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Health Insurance—The Next Step

Dorthea Lange/Getty

One of the gravest problems confronting wage-earners at all times is illness. For centuries workers sought protection against sickness and its concomitant wage losses through the medieval guilds, the trade unions and a variety of mutual-aid societies. In the modern era the risk of illness is met throughout the industrial world by social insurance. The contingency of sickness lends itself most easily to this technique. Its extent and duration are readily ascertained. Its costs can be calculated fairly accurately. It does not require large reserves. Its benefits become effective upon the mere budgeting and distributing of the present costs.

In the United States illness remains to this day the most neglected of all the major industrial risks, although two decades ago, when many state commissions were reporting on the subject and standard bills were being discussed in many state legislatures, it seemed that health insurance would follow on the heels of workmen's compensation laws. The issue is ignored even by the Social Security Act. Faced with the bitter opposition of organized vested interests—the medical and allied professions and the insurance companies—the aims of health insurance are today less known and less popular than they were twenty years ago. 

Every passing year, however, makes the need for health insurance more urgent. Each new investigation reveals the crying need for remedial action. In normal times sickness constitutes the chief cause of dependency. From 2,500,000 to 3,000,000 persons are ill in the United States every day. With the highest proportion of doctors to population in the world, millions of Americans have to resort to public medical charity or go without care because they cannot meet the cost of illness. Illness strikes suddenly and unexpectedly. Its incidence is not uniformly distributed. While some people escape it or suffer only a short time, others are seriously ill for such a long time that heavy individual as well as social burdens are created. Illness is especially hard on the groups with the lowest incomes, who are most subject to it and can least afford its cost.

It is not possible in this short article to cite the many facts establishing the close relation of illness and poverty. The consensus of all studies is that the incidence and severity of illness are nearly twice as great among the lowest income receivers as for the better-paid groups. A recent study, for instance, showed that families with an annual income of less than $250 per capita suffered 35 percent more disabling illnesses and 47 percent more sicknesses necessitating confinement in bed than those having yearly resources of $425 and over per capita. Studies of the changes in health from 1930 to 1932 among unemployed families in New York's lower East Side showed the number of ill almost doubled and trebled among children.

Indeed, it has long been established that workers not only suffer higher morbidity but also pay with shorter lives. The higher infant mortality rate in the lower income strata was revealed by a survey of five cities made by the United States Children's Bureau in 1912-1914, which disclosed that the infant death rate was 49.2 per 1,000 live births in families where the father's annual earnings were $1,250 and over, as against 179.3, or almost four times as much, in families whose annual earnings were under $450. As stated by the late Dr. I. M. Rubinow, there are few generalizations so scientifically accurate as the proposition: "Poverty causes ill health; ill health causes poverty." 

Caught between two millstones—loss of wages and unbearably heavy sickness costs—the sick American wage-earner first tries to get along with as little medical care as possible. When this can no longer be done his alternative is private or public charitable medical relief. A compilation of sickness surveys in twelve communities in the United States, made by Dr. Michael M. Davis, disclosed that from 25 to 30 percent of the relatively serious cases of sickness had no physician's care. In the rich city of Rochester, New York, 39 percent of the persons suffering from disabling illness had no doctor in attendance. The Committee on the Cost of Medical Care concluded: "Each year nearly one-half of the individuals in the lowest income group receive no professional medical care or dental attention of any kind, curative or preventive." 

When medical care can no longer be postponed, self-respecting wage-earners are forced to resort to charity. The fact that large numbers in the poorer classes receive free medical care is too well known to require further backing here. What is significant is the fact that despite the inadequate care they receive and the enormous medical charity, workers still pay a larger proportion of their wages for medical services than persons in the upper income groups. The Committee on the Cost of Medical Care showed that while the group with the highest income pays only 3.7 percent of its income for medical care, the $1,200-$2,000 income group pays 4.3 percent, and the lowest income group 5.9 percent of its earnings for the same purpose. In other words, the very poor, presumably beneficiaries of unlimited free medical service, actually pay nearly 60 percent more for medical service in proportion to their incomes than the few who have the costliest specialists at their beck and call. 

