What’s Wrong With American Healthcare?

By Gene Santoro
10/15/2009 • American History

Health is not a free market commodity, like a car. People will spend everything they have and whatever they can borrow for health.

An Interview With Medical Historian James Mohr

Q. Is government involvement in health care un-American?

A. There is a long American tradition of public responsibility for health. In the 19th century, for instance, states devoted as much as 30 percent of their budgets to public mental health care. And when it became clear that vaccination actually worked against smallpox, state after state created labs to provide vaccines free of charge to citizens. So to say it’s un-American is profoundly wrongheaded.

Is the current system broken?

It can’t be sustained as it is right now if we care about the public’s overall health. We can’t afford it. The World Health Organization ranks the U.S. 38th in health-care quality, below Dominica and Costa Rica and above Slovenia and Cuba. Meanwhile, per capita we’re spending half again as much as our nearest competitor.

What’s the key problem?

Nowhere else are doctors paid the way they are here, or allowed to have such absolute autonomy. Decisions made in the 19th century created an occupation that almost guarantees a handsome income and high status, but offered few incentives to be rigorous about internal discipline: It’s still almost impossible to lose a medical license. As a result, medical mistake rates are stupefying: Hundreds of thousands of Americans die annually from medical errors.

You sound like an anti-doctor muckraker.

I’m not. I believe most physicians are caring professionals. But because of the way our health-care system evolved, bad doctors are rarely held accountable for their mistakes. Under 5 percent of doctors account for roughly a third of malpractice suits, yet the system lets them keep their licenses.

How are doctors regulated?

Historically there has been very little regulation. By the 1880s, the doctors who graduated from a medical school were pushing to upgrade the profession. They wanted licensing laws at the state level and tighter educational requirements, and got them. But unlike elsewhere, American licenses came with no strings attached.

What was the result?

The heightened educational standards began reducing the number of medical school graduates, thereby reducing the number of license-able physicians. And so their power and prestige in society increased—along with their incomes, which was the bottom line. Meanwhile, the situation priced many Americans out of health care.

What about early efforts to provide national insurance?

In 1915 and 1916, bills were introduced into Congress that would have produced a structure similar to those in place today throughout Western Europe. Initially the AMA—the American Medical Association—was all for it. After all, doctors had been accustomed to collecting only 50 percent of their bills, so 100 percent looked like a good deal. National insurance seemed inevitable. But the AMA soon began to shift its position.


The leadership was afraid: If the government became the principal payer, doctors might lose their autonomy and become government employees at fixed salaries. So they hunkered down behind the concept of fee-for-service: direct payment by the patient. They actively opposed doctors who hired out to group practices, and ostracized doctors who signed contracts with labor unions on a per-head basis, similar to modern HMOs. World War I brought new arguments: National insurance was Prussian, socialist, un-American.

What resulted?

Doctors’ incomes and medical costs continued to rise steadily in the 1920s. In 1932 the Committee on the Costs of Medical Care, a national blue ribbon panel that included the AMA, again recommended a national insurance program. But a committee minority said that would destroy the medical profession. The AMA claimed this minority represented the majority of physicians—although no one could ever calculate whether that was true—and killed that initiative too.

Were there any alternatives?

The Depression forced the medical profession to tolerate some medical cooperatives, like the Mayo Clinic and Kaiser. These were large, powerful operations that could withstand pressure. Some local groups also developed co-op plans, but they were generally in areas where there wasn’t much money at stake, like coal-mining regions, so the AMA let them go.

What about Medicare and Medicaid?

The AMA initially fought the proposals, calling them a government takeover. But this time—in the progressive 1960s—they lost. Ironically, they realized, “Wow, were we ever wrong! Now we have this government spigot of money pouring into the largely unregulated world we created in the 19th century.” That’s where the real acceleration of medical costs started.

What changed?

That much money without much regulation attracts people who know a lot more about running major enterprises than individual doctors do. So there was an explosion of major medical for-profit corporations. Today, doctors find themselves more concerned about falling under the control of corporate medicine than the government. That’s one reason so many physicians are reconsidering health-care reform.

Can the free market fix the system?

No. Health is not a free market commodity, a good you can choose, like a car. People are willing to spend everything they have and whatever they can borrow for health.

Would a public plan lead to rationing care?

We ration it already, on an ability-to-pay basis. Yet we also pay for those who can’t, in subtle and indirect ways like soaring emergency room expenses charged to taxpayers, and a less healthy and productive citizenry overall. We need to adjust this malfunctioning distribution system to make our health-care dollars go much farther.


For one thing, by not doing tests for which there’s little demonstrable payoff—except for the test providers. These hidden costs riddle the system.

For example?

A 60-year-old woman complains her knee has been hurting. The orthopedist says, “It could be this or that.” The patient wants an MRI to settle the uncertainty, even though it’s costly. The doctor is willing; he might even own 50 percent of the MRI lab. The MRI shows tears in her meniscus. She wants scope surgery, and the doctor has a financial incentive to agree. It’s the orthopedic operation most commonly performed on women in this country. But half of all women 60 and older have these tears. If there’s some pain, it’s most likely arthritis. This whole costly process probably won’t make much difference.

Whose fault is this?

There’s no bad guy here. The patient wants it. Because of the system’s structure, the doctor has incentives to do it. It probably won’t hurt. But it’s not money well spent.

How do we fix it?

Doctors have a vested interest in you getting sick. They are paid to get you better—and generally the more that costs the more they make. We need to change that incentive. If doctors were salaried—and we can afford handsome salaries—to maintain people’s health in the most effective, not most expensive, manner, we would have a far better structure. Around the country there are plenty of small practices and some big ones that do that and work very well indeed.

What’s the biggest worry?

No change. Making no progress. We won’t revolutionize the system overnight. Change will be incremental on myriad fronts. But we have to be world leaders instead of lagging. We have to find ways to combine what is positive and unique about our system while eliminating the historical anomalies that make it unsustainable.

James C. Mohr is a professor of history at the University of Oregon and editor of New Perspectives on Public Health Policy (Penn State Press, 2008).

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