Printer Friendly

The paradoxes of national health reform during the Wilson era.

The enactment of legislation resulting in significant health care reform has occurred under one of two circumstances. Lyndon Johnson's landslide victory in 1964 provided the massive legislative margin needed to enact Medicare.

Such lopsided advantages in favor of substantive action are unique in American history and typically occur with respect to issues pertaining to war, such as the Gulf of Tonkin resolution supporting America's entry into the Vietnam war. In the second, more typical, political circumstance there is a relatively even balance in Congress between liberal and conservative perspectives. In this situation, change in the health care system, notably in the area of access to health services, has been legislated for specific segments of the population that have organized themselves into interest groups. The End Stage Renal Disease (ESRD) program is an example of legislation directed at a specific issue.

Substantive national health reform was strongly considered at several points in the 20th Century. While ironies and missed opportunities abound in all failed NHR efforts, the critical ingredient is a failure to compromise between two groups espousing widely divergent approaches. This inability to compromise occurred during the Nixon, Truman, and Wilson eras, the periods in American history when NHR came close to enactment. It is ironic that newspaper accounts of current NHR efforts are already predicting defeat for NHR exactly for this reason. In a recent article entitled "Health Care Reform: Examining the Political Realities," published in the Los Angeles Times, the reporter concluded: "Because the Bush administration proposals are so different than the Democratic plans, there is virtually no expectation that any major reforms will be enacted this year-- and a senior White House official traveling with the President...conceded as much."(1)

Compromise is difficult to achieve because the opposing sides tend to be very committed to the specifics of the legislative program they are espousing. This identification with the specifics, not just the direction, of NHR preempts significant compromise on the part of the principal advocates and authors of the legislation.

The lack of compromise continued until the mid-1960s when Wilbur Cohen, a prime mover of NHR efforts beginning in the 1930s, realized that NHR for the entire population was politically impossible and settled for senior citizen coverage. Even this compromise, resulting in the passage of Medicare (and Medicaid, as an afterthought) would not have occurred without the massive Johnson win in 1964. An ability to compromise was certainly not present in the early 20th Century. It remains to be seen whether a consensus can be built today.

In light of today's discussion over the difficulty in obtaining health insurance, an examination of the NHR debate during the Wilson era is particularly instructive, as few Americans were covered by any form of health insurance during this period. The health insurance industry hardly existed in the early 20th Century. It is therefore all the more remarkable that NHR was not successful. However, opposition offered by the insurance industry constituted a critical deciding factor in the ultimate demise of NHR during the Wilson era.

Americans inclined to consider national health reform in the early 20th Century had two Western European models to emulate: Great Britain and Germany. In 1871, Germany, led by Chancellor Bismarck, became the first country to enact national health reform. It is ironic that both Medical Economics and the New England Journal of Medicine in 1992 published articles on the relevance of the German health system for health care change in the United States. In contrast with the current fascination with the German system on the part of certain American health experts, enthusias. tic accounts of the success of the German health system during the earlier effort to enact NHR became an albatross after the United States entered World War I on the side of the Allies.

Health Insurance in the Early Twentieth Century While, overall, a very small percentage of Americans were covered by health insurance in the earlier time, there were pockets of extensive coverage, largely restricted to specific industries or to fraternal associations that covered employees or members. For example, the first health maintenance organizations, dating back to the 1860s, were for railroad employees.

While unusual, there were health insurance programs directed at the general population. The advertisement in figure 1, below, from a Kansas City newspaper sought enrollees for a prepaid health plan very similar to today's health insurance. Subsequent diminishing value of the dollar, improvements in medical care, and, particularly, health care cost inflation explains how the National Health Foundation could cover all health services for a family of four for $3.25 per month.

Shape of National Health Reform Legislation

The debate on health insurance reform today is strictly limited to services under the rubric of personal health care. This was not the case in the efforts to enact NHR during the Wilson era. The proposals then included many aspects of preventive and work-related care for the individual, which experts at the time felt should be part of any health insurance package. NHR advocates believed that benefits should include disability, coverage that has been split from health insurance over the past half century of piecemeal legislation and benefits.

After the passage of worker's compensation legislation in 1908, many of the same proponents worked together to develop NHR legislation modeled after many of the benefits available in Great Britain and Germany. The proposed legislation, entitled the Standard Bill, was finalized in 1915. Its salient features, as proposed by the American Association for Labor Legislation (AALL), were:

* Insurance was compulsory for every employed person earning $1,200 per year or less.

