It’s difficult to get a man to understand something when his salary depends on his not understanding it. –Upton Sinclair.
In 1940, after conquering most of Western Europe, Hitler mercilessly bombed British cities and tried to bring England to its knees. 18,000 tons of explosives over 8 months killed close to 40,000 people.16 3 ½ million people were moved to the countryside and the Ministry of Health “built or expanded hundreds of hospitals”, updated laboratories, X-ray facilities. He began paying for ambulances and the care of civilians and combatants who suffered fractures, burns, and head injuries. The ill and injured were transferred to private suburban hospitals and “doctors received government salaries.” Unexpectedly amidst the death and destruction most Brits got healthier, and when the war ended the Brits didn’t want government care to end. In 1948 parliament formally passed the National Health Service act and health care became a right. 4
Postwar France was devastated. “Seventy-five per cent of the population paid cash for private medical care. Many people had become too destitute to afford heat, let alone medications or hospital visits.” However, pre war, some manufacturers and unions had instituted a self imposed payroll tax. They now used the money for medical care. As an outgrowth, France currently has a number of non profit insurance funds.
In the U.S. president Franklin Roosevelt didn’t mention health care or use the word “rights” in his famous 1941 speech to congress. The four freedoms he championed were speech and expression, “the freedom to worship God in a person’s own way, freedom from want and freedom from fear.” He had wanted federally sponsored health insurance to be part of the 1935 Social Security act, but “he allowed it to be thrown out in order to hurry the bill through Congress.2”
Before health insurance was more than a concept, the military and VA were caring for the wounded. During the Second World War employers attracted workers by offering health insurance. At the time the wages industry could offer were restricted as part of the 1942 Emergency Stabilization Act. Our nation’s work related system created inequities and it helped foster the rugged individualistic belief that people don’t deserve health care. They have to earn it.
In 1947 health care costs were rising and it was too expensive for many. That January in his State of the Union address, President Truman said: “Of all our basic resources none is more valuable than the health of our people.” He proposed a plan that provided medical care to all who need it. “A government funded health care program that everyone pays into and from which they can withdraw when they need it. Not a charity, but (care) on the basis of payments made by the beneficiaries of the program.”
Truman’s idea initially had widespread support. Then the powerful white male American Medical Association (AMA) launched a massive campaign: Radio and newspaper ads. Pamphlets and mailers. “Keep politics out of medicine.” Truman was a Communist. (At the time Communism was a real scare.) “His plan was socialized medicine. Government officials will intervene in medical decisions and destroy the “sacred doctor patient relationship.”
Popular support plummeted and the bill failed to get through congress.6” Efforts by subsequent politicians to provide government sponsored health insurance was repeatedly opposed by the “influential” American Medical Association.
In the post war years Blue Cross and Blue Shield were started in one state, then another as public, tax-exempt corporations. By 1945 the “blues” were responsible for 2/3 of the nations’ hospital insurance, and by 1955, 60 percent of Americans had an insurance policy.1
Aetna and Cigna began marketing medical policies in 1951. They tended to target people who were healthy and unlikely to need expensive care. The IRS did not treat employer provided health care as part of a person’s taxable income and the Revenue Act of 1954 made it official.6
In 1960 John Kennedy, the son of a wealthy Irish immigrant became the nation’s youngest ever president. In 1959, the year before Kennedy was elected, Cuban revolutionaries ousted their ruler, a dictator named Batista, and Fidel Castro became the country’s leader. He was a communist and “Under communism, virtually everything belongs to the state.” Large single owner farms were taken over by the government and “either redistributed to peasants or run as communes.” The U.S. and Russia were in the midst of a “cold war”, and the thought of a Soviet ally a mere 110 miles south of Florida troubled some of the nation’s leaders. In 1961 a group of Cubans, sponsored by the CIA invaded the island. The U.S military didn’t get involved and the intruders were quickly defeated and captured. After that the popularity of the U.S. president waned.9
At the time Kennedy was trying to change the system that prevented blacks in the South from voting. His efforts went nowhere. Nor was he able to convince Congress to pass legislation that provided medical care to our older citizens.
