Public - Private Conflict in US Health Care - Some Historical Context

Rashmi Prasad, a colleague at the University of Alaska Anchorage, and I presented a paper in a conference on poverty reduction in New Delhi in 2006. We were trying to step back and look at how Indians and Americans think about poverty based on their differing models of the world and humans in that world. We assumed if there were different basic models of the relationship between society and the individual, this would lead to different approaches to policy for alleviating poverty. For our key example of poverty policy in the US, we used material Rashmi had developed previously on:

"the evolution of the almshouse, or poorhouse, to the nursing home, the present repository for the elderly poor who can no longer live independently."

A significant part of that history is related to conflicting American stories about public and private responsibilities. I think this history helps inform the battle that is going on now in the US over health care reform so I thought I'd try to excerpt some of Rashmi's argument. I'm going to excerpt much more extensively than I normally would from a paper, but it is a paper that we wrote, so we aren't stealing anyone else's material. The whole paper is available at Google books. The link starts at this discussion of alms houses, but you can scroll to the beginning if you like.

First we described some of the American stories that underlie our modern health policies. There's a lot more detail, of course, in the paper. [Most of the rest of this is quoted from the paper. If it is indented, it's a quotation - at least it is my intent to indent.]

Story 1: Self-Determination and individualism: The Liberal Creed

This is a seminal United States narrative embodied in the US Constitution’s “life, liberty, and pursuit of happiness.” Individuals are free to determine their fate, free to choose, free to fail. It is a creed consonant with the optimism that non-Americans often find characteristic of the country. High value is placed on achievement and ascription. One will boast of humble origins and being a self-made man. The rugged individual is celebrated, along with the virtues of thrift, initiative, enterprise, and self-reliance. We see this in politics as well as the popular culture. Herbert Hoover warned against the slackening of these values in his opposition to Franklin Roosevelt’s ‘New Deal’ initiatives during the Great Depression (Hofstadter 1968: 263).

• "We must have government that builds stamina into communities and men…. We must stop this softening of thrift, self-reliance and self-respect through dependence on government. We must stop telling youth that the country is going to the devil and they haven’t a chance. We must stop dissipating the initiative and aspirations of our people. We must revive the courage of men and women and their faith in American liberty. We must recover these spiritual heritages of America. . ."

• "This is a classless country. If we hold to our unique American ideal of equal opportunity there can never be classes or masses in our country. There is no employing class, no working class, no farming class. You may pigeonhole a man or woman as a farmer or a worker or a professional man or an employer or even a banker. But the son of the farmer will be a doctor or a worker or even a banker, and his daughter a teacher. The son of a worker will be an employer—or maybe President."

This narrative has often been mobilized to counter arguments favoring social-insurance by characterizing it as a form of group coercion of individuals and ‘creeping socialism’. Such narratives have helped to maintain physician’s property rights and to define health services as commodities instead of entitlements.

Story 2: The Deserving and Undeserving Poor

The existence of poor people in the United States required other stories. Differentiating among the deserving and undeserving poor became a pressing social concern in periods of tangibly rising pauperism. Traditional Christian narratives required relief for the sick and the lame. However, increases in claims to public relief were attributed to inappropriate outdoor relief to the able-bodied. The Quincy report (a commonwealth of Massachusetts commission on pauper laws in 1821) indicating the two classes of poor:

1. The impotent poor; in which denomination are included all, who are wholly incapable of work, through old age, infancy, sickness or corporeal debility.


2. the able poor; in which denomination are included all, who are capable of work, of some nature or other; but differing in the degree of their capacity, and in the kind of work of which they are capable. (Quincy, p.1) . . .

Story 3: The Christian Ideas of a Calling and of Charity

Protestants were the dominant Christian denomination to settle in the North American colonies. Their form of Christianity saw work as a religious calling, as the morally proper thing for people to do. “The Protestant Work Ethic” or just “Work Ethic” is still invoked today, as is the proverb “Idle hands are the devil’s tools.” Yet, Christ’s advocacy of charity to those less fortunate was also present and underpins some of the story of the deserving poor.

Story 4: Science – the solution to all problems

The 20th Century saw a rapid rise in the application of science to society’s problems. With science came the professionalization of increasing numbers of social domains from the late 19th century onwards (Abbott 1988). The public became accustomed to listening in awe to the ‘miracles’ produced by modern science. The field of medicine, for example, suddenly had a scientific basis, medical schools became professionalized, and it emerged as the exemplary and most prestigious of professions as doctors were now able to more reliably cure many more patients. For many, science became a new religion.