* Employees, employers, and the states were each to contribute to a fund that was to cover the cost of sickness insurance.

* Cash disability benefits were to be included after the fourth day of illness. In this circumstance, twothirds of the weekly wage was to be paid--a remarkably generous package, considering today's disability policies.

* All medical expenses, including maternity costs, up to 26 weeks in any one

year were covered.

* Funeral benefits, up to $50 were covered. As will be seen below, the insistence on the part of NHR advocates that this provision be maintained in the legislation became one of the principal stumbling blocks to enactment of NHR.(2)


Initially, many diverse organizations, ranging from the National Association of Manufacturers (NAY[) and to the American Medical Association, were supportive of NHR. While it eventually strongly opposed health care legislation, initial NAM support largely derived from the recent passage of laws providing for worker's compensation. In a 1914 report to NAM, Frederick C. Schwedtman, the staff person examining "sickness insurance," as it was then called, exhorted NAM to examine this issue in a positive light: "For five years, each and every member of your Committee has worked faithfully and strenuously to the end of making our organization the most enlightened and the most powerful factor in the United States for practical, constructive Industrial Betterment....I give it as my opinion that Sickness Insurance of some kind, with Compulsory contribution on the part of employers, will be enacted into law by many States of the Union within the next five years and that now is the time to go into this subject thoroughly and carry on an educational campaign such as we have been carrying on in connection with Workmen's Compensation Insurance and Accident Prevention."(3)

Among the most interesting support on behalf of NHR was that from professionals working within the Public Health Service (PHS), located at the time within the Department of the Treasury. These PHS officials viewed NHR as a vehicle that would integrate public health, worker's compensation, disability, and sickness insurance. While these programs are currently separate and disjointed, they had, with the exception of worker's compensation, not yet been legislatively enacted. Public health experts in the early 20th Century viewed the absence of health and disability insurance as an opportunity to integrate these programs into a unitary program.

This historical perspective is an important one to emphasize, especially considering recent efforts on the part of several states to reintegrate several of these benefits into one seamless package. This has occurred as worker's compensation costs have skyrocketed and the administration of these benefits has become complicated by efforts to pass claims back and forth between worker's compensation and traditional health insurance.

B.S. Warren, MD, a senior PHS official who reported to the U.S. Surgeon General, outlined the aspirations of many public health officials in the early 20th Century. He hoped to integrate public health with routine medical care by placing public health agencies into the role of arbiter of how government funds for all health services would be spent locally. "There is reason to believe that the enactment of health insurance laws will constitute the next important step in social legislation. Further investigation and consideration of all experience in the operations of existing forms of health insurance should be made in order to work out the best method of linking up any proposed health insurance laws with existing health agencies....Health officials should realize, now, the necessity for correlating the administration of the medical benefits of any proposed health insurance system with existing health agencies. If health departments are at present inefficient, they should be strengthened and made adequate to meet all demands."(4)

This aspiration, though never realized in the United States, brought to mind my first job as director of a health center for the County of Los Angeles. In this work, I was responsible for integrating public health services for the entire catchment area, together with ambulatory services for those who could not afford private coverage. During the 1920s, before the era of voluntary health insurance, Los Angeles County provided this integrated type of service for all residents. For obvious political reasons, the American Medical Association insisted on separation between curative and preventive services. This political drive was supported by the increased scientific basis of curative medicine, which began in earnest with the Flexner report in 1908, the same year that worker's compensation legislation was passed. Despite the inexorable separation between public health and scientific or curarive medicine, public health advocates in the early 20th Century still hoped that such an integration could be achieved on a nationwide basis.

