How the Health Crisis was solved 80 years ago.

[guartz]

Today, we are constantly being told, the United States faces a health care crisis. Medical costs are too high, and health insurance is out of reach of the poor. The cause of this crisis is never made very clear, but the cure is obvious to nearly everybody: government must step in to solve the problem.

Eighty years ago, Americans were also told that their nation was facing a health care crisis. Then, however, the complaint was that medical costs were too low, and that health insurance was too accessible. But in that era, too, government stepped forward to solve the problem. And boy, did it solve it!

In the late 19th and early 20th centuries, one of the primary sources of health care and health insurance for the working poor in Britain, Australia, and the United States was the fraternal society. Fraternal societies (called "friendly societies" in Britain and Australia) were voluntary mutual-aid associations. Their descendants survive among us today in the form of the Shriners, Elks, Masons, and similar organizations, but these no longer play the central role in American life they formerly did. As recently as 1920, over one-quarter of all adult Americans were members of fraternal societies. (The figure was still higher in Britain and Australia.) Fraternal societies were particularly popular among blacks and immigrants. (Indeed, Teddy Roosevelt's famous attack on "hyphenated Americans" was motivated in part by hostility to the immigrants' fraternal societies; he and other Progressives sought to "Americanize" immigrants by making them dependent for support on the democratic state, rather than on their own independent ethnic communities.)

The principle behind the fraternal societies was simple. A group of working-class people would form an association (or join a local branch, or "lodge," of an existing association) and pay monthly fees into the association's treasury; individual members would then be able to draw on the pooled resources in time of need. The fraternal societies thus operated as a form of self-help insurance company.

Turn-of-the-century America offered a dizzying array of fraternal societies to choose from. Some catered to a particular ethnic or religious group; others did not. Many offered entertainment and social life to their members, or engaged in community service. Some "fraternal" societies were run entirely by and for women. The kinds of services from which members could choose often varied as well, though the most commonly offered were life insurance, disability insurance, and "lodge practice."

"Lodge practice" refers to an arrangement, reminiscent of today's HMOs, whereby a particular society or lodge would contract with a doctor to provide medical care to its members. The doctor received a regular salary on a retainer basis, rather than charging per item; members would pay a yearly fee and then call on the doctor's services as needed. If medical services were found unsatisfactory, the doctor would be penalized, and the contract might not be renewed. Lodge members reportedly enjoyed the degree of customer control this system afforded them. And the tendency to overuse the physician's services was kept in check by the fraternal society's own "self-policing"; lodge members who wanted to avoid future increases in premiums were motivated to make sure that their fellow members were not abusing the system.

Most remarkable was the low cost at which these medical services were provided. At the turn of the century, the average cost of "lodge practice" to an individual member was between one and two dollars a year. A day's wage would pay for a year's worth of medical care. By contrast, the average cost of medical service on the regular market was between one and two dollars per visit. Yet licensed physicians, particularly those who did not come from "big name" medical schools, competed vigorously for lodge contracts, perhaps because of the security they offered; and this competition continued to keep costs low.

The response of the medical establishment, both in America and in Britain, was one of outrage; the institution of lodge practice was denounced in harsh language and apocalyptic tones. Such low fees, many doctors charged, were bankrupting the medical profession. Moreover, many saw it as a blow to the dignity of the profession that trained physicians should be eagerly bidding for the chance to serve as the hirelings of lower-class tradesmen. It was particularly detestable that such uneducated and socially inferior people should be permitted to set fees for the physicians' services, or to sit in judgment on professionals to determine whether their services had been satisfactory. The government, they demanded, must do something.

And so it did. In Britain, the state put an end to the "evil" of lodge practice by bringing health care under political control. Physicians' fees would now be determined by panels of trained professionals (i.e., the physicians themselves) rather than by ignorant patients. State-financed medical care edged out lodge practice; those who were being forced to pay taxes for "free" health care whether they wanted it or not had little incentive to pay extra for health care through the fraternal societies, rather than using the government care they had already paid for.

In America, it took longer for the nation's health care system to be socialized, so the medical establishment had to achieve its ends more indirectly; but the essential result was the same. Medical societies like the AMA imposed sanctions on doctors who dared to sign lodge practice contracts. This might have been less effective if such medical societies had not had access to government power; but in fact, thanks to governmental grants of privilege, they controlled the medical licensure procedure, thus ensuring that those in their disfavor would be denied the right to practice medicine.

Such licensure laws also offered the medical establishment a less overt way of combating lodge practice. It was during this period that the AMA made the requirements for medical licensure far more strict than they had previously been. Their reason, they claimed, was to raise the quality of medical care. But the result was that the number of physicians fell, competition dwindled, and medical fees rose; the vast pool of physicians bidding for lodge practice contracts had been abolished. As with any market good, artifical restrictions on supply created higher prices — a particular hardship for the working-class members of fraternal societies.

The final death blow to lodge practice was struck by the fraternal societies themselves. The National Fraternal Congress — attempting, like the AMA, to reap the benefits of cartelization — lobbied for laws decreeing a legal minimum on the rates fraternal societies could charge. Unfortunately for the lobbyists, the lobbying effort was successful; the unintended consequence was that the minimum rates laws made the services of fraternal societies no longer competitive. Thus the National Fraternal Congress' lobbying efforts, rather than creating a formidable mutual-aid cartel, simply destroyed the fraternal societies' market niche — and with it the opportunity for low-cost health care for the working poor.