Then in the fall of 1963 Kennedy was assassinated. The nation mourned, and Lyndon Johnson, former leader of the senate, became the nation’s president. Under his direction Congress paid tribute to their slain leader. The voting rights act and Medicare and Medicaid became the law of the land. (see prior chapter.)
During the subsequent decade medical care became more effective, technical, and hospital based. Costs escalated. In the early 1970s the political elite felt there was a “crisis”. In 1973, during the Nixon presidency, the HMO: health maintenance organization–act was passed. The idea was to get groups of doctors working together. In addition to treating illnesses physicians were now being asked to keep people healthy. Companies with more than 25 employees were required to offer this new entity as an option.
Groups popped up all over the country, and they took customers away from the ‘indemnity” insurance companies. In response traditional insurers started buying HMO’s and the new bosses put pressure doctors and hospitals. They tried to modify the way medicine was practiced by enforcing “guidelines”, recommendations by authoritative medical committees that told doctors what tests to perform in certain situations. Physicians were paid less. Knowing they would only be compensated for a portion of their charges, doctors and hospitals raised the “list price” of their surgeries, visits, and procedures.
At one time HMOs tried to kick women out of the hospital the day after they delivered a child or had a breast surgically removed. Some of the patients were ready to go home, but others had medical or physical problems that created risks. An outcry led to publicity and lobbying. Laws were passed, and the practice ended.
The law restricted the amount a sick person in an HMO had to pay in the form of co-pays and deductibles. And it required HMOs to hold an annual open enrollment period. During that time people with pre-existing conditions could become members. HMOs were required to provide insurance “without regard to health status.”
For-profit companies could exclude high risk individuals. A law passed in 1945, the McCarran-Ferguson Act, had “exempted the business of insurance from most federal regulation.” For profit companies were able to cherry pick—to offer the young, healthy, and employed, low cost policies, and they were able to reject individuals with medical problems, people who needed health care. An expectation—a de-facto right—was created for young, healthy, and employed and it was taken away from others. HMO’s could not offer companies high deductible or low benefit policies, but for-profit insurers could and did. Employers and healthy individuals increasingly bought policies from for profit companies.
Over the years the high risk populations of HMOs like Kaiser of Northern California and the Blues grew. For the young and healthy the plans they offered were costlier than those offered by for- profit companies, and the young and healthy increasingly chose private insurers.
In time “the Blues were hemorrhaging money”. The HMO I worked for was in grave risk of failing.
In 1993 Bill Clinton became president and he asked his wife, Hillary, to form a committee and come up with a bill that would do something about the rising cost of health insurance. The premiums people paid were going up 8.5% a year; many Americans were dropping their coverage, and polls indicated the public would welcome controls.
At the time the government, under Medicare and Medicaid (and to a lesser extent the Public Health Service, the National Institutes of Health (NIH), Indian Health etc.) was on the hook for more than half of the nation’s health care costs.
Blue Cross controlled a large part of the private insurance market. The Blues weren’t a single large company. They were a conglomeration of state by state plans that were non-profit and tax exempt. Their boards and CEOs were very well (and sometimes quite richly) compensated, but they had no shareholders. They didn’t need to earn money or pay dividends.
In 1990, while Hillary Clinton’s group was working on their bill, the CEOs of insurance companies pow-wowed with the people in charge of hospitals, and with drug and medical device manufacturers. They formed a group called the HLC., the Health Care Leadership Council.
I suspect the Clintons thought their proposals would be popular. I doubt they were prepared for the HLC attack and spin that followed.
For the record the plan Hillary and her medical advisors (Atul Gawande was one of them) came up with sounds a lot like Bernie’s Medicare for all. It didn’t pass so it’s not really part of the “real history of medicine.” Many of the details are in the foot notes.11
The proposed legislation would have required health plans to provide an all inclusive benefit package. It would have been regulated by a regional non-profit organization or an agency of the state. When people got their insurance from their jobs the employer had to pay 80 percent of the cost of the premiums.
