Christy Ford Chapin on the History of Health Insurance in America

My guest for the latest episode is Christy Ford Chapin, Associate Professor of History at the University of Maryland, Baltimore County. Christy wrote *Ensuring America's Health: The Public Creation of the Corporate Health Care System*, which covers in enormous detail the historical origins of the US Health Insurance system. The central thesis of the book is that the American Medical Association was the linchpin player in warding off alternative payment systems for healthcare in the US. It's a fascinating idea and also serves as an excellent excuse to tour the origins of our system today. 

We cover much more including how hard it is to categorize the AMA's political stance in today's language, the variety of alternative systems in the early 20th century, how fraternal associations were the original insurers, whether the political diversity of the US was really to blame, whether Medicare would have been passed if JFK hadn't been assassinated and when the first worries about the cost of healthcare started to emerge.

Christy's homepage: https://history.umbc.edu/facultystaff/full-time/christy-ford-chapin/

Show notes:
https://notunreasonable.com/2022/01/10/christy-ford-chapin-on-the-history-of-health-insurance-in-america/
youtube: https://youtu.be/WlnYHVFwKhM

Twitter: @davecwright
Surprise, It's Insurance mailing list
Linkedin
Social Science of Insurance Essays

Transcript

David Wright:   0:00
Welcome to the not unreasonable podcast hosted by me, David Wright. This is a show of interviews with people who have something to teach us about managing our businesses and ourselves. There's a lot to learn out there, folks, so let's get to work. This show is brought to you by alway insurance, where we're building software on a I to protect our customers through education insights and personalized recommendations on how to transfer and mitigate risks. We're always looking for talented people and great ideas. Reach out to me on Lincoln or at David at all way dot com. My guest today is Christy Ford Chapin, associate professor of history at the University of Maryland, Baltimore County. She's the author of Ensuring America's Health. The Public Creation of the Corporate Health Care System, which will be discussing today. Christy, welcome to the show.

Christy Chapin:   0:46
Thank you for having me

David Wright:   0:47
You wrote a paper with a great name: "Going Behind with the 15 Cent Policy: Black Owned Insurance Companies and the State". So please tell us about the name, but also about the central idea. There is why black owned insurance companies were at the dawn of the 20th century at a disadvantage. And I mean in addition to fighting explicit racial segregation and usual things we associate with this kind of thinking. But black owned insurers haven't even harder battle to fight, right?

Christy Chapin:   1:10
They did. They did. So the quote in the title going behind with that 15 cents, Um, policy that comes from Jesse Jackson when he was giving a talk to the insurance industry and he was basically characterizing their industry. You all are right underwriting this 15 cent policies where the mainstream white owned and operated insurance companies they they underwrite, You know, the life insurance policies that are larger and, of course, very importantly in the insurance industry. They underwrite the group insurance that people got through their employers. Um, and that's the interesting history that I explore in that article. So I got interested in the black owned in life insurance business, and I wanted to find out what happened to them and thankfully, I That's why I love being a historian. It's so great we can have a questioning. Just go research it, Um, and I was surprised what I found, because if you look at the way people have studied black owned business there's this theme that you see that constantly re occurs is after segregation after segregation ends formally. Once we get the Civil Rights Act in the 19 sixties, well, black owned business, of course, it's a mint to go away with integration. They're too weak. They couldn't. They couldn't continue to thrive in an integrated economy. And I already thought that was kind of, Ah, strange argument because we know there are lots of small businesses that thrive by having a niche market. Absolutely. In fact, there's been a lot of interesting work done more recently. You know, Alfred Chandler's been very important in business history for mapping out these gigantic corporations and what we think of the American corporation. But then you have people like Philip Scranton coming in with looking at small businesses and saying, Look at how important they are to and such large drivers of the economy on DSO. A lot of work has come out of that. And so, looking at these black owned insurance companies, what I found was not only were they disadvantaged by formal segregation and racism, and such is that there were policies that were passed, that benefited, you concede is the type of corporate welfare for the white owned and operated insurance companies that they were shut out from, and it was not done on purpose. I'm sure they're plenty of policymakers who would have been happy to do it on purpose. Um, but basically, for your listeners who might not know, the reason that businesses underwrite group insurance is it's because of the tax code. They get a nice right off whenever they supply benefits for their employees, and certainly earlier in the 20th century they were very motivated to do so because it helped them thwart union organizing. They wanted to have the workers loyal to them, not to a union that might provide them benefits, whether life insurance or health insurance. Um, So, um, what we see is this this because of the tax code, we see the insurance industry really transformed from being about individually underwritten policies to group policies. You really see that transition in the twenties and thirties? Um, but then, on top of this federal tax policy, you also have state regulations that are deciding who counts. Is this group thing group that qualifies for the tax benefit or that you can because When you are underwriting group policies, you get around a lot of state regulations. You can get a lot around a lot of regulations under this idea that the business is purchasing the policies, they have the expertise to not be cheated. You know, they know what they're doing. Well, the black owned insurance companies don't get this benefit because, well, first of all, they're not going to underwrite, obviously, employee insurance for the big large. You know, they're not gonna go into Ford Motor Company and get that account because of racism. But they're also stopped from underwriting a group insurance for their own black owned businesses because a lot of times they're not large enough to qualify under state regulations. To count is a group, um, or

David Wright:   5:11
they're not even a business

Christy Chapin:   5:12
or they're meant business. Sure. Massive mutual aid society. These things were huge and

David Wright:   5:21
bigger in the black community,

Christy Chapin:   5:22
a much bigger because that's that's how they provided for one another, right? And so it was kind of heartbreaking because I'm sitting there in these archives and they're down at Duke and I'm looking at North Carolina Mutual. It's a large black owned, a successful one of the most successful, probably the most successful and seeing all these different groups. Either they're not employer employee relationship, which knocked him out or they weren't 50 orm or you know, so it's a black owned ballet studio or a haircut. And then, like you said, there were all these big, large groups that it was an employer employee, although also the church associations as well. So many of them writing to this company and asking if they can have thes group policies, which is where the industry's going. We all know that's so important because it's so much decreases the overhead A. You're I'm sure your listeners know that when you're underwriting individual policies of the overhead and having to collect the money every quarter or whatever it might be on individual policies, you just need so much more administrative capacity to administer that that that's a very high cost proposition. So seeing all these groups riding to the this insurance committee, asking for group insurance and them having a running back and say no, we can't because of these laws and regulations, So they really did kneecapped, they really do. They don't have this ability to develop along with their community. Um And then when? Once you get up to the 19 seventies and eighties because consumer protection become such a big deal and you have so many more regulations on both the federal and state level, they are the ones that are hurt by far the most in

David Wright:   6:56
the. In some ways, they're stunted growth of them as a result of this, which was fascinating to me as well. You kind of have this. I mean, you don't want to call it necessarily a historical accident, right? But you have this peculiar unintended consequence and let's give a minute for the damn call. Unintended consequences, you pointed out. There's a lot of folks have been pretty happy about that under any consequence in the sense of the racial tension of the time. And they didn't have, as a result of this, the financial strength to compete later on. Right. So you have you made a distinction between the industrial and the ordinary policies, right, which is interesting. I never heard that before, So you have these kind of like the life insurance policies that only pay a small amount of money just to have something other than a non funeral for somebody, right? Right and all they could afford to give. And then you, the bigger companies saying, Hey, we could give you more, better policies and even the black community themselves, saying You're not as good of a company. You know, we have this. We have this kind of communal residence with each other. You're black and insurance company on myself. Remember the community? But e, I need to go with the real company.

Christy Chapin:   7:54
Sorry. Exactly so that you have African Americans who want to support black owned, you know, cos they're they're having to more and more turn away from their own companies because the bigger, white operated wealthier favored right favored through policy. They can give them a better policy, much cheaper price. And it's it's simply because the black operated companies were not given that same opportunity.

