The AMA faces down FDR and wins.

There are two types of change that can occur via federal health care legislation: expansion in access and cost containment. Without passing judgment on the advisability of legislative change, I will argue that federal legislation is unlikely to occur unless both the executive and the legislative branches of government are controlled by the Democratic party. I am not suggesting that the change is necessarily an "improvement," only that Democratic Party control is necessary, particularly as the change pertains to access.

Although both the executive and the legislative branches of government were controlled by Democrats during the Carter and FDR presidencies, little occurred in the way of changes in our health care system. At least during the Carter administration, political compromise within the Democratic party was not possible. While no legislative change involving massive governmental intervention occurred during the FDR period, several developments increased access, albeit for a brief period, and may have important lessons for today's political debate.

The failure to enact health reform during the FDR era is particularly striking in light of the fact that the Committee on the Costs of Medical Care issued its landmark reports at the very beginning of the FDR administration.[1] Yet FDR did not actively press for national health reform. Most important, FDR correctly perceived that popular support for national health reform was not as important issue an issue in the public's mind as, for example, economic sustenance. There was, as yet, no tradition of voluntary health insurance in the United States. Thus, while many felt the lack of coverage, most Americans had never had health insurance coverage. This lack of an understanding of the usefulness of health insurance, together with the virulent opposition of the American Medical Association, provided FDR's acute political antennae with the information necessary to encourage him to stay away from the national health reform issue.

Despite this lack of public support, numerous efforts to stimulate public interest in national health reform did occur. They included conferences held at the federal level, such as the National Health Care Conference of 1938, and numerous local and state efforts to encourage the development of health reform both at an organizational and legislative level. In addition, the FDR period did, for a brief period, provide health care coverage that not only provided access but provided it in an innovative manner. These programs, sponsored by the Farm Security Administration (FSA) and the Federal Emergency Relief Agency (FERA), at their height covered more than a million people. The positive role played in these efforts by local medical societies may be relevant today as the medical profession struggles to identify and pursue an appropriate role for physicians in national health reform.

The American Medical Association (AMA) supported the FSA and FERA programs because they recognized the preeminence of organized medicine. The AMA flexed its considerable political muscle throughout the FDR period in an effort to preserve its monopolistic position. In the words of James J Means, MD, in his presidential address before the American College of Physicians in 1938: "The behavior of the AMA is political. It is partisan behavior. It champions a cause. At the present time the cause is something close to standpatism."[2]

The AMA attempted to achieve its goals via simultaneous action on two principal fronts. From an organization of medical practice perspective, the AMA sought to shut down nascent efforts at prepaid group practice. The 1930s witnessed a virtual explosion of alternative financing arrangements for health services. While Blue Cross and Blue Shield are the most important movements that began in the '30s, numerous other more localized efforts occurred. They began largely in response to the void created by the absence of federal involvement in health care financing. The second principal area of AMA involvement was purely political and occurred at all levels of government. Underlining the policy was an absolute fear of government involvement in the private practice of medicine. In the short term, the AMA was successful in this effort. The long-term results of this approach may not have been what AMA leaders of the FDR era anticipated.

FDR's First Years in Office

Much of the significant federal social legislation was enacted in the first few years of FDR's presidency. This was organizationally executed via a Cabinet-level Committee on Economic Security (CES) headed by Harry Hopkins, FDR's intimate advisor, and Frances Perkins, the Secretary of Labor. They were assisted in this work by several academicians from the University of Wisconsin who had a keen political sense, notably Arthur Altmeyer and Wilbur Cohen. While many within the CES hoped that health insurance would be included in the final Social Security bill, this did not occur, primarily because of opposition from the AMA. This opposition was expressed indirectly via Dr. Harvey Cushing, the world renown endocrinologist from Harvard Medical School who used his family ties to FDR with good effect. In addition, AMA lobbyists were indefatigable, both in person and via the sharp-witted pen of Dr. Morris Fishbein, editor of JAMA and bete noire of the compulsory health insurance movement. Dr. Fishbein was able to equate any health insurance with "socialism, communism, inciting to revolution."[3] As Wilbur Cohen attested in an interview shortly before his death: "Fishbein's characterization of health insurance, whether voluntary or public, served to set the dominant ideological and controversial note for some 23 years...."4 Figure 1, right, represents an optimistic, perhaps naive, conception of the perspective of physicians during the FDR era.

After much debate, the Committee on Economic Security, in 1935, issued a health insurance statement, purportedly representing the administration's position (see figure 2, page 5). Although no legislation emerged, several philosophical premises undergirding this statement are worthy of note. First is the complete deference to the medical profession on all issues pertaining to management of physicians. There is also an emphasis on the need to integrate health insurance with cash benefits. This split still has not been resolved. Last, the statement emphasizes the important role of the states in the implementation of any comprehensive health program.

