finally, the AMA felt it was unnecessary; private insurance was growing rapidly and was believed capable of doing the job. (The AMA coupled this last argument with an effort to encourage the spread of private coverage.)

In the first year of the "national education campaign," several million pieces of literature were distributed by the AMA, and endorsements were won from no fewer than 1,829 organizations, including the Chamber of Commerce, the American Bar Association, the American Farm Bureau Federation, the American Dental Association, the American Legion, the General Federation of Women's Clubs, and others. Perhaps the biggest coup, though, was the reversal by the social welfare arm of the Catholic Church of its long-standing support of National Health Insurance. Editorial opinion also turned against the program, and by late 1949 a Gallup poll showed that support for Government health insurance had dropped to a bare 51 percent. Meanwhile, private health insurance continued to make progress. In 1946 only one-fourth of the population had had health insurance, but by 1950, about 60 percent had at least basic hospitalization coverage. (However, such basic insurance alone typically covered less than 20 percent of the individual's total health bills.)

The final defeat of this third attempt to enact Government health insurance came in the 1950 election campaign. Elections are scarely perfect indicators of voter sentiment on any given issue. Often it is difficult to gauge the influence of any one factor out of the mix that influences voter choices. Nonetheless, elections do serve as referenda on policy issues. From the politician's point of view, the ballot box is by far the most relevant barometer of public opinion. For this is where political power is ultimately won or lost. "Taking the issue to the voters" may, on occasion, effect a change in the makeup of Congress, particularly the makeup of the key committees (which can either hinder or help the fortunes of a major bill). Indeed, it may not even be necessary to bring about a drastic change in the complexion of Congress in order to pass or defeat a measure; a few token tests at the polls, particularly ones involving key supporters or opponents of a measure, may influence the positions of other incumbent legislators.

(Such was clearly the hope of the AMA in 1950.)

Throughout 1950 the political climate continued to deteriorate for supporters of Government health insurance. Senator Joseph McCarthy of Wisconsin was beginning to give his name to an era. The Nation was plunged into the first turbulent months of the Korean war, and there was a rising tide of reaction against the New-Fair Deal philosophy and the "welfare state." In a throwback to the early 1900's, health insurance became entangled with patriotic issues and was pictured as un-American and "revolutionary" by the time the election campaign had begun, many candidates were shying away from taking a position on it. In political parlance, it was becoming a "pariah issue."

But equally important, the physicians "rolled up their sleeves," as an AMA spokesman put it, and campaigned vigorously against key supporters of health insurance. In the spring primaries, two prominent advocates, Senators Claude Pepper of Florida and Frank Graham of North Carolina, were defeated. Though it was later concluded that other issues played an equal, if not more important, role in these contests, at the time the physicians were able to claim the credit for their defeat. Likewise, in the November election, the physicians helped defeat Senators Elbert Thomas of Utah and Glen H. Taylor of Idaho, as well as Representatives Andrew Biemiller of Wisconsin and Eugene O'Sullivan of Nebraska. The physicians also helped elect eight new Senators who opposed health insurance.(11) Even discounting all the ambiguities of ballot-box referenda, the outcome suggested a lack of strong public support for the measure.

By mid-1951 the AMA was openly claiming victory, and President Truman acknowledged as much when he omitted the proposal from his 1952 state of the Union message. Instead, he announced the establishment of a Commission on the Health Needs of the Nation to study the problem. In the presidential election that year, the Democratic candidate, Adlai E. Stevenson (who replaced the retiring President as the party's standard bearer, skirted the issue of Government health insurance. On the other hand, the winner, Dwight D. Eisenhower, voiced strong opposition to the proposal, ensuring that the new administration would not soon revive it.

In sum, the Wagner-Murray-Dingell bill was the victim of a cautious Congress, massive resistance by a prestigious and vitally affected interest group, sympathy for the AMA's position from an imposing array of nonmedical groups, a lack of wholehearted support from some of the key proponents, considerable antipathy from the press, the rapid growth of private insurance, and, finally, of a hostile political climate. (12)

Years later, President Truman wrote: "I have had some bitter disappointments as President, but the one that has troubled me most, in a personal way, has been the failure to defeat the organized opposition to a National compulsory health insurance program. But this opposition has only delayed and cannot stop the adoption of an indispensable Federal health insurance plan."