David Wright:   8:18
There's there's one my reading of this coming from the insurance business and seeing some reason residue of these decisions, which I I understand from an actuarial perspective because one of the things that group policies have the individual policies don't is that the installation of the group? So what? You have the dynamic you have in in the insurance business. When you go up to an individual and you say I want to say this health insurance policy, people who are healthy will not buy it and keep the money right. And then people who aren't healthy, we'll biopsy his moral hazard problem Right now in a group setting, you tend to have better uptake of the policies. And so on some margin you tend to have a higher percentage of healthy people buying a policy than and there's this like there's kind of a weird correlation causation argument here, right? So in some real important sense, there's an equilibrium in a group where, by more healthy people buy the insurance and an individual setting. It's not the case, and so as a result, you have a lower price, right and so that you can offer on a group coverage. And this is just an absolute truth and its truth. Today, group coverages are cheaper.

Christy Chapin:   9:19
Oh yeah, our coverage less premium. You've got the risk balanced and then also imagine especially, you know, the first half of 20th century on these individual policies, they have to go door to door not just to sell them pursue cool, like the payments. So think of the cost in that it's a massive instead of just the company's sending a check in for this massive group. ESO

David Wright:   9:40
doesn't have credit cards. You don't have bank drafts. You don't have a little trying payments, which really leave a level playing field. So I see this as as an evolution. In some ways, one of the things would have happened before. The advent of this legislation is that a lot of insurance companies would probably have gone bust rights. You have insurance entities who are under pricing policies. And then there's a huge What's interesting about insurance regulation is you have the consumer protection side and you also have this other side, which is actually corporate protection, corporate welfare. And you pointed out, you might use that. Those words is gonna go, I think, where you have to protect insurance companies from themselves because they will underprice their policies and it will explode. And it's a shower of consumer angst and problems because people can't get their claims paid and all the rest of that and surveyors move in and actually prevent insurance companies from underpricing right and so I interpret least a portion of this group legislation as being protecting the insurance companies against themselves. You have to go to employer groups because they're a bit more stable than his own employer groups. And so, you know, we had probably a couple of insurance companies that have failed because they supported on employer groups under price policies in. So we're gonna come in with a heavy hand, just clear the table and say you have to go to the easy ones, and that has these unintended consequences. The insurance industry is becoming more sophisticated,

Christy Chapin:   10:50
right? Right. It certainly has. Um, the insurance industry had some scandals at the beginning of the 20th century, and you had the Armstrong hearings of the New York starts regulating insurance more carefully. And those regulations are copied by a lot of other states is yours. I'm sure your listeners no insurance. The insurance industry is very odd in the way it is regulated by states. Um um, And the interesting thing is, the insurance industry did not like that and was pushing for federal regulations so it could be uniform and not different. Every state you can imagine the cost of the burdens with that. But as soon as the federal government started ramping up more, we see that in the progressive era and certainly going into them. It's definitely by the time in the 19 thirties, with the new Deal in the unprecedented intervention of federal government into the economy. That's when the insurance industry says no. We're doing everything we can to protect our state regulatory. That's the state, the state being where our regulatory jurisdiction is rather than the federal government

David Wright:   11:47
at the same time, What's interesting? One thing I've learned things I learned from your book was as the insured. It's almost like all of society is becoming a little bit more integrated and sophisticated. And another area, which is this happening is in is in health care and then actually specifically physician training. And then there's this thing called the Flexner report. I think it is. All right. So tell me, Little tells. What about that

Christy Chapin:   12:08
s o the Flex? No report was I think he worked for the Carnegie Foundation. It was one of these philanthropies that gave the Carnegies and Rockefellers. That's one thing that has been important for American medicine has been all this money that has been charitably put into it. But they hired Ah, this man, Abraham Flexner, to do go around the country and survey all our medical schools. So the U. S medical schools If you looked at him in the 19th century, they were a joke, even at the best. Even at Harvard and Yale, there were jokes about Oh, you're illiterate. You can't You know you can't go team, Ministry or law. You need to be a doctor. And it is hard for us to wrap her life right, because it's so different from the way it is today, right? So basically, any medical school could just kind of crop up anywhere. You have a room in a couple doctors and they can collect fees, right? So one of the things the AM a. The American Medical Association one of their big things they wanted to do their founded in the mid 19th century is reform medical schools. Even though Flexner does not work directly with them, they're going to use his findings. But Flexner was an undergrad at Johns Hopkins. He didn't go to medical school there, but he uses Johns Hopkins is the model because Johns Hopkins is modeled after the European medical universities. And in the 19th century, if you wanted to be a prestigious physician, you did not get trained in the United States. You either went to England. There's time at the beginning of the 19th century, where it was France, and then certainly by the end of the 19th century, it's Germany, you know, everything's about their their the height off medicine and suffix sophisticated scientific knowledge. Eso Johns Hopkins was modeled after that European, um, medical university where you had professors who conducted research. Um, and we're also in the clinic but taught classes. And also they had their own hospital where they could teach their students, and they drastically raise the requirements for medical students To get in, you have to be able to re German. You had to be able to read French. You had you not be illiterate, you know is the joke, you know, and medical schools didn't want to do that. Because if they did that when they lose all their paying customers, so s so. Of course, that's why they didn't. They weren't incentivized to do so. But once the flexible report comes out and it kind of is a report card off. What? Um, the university's look like the top tier ones Start implementing reforms, and a lot of the lower tier once just go out of business. But the A Emma is able to use this grating of medical universities along with licensing laws that they're having either put on the books around this time in the 19th century, began the 20th century or strengthened in each state. And so they can say these air the only universities that quality that qualify you. You know, if you're if you're getting a medical degree to sit for the licensing exam, so then they can have a lot. They can also come in Ah, and have a lot of power over what's a legitimate medical school and what isn't. The downside is you're gonna have a lot fewer women, African Americans and also poor working class people going into medicine because the costs are going to shoot way up to your right. But the upside is our medical universities. The quality comes right and and this is around the period where you know the United States is very soon going to come and be the leader off. You know, medical science worldwide.

David Wright:   15:39
Yeah. Held ever since. And it's interesting to me that you see the foreshadow of, um, important. Call it a segment of the debate on health care costs. Right, Which is the, uh, the wages of the people in the health care industry. Right. And you can you can see that in the 18 or 19 century, I imagine that health care was certainly relatively cheap in the United States. You get a low quality product you get what you paid for. It's not really it's, Ah, it's not costing too much. And suddenly you have this revolution which really kind of takes the whole industry by storm pretty quickly, right in the AMA is an important vehicle for that professionalization of medicine, and I'm sure the costs are going up.  

Christy Chapin:   16:17
Yes, absolutely.  

David Wright:   16:18
Your eyes is an interesting question that I've been thinking about, cause I see lots of references way earlier than you think in your in your work about people kind of wringing their hands and complaining about the skyrocketing costs of health care.

Christy Chapin:   16:29
Right

David Wright:   16:30
When was the first was the first instance of that that you can recall?

Christy Chapin:   16:33
Oh, I'd be hard to say because and also this book gosh, It came out in 2015 and haven't worked on it so and now I'm working on finance. I was so long ago, but I am thinking about how I did look at some reports in the 1920s. And it was a problem before that because, you know, the discovery of germ theory end of the 19th century. This is why doctors become all of a sudden, so prestigious is wow, they're not killing us, but they're not exactly so. And they're actually in a very, you know, Maur far more effective medicines. And they know what is causing illness. So So, of course, the costs go up because they have more techno. They have surgery. You know that all these advances, their cleanliness. Obviously, they have to figure that all these important things were going on. And so the prices are going up with the problem with help with health care, of course, is it's difficult to predict. So if, say, in the 19 twenties, ah, family has a member who needs to be hospitalized and they're looking at. That's 1/4 of our income for a year. That's very difficult to budget for because maybe you needed maybe a don't What? So you can see why there's this problem and why the market people being clever like they are, comes up with all these really and interesting ways of taking care of that,

David Wright:   17:50
Yes. And so there are lots of different vehicles for delivering this health insurance, right? You have these fraternal societies, and you have community groups and churches and the like, and those start receding importance. But you have a lot of other lots of you have hospitals, for example, maybe talk a bit about what options does somebody have? If you want to get a medical care, where do you go in the 19 twenties?