Story 5: The Government’s Role

Stories can be powerful, but when the story hits smack against a contradictory reality, new stories begin to emerge. The power of corporations at the beginning of the 20th Century raised questions about laissez faire capitalism and Theodore Roosevelt used his power as president to bust the large trusts. The Great Depression demonstrated even more problems with capitalism. Marxists stories – many brought by immigrants – began to compete with the market story. Keynesian economics argued for a powerful role for government to macro-manage the economy and strongly influenced President Franklin Roosevelt’s New Deal programs. The American story was not a Communist story as much as a story about the need for a strong government to counter market failures. By the late 1970s, the new reality of the tremendous growth of government along with an economic depression, made the market story appealing again. Ronald Reagan was elected President in 1980 on the theme that government was the problem and that the market was the solution.

Okay. This background now gets us to the Almshouses story in which we tried to show how these different American values played a role at different times.

The Almshouse

The corporate towns of Colonial America were essentially made up of members and closed to others. These towns provided ‘outdoor relief’, to recognized members of a community. ‘Outdoor relief’ could be money or goods given to the member. By the early 19th century increases in pauperism, especially of the urban, rootless sort had become prevalent and a rising financial burden on existing outdoor relief practices maintained by cities. A desire to weed the able-bodied (i.e. undeserving) from the relief rolls brought advocates of ‘indoor relief’ into prominence. ‘Indoor relief’ meant that beneficiaries became, essentially, inmates, of physical institutions. Here relief was controlled by the institution, not the poor beneficiary. The term inmate, used to describe the inhabitants, reflects their status. If you were poor and in need you went to the almshouse. This included the sick, though few special provisions were made to treat illness in almshouses. Inspired by Benthamite ideals, these reformers advocated the substitution of outdoor relief with institutions that would deter the able-bodied poor from seeking relief, rehabilitate the deserving poor through productive work, and, in the expectations of some reformers, even turn a profit. Administrators of poorhouses went to considerable lengths to enforce the norms of work:

"In 1855 a New York critic of relief praised the success of the Providence, Rhode Island, poorhouse which, he claimed, utilized pauper labor so efficiently that it operated much more cheaply than almost any other urban almshouse. Even if the almshouse managers had no “profitable work”, they set inmates to work at some task, however pointless. During his last visit, he “saw a party of men carrying wood from one corner of the yard to another and piling it there; when it was all removed it was brought back again and piled in the old place”.(Katz 1984: 120)

As Katz (1984) points out, amongst the contradictory goals of poorhouses, harsh deterrence emerged as their primary function. Poorhouses’ ominous reputations made them a fate to be avoided in 19th century America. Yet from the mid-19th century onwards, the institution endured, though specific populations were moving out to specialized institutions. Children went to orphanages, the mentally ill to asylums, and the elderly poor of specific religious denominations to church run shelters for their own members. Large scale hardships such as economic depressions, and the smaller personal calamities which befell poorer families left few recourses but the poorhouse for the rest.


The first community hospitals offered limited medical services, and were not frequented by physicians. They were largely board and care facilities to help the feeble, dependent aged of their respective communities cope with chronic ailments. Dr. William Osler was one of the first physicians to make a regular practice of visiting hospitals, in order to show his students a range of interesting medical cases. In the first decades of the 20th century, the hospital became a site of increasingly intensive medical care, and less a place for the care of chronic old age ailments.

Old Age Homes

Poorhouses persisted well into the 20th century and became largely the abode of the aged poor and sick lacking either the means, family, or religious community support. These institutions were funded and operated by county and municipal governments and the bad reputation they had long since acquired was endemic in the popular mind. ‘Over the hill and to the poorhouse’ for example was a story in Harper’s, which subsequently became a popular song (Haber, 1993, p. 91)

Social Security

The poorhouse endured until the advent of Social Security legislation in the 1930s. People had long advocated for old age pensions. There was an important precedent in the form of Civil War veterans’ pensions, which ultimately became an old age pension and at its height consumed one-third of the U.S. federal government budget. It was the trauma of the Great Depression that once again brought the issue of old age pensions to the forefront, contributing to the passage of the Social Security Act of 1935. Social Security put the benefits into the hands of the beneficiaries, a point of debate before passage, reflecting the older change from ‘outside’ to ‘inside’ relief, revolved around the question: should direct payments be made to poorhouses or to their aged inmates? The decision to make direct income payments to the aged residing in poorhouses led to an exodus from the institutions in favor of private board and care, which had become abundant because of the Depression era need for households to take in boarders to generate income.

