A Century and Counting: The Campaign for National Health Insurance

By Gerald Friedman

“You can always count on Americans to do the right thing – after they’ve tried everything else.” -Winston Churchill

The campaign for universal health insurance passed the century mark last year, the centennial of Theodore Roosevelt’s 1912 Progressive Party platform calling for national social insurance. Since then we came close to establishing the type of national health insurance system found in every other affluent democracy several times.  Health insurance was included along with old age pensions, welfare, and unemployment insurance in President Franklin Roosevelt’s original proposal for Social Security; it was dropped from the final act from fear that it would jeopardize the rest of the program.

While FDR continued to press for universal access “to adequate medical care,” and Democrats from Truman to Kennedy supported national health insurance, it took some trimming by Lyndon Johnson in 1965 to enact a limited system of national health insurance restricted to the elderly (Medicare), the poor (Medicaid), and the disabled (Social Security Disability).

Since Johnson, Democrats continued to retreat from their original demand for a universal and comprehensive national health insurance system, often recycling old Republican proposals in hopes of getting something in law.  Richard Nixon’s health care plans from the early 1970s were the basis of both Governor Michael Dukakis’s proposed employer mandate in 1988 and President Clinton’s call for HMOs and “managed competition” in 1993. Matching the Democrats’ move to the right, Republicans (including the Heritage Foundation and Newt Gingrich) abandoned Nixon’s national program to propose requiring individuals to buy insurance.  This was the basis of Governor Romney’s 2006 Massachusetts health care plan and of President Obama’s Patient Protection and Affordable Care Act.

The early 1970s was a watershed in another way: the time when attention moved from expanding access to a growing concern over cost. While no significant national legislation was enacted between 1965 and 2010, regulatory changes have transformed American health care, reducing the insurance function by charging health care “consumers” (a.k.a. the sick and the disabled) directly for services.  Copayments have increased, deductibles have been raised, and community rating ended so that insurance plans can be priced based on expected use (how sick they expect you to be).  To control their “medical losses,” insurers now routinely supervise doctors to reduce use of expensive pharmaceuticals and procedures. In an increasingly competitive insurance market, companies who fail to contain “costs,” what we call access to medical services, risk losing profits and the favor of Wall Street investors.

Paradoxically, all the focus on containing costs has raised medical spending, which has increased significantly faster than the rest of the economy.  Commodifying access to health care has inflated the administrative load more than it has saved by reducing access to care and services.  Competition has led health insurers to wasteful practices: advertising and investing in “adverse selection” to identify and discourage the expensive sick (“lemon dropping”) and to attract the low-cost well (“cherry picking”). While health insurance administrators have done nothing to cure the sick, the proliferation of plans has raised billing costs for providers, hospitals, clinics, and private medical practices so that administrative expenses now come to a third of our health care spending; we now spend more per person on health care administration than many European countries spend on health care. 

Marketization of health insurance has brought the United States the worst of both worlds: rising costs and declining access, nearly 150,000 unnecessary deaths per year and a rising tide of medical bankruptcy.  There is an alternative.  By eliminating perverse incentives for adverse selection, a single-payer plan would dramatically lower administrative costs and monopolistic pricing, saving nearly $600 billion, $5000 billion over a decade, while providing meaningful universal access. 

Barack Obama knows this and has been a long-time supporter of single payer.  But as president, he accepted the long-standing political wisdom that it would be impossible to enact a single-payer program; instead, like Democrats since Johnson, he sought to reform the existing market.  The outcome, the Patient Protection and Affordable Care Act of 2010 reforms and expands the existing health insurance system; expansion is the carrot to get private insurers to accept reforms limiting (but not ending) their use of adverse selection.  The law does provide a dramatic expansion of public insurance by mandating that everyone is eligible for Medicaid whose income is below 138 percent of the Federal Poverty Line (FPL); the Supreme Court dramatically limited this program by allowing states to opt out.  Subsidies to help people buy insurance will go to households with incomes as much as 400 percent of the FPL.  In all, the ACA should halve the population without insurance.  Because the subsidies to help the newly insured buy coverage are paid largely through new taxes on the highest earners, the subsidized insurance will be one of the largest redistributive measures ever enacted.

Subsidized coverage expansion and restrictions on insurance company abuses are significant gains. But these gains come at a steep price, because with the ACA the Obama administration has entrenched the insurance and drug companies as arbiters of America’s health care system.  This is not only repugnant because of these companies’ abusive policies, but also it endangers everything that the ACA seeks because it precludes effective action to contain rapidly rising health care costs.  Only a single-payer plan, like Improved Medicare for All (HR 676) can control costs and expand coverage because it is the only way to put effective controls on profits and administrative costs.  Without single payer, health care costs will continue to soar, squeezing income, wages, and company and government budgets.  If we do not control costs the right way, by limiting insurance administration and waste, there will be growing pressure to control costs the wrong way, by squeezing providers and restricting access.

After a century of struggle, the ACA commits the United States to providing universal access to health care.  This is a great achievement, one to be treasured and nurtured.  Now the real fight begins, to turn this commitment into a reality that the ACA itself cannot produce.  Barack Obama was right the first time: only a single-payer program can provide universal coverage, and only a single-payer program can control costs.  The ACA may be the last bad idea that Americans try; after it fails, we will finally do the right thing: single-payer health insurance.

Gerald Friedman is Professor of Economics at the University of Massachusetts at Amherst. He writes on economic history, labor history, and alternative economic theories. 

You can follow him on twitter at @gfriedma

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