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Liberal Default, Labor Support, and Conservative Neutrality: The Kaiser Permanente Medical Care Program After World War II

Published online by Cambridge University Press:  14 October 2011

Rickey L. Hendricks
Rickey L. Hendricks
Affiliation:
University of Denver
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Extract

In the politically turbulent post–World War II period, proposed federal legislation to expand the welfare state pitted conservative Republicans against liberal Democrats in Congress. The conflict over national health insurance introduced between 1943 and 1947 in the Wagner-Murray- Dingell bill ended in a conservative victory with the bill stalled in committee. The primary constituents of the two sides were American Medical Association (AMA) spokesmen and corporate interests on the political right and labor leaders and public health advocates on the left. By 1946 the conservatives controlled Congress; thereafter liberal congressional reformers defaulted on the national health issue, as they had throughout the twentieth century, to corporate progressives and the tenets of “welfare capitalism.” Government continued as a regulator of “minimum standards” for business and industry. Provision of voluntary health insurance and direct medical services was left to the private sector. The Kaiser Permanente Medical Care Program emerged out of the political stalemate over health care in the middle 1940s as a highly efficient and popular prepaid group health plan, innovative in its large scale and total integration of service and facilities. Its survival and growth was due to its acceptability to both liberals and conservatives as a model private-sector alternative to national health insurance or any other form of state medicine.

Type
Articles
Information
Journal of Policy History , Volume 1 , Issue 2 , April 1989 , pp. 156 - 180
Copyright
Copyright © The Pennsylvania State University, University Park, PA. 1989

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References

Notes

1. Berkowitz, Edward and McQuaid, Kim, Creating the Welfare State: The Political Economy of Twentieth-Century Reform (New York, 1980), ix—x.Google Scholar, 110–13; Brody, David, Workers in Industrial America: Essays on the Twentieth Century Struggle (New York, 1980), 48–81.Google Scholar

2. Starr, Paul, The Social Transformation of American Medicine: The Rise of a Sovereign Profession and the Making of a Vast Industry (New York, 1982), 282Google Scholar; Poen, Monte M.Harry S. Truman Versus the Medical Lobby: The Genesis of Medicare (Columbia, 1979), 45–48.Google Scholar

3. Lichtenstein, Nelson, Labor's War At Home: The CIO in World War II (Cambridge, London, New York, 1982), 5–7.Google Scholar; Kazin, Michael, “The Great Exception Revisited: Organized Labor and Politics in San Francisco and Los Angeles, 1870–1940,” Pacific Historical Review 55:3 (August 1986), 375–83.CrossRefGoogle Scholar, 396–401. Kazin, , Barons of Labor: The San Francisco Building Trades and Union Power in the Progressive Era (Urbana and Chicago, 1987).Google Scholar, focuses on the earlier period. Early labor radicalism in the West is traced also in Brody, 32–47.

4. Nash, Gerald D., The American West Transformed: The Impact of the Second World War (Bloomington, 1985), 56–59.Google Scholar, 75–76. Federal Security Agency (FSA) report, “Population Shifts in Richmond Shipbuilding Area,” n.d., but c. summer 1943, Kaiser Papers, Bancroft Library, University of California, Berkeley, Carton 186; Alice M. Kramer, “The Story of the Richmond Shipyards,” draft typescript, n.d.; Fact Sheet on Wartime Richmond, excerpted from “Richmond Took A Beating,” Fortune (February 1945) Kaiser Papers, Carton 330.

5. Kruif, Paul de, Kaiser Wakes the Doctors (New York, 1943), 24–40.Google Scholar; Kaiser 50th Anniversary Book, “The Hospital in the Desert,” typescript, Kaiser Papers, Carton 295; Fleming, Scott, “Kaiser-Permanente Medical Care Program History” (Kaiser Foundation Health Plan, Inc.: 25 August 1983), 6–7.Google Scholar; Table, “Health Plan Membership for Selected Years,” Kaiser Papers, Bancroft Library, University of California at Berkeley, Carton 339.

6. Starr, 322–23, 383, 395, 415, 439, 447; Brown, Lawrence D., Politics and Health Care Organization: HMO As Federal Policy (Washington, D.C., 1983), 122–28.Google Scholar; U.S. Department of Health and Human Services, Office of Health Maintenance Organizations, The 1983 Investor's Guide to Health Maintenance Organizations (Washington, D.C., June 1983), 9.Google Scholar, 18–19; Telephone interview with Kaiser Permanente Marketing Director, Colorado Region, August 1987.

7. The Kaiser organization ultimately built housing, recreation, and transportation facilities for workers, as well, that amounted to nearly $73 million in company investment. Facts About Henry J. Kaiser, “Kaiser Enterprises At War,” 29–31. Most of the Kaiser medical land and buildings were mortgaged to the Bank of America. Mimeo., “Kaiser Foundation Balance Sheet—Summary of Existing Facilities, Recorded Cost of Expansion Program to October 31, 1953,” Kaiser Papers, Carton 89. The definitive biography of Henry Kaiser is Mark S. Foster, Henry J. Kaiser: Builder in the Modem West (Austin, forthcoming, 1989). For an overview of Kaiser's industrial feats during the 1930s and 1940s, see Foster, Mark S., “Giant of the West: Henry J. Kaiser and Regional Industrialization, 1930–1950,” Business History Review 59:1 (Spring 1985), 1–23.Google Scholar. Also, Fleming, 30- 31.