AND, it WAS comprehensive. Hospital, outpatient, drug, and dental care were part of the scheme.
To keep costs from going through the roof there was a regional money target. If it was exceeded the payments to hospitals and doctors would drop. Out of network emergency charges couldn’t be inflated. Balanced billing–making the patient kick in when the insurance company refused, was prohibited. There were caps on premiums and drug prices would have been “reviewed.” A tax increase was not recommended. (details in the foot notes.)
The HLC claimed that if the proposals became law: Health care would be rationed. Patient’s rights would be compromised. The Clinton plan “was formed by academic elites behind closed doors.”
T.V. ads featured Harry and Louise, two fictional Americans who thought the suggestions would let “Washington bureaucrats decide how much care you and your family receive.”
Congressmen and women were lobbied. There were letter writing campaigns. The Medicare program was pronounced “dysfunctional”.
The effort to prevent health care reform cost $300 million. Insurance companies argued that the “free market could work if government got out of the way. “
In the end the Clinton proposals were not accepted by Congress, and Clinton went on to fight other battles.
As I read about the political clout of the AMA, American Medical Association, I began wondering how doctors decades later allowed the for profit insurance companies to totally take over the entirety of health insurance. Where were we? Why didn’t we do or say something?
My answer: Doctors in the 50s and 60s had feared and fought government involvement, but they found Medicare led to better care and higher salaries. I think the experience lulled the profession and made us more trusting and complacent. Big organizations, it turned out, weren’t bad after all.
Insurance company representatives were smooth and seemed to be good guys. A prominent Georgia doctor named Leaderman was convinced the companies would “respect physicians” and allow them to provide high quality, cost effective care.”
At the time that Clintons released their plan, Blue Cross and Blue Shield created obstacles to the for-profit companies. They controlled a large part of the health care market. The money they took in was actually used to pay for medical care. Driven by “need” not “greed”, these companies only charged what they needed to cover their costs. By so doing they established a de-facto price boundary, and it limited the amount the for-profits could charge for policies.
But over many decades the Blues had gradually lost market share, and they were about to crack3.
Then, one day in 1994 I heard a group at the nurses’ station discussing an article in the local paper. The board of directors of Blue Cross had resigned. They formed a for-profit health care organization and took all the low risk policies with them.
We now know7 that in 1994 the national Blue Cross and Blue Shields board of directors met in Washington D.C. and voted to allow its members to “operate as for profit companies.” Blue Cross of California changed its name to WellPoint, took a bulk of the policies that insured low risk individuals, and they became a new, for-profit company. They then bought the non- profit Blues plans in Missouri and Wisconsin. Blue Cross of Indiana became Anthem, and merged with WellPoint. By 1996 California, Colorado, Ohio, Virginia, Kansas, Maine, Missouri and Georgia had changed over. There were few remaining not-for-profit insurance plans. But the private companies were in charge and could now call the shots.
The for-profits were not required to “provide affordable, accessible health care” to all the people of their state. They could, instead, provide and/or charge for health care according to risk, and they could concentrate on making money for their stockholders. Kaiser, the group I worked for, modified its business model.
In 1987, the for-profit companies contended they were providing a service to the community and convinced the IRS to give them “special tax benefits.”
In 2008 a former insurance executive named Wendell Potter had enough, quit, and wrote an “expose”, a book titled Deadly Spin. His revelations didn’t make headlines or shake events much. But his story is similar in some ways to that of the man who exposed big tobacco. Formerly one of the nation’s better PR people, he was a “spin” expert. When the press came after his company for misdeeds, questions were not answered. He taught his people to respond with talking points. CEOs were trained. Potter attended interviews, and he limited the scope and duration of the sessions.