Not all public health officials believed that either the public or the AMA would favor an integrated approach to NHR. Public health officials both within and outside the government were much more politically sangtune than Dr. Warren. Two consecutive Surgeon Generals of the Public Health Service correctly assessed from a political point of view the dangerous shoals that Dr. Warren was sailing in. Rupert Blue, MD, then Surgeon General, strictly limited Dr. Warren's initial forays into the study of health insurance with this response to a 1915 request by Dr. Warren for funds to study health insurance: "Approved for the carrying out of the studies outlined with the understanding that they shah be confined to the purely public health aspects of the subject."(5) J.W. Kinney, MD, the next Surgeon General, revealed his political astuteness on the question of NHR: "It would in my opinion be inadvisable for the Bureau and the Department to advocate any particular measure for health insurance at this time, for it must be remembered that neither organized capital nor organized labor are at present wholly sympathetic with the movement."(6)

Dr. Kinney did not mention organized medicine as one of the opponents of NHR efforts. In fact, several AMA executives, including I.M. Rubinow, MD, a socialist physician working for the insurance industry, and, E.A. Lambert, MD, an independently wealthy east coast physician, assisted the AALL in the development of the "standard bill." In fact, for several years during the Wilson administration, the Journal of the American Medical Association reflected the perspectives of the AMA executive staff in favor of NHR. Lambert, the AMA's executive vice president, expounded forcefully on the need for NHR as a follow-up to the recently passed worker's compensation legislation and to the recently enacted National Health Service in Britain. In the final analysis, the AMA leadership could not bring along the rest of the membership, and almost the entire leadership was ousted when AALL leaders forcefully attempted to have NHR legislation enacted.

It is difficult to assess the AMA's initial support. It is entirely possible that AMA members would have been more supportive of NHR if AALL supporters would have been willing to make significant changes in the "standard bill."A greater emphasis on the pivotal role of physicians over public health and a greater focus on private practice would possibly have encouraged a greater willingness on the part of AMA members to support NHR. Although controversy surrounded the enactment of the British National Health Service, many physicians were positively disposed to it, particularly as they viewed government intervention as a guaranteed source of income. This was important, as many physicians at the turn of the century were unable to fully support themselves through the practice of medicine. In the final analysis, all these "ifs" must remain conjectural. As has occurred in all other major NHR efforts, AALL supporters were unwilling to compromise on critical issues.

Beginning in 1916, health insurance legislation modeled after the "standard bill" endorsed by the American Association for Labor Legislation was introduced in 20 states. In addition, special commissions of inquiry into the need for NHR were empaneled in Massachusetts, New Jersey, Wisconsin, and California. With the support of AALL, representatives of the Public Health Service, and even executives of the American Medical Association, significant efforts were expended at the state level to encourage the passage of legislation facilitating and/or encouraging the development of NHR.

In summary, supporters of the "standard bill" for the enactment of NHR looked to its passage as a natural outgrowth of recently passed worker's compensation legislation. Supporters hoped that an emphasis on prevention in combination with wage replacement payments would ensure a seamless national health, not sickness, insurance program. The efforts failure presaged the split in coverage between worker's compensation, disability, and health insurance that has remained to this day. Ironically, the recent renewed interest in national health reform has prompted several states to reexamine the possibility of integrating disability, worker's compensation, and health reform at least on a statewide level. It is important to review why legislation mandating health reform in combination with worker's compensation and disability failed during the Wilson era if one is to understand the prospects of success for these renewed statewide efforts.


While several state federations of labor endorsed NHR, much of organized labor led the early charge against it. In particular, Samuel Gompers, the founder of the AFLCIO, fought hard against any government involvement in health care reform: "This fundamental fact stands out paramount, that social insurance cannot remove or prevent poverty. It does not get at the causes of social injustice....In attacking the health problem from the preventive and constructive side (trade unions) are doing infinitely more than any health insurance could do which provides only for relief in case of sickness, and yet the compulsory law would undermine the trade union activity. There must necessarily be a weakening of independence of spirit and virility when compulsory insurance is provided for so large a number of citizens of the state."(8)

In opposing NHR, Gompers echoed America's libertarian values and emphasized inherent threats of mandated government benefits to the trade union growth. Gompers pointed to the fundamental flaw of sickness insurance, which in his mind made no effort to prevent workplace illness. While this theme was also emphasized by public health supporters of NHR, the latter hoped to integrate prevention and sickness insurance. Gompers did not believe this was possible.

Other members of the labor community, such as James W. Mullen, editor of the Labor Clarion of San Francisco, also were opposed to the standard bill, but for different reasons. According to more liberal members of the labor community, the standard bill was fatally flawed, as significant numbers of Americans would still be left without health insurance coverage. Such an omission has been true for all subsequent NHR legislative proposals. While supportive of Federally mandated worker's compensation, organized labor and other NHR opponents emphasized the difference between worker's compensation and sickness insurance: "In the case of sickness insurance, the situation is, broadly speaking, completely reversed. With the exception of occupational diseases, no court or code has ever held an employer responsible for the general health of his employees. The causes of illhealth are not only extremely numerous, but cause and effect in other than infectious diseases are generally remote. Even typhoid fever, for illustration, may be contracted in ones' place, but the disease may not manifest itself in a serious form until the person concerned has gone to some other place.'

