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  • Healthcare Under the Microscope
  • David Herzberg (bio)
Jonathan Engel. Poor People’s Medicine: Medicaid and American Charity Care Since 1965. Durham, NC: Duke University Press, 2006. 318 pp. Notes, bibliography, and index. $79.95 (cloth); $22.95 (paper).

In Poor People's Medicine, Jonathan Engel examines the troubled history of Medicaid and comes to a surprising conclusion: all things considered, it has worked pretty well. For a program criticized on the left for falling short of national health insurance, and damned on the right as a budget-crushing invitation to government dependence, such positive judgments are not easy to come by. After a careful and detailed look at Medicaid's legislative and social history, however, Engel finds that the program has continually improved the health of the poor and that most Americans have been happy with it (and the broader healthcare system). These two basic facts, he suggests, explain the program's survival in relatively consistent form over the years despite its deep and—for many poor people—even catastrophic shortcomings.

Engel traces Medicaid's emergence to a crisis brought on, ironically, by medical advances in the "golden age" of the 1950s. After World War II, antibiotics and other innovations gave physicians truly curative power over a myriad of illnesses for the first time. This raised both the value and the costs of healthcare: suddenly, money could actually buy health. This sharpened the long-existing divide between hospitals that served paying populations and the public and private sectarian hospitals devoted to the poor. To the extent that charity hospitals focused on curing illness instead of providing comfort and spiritual guidance, they, too, began to re-orient away from a social welfare mission and towards a more conventionally therapeutic one. Medicine's rising power threatened the traditional system of charity care for the poor.

Despite the brewing crisis, Engel argues, the healthcare system remained solvent in the 1950s because middle-class Americans increasingly held hospital and physician insurance. Hospitals charged insurers higher fees to recoup unpaid charity care, and insurers passed along the increases to their customers. This system of redistributing costs worked fairly well in the 1950s, when overall medical expenditures remained relatively low, and federal dollars flowed into research, hospital construction, and public health. [End Page 140]

The system's flaws were already evident to those paying attention, however. The most important one, according to Engel, was the problem of the elderly. How could an insurance-based system handle this known high-risk population? Because the elderly voted in disproportionate numbers, Engel writes, politicians hastened to address their needs, with decidedly mixed results. The 1957 Forand Bill to cover sixty days of hospitalization to Social Security recipients died in committee, opposed by physicians' and insurers' groups. Faring better was the 1960 Kerr-Mills bill focusing only on the elderly poor. Its success came in part because of support from the American Hospital Association, which feared that insurers would one day balk at the high charges necessary to recoup losses from charity care. The new law established matching federal grants to states to cover health costs for the elderly poor. But this state-administered program was unwieldy, slow to reimburse, and failed to pay market rates for services; hospitals eventually began rejecting Kerr-Mills patients as nothing but glorified charity care. Like the nation's poor, the elderly continued to miss out on the ever-improving wonders of modern medicine.

This was exactly the sort of problem that President Lyndon Johnson vowed to address after his election in 1964. Rallying a new cultural willingness to absolve the poor of culpability for their state, Johnson declared a federal "War on Poverty." Among its many programs were two ambitious revisions to the Social Security Act to address healthcare: Medicare (for the elderly) and Medicaid (for the poor). The two programs were quite different, paralleling existing divisions between the "social insurance" and "welfare" elements of the Social Security Act. Medicare, shaped by physician and hospital lobbying, was to be "social insurance" for the elderly: its hospital insurance was paid for by all wage-earners through a separate payroll tax, and its voluntary physician insurance was heavily subsidized but paid for by beneficiaries. Furthermore...

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