The Price of Health: Two Ways to Pay It

In the field of medicine, the biggest news of the last two decades has been the discovery of life-saving wonder drugs--the sulfas and antibiotics. But the most heated discussion, among doctors and laymen alike, has been about the cost of medical care.

The problem is greater and more complicated, and goes much deeper, than the emotional, sloganized fight between "free" and "socialized" medicine. It breaks down into two parts: 1) how to help (or force) people who can afford to pay their medical bills to budget or insure these costs; 2) how to improve the overall health of the nation by providing that everybody gets adequate medical care regardless of means.

At the root of the first problem, which is primarily financial, is the basic human frailty expressed in the old saying: "The doctor is always paid last." Put in more modern terms, it was summed up by a prominent California physician: "The average patient isn't for socialized medicine until he gets his bill."

The second problem stems from the comparatively recent notion that a nation which undertakes to guarantee the financial security of its people should also guard and improve the health of every one of its citizens. This problem is political, moral and social as much as financial. Much of the confusion of recent years has resulted from the fact that the two problems have not been kept separate.

Peace & War. As long ago as 1932 the Committee on the Costs of Medical Care, headed by the late Dr. Ray Lyman Wilbur (then Herbert Hoover's Secretary of the Interior, longtime president of Stanford University), reported after five years of study: "Human life in the U.S. is being wasted as recklessly, as surely, in times of peace as in times of war. Thousands of people are sick and dying daily in this country because the knowledge and facilities that we have are inadequately applied. We must promptly put this knowledge and these facilities to work."

The Wilbur committee urged that the costs of medical care "be placed on a group payment basis, through the use of insurance, through the use of taxation, or . . . both of these methods."

Since that time, the nation's health has vastly improved, for many reasons. Payrolls shrunk by the Depression have swollen in boom times and given millions added buying power for medical care. The wonder drugs have worked miracles. World War II, though it killed and maimed hundreds of thousands, gave millions of men & women better medical and dental care than they had ever had before, and made them health-conscious. Group insurance has enabled many families to go to the doctor oftener--and earlier, when it does the most good.

Plant & People. Today, the U.S. has almost--but not quite--the world's healthiest citizens,* and the world's biggest medical plant: 6,335 hospitals with 1,423,520 beds and 87,596 bassinets. In 1948, a total of 445,478,364 patient-days were spent in them.

From these facilities, many Americans already get free medical care. For the 1,500,000 men in the armed forces and their 1,800,000 dependents, who get virtually all medical and dental care at Government expense, there are 132 hospitals with 55,252 beds, served by 6,755 doctors and 2,083 dentists. Almost 20 million veterans get free medical service in emergencies, or for service-connected ailments, can also get free service for other ailments if they swear that they cannot pay for it. For them there are 125 hospitals, 4,211 doctors and 884 dentists. Free care is given to 140,000 Americans in state and federal prisons, and to 335,000 Indians. Some free care is given to hundreds of thousands of employees by farsighted industrial and commercial concerns.

Across the land are 1,500 city, county and state hospitals, about half of them for chronic illnesses such as insanity and tuberculosis. Almost 700 give a wide and ever-widening range of general medical care without charge to those who cannot pay for it. Countless persons too proud to accept "charity" publicly, go to private physicians but do not pay their bills; they represent 5% of some doctors' practices, up to 25% of others.

The Bureau of the Census lists 202,000 physicians (M.D.s), many of whom are retired, or working for the Government, insurance companies, medical colleges or research groups, leaving an estimated 150,000 in active private practice, general or specialized. There are also 11,233 osteopathic physicians.

Dollars & Drinks. Medical care costs the U.S. consumer $4 out of every $100 that he spends. This added up to a whopping $7.4 billion in 1948. (Doctors complain that the American people spend more on alcohol--$8.8 billion in 1948.)

Poor and middle-income families pay a higher proportion of their incomes than the national average. The last breakdown (1944) by the Bureau of Labor Statistics showed that a family living on $500 to $1,000 a year spent $88 on doctors, dentists, osteopaths, chiropractors, faith healers, hospitals, X rays, drugs (both prescription and proprietary), eyeglasses and appliances. Families earning $2,500 to $3,000 paid an average of $123 a year; those earning $4,000-$5,000 paid $190; and those earning more than $5,000 paid $265. The 1948 total, based on higher costs all around, was estimated by the Federal Security Agency at $160 each for 46 million U.S. families.

There is infinite variety in the way U.S. families pay for medical care. More than half still do as best they can--out of income, out of savings, borrowing from personal loan companies. They meet each medical emergency as it arises. Some do so from necessity, some from choice, deliberately gambling that they will be able to take care of themselves.

