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Health Reform through History: Part I: The New Deal

May 26, 2009 - 9:36am

This week, New Health Dialogue will feature a series of posts comparing current and past efforts to reform the American health care system. We're looking both at attempts that succeeded (the creation of Medicare in the 1960's) and those that failed (creating national health insurance in the New Deal era). Disclaimer for those historians who may be reading: we're not pretending to offer a definitive account of the New Deal, the creation of Medicare, or the creation of SCHIP. Rather, we're offering what we believe are the pertinent lessons of those episodes in the minimum amount of time to do the material justice.

Clearly the programs, the players, and the national political landscape are in constant motion, making comparisons between the political battles of the past and present a challenge. But neither the underlying issues nor the legislative process have changed. Past successes and failures hold lessons for current would-be reformers, from the interest groups lobbying to affect the outcome to majority and minority leadership in Congress to the President himself.

It's also illustrative to view the current effort at reform in the broader context. The comprehensive reform under development by President Obama and Congressional leadership didn't emerge in a vacuum—it's the latest incarnation of nearly a century of health reform efforts, both failed and successful. The Progressive Era attempts at national health insurance didn't quite come to life in the New Deal—Truman unsuccessfully tried to resurrect them when he became President; and though national health insurance remained elusive, President Johnson finally signed Medicare into law in 1965 as President Truman watched.

By the same token, current reform efforts are deeply influenced by the 1993 Clinton experience. The Clinton initiative was perceived by its architects as accomplishing the unfinished work of the New Deal. We hope you'll enjoy these brief stories of health reform past and that they'll enrich your understanding of the current health reform debate.

 

The 1930's: The Unfinished Work of the New Deal

Looking back at the devastation of the Great Depression and the resulting transformation of the federal government by the New Deal, it's easy to ask why the country never tackled national health insurance. The federal government took a huge new role in public life and the economy, but health care remained virtually unchanged. Why?

Paul Starr, in his book The Social Transformation of American Medicine, argues that a combination of poor timing, organized and fierce opposition, and dissension within the ranks of the reformers all prevented health insurance from becoming part of the New Deal.

The immense human misery caused by the Depression—homelessness, unemployment, malnutrition—made mitigating "the grim problem of existence," in President Roosevelt's words, the New Deal's first priority. Certainly some New Dealers, including Roosevelt's aide Harry Hopkins, considered creation of a system of national health insurance a top priority. (In the statist approach typical of progressives of the era, guaranteeing health insurance meant creating a mandatory system of national health insurance in the minds of New Dealers). But the early and vocal opposition of the American Medical Association to any government role in paying for medicine dissuaded reformers from including health insurance in the centerpiece of the New Deal, the Social Security bill.

Even by the 1930's, the AMA had proven itself a formidable lobby, having successfully killed the universal health insurance proposals of the Progressive Era. (During the Progressive Era, in the 1900's and 1910's, various attempts at national health insurance enjoyed broad support but were never enacted). It approached the New Deal with guns blazing. Though many physicians had been badly hurt by the Depression and accompanying loss of income, the AMA continued to oppose any system of voluntary or mandatory insurance offered by the government.

In 1935 and again in 1938, committees of executive officials met on the issue of health insurance. Both made modest recommendations, including appropriating funds for hospital construction and increased aid for medical care for the indigent. The second committee's report prompted the President to call a conference on a national health care program in July 1938. Roosevelt was apparently so enthused about a national health care program that he intended to campaign on it during the 1938 midterms. However, he chose not to, preferring to defer until the 1940 presidential campaign. Unfortunately, by 1938 and 1940, it was too late.

It's no accident that the vast majority of the New Deal—creation of Fannie Mae, Social Security, the Civilian Conservation Corps, and the Tennessee Valley Authority—came into being during Roosevelt's first term. The landslide election of 1932 swept giant pro-Roosevelt majorities into Congress and left the conservative opposition neutered, easing the way for an enormous burst of legislative activity. But by 1936, and especially 1938, the opponents of the New Deal—conservative southern Democrats and Republicans supported by the business community—had gathered enough strength to stop the New Deal in its tracks. But that period, Roosevelt's second term, was when the New Dealers who had agreed to leave health insurance out of Social Security finally made their push.

When the new Congress convened after the 1938 midterms, Senator Wagner (D-NY) introduced a bill based on the 1938 commission report. It called for funds for hospital construction, health care for poor and disabled, and to placate the AMA, left health insurance as an option for the States. Still, the AMA testified against it, and the President chose not to back the bill, asking instead solely for hospital construction funds for underserved areas. Even this proposal, which passed the Senate in 1940, died in the House.

If universal health care had had a chance to become law, its moment had passed.

The Obama Administration is taking a very different approach to health reform than did President Roosevelt. First, the President is striking while the iron is hot, making comprehensive health reform an immediate top priority in a way it never was during the New Deal. (To be fair to Roosevelt, despite all the comparisons of the current recession to the Great Depression floating around, the Depression was far, far worse. And medical care was far less advanced and less expensive than it is today, making its provision a lower priority to the public). Second, President Obama has explicitly and repeatedly linked health reform to economic recovery, rather than viewing them as separate challenges.

Third, he is forcefully committing his political capital to the issue in a way that Roosevelt did not. Finally, Obama and Congressional leadership have been careful to include the likely opposition to comprehensive health reform. Roosevelt never had that opportunity with the innately conservative and anti-New Deal leadership of the 1930's AMA.