Shareholders, Stakeholders, and US Health Care

I haven’t had as much time to write as I would like because of other commitments. One of those commitments has been working on the Robert Wood Johnson Foundation’s Culture of Health program as it relates to the U.S. business community. That experience has deepened my interest in the corporate role in the health care space and the health care role in the business space. This new Milbank commentary outlines some of my interests. More to come, I hope. Please send your comments to: jmcdonough@hsph.harvard.edu

August 19, 2019 was a big day for The Business Roundtable (TBR), the Washington, DC non-profit association of chief executive officers of major US companies. The organization released a new “Statement on the Purpose of the Corporation” signed by 183 CEOs declaring that the interests of workers, customers, communities, and “other stakeholders” should be as important as the interests of a company’s shareholders.¹ This represented a significant change from its 1997 Statement that declared “the principal object of a business is to generate economic returns to its owners.”

While actions, not statements, will reveal real intent over time, this change was noteworthy—including for the US health care sector. The subject has deep roots in American society, especially in the advocacy of the late economist Milton Friedman, who derided corporate social responsibility as “fundamentally subversive” and asserted that “there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits.”²

In the 1970s and 1980s, Friedman’s notion powered a movement in the United States, Great Britain, and around the globe called “neoliberalism” that promoted deregulation, defanged labor unions, shrunken government, and ever lower taxes. From business schools to high cathedrals of capitalism “greed is good” became more than a movie line from Wall Street and its iconic Gordon Gekko. Binyamin Applebaum’s new book, The Economists’ Hour, lays out the neoliberal narrative, warts and all, in compelling detail.

In recent years, polite rebellion has broken out in business circles against the presumption of shareholder primacy. In January 2019, BlackRock CEO Larry Fink, in an open letter to CEOs, asserted that companies that “fulfill their purpose and responsibilities to stakeholders reap rewards over the long term. Companies that ignore them stumble and fall.”³ Back in 2009, then-Microsoft CEO Bill Gates advocated for “creative capitalism” to confront societal needs, while business strategy guru Michael Porter introduced “shared value” into the business lexicon. Whole Foods CEO John Mackey has made hay with his attempted movement and 2013 book Conscious Capitalism.

Today, companies have many organizations, associations, and pathways with which to engage in societal improvement and stakeholder engagement. Environmental, social, and governance criteria (ESG) are the recognized set of standards by which companies are measured for social consciousness, among others.

What about US health care and this neoliberal era in which we still breathe? The connections are multiple, deep, and noteworthy. For starters, of the 183 CEO signers of the TBR statement, only 11 come from companies primarily embedded in the health sector, such as Pfizer, CVS Health, and Siemens, far less than a proportionate share of health care’s 18% jumbo slice of the US economy. And it is not difficult to view TBR’s statement as whitewash, especially when signers include CEOs of Johnson & Johnson and Mallinckrodt Pharmaceuticals, companies that are neck deep in the nation’s opioid marketing scandal.

Influential US political and economic historians refer to the period from the late 1970s through today as the “Reagan era,” crowned during the presidency of Ronald Reagan who declared in his inaugural address that “(i)n this present crisis, government is not the solution to our problem, government is the problem.” His term in office ushered in the modern era of tax cuts, growing inequality, wage stagnation, diminished unionization, and repeated assaults on government legitimacy. The “Neoliberal Era” may be a better fit. An important question is whether Donald Trump represents the end of this era or the start of something new.

Coincidentally or not, in the early 1980s US national health spending as a percent of gross domestic product (GDP) split from rates in other advanced nations toward its current extreme outlier status. US spending on health increased from about 8% of GDP in the late 1970s to 17.8% in 2017, far ahead of the nation with the second highest rate of national spending on health, Switzerland, at 12.2%.

In return for this massive societal investment in medical care, we have the world’s most technologically advanced health care system along with the highest prices in the world for any category of medical services or products one can imagine. The rush of private investment capital into our medical sector has resulted in cutting-edge medical care, advanced drugs and medical devices, and the highest salaries of any professionals in American society.

In these 40 years, we also have seen three consecutive years of declining life expectancy, a deep anomaly among our international peers, humiliating rates of infant and maternal mortality, shocking levels of gun violence, and extreme incidence of overweight and obesity. As economist John Komlos has documented, during World War II, native born Americans were the tallest among advanced nations, both men and women—we are now among the shortest.⁴ For good measure, Americans are also among the most dissatisfied with our health care system. For what it is worth, money doesn’t buy us good health or happiness.