Insured Millions. Other U.S. families use insurance to spread the costs of medical care over the years. Their number grew slowly in the first years after the Wilbur committee recommended this method. Lately it has mushroomed, until today 40% of the nation is covered in some degree. No less than 61 million Americans (counting subscribers and dependents) have hospital insurance, 43% of them through insurance companies, 57% through the famed Blue Cross voluntary plans.

Among these 61 million are 34 million who have additional protection against part of the costs of surgery while in hospial. Two-thirds of these policies are written by insurance companies, most of the remainder by voluntary plans in Blue Cross's associate organization, Blue Shield, which has grown phenomenally in four years. Among the 34 million, about 13 million have additional coverage for some physicians' bills, usually only while in hospital. Some 3 1/2 million of these, in turn, are insured against most types of medical expense (excluding dentistry, optometry and chronic illnesses like tuberculosis) from the sickbed at home to the operating room. But even under these policies, usually only the first $2 to $4 for each doctor's visit is covered.

How Insurance Works. Here is a specific example of how the combined Blue Cross and Blue Shield plans work. Last October, the wife of a Bronx freight handler, whose income is $2,400 a year, came down with acute appendicitis. The illness marked the first time that the family had had occasion to use its hospital insurance (held since 1943), now combined with a Blue Shield surgical plan, for premiums totaling $64.32 a year. The wife had an appendectomy and, because of complications, stayed in the hospital 24 days. For the first 21 days, Blue Cross allowed $6 a day; beyond that, $3 a day (it would have paid half benefits up to 180 days). The total bill for the hospital surgery, and in-the-hospital doctors' visits was $676.56. The insurance paid all but $59.03. Of this, $9 was for the last three days in the hospital and $36 for special nurses.

Blue Shield paid the surgeon its fixed allowance of $100 for the appendectomy. The surgeon had contracted, when he signed up with Blue Shield, to give "service benefits" at its fixed rates to families with incomes of less than $2,500 a year. If the freight handler had earned more than $2,500, the surgeon could have charged more than $100, and the freight handler would have had to pay everything over $100.

Two months after their mother's illness, both the freight handler's sons had their tonsils and adenoids out. Blue Cross and Blue Shield between them paid $141.36 for the two operations, and father did not have to lay out a penny.

Turnover. The people who benefit most by Blue Cross and Blue Shield are steady wage-earners not too highly paid to be eligible for service benefits, and working if? a plant where group membership is possible. Both Blue Cross and Blue Shield subscribers are concentrated in the cities and metropolitan areas of industrial states. Rhode Island tops the Blue Cross list with 72% of the state's people enrolled, Delaware is next with 55%, and also tops the Blue Shield rolls with 50%. Eight states (Rhode Island among them) have no Blue Shield plan.

Both Blue Cross and Blue Shield have run into a difficulty which is inherent in voluntary plans: they have a high turnover among subscribers. Many who have no serious illness in the family for a year or two ask themselves, "Why should I pay a lot in and get nothing back?" They drop out. Blue Cross turnover has ranged as high as 25% a year. Those who dropped out were, naturally, the healthiest--from an insurance point of view, "the best risks." Those who came in were likely to be poorer risks.

Indictment. Are these plans adequate to meet the nation's needs and desires for health insurance? Granted that they do not fill the bill today, can they be expanded (for they are still growing fast) to do the whole job?

This is the point at which the Fair Deal, following New Deal thought patterns, steps in with a resounding no. President Truman, lumping the financial and social problems together, proclaimed in January 1949: "In a nation as rich as ours, it is a shocking fact that tens of millions lack adequate medical care." Harry Truman's prescription: "We need--and we must have without further delay--a system of prepaid medical insurance . . ." That system, he said, must be national and compulsory, based on a payroll tax.

A year and a half ago, Federal Security Administrator Oscar Ewing backed up his boss with an elaborate report entitled The Nation's Health. Ewing declared: "Every year, over 300,000 people die whom we have the knowledge and the skills to save ... By & large, only the well-to-do and, to a certain extent, charity patients, get satisfactory medical care."

More specifically, said Ewing: "A scant 20% of our people are able to afford all the medical care they need. About half our families--those with incomes of $3,000 or less--find it hard, if not impossible, to pay for even routine medical care. Another 30% of American families with incomes between $3,000 and $5,000 would have to make great sacrifices or go into debt to meet the costs of a severe or chronic illness."

