price_of_citizenship.jpg (9774 bytes) The Price of Citizenship

Chapter Ten

Chapter Ten: The Assimilation of Health Care to the Market

Worries about costs drove debates over the future of healthcare just as they did Social Security. But health care carried other burdens beyond a potentially bankrupted trust fund: the elderly who needed expensive long-term care in nursing homes and prescription drugs; the indigent and working poor unable to afford insurance; the high price of new technology; and a payment system that fueled inflation. Access was the other great issue. In the growing ranks of the uninsured, America reaped the consequences of linking its welfare state to employment.

The link between poverty and sickness is the reason why early American health insurance proposals focussed on assuring some income during periods of illness, what today we would call disability insurance.

With the advent of the cold war in the 1940s, opponents tarred health insurance with the label of socialized medicine, which further weakened its legitimacy, and business and insurance interests kept up their attack on the issue.

Despite the opposition's success in blocking a public and compulsory plan, forms of health insurance with enduring significance developed in the 1930s and 1940s.

By the 1950s, America had a nascent system of health insurance that - uniquely among industrialized nations - tied benefits to employment. By default, public policy had rejected the idea of medical care as a right of citizenship. Instead, it remained a consequence of income and class. Nonetheless, progress under private insurance had been swift and stunning. Between 1940 and 1966, the share of the population covered by hospital insurance had grown from 9% to 81%.

Despite hostility to universal health care, support developed for subsidizing the medical care of very poor people.

In 1965, Congress approved Medicare and Medicaid. Those new programs did not give America comprehensive national health insurance. Instead, they enshrined the distinction between social insurance and public assistance into medicine, where it remains firmly anchored. Physicians and hospitals did very well under Medicare. To prevent their opposition, the program reimbursed hospitals for reasonable costs and physicians for prevailing charges. This open-ended funding arrangement built into Medicare unleashed the inflation of medical costs, which began to soar.

Medicare and Medicaid left the action with an uncoordinated health care system divided between private insurance for the employed and well off, social insurance for the elderly, and public charity for the poor. The system invited cost inflation while it excluded millions of Americans. It is the most expensive in the world; has the largest share of uninsured individuals among advanced nations; and allows a rate of infant mortality in poor neighborhoods that rivals or exceeds that of the Third World.

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The War on Costs







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