Frederick Hoffman, another naturalized American citizen born in Germany and chief actuary of the Prudential Insurance Company, played a significant role in the successful effort to derail NHR during the Wilson era. Hoffman attacked NHR along many lines. Like Gompers, Hoffman believed not only that an emphasis on prevention was more important than sickness insurance, but also that a true focus on prevention obviated the need for sickness insurance such as that proposed by the AALL: "But it is easy to overrate the importance of sickness in the everyday life of the wage-earner and his family. It is not going too far to maintain that infinitely better results would be secured by concentrating the public interest, collectively and individually, upon the far-reaching possibility of preventive medicine rather than by arousing faith in the efficacy of an institution which...has failed to meet the reasonable expectations of all those most familiar with the facts."(10)

Another insurance physician active against NHR, Lee K. Frankel, MD, of the Metropolitan Life Insurance Company, posed an interesting argument: " is, strictly speaking, indemnity for loss, and that prevention of sickness and provision of medical care come in only incidentally; that the functions of the attending physician are distinct, and should be kept free from insurance claims. He proposed universal rather than compulsory insurance, by a method of taxation of employers and workers which would make it universal, while not legally compulsory."(11)

Dr. Frankel elegantly summarizes one of the main conflicts within traditional health insurance: Health insurance today actually has more to do with sickness insurance than health insurance. His proposal is remarkably similar to Nixon's Family Health Insurance Plan and the Democrats' current proposal.

Despite the fact that the insurance industry of the Wilson era was not yet involved in health care delivery, it eventually came to oppose NHR on several grounds. The insurance industry was opposed to NHR not because of health insurance but rather because of fears of government intervention in general and because of provisions of the "standard bill" that would have excluded the insurance industry from lucrative activities, such as burial insurance.

In addition to the opposition by important interest groups, a significant monetary factor in the demise of efforts to enact NHR was the relative poverty of the federal treasury. It should be remembered that it was not until 1913 that the first income tax was placed on Americans. Americans were not used to committing large sums of moneys from the public treasury for an entitlement program whose need was not immediately selfevident. As already emphasized, many working and middle-class Americans took care of their health insurance needs with contributions to a variety of self-help organizations, such as fraternal orders.

In the final analysis, the most powerful interest groups--insurance industry; employers; labor; and, eventually, the medical profession-- expressed strong opposition to the plan. A primary focus needs to be paid to the insurance industry. The most vocal insurance opponent of NHR was Dr. Hoffman. He tirelessly spoke in strident opposition to NHR throughout the cguntry. He became a veritable one-person phalanx against NHR.

Opposition from these interest groups, together with America's impending entry into World War I, doomed any serious possibility of enactment of NHR legislation. The exigencies of war sealed the fate of NHR. While many health care observers initially looked upon the German national health system with favor, their support turned to complete opposition after America's entry on the side of the Allies. According to President Arthur Hadley Twining of Yale University: "There are many reformers who are anxious that others should follow the example of Germany. But the experiment has not progressed far enough to pass judgment on its success. In many respects the gain to the public from a system of this kind is more apparent than real. The payment to the insurance funds must chiefly, if not wholly come out of wages. Even though they be nominally levied on the employer, he is compelled by competition with other employers who are not subject to this levy to reduce in corresponding degree the wages which he pays.''12

The opposition of critical interest groups enabled President Wilson to avoid entanglement with the NHR issue. This lack of federal involvement in the debate over NHR is best exemplified by the Secretary of Labor's response to a letter by AALL leadership inquiring about the Wilson administration's position on NHR: "(the) Secretary...regrets that owing to the pressure of departmental business he has been unable to find time to prepare a statement on the subject of health insurance such as you desire."(13)