Blueprint. Ewing's complaint was threefold: 1) the nation was not spending enough on health; 2) the spending power was not evenly distributed; and 3) because illness strikes without warning, even a thrifty, budget-careful family may have its savings wiped out and be forced into debt by a catastrophic or chronic illness. To allow the nation to spend more on its health, Ewing had detailed blueprints for building more hospitals, boosting the output of doctors, dentists and nurses, and beefing up public health services. Few argued with these aims, though many--especially doctors fearing federal interference with their profession--disagreed over details of their attainment.

But Ewing went farther. "Our goal," said he, "can be no less than the removal of any economic barrier between the individual and his access to whatever health or medical services he needs. Everything else that is done to promote national health will be virtually canceled if millions of the people are barred from health because they are unable to pay for it out of pocket. [We must] provide that all people shall have access to such health and medical services as they require through a system of insurance covering the entire population" (thus trying to resolve both the financial and social problems at one stroke).

The Cost. The only way to reach this goal, said Ewing, is to tax all U.S. payrolls and self-employed persons to the tune of 3% at first, and eventually 4%, on the first $4,800 of income. On a taxable $150 billion (more than the nation's $133 billion payroll but well under its total personal income of $210 billion), Ewing figures this would yield $4.5 billion at first--just what private U.S. citizens now spend on doctors, hospitals and drugs. But with the same amount of money, Ewing planned to give more of this kind of care to more people--85% of the nation.* Since the money could not possibly stretch so far, Ewing also wanted an open-end account to draw from general tax funds. He estimated that he might need, after the first year or so, an extra $2 billion a year.

A skilled politician with a sensitive ear for wails of states' rights, local autonomy and professional independence, Oscar Ewing had tried to soothe some possible opponents in advance. He urged a decentralized administration, with the Federal Government doing nothing but collecting the compulsory health insurance funds and doling them out to the states. Every state, said he, should have its own authority; each community area (probably a county) should have its own plan, run largely by volunteer committees with one paid executive.

The law which he proposed, said Ewing, should stipulate that every patient have the right to choose his own doctor, and every doctor should have the right to reject any patient. Any doctor would have a free choice--to join the plan or not. Once in, doctors in a community would decide among themselves how they should be paid: on a fee-for-service basis (so much for each call for each patient), or by capitation (so much a year for each patient on a doctor's list) or, in a group practice,/- by salary. They might combine two methods or all three.

Who Would Benefit? Under the Ewing plan, the Bronx freight handler's premiums would be $72 a year at first, rising to $96 after the plan is widened to cover dentistry, eye care and chronic illnesses. But the freight handler would pay only half ($36 to $48) in direct payroll taxes; his employer would pay the rest.

Actually, the Ewing plan would not make much difference to the Blue Cross-Blue Shield subscriber, such as the Bronx freight handler, in terms of dollars. Most directly benefited by it would be millions of Americans who live in areas where no such plan is available, or who do not qualify for membership because they cannot get into a "group membership" plan, or who are not regularly employed, or who simply cannot afford the premiums. For subscribers to the Blue Cross-Blue Shield types of insurance above the income cutoff, the Ewing plan would offer an apparent saving in years of heavy illnesses or operations. But since this income group is the part of U.S. society which pays heavy income taxes, people in this group would make up most of the deficits in even bigger income taxes. The well-to-do, if they chose to continue going to a nonparticipating doctor, would pay their full bills. In addition, they would be taxed for something they did not use--just like parents who pay school taxes and then send their children to private schools.

Ewing insists, especially since his recent visit to Britain, that his plan is not "socialized medicine." He reserves that term for systems like the British, in which hospitals have been nationalized. His plan would leave them as at present under private or local control. Also, he maintains, "socialized medicine" covers the systems, common in continental Europe, where doctors are employed by the state.

Capacity to Pay. Before they could quarrel with Swing's prescription for the nation's health, his opponents had to make their own diagnosis of the nation's ills. In general they agreed that many U.S. citizens were not getting the best of medical care, but they argued that it was not because of inability to pay for it. The Brookings Institution, in a report-made at the request of a Senate committee in the 80th Congress, concluded that families with incomes of $2,000 or more (at 1941 price levels) should have no difficulty in paying for medical care if they cut down on luxuries (automobiles, liquor, tobacco, recreation) and savings.

Having, pared down the problem, the Brookings researchers proceeded to knock down the Ewing solution. Compulsory insurance, they argued, would mean too much governmental regulation and control, which would creep into the relationship between doctor and patient. Furthermore, politics could not be kept out. Worst of all, "the cost of medical care presumably would increase because of a) administrative expenses; b) the tendency of insured persons to make unnecessary and often unreasonable demands upon the medical care services; and c) the tendency of some practitioners and agencies to use the system for their own financial advantage."