In this epoch, we have seen enormous growth in private investor funding into a sector formerly dominated by nonprofits or government, in hospitals, physician practices, home health, hospice, air ambulances, and much more. The pharmaceutical industry has always been for-profit, yet its extraordinary concentration has ballooned its pricing structure. The for-profit health sector keeps evolving, assuming new forms. As Gondi and Song document, between 2010 and 2017 the value of private equity deals involving acquisition of health-related companies, mostly hospitals and physician practices, increased 187% reaching $42.6 billion.⁵

Could the investor dominance of much of US health care explain at least part of our outlier status on health spending and outcomes? It is hard to imagine that the investor-driven corporatization of American society could have left medical care untouched. Even today, the most common complaint from conservatives and Republicans about US health care is that government regulation thwarts the free market.

The notion that we could put this massive bulk of toothpaste back into the tube seems preposterous. The economic and political power of the incumbent system would easily stymie any serious challenge, including the apparent one, a nationalized “Medicare for All” structure. Assuming anything of this magnitude could get through Congress—or the Supreme Court—is a daunting stretch. And yet, the real frustrations of Americans with a system organized first and foremost to serve money and power before patients deserve attention.

If, as the Business Roundtable advocates, we are embarking on a new national conversation concerning the role of the for-profit corporation in American society, perhaps we should also instigate a parallel and sustained national examination and conversation about the history, experience, and results from for-profit corporatization of our health and medical care sector. It is clear that this revolution produces good and bad results for American society and for the world. Is it time for a reckoning?

References

The Business Roundtable. Statement on the Purpose of the Corporation. Washington, DC. August 19, 2019. https://opportunity.businessroundtable.org/wp-content/uploads/2019/09/BRT-Statement-on-the-Purpose-of-a-Corporation-with-Signatures.pdf. Accessed October 30, 2019.
Friedman M. The social responsibility of business is to increase its profits. New York Times Magazine. September 13, 1970.
Fink L. Larry Fink’s 2019 letter to CEOs: profit and purpose. BlackRock. January 2019. https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter. Accessed October 30, 2019.
Komlos J, Buar M. From the tallest to (one of) the fattest: the enigmatic fate of the American population in the 20th century. Economics and Human Biology. 2004;2:57-74.
Gondi S, Song Z. Potential implications of private equity investments in health care delivery. JAMA. 2019;321(11):1047-1058.

Published in 2019
DOI: 10.1111/1468-0009.12432

Case Studies in Medicare for All

[I wrote this new commentary, “Case Studies in Medicare for All,” for the Milbank Quarterly.]

George Santayana’s famous quote—“Those who cannot remember the past are condemned to repeat it”—comes to mind when considering prospects for a “Medicare for All” or single-payer health system revolution. There is history here demanding attention that goes beyond President Harry Truman’s ill-fated effort in the late 1940s. Since 1994, four states have taken a cold, hard, and serious look at single payer and backed off, three via voter ballot initiatives and one by legislation. Collectively, they offer a compelling “starter’s package” of case studies on Medicare for All. Let’s take a closer look at each and then consider the patterns.

California Here We Don’t Come, 1994. Voters rejected Proposition 186—the California Health Security Act—by 73% to 27%. The initiative appeared on the November 1994 ballot only two months after the final and ignominious death of Bill and Hillary Clinton’s health reform plan. Throughout 1993-1994, single-payer advocates preached that Democrats were squandering a historic opportunity by advancing the Clinton’s complicated and indecipherable proposal instead of moving single-payer legislation. The California initiative would have been financed by new taxes on employers, individuals, and tobacco products. A diverse group of “good guy” proponents had enough organizational heft to collect more than one million signatures statewide to qualify for the ballot. Continue reading “Case Studies in Medicare for All”

The Secret Weapon behind State Medicaid Expansions

This post appeared in the Health Affairs Blog on March 29, 2019: “The Fairness Project: A New Kid on the Block’s Role in Voter Driven Medicaid Expansions.”

One surprising outcome from the November 2018 mid-term elections was voter approval of ballot initiatives expanding Medicaid coverage in Idaho, Nebraska, and Utah. These victories were preceded by a similarly successful ballot initiative in Maine in November 2017. In three of the four states (not including Nebraska), Republican leaders have attempted to thwart the will of voters by undermining or negating the initiative wins. In the process, the issue of Medicaid expansion as permitted under the Affordable Care Act (ACA) has become reinvigorated.

