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Published online by Cambridge University Press: 23 August 2010
This narrative demonstrates how public and private power interacted during the post–World War II era to create America's unique health care system, a system based on a high-cost, corporate model financed and managed by insurance companies. The article compares the divergent political, organizational, and economic strategies of the American Medical Association (AMA), which represented physicians, and the Health Insurance Association of America (HIAA), which represented for-profit insurance firms. Even after the defeat of President Harry Truman's plan for a universal, government-managed system, policymakers in both parties attempted to reform the health care market, because most observers recognized that the embryonic insurance-company-funded model had inherent cost problems. In order to defeat numerous reform proposals, AMA and HIAA leaders allied to rapidly develop the market around insurance-company financing. Insurers and physicians constructed overlapping institutions to manage their increasingly close financial relationship, thus creating a pseudocorporate arrangement. In an attempt to control costs, insurance companies expanded their function beyond simply underwriting the risks associated with medical services consumption to also assuming a supervisory role, albeit distant, over health care delivery. When policymakers designed Medicare, they adopted the organizational framework that private health interests had already created, thereby legitimizing the previously contested high-cost model.
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3. The HIAA is known today as America's Health Insurance Plans (AHIP).
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5. Starr, Social Transformation of American Medicine, 198–220, 290–334. The AMA also approved nonprofit Blue Cross and Blue Shield plans. For an in-depth analysis of Blue Cross and Blue Shield's role in the developing health care system, see my forthcoming dissertation, Ensuring America's Health: Publicly Constructing the Private Insurance Industry, University of Virginia.
6. For traditional accounts that stress the willingness of Eisenhower-era politicians to accommodate private interests, see Hacker, Divided Welfare State, 237–43; Starr, Social Transformation of American Medicine, 335–47.
7. In recent years, scholars have begun revising the argument that health care costs became an economic problem and political issue after Medicare's passage. Klein, For All These Rights, 217–18, 242–43; Rothman, David J., “The Public Presentation of Blue Cross, 1935–1965,” Journal of Health Policy, Politics, and Law 16 (1991), 684–87Google Scholar. For traditional accounts of the U.S. medical system that identify cost problems as a post-Medicare phenomenon, see Fein, Rashi, Medical Care, Medical Costs: The Search for a Health Insurance Policy, 2nd ed. (Cambridge: Harvard University Press, 1989)Google Scholar; Davis, Karen, Anderson, Gerard F., Rowland, Diane, and Steinberg, Earl P., Health Care Cost Containment (Baltimore: Johns Hopkins University Press, 1990)Google Scholar.
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15. For thought-provoking discussions of how businessmen deployed underwriting arguments such as moral hazard and individual risk classification to oppose redistributive policies, to fragment the market for profit, and to exclude people who most needed coverage, see Stone, Deborah, “Beyond Moral Hazard: Insurance as Moral Opportunity,” in Embracing Risk: The Changing Culture of Insurance and Responsibility, eds. Baker, Tom and Simon, Jonathan (Chicago: Chicago University Press, 2002): 52–79Google Scholar and Stone, Deborah, “The Struggle for the Soul of Health Insurance,” Journal of Health Policy, Politics, and Law 18 (1993): 287–317Google Scholar.
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22. Robert Griffith's revisionist account portrays Eisenhower as a moderate who sought to blend social responsibility with private enterprise. Griffith, Robert, “Dwight D. Eisenhower and the Corporate Commonwealth,” The American Historical Review 87 (1982): 87–122Google Scholar. Also see Stebenne, David, Modern Republican: Arthur Larson and the Eisenhower Years (Bloomington: Indiana University Press, 2006)Google Scholar; Blumenthal, David and Morone, James A., The Heart of Power: Health and Politics in the Oval Office (Berkeley: University of California Press, 2009), 99–130Google Scholar. Blumenthal and Morone label Eisenhower the original “compassionate conservative.”
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24. This fear was what animated AMA opposition to the Committee on Costs of Medical Care's 1932 report calling for a voluntary effort to rearrange the health care market around prepaid physician groups. Indeed, committee members who wanted a federally funded system believed efficient market organization was the first organizational step down that road. Weeks, Lewis E. and Berman, Howard J., Shapers of American Health Care Policy (Ann Arbor: Health Administration Press, 1985), 17–22Google Scholar.
25. Even Taft recommended federal intervention as a way to head off stronger measures. During debates over Truman's plan for a federally managed health care system, Taft-Smith-Ball legislation proposed grants-in-aid to states for the purchase of medical plans for the poor. As we will see, variants of this plan continued to crop up during the Eisenhower era. Starr, Social Transformation of American Medicine, 283–284.
26. Hacker, Divided Welfare State, 212–20; Starr, Social Transformation of American Medicine, 280–89.
27. Balogh, Brian, Chain Reaction: Expert Debate and Public Participation in American Commercial Nuclear Power, 1945–1975 (New York: Cambridge University Press, 1991)CrossRefGoogle Scholar. Balogh demonstrates how federal officials reversed the traditional “iron triangles” pattern by lobbying private businesses to access federal subsidies to establish a nuclear power industry. Oveta Culp Hobby, “Address to the National Association of State Insurance Commissioners,” 10 June 1954, Box 7, F.J.L. Blasingame Papers, University of Texas Medical Branch, Galveston, Tex. (Blasingame Papers); “Mrs. Hobby Explains Details of Re. Measure,” The Eastern Underwriter 56 (11 Feb. 1955): 37.
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29. Prepaid groups were the forerunners of Health Maintenance Organizations or HMOs. Rorem, C. Rufus, “Economic Aspects of Medical Group Practice,” in Benefits of Group Practice (New York: Medical Institute, 1948)Google Scholar; “Falk Provides Blueprint for National Health Plan,” The National Underwriter 56 (10 Oct. 1952): 1, 28.
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31. Klein, For All These Rights, 197–200, 213–218; Becker, Harry, “Labor Looks at Prepaid Medicine,” Medical Economics 27 (Aug. 1950): 103–11Google Scholar; Croatman, Wallace, “Is Labor Through with Private Medicine?,” Medical Economics 34 (Oct. 1957): 174–196Google Scholar.
32. “Fact Sheet on the Wolverton Bill (HR 7700),” n.d., Box 7, Blasingame Papers. In 1959, the AMA issued a report that ended the association's official hostility towards prepaid group practice. As Paul Starr points out, organized physicians only approved prepaid groups once they were too weak to seriously compete with individual, fee-for-service practice. Starr, Transformation of American Medicine, 320–27.
33. Hacker, Divided Welfare State, 400, n30.
34. Furman, Bess, “Health Plan Asks Insurance Subsidy,” New York Times, 23 Feb. 1953, 39Google Scholar. Hacker, Divided Welfare State, 226–227, 400–401.
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38. For examples of media accounts heralding postwar medical advances, see for example “Hope of Victory over Cancer is Held in Sight; AMA Editor Predicts Medical Wonders,” Chicago Daily Tribune, 7 Jan. 1950, A10; “Mechanical Heart's Value in Surgery Told by Doctor,” Los Angeles Time, 12 Apr. 1950, A12; “New Drugs Permit Miracle Surgery,” Los Angeles Times, 5 Nov. 1950, 21; “New Techniques Save 98 Pct of Korea Wounded,” Chicago Daily Tribune, 4 Feb. 1951, 8; “100-Year Life Span Foreseen Average,” New York Times, 27 Jan. 1953, 27; “Atomic Cocktails Save Life of Woman Cancer Victim,” Chicago Daily Tribune, 23 Sep. 1953, 3.
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39. Examples include “Address of President, Dr. John W. Cline,” JAMA 149 (1952): 854; “Address of President, Dr. Louis H. Bauer,” JAMA 150 (1952): 1679; “Address of the President, Dr. Walter B. Martin,” JAMA 158 (1955): 669–70; Elmer Hess, “The Physician's Obligation to Society,” JAMA 163 (1957): 121–23; F.J.L. Blasingame, “‘Choosing Our Rut’ In Voluntary Health Insurance,” 1957, Box 20, Blasingame Papers.
40. Allman, David B., “Medicine's Role in Financing Health Care Costs,” JAMA 165 (1957): 1571–73CrossRefGoogle ScholarPubMed.
41. A. M. Wilson, “Where Do We Go From Here?” (Proceedings of the Bureau-Conference Group Accident and Health Insurance Meeting), Chicago (7–9 Feb. 1955): 89.
42. Quotes from “A.L.C. President Comments on New Role of A. & H.,” The National Underwriter 57 (8 May 1953): 26, and “Keen Interest in Doctor-Hospital Panel Talks,” The Eastern Underwriter 54 (30 Jan. 1953): 32. Other examples include “Hipp Calls Experimentation Spirit Greatest Bulwark Against Socialism,” The Eastern Underwriter 52 (16 Feb. 1951): 36; “Service, Good Public Relations Help Keep Government Out of Private Business,” The National Underwriter 57 (18 Sep. 1953): 1; “Industry Achievements Testify to Its Reasonableness Toward Public,” The Eastern Underwriter 56 (30 Sep.1955): 38; Faulkner, Edwin J., Health Insurance (New York: McGraw Hill, 1960), 69Google ScholarPubMed.
43. See Mahoney's discussion of competing explanations for reproduction: Mahoney, “Path Dependence in Historical Sociology,” 515–22.
44. Clemens, “Organizational Repertoires and Institutional Change,” 775–98.
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48. Poen, Harry Truman versus the Medical Lobby, 177–82; Rayack, Elton, Professional Power and American Medicine: The Economics of the American Medical Association (Cleveland: World Publishing Co., 1967), 10–12Google Scholar; Starr, Transformation of American Medicine, 287–88.
49. Skocpol, Protecting Soldiers and Mothers, 55; Quadagno, “Why the United States Has No National Health Insurance,” 24–44.
50. Mal Rumph and Ernest E. Anthony to F.J.L. Blasingame, 4 Aug. 1955, Box 12, Blasingame Papers; Mal Rumph to Elmer Hess, 3 Jan. 1956, Box 8, Blasingame Papers.
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52. Albright, Robert C., “Health Insurance Fight Pledged by Ike,” The Washington Post, 15 July 1954Google Scholar, Box 7, Blasingame Papers.
53. See for example “Watch it, Life,” JAMA 153 (1953): 1142–43; “‘We're Against It.’ But…,” Medical Economics 31 (Mar. 1954): 97–98.
54. “The Doctor in Politics,” Consumer Reports, Feb. 1950, 75–78. Also see Hyde, David R. and Wolff, Payson, “The AMA: Power, Purpose and Politics in Organized Medicine,” Yale Law Journal 63 (1954): 938–1022Google Scholar; “Yale vs. AMA,” Newsweek (16 Aug. 1954): 78; Carpenter, Daniel, Reputation and Power: Organizational Image and Pharmaceutical Regulation at the FDA (Princeton: Princeton University Press, 2010), 194, 206Google Scholar.
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57. “Needless Surgery – Doctors, Good and Bad,” Reader's Digest, May 1953, 53–57. Hawley's accusations so angered physicians that over eleven resolutions to censure him were offered in the AMA's 1953 House of Delegates meeting. After considering the resolutions, the Reference Committee deplored Hawley's “ill-advised statement” but advised the House to take no action because they feared that the AMA would be portrayed as being against free speech. “Report of Reference Committee on Insurance and Medical Service,” Abstract of Proceedings, JAMA 152 (1953): 839–42.
58. The Gaffin survey used data from approximately 4,000 respondents. “Public Opinion Survey about Doctors,” JAMA 160 (1956): 471–72. Also see “Some Meanings of Medical and Public Opinion about the AMA,” JAMA 161 (1956): 68–69.
59. “Report of the Council on Medical Service,” JAMA 156 (1954): 981–88; “Medical Care for the Needy,” JAMA 162 (1956): 1626; “Guides for Medical Societies in Developing Plans for Tax-Supported Personal Health Services for the Needy,” JAMA 163 (1957): 190–91.
60. “The Case against Disability Payments,” JAMA 160 (1956): 1058–71; “Disability Checks from Uncle Sam?” Medical Economics 27 (May 1950): 53–54; Derthick, Policymaking for Social Security, 319. Derthick describes the 1956 bill as a “necessary prelude” to Medicare because it taught Social Security Administrators how to work with the intermediary groups that would administer such medical programs and because it set the stage for incremental program increases. Also see Poen, Harry Truman versus the Medical Lobby; Mayes, Rick, Universal Coverage: The Elusive Quest for National Health Insurance (Ann Arbor: University of Michigan Press, 2004), 54–55Google Scholar.
61. “Address of Speaker, Dr. F. F. Borzell,” JAMA 149 (1952): 851–52.
62. Truman, Governmental Process, 139–155; Wilson, Political Organizations, ch. 11. Wilson argues that member preferences greatly constrain minority leadership actions.
63. “Address of the President, Dr. John W. Cline,” JAMA 149 (1952): 854; Campion, AMA and U.S. Health Policy, 195–200.
64. Menges, Roger, “Why They're NOT in the A.M.A.,” Medical Economics 31 (Feb. 1954): 100–104Google Scholar. Approximately 70,000 members or one-third of doctors did not have AMA membership. The reasons that physicians gave for not having AMA membership ranged from still being in training, having retired, believing dues to be too expensive, and opposing association policies.
65. For examples of ideologically moderate physicians who called on the leadership to accept compromise programs to expand health care access, see George Baehr to Morris Fishbein, “A Protest Against the Present Attitudes and Policies of the American Medical Association in Regard to the Problem of Medical Care,” 31 Jan. 1949, Reel 6, Michael Davis Collection; “What the ‘Loyal Opposition’ Wants,” Medical Economics 27 (June 1950): 61–63, 150–55; “RX for Doubletalk,” Medical Economics 27 (June 1950): 42.
66. John K. Glen to Bing Blasingame, 28 Sep. 1956, Box 6, Blasingame Papers; “Should Medicine Oppose All Federal Aid?,” Medical Economics 33 (Sep. 1956): 240–63, quotes 243, 252.
67. “Address of the President, Dr. Louis H. Bauer,” and “Report of the Reference Committee on Reports of Officers,” JAMA 152 (20 June 1953): 722–24. Also see “AMA Says Yes to Ike,” Medical Economics 31 (Apr. 1953): 6–7.
68. John K. Glen to Bing Blasingame, 28 Sep. 1956, Box 6, Blasingame Papers; “Should Medicine Oppose All Federal Aid?,” quotes 243, 252. Much of this criticism came from southerners who feared that government funding of schools would force integration.
69. See for example Bauer, Louis H., “Working Together in '52,” JAMA 147 (1951): 1509–10Google Scholar; Fox, Everett C., “The Physician's Responsibility to Medical Organizations,” JAMA 159 (1955): 546Google Scholar; Hess, Elmer, “The President's Page: A Monthly Message,” JAMA 160 (1956): 293Google Scholar.
70. Most insurance companies refused to sell malpractice insurance to physicians without medical society membership because they feared that non-affiliated physicians would not have colleagues to testify on their behalf in case of a trial. Likewise, hospitals preferred to hire doctors vetted through their local medical society.
71. Dr. Lester, Messrs. Webb and Hawthorne to W.R. McBee, “What A.M.A. Can Do To Stop the Drift Toward Socialized Medicine,” 2 Aug. 1955, Box 19, Blasingame Papers.
72. Stevens, Rosemary, American Medicine and the Public Interest (New Haven: Yale University Press, 1971)Google Scholar, chs. 6, 9–15; Gross, Paul M., “The Rise of Specialism in Modern Society,” JAMA 179 (1959): 285–89Google Scholar; Rayack, Professional Power and American Medicine, ch. 6.
73. Campion, AMA and U.S. Health Policy, ch. 9.
74. “Resolution from Dr. C.G. Krupp,” 11 Oct. 1955, Box 1, Blasingame Papers.
75. Supplementary Report of Board of Trustees, “Progress Report of Commission on Medical Care Plans,” JAMA 159 (1955): 1370–79.
76. “Committee on Relations with Lay-Sponsored Voluntary Health Plans,” JAMA 162 (1956): 815. As the council conducted field studies on various prepaid plans, it did so “cognizant of the continuing efforts of the Commission on Medical Care Plans created by the Board of Trustees … In view of this, the Committee is proceeding rather deliberately in order to minimize any possible confusion between the activities of the Council Committee and the commission.”
77. “Report of Law Department,” JAMA 159 (1955): 896–98.
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83. Quote in James E. Powell to Orville F. Grahame, 10 Dec. 1954, Box 29; E.J. Faulkner to J.W. Scherr, Jr. and Alfred Perkins, 31 Mar. 1955, Box 17; E.H. O'Connor to John W. Powell, 1 May 1956, Box 28; R.L. Paddock to Orville F. Grahame, 29 Nov. 1954, Box 29; R.J. Wetterlund to Orville F. Grahame, 29 Nov. 1954, Box 29; H.O. Fishback, Jr. to Orville F. Grahame, 3 Dec. 1954, Box 29; Orville F. Grahame to H.O. Fishback, 7 Dec. 1954, Box 29; James E. Powell to Orville F. Grahame, 13 Jan. 1955, Box 29; All in Grahame Papers.
84. “J.P. Hanna Report Cites Conference Staff Contributions during Past Year,” The Eastern Underwriter 56 (13 May 1955): 44–46; La Mont, Stewart M., “Accident and Health Insurance,” Annals of the American Academy of Political and Social Science 161 (1932): 128–133CrossRefGoogle Scholar. The Bureau primarily represented stock casualty companies in the Northeast while the Conference had a broader representation of almost every type of insurer involved in underwriting accident and health benefits.
85. “Follmann Observes 10th Year with Bureau,” The Eastern Underwriter 56 (20 May 1955): 45–46.
86. “General Manager's Report to the Board of Directors on the Affairs of the Health Insurance Association of America as of the end of October, 1956,” n.d., Box 25, Grahame Papers. The Insurance Economics Society of America, established by insurers at the beginning of the twentieth century to lobby state governments, made a bid to become health insurance companies' primary representative in federal politics. However, industry leaders decided to create a new organization to handle federal issues.
87. E.J. Faulkner to J.W. Scherr and Alfred Perkins, 31 Mar. 1955, Box 17, Grahame Papers.
88. The seven associational members of the Joint Committee on Health Insurance included the American Life Convention, American Mutual Alliance, Association of Casualty and Surety Companies, Life Insurance Association of America, Life Insurers Conference, Bureau of Accident and Health Underwriters, and Health and Accident Underwriters Conference. Each association provided one representative and one staff member to work for the joint committee while another fourteen members of the committee represented various insurance companies.
89. For a general history of the Joint Committee on Health Insurance, see Frank S. Vanderbrouk, “Report of the Executive Committee,” Health and Accident Underwriters Conference, 4 May 1955, Box 17, Grahame Papers.
90. During the TNEC hearings, the insurance industry was investigated for cooperative rate-making practices. Because of allegations made in the hearings, the Justice Department filed an antitrust suit against fire insurance companies. The 1944 U.S v. Southern-Eastern Underwriters Association case overturned the 1869 Paul v. Virginia case, which had protected insurers from federal jurisdiction by stating that “issuing a policy of insurance is not a transaction of commerce.” Congress responded to the Supreme Court's ruling in 1945 by passing the McCarran Ferguson Act to prevent federal legislation from interfering with state insurance regulation. The act, however, continued to present legal ambiguities because it deemed federal laws applicable when state law failed to regulate particular activities. The Federal Trade Commission attempted to bring insurance advertisements under its jurisdiction throughout the 1950s. Additional court cases failed to conclusively draw jurisdictional boundaries, although insurers remained primarily under state regulation.
91. “Reader's Digest Article on A.&H. Causes Headaches,” The National Underwriter 57 (28 Aug. 1953): 7; “Don't Fall for Phony Health Insurance,” Coronet, June 1951, 14; Clark, Blake, “Be Sure You Know What's in Your Health and Accident Policy,” Reader's Digest, July 1954, 115–19Google Scholar; Silverman, Milton, “Is this the Pattern of the Future?,” The Saturday Evening Post, 21 Jun. 1958, 30, 100–102Google Scholar; Biemiller, Andrew J., “The Need for Health Insurance,” Consumer Reports, April 1949, 174Google Scholar. For a discussion of unfavorable media coverage and legal cases involving cancellation of health insurance policies, see Gibbons, Gerald R. and Johnston, John D. Jr., “Termination of Personal Health Insurance Contracts by Cancellations or Nonrenewal,” Duke Bar Journal 5 (1956): 74–76Google Scholar.
92. Gallup Poll, “Businesses and Campaign Contributions,” Roper Center for Public Opinion Research (Aug. 1947).
93. Neal, Robert R., Social Security Administration Project, no. 578, 1967 (New York: Columbia University Oral History Collection), 25Google Scholar.
94. “General Manager's Report to the Board of Directors, October, 1956,” Box 25, Grahame Papers; James R. Williams, “Strengthening Public Confidence – Through Advertising” (Health Insurance Association of America Annual Meeting, 13 May 1958).
95. E.J. Faulkner to Roger Billings, 11 Mar. 1957, Box 19, Grahame Papers.
96. E. J. Faulkner to Orville F. Grahame, 25 Oct. 1955, Box 19, Grahame Papers.
97. Neal, Social Security Administration Project, 42–45.
98. E.J. Faulkner, “President's Address” (Health Insurance Association of America Annual Meeting, 7 May 1957); Phillips-Fein, Invisible Hands. Phillips-Fein demonstrates how business leaders leveraged their social networks by organizing employees to engage in political activities.
99. Neal, Social Security Administration Project, 42–43.
100. Cohen, Wilbur, Social Security Administration Project, no. 578, 20 Jul. 1966 (New York: Columbia University Oral History Collection), 27Google Scholar.
101. Frank E. Wilson to F.J.L Blasingame, “Legislative Action, Health Reinsurance Bill,” 17 Aug. 1954, Box 7, Blasingame Papers.
102. “Committee on Legislation Minutes,” 30 Mar. 1957, Box 8, Blasingame Papers.
103. The Standing Committees were as follows: Public Relations, Membership & Ethical Standards, Nominations, Administrative, Actuarial & Statistical, Health Insurance Council, Group Insurance, Individual Insurance, Legal, and Legislative & Regulatory.
104. Faulkner, Health Insurance, 467–68; Neal, Social Security Administration Project, 4–6.
105. “General Manager's Report to the Board of Directors, Oct. 1956,” Box 25, Grahame Papers. During its first year of operation, HIAA leaders budgeted 818,000 for operational and public relations activities.
106. Source Book of Health Insurance Data (New York: Health Insurance Institute, 1966), 10. Commercial insurers underwrote approximately 57% of hospital policies, 59% of surgical coverage, and 48% of regular medical policies for doctor services. In each of these categories, independent plans such as Kaiser and Group Health Association underwrote between 7% and 9% of all policies. The nonprofit Blues issued the remaining policies.
107. Bauer, Raymond A., de Sola Pool, Ithiel, and Dexter, Lewis Anthony, American Businessmen and International Trade (Cambridge: MIT Press, 1963)Google Scholar; Galambos, Competition and Cooperation.
108. By avoiding discussion of premium prices or coercive enforcement outside of membership exclusion, HIAA officials managed to standardize many industry practices without provoking antitrust suits. By the mid-1960s, the courts generally employed a rule of reason that allowed standardization projects that did not competitively harm one firm through “refusals to deal” or group boycotts. “Antitrust: Limitation on the Group Boycott Per Se Rule,” Duke Law Journal 1961 (1961): 6006–613; “Trade Association Exclusionary Practices: An Affirmative Role for the Rule of Reason,” Columbia Law Review 66 (1966): 1486–1510.
109. Joint Committee on Health Insurance, “Major Steps in Development of Proposed Organization,” n.d.; Health Insurance Association of America Application, “Data Sheet and Authorization,” n.d.; both in Box 19, Grahame Papers.
110. “Proposal to Establish the Health Insurance Association of America,” Dec. 1955, Box 19, Grahame Papers; “HIAA Bylaws,” n.d., Box 19, Grahame Papers; “Watt Tells About First Year's Results Under Conference Advertising Code,” The Eastern Underwriter 56 (13 May 1955): 40, 55; “A.&H. Pamphlet on Fine Print,” The Eastern Underwriter 56 (11 Mar. 1955): 40; Frank S. Vanderbouk, “Report of the Executive Committee,” 4 May 1955, Box 17, Grahame Papers; “Health Insurance Association of America, Minutes of the Meeting of the Subcommittee on Advertising Rules,” 19 Sep. 1956, Box 25, Grahame Papers; “Cancellable Accident and Health Insurance: A Study and Recommendations,” Apr. 1956, Box 18, Grahame Papers; “Industry Achievements Testify To Its Reasonableness Toward Public,” 38, 42.
111. By 1960, all but one state had adopted both laws. Faulkner, Health Insurance, 485–94.
112. “Proposal to Establish the Health Insurance Association of America,” Dec. 1955, Box 19, Grahame Papers.
113. Today, individually purchased insurance represents only about ten percent of coverage. Source Book of Health Insurance Data, 11,14. Hacker, Divided Welfare State, 204; Klein, For All These Rights, 226–37.
114. “H. &A. Conference Has Golden Jubilee,” The National Underwriter 55 (18 May 1951): 1, 21; “Shift to Offensive Will Put Stopper on Government: Randall,” The National Underwriter 55 (14 Sep. 1951): 1, 20; “A.&H. Companies Can't Operate in Vacuum – Heller,” The National Underwriter 56 (6 Jun. 1952): 6; “Keen Interest in Doctor-Hospital Panel Talks,” 32; Faulkner, “President's Address”; V.J. Skutt, “Keynote Address” (Health Insurance Association of America Annual Meeting, 16 May 1960); Paul B. Cullen, “No One But You” (Health Insurance Association of America Annual Meeting, 17 May 1960); Faulkner, Health Insurance, 69.