Christy Chapin:   18:10
Right in the 19 twenties. So what a lot of people don't realize about the health care market is, um, the model we have now is a very specific model. I called the insurance company model. We can talk about that later, but what people don't realize is that there were all these other models, all these other ways of organizing health care. And if you're looking at the 19 twenties, there were just so many. So, for example, mutual aid societies and fraternal orders were very important in the United States, particularly for African Americans and immigrants. I mean, you would be shocked at how many just Croatian mutual aid society there were in the country. They were thousands and thousands of these. So you can imagine if you're an immigrant, you get together. You know, with your people in town were food right? Tell each other about job opportunities.

David Wright:   18:59
You bring more people over from your old country.

Christy Chapin:   19:01
Exactly. You protect one another, you would see, like the Italian mutilates is going down to the ports in New York to make sure that they're people coming off. The boats straight from Italy weren't taken advantage of by all the shysters and hucksters down there saying, Hey, give me this money and I'll take you here whatever it may be. So they needed one another. And so it was very much like, If you think of a fraternity or sorority today, you pay dues. And so, of course, it's a social function. They also usually had elaborate costumes and, you know, handshakes such. But with that pot of dues, they would make business loans to one another, almost always underwrote life insurance for one another and then, of course, started providing health care for one another. So you can imagine the jute, one of the many Jewish mutual aid societies, whether it's in Baltimore, in New York City, contracting with a Jewish physician or several Jewish physicians are depending on the side

David Wright:   19:54
of the group

Christy Chapin:   19:55
part of the group. And this is, you know, we're paying you this set amount and anybody who belongs to our Mutual Aid Society, you have to come see. And they would do. Really it was interesting, too, because they were sophisticated about these problems off. Um, well, they didn't want people taking advantage of the groups that sometimes he would have a member, a leader of the mutual aid Society, go with the person to the physician. And plus, they're also in a very closed community, you know, in a tight knit community so you don't have people wanting Thio Trust right words. People are find ripping off a big corporation a lot of times. Unfortunately, they can. They can rationalize that to themselves. It's much more difficult to do that to your community,

David Wright:   20:38
social costs to it, right? Right. So next time you see each other at the potluck at that church or whatever it is. That's what you do that for exactly. You don't want that conversation,

Christy Chapin:   20:47
so these actually became very sophisticated. Some of these there were mutual aid societies that were so large that they built their own hospitals, and then you could have entry into that hospital. There was a black owned and operated hospital in Mississippi, for example. Now, this is just one of the many organizational models. Businesses were trying different things, whether they would have physicians, you know, employed almost his man, you know, in a salaried position there to take care of workers to look for possible hazards. You know, they wantto limit their negative PR. Also, of course, the screen out sick applicants from the employee pool on and then that would gradually turn into them. Also being there for the family members you had. Consumer Cooper's were very popular. That's when you would have again people paying a physician group a set amount, say, every month or quarter and order to have benefits, and also often they include hospital benefits. But if their consumer cooperate often the board that operated it, it would be voted in by the policyholders. So you see, this of one famous example was in Oklahoma with the consumer cooperative there. But then when we get to the 19 thirties, the federal government actually sends people around the country toe work with farmers groups, and they set these up everywhere. So they work with farmers. Groups with basically get together with the local medical society, hammer out. You know the set cost on. Then the farmers can get their health care as long as they're paying this or the government would for them pay this this monthly fee. Um so those are just Some of the unions were very, very involved in this, and they were They were probably the most sophisticated as faras understanding the wrists and the costs. And so they would sometimes contract out whether hospitals and physicians, or sometimes they would own their own medical centers. Of course, the aim A did not like any of definitely did not what unions and labor leaders in charge of physicians. But they did not like any off these organizational models, and kind of surprisingly, they also didn't like the prepaid physician group, which was an organizational model that I think you know, if not pushed down and held back by the A M A would have become the dominant model. I think in our health care system, because they were so popular. And what made these physician groups different from physician groups today is first of all, they were multi specialty, not single specialty. So they really own the patient

David Wright:   23:15
Mayo Clinic. One of the first things

Christy Chapin:   23:17
they get away with it for so because they're connected to the a m A. They get away with it with all the other ones, all the other people working it. They have a maid going after their licenses cross lose. Exactly. They're hospital admitting privileges because this is the time when physicians had a lot more power over hospitals. Now it's the reverse. Right now, hospitals have a lot more power over physicians. They would use that and also, if you got kicked out of the local medical society, which is a constituent society, it was almost impossible for you to get malpractice insurance, which in our litigious society, was already very important in the early 20th. Yeah, one of

David Wright:   23:53
the things that I learned was actually the hospitals and physicians are distinct, actually has kind of interest groups or whatever. You know, economic units. We're I away. I mean, I always had just kind of completed in my guests thought of them as a kind of one thing one, but they're not right. And they departed. He parted company very, very drastically in the twenties where the hospital group started. They formed Blue Cross or the Precursor to cross me. Talk a bit about that.

Christy Chapin:   24:16
Yeah, sure. Um so just a finish up real quickly with the physician groups is they were multi specialty, and you paid your monthly fee. You know, family, individual, whatever it might be on. And they almost always were somehow associated with the hospital had their own hospital or admitting privileges. And you've got unlimited care from. And because it was multi specialty, they couldn't just write you off and send you to a specialist they owned. You're you're how healthy you were. And because these physicians acted is the insurers themselves. They underwrote the patients. They financed all this. They were perfectly incentivized so that they unlike today, there was no reason t have over utilization. That doesn't help them at all. Because they're most All of them are receiving a salary plus a portion of the profits every quarter. But on the other hand, if they ration care, they're gonna lose subscribers and also possibly make people sicker. And then that's gonna cost them more money down the road. Anyway,

David Wright:   25:13
the balance, those things, which is the

Christy Chapin:   25:15
whole problem, and and every health care system around the world. The problem is, either over utilization are rationing. And, of course, I submit that the physicians are the ones with the requisite expertise to under tow. Walk that very fine line. So they're the ones who need to be as incentivize car.

David Wright:   25:33
I'm from Canada. And what my experience of the health years I haven't studied it, ironically enough, as deeply as have the U. S. System. Is there a little your book? But my my memory of it is that the doctor is the gatekeeper for everything. So your primary care physician actually is the one who will say you need this or don't. And then I think there's some actually, some macro level rationing of some service is so many memories a year in this kind of thing. But for the most part, the doctor is actually the gatekeeper and in the U. S. System is very different. One of the things that I observe about just the experience of the system is that the doctors a lot Maur social distance between doctors and patients in Canada than there is here. Whereas here I find doctors or a little bit Maur accessible socially, personally, and then maybe this is as I'm getting older. I love the United States Been here for 10 years, but in Canada, I always found it to be a little more little cooler, a little more distant and a little more kind of imperious. And I have friends, your positions in Canada, eh? So I gotta be careful there, of course. But that's how I remember it, right? And remember them being a little bit more kind of in control. I'm the expert. You just sit there and I'm gonna tell you what to do. And you can't criticize it.