Figure 3, page 6, provides the AMA's response to the CES. It is difficult to believe today that the AMA could adopt such a reactionary position not just on the role of the medical profession but also on the need to separate cash payments from medical services. The AMA fought not only against compulsory medical insurance but also against any physicians who organized alternative systems of health care delivery. The AMA organized many boycotts of physicians who participated in any of these arrangements. AMA actions had the initial effect of stifling physician involvement. However, organizations such as the consumer-run Group Health Cooperative of Puget Sound, Seattle, Wash., and the Cooperative Health Physicians of Elk City, Okla., filed countersuits and, by the early 1940s, the AMA was convicted of restraint of trade.

Even with these convictions, the AMA continued to block any national health reform legislation during the FDR era. The opposition of the AMA proved too much for the fundamentally cautious president. "There is also the problem of economic loss due to sickness--a very serious matter for many families with and without incomes, and therefore an unfair burden upon the medical profession. Whether we come to this form of insurance soon or later on, I am confident that we can devise a system which will enhance and not hinder the remarkable progress which has been made and is being made in the practice of the professions of medicine and surgery in the U.S.[5]

FDR attempted to placate advocates of compulsory health insurance by establishing, under Altmeyer's direction, an Interdepartmental Committee on Health to study health insurance and the role of government. Both Wilbur Cohen and I.S. Falk, Director of Research under the Committee on the Costs of Medical Care, played important roles in this committee. The Interdepartmental Committee's main accomplishment was the National Health Conference held in 1938.

National Health Conference of 1938

The official federal health program was presented before the National Health Conference held in Washington in January 1938. The main recommendations of the conference,which included professionals on all sides of the national health reform issue, are outlined in figure 4, page 7. The importance of state involvement is clearly articulated. The recommendations again emphasize the primacy of the medical profession in the control of issues directly affecting the practice of medicine. Federal involvement in health care financing was to be examined, but it was by no means unequivocally endorsed.

Despite its major billing, the National Health Conference, the most vsible-effort- during-the FDR era to initiate legislative interest in national heath reform, accomplished very little. However, several other initiatives were undertaken that merit extensive discussion, even if, as is likely, President Roosevelt was unaware of their policy implications.

FDR's Programmatic Initiatives in Health Care Delivery

It is hard to imagine the economic situation that afflicted the United States in the early 1930s. The depression prompted FDR to enact several shortlived programs that represented the government's first intrusion into everyday medical practice. The most significant of these was the home medical care program developed for "relief clients" by FERA. This program lasted from 1933 to 1935. Beginning in 1935, a completely different program was established under FSA in which subsidies were provided to low-income farm families to purchase health care under county prepayment plans. Amazingly, the program was developed with the support of physicians involved in the program. "Arrangements were made through local medical societies for physicians to accept their services on a prorated basis as much money as was available in the fund, which on the average represented about 70 percent of their fees. Similar plans were worked out for dental service, for hospitalization, and for prescribed drugs.[6] The programs funded by FERA and FSA worked within two critical constraints favored, if not specified, by the AMA:

* Grants were provided not via the federal government, or even the states, but rather to local communities.

* Funds were provided to pay physicians for acute illnesses on a private, fee-for-service basis.

At the programs' height, there were more than 1,000 plans covering approximately 1,000,000 subscribers operating in 41 states. There was open choice of physicians (picked from a list provided by the county medical society). Subscribers were initially "borrowers" from the FSA programs. Eventually, because of the popularity of the programs, many nonborrowers joined in. While physicians were represented by the county medical society, subscribers were represented by a board of borrower-directors. Medical services included all primary care services and emergency surgical care. Most plans included hospitalization and dental service. Health education programs existed in virtually every program. Annual charges were $15$35 per family depending on income. The charges were included as part of the FSA loan, which had to be repaid.

Building on the popularity of these programs, the Department of Agriculture's Interbureau Coordinating Committee on Post-War Programs in 1942 developed six rural health associations, with membership available to all farmers. Similar to the FSA programs, these health associations of farmers were responsible for administration of the programs while the local county medical society had control over medical matters. Each family paid up to six per cent of net cash income up to an annual maximum of approximately $50. Several of the plans paid physicians on a capitated basis. One of them allocated the formula as follows: physicians ($17); surgeons-specialists ($6); hospitalization ($10); drugs($4); dentists ($6); and nurses ($3). In addition to sponsoring these plans, the FSA worked with county medical societies in California, New Jersey, Oregon, Washington, and Buffalo, N.Y., in expanding access to health care for the general population, but with a specific focus on farm families.[7]

In light of the dramatic rise in the number of physicians interested in management over the past 10 years, the active participation of county medical societies in these programs is interesting. The physician liaison with the local FSA plan was unequivocally a representative of the county medical society. A possible contemporary example of the type of relationship found in the FSA programs is the Kaiser Foundation Health Plan Model, in which distinctive medical and administrative components coexist to provide medical care services.