Why do we have a crisis in health care costs today? Because government "solved" the last one.

How Government Solved

One should really consider this before so vehemently supporting another government intervention. *cough* kuya, beckwin *cough*

[Correction]

So is the article trying to say that health care should not be touched by government and left to the, what...two million masons still active in the united states?

[guartz]

So is the article trying to say that health care should not be touched by government and left to the, what...two million masons still active in the united states?

There is a moral to this story, correction. Do you need me to spell it out?

[Correction]

Oh, it's a fairy tale. I get it.

[Eaglestrike]

It sounded to me more like they were "Unions" of sorts, but on a small neighborhood scale.

IMO, I'm a fan of that, the more freedom the people have the better it is. The government should be there for those who fall through the cracks because of things like race/creed/religion/etc., not for everyone.

It's probably too late for a system like this to work, most people have lost touch with what it means to be part of a friendly neighborhood.

[guartz]

Oh, it's a fairy tale. I get it.

Yeah, you know the one where the peasants keep going to the king to solve their problems, but he just hangs them? Like that.

[tyven]

my fraternity covered all insurance issues in college. shit was so cash

[Jeryhn]

The response of the medical establishment, both in America and in Britain, was one of outrage; the institution of lodge practice was denounced in harsh language and apocalyptic tones. Such low fees, many doctors charged, were bankrupting the medical profession. Moreover, many saw it as a blow to the dignity of the profession that trained physicians should be eagerly bidding for the chance to serve as the hirelings of lower-class tradesmen. It was particularly detestable that such uneducated and socially inferior people should be permitted to set fees for the physicians' services, or to sit in judgment on professionals to determine whether their services had been satisfactory. The government, they demanded, must do something.

So wait, doctors were mad because they saw that their profession was no longer for-profit?

What else is new?

[Correction]

Yeah, you know the one where the peasants keep going to the king to solve their problems, but he just hangs them? Like that.

You forgot chapter 2, where the peasants revolt, behead the king then spend the next 20 years arguing amongst themselves who is in charge, at which point the lack of agreement allows a new tyrant to enter and destroy their chances at utopia.

I'm not against the idea of returning more control to local communities, except for the fact that their record on health care is far from spotless. Sure you can write laws to protect the medical rights of minorities within such small communities but in practice such laws still get ignored: Everysaturdaymorning's Blog

Replacing federal ineptness with local ineptness just doesn't seem like much of a plan. And preferring inaction is worse.

[Qalbert]

we could adopt the horse plan and jsut kill all the sick people

[Olo401]

So is the article trying to say that health care should not be touched by government and left to the, what...two million masons still active in the united states?

There is a moral to this story, correction. Do you need me to spell it out?

Yeah.. the moral is you're trying to scare people with your OOGA BOOGA HEALTH CARE REFORM BAD crap and it's not gonna work, especially when you present a cleverly worded yet factually bankrupt essay that bashes the New Deal and ignores the Libertarian movement's goddess Ayn Rand in respect to government involvement in health care.

[Olo401]

AND BY THE WAY..

The reason lodge practices were done away with is the same reason you don't see barbers practicing medicine anymore - PEOPLE WHO WERE PARTIALLY OR COMPLETELY UNTRAINED IN MEDICINE PERFORMING MEDICAL PROCEDURES.

[Olo401]

One more for ya.. the guy who authored this article is an anarchist and has an online petition to abolish the US government.

[Takedown3]

oh guartz

[miokomioko]

we could adopt the horse plan and jsut kill all the sick people

I'm all for turning into a modern-day Sparta.

[Seraph]

Are we assuming that Big Government is the only asshole in the room here? Hardly.

[Leif]

Because of government, we have insurance mandates that have brought health "insurance" father and farther away from the concept of insurance and closer to plans that cover every stupid little doctor visit and every prescription of Viagra. The real emphasis isn't on whether or not you will get top of the line treatment when you get a brain tumor or cancer - it is whether or not you can get every little pill that you should be paying for by yourself covered.

As Ann Coulter brilliantly writes, "All the problems with the American health care system come from government intervention, so naturally the Democrats' idea for fixing it is more government intervention. This is like trying to sober up by having another drink... The whole idea of insurance is to insure against catastrophes: You buy insurance in case your house burns down -- not so you can force other people in your plan to pay for your maid. You buy car insurance in case you're in a major accident, not so everyone in the plan shares the cost of gas."

[Kuya]

This is nice and everything guartz, but would you care to establish relevence? And please make it a very detailed post on how this is relevant right now.

[Leif]

The lesson is that one should think very long, hard, and carefully before expanding the government. Interfering with lives by telling people how to spend their money, live their lives, and who to support always has the potential to do more harm than good. It can be good, but rushed programs that are full of care and emotion tend to lead to more problems than solutions.

Nobody has jumped beyond the "Look! A problem! Let's do the most obvious and quickest solution!" mentality. When you dig deeper into it you begin to examine the upsides and the downsides you can truly make an informed opinion as to whether or not a certain program is in the best interest of the people or not.

[Kuya]

Don't talk to me.