Unknown by most is that a relatively new and ambitious national organization called The Fairness Project was key to these significant health access victories in all four states. The Fairness Project’s background story is compelling, as are on-the-ground stories of the roles it played in each state. The Fairness Project also bears watching because as many as 14 state governments still are unwilling to expand Medicaid as authorized by the ACA in the next two years. Six of those states allow citizens to advance policy initiatives to the ballot, including Florida and Missouri. Planning for 2020 is already well underway.

The inspiration for The Fairness Project came in 2014 from Dave Regan, president of the labor union Service Employees International Union-United Healthcare Workers West (SEIU-UHW). Regan wrote a widely distributed letter suggesting that organized labor was squandering power and influence by focusing heavily on collective bargaining while ignoring the economic needs of tens of millions of unorganized lower-income workers. As a Californian, he had seen firsthand how citizen ballot initiatives can achieve wins outside of traditional paths to power. The Fairness Project launched in 2015 with support from the SEIU-UHW.

An Impressive History

Between 2016 and 2018, The Fairness Project played a key role in winning ballot initiatives to mandate minimum wage increases in Arizona, Arkansas, Colorado, Maine, Missouri, and Washington State. In California, the District of Columbia, and Massachusetts, The Fairness Project ballot initiative efforts triggered legislatively mandated minimum wage increases without going to the voters. In the same period, The Fairness Project won ballot initiatives to mandate paid sick leave in Arizona, Michigan, Washington State, and San Antonio, Texas, and to cap payday loan interest rates in Colorado.

And then there is Medicaid for low-income uninsured Americans. By 2019, The Fairness Project’s four Medicaid wins opened doors for expanded coverage for a total of 405,000 uninsured low-income individuals in Idaho (90,000), Maine (70,000), Nebraska (90,000), and Utah (155,000). (Utah lawmakers scaled back the voter-approved expansion—although as detailed below, The Fairness Project helped reduce the legislation’s damage to expansion efforts—while efforts to undo the voters’ decision failed in the Idaho legislature.) The Fairness Project also got involved in the unsuccessful 2018 ballot campaign in Montana to raise tobacco taxes by $2 per pack to permanently finance that state’s Medicaid expansion implemented in 2015. The Montana expansion is likely to survive beyond its initial 2019 authorization, although with a different financing source than tobacco taxes. (See Exhibit 1 for state details.)

Exhibit 1: State Medicaid Expansion Ballot Initiatives 2017–18, Vote Totals And Financing

Source: Ballotpedia.

The Fairness Project’s Methods

The Fairness Project’s executive director is Jonathan Schleifer, former chief policy officer for Iraq and Afghanistan Veterans of America and former executive director of Educators for Excellence in New York. Since 2016, his seven-person team has learned many lessons about winning ballot initiatives.

Most important is the need for early and significant investments in professional polling, policy and legal research, and signature collection. “Most ballot initiative campaigns are underfunded and under-resourced, especially at the beginning, and most funders don’t want to invest in the early and crucial incubation period,” he observes. “Campaigns get bled during signature collection and then lack resources to win. We make early risky investments in incubation work, research, coalition building, grassroots/grasstops organizing, and signature collection.”

The Fairness Project works with local activists and groups to build professional campaign websites, exploit social media, raise local and national funding, hire staff, ensure that polling is rigorous and honest, and ride “shotgun” with state-based partners for the campaign’s duration. As of 2018, its track record is an impressive 16 wins and 1 loss; its minimum wage increases have put an estimated $7 billion into low-income workers’ pockets.

Maria Weeg, who served as general consultant to Idaho’s campaign, saw The Fairness Project as a helpful bridge between the long-time and legislatively focused “Close the Gap Coalition” and the newer “Reclaim Idaho” grassroots movement. “The Fairness Project provided another voice in the room, much-needed resources, cutting-edge data, and facilitation to bring the two groups together.” In the end, the campaign raised $1.77 million, half from instate sources and half from The Fairness Project’s national donor base. Two weeks before Election Day, the campaign secured a public endorsement from outgoing Republican Governor Butch Otter, who had opposed Medicaid expansion up to then.

