restricted access 5. Economic Security
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chapter five economic security Beginning with the collapse of the stock market in October 1929, the Great Depression settled in as an omnipresent social and economic fact during 1930. The Depression represented a substantial threat to the health of the American people and placed immense stress on the nation’s health care delivery system. With their finances stretched past the breaking point, state and local governments found it difficult to fund public health work and to continue helping to finance individual medical services for the indigent. For physicians, the tradition of providing charity care became difficult to sustain as more and more patients became unable to pay. Hospitals faced similarly major sustainability issues. These pressures came on top of what by the late 1920s was already recognized as a looming crisis in the financing of American health care. In 1932, after a more than decade-long lull, government-backed health insurance again emerged as a central issue in American health policy. The precipitating event was a report issued by the Committee on the Costs of Medical Care (CCMC), a privately funded group comprising physicians, public health workers, and social scientists. After the CCMC’s majority proposal that the delivery of medical services be reorganized, with physicians working in groups connected to hospitals and payment financed through voluntary insurance, the AMA launched an all-out assault. The proposals, the AMA maintained, were the first step toward revolution. The divisions over health policy that reared their head in the aftermath of the CCMC report proved central in the development of the health provisions of what became the 1935 Social Security Act. In November 1932, the month the CCMC report was issued, Democrat Franklin Roosevelt was elected president. Having claimed the House of Representatives in the 1930 midterm elections, Democrats also gained control of the Senate. In both chambers, the party’s majorities were overwhelming . The federal government began funding the PHS’s rural sanitation program through its Federal Emergency Relief Administration (FERA). FERA also began funding individual medical services for the indigent and, through its short-lived Civil Works Administration (CWA), ECONOMIC SECURITY : 97 large-scale public health interventions such as drainage projects aimed at Southern malaria. The framework for the Social Security Act (originally called the Economic Security bill) was drafted by the Committee on Economic Security (CES), which was created by an executive order in June 1934. Edgar Sydenstricker, the longtime PHS statistician who now served as a chief researcher for the Milbank Memorial Fund, was put in charge of the committee’s Technical Committee on Medical Care. In this role, Sydenstricker was in charge of drafting the report on risks to economic security arising out of ill health for the committee. Thomas Parran Jr., the prominent PHS officer, veteran of the extracantonment effort and rural sanitation program, and adherent of a broad vision of the appropriate role of the federal government in ensuring American health, was a key member of the CES’s advisory committee on medical care. Already, it was widely known that President Roosevelt would soon appoint Parran surgeon general. Ultimately, the CES’s report to the president included a proposal that the PHS be granted a great deal of latitude in expanding the rural sanitation program into a nationwide system of assistance to states and localities for developing high-quality public health infrastructure. Public health, notably, was not among the areas that the CES originally instructed Sydenstricker ’s Technical Committee on Medical Care to investigate. Meanwhile, the CES did not endorse the Technical Committee on Medical Care’s plan for federally funded but locally administered health insurance. Deemed too politically volatile, and potentially a threat to passing the entire economic security program, insurance was excluded from the CES’s report to the president. The PHS’s Thomas Parran proposed an alternative plan, centered around direct federal payments for indigent health services and for particularly expensive illnesses, treatments, and diagnostic facilities. Influenced by the earlier Hermann Biggs health center proposal, this plan was discussed favorably in the CES’s medical advisory committee but was rejected by Sydenstricker. The development of what became the Social Security Act’s health provisions during 1934–1935 marked the beginning of a critical juncture in the political development of American health policy. At this point, a variety of approaches might have been taken to structuring the federal government’s role in American health care, including the creation of a health policy regime that encompassed both public health and...


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