In his book he explained the “right way” to reply to questions about the 45 million Americans who didn’t have health insurance. Spokesmen and women were taught to blame the victim: 40% of the uninsured were young adults, and company representatives explained that many of the uninsured believed the risk of injury or illness was too low to justify the cost of the premium. 35% earned $50,000 a year and should be able to afford insurance, so it was a question of choice. 20% were not citizens.
Potter, a poor boy from the back country of Tennessee, was the first in his family to go to college. His father served in Europe and North Africa during the Second World War, then came home, married, and opened a grocery store. When the business lost money his dad got a job in a “brutally hot factory”, and toiled there until he retired.
In and after college Potter was briefly a journalist. Later he became a press secretary for a man who ran for governor and lost, and he next became a “spokesman for a failing banking empire.” In time the health insurer Cigna hired him “to help boost awareness” of the company’s health care business. He became a PR man extraordinaire and helped devise the messages of some of the nation’s leading insurance companies. He participated in the demolition of Bill Clinton’s health bill. Well paid, important, and at the top of his game, he paid a visit to his parents in July 2007. While there he learned that John Edwards, the presidential candidate, was scheduled to talk about health care reform at a fair in nearby Wise County Virginia. Wendell decided to attend and listen. He was devising talking points for his company and was looking for inspiration.
The health fair was produced by an adventurer and T.V. personality named Stan Brock. In 1985 Brock had founded a nonprofit organization called Remote Area Medical. “Volunteer doctors, nurses, technicians, and veterinarians, at their own expense, were taken on expeditions where they treated hundreds of patients a day under some of the worst conditions.” Crews worked in Katrina after the hurricane, Haiti after the earthquake, and held day long clinics in underserved areas in the U.S. Wise County Virginia was one of those locations.
Potter arrived early and parked in a jammed lot. Some of the people who formed long lines had slept in their vehicles. It had rained the night before and it was damp. Inside the treatment area large numbers of people waited in lines that led to clinics. Some people got their care in tents or animal stalls. Dentists pulled teeth. Nurses performed pap smears. Potter recalled mammograms, sigmoidoscopies, and doctors cutting out skin tumors.
He was troubled by what he saw. This wasn’t happening in a third world country. This was America, the land with the best health care in the world. Two thirds of the people at the health fair had no insurance, but a third did. Problem was many of their policies didn’t kick in until thousands of medical dollars were paid by the policy holder. In some cases we’re talking about $15,000 each year. In other cases the amount was $30,000. The average income in the nearby counties was $23,000 to $26,000. A “family health insurance” policy went for $13,375.
62% of bankruptcy filings in 2007 were the result of healthcare costs.5
What Potter witnessed could have been spun. The young uninsured were risk takers. People who earned $50,000 a year were shirking their responsibilities. Non citizens would be lumped and denounced as illegal aliens, though many were students. Other non citizens were in the country legally, and were performing jobs Americans couldn’t or wouldn’t do. They didn’t have health care because they couldn’t afford it.
Potter knew how to tell the story, but when he looked into the faces of the people standing in the line in the rain for hours to get care in animal stalls, Wendell saw folks who could have been his relatives or neighbors. He didn’t know them, but they seemed so familiar. They were like his dad and mother. The army had sent Potter’s father to Europe and North Africa during World War Two. When his dad returned, both parents dropped out of high school and worked. “They sacrificed years to send Wendell to college.” The people Potter was being paid to vilify were no longer anonymous or faceless.
A few days later Wendell was aboard a company jet. When his food arrived on a gold trimmed plate, he thought about the people who days earlier were receiving medical care in animal stalls. That’s when he decided to quit the spin game. The contrast between the compensation executives exacted and the care they denied was something that Potter pointed out in his book.
When Edward Hanaway left Cigna in 2009 he wrote a book blaming the health care consumer for the rising cost of health care. His retirement package was valued at $111 million. In 2007 a top average Health Insurance CEO had a salary of over $11 million. William McGuire of UnitedHealth backdated his stock options, was caught, and paid back $620 million dollars. He then managed to survive on $530 million in non stock compensation plus an additional $800 million in stock options.