Christy Chapin:   26:41
Well, I mean, just off the cuff, I wonder. First of all cultural differences, we all know how the Americans are as I'm rolling my eyes of and laughing at us. But also I wonder if it is because They're almost in a political position, you know? And so there's vested with political power in a way that our physicians are.

David Wright:   26:59
Yes, yes. That was always been kind of pop psychology. Sort of explanation for it. But, you know, I think that what may be ironic is the A m a being obsessed American Medical Association been obsessed with Dr Status and Control. Introduced a very different system whereby it kind of sultan this consequence, which is kind of strange, right? Right. So what? It does puzzle me Even though I've read the explanation, I want to hear you talk about it. Why the aim? A opposed its own. You think like we want to be empowered. And so Dr own physician groups are owned by doctors were the association of Physicians. But we don't want these Dr own groups explain that.

Christy Chapin:   27:34
Yeah, I know. It sounds crazy, Onda. Also even to that the am I was very much against health insurance at all. Any kind of pre paid benefits, which is a synonym for health insurance back then. Anything. So the reason is and this is again hard for us to imagine, because the time period we live and we're even though there can be a lot of hostility to the large corporations were still used to them, right? We're still very much accustomed to them at the end of the 19th century beginning of the 20th century. This is a new phenomenon to American. I mean, that American to worldwide civilization, right? Humanity had been going for thousands and thousands of years and never had seen these large, hierarchical bureaucratic structures. Not under the government. You solve them over the government military. But these were private, uh, corporations with private power on lots of money. So is that this is, you know, kind of as American History's told you have the reactions the progressive Ah, the progressives, right? Who want who want the federal government Maur involved in the economy. But what you also seeing what people don't realize is that there was this nervousness among professionals about the corporation and by being about being swept up into the corporation and losing your autonomy being de skilled, think of all the factory workers and for professionals. Think of maybe the engineer, for example. They get sucked into the corporation, and so then they're part of this hierarchy. and they have possibly lay people who don't understand what they are doing. You don't have the same expertise who are over them. And so physicians are very afraid of anything that's gonna turn into a corporation on. They're looking at the's physician groups, and they're seeing some hierarchy there cause you're gonna have the more senior physicians you know in charge of more junior physicians. They're seeing capital pulling any time they see capital pulling. They are not happy they went there just to be an individual payment. Really, I'm laughing because this is It's hard to believe that they want to stick to this pre modern model of the individual person paying the physician what they can and nothing in between no health insurer, mutual aid society or consumer cooperative. And they don't They don't even want the physicians to be involved with that, because they see, for example, with the Ross Loose prepaid group in California. It's a very large one. I mean, they employed, like, 50 physicians. I mean, they had 40,000 patients. If I'm remembering the numbers right, I hope I am. But not all of them, we're gonna be this big is gonna pretend depend on the area you're in. Um, and also it's big becomes more and more difficult to set these up and grow them when the A M A. Is is going after any physicians associated with them and trying to get their licenses poor. And during this period, the AM really controlled state licensing boards. The AM A does not have this kind of power today. But then they did, and they would even print things. In The Journal of the American Medical Association, this prestigious medical scientific journal worldwide warnings the physicians that if you join, if you are part of any of these third party contracting or anything prepaid physician groups, we are going to come after

David Wright:   30:49
any business. Yes, yes, part of any business.

Christy Chapin:   30:52
So they're very afraid of the corporation Number one. They don't want what they would say quote supermarket medicine or mass produced medicine, which, unfortunately, that you no way needed efficiency and especially, yeah, exactly deficiency on, then. The other reason is because they're looking at Europe, and you know that, you know, at the end of the 19th century, Germany becomes the first, um, Western country to roll out health care benefits to the federal government in 1911. You have that going on in England with workers, and they have a very developed systems of mutual aid, healthcare through mutual aid, through unions to friendly societies and the AM A leader's interpret this as because they have all this private, you know, organization that because that's what causes the government to intervene. Um, I don't think they were right on that at all, but that's what they believe.

David Wright:   31:49
And so they crushed to the extent of the good. I mean, Ross, lose. I looked into that one's reading in your book, and it survived in some way, although the actual owners Ross and lose where they were kicked out of the M es where they d licensed.

Christy Chapin:   32:01
Yes, even though, like one of them had, I think was president of the San Diego Medical Society said they were fine and all good standing until they went on the wrong side of the A m. A. With economic policy in the way that medicine was going to be organized. But what's interesting

David Wright:   32:17
me is that about this episode to preview some of the future which were to come to you in a few minutes, but this'll model did survive, Right? You mentioned the Mayo Clinic, which is a weird kind of exception. But it survived in Ross. Lose survived as well. And then you had eventually they're re emergence as HMO's later on in the future. But the A maze power wasn't absolute in this case, right? It couldn't actually completely control everything. So maybe talking about about kind of what was the extent of their power here?

Christy Chapin:   32:49
Well, for 1st 1 thing I do want to say is thes prepaid groups were not like HMO's, even though the people who put through H M A regulation in the 19 seventies we're looking back at these prepaid groups trying to recapture it. But by then, you don't have the incentive set up correctly. The doctors are not directly tied to the bottom line. They're not financing the practice. You still have the insurer coming. All the H m overtly does is allow the insurer to come in and put more regulations and strictures on the physicians because they're desperately trying to control costs and can't so I mean, I have a sympathy for both sides of this equation, right? Eso HMO's are nothing like that. And then also Kaiser Permanent Day is nothing like that, even though I think a lot of people look at the pre paid physician groups and think of that because again it's not the physicians financing it. You have this kind of corporate third party. Ah, and they're more like said to me they look more like salaried physicians that you would see in England and Canada than they do like the physicians are talking about, because also, the way medicine was even practiced in a pre paid physician group was so exciting because they're getting together at the end of the day for all the really complex cases that they need to figure out in spitball. And what if we're treating him for this and this other thing at the same time? Or we can't figure it out? It's more exciting way to practice medicine because you're learning from your colleagues in another specialty instead of just getting like physicians do today there, same specialty, doing the same procedures, and they don't get that kind of opportunities. T talk with colleagues outside of their specialty. So, um, and an integrated medicine like that was so good for the patient. Where's today? You're just sent from specialists specialists, but and hopefully, hopefully somebody will figure out. But it's not really anybody's best interest to care whether or not they get you an answer. And that can be very frustrating for people who are who are sick. No, I'm sorry I went off on all that. You had another question where

David Wright:   34:39
we want it. Where I want to go is contrast ing the M ES efforts there with its its limitations on DS specifically that come back to the Blue Cross example where there's these hospital groups which is so closely with the physicians. But you know, when in a very different direction, right with with the creation of thes hospital groups, which is not the same thing as a physician group, right, Maybe you can contrast that. What's the difference?