RyLee Curtis managed the “Utah Decides Healthcare” campaign. “We could not have found someone in Utah who knew how to run at this level,” she concludes. Unlike in Nebraska and Idaho, the Utah initiative included a funding mechanism through a modest 0.15 sales tax hike; opponents exploited this to reduce the final “yes” vote to 53 percent from pre-election polling estimates around 60 percent. Most of the $3.8 million raised in support—except for about $300,000 raised locally—came from The Fairness Project. “This was a blessing,” says Curtis. “We would never have had the money and resources to make this happen without their help along with our countless volunteers.”

The Fairness Project’s effectiveness continued in all three states after the November wins, helping state groups to organize to defend their victories. In Utah, the state Senate had passed a watered-down version that requires a federal Medicaid waiver and specified that if federal approval were not provided, no expansion would happen, negating the entire voter initiative. Local groups descended on the state House of Representatives and won a vital change—signed by Governor Gary Herbert (R)—that if a federal waiver is not approved, the original initiative will be implemented as written.

Unsurprisingly, financing is a challenge. In Montana, the $2 tobacco tax proposal drew $18 million in opposition spending from that industry. The inclusion of sales tax funding in Utah’s plan reduced their expected margin of victory. On the other hand, lack of financing in the 2017 Maine initiative gave then-Governor Paul LePage (R) the argument to stall implementation until his departure 14 months later. Given these experiences, articulating a generalized financing theory is challenging. It will be case by case for the time being.

The Road Ahead

Going forward, The Fairness Project will continue its minimum wage, paid sick leave, and other campaigns to help disadvantaged workers. It also intends to keep working on state Medicaid expansions. Only six of the remaining 14 non-Medicaid expansion states allow citizen ballot initiatives: Florida, Mississippi, Missouri, Oklahoma, South Dakota, and Wyoming. The jewel of these is Florida with as many as 1.25 million potential Medicaid enrollees, including many recent exiles from Puerto Rico. However, the only feasible pathway to voter-driven expansion in Florida requires a constitutional amendment that carries a high voter signature threshold and a required 60 percent voter approval margin; the Sunshine State also has one of the nation’s more expensive media markets. Moreover, lawmakers in Florida and Missouri as well are even now contemplating how to make the ballot requirements even more onerous.

More than a few savvy health policy leaders demurred in supporting The Fairness Project’s Medicaid campaigns in 2017 and 2018. The Project’s leaders, undeterred, saw opportunity where others only saw risks and downsides. As Marcel Proust wrote: “The real voyage of discovery consists not in seeking new landscapes, but in having new eyes.” Schleifer and colleagues’ new eyes have helped to transform the nation’s political landscape regarding Medicaid. Here’s hoping that they keep looking.

Might We See a Medicaid Wave Start Next Week?

[This column appeared on the Health Affairs blog on Thursday, November 1.]

Ever since the U.S. Supreme Court ruled in 2012 that states must have an option whether or not to expand Medicaid as authorized in the Affordable Care Act, expansion has been a long, slow slog, state by state, inch by inch. While blue states had mostly lined up to expand Medicaid by 2013, nearly every purple and red state proved to be a battlefield. Today, 19 states have yet to expand, with 31 in the “yes” column (plus the District of Columbia) (see table 1). The last state to expand, #31, was Louisiana in mid-2016. But, might a mighty Medicaid wave be coming courtesy of the November 6^th elections? The answer is a definite maybe.

Right now, all that’s certain is that Virginia will become state #32 to expand Medicaid in January. The state enacted the 400,000-person expansion last May, albeit with a “work requirement” to be filed with the Centers for Medicare and Medicaid Services (CMS) sometime in 2019.

Maine is certain to become #33 early next year if Democratic Attorney General Janet Mills wins the Governor’s Chair. In November 2017, Maine voters approved expansion—59-41 percent—in a state ballot initiative. Departing Republican Governor Paul LePage refused to implement the expansion in spite of strong legislative support to do so, as well as an order from Maine’s highest court. In previous years, the Legislature failed by only a small number of votes to override LePage’s vetoes (5 times). Progressive forces expect to pick up state legislative seats on November 6^th, so it’s also possible expansion could happen with a new Republican governor, supportive or not.