This situation is socially disastrous all around. It is as deleterious to the public health as to the doctors, dentists, hospitals, druggists and nurses. Medical practice today permits the existence of millions of remediable physical and mental defects and the occurrence of millions of cases of preventable diseases. The late Edgar Sydenstricker, a leading authority in the field, recently pointed out:

Although we are accustomed to boast of achievements in medicine and public health as having lowered mortality among infants, children and younger adults, the death rate among adults of middle and old age has not appreciably diminished in the past fifty years…. Even the mortality among mothers and infants in a large class of the population of the United States is still far above that in some other countries…. Four persons in every five obtain no dental care; less than seven percent of the population have even a partial physical examination, and less than five percent are immunized against some diseases…. Increased mortality rates, especially from tuberculosis and among infants, and more malnutrition among school children are already appearing in some areas and in some groups of the population. 

A similar indictment was made a few months ago by the Surgeon General of the United States, Thomas Parran Jr., who shocked the nation with the extent and the devastating effects of venereal diseases in the United States, placing us among the worst countries in the world. 

The medical practitioners suffer from these chaotic conditions because the burden of medical charity falls almost entirely upon them. By tradition and humanity physicians are forced to donate free service to individuals, hospitals and clinics. Their charity is not only disproportionate to their incomes, especially among those catering to the poorer sections of our cities, but makes these incomes still lower. Even in 1929 one-third of all private practitioners had net incomes below $2,500. In 1933 a study of some 2,000 California physicians revealed that one-third earned less than $2,000 net that year. One-half had net incomes below $3,000 and three-fourths below $5,000. One-third of the California dentists earned less than $2,000 net, two-thirds less than $3,000 and three-fourths less than $4,000. 

The doctor's dilemma is indeed perplexing today. In order to increase his income he strives to become a specialist. Competing for a livelihood he must maintain an office full of impressive and expensive apparatus which he may use only on the rarest occasions. Studies of physicians' overhead expenses place them at nearly 50 percent of gross earnings. The high overhead transferred to patients' fees means that more people go without adequate care while thousands of practitioners sit idly waiting for patients. It has been estimated that physicians arc idle between one-third and one-half of their working time. 

Indeed, no group rendering medical services is immune. The difficulties of private hospitals are well known. With one-third of their beds empty, they must constantly appeal to charity. The apothecary's art has disappeared. Fortunately for him, he has been saved by the soda fountain and lunch counter. A pharmacist today compounds about 1,200 prescriptions per year on the average, although he could prepare ten times this number. Nurses face even greater difficulties. They have been particularly hard hit during the depression since, though the demand for their services declined, their numbers continued to increase because the hospitals needed cheap labor. A study in New York State in 1932 showed that the private-duty nurse earned a yearly gross income of $478.80. Thousands of nurses have had to go on relief rolls. 

The modern medical paradox of illness unattended amidst thousands of idle doctors, empty hospital beds and idle nurses, parallels our industrial paradox—starvation in the midst of plenty. Richly endowed with the highest quality of medical service, we are among the outstanding nations in physical plant and equipment, in the thoroughness of medical education and in medical research. Nearly 1,100,000 persons in the United States devote all or a large part of their time to medical service. We have nearly 7,000 hospitals, 132,000 pharmacists and an ample supply of nurses. Nor do we lack the means to pay for adequate medical care. The American people actually spend every year about $3,500,000,000 for medical services, a sum sufficient to purchase reasonably adequate and proper care for all who need it. 

The problem arises from the fact that despite great medical discoveries and new techniques, the practice of medical care in the United States remains as individualistic as it was centuries ago. Since, however, the bulk of our population today depends on wages for a living, few workers even in the best of times can save from their meager earnings for the many costly emergencies. When illness strikes a wage-earner, his wages—the very means of his livelihood—are cut off. Under these conditions it is not possible for him individually to provide for his family and also pay expensive medical bills. All authorities agree that by proper budgeting and distribution the present total expenditures on medical services would suffice to provide ample care for all. The practicable and feasible modern method of accomplishing this, without undue interference with present-day medical practices, is by health insurance. 

