Socialized Medicine New for U.S.?

An Op Ed piece in the Sunday Tulsa World news paper was headlined “Socialized Medicine is not new for U.S”.  The author, Lane Filler of Newsday, said:

“The socialization of health care in the United States didn’t start with Obamacare, or even with the introduction of Medicare and Medicaid in 1965.  It got rolling in 1945.”

His thesis is that it started as a way avoid the wage and price controls put in place because of WWII.  The National War Labor Board, he says, agreed that health insurance wasn’t subject to the wage ceiling.  Company’s then offered health insurance as an alternative to wage increases and the rest is history.  “The social health care ship sailed in 1945”, he says, and so today the problem is to simply how to keep the ship afloat.

My important fact of life #2 is “nothing is as simple as it seems”.   Filler has certainly confirmed the truth of this.  In making his case I’m not sure he’s said much that isn’t true, but he has sailed past several salient historic happenings that bear on the his conclusion.  The most relevant thing he admits – sort of – in the last sentence is that this is currently a fiscal problem.  He seems to blame most of the cost problem on “high-priced technology’ and “needless procedures”.  These ar certainly factors, but how to deal with them?  He has no specific suggestions.

The first difficulty with resolving the health care issue is to arrive at a realistic common definition of the problem.  Congress in all the publicity around the passage of Obamacare seemed to define it as an “insurance problem”.  That is a nice political position because none of us really understand or like insurance companies.  And it fit nicely in a TV news “10 second sound bite”.   The best problem definition that I have seen of our medical system dysfunction was in an Atlantic Monthly magazine article from a couple of years ago. The difficulty with it was that it was about 20 or more pages long.  Most of us don’t have the time or the patience for heavy articles that long.  Interestingly enough, the author didn’t have insurance defined as a major part of the problem.  Not to worry, my ambition for this post is not to rigorously define the problem, but merely to fill in some of the missing pieces in Filler’s history.

Where we might start is with a definition of “insurance”.  Insurance is basically a financial arrangement to provide us protection against unpredictable, infrequent events.  For example the vast majority of the years that I have carried auto and homeowners insurance, I have not filed a claim.  The idea is that we spread the risk of infrequent, but major events among all the people who pay premiums.  My auto and home insurance does not cover  maintenance, minor repairs or other routine events.  If these things were covered there would need to be an administrative payment system requiring overhead costs that I avoid  by getting my service directly from the provider and paying the bill myself.

What we had in 1945 was “insurance”.  We still had  “insurance” when I started working in the 1960s.  I had “hospitalization” insurance.  It didn’t pay for doctor’s visits, physicals, or things not connected with a “major” problem that might require hospitalization.  I shopped for a doctor.  I ended up with a family doctor who was a GP and didn’t require a physical before he would take me. My other choice was an internist who required a physical (he would not take the military physical I had just gotten) and charged twice as much as the GP for office visits.  I felt my medical care was very good.  The doctor only had a receptionist in his office and I paid the bill.  If there was anything that I could recover from my medical insurance, I would have to file a claim myself.

By the early 80s, this doctor had retired and I became a patient of an internist.  He required a physical, and charged an impressive fee for office visits.  I also had to get lab work done annually (and I learned – he also owned the lab).  But I didn’t really care, because my insurance was now paying everything.  It had ceased to be insurance and had instead become – by the late 70s – a corporate “welfare program”.   And I quit asking the price (and my wife considers me to be fiscally “tight”).  Guess when costs of medical care began to rapidly accelerate?  It correlates pretty directly to the change from insurance to welfare.  No surprise here, when things are “free” the demand goes up.  But the other thing that happened was the number of administrative people has gone up dramatically also.  In doing a management consulting assignment for a group of doctors in the 1990s, it was interesting to note that the number of administrative people – most of whom were filing insurance claims – outnumbered the number of doctors and there was still only one receptionist.  One would expect that the increase in personnel required by insurance companies to have also increased dramatically because the volume of claims had likewise risen significantly.

Why would companies have agreed to the changes that obviously increased the costs?  Probably three possibilities.  1) It did not increase wages, so it was not a high-profile thing to give in Union negotiations. 2) the unions liked it because, unlike wages, health and other “benefits” were not taxable. 3) Non-union employees benefits were kept current with what the union got, so the people doing the negotiations (and their friends) knew that they would also get what the union got in benefits – but not wages.

By the 1990s, my company, and others, was putting pressure on its insurance carrier to reduce costs.  The result of that was “managed care”.  And second guessing of family doctors by insurance company doctors which none of us liked.  (How many doctors ended up on insurance company payrolls with the primary purpose of trying to eliminate “needless procedures”?)  Some of the newer technologies (MRI machines,etc) have been expensive to purchase which would also tend to have raised some prices, but they also should have saved some money by making diagnosis and treatment take less time and money.  What happened to those savings?  There is some evidence that those have been overused and some of that, with a new insurance company initiative on costs, may be corrected.  But how much will more oversight cost?

Socialized medicine is not necessarily new to the U.S.  But it didn’t start in 1945.  It started when corporate health insurance quit being insurance and became corporate welfare.  And just because it may have started in the private sector doesn’t mean that it was a good idea.  The private sector has been known to do some dumb things.  I don’t have an easy answer, and maybe not even a good answer.  But this doesn’t seem to me to be an “insurance problem”.   Like Nancy Pelosi, I haven’t read the thousands of pages in the bill, but it appears that we are trying to solve the problem by doing more of the same things that caused it to begin with.  Maybe this time is different, but that doesn’t usually work.  As Albert Einstein said “We are not going to solve our problems with the same level of thinking we used to create them”.


About tjc13

BE - Chem Engineering, Vanderbilt Univ, MBA, University of Tulsa - Worked for an energy and chemical company for many years and then started a management consulting business working for both for-profit and not-for-profit organizations.
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