Christy Chapin:   35:04
Right? So the hospital's you mentioned about hospitals and physicians being something very different. The physicians were not about to allow themselves to be rolled up into the same packages. The hospital's very hostile to that and the hospitals you see their attitude, hospital administrators and industry leaders. Their attitude to the government is much more positive because they had long been funded, their chair to be and government funding

David Wright:   35:29
their positions

Christy Chapin:   35:30
and their big organizations. So they always, for example, they were, you know, far more disposed toward in favor off Medicare. So in 1929 you have a story goes for Blue Cross. Ah, you have down in Baylor, Texas. Hospital administrator figures that Hey, why don't I go to the local teachers union? Have them, you know, pay this hospital set amount every month out of their check. And that way, when and if they get sick, they can just they can use our hospital, right? It's It's a form of insurance. Ah, and it was a way for him to pull in some revenues that the hospital really needed at that time. This develops into, ah, Blue Cross, but would once thehe merican hospital association gets involved, as they say, can't just be one hospital has to be all the hospitals in an area. And so this turns into Blue Cross Blue Shield is the physician side, which is separate, and these are basically just insurance companies. At first, they are different than commercial insurance companies. Um, their nonprofit, um they they do community rating, which probably most of your audience does. That means that everybody you know, at least within the same age category, has the same pays the same price for their policy. Um, they would doom or of individual underwriting, that the commercial insurance companies might not want to do quite a CZ much, although, and I found that that story is not entirely true because the political project the commercial insurers are involved in. But so they're nonprofits. The argument I make and I find in my research, is that really, by the end of the fifties, they really just pretty much resemble their commercial insurance companies. I mean, because of the competition, because of the rules that the AM a sets up on. And, of course, the H A sets up its own rules as well. But the aim is far more hostile, So the Blue Shield side does come out of medical societies. They are like they say, we need to found, you know, a parallel. They're kind of pushed to do it because we'll cross says if you don't, we're going to do it in a maze. Of course, again, being very protective, says no way

David Wright:   37:38
policies of the A may want What s So what is it? Let's go to the thirties, I guess. What's the difference from the Blue Cross plan in a blue shield plan? I sort of came with this impression that you do kind of need one of each because they don't totally overlap, right? Do different things,

Christy Chapin:   37:54
right? S Oh, yeah, you had to is a Blue cross only covered your hospitalization, right? And even if you were in the hospital wouldn't cover what the physician came and did. Like yeah, they insisted. Absolutely not. The hospital's not physician, because that will give them power over the position. So that's the way it works even today. And you even see them fighting about anesthesiologists and pathologist. But, you know, that's a we don't need to get to in the weeds there. So, um, yes, in order to have full coverage, is we think of it today. You have to buy a policy from Blue Cross and Blue Shield. So medical society start founding blue shields, and the way that looks in each state or area is different everywhere because in some places they'll have two different boards and maybe the same staff that they employ or other places that have the same board but different dates. It's very aid set up and structure differently everywhere. Other places will be so completely separate and often fighting all the time. Why did they name

David Wright:   38:54
them all the same? Why they all Blue Shield plans Blue Cross plans where they just sort of adopted common naming convention for branding purposes?

Christy Chapin:   38:59
Yes, yes, there's all these things where they have the straight are

David Wright:   39:03
individually dependent. They weren't linked

Christy Chapin:   39:05
because Blue Cross at this point was working so closely with A J. And they're following whatever the A. J is saying so. Hospitals, Yes, American Hospital Association. So, um so And it's really in every hospitals. Best interest to be in that network so that they can get those patients and with the American Hospital Association, is just insisting is that Blue Cross let all the hospitals in the area and and not and not selectively contract S O. That goes far more smoothly. It goes. It's much bumpier ride on the blue Shield side and the fights and the arguments between the, you know, the insurers and the physicians. Um, it looks slightly different. That's why did. In my in my book I have these case studies of Michigan um Philadelphia, Yeah, the Pennsylvania area and Texas to see how and some of the more progressive and also union dominated states their little more favorable towards Blue Shield. Um, but in Texas, on my just laugh at how I mean, there was just over fraud going on. It's what they were doing to the insurance companies and like, How dare you even question us? You know, that kind of Texas, but not put towards good purposes. So, yes, there is a lot of lot of bickering, but Blue Cross and Blue Shield, though I would say, you know, you really you want to look at them as basically insurance companies. They just get in sooner because their non profit and they do curry a lot more favour with unions for a long time for that reason to. And so they're able to get some of these big contracts through thes large companies because the unions are, um, would rather have there behind the ideology and the founders of Blue Cross, not Blue Shield as much at all. They really had a whole ideology, and they looked at it differently and they didn't want to be commercial. But by the time you get to the late fifties, a lot of that first generation is kind of retiring. And now they're bringing in people from the commercial industry anyway to be there. And it's all the whole culture is changing.

David Wright:   41:08
But it's one of the things that I was interested in. Intrigued by was the Blue Shoes Blue Cross plans. We're much more in in similar and spirit to this prepaid medical idea. So I guess you would pay some kind of subscription P and you can go to the hospital, right? But the position these Blue Cross type plans had a very different model. It wasn't there they were. They were indemnity policies, Right? So, uh, you pay in some money, you get a fixed number of dollars back, but the doctor might charge more than that. I think

Christy Chapin:   41:40
the A M. A insists on that. We're not gonna let you set our fees now. Today everybody's on a fee schedule, takes many battles and a long, uphill battle for insurance companies to get there. But first it is. Nobody's gonna tell physicians what they charge. So instead, insurance company. You have to send in an indemnity feed to your customer who will then pay maybe all but probably not their physician Bill. And what happens to is once the physician knows that the patient has insurance well. Studies from the period show that all the what they charge goes up on dhe. There's this inbuilt reason that this happens. It's because physicians before the rise of insurance, they always charge customers on a sliding fee scale, which was kind of a nice way to do things because they charged the rich, the wealthy are underwriting. They're giving away a lot of charitable care. Let's be honest. I mean, I was surprised at how much charitable care they were giving away. Even like saying the in the fifties to, you know, the elderly and how like writing off 1/3 of their medical bills and stuff. And, you know, I think a lot of people in the image of the doctor getting old pair of boots or some eggs are firewood. Yes, absolutely. And that is what happened. But, um, the AM A was not about to let. An insurance company said their fees. Not until there were many battles that's going to start happening in the in the late fifties and sixties. Those fee schedules, they're gonna get hammered out. But until then, with Blue Shield and commercial companies, they are insisting that it's indemnity. So it goes to the patient who then has to wrangle out what the exact cost is with the physician. It feels

David Wright:   43:14
to me like this is previewing some more of the conversation a minute, but there's this very clear direction of evolution of these, which is towards some version of what? Well, it seems to me that everybody wants to have unlimited access for free. Yes, that's where we want to go. And and one of the interesting take do you have on it is kind of figuring trying to think about and this is really complicated. But what degree is this driven by market evolution and what degree is different political evolution? Because it's what was amazing to me as well was that both sides of the aisle, right? I'm in the federal government. Anyway, we're saying we're going this way, and the enemy is fighting them. And, um uh, do

Christy Chapin:   43:53
you have

David Wright:   43:53
any idea where that comes from. I mean, what what? Why is the direction so clear?

Christy Chapin:   43:57
Well, okay, so go back a little bit to explain to your audience what happens. We So we've explained that the end was against health insurance and all these different ways of organizing health care. We see Blue Cross and Blue Shield coming up on the scene. BlueCross well before Blue Shield Blue Shield's not really gonna come up on the scene to the forties. Where's Blue Cross's is in the 30 spreading everywhere. The role of the M is reluctantly having to say okay to Blue Cross. But even then, they're like only if you're under a certain income in your poor and if otherwise we don't, we're against it. So the aim is busily beating up everything they can in the market, doing everything they can to keep it on this 19th century model, that pre modern model we talked about, um, no insurance. And then the federal pressure starts in because it's the Great Depression, The New Deal. There's all this economic policy coming down, and we get the 1935 so security act and the people who worked on that act the Committee on Economic Security. They wanted to put health care benefits in it. It is the cornerstone of our welfare state and President Roosevelt. I always say, very savvy politician. He knew that if they did that, that he was a worried would sink the entire bill because the Amy was so powerful And constituents societies, the state level county city very easy for them to lobby to have the bill defeated. So it gets put aside. But that's the beginning of the federal government. From there on always pressuring the industry, it looks like something's gonna happen. You know, at the end of the thirties you have the Wagner Act and the Senate that's proposed. You have this big national health care conference in 1938. So the political pressure is really starting to come down on the A m A s O. They might have won by destroying the market, but in a way that because there's a vacuum and people can't get you help get what they want. Well, of course, the of course, people are looking at the government for this. So the Emma realizes they can't continue on the path they had been on. And so they make a big compromise and their compromises, that they're going to say that health insurance is OK. Finally, again, they had earlier in the thirties for poor people in charity. But it's not until 1938 that they say Okay, everybody could have health insurance, but they designed a very particular model. And that's the insurance company model that I was. I referred to earlier, just basically, that it can only be insurance, an insurance company and Blue Cross Blue Shield would be included in that. No prepaid physician groups, no consumer cooperative mutual aid, societies, unions absolutely not, etcetera, etcetera. So

David Wright:   46:34
you're saying you didn't want this?