Capitalistic Medicine

Medical doctors were among the best organized and most prestigious professions in the newly industrializing United States. Local medical societies exerted a powerful influence over the character in health care in their communities. Above all, doctors fought to maintain a ‘fee for service’ character to their practice of medicine, fiercely resisting the formation of ‘pre-paid’ and other ‘socialistic’ forms of financing health services.

Failures of National Health Insurance

Health insurance emerged in the United States first as a private commodity, not as a means to pool the health risks of the entire population, rich and poor alike. The largest insurance underwriter, Blue Cross, emerged as an answer to a slump in the demand for hospital services during the Great Depression. Formulas for reimbursement favored the provider of health services entirely. Attempts at national health insurance to pool together the entire population have suffered resounding defeats, starting with President Harry Truman’s proposal in 1949 (defeated by the American Medical Association-the principal representative of doctors) to Bill Clinton’s Health Security Act in 1994.

Medicaid and Medicare

After emerging as a private commodity, health insurance became a job benefit for those employed by well-to-do public and private employers. The poor and the aged remained outside the umbrella of this private welfare state. Poor relief, including health care, remained the bailiwick of local governments, and the poorly equipped county hospitals. The legacy of the Great Depression resulted in a more activist federal government, and with the elections of John F. Kennedy and Lyndon Johnson, such notions as the ‘Great Society’ and the ‘War on Poverty’. A rare conjuncture of events led to an extension of Social Security legislation in the form of ‘Medicare’ (hospital insurance for the elderly) and ‘Medicaid’ (insurance for low-income persons and families).

Those Americans with health insurance (about 85%) are grouped into the following categories: the favorably employed, the aged, the poor, and military veterans. The quality of coverage among the groups forms a class hierarchy, with the favorably employed at the top and Medicaid viewed by health providers as the least desirable.

Nursing Homes

The evolution of health services for the poor in America comes full circle in the nursing home. In the United States over 1,500,000 elderly permanently reside in ‘Skilled Nursing Facilities’. They are largely custodial facilities for the poor and chronically sick aged, operated by for-profit corporations. [NOTE: We are talking here about nursing homes for the poor. There are also nicer physical facilities for those who can afford them.] Critics charge nursing homes with creating an inhumane environment for inmates through an over-reliance on psychoactive medications and physical restraints, and an impoverished social support network. Most residents of these institutions are Medicare and Medicaid beneficiaries; however, payment is made through Medicaid (the ‘welfare’ program rather than the entitlement program.). Nursing home care for Medicaid recipients is reimbursed at Spartan levels, leaving few resources for genuine medical services.

Despite the quality of services, Nursing Home care consumes the lion’s share (about one-half) of the health care resources earmarked for the poor, one more indication once again, of America’s priorities in helping the ‘deserving’ poor.

The conflicts between the belief of many that health care is a right, that we shouldn't let people die because of poverty (Christian charity values) and the belief that people should take care of themselves and not become wards of the state (rugged individualism) still play in today's health care debate. So do the other 'stories' mentioned above.

This was an overview for an Asian audience of the evolution of health care for the poor in the United States, from almshouses to nursing homes. The point of the paper overall was to illustrate that approaches to poverty reduction will differ from culture to culture, based on the world views and value systems of each culture. The United States, with a strong belief in the opportunities for and responsibilities of the individual talks about poverty very differently from a culture like India where there is much more focus on the systemic and class structure and how they need to be modified to reduce poverty.

In any case, I think Rashmi's overview, abbreviated as it is, might help some people get a longer term perspective on how we got where we are today and why.



References:

Abbott, Andrew. (1988). The System of Professions: An Essay on the Division of Expert Labor, University of Chicago Press, Chicago, Il.

Haber, Carol. (1993). “’Over the Hill to the Poorhouse’: Rhetoric and Reality of Institutional History of the Aged”, in Societal Impact on Aging: Historical Perspectives, edited by Warner Schaie and Andrew Achenbaum, New York, Springer Publishing Company, pp. 90-113.

Hofstadter, Richard ed. (1968). Ten Major Issues in American Politics, Oxford University Press, New York, NY.

Katz, Michael B. (1984). Poorhouses and the Origin of the Public Old Age Home, Milbank Memorial Fund Quarterly, 62(1): 110-140.

Quincy, Josiah (1821). "Report of the Committee on the Subject of Pauperism and a House of Industry in the Town of Boston." Kress Collection. Baker Library at Harvard, Cambridge, MA.