Since our problem is chiefly that of the illness of the wage-earner, the health-insurance program must concern itself largely with the workers. Not only must the wage-earner be insured against the costs of medical care, but of even greater importance to him is the continuation of his wages when ill. The many years of experience abroad enable America today to work out the best and most practicable system of health insurance. The main principles of such a program are as follows: 

  1.  Like other social-insurance programs, health insurance must be on a compulsory basis. Voluntary insurance has met with universal failure. The recently growing number of voluntary insurance schemes in the United States will not meet the problem. European countries found that those most in need of this protection either cannot or will not insure and were forced to replace their voluntary schemes with obligatory systems. 
  2. Since all studies indicate that persons earning less than $3,000 per year cannot budget for illness, these workers should be included in the scheme. Protection should also be extended to the existing unemployed through arrangements by the relief and insurance authorities. Those earning between $3,000 and $6,000 annually should be permitted to enter the system voluntarily. 
  3. The plan must provide for cash benefits as well as for medical care. To confine the system to medical benefits is to ignore the major economic problem and to hamper recovery from illness. Cash benefits should be paid the insured for about twenty-six weeks after an insurance period of three months find a waiting period of five days of illness. In the beginning the benefits might be limited to $15 a week with additional allowances for dependents. The medical benefits should be extended not only to the insured but to his dependents. Without such provision, the worker's protection would not be complete, since the cost of health services for his family is almost as crushing. The medical benefits must begin immediately upon entrance into the insurance system and continue as long as necessary. They must include indispensable surgical and hospital services as well as essential dental care. If inability to work results, all benefits may cease after twenty-six weeks, when invalidity benefits should be provided either through the health or old-age insurance systems. The law should also provide for maternity benefits. These should include cash benefits for a short period before and after childbirth, all necessary medical care and a small cash bonus to help defray the costs of childbirth.
  4. While both medical and cash benefits must be linked in the same system, the determination of the right to cash benefits may be placed with full-time public officials rather than with the doctor who treats the insured person. The cooperation of the state, employers, insured, and health professions may be obtained by giving them effective representation and control in the administration. Representative councils may be set up in each locality with power to make agreements for the remuneration of the health professions, according to the method preferred by the physicians themselves, which need not be the same everywhere. 
  5. Present estimates indicate that a fairly adequate system of health insurance would require about six percent of wages, which, on average weekly wages of $25, would be $1.50 per worker. Of this sum three-fourths is necessary for the medical care and the remainder for the cash benefits. The $1.50 contribution may be divided as follows: Employers would pay 88 cents weekly for their employees receiving wages under $20 a week, 63 cents weekly for those earning between $20 and $40 a week, and 38 cents weekly for those whose wages exceed $40. Since a social measure should encourage the payment of higher wages, it is socially sound to arrange the employer's contribution in inverse proportion to the wages of the worker. The employee rates would be as follows; Those earning under $20 weekly would pay only 25 cents a week; those receiving between $20 and $40 a week would pay 50 cents weekly; while those with incomes above $40 a week would pay 75 cents weekly. The federal government would pay into the fund an amount equal to 38 cents for each insured worker. 

The employers’ contributions are not only just but will benefit them greatly. Excessive illness of lower-paid workers is due largely to insufficient wages. Industry, responsible for the maintenance of plant and machinery, must also be accountable for the worker's welfare which is even more vital to efficient production. Moreover, improvement in the worker's health means reduced labor turnover and greater efficiency. The employees' contributions are justified because they and their families are the chief beneficiaries of this insurance. They are now paying considerably more without receiving corresponding benefits. With the state already defraying much of the cost of sickness, government contributions to health insurance are not only natural but may represent a saving on present outlays for crime and indigency, and make for a more equitable distribution of costs. 

The perennial objections of the American Medical Association to health insurance have long been at variance with the facts. Under compulsory insurance, they contend, free choice is denied to both patient and doctor, the personal relationship is destroyed and the initiative of medical practitioners endangered. These objections are silly and unfounded. Compulsory insurance everywhere permits the free choice of doctors by the patients, and vice versa. In fact, it allows a wider choice, since all qualified doctors are permitted to join the insurance system. The personal-relationship factor is exaggerated. No system of medical care could be more impersonal than the present clinics and charity wards to which the poor are driven. The fear that medical practitioners may lose their initiative under an adequate system of compensation is similarly absurd. Assurance of income, regular hours and better opportunity for post-graduate research will stimulate rather than weaken present initiative. Group practice and close association with colleagues are bound to foster the development of medical science. Health insurance in the United States, as in all other countries, would not only provide protection against the hazards of illness for the mass of wage and salary-earning population, but would also immeasurably benefit the medical profession by bringing to it a class of paying patients not in existence today.