Christy Chapin:   46:35
They didn't know what

David Wright:   46:36
they're like. Please don't. Thanks, but

Christy Chapin:   46:39
absolutely not. Because it wasn't the insurance company model doesn't just mean that its insurers, it also means there's very specific rules the insurers have to follow. They are not allowed to question the physician. The physician staff full autonomy over what happens fee for service payment, which we have mentioned. The fact that that just encourages over utilization right? They could not pay them. There was no capitation coming. Everybody s o the insurers get dragged kicking and screaming into this because they're they're looking and saying You don't have to be a genius, a mathematical genius to say you're asking us to fund all these service is and we can't even forecast with the supplies gonna look like as we know it's gonna go up on dhe. That's why you see both Republicans and Democrats trying to reform health care because everybody is like this is not a good idea. It's gonna drive costs up so much. Now, of course, the Democrats, Truman and his allies want universal health care. Where is Eisenhower? Another maybe more moderate. Actually, there were even moderate Republicans had plans for universal health care that would have done Dunmore through the states. That actually looked a lot like the CIA and state exchanges and such. But everybody's trying to get rid of this model because they're do something to perform it, Um, Eisenhower once reinsurance so that they can expand it to more people and make it more generous, because again, everybody sees and built cost bones. It's just that. And that's why insurers in the A M a run so quickly to build up the insurance company model and coverage of people and generosity of benefits so that they can continually make this argument that we do not need reform. And, of course, the big crack. And that is in 1965 with Medicare s.

David Wright:   48:17
So I I think that it might be worth coming at that, which is a big move by talking a little bit about how the the political climate of the time really was, how it felt. Right. So you have this. You have this moment where people are are looking for a change. Do you get a feel for whether there was any state innovation because that's something that I would have thought would have occurred any time you have a pretty polarized environment? Yeah, you would imagine that there's regional differences doing mother regional differences for people who were was because it seems to me that there the federal government reaction was one of just complete absence of any other option. But there must have been something

Christy Chapin:   49:05
Well, and I don't know if this is the answer you're looking for. And, um, also for your listeners, just thio underscore why the insurers get involved for political reasons and that they're worried that any kind of nationalization of healthcare will lead to nationalization of all other men,

David Wright:   49:21
other sectors of the German system.

Christy Chapin:   49:24
So, um, as faras Aah! Regional variations go and innovation at the policy level. One thing I saw reading very carefully into what was going on the Truman that hadn't been brought out and some of the research and publications on health care before was it was really interesting to me to see how these, whether it's health care reformers and activists or people in so security administration, their labor allies who were very sophisticated about health care, how they were trying to go back to the pre paid group model there. We're gonna include Kasim BlueShield cause the non profit stuff. But how? This is a time when progressives and it's carrying over into the thirties and forties. It doesn't just go away. You know, I knew is that I know we think of the progressive era in the 19th century, began the 20th century in one of the watchwords of that period that Euler is efficiency they they're fascinated with. How do you set up an organization for efficiency? Um, you don't see that as much anymore, so they are thinking about. How do you cover people? Uncover them generously but doing it in an economically efficient way. And that's why they want to go back. And if if the if the Truman Bill had passed, they would have incorporated the prepaid physician groups and gonna wake, that was a big part of it for them wasn't just having universal benefits. It was to reorganize the market back along Maur efficient lines.

David Wright:   50:43
So the Truman administration was trying to create. I mean, it was it was a holdover from the Eisenhower administration. Right then they have something I started first. And then the Truman administration.

Christy Chapin:   50:52
Well, Eisenhower administration comes after,

David Wright:   50:54
right? Right. Sorry. So Truman was in Second World War, and then Eisenhower picks up on, modifies it so the ball gets carried.

Christy Chapin:   51:00
Oh, yeah. So you have Eisenhower and a lot of, ah, moderate Republicans. Um, well, not even moderate men. Most Republicans supported some kind of health care reform. What you have them saying is okay, we weren't willing to go as far as Truman with his Soviet state of that would have been the right because it looks It looks very Communistic to have the government running errands, but they still had their All of them had their plans for how to reform health care and to get rid of this insurance company model. Or somehow have the government intervened to make it more tenable. So there were so many different ways that were proposed. You had a lot of bipartisan groups in the Senate and the House who had different proposals that were different from one Eisenhower had. So a lot of people don't realize how much is going on in health care in the 19 fifties. People just assume Oh, it was, Eisenhower said. The insurers didn't have to care, and the physicians didn't have to care. That's why I was so surprised when I went into the archives and something like, Why are they so worried? Don't they know that? I said Arson charge And they keep telling me through all their documents, they're freaking out and trying to quickly expand this insurance company model as fast as possible. And every time they're showing upto Thio testify in a congressional hearing, it's like here's our progress report. We have covered this many more people in the last six months. Look at how we've expanded our policies, look at how much

David Wright:   52:18
they're trying to create the outcome of the insurance papers saying, We already got there,

Christy Chapin:   52:22
we got it. We don't need you.

David Wright:   52:23
do it this wayand you even have the Republicans going to them and saying If you grow quickly enough, we can maybe hold this back. But if you don't, we can't It's very explicitly said that this is a political project That's not it's not hinted at its everywhere. 

David Wright:   52:35
But so this is where I was fascinated by this. And this again, is something an observation that I've been thinking about quite a lot since. Reading your book is this interplay between the political and the market forces because it's almost in a weird way. Typically, you think the market forces are this bottom up. The consumers are getting what they want because they're making all these choices and in the political process, is hijacked by special interests. And look at that right. But am I right in thinking these were kind of reversed here? Where actually the AMA  suppresses the market forces the I mean, if you can say that the public will, which normally would be expressed through through prices and quantity and selection and all the rest that actually comes bubbles up through the political process

Christy Chapin:   53:16
Yes, I know. Isn't that so interesting? It's so it is so different. And it's funny because a lot of people have thought have assumed that the AMA... I've seen other scholars err in thinking they assume that they're pro market because they are anti-government. Not at all. That's just not the way ideology worked back then. It wasn't one or the other  

David Wright:   53:36
different tent.  

Christy Chapin:   53:37
Yeah, they weren't running around like yay Adam Smith, not at all or fine Adam Smith, but not for our field. Because you know, our field is special and different because of the expertise and also the relationship with the, ah, the so customer slash patient is so much different than another ways. But I kind of say that in a sarcastic way, because everybody says my field is different. My field is different.. I'm in education, you know everybody says this and you can go on and on about it. But yeah, so I think that's a really good point.

David Wright:   54:09
So what, you have at the same time a failure, right? And one of the things of actually passing this reform many times, right? So illustration administration tried to pass that they don't get through. And one of the things that that I was kind of wondering about get your reaction to This is a potentially alternate reading of history, which is, if you look zoom way out there looking at the U. S. Healthcare system, you're saying Okay, we got two facts that are really important here. One of them is you have this very high cost in relation to GDP for health care, right?  With century. Yeah,

Christy Chapin:   54:40
we're very close to one.