Footnotes to Chapter 3

(1) If anything, deficiencies in our health care system were underscored by the wartime strain of providing medical care on scores of military battlefields around the globe. And a congressional investigation of the high rate of draft rejections showed that between 30 and 40 percent of all draft-age men were physically or mentally unfit for military service.

(2) Aside from the original Social Security Act, the first Wagner-Murray-Dingell bill, as it came to be called, was the most comprehensive social measure ever introduced in Congress. It envisioned a federally sponsored health insurance program, along with permanent and temporary disability, maternity and death benefits, full federalization of the existing Federal-State unemployment insurance, expansion of old-age and survivors' insurance, and enlargement of public assistance. A more modest version of the health insurance proposals had been introduced previously by Representative Thomas Eliot (of Massachusetts) in 1942 (H.R. 7534) and by Senator Theodore I. Green (of Rhode Island) in 1943 (S. 281); because it did not enjoy an administration "aura," however, this earlier bill received little attention.

(3) Wicker might also have cited federalism, the separation of powers, the requirement that two-thirds of both houses of Congress and three-fourths of the States must approve amendments to the Constitution, the protections contained in the Bill of Rights, and other constitutional amendments.

(4) Of course, there are also arguments against delay: The longer an urgent problem is unattended to, the more social disruption and suffering may occur. Beyond a certain point, the technical debate merely becomes repetitive and stale. One does not necessarily have to try out every theoretical alternative to know whether or not it is practicable. And if delay may produce harmonizing compromises, it may also force concessions that weaken the effectiveness of a measure. Similarly, while delay may test the intensity of opposing positions, it may also favor the side with the greatest financial resources, especially in carrying the issue to the voters. Finally, while public debate may serve to enlighten the voters, it is equally likely to confuse them with distorted emotional and ideological arguments.

(5) Government health insurance bills were also introduced in a number of State legislatures in 1945 and thereafter. All were defeated. The most dramatic defeat came in California, where Governor Earl Warren's proposal lost by a single vote after intense public debate.

(6) On the other hand, 1946 saw one important forward stride in the field of health legislation. One title of the original Wagner-Murray-Dingell bill was lifted almost intact and enacted into law as the Hill-Burton Hospital Survey and Construction Act of 1946. Also, Herman M. and Anne R. Somers, in their recent study, Medicare and the Hospitals (The Brookings Institution, 1968), consider 1946 to be a Rubicon, in the sense that it marked the point at which all the major political and economic interests in the Nation appeared to agree on the necessity for Federal action of some kind to improve medical care.

(7) One of the founders of the CNH was Mrs. Eleanor Roosevelt, who had experienced a change of mind since the days when she had counseled her husband against pressing for health insurance.

(8) The official posture of restraint did not, however, prevent some sharp exchanges between individual delegates.

(9) Although health insurance did not come to a vote in 1949, a test of strength came on an administration proposal to transform the Federal Security Agency into a cabinet-level department and elevate Ewing, the chief administration spokesman for health insurance, to cabinet rank. After a fractious debate, the proposal was defeated.

(10) Some Republicans, for example, swung behind the so-called Flanders-Ives bill of 1949 (S. 1970) co-sponsored by then Representatives Case, Fulton, Hale, Herter, Javits, Morton, and Nixon (H.R. 4918 through 4924). The basic principle of the Flanders-Ives bill and its successors was derived, with modifications, from a provision of the original Taft-Smith-Ball bill of 1946. Both bills would have allocated Federal funds to the States to permit State agencies to subsidize private health insurance coverage for low-income citizens; but whereas the Taft bill would have done so on a permissive basis, in addition to other financing arrangements, the Flanders-Ives bill would have relied exclusively on private, non-profit plans.

(11) Shortly before the 1950 election, the AMA undertook an advertising campaign designed to reach every voter in the country. The AMA alone spent $1.1 million for advertising in 11,000 newspapers, 30 national magazines, and 1,000 radio stations, and supporters of the AMA position spent an additional $2 million in tie-in advertising.

(12) Proponents of Federal action in the health field nonetheless made some progress during lthese years. In addition to the Hill-Burton Hospital Survey and Construction Act in 1946, in 1950 the Congress enacted far-reaching improvements in the Social Security Act, including a new program of payments to the "vendors" of medical services to persons on public assistance rolls (see footnote No. 6).