The services provided under the FSA plans are also noteworthy, particularly the explicit provision of health education services. This type of integration into the area of prevention is virtually unknown today, even in most managed care plans. FSA pricing policy, detailed earlier, explicitly acknowledged the nursing profession in the calculation of the capitation rate. This approach represents a much clearer acknowledgement of the role of nursing than even today's research attempts at quantifying nursing input into health care services.[8] The administrative capitation rate quoted from the plan above ($3, or 6 percent) is much more efficient than that of any managed care plan operating today in the United States. In fact, it rivals the much-maligned expense ratio of the Medicare program, which spends only a few cents on the dollar on administrative expenses.

A contemporary observer of the relevance of the FSA plans said, "From the viewpoint of urban communities, perhaps the principal point of interest in FSA achievements in this field is the satisfaction registered by the physicians directly concerned and by organized medicine in general. Any open-panel plan must have the approval of physicians as a basic element of success. The FSA plans have been cleared through state and local county societies in all communities where operated. Federal funds and initiative, working with consumer groups and medical representatives, have produced a voluntary medical insurance movement of considerable scope and potentiality. A new precedent has been established. Urban communities might well profit from an analysis of its implications."[9]

These programs were short-lived. Advocates of compulsory health insurance, encouraged by the National Health Conference of 1938, prompted FDR to submit a health message in 1939 that suggested that a comprehensive and compulsory health insurance legislation would be introduced. Figure 5, page 8, expresses the hopes of those who expected FDR to actively push for national health reform. The frustrations on the part of those advocating national health reform is amply documented in this excellent review of the "failures" of FDR to enact NHR. "Our readers will recall the President's pledge, in June 1934, of a rounded program including the various types of social insurance which he declared to be 'inter-related' and 'a minimum of the promise that we can offer to the American people.' They will recall the announcement by the President's Committee on Economic Security in January 1935 that its report on health insurance, although temporarily delayed, would be made at an early date. They will recall also the creation of a new study committee by the President in August 1935, the three years of official investigation that followed, the voluminous reports that resulted, and the inspiring National Health Conference held under Administration auspices in July 1938. They will recall that all of this had been preceded by a five-year, half-million dollar study of the costs of medical care under private auspices....Our readers will recall also the President's special message to Congress in January 1939 transmitting the National Health Program."[10]

FDR never did introduce a comprehensive health reform package. Instead, the administration submitted a bill that encouraged the states to engage in "experiments in health reform" and recommended expenditures for hospital construction. The latter recommendations eventually was enacted into law in the Truman administration as the Hill-Burton Act.

With administrative action setting in, advocates of national health reform looked to Congress. Senator Robert Wagner of New York submitted a comprehensive national health reform bill (S. 1620) that paved the way for a national debate on health reform that culminated in President Truman's effort to enact NHR. President Truman's biggest disappointment of his administration, his inability to pass NHR, will be analyzed in the next article in this series.

Conclusion

Despite the lack of commitment to significant change in our health care system, the FDR period is notable for several important advances in national health reform. Going as far back as pre-Revolutionary War America, virtually the only support for primary care services to the poor in the United States came via local government in the form of either payments to private physicians or the hiring of a nurse or part-time physician within the local public health department. While short-lived, the FSA and FERA programs represent a significant advance in federal government involvement in health care financing and administration.

Of greatest relevance may be the involvement of county medical societies in the administration of the program. Clearly, the same type of operation should and could not be replicated in today's environment. However, there remains a need for an effective organization that represents the individual desires of physicians. Physicians, and I would also argue our health care system, would benefit from a policy process that organizationally ties physicians together who work in widely disparate health care institutions. Such input already occurs in several industrialized countries that have national health policies and institutionalized physician input at both a national and a local level. With such an approach, physicians become de facto partners and participants in national health policy.

The AMA battles with advocates of NHR during the FDR era may have garnered physicians a Pyrrhic victory. Unfortunately, the AMA and its constituent physician members may have lost the war. Physicians in the United States may end up with the worst of both worlds: government/private managed care intervention without any significant organized physician input into the implementation of these programs. The FDR era provides an opportunity to begin to understand several ways in which physicians could be systematically involved in organizational reform.[11]

References

1. Goldfield, N. "The High Point of Efforts to Improve Access to Health Care by 'Documentation.'" Physician Executive 18(6):12-17, Nov.-Dec. 1992.

2. James J. Means, MD. Presidential Address, American College of Physicians, Philadelphia, Pa., 1938.

3. Fishbein, M. "The Committee on the Costs of Medical Care." JAMA 99(23): 1950-4, Dec. 3, 1932.

4. Cohen, W. Oral History Project of the American Hospital Association, Chicago, Ill., p. 16.

5. Franklin Delano Roosevelt. Quoted in Roemer, M., "Government's Role in American Medicine," Milbank Memorial Quarterly, Vol. 42, p. 549, 1938.

6. Avnet, H. Voluntary Medical Insurance in the United States: Major Trends and Current Problems, Medical Administration Services, Inc., 1944, p. 60-1.

7. Ibid., p. 61.

8. Ibid., p. 62.

9. Ibid., p, 61.

10. Quoted in "Pledged Action on Health Bill Endangered by Delays." American Labor Legislation Review, 1938, p. 157.