David Wright:   54:42
Almost twice as much as a percent of GDP. Is the next one down with DDB even being that much bigger, ready for the total amount is it's like colossal expense anywhere else. And in fact, too, is you have this insurance company system, right? And so that you know the causation. You know this question of which way it goes, and the and so typically folks will say and in your book is an argument for this is that the insurance company system is actually drives the cost. But what I found was another thing about United States was is different is that you have somebody was on the side of the M Es here, right? So you have There is there was a There was a constituency that that was going along with it that liked it as well. And there's a political constituency, and one of the things that I recognize myself about this country is is that there is a lot of there's a lot of anti big government sentiment, not necessarily on the coast where you and I live, but there is a swell. But elsewhere, too, there's there's It's not a cohesive unit, right? There's all kinds of all sorts of differences, opinion and and quite a lot of any government sentiment, and particularly in the more kind of rural areas or the central United States. And so I see that as the political coalition of the AMA was motivated, was mobilizing and supported it. And what I'm wondering about is that were they the ones who were actually really didn't want the federal government's oversight in the A. M. A. Is kind of part of this. They weren't on their own, right, so they were part of an ideological side system, actually a party, but But that was actually aligned, and they made a symptom and not a cause. Do you might making that point right? What you think about,

Christy Chapin:   56:19
Um So what I would say about that is the aim, of course, is during this period, aligning themselves with the Republican Party. Yes, but it's not like people understand is well, you know, once the insurance company model starts to dominate, Really, by the time we're at the end of the forties, it's not like people really remember, you know, the forgotten and lost models. I mean, some of them still Survivor hanging on Cem HMO's and stuff, but not at all like it had been S o the AM A spins this out and creates this narrative that this is the free market option. And if you're you know, you're anti Soviet, your anti communist So clearly, if that's your ideology or on our side, where's the people who are quote unquote on their sides? And physicians didn't realize what had really happened is the A m A. Just made up. This model pulled it out of thin air, which tells you there's a problem because the market hadn't already offered it up. You know, it's not going to be efficient. Um, and it's it's just that's the narrative. And that's the narrative that people are gonna buy into. And unless what there? Three union leaders. Like I said, they were so sophisticated, they knew better. But very few people understand this. And so they accept the narrative because fighting the Truman Bill, that's all against communism. Soviet style healthcare,

David Wright:   57:29
Yes. Oh, that's interesting. And so the It's a pretty sophisticated, actually. Ah, set of reasoning there. If only Let me see if I could. If I understand it, do you have? On the one hand you have this big government option, which is the centralized health care socialized medicine, which is you have his opposing force, which is something else, right? Right, and into something else is a slot to fill their right. And you have political forces which don't want the big government because they enter communists and and all the rest of that and then they want something else. In the A. M is the one that populates that slot exactly, So their control is unnecessarily. They're not the only ones who are anti big government, the logical are, but the aim is the one that controls the agenda that says into big government means this. And so we got

Christy Chapin:   58:11
that exactly, and they didn't call it the free market. What the popular term was back then was the voluntary market or the voluntary way. And so that meant keep government out of this picture and that famous poster that all the physicians hung up. You know, during the Truman Battles, was that that famous painting of the doctor, you know, in in the home tending to a child as a patient keep government exactly the voluntary. Yeah,

David Wright:   58:41
nobody's controlling this coming between you and your patient.

Christy Chapin:   58:44
Exactly. Not there's There's no poster saying, Hey, we made up this far along. Yeah, exactly.

David Wright:   58:52
So let's let's turn Medicare. So what's interesting to me? Actually, another thing I learned from the book amongst many, many things is Medicare

Christy Chapin:   59:00
wasn't really a slam dunk.

David Wright:   59:01
I mean, so I let me let me kind of try, try this one. The Medicare would became Medicare was actually originally proposed by a young senator from Massachusetts called JFK when he was a senator. So it was originally a Kennedy bill. The first, the first version of it early on And then. So this story goes is that if you don't have a J f K assassination and this baby the upwelling of goodwill in the country, towards things that are associated with JFK, do you think Medicare still passes? Is it?

Christy Chapin:   59:29
Yes, I I think it does. And this is why so after the Truman defeat, that's by 50 51. They know the Truman Bell isn't going to happen. And so Security Administration's where a lot of these policies are being proposed and advocated for, um, they immediately say, OK, let's get old age. Let's focus on them heaviest

David Wright:   59:49
users or care the most disadvantaged group

Christy Chapin:   59:51
and then we can roll out Universal Kid. The idea was they wanted to roll it out, start with the elderly, and then you would bit by bit pull the whole country and

David Wright:   59:59
knock the dominoes over.

Christy Chapin:   1:0:00
So And if you look at the 1960 election, even Nixon versus Kennedy, both of them had a healthcare plan again. So this goes back to this idea that we keep trying. That I keep trying to say, is everybody hundreds to the President Seo, that everybody understood this insurance company model as it was developed. I think once we have passed Medicare, everything else gets for gotten. But in the fifties, you certainly see this clear idea of home. This thing that the AM a made up in the insurers in the A M Air doing is not very, you know, isn't gonna work on its own, or we need to completely change it one or the other. So yes, certainly with JFK assassination, there's This is this political goodwill that allows the Johnson administration to get a lot of things through. But I think that what a lot of people don't realize is if you look at people talking about the voting of Medicare, and they said there's a good number of Republicans who vote for it. But people presented is it's this Democrat plan, and what they don't realize is even the Republicans who didn't vote for Medicare, which was the Kennedy Johnson administrations particular package and set of policies. They all backed a different kind of Medicare plan, and for the Republicans, it would have been trying to create a program that they thought would be even more difficult to roll out and create universal care, which we now know that wasn't a threat because it doesn't happen. But they were trying to do things like not run it through Social Security. Um, they're trying to, you know, modify it a bit, are maybe only offered to certain people under a certain income. So there were various. So almost, if you look at Congress, you pretty much have almost everybody in the Republican Party even saying, Look, you guys tried the insurers and heroine of doctors. You did a good job. You built it up. 80% of the country is now covered. You've even tried to cover the elderly. I mean, they actually insurance companies go so far as to lobby state legislatures to give them antitrust exemption so they can pull. Their administrative resource is and you know, capital to try to ensure the elderly, which is they lose money on it anyway. Because, of course, they have this inefficient model and their elderly. So and of course, and these policies are pretty limited to for obvious reasons. So at this point, the whole even the Republicans had put this as if you if if the market doesn't get enough job, fine. But if it doesn't, we are intervening and you and you think like people like Nixon. They're very, you would say, almost like a moderate Republicans, Progressive Republicans. So for them, this is no problem in their ideology. Some of the Midwestern and Southern Republican wealth diverse, really seven Republicans at this point, But it's going to be or Southern Democrats. It's going to be a different kind of ideology. So and as I had mentioned before, this is when you see the insurance companies split within the industry makes perfect sense. The insurers are saying, Okay, mea, we're splitting off. And Amy is furious that they are not as good a political allies. They should be. They're saying, Why should we sit here and kill ourselves and lose money trying to insure the elderly? We could just give it to send it off to the government. It's a popular program. It's middle class, welfare, right. It's wildly popular. It's a vulnerable group that people have sympathy with. That there is going to say if we're gonna have welfare for anybody, Okay, the elderly. So the M A really hurts themselves. This is where they really start to decline as faras power and prestige and influence because of going after Medicare so hard when there is just so much bought in already on both sides of the aisle that some type of program needed to come down at this

David Wright:   1:3:32
point and Medicare happens. And what's the result?

Christy Chapin:   1:3:36
So what's so interesting about Medicare is after these decades itself, everybody trying to get rid of the insurance company model. Some of the Republican plans more worked with it, but certainly the progressives understood. We just got to get rid of the model altogether. So you see again the people with the Security Administration realizing that uh oh, we're too far along were so far along. And the market has been built up organizationally around this other model that we have to incorporate it into our plan, and you see that there. They don't want to do that. They're not happy about it, but they have to because it's more politically palatable, because then you're selling benefits that are exactly like what the rest of the population has not creating A, you know, a brand new foreign type of organization of model, um, and well, that organizational capacity is already there. So then you bring in the insurance companies of the administrators and how Yeah, they've already spent decades, you know, wrangling and fighting with the providers, especially physicians, and working out these payment processes. And now there's more and more costs. They're starting to be more cost containers and supervision. And so you guys handle it?