State Adoption Of ACA Medicaid Expansion (By Year)

SOURCE: Advisory Board. “Where the States Stand on Medicaid Expansion.” June 8 2018. Accessed Oct. 29 2018 at: https://www.advisory.com/daily-briefing/resources/primers/medicaidmap

Medicaid On the Ballot

Activists in three states—Idaho, Nebraska, and Utah—are standing in the wings hoping to be states #34, 35, and 36 depending on the outcomes of state ballot initiatives in each of them on November 6^th. Montana has an initiative on the ballot to continue its expansion with dedicated funding.

While Idaho’s departing Governor Butch Otter fought consistently against Medicaid expansion throughout his tenure, he recently changed his position and announced his support for the Medicaid ballot initiative. Republican gubernatorial candidate Brad Little says he will respect the ballot initiative’s outcome—even though the measure does not specify how to finance the 10 percent financing match states will need to pay by 2020 (7 percent in 2019). Two organizations, Idahoans for Healthcare and Reclaim Idaho raised $594,191 by the late September reporting deadline, while the opposition Work, Not ObamaCare has raised $29,999. Idaho’s Hospital and Medical Associations contributed nearly $200,000 to the “yes” effort. Recent polling shows 66 percent support, including 77 percent from independents and 53 percent from Republicans. The yes campaign co-chair is Republican State Representative Christy Perry.

Nebraska previously did not have enough support to overturn a Governor’s veto against expansion. Nebraska Governor Pete Rickets maintains his opposition as he coasts toward an easy re-election. But it’s a spirited race for Nebraska Initiative 427, the Medicaid Expansion Initiative that would cover an estimated 90,000 low-income Nebraskans. The lead organization—Insure the Good Life—has raised $1.69 million as of late September to support a yes vote, versus $0 by the opposition Americans for Prosperity. The “yes” camp’s largest contributor is a national progressive political action committee called the “Fairness Project” which also backed the 2017 Maine Medicaid initiative and which has donated $1.19 million. Other key supporters include the Nebraska Hospital Association, the state health center association, Nebraska AARP and 24 other organizations.

Of the three ballot initiative campaigns, Utah’s is the most compelling. Proposition 3 would raise the state’s sale tax from 4.70 to 4.85 percent to fully finance the expansion for 150,000 low-income Utah residents. In 2021, that is projected to raise $88 million to cover the state’s projected $78 million share of the $846 million total expansion cost (the federal government pays the rest). A February 2018 poll showed 68 percent support among Utah voters. As in Nebraska, the national Fairness Project is driving the campaign, providing $2.7 of the $2.83 million raised as of late September. A wide array of health care and religious organizations are public supporters. No organization is registered with the state in public opposition to the initiative, as of late September.

To thwart the proposal, in March, Governor Gary Herbert signed House Bill 472 into law to expand Medicaid for individuals with household incomes no higher than 95 percent of the federal poverty line, as opposed to 138 percent in Proposition 3, as authorized under the ACA. HB472 would also impose work requirements on many enrollees and would cover 90,000 as opposed to the initiative’s 150,000. Earlier this year, the Trump Administration rejected a plan similar to HB472 that was advanced by Oklahoma to expand Medicaid eligibility no higher than 100 percent of the federal poverty level. So it is unclear whether the Trump Administration will allow the Utah HB472 expansion to go forward.

Montana is another state with a Medicaid expansion ballot initiative facing the voters on November 6^th, but to continue the existing expansion. The state expanded Medicaid in 2015, though only through 2019. The November 6^th ballot will present an initiative, I-185, to continue expansion past 2019 by raising tobacco taxes by $2 a pack as the state’s funding source. Healthy Montana for I-185 backers have raised $4.8 million and are battling the tobacco industry in the form of Montanans Against Tax Hikes (MATH) which has invested at least $12 million to defeat the initiative; 97 percent of the MATH’s money has come from Altria Client Services, maker of Marlboro cigarettes and other smoking products. If voters approve, the expansion will continue without restraints. If the referendum fails, the legislature still could pass a new funding law, likely with a work requirement attached.

Other Election Day Impacts

Of the 14 remaining non-expansion states, the November 6^th results may have consequential impact. If Democratic candidates win currently competitive gubernatorial races in Florida, Georgia, Kansas, and Wisconsin, and pick up legislative seats, that could alter the Medicaid expansion equation. This would be especially true in Kansas where prior expansion efforts were thwarted by a narrow inability to override gubernatorial vetoes by only three votes. In other states, notably North Carolina with Democratic Governor Roy Cooper, significant Democratic gains in the state legislature may also have a consequential impact.