In his book Potter documented, but avoided direct comments about the pay executives received, dollars that could have gone into providing better or more care (or even used as dividends for investors).4
Corporations in this country are strange inventions. They are endowed with the same freedoms of speech the constitution gives to humans. Some tend to only have the conscience and ethics needed to mollify the public and the government. They make no bones about their purpose for being. Their job is to make money, nothing more.
1. An American Sickness by Elizabeth Rosenthal. Penguin Press. 2017.
2. https://timeline.com/social-security-universal-health-care-efe875bbda93
3. https://www.npr.org/templates/story/story.php?storyId=124807720
4. Deadly Spin, Wendell Potter, Bloomsbury Press, 2010
5. https://www.npr.org/templates/story/story.php?storyId=124807720
7. https://www.managedcaremag.com/archives/1996/6/what-profit-trend-health-care-really-means ——Managed Care Magazine June 1996: “In June 1994, a little-known event occurred behind closed doors in Washington, D.C., that opened the path for any of the 63 Blues plans to switch. The Blue Cross and Blue Shield Association’s board of directors gathered to discuss, among other things, changing the association’s bylaws to allow its affiliates to operate as for-profit companies. It wasn’t the first time the board discussed the hotly-debated issue, but this time the measure had enough supporters to enact the proposed reform by a narrow margin. Until then, the board only allowed its plans to operate for-profit subsidiaries, while the parent company using the Blue Cross and Blue Shield name had to remain nonprofit.”…”Whatever its implications for that “social value,” the market — employers, government and patients themselves — is clearly calling the shots in health care today. In most places, it seems to be saying that for-profit plans are the wave of the future.”
8. https://www.gsb.stanford.edu/insights/kate-bundorf-what-really-drives-medical-treatment-decisions https://www.kevinmd.com/blog/2012/04/money-influences-decisions-doctors.html
9. https://www.npr.org/2011/04/17/135493605/ahead-of-bay-of-pigs-fears-of-communism
10. https://www.congress.gov/bill/103rd-congress/house-bill/3600/text
11. The Hillary Clinton Health care proposal (abridged.) The health plans they proposed had to cover: hospital services; health professionals; emergency and ambulatory medical and surgical services; clinical preventive services; mental illness and substance abuse services; family planning and services for pregnant women; hospice and home health care. extended care and ambulance services outpatient laboratory, radiology, and diagnostic services; outpatient prescription drugs and biological; outpatient rehabilitation services durable medical equipment; prosthetic and orthotic devices; vision care; dental care; health education classes; investigational treatments;
The items and services provided could not be subject to any duration, scope limitation, deductible, copayment, or coinsurance.
The legislative proposal included a “low” cost sharing schedule: no deductibles; An annual individual out-of-pocket limit on cost sharing of $1500; and (B) an annual family out-of-pocket limit on cost sharing of $3000;
High cost packages which (with a few exceptions) had an annual individual general deductible of $200 and an annual family general deductible of $400.
Individuals had to pay for the first day of care for each episode of inpatient and residential mental illness and substance abuse, and for each episode of intensive nonresidential mental illness and substance abuse treatment. And patients were responsible for the first $250 for outpatient prescription drugs and biological. Then the plan provided benefits.
To keep costs from going through the roof there was a regional target. If the projected cost of care was exceeded there were: automatic, mandatory, nondiscretionary reductions in payments to health care providers.
For out of network emergency and urgent care, individuals had to pay “a percentage of fee set by the alliance.
The items and services provided could not be subject to any duration, scope limitation, deductible, copayment, or coinsurance.
The legislative proposal included a “low” cost sharing schedule: no deductibles; An annual individual out-of-pocket limit on cost sharing of $1500; and (B) an annual family out-of-pocket limit on cost sharing of $3000;
Balanced billing was prohibited: A provider was not allowed to charge or collect money in excess of the fee schedule. And they couldn’t directly bill the patient.
They also recommended caps on health insurance premiums. Companies who wanted to charge more would now have to come before a commission and explain where the money was going and why it was needed.