David Wright:   1:4:41
Yeah, the aim is giving all that ground. Okay, it's all gonna happen.

Christy Chapin:   1:4:45
Well, they're still mad, and they're still fighting it all the way. But they have to start lowering cost containment because what happens is the press coverage is so bad in the fifties about what's going on with health care costs and even all this. There's a crisis of unnecessary surgeries. And so the Emma realizes they have to start allowing insurers to do something, because how are they going to maintain their political project of you have all this negative PR? So that's why you know they're furious. But this is when I would say with Medicare is when you start to see the power dynamic flipping, and this is where we're going to start to see insurance companies become or not. It doesn't happen right away. But I would maintain that today the insurance companies have more power. And this is wise because gradually they have to put cost containment measures in. And also you see the political line splits with the insurers and am a where AH lot of the reforms post Medicare. I mean, we saw this. You see whether it's the H mo legislation, the seventies of the Clinton health care bill or the Obama health care bill. It's almost like this labor management negotiating table. You know, insurers versus doctors. They use each piece of legislation to get back at each other to gain to gain something in this power dynamic. Ah, lot of times will say fine, we'll go along with your bill. As long as you know, the doctors will say you keep the insurance companies offer back, and then the insurance company say yes, we'll go along with this bill if you give us more power to control the providers so they stop spending all this money. So, yes,

David Wright:   1:6:08
you wind up with a cost a supply explosion after Medicare. Right? So lots more care is being provided in the aggregate, right? I mean, do you know what the stats are? Roughly maybe, like a total, that the total amount of healthcare supplied goes up, I guess. Right Mean the elderly is not as big of a population than as it is now because of the just the way it demographics and poor world wars and on all that. But I guess there must have been just way Maur cost in the system.

Christy Chapin:   1:6:37
Yeah, certainly. Now, people could get cared that they couldn't before, So it many more service is I would also and I can't off and tell you what the statistics are. But I would say to be a little bit careful with some of them because what is also happening is service is that weren't counted before. Okay, are being counted because I wanna reiterate that in the fifties I would say easily that the average doctors writing off 25% of their bills. Yes, from S O. My adviser had me interview physicians who were practicing during this period. And, um, I was kind of a broad about it cause I thought, Well, I have all these fantastic sort and I really did a great primary sources inside the insurance industry. And inside the AM a, I found documents that nobody had ever looked at on the A m A. That was really right on inside their board meetings and everything else. Um, when I found those documents, I almost. But anyway, that's another story. Ah, you know, archival research could be so exciting. But he was so right while my advisor always right. Always. Esso going to talk to the physicians that you think, you know, and you're asking all these questions and just hearing the stories and having them put them flesh on the bones and hearing them talk about what it was like to practice then and the pressure on them to, you know, have enough money to pay the bills to keep the press just open and pay the administrators in the building and the parking and everything else. And and and then how you know, they're working all day and then two or three hours of night on paperwork and and all these these things were getting laid down in the fifties and sixties. These papers that these very important paper heart jails, right? The

David Wright:   1:8:15
document while you did what you did

Christy Chapin:   1:8:16
exactly right. But just so interesting to hear how every one of them told me how much a lot of them were saying 30% or more. So I'm saying I want to say if I'm saying 25% I think that's that's about right So I think what you're going to see the statistics is yes, more service's or demanded cause now it's there and you know it can be paid for more easily. If you have insurance, you know, there's what is it called the premium payer syndrome that insurers would talk about like, Well, I might as well get the use out of even though, if you're not paying for it through Medicare. You are. If you at least have the physician coverage that's voluntary and such, so get your good use out of it. But I would also say that probably a lot of stuff it wasn't documented is now being documented and paid for minutes before it was just written off. And also

David Wright:   1:8:59
the stats are going to start. You know, the same amount of care I don't know. I suppose there's

Christy Chapin:   1:9:03
more. Oh, I definitely think a lot more care,

David Wright:   1:9:06
right? More care? Yeah, I suppose I just thinking like hypothetically, given the same amount of care you would have a different. You'd have a different number for the cost after than before, because now it's all there's no like gray market,

Christy Chapin:   1:9:17
right? Yeah, yes, Oh, charity by have because Medicaid comes along in the Medicare package as well. But Medicaid's a tricky thing because it looks. That's more federal grant funding to states, which then set up their own programs that look different in different places. Eso Medicare is easier to talk about causes at the federal level. It's one program.

David Wright:   1:9:37
Well, we're actually run a bit a long time, but I'm wondering if let's reflect a little bit on what's possible here. So we've gone through another kind of agonizing health care debate on which never stops, really, I suppose. But the May shows up and now, looking to the future, what's your kind of what you're feeling about where this system goes from here?

Christy Chapin:   1:9:56
Oh, that is so difficult to say. And I always love to hide behind the fact that you know, I'm historian and you and I don't know, but what's the trend? So one thing that really surprised me was that, um, direct primary care has kind. That has been the closest thing to approximate the prepaid physician groups that were so popular and said there were hundreds and hundreds of them all over the country. Back say, in the 19 thirties. That is the closest thing. However, they're not multi specialty. They tend to be single specialty general practitioners. Um, basically, that has turned into a whole thing. They've actually had to do a lot of lobbying state by state. As you can imagine, there are a lot of laws on the books that physicians had put on the books against the quote corporate practice of medicine. And in order to keep out prepaid physician groups and such eso, they've had to do a lot of lobbying to allow there to be room in this very kind of thick regulatory environment. Have it clear a lot of that out to set up a system where they act as the insurer. So it's basically I would explain it is like Khan shares medicine for Joe six pack. You know it's not the fancy. You pay a huge fee, and but instead it's families consign up. It's reasonable. They often have a catastrophic policy on the backside to cover. If somebody gets very sick,

David Wright:   1:11:10
it's like a real minor prepaid group,

Christy Chapin:   1:11:12
right? We have a lot more access to your physician. They've started doing things the pharmaceuticals were They're offering, you know, medications that much cheaper, rates big with what they're doing. It's very much in its infancy. I think the administration now is trying to find ways to allow them to grow a bit more. Of course, my thing is, I think you know they have to become multi specialty. But then that opens up a whole can of worms of how did they get access to the hospitals and the facilities there and such? And so, um, again, I will hide behind the fact that Mr E don't know hard. Yeah, it's too hard to figure out because we've had such a thick organizational right out of his path dependency. This is why there is pat dependency cause so many institutions, not just organizations, you know, but just the culture of the way we think about it. Everything has built up so much around this one model. It's really hard for us to think outside of it, and that's why so many of the, um reforms that are offered or just oh, Medicare for all because we already know what Medicare is and everybody's familiar. And so we're just expand that. And I would just say, Hey, yeah, great universal care. But let's not use the broken model and it doesn't matter if you get rid of insurance companies, it's still the same model. You're just having a state agency taking over that role. So that's my concern with where we are now, as we have to think about efficiency and how you fund things. I would think that the insurance companies would have been involved all along as prepaid physician groups read, bought reinsurance on the back and just wouldn't have had to be so darn involved in health care and how it's delivered, have what it looks like in what form, because they could have had a much more hands off approach.

David Wright:   1:12:50
A day to day stuff is actually the thing that kills you. Insurance companies were used to evaluating risky big you know, Pops recall them on, and that's where their specialty lies exactly. My guest today is Christie for shaping. Thank you very much.

Christy Chapin:   1:13:03
Thank you so much.