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Gorsky, M (2012) Hospitals, Finance, and Health System Reform

in Britain and the United States, c. 1910 - 1950: Historical Re-

visionism and Cross-National Comparison. Journal of health poli-

tics, policy and law, 37 (3). pp. 365-404. ISSN 0361-6878 DOI:


Downloaded from: http://researchonline.lshtm.ac.uk/20901/

DOI: 10.1215/03616878-1573067

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Copyright c and Moral Rights for the papers on this site are retained by the individual au- thors and/or other copyright owners Journal of Health Politics, Policy and Law Advance Publication, published on February 9, 2012 Hospitals, Finance, and Health System Reform in Britain and the United States, c. 1910 – 1950: Historical Revisionism and Cross-National Comparison Martin Gorsky London School of Hygiene and Tropical Medicine Comparative histories of health system development have been vari- Abstract ously influenced by the theoretical approaches of historical institutionalism, politi- cal pluralism, and labor mobilization. Britain and the United States have figured significantly in this literature due to their very different trajectories. This article explores the implications of recent research on hospital history in the two countries for existing historiographies, particularly the coming of the National Health Service in Britain. It argues that the two hospital systems initially developed in broadly similar ways, despite the very different outcomes in the 1940s. Thus, applying the conceptual tools used to explain the U.S. trajectory can deepen appreciation of events in Britain. Attention focuses particularly on working- class hospital con- tributory schemes and their implications for finance, governance, and participation;

these are then compared with Blue Cross and U.S. hospital prepayment. While acknowledging the importance of path dependence in shaping attitudes of British bureaucrats toward these schemes, analysis emphasizes their failure in pressure group politics, in contrast to the United States. In both countries labor was also cru- cial, in the United States sustaining employment-based prepayment and in Britain broadly supporting system reform.

A previous version of this article was presented at the First Conference for the International Study of the Hospital in the Twentieth Century in Japan, the UK, and the USA, held at Hitotsu- bashi University, Tokyo, Japan, in January 2007. I thank Shuhei Ikai for encouraging me to write it and participants for their comments. I am also most grateful to Bruce Fetter, Beat- rix Hoffmann, Rosemary Stevens, and this journal’s anonymous reviewers for their generous advice and (I suspect) forbearance.

Journal of Health Politics, Policy and Law, Vol. 37, No. 3, June 2012 DOI 10.1215/03616878-1573067 © 2012 by Duke University Press

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Comparison in Health Systems History The comparative history of health systems is now a substantial field, both in its own right and within the literature on welfare states. Britain and the United States have figured frequently in such histories, thanks to perceptions of them as “polar types,” the former with its early move to a

centralized National Health Service (NHS) and the latter with its longstanding adherence to public-private welfare structures (Anderson 1963:

842). The two countries’ experiences have also been influential in shaping theoretical explanations of health system development. Put crudely, such approaches have moved on from an early focus on welfare policies as concomitants of industrial development or products of national political cultures. Instead scholarship over the last three decades has tended toward three strands of interpretation. Some have concentrated on the social forces that advance redistributive welfare reform, emphasizing either the agency of the organized working class or the decisive importance of cross-class solidarities. Others, thinking within a framework of political pluralism, have foregrounded the role of interest groups in determining the timing and extent of reform, with the medical profession typically the key actor. A third strand has privileged the nature of the state, emphasizing the role of bureaucracy as progenitor of change and the part played by institutional structures in advancing or impeding legislative development.

Within this historical institutionalist school the concept of path dependence has gained particular traction, illuminating different national outcomes by showing how early decisions conditioned later trajectories.

These, then, are the main planks of interpretation with which new national or comparative research must engage. My aim here is to discuss the implications for such accounts of recent revisionist work on British and American health services in the first half of the twentieth century.

Specifically, I focus on the financing and organization of hospital care in an era when both countries moved from traditional modes of philanthropy to new forms of organized prepayment. In Britain the period before the inception of the NHS had seen the introduction of statutory national health insurance (NHI) through which primary care was made available to employed workers. Hospital coverage, however, was excluded, and the response was the emergence of voluntary contributory schemes to provide access to the voluntary hospitals, the main sites of acute care. In the United States, meanwhile, legislators had decisively rejected Europeanstyle health insurance. An alternative route of private, employment-based Gorsky ■ Hospitals, Finance, and Health System Reform 367 insurance had developed to provide income replacement during sickness, but in the interwar period this proved insufficient for hospital care. The U.S. solution was a different form of prepayment, notably Blue Cross.

Hitherto the similarities between these British and American funding models have gone largely unobserved, the national paths having apparently already diverged. Yet consideration of their parallel histories directs attention to common experiences. Their hospitals were tackling the challenges of broadening access and consolidating their financial base as medical technologies advanced. Both funding mechanisms had ramifications for hospital capacity and managerial control and for the regionalization of health systems. Both were responses by the private and voluntary sectors to earlier policy decisions to keep the state out of hospital insurance, setting a path creating new stakeholder interests that would shape subsequent debates. Both represented a means of providing health coverage for employed workers and hence are germane to discussion of labor’s part in health system change. Yet both experienced different outcomes following the mid-century health care debates, with the U.S. prepayment funds retaining independence and the British contributory schemes losing their prime function to the NHS. Consideration of why this was so should therefore augment our understanding of this crucial phase of health politics.