Some noteworthy features of this issue are worth considering. First, in many of these remaining states with Republican control, the price of expansion is likely to include work requirements on many newly eligible enrollees—as occurred in Virginia this past year. Unless ruled illegal by the federal courts, this national experiment will more than likely run at least for the duration of Republican control of the executive branch. As is apparent from the track record in Arkansas thus far, this is about values and ideology more than dollars and sense.

Second, after six years of fighting the Medicaid expansion wars, it is clear that most expansion opponents are not going to change their minds. Not much is left to say that hasn’t been said countless times before. As we saw in Virginia, a change of mind accompanies a change in occupants of legislative and gubernatorial seats. And in the four November 6^th ballot initiative states, if successful, we should anticipate that one or more of the affected Governors may imitate Maine Governor LePage in seeking to block expansion in spite of voter sentiment.

Third, in spite of all the uproar, it is significant that not one expansion state has gone back on it, or even considered doing so. The closest an expansion came to a rollback was the election of hard right conservative Matt Bevin as Kentucky’s governor in 2015. Bevin abandoned his pledge to repeal Kentucky’s ground-breaking and successful Medicaid expansion early in his gubernatorial campaign, and never returned to that stance, turning to mandatory work requirements as the next best thing.

Much like how the public’s support for banning pre-existing condition exclusions has become calcified in the public’s mind from the battles of 2017 and 2018, similarly the expansion of Medicaid has become hard-wired into public consciousness in the states that adopted it.

I have yet to read an insider’s account on how and why the U.S. Supreme Court lined up 7 votes to secure their atrocious 2012 ruling to make Medicaid expansion an option for states. It is true that their decision played a role in compelling Americans to grapple with and understand the rationale and importance for Medicaid expansion. But at what a damn price!

Continue reading “Might We See a Medicaid Wave Start Next Week?”

Health Reform Realism

[I wrote this new commentary for the Milbank Quarterly.]

In noticeable ways our current health reform period resembles the 2005-2006 era when political leaders, stakeholders, and think tanks began formulating proposals to prepare for a future national effort to achieve comprehensive health reform, a process that came to fruition with the signing of the Affordable Care Act (ACA) in March 2010. Though those years were also a time of unitary Republican control of the White House and both houses of Congress, many foresaw the arrival of a new president and Congress in 2009 as a potential and not-to-be-missed window of opportunity for important reform. Waiting until 2009 to begin planning would have been too late. I propose that in 2018 we embrace this renewed possibility for reform with realism and humility.

Today, we already see a plethora of legislative and policy proposals emerging from elected Democratic officials and progressive think tanks such as the Urban Institute and the Center for American Progress. While Sen. Bernie Sanders’s Medicare for All bill seeks the holy grail of single-payer reconstruction, others aim for meaningful yet incremental changes to address critical pain points in the current system.

All of these plans rely on an unreliable expectation that, come January 2021, Democrats will control the White House and governing majorities in the US Senate and House of Representatives, as the federal election cycles of 2018 and 2020 come to resemble the blue-wave cycles of 2006 and 2008. All of these plans recognize little potential for meaningful reform until then. However, if Democrats control all 3 power sources come January 2021, public demands on them for far-reaching national health reform may well be overpowering. Continue reading “Health Reform Realism”

Revisiting the Land of the Individual Mandate

[This new commentary was just published by the Milbank Quarterly.]

The years 2013 through 2016 were excruciating for the Massachusetts Health Connector. In 2013, the Connector was among the nation’s most troubled federal/state health insurance exchanges, as it endured an epic collapse of its new website to help consumers purchase individual health insurance. Since then, it has taken a step-by-step and low-key “no news is good news” approach to rebuilding trust and credibility with its 252,000 clients.

Now the silent period is ending. In 2006, Massachusetts was the first and only state to enact an individual health insurance mandate, the essential model for the federal individual mandate included in the Affordable Care Act (ACA) in 2010 and implemented in 2014. In last December’s Tax Cuts and Jobs Act, President Trump and Congress neutered the ACA mandate by reducing the financial penalty to 0. Despite widespread reports to the contrary, the mandate was not repealed, and the law, with its mandatory reporting requirements, remains on the books.