Turnabout. Doctors in general agreed with this indictment, but individually did little at first to prosecute their case. This they left to the American Medical Association. Once (during World War I), the A.M.A. had favored compulsory, health insurance. But during Dr. Morris Fishbein's long (1924-49) and bellicose editorship of the A.M.A.'s Journal, the tune changed. Though Republican Ray Lyman Wilbur was an M.D. and a past president of the A.M.A., his committee's 1932 report was denounced by Fishbein as "socialism and communism." Under Fishbein's leadership, the A.M.A. at first also opposed both hospital insurance and surgical-medical insurance.

By last year, doctors decided that the U.S. public was not judging the A.M.A. on the merits o.f its case, but was taking sides for or against Fishbein. So the A.M.A dumped Dr. Fishbein (TIME, June 20) and hired a firm of San Francisco pressagents, Clem Whitaker and his wife Leone Baxter, to run its "National Education Campaign" against the Truman-Ewing program. Doctors have found it an expensive war: Whitaker & Baxter (for a fee of $100,000 a year) are spending $2,000,000 a year to counter the effects of Ewing's tax-supported propaganda. This year, for the first time, the A.M.A. will collect $25 dues from most of its 143,000 members to finance the battle.

The Doctors' Reply. The A.M.A. sees the nation's health program clearly in its separate financial and social components. It charges Oscar Ewing with exaggerating both, and also exaggerating the difficulties of solving them. U.S. medicine, says the A.M.A.'s President-elect Dr. Elmer L. Henderson, is the world's best, and the nation has more doctors in proportion to population-than any other (except refugee-filled Israel). The bulk of its citizens, Dr. Henderson argues, have access to adequate medical care and can afford to pay for it. Doctors and hospitals could be better distributed, he concedes, but he argues that "socialized medicine" would promise vast benefits to people in areas where services are simply not available and could not be made available. Worst of all, Dr. Henderson charges, the plan eventually would cost $12 to $15 billion a year.

Voluntary plans, say A.M.A.'s spokesmen, are adequate and can be expanded to embrace 90 million Americans. The rest--roughly two-fifths of the nation--have been described in A.M.A. pronouncements as "medical indigents." For them, says the A.M.A., the state and federal governments should pay premiums out of public tax money to private insurance plans which would be largely controlled by doctors.

The A.M.A. has been getting its message across in many ways. Today, patients in doctors' waiting rooms find themselves facing a blown-up reproduction of Sir Luke Fildes' painting, The Doctor. Once used to advertise a laxative, it is now captioned Keep Politics Out of This Picture. Each month, meetings of many county medical societies hear denunciations of the Ewing plan. The societies have organized speakers' bureaus and they stage exhibits at state & county fairs. In most areas, the battle cry is "socialized medicine."

Middle Way? In this heated exchange of charges and countercharges, the U.S. public has looked for a middle way. It has looked in vain to independent doctors who dislike both the Ewing plan and the A.M.A.'s tactics. Most of the effort to find a middle way has been in Congress. Alabama's Lister Hill has a bill in the Senate to take care of medical indigents by using state and federal funds to pay their premiums in voluntary plans. Vermont's Republican Ralph Flanders would buy this, but with a neat compromise added: those who could afford to pay should subscribe to a voluntary plan--but on a sliding scale according to income.

One promising compromise suggested a "deductible," familiar in automobile insurance. Individuals would pay something toward their medical bills; a payroll tax fund would cover the rest. Illinois' freshman Senator Paul Douglas, who has turned against the Ewing plan, believes that the individual might pay up to $150 a year, and be caver-ed only for "catastrophic illness."

Time the Healer. The problems were so deep, and emotions running so high, that no national health bill was likely to be considered at this session of Congress. Both parties wanted to save the issue for the congressional elections next November. It might well figure in the 1952 presidential election.

This public airing of the issue would be good for the nation's health--and its pocketbook. There was a situation which needed to be remedied. There was no doubt that with its technical and financial resources and social resourcefulness, the U.S. could find a sound remedy. But the hasty enactment of unworkable legislation, creating an unwieldy bureaucracy, was more likely to impair than improve the nation's health. Such a cure would be worse than the disease.

* Healthier, judged by death rates: those of The Netherlands, Denmark, Norway and New Zealand.

* Social Security covers 44 million or 29%. It excludes the self-employed, agricultural and casual laborers, domestic workers and employees of Government and nonprofit groups, most of whom would be covered by national health in surance.

/- Relatively new when the Wilbur committee recommended it, group practice helps doctors to give better medical care by bringing several specialists under one roof (cutting their over head for rent, office help, expensive equipment and laboratory technicians), and helps the patient by giving him automatic access to the group's specialists.

* The Issue of Compulsory Health Insurance, by George W. Bachman and Lewis Meriam, 1948.

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