Two preliminary points need to be made. First, this study does not propose a fundamental revision to the historical explanation of such changes, whose causes in both countries are multifaceted. Instead it asks how new research into hitherto underexplored aspects fits with existing theoretical accounts and, where it proves incompatible, what this suggests for readings of the politics of health reform. One place it leads is to a skeptical position toward any single “master explanation,” whether treating interest group pressures as the primary factor, class and organized labor as the critical determinant, or the structural bias of institutions as crucial (Quadagno 2005: 11; Navarro 1989: 890; Steinmo and Watts 1995: 330). My case instead suggests that integrating insights from all three interpretative schools yields the most satisfying results.

Second, the primary research from which this article arose has been on the British side alone. It was animated originally by the aim of reevaluating earlier accounts of the voluntary hospitals and their role in the coming of the NHS. I subsequently developed the American comparison based on the secondary literature, both because the cross-national similarities noted above seemed worth exploring and because comparative approaches offered a means of averting “explanatory provincialism” and of gauging which causal factors were “decisive, as opposed to simply present” (MarJournal of Health Politics, Policy and Law mor, Freeman, and Okma 2005: 339). My method here is therefore one of “confronting” two historiographies “with one another,” then identifying similarities and differences to prompt novel perspectives and questions (Hennock 2007: 4 – 5).

I begin with a brief outline of British and American health politics in the early to mid-twentieth century, then examine how these cases are treated by different analytical schools in cross-national comparison. I next introduce some of the recent literature on British and U.S. hospitals and health insurance during the interwar period and discuss its significance for the existing historiography. The central sections turn to the rise of the British contributory schemes and their role in hospital finance and organization. I compare this with hospital prepayment in the United States, particularly Blue Cross, where I argue that notwithstanding the different paths on which the two countries were set, some key similarities remained until the mid-1940s. Turning finally to the NHS debates, I draw on comparative analysis to examine anew the point at which the British path irrevocably diverged.

Trends in National and Cross-National Historiographies Overview Two periods of reform loom large in histories of health policy in Britain and United States: the 1910s, when the British government adopted a national health insurance (NHI) system and various American states rejected this option, and the late 1930s and 1940s, when Britain created its NHS and the United States again refused NHI. Before the 1910s health services in both countries were a mixed economy. Civil society organizations provided sickness insurance: the friendly societies in Britain and fraternities and industrial funds in the United States. Hospital provision spanned a public sector, which included mental asylums and poor law institutions (fewer in the United States), private proprietary hospitals (fewer in Britain), and acute care voluntary hospitals (Gosden 1961; Murray 2007; Peebles 1929: 9, 12; Pinker 1966: 49; Abel-Smith 1964; Rosenberg 1987; Jacobs 1992: 188). Policy debate followed the 1883 enactment of statutory sickness insurance in Bismarck’s Germany, which built on the work of existing sick funds (Hennock 2007). As its viability became established other countries followed, with Britain’s Liberal government initiating NHI in 1911 as part of a broader social program. It covered Gorsky ■ Hospitals, Finance, and Health System Reform 369 specific categories of worker, with funding from employers, employees, and the state, to provide a sickness benefit and medical care, though not in hospitals; existing friendly societies and private insurers were the carriers (Harris 2004: 211 – 213). Gradually the population coverage of NHI extended, and many doctors combined insurance “panel” work with feepaying private patients (Digby 1999). Meanwhile in the United States, Progressive reformers campaigned for the adoption of mandatory health insurance, but state legislatures rejected their proposals, as did a referendum held in California (Starr 1982; Hoffman 2001).

In both countries a new momentum for reform gathered from the 1930s, underpinned by concerns about service organization, finance, and population coverage. Although President Franklin D. Roosevelt decided against including health insurance within New Deal Social Security legislation, a series of attempts was made (generically, the Wagner-Murray-Dingell health bill) between 1939 and 1949 to legislate for NHI. None were carried, despite gaining presidential backing from Harry S. Truman in 1945, although federal aid for hospital construction was endorsed in the HillBurton Act of 1946. World War II and the reconstruction plans in the Beveridge Report catalyzed British interest in a comprehensive, universal, and free health service. The wartime coalition government initially proposed that this might be funded from a mix of NHI and general and local taxation (Beveridge 1942: 6, 160 – 161; Ministry of Health 1944).

A lengthy phase of policy debate ensued, until the Labour Party won the 1945 election and the new minister of health, Aneurin Bevan, brought forward a bill. This unified the hospital service by bringing both voluntary and municipal institutions under central state ownership, funded principally through national taxation. Democratic accountability would be achieved through ministerial responsibility to Parliament. On this basis the NHS Acts for England and Wales (1946) and Scotland (1947) were passed, and the service was launched on the “appointed day,” July 5, 1948 (Klein 2006: 12 – 22; Webster 2002: 10 – 30).

Explanatory Approaches Those are some basic facts of the two national histories. How are they accounted for in the broader comparative literature on welfare states and on health systems within them? Here I briefly sketch the current leading schools of thought and suggest how these have been applied to the British and American cases. Such a strategy inevitably oversimplifies: to allot particular explanatory models to given authors is not to imply dogJournal of Health Politics, Policy and Law matic theoretical attachment; typically it is a matter of emphasis within multilayered accounts. I also do not dwell on earlier theorists who have asked whether the development of welfare states is best understood as a “logic of industrialism” or a product of democratization, or as culturally determined (whether by national values or intellectual currents) (Skocpol and Amenta 1986: 131; Polanyi [1944] 2001: 152 – 162; Wilensky 1975;

Ashford 1986). Each approach has its insights, but each has come to seem less compelling in the comparative historiography than accounts that in their various ways put “the state back in” (Skocpol 1985).

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