The Libertarian Values of President Wilson

Even if significant interest groups had come out in favor of NHR and World War I had not intruded, President Wilson's philosophy in many ways echoed the libertarian framework of American values in opposition to NHR. The President often spoke of the importance of individualism and the evils of the State. While we often hear of Wilson's belief in democracy, freedom, and various forms of progressive legislation, it is important to emphasize his firm belief in the American libertarian ethos. ' program is to rediscover the individual,' [he] told the Cleveland Chamber of Commerce. 'We rounded this government upon principles, and the center of those principles was faith in the individual rather than in the government .... if God does not make us honest, the government cannot make us over again.'"(15)

More graphically, a contemporary opponent of NHR stated: "A great many wage-earners who would be forced to contribute to the insurance funds have wisely husbanded their strength and rarely become sick. Yet they must, against their will, help support those who have induced weakness and illness by foolish living, those who are frequently ailing and are most apt to play sick or to fancy they are sick when they are really well enough to work; and who would work if it were not made easy for them to 'lay off.' The American citizen who saves his money for investment in the United States would have to help support the alien who sends his savings abroad; the thrifty would be called upon to support the thriftless; the virtuous would be taxed for the benefit of the vicious, the temperate for the intemperate; all by the authority of the State."(16)

The foregoing passages refer to many undercurrents in American cultural trends of this era that were not favorable to NHR. Thus, the perennal American suspicion of welfare recipients was not only everpresent; it was compounded by a renewed fear of immigrants. The largest number of immigrants ever to land on the shores of the United States came in the early 2Oth Century.


The reader can extrapolate two messages from this article. On the surface, it would appear that the details are very different between the situation we are confronted with today and that present immediately prior to and during World War I (figure 2, page 13). For example, health insurance was virtually absent in the early 20th Century. Health care costs were, relatively speaking, much lower and largely consisted of physician consultation and hospital stays. While the surface appears to be starkly different, many of the same interest groups with similar concerns are present today. More important, many American values have remained remarkably stable to this very day. Yet these values are strained, particularly when significant segments of the middle class and interest groups, such as the AMA, become interested in national health reform. Such was the case during the Wilson era and may be the situation today.


1. "Health Care Reform: Examining the Political Realities." Daily Hampshire Gazzette, Feb. 7, 1992, p. 7.

2. American Association for Labor Legislation Standard Bill, 1916.

3. Report submitted to the President and the Board of Directors, National Association of Manufacturers, July 1, 1914, p. 1.

4. "Health Insurance." Annual report from Rupert Blue to Secretary of the Treasury B.S. Warren, July 31, 1916, pp. 5-6.

5. Comment by Rupert Blue on letter from B.S. Warren, April 24, 1915.

6. Letter to Congressman Meyer London from J.W. Kinney, March 17, 1916.

7. Support for national health reform for economic reasons may have some parallels to the current gradual shift within the American Medical Association toward some form of government intervention. It is likely that this gradual AMA shift may also be due to changing economic circumstances for many physicians.

8. Gompers, S. Address at annual meeting of National Civic Federation, Nov. 9, 1917.

9. "Report of the Wisconsin Special Committee on Social Insurance, Jan. 1919.

10. Hoffman, F. More Facts and Fallacies on Compulsory Health Insurance. Newark, N.J.: Prudential Press, 1917, p. 21.

11. Frankel, L. Internal memo, Metropolitan Life Insurance Co., 1918.

12. Arthur Hadley Twining, President of Yale University as quoted in Hoffman, F., op. cit., p. 43.

13. Letter from Hugh L. Kerwin, private secretary for Secretary of the Treasury Wilson, to Joseph B. Andrews, Secretary, American Association for Labor Legislation, March 8, 1916

14. Goldfield, N. "Why We Cannot Agree on the Direction of Health Care Reform: An Exploration of American Values." Physician Executive 18(4):16-22, July-Aug. 1992.

15. Mulder, J. Woodrow Wilson: The Years of Preparation. Princeton, N.J.: Princeton University Press, 1978.

16. Anonymous pamphlet, Boston, Mass., 1918.
COPYRIGHT 1992 American College of Physician Executives
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:National Health Policy; Woodrow Wilson
Author:Goldfield, Norbert
Publication:Physician Executive
Date:Sep 1, 1992
Previous Article:Physician and nonphysician managers as decision makers: are the differences justified or just an illusion?
Next Article:Total quality management: care dealers vs. car dealers.

Related Articles
The AMA faces down FDR and wins.
Truman and the medical profession: replay or lesson for the nineties.
Social Policy in the United States: Future Possibilities in Historical Perspective.
Intrigue of nations.

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters