September 2012 Brief: Volume 19, Number 27
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"How Shall We Pay for Health Care?"
by Deborah D. Thornton
As a child of the Depression, my mother-in-law never threw anything away. She might need it – sometime. When going through her effects recently I found a 1949 pamphlet, “How Shall We Pay for Health Care?” “Sometime” has arrived, and her habits provide the opportunity for an interesting history lesson.
The options were clearly outlined on the cover illustration: The family could send their money directly to the doctor, or they could send it to the big white building with columns and a flag on top – which would then send it to the exact same doctor. Published by the Public Affairs Committee, Inc., articles in the 4” by 8” pamphlet were written primarily by two key players in the 1949 national health-care debate.
The first was Oscar R. Ewing, an attorney who headed Federal Security Agency from 1947 to 1953. The Federal Security Agency controlled Social Security, the Public Health Service, the Food and Drug Administration, and the Civilian Conservation Corps, later becoming Health, Education, and Welfare (HEW). Ewing also served as Vice Chairman of the Democrat National Committee and was a long-time Truman policy advisor.
Mr. Ewing was the lead Truman official supporting nationalized health care. He argued strongly that inability to afford care resulted in a “barrier of formidable properties between the doctor and his patient.” A nationalized system of medical care, funded by a 3 percent payroll deduction on incomes up to $4,800 and paid equally by the employer and employee, would be able to “cover all services and prevent, diagnose, and cure” all diseases. This system would result in full coverage for almost everyone (85 percent), but be “no major increased burden on the national economy.”
A national committee would advise state governments on broad standards, while local committees would determine the “fair scale of fees.” Doctors could charge on a service-provided basis or by the number of patients, with a limit on how many a doctor could claim. The patients would be free to choose their own doctor – an important concern even in the 1940s. This system would have the “same amount of paperwork” as the private insurance companies. Ewing claimed that the administrative overhead would be no more than 5 to 7 percent of the wage deductions.
For those without jobs, who were indigent, or were bad risks there would be a means test and the government would pay. Ewing estimated that the cost to cover these people would be only 14 to 25 percent above the payroll tax. The government would provide the additional funds (from where he did not say…). Ewing did admit that the services offered would have to be determined by “what we’re willing to pay” to cover the unemployed, indigent, and bad health risks. Though the terms rationing and death panels were not used, the issues raised were the same as today. What services, at what cost? After seeing that nationalized health care would not pass, Ewing became the main proponent of Medicare for those over 65.
The second article was written by Dr. George F. Lull, Secretary of the American Medical Association (AMA). Dr. Lull had been a Major General in the Army in the Medical Department, and also served as an Assistant Surgeon General.  The AMA was opposed to Truman’s legislation, instead favoring the expansion of medical facilities, increased numbers of doctors, and continued expansion of voluntary health insurance, including a “service card” proposal similar to reform proposals of today. By 1949, Blue Cross was covering approximately 32 million Americans with medical insurance and approximately 100 voluntary societies were covering another 11.5 million people. Some 20 million were reported to have hospitalization insurance only.
There were, however, significant rural and Southern care shortages. Maternal and infant mortality were of special concern in rural, Southern, and minority households, because most women had limited medical care. Minorities were generally considered uninsurable.
Lull’s concerns included the “hampering and destroying of the professional freedom” of doctors, and the political control of health care decisions by government bureaucrats. His estimate was that 400,000 – 500,000 new government workers would be required to manage the program. He referenced the problems with the newly implemented English health care program and significant cost increases in New Zealand. Medical care costs there had more than tripled in only six years, following nationalized medicine. Many of the problems Lull cited remain today – patient confidentiality, limited choice of physicians, number of patients seen, panel practice, and government approval of procedures.
The cost estimates Lull offered were significantly higher than those quoted by Ewing, requiring the payment of “six percent initially and as much as eight to ten percent” in payroll taxes on top of social security and federal income taxes.
Other organizations, such as the New York Academy of Medicine and Catholic Service Organization also presented alternatives. Both of these groups basically advocated for HMO type care organizations – with all services under one roof – and for state control. The Catholics supported a federal tax credit to encourage the purchase of individual private insurance. They also argued for a base amount of money provided to the poor, which would allow them to either buy private insurance or acquire it through a state plan.
It is obvious, 63 years after this pamphlet was issued, that many problems have been substantially addressed – including elder care (Medicare), indigent care (Medicaid), general infant and mother mortality, and rural access issues. The vast majority of Americans have health-care insurance – yet, the push for nationalized health care continues. Concerns about government control and bureaucracy, cost of care versus the care provided, who decides what care is received, and patient/doctor independence are still relevant. The question remains, “How Shall We Pay for Health Care?” And the final answer also remains – in the end, life is still finite.
A copy of the 1949 brochure, "How Shall We Pay for Health Care?" is available at
Deborah D. Thornton is a Research Analyst with Public Interest Institute, Mount Pleasant, Iowa. Contact him at Public.Interest.Institute@LimitedGovernment.org.
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