Thus, Massachusetts now returns to the spotlight as the nation prepares to examine the impact of the federal action, testing 1 state’s experience against that of the other 49. In 2015, the last year for which tax data is publicly available, only 3% of adult tax filers in Massachusetts reported not having insurance meeting state standards, corroborating other data sources indicating that it has the lowest rate of uninsurance in any state (the most recent US Census data shows Massachusetts at 97.5% coverage). Depending on an uninsured person’s household income, the monetary penalty ranges between $21 and $96 for each month without coverage. As of early February, at least 9 other Democratic-leaning states are considering adopting a similar mandate. Continue reading “Revisiting the Land of the Individual Mandate”

Looking Back on the Desegregation of U.S. Hospitals in 1966

[Last summer, I wrote the following review of The Power to Heal: Civil Rights, Medicare, and the Struggle to Transform America’s Health Care System by David Barton Smith. The review just came out in The Common Reader. I still think the book is required reading in our times. And I love the cartoon!]

On a Saturday morning in January 1967 Dr. Jean Cowsert, an African-American physician, was found shot to death in front of her home in Mobile, Alabama, after a stone had been thrown through her front window and she went out to investigate. Though police concluded that she had accidentally shot herself, in the months prior to her death she had been a key confidential informant to officials from the U.S. Department of Health, Education and Welfare (HEW) concerning the Mobile Infirmary’s publicized efforts to thwart patient desegregation of its facilities. A HEW official’s carelessness may have inadvertently disclosed her identity to desegregation opponents.

Dr. Cowsert’s is one of many compelling stories in David Barton Smith’s powerful account of U.S. hospital desegregation in 1966, triggered by the convergence of national civil rights mobilization, the 1964 Civil Rights Act and the 1965 enactment of Medicare. In The Power to Heal: Civil Rights, Medicare, and the Struggle to Transform America’s Health Care System Smith tells how federal health officials—with backing from President Lyndon Johnson, HEW Secretary John Gardner, and other federal officials—mobilized to achieve a startlingly rapid transformation of America’s hospitals, erasing the stain of racial segregation that had always prevailed across the nation, North, South, East, and West.

Smith’s account stands in vivid contrast to the equally compelling and failed story of American public school desegregation, best told in the 1976 Pulitzer Prize-winning Simple Justice: The History of Brown vs. Board of Education and Black America’s Struggle for Equality by Richard Kluger. In that case, the 30-year struggle to overturn “separate but equal” racial segregation in public education, culminating in a landmark 1954 U.S. Supreme Court’s 9-0 decision in Brown v. Board of Education, to this day has been mostly unachieved. A bold court decision was fatally undermined by a subsequent enforcement ruling committing the nation to an unsuccessful implementation strategy called “with all deliberate speed.” The contrast between successful desegregation of U.S. hospitals versus failed desegregation in public education is instructive.

Smith writes: “In four months, civil rights activists … transformed the nation’s hospitals from our most racially and economically segregated institutions to our most integrated. In four years, they changed patterns of use of health services that had persisted for half a century. The fundamental moral imperative—that those needing medical care should receive it—began for the first time to reflect actual use of services. A profound transformation, now taken for granted, happened almost overnight.”

A bold court decision was fatally undermined by a subsequent enforcement ruling committing the nation to an unsuccessful implementation strategy called “with all deliberate speed.” The contrast between successful desegregation of U.S. hospitals versus failed desegregation in public education is instructive.

As with so many aspects of American society prior to the 1960s, segregation ruled. A 1952 report by the South Conference Education Fund titled “The Untouchables: The Meaning of Segregation in Hospitals” documented 12 deaths of African Americans denied admission to white-only hospitals governed by white physicians and white dominated medical associations. In most of the nation, black-only hospitals were under-staffed, under-financed, and under-equipped.

Beginning in the 1940s, black health professionals who were systematically excluded from the white medical mainstream, supplied backbone in the struggle for civil rights in hospitals, in schools and across American society. Theodore Roosevelt Mason Howard, MD, Sonnie Wellington Hereford III MD, Reginald Hawkins DDS, W Montague Cobb MD PhD, Charles Watts MD, George Simkins Jr. DDS—these are long-forgotten names of physicians who stood up for justice in their communities and in courts.

