Historical Research: A Century of Healthcare Battles

A pivotal moment in the health care debate came when the president went before Congress and said this: “Millions of our citizens do not now have a full measure of opportunity to achieve and enjoy good health. Millions do not now have protection or security against the economic effects of sickness. The time has arrived for action to help them attain that opportunity and that protection.”

The time was November 19, 1945, and the president was Harry S. Truman. He was unveiling a health care reform proposal that included, as its controversial centerpiece, a national health insurance plan to be run by the federal government. The idea was that people could choose to get their health insurance from the government instead of through a private insurer. The plan was an early version of what would be known, in the political parlance of 2009, as a “public option.”

The health care contretemps currently playing out in the halls of Congress is the latest episode in a lengthy political conflict that stretches back even decades before Truman’s unsuccessful proposal. It’s a conflict over contrasting visions of the structure of the health care sector of the U.S. economy, generally pitting proponents of a sharply expanded government role against opponents who seek more market-oriented approaches to providing health care.

The stakes involved are vast, with far-reaching implications for the financial well-being of investors as well as the physical well-being of patients. Health care stocks have demonstrated acute sensitivity to the prospects of sweeping restructurings of the sector by government. This was the case both in the early 1990s, during the clash over the Clinton administration proposal spearheaded by then-First Lady Hillary Clinton, and in the recent legislative maneuvering over what has come to be known as Obamacare.

Moreover, health care currently accounts for some 15 percent of gross domestic product, and the strength or weakness of such a sizable slice of the economy will affect the overall investment outlook. In particular, health care has demonstrated a profound capacity to affect government finances, increasingly so since the advent of Medicare in the 1960s. Thus, the prospective effects of current reform efforts on government spending, and on taxes and deficits, will be a major shaper of the investment climate.

The history of health care politics can be sobering. It suggests, for one thing, that government health care programs can cost a great deal of money, possibly much more than their proponents indicated or realized when the programs were proposed. History also shows that the health care sector, traditionally touted as largely recession-proof in that people will continue to purchase its products even in a downturn, can be quite volatile, especially when political debates are afoot that could transform the sector.

Another sobering feature of health care debates over the decades is that they fall into predictable grooves, with reformers often seizing on the same basic idea — a government-run health insurance program — rather than contemplating a broader array of reform possibilities. Meanwhile, opponents often have focused on the downsides of such a government-heavy approach rather than emphasizing alternative reforms to address problems in existing health care arrangements.

In recent years, a number of market-oriented reform proposals have taken shape, such as lowering regulatory hurdles that prevent consumers from buying health insurance across state lines, and revamping tax incentives to facilitate direct purchasing by individuals rather than through employers. However, such proposals have remained relatively marginal to the health care debate, which instead has focused on finding a large-scale, centralized solution to the problem Truman identified, of millions of people not having “protection or security against the economic effects of sickness.”

The Early Decades

Health care reform’s first stirrings as an American political issue came in the 1912 presidential campaign. Theodore Roosevelt, in his losing campaign as nominee of the Progressive or “Bull Moose” Party, called for compulsory health insurance for industrial workers. European nations had been adopting similar mandatory plans, a trend initiated by German Chancellor Otto von Bismarck in 1883.

But the issue gained little traction in the United States. The association with Germany, for one thing, was a negative after World War I broke out; Prudential Insurance executive Frederick Hoffman called health insurance mandates a “German plot.” Labor leader Samuel Gompers was suspicious as well, preferring that workers get their coverage through union contracts rather than from any government requirement.

The conservative Republican presidents of the 1920s showed little desire to expand government’s role in health care. Meanwhile, American doctors were starting to worry that European-style health systems meant less income and less freedom for physicians. The American Medical Association, which had shown some amenability to government mandates during the Progressive Era, now emerged as a leading opponent.

In the Depression-struck 1930s, the New Dealers took new interest in restructuring the health care sector, and reform ideas increasingly moved beyond mandates and into the realm of publicly funded health insurance and services. But “socialized medicine” was gaining currency as a term that could rally opponents, and Franklin D. Roosevelt’s administration left any major health care push out of its Social Security legislation so as to avoid a fight that could damage the nascent program.

In 1939, Senator Robert Wagner of New York introduced national health insurance legislation, and during World War II that approach became the subject of an annual congressional push co-sponsored by Sen. James Murray of Montana and Rep. John Dingell Sr. of Michigan. FDR may have intended to press for such legislation in his fourth term, but his death in April 1945 left health care as an issue for his successor.

Truman’s health care proposals, launched seven months later, drew heavily on ideas developed during the Roosevelt years, and came to Congress as a Social Security expansion bill co-sponsored by Wagner, Murray and Dingell. Organized labor, unlike in the Gompers days, was now firmly on the side of national health insurance, but had lost much public support after a series of unpopular strikes.

When Republicans gained a majority of both houses of Congress in the 1946 elections, Truman’s health care reforms stalled. Soon, the president was lambasting the “do-nothing” Republican Congress for not passing national health insurance. Truman won the 1948 election, and Democrats regained majorities in Congress. However, it turned out that conservative southern Democrats were unenthused about Truman’s health care agenda, and the whole issue went to the back burner, where it stayed for a decade and a half.