Martin Gorsky: The Different Approaches of America and Europe to Health Care





[Martin Gorsky is Senior Lecturer in the History of Public Health at the London School of Hygiene and Tropical Medicine.]

...History can help us understand the choices which led the US to such a different approach to [health care reform than] that of Europe. A useful concept in thinking about this is ‘path dependency’, the idea that decisions taken early on can significantly constrain possibilities for change later in time.With this in mind,we can look at why national health insurance was rejected by Americans from the early 20th century onwards.

Statutory sickness insurance originated in Germany in 1883, devised by civil servant Theodor Lohmann and implemented by the ‘Iron Chancellor’ Otto von Bismarck. The principle was that health coverage became obligatory for particular groups of waged workers, financed by employer contributions and employee payroll deductions. Bismarck’s goals in delivering welfare benefits were partly to enhance the efficiency with which ‘human capital’ was managed in an era of dynamic industrial expansion and partly to head off the appeal of socialism.As the system proved broadly successful, other countries began to consider their own versions of it. In Britain it was adopted in 1911 as part of the Liberal welfare reforms,which also included unemployment insurance and old age pensions.

...President Franklin Roosevelt briefly considered whether national health insurance should be an element of his 1935 Social Security Bill, which introduced pension provisions and unemployment insurance. However, fearing that it might imperil the bill, he decided against including it....

At this point, the ‘path dependency’ explanation comes into play. In western Europe politicians and people were already accustomed to compulsory health insurance. Moreover, the resistance of groups such as doctors had been partly overcome. It was therefore not such a big leap to legislate in the 1940s for a larger state role,whether through the tax-funded NHS devised by Britain’s Aneurin Bevan, or through extending the reach of insurance, as under France’s Sécurité Sociale, introduced by President de Gaulle. In the US, by contrast, there was no prior popular acceptance and the fears of opponents were undimmed. Nor, unlike in Europe, had the political left entirely embraced the goal of a bigger welfare state. Instead, American trade unions had accommodated themselves to the market by demanding that employers provide health benefits within remuneration packages. Thus the favourable labour market conditions of wartime had seen a huge expansion of voluntary coverage, so that by 1945 there were 15.7 million people enrolled in Blue Cross schemes....

That said, path dependency does not really explain why popular, competent politicians failed to overcome the odds against them.Why, despite Democratic electoral successes and the trauma of depression and war, could Roosevelt and Truman not assert their wills? A fuller explanation demands the ‘institutionalist’ and ‘pressure group’ explanations....

In the 1960s, however, the US state finally extended its role through the Medicare and Medicaid programmes. Once again the Democrats were in power and once again a president, Lyndon B. Johnson, backed the proposals. This time, though, various factors undermined the capacity of interest groups to block change. First, demographic and scientific factors combined to expose the limits of markets as providers of health care: the elderly population was booming and technological and pharmaceutical innovation both increased costs and raised expectations about what medicine could deliver. The problem of health cover had therefore returned to the political limelight. The intellectual mood had also changed in the era of Kennedy progressives... The economic context was also favourable with America enjoying a golden age of growth before the burden of Vietnam and the oil crisis of the 1970s.

... America had arrived by the mid-1970s at a mixed economy of health care which apparently satisfied all citizens... Unfortunately, the cracks in the system soon began to appear. Public expenditure shot up to meet Medicare payments as both hospitals and physicians increased their activities. Meanwhile the structure of the private healthcare industry changed, with small institutions superseded by large,profit-hungry corporations running hospital chains. This was the point at which US health spending began its relentless upwards course, rising from 5.6 per cent of GDP in 1966 to 8.1 per cent in 1976 and reaching 13.2 per cent in 1996....

The next attempt at a solution was the Clinton Plan of 1993, with its ‘third way’ goal of ‘managed competition’. A more tightly regulated private health insurance sector would remain dominant, supplemented by new state-level ‘health purchasing alliances’, while mandatory employer contributions would ensure universal coverage. Once again though, the absence of party unity undermined support in Congress with conservative Democrats too ready to concede to the interests of employers on whom they depended for funding....

Where does all this leave Obama’s America? The path dependency analysis tells us why healthcare reform is such a challenge. At each fork in the road the private health insurance industry emerged stronger and now forms a huge opposition lobby. This means that pro-reform politicians now regard a European-style NHS or social insurance scheme as unfeasible. The institutional structure still means the president can’t count on party unity, which encourages the hostile propaganda of interest groups and Republican adversaries....



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