115. Health Insurance Institute, Source Book of Health Insurance Data (New York: Health Insurance Institute, 1963), 17.
116. Hohaus, Reinhard, Social Security Administration Project, no. 578, 27 Jul. 1965 (New York: Columbia University Oral History Collection), 40–41Google Scholar; Munts, Raymond, Bargaining for Health: Labor Unions, Health Insurance, and Medical Care (Madison: University of Wisconsin Press, 1967), 124Google Scholar; Klein, For All These Rights.
117. “Report to Board of Directors: Progress Surrounding Recommendations Contained in the Blueprint,” Feb. 1965, Box 25, Grahame Papers; “Report of the Committee on Economics of Financing Medical Care to the Board of Directors,” 11 May 1964, Box 25, Grahame Papers.
118. “Report of the Special Committee on Continuance of Coverage,” Jun. 1960, Box 18, Grahame Papers. Also see Neal, Robert R., “Current Developments and Problems in Health Insurance,” The Journal of Insurance 27 (1960): 1–10CrossRefGoogle Scholar.
119. “The Extent of Insurance Company Coverage for the Medical Expenses of the Senior Citizen,” Dec. 1961, Box 22, Grahame Papers.
120. Faulkner, Health Insurance, 418–19; “Medical Underwriting – A Retrospective,” Record of the Society of Actuaries 25 (1999), URL: http://www.soa.org/library/proceedings/record-of-the-society-of-actuaries/1990-99/1999/january/rsa99v25n3100pd.pdf; “Thaler, Hotson and Lembkey Tell About Steps Taken to Start Conversion Plans,” The Eastern Underwriter 56 (11 Feb. 1955): 41; “Bureau Releases Statistical Study on Personal Accident Experience,” The Eastern Underwriter 56 (21 Oct. 1955): 36.
121. Joseph W. Moran, “Comprehensive Major Medical Expense Insurance at New York Life Insurance Company” (Health Insurance Association of America Annual Meeting, 4 Feb. 1957), Box 19, Grahame Papers; “Cancellable Accident and Health Insurance,” Box 18, Grahame Papers; “Kern Describes Inter-Ocean's Program for Physically Impaired Risks,” The Eastern Underwriter 56 (28 Oct. 1955): 44.
122. Faulkner, “President's Address”; Robert Neal, “Report of the General Manager” (Health Insurance Association of America Annual Meeting, 7 May 1957); Robert Neal, “Annual Report of the General Manager” (Health Insurance Association of America Annual Meeting, 12 May 1958).
123. V.J. Skutt, “The Follow Through” (Health Insurance Association of America Annual Meeting, 16 Nov. 1959), Box 19, Grahame Papers.
124. Klein and Rothman have revised traditional interpretations asserting that cost problems began after Medicare's passage. Klein, For All These Rights, 217–18, 242–43; Rothman, “The Public Presentation of Blue Cross,” 684–87. For traditional accounts, see Fein, Medical Care, Medical Costs; Davis, et al., Health Care Cost Containment.
125. Sourcebook of Health Insurance Data (New York: Health Insurance Institute, 1959), 47.
126. Hohaus, Social Security Administration Project, 40–41, 106–108.
127. “Implies M.D.s Wreck Voluntary Insurance,” Medical Economics 28 (Aug. 1951): 218–22; “Is the Hysterectomy Really Necessary?” Medical Economics 31 (Aug. 1953): 267, 278; “Cites Doctors' Abuses of Blue Cross Contracts,” Medical Economics 29 (Jan. 1952): 223–25.
128. Cunningham, The Blues, 102–103.
129. “Supplementary Reports of Council on Medical Service,” JAMA 169 (1959): 713.
130. Victor Fuchs with Marcia J. Kramer, “Determinants of Expenditures for Physicians' Services in the United States,” National Bureau of Economic Research, Occasional Paper 116 (1973). “Beware the Gimmick!,” Medical Economics 28 (Feb. 1951): 206–209; “Physicians May Scrap Service-Type Health Plan,” Medical Economics 30 (Apr. 1953):112–13; “Do Doctors Hike Fees for Insured Patients?,” Medical Economics 35 (May 1958): 34, 38; “What to Charge a Patient Who Has Major Medical,” Medical Economics 35 (8 Dec. 1958): 53–54; “Ill-Advised Practices May Take ‘Voluntary’ Out of Health Insurance, Walker Declares,” The National Underwriter 57 (18 Dec. 1953): 17; “Insurance Plan Leads 7 in 10 M.D.s to Raise Fees,” Medical Economics 36 (11 May 1959): 29.
131. “Health Insurance Council Activities are Reviewed for Claim Executives,” The National Underwriter 56 (17 Sep. 1952): 2, 20.
132. Croatman, Wallace, “A Study of How Doctors Set Fees,” Medical Economics 28 (Jun. 1951): 64–69Google ScholarPubMed; “She Helps Doctors: Fee Consulting,” Medical Economics 27 (Jul. 1950): 78–79, 153–59; Ben Olds, “‘Usual Fee’ Plan Put to Test,” Medical Economics 31 (Jul. 1954): 131–32, 203–06.
133. Quote in John P. Hanna to Executive Committee Members, “Report of Task Force Three Subcommittee on Claims Cost Control,” 14 Nov. 1955, Box 17, Grahame Papers; Subcommittee on Claim Costs Control, “Report to Task Force Three of the Joint Committee on Health Insurance,” 8 Apr. 1955, Box 17, Grahame Papers.
134. J.E. Taylor, “Minutes of the Executive Committee Meeting” (Health and Accident Underwriters Conference), 8 May 1955, Box 17, Grahame Papers; Neal, “Annual Report of the General Manager” (1958), 19–23; Morton B. Miller, “The Role of the Health Insurance Council” (Health Insurance Association of America Annual Meeting, 14 May 1958); “New Identity Forms to Ease Claims Processes,” Insurance Economics Surveys 13 (Jan. 1957): 4, Box 28, Grahame Papers; “A. &H. Industry Courageously Faced Difficult Problems During 1954,” The Eastern Underwriter 56 (14 Jan. 1955): 37.
135. “Committee on Prepayment Medical and Hospital Service,” JAMA 162 (1956): 814; “Supplementary Reports of Council on Medical Service,” JAMA 169 (1959): 713.
136. “Supplementary Reports of Council on Medical Service,” JAMA 169 (1959): 713.
137. Albert Pike, “The Insurance Companies' Approach to Health Insurance” (Annual Meeting of the Alabama Society of Internal Medicine), 28 Apr. 1962, Box 29, Grahame Papers; George Bugbee, “The Customer Looks at Health Insurance” (Health Insurance Association of America Annual Meeting, 13 May 1958), 26; Ralph J. Walker, “The Challenge of Voluntary Health Insurance,” Medical Economics 31 (Feb. 1954): 199–224; “What to Charge a Patient Who Has Major Medical,” 53–54; “Ill-Advised Practices May Take ‘Voluntary’ Out of Health Insurance,” 17; “Insurance Plan Leads 7 in 10 M.D.s to Raise Fees,” 29; “Educational Seminar Ponders Intrinsic Problems Facing A & H Industry,” The Eastern Underwriter 56 (27 May 1955): 43.
138. “Committee on Prepayment Medical and Hospital Service,” JAMA 162 (20 Oct. 1956): 814.
139. Principal-agent literature examines how managers, who Alfred Chandler found so important to U.S. business structure, often have goals that differ from those of stockholders and financiers. See Chandler, Alfred, The Visible Hand (Cambridge: Belknap Press, 1977)Google Scholar; Raff, Daniel and Temin, Peter, “Business History and Recent Economic Theory,” in Inside the Business Enterprise: The Use and Transformation of Information, ed. Temin, Peter (Chicago: University of Chicago Press, 1991), 43–71Google Scholar; Clarke, Roger and McGuinness, Tony, eds., The Economics of the Firm (New York: Oxford, 1987)Google Scholar; Pratt, John W. and Zeckhauser, Richard J., eds., Principals and Agents: The Structure of Business (Boston: Harvard Business School Press, 1985)Google Scholar; Moe, Terry M., “The New Economics of Organization,” American Journal of Political Science 28 (1984): 756Google Scholar.
140. For example, “Needless Surgery – Doctors, Good and Bad,” 53–57; “Hawley Cites Needless Surgery by Two M.D.s,” Medical Economics 30 (Sep. 1953): 258–62; “Is this Hysterectomy Really Necessary?,” 267.
141. Weinert, Henry V. and Brill, R., “Effectiveness of Hospital Tissue Committee in Raising Surgical Standards,” JAMA 150 (1952): 992Google Scholar; Myers, R.S. and Stephenson, G.W., “Evaluation Form for Tissue Committees,” JAMA 156 (1954): 1577Google Scholar.
142. Hanna to Executive Committee Members, “Report of Task Force Three Subcommittee.”
143. “Medical Care Insurance Rating and Medical Economics,” Transactions of Society of Actuaries 17 (1965): D94–D99; Milton I. Roemer and Max Shain, “Hospital Utilization Under Insurance,” mimeographed (Ithaca, N.Y.: Cornell University School of Business and Public Administration, 1959), 17–18, 51. This influential study linked hospital construction to an oversupply of beds and over-utilization of medical services.
144. “Joint LIAA-HIAA Meetings, Report,” 7 May 1957, Box 25, Grahame Papers; Quote in Hanna to Executive Committee Members, “Report of Task Force Three Subcommittee.”
145. Subcommittee on Claim Costs Control, “Report to Task Force Three.”
146. “Medical Care Insurance Rating and Medical Economics,” D94–D99.
147. McNamara, William J., “The Role of the Medical Director in Major Medical Expense Insurance,” JAMA 165 (1957): 1586–91CrossRefGoogle ScholarPubMed.
148. Munts, Bargaining for Health, 145.
149. Sherwood, Hugh C., “National Value Scale May Help You Set Fees,” Medical Economics 35 (6 Jan. 1958): 147–54Google Scholar. See AMA president McCormick's, Edward J. positive remarks about average fee schedules in “Fixed Fees Urged,” Medical Economics 31 (Aug. 1954): 46–47Google Scholar.
150. “Committee on Medical Practices, Supplementary Report,” JAMA 166 (1958): 1621.
151. Marmor, Theodore and Thomas, David, “The Politics of Paying Physicians: The Determinants of Government Payment Methods in England, Sweden, and the United States,” International Journal of Health Services 1 (1971): 71–78Google Scholar; Marmor, Theodore and Thomas, David, “Doctors, Politics and Pay Disputes: ‘Pressure Group Politics’ Revisited,” British Journal of Political Science 2 (1972): 412–42Google Scholar. Marmor and Thomas argue that organized physicians in all western industrial countries employ such great economic and political resources that their preferences decide the government's remuneration methods in state health programs. I argue that physicians received “usual and customary” fees in the U.S. partially because of their cultural and political authority but also because of established insurance-industry practices.
152. Eilers, Robert D., “Blue Shield: Current Issues and Future Direction,” Journal of Risk and Insurance (1966): 537–52CrossRefGoogle Scholar.
153. Tucker, R.W., “Assignment Form Pulls in the Payments,” Medical Economics 33 (Dec. 1956): 104–106Google Scholar.
154. Memorandum, “1099 Reporting on Payments to Doctors,” n.d., Box 24, Grahame Papers.
155. “Meeting the Problems of Decentralization,” The National Underwriter 57 (17 Apr. 1953): 2, 35; Phillips, James T., “Some Considerations of the Development of an Individual Accident and Sickness Program,” Transactions of the Society of Actuaries 6 (1954): 350–412Google Scholar.
156. Faulkner, Health Insurance, 463–67.
157. Dr. Altman, Joseph, “Simpler A.&H. Forms Should Ease Many Difficulties,” The National Underwriter 56 (12 Dec. 1952): 27–28Google Scholar.
158. L.A. Orsini, “Report of the Health Insurance Council,” 1965, Box 20, Grahame Papers.
159. “Medical Care Insurance Rating and Medical Economics,” D94–D99.
160. For a more thorough treatment of the Medicare political debates, see my forthcoming dissertation, Ensuring America's Health.
161. Hacker, Divided Welfare State, 248–51; Derthick, Policymaking for Social Security; Marmor, Politics of Medicare, 10–15.
162. Marmor, Politics of Medicare, xxiv.
163. Ibid., 26.
164. National Academy of Social Insurance, “Reflections on Implementing Medicare,” 1992, quote p. 1, Revolving Files, Baltimore SSA Archives.
Despite Social Security administrators' belief that they had to maintain the existing private financing framework in order to pass a bill, the rising health care costs caused by the existing model stymied legislative reform efforts for years. See Zelizer, Julian, Taxing America: Wilbur D. Mills, Congress, and the State, 1945–1975 (New York: Cambridge University Press, 1998), 212–54Google Scholar.
165. Marmor, , The Politics of Medicare, 17–21Google ScholarPubMed, 38–41, quotes 38, 39.
166. Campion, AMA and U.S. Health Policy, 269.
167. Leonard W. Larson, “For the People” (Health Insurance Association of America Annual Meeting, Philadelphia, 5 May 1959). At this annual insurance industry meeting, Larson, representing the AMA, joined with more conservative elements of the HIAA to convince insurance companies not to compromise with policymakers seeking to fund coverage for the elderly. In 1964, the AMA leadership, sensing a coming defeat, proposed Eldercare legislation to expand the existing Kerr-Mills program of state-provided insurance for the elderly indigent.
168. Larson, “For the People”; Hohaus, Social Security Administration Project, 32; Robert M. Ball, Memorandum, “The Potential of Private Health Insurance,” 5 Jun. 1963, SSA, Box 299, NARA; Hacker, Divided Welfare State, 250.
169. Officials drew a parallel to the way insurance companies sold pension products to supplement Social Security retirement benefits. Wilbur J. Cohen, Memorandum for Honorable Theodore Sorensen, “Health Insurance for the Age,” 19 Dec. 1962, Cohen Papers, Baltimore SSA Archives; Robert M. Ball, “Medical Care: Its Social and Organizational Aspects,” New England Journal of Medicine, n.d., SSA, Box 300, NARA; Robert Ball, “Staff Paper on the Limitations of Private Health Insurance for the Aged,” 15 Oct. 1963, SSA, Box 299, NARA.
170. Earl Clark to General Agents, 6 May 1965, Box 14, Grahame Papers.
171. Robert Ball to the Secretary, “Alternative Arrangements for Administering a Program of Hospital Insurance for the Aged,” 16 Aug.1963, SSA, Box 299, NARA; Robert Ball to Harold R. Levy, 10 Jul. 1963, SSA, Box 299, NARA.
172. See Morris, The Limits of Voluntarism, ch. 6, for the role of voluntary organizations in administering portions of the formal welfare state. On the “Politics of Accommodation,” see Starr, Social Transformation of American Medicine, 374–78.
The Blues assumed a larger proportion of intermediary contracts than did their commercial competitors. The important story of nonprofits is fully covered in my forthcoming dissertation, Ensuring America's Health.
173. See for example “Summary of Meeting of the Subcommittee of the Work Group on Physician Participation,” 10 Dec. 1965, SSA, Box 1; “Summary of the First Meeting of the Work Group on Intermediaries,” 14–15 Oct. 1965, SSA, Box 1; Robert Ball to Proposed Intermediaries, 8 Feb. 1966, SSA, Box 1; “Determination of Reasonable Charges,” 14 Mar. 1966, SSA, Box 299; all at NARA.
174. Insurance companies drew political fire during the late 1960s and 1970s for being too lenient in the payment of provider bills under Medicare. Furthermore, insurers grew increasingly frustrated during the 1970s and 1980s as reduced Medicare payments caused cost shifting to the private sector. Nonetheless, the general task of insurers was the same as that of the federal government—to manage and scrutinize the work of physicians and hospitals in order to constrain costs.