Though the 1946 Hill-Burton Act banned racial discrimination in new and expanded hospitals for which it provided ample federal funds, the law explicitly sanctioned “separate but equal” facilities. A 1962 federal lawsuit, Simkins vs. Moses Cone, attacked the constitutionality of that provision, winning crucial support from the Kennedy Administration, and upheld by the U.S. Supreme Court in March 1964 just as Congress was passing that year’s landmark Civil Rights Act. That law’s Title VI, for the first time, prohibited using federal funds for racial segregation.

Passage of the bold 1964 law, though, was insufficient to compel hospital desegregation. The critical catalyst was the passage of Medicare in July 1965 providing many millions of dollars in payment for medical services for senior citizens for the first time. Though Title VI clearly applied, its remedies and enforcement powers were meager. The question became: Would President Lyndon Johnson enforce Title VI compliance in Medicare by blocking payments to racially segregated hospitals? An initial push for voluntary desegregation failed as surveys conducted by civil rights activists had proven in mid-1965.

With only six months until the July 1, 1966, inauguration of Medicare, “Gardner was launching perhaps the riskiest domestic policy initiative in the nation’s history. It tied together the fate of Johnson’s two signature pieces of legislation—the Civil Rights Act and Medicare,” Smith writes.

In December 1965, HEW Secretary Gardner distributed a memo declaring that Medicare compliance with Title VI “is too important to be treated as anything less than the highest of priorities in our total program,” committing staff and resources to the task. With only six months until the July 1, 1966, inauguration of Medicare, “Gardner was launching perhaps the riskiest domestic policy initiative in the nation’s history. It tied together the fate of Johnson’s two signature pieces of legislation—the Civil Rights Act and Medicare,” Smith writes.

Gardner’s team quickly concluded that success would require “no ‘all deliberate speed’ pass for hospitals wishing Medicare funds. No money should go to any facility where race played any role in the treatment of patients, employees, or medical staffs.” Compliance was handed to HEW’s Public Health Service managed by U.S. Surgeon General William H. Stewart and the new HEW Office of Equal Health Opportunity. But with months before Medicare’s rollout and more than 4,000 noncompliant hospitals, how could they achieve this seemingly impossible task?

When HEW leaders put out a call for volunteer temporary federal employee transfers to perform compliance, more than 1,000 employees, mostly from the Social Security Administration and the Public Health Service, answered yes. They included “bench scientists from NIH, veterinarians, pharmacists, managers of Social Security field offices, venereal disease investigators, even a ‘medical officer from the Indian Health Service complete with an Eskimo secretary.’”

The challenges were daunting. A January 1966 review concluded that at least two-thirds of Southern and border state hospitals were out of compliance, while many Northern hospitals operated as de facto segregated facilities. On March 4, 1966, Surgeon General Stewart sent a letter to all U.S. hospitals with this message: “To be eligible to receive Federal assistance or participate in any federally-assisted program a hospital must be in compliance with Title VI … Representatives from the Department of Health Education and Welfare Regional office will be visiting hospitals on a routing periodic basis …” Three weeks later, Dr. Martin Luther King offered his historic judgment: “Of all the forms of inequality, injustice in health care is the most shocking and inhumane.”

Smith provides many anecdotes of intransigent hospital officials who tried to hoodwink inspectors, concluding that “the vast majority of the hospitals chose to comply in order to get the Medicare payments, and it was remarkable how fast and dramatic the changes were.” Literally overnight, the blood supply from the Louisiana Red Cross Blood Bank, previously labeled “white” and “colored,” was integrated. At a June 15 White House meeting with hospital officials, President Johnson declared: “The federal government is not going to retreat from its clear responsibility … and I hope that you will not retreat either.” By June 15, more than 80 percent of hospitals were complying, and by June 30, the number had risen to 94 percent. “By January 1967,” Smith reports, “the mopping up, with only a few exceptions, had been completed.”

Not all changes were welcome. According to Smith, “within two decades of the implementation of Medicare, all but four of the more than 400 20^th century historically black hospitals had closed or converted to other purposes.” The Office of Equal Health Opportunity was disbanded by President Richard Nixon. And the problems of racial and ethnic inequities and disparities in health and health care are enduring national concerns.

Still, the rapid and effective desegregation of U.S. hospitals is one of our nation’s—and our health care system’s—shining moments. Smith’s book is the authoritative source to understand the political, social, economic, and cultural context of this transformation. Perhaps as monuments to Confederate generals are demolished, we might find space for a monument to Dr. Jean Cowsert.