8. U.S. Senate Committee on Education and Labor, 77th Congress, 2d Sess., Hearings on S. Res., Pt. 2, 325–47, 2 November-3 November 1942, reprinted in Journal of the American Medical Association [henceforth, JAMA], 120:12 (21 November 1942), 940.

9. Summary of a conference between Dr. Cecil C. Cutting and Dr. Harold Fletcher, 10 October 1942, Kaiser Papers, Carton 309.

10. U.S. Senate Committee on Education and Labor, 77th Congress, Hearings, reprinted in JAMA 120:12 (21 November 1942), 929–47.

11. Fishbein editorials, JAMA 120:10 (7 November 1942), 766 and 120:11 (14 November 1942), 840–41.

12. U.S. Senate Committee on Education and Labor, 77th Congress, Hearings on S. Res., Pt. 2, 325–47, 2 November-3 November 1942, reprinted in JAMA 120:12 (21 November 1942), 929–47.

13. Joint Report to Alameda County Medical Association, East Bay Hospital Conference, 15 June 1943; Minutes, Coordinating Committee of Procurement and Assignment Service, 1 November 1943, Kaiser Papers, Carton 309.

14. F. A. Stewart, Superintendent, Northern Permanente, to Mrs. Franklin D. Roosevelt, 17 May 1943; Garfield to Mrs. Roosevelt, 25 May 1943, Kaiser Papers, Carton 309; Kaiser to C. E. Wilson, 14 December 1943, and “Answers to Questions,” undated; E. E. Trefethen, Jr., to Bay City Metal Trades Council, 23 November 1943; Trefethen to Kaiser, 27 November 1943, Kaiser Papers, Carton 22.

15. George E. Link, “History of the Kaiser Permanente Health Care Program,” oral history conducted in 1985 and 1986 by Malca Chall and Sally Smith Hughes, Regional Oral History Office, Bancroft Library, University of California at Berkeley, 1986, transcript draft, 14; Sidney R. Garfield, “First Annual Report of the Permanente Foundation Hospitals,” n.d. but c. 1943, Kaiser Papers, Carton 330; Memo, R. H. Gillespie to E. E. Trefethen, Sr., 6 October 1943, Kaiser Papers, Carton 22.

16. American Medical Association, Commission on Medical Care Plans, Report, Pt. 1, JAMA, Special Edition (17 January 1959), 6.

17. “AMA Loses Fight in Supreme Court in Health Plan; Its Conviction Under Antitrust Law in Cooperative Case Unanimously Upheld,” New York Times (19 January 1943); Brown, 103; Berkowitz, Edward D. and Wolff, Wendy, Group Health Association: A Portrait of a Health Maintenance Organization (Philadelphia, 1988).Google Scholar

18. Poen, 29–32, 66–68; Berkowitz and McQuaid, 129–31. For California health-care legislative initiatives, see Greenfield, Margaret, Meeting the Costs of Health Care: The Bay Area Experience and the National Issues (Berkeley, 1972), 144.Google Scholar

19. Starr, 287–79.

20. Ibid.; Poen, 29–30.

21. Poen, 32–34, 59–73; Berkowitz and McQuaid, 128–29.

22. Kaiser to Mrs. Albert D. Lasker, 21 November 1945, Kaiser Papers, Carton 33; Robert F. Wagner to Kaiser, 7 December 1944; Kaiser to Wagner, 30 December 1944, Kaiser Papers, Carton 30.

23. Committee on the Cost of Medical Care, Medical Care for the American People (Chicago, 1932), 158.Google Scholar. Labor's expression of opposition to contract and corporate practice is illustrated in Cochrane, Cornelius, “Meeting a Compensation Medical Problem,” American Labor Legislation Review (December 1930), 433–35.Google Scholar

24. Robert F. Wagner to Kaiser, 7 December 1944; Kaiser to Wagner, 30 December 1944, Kaiser Papers, Carton 30.

25. Garfield, “Paper on Postwar Industrial Health,” delivered at AMA Congress on Industrial Health in Chicago, February 1944, Kaiser Papers, Carton 330. Theories of the economic and social efficiency of reform evolved through a long line of twentieth-century business theorists are traced by Berkowitz and McQuaid in Creating the Welfare State. In the 1930s these were expressed by Algie Martin Simons and Nathan Sinai, The Way of Health Insurance (Chicago, 1932), 15–17.Google Scholar, 206–7.

26. Fiorello, La Guardia to Kaiser, 20 May 1944; Kaiser to La Guardia, 24 January 1945; Paul S. Marrin to Paul F. Cadman, 27 June 1946, Kaiser Papers, Carton 37.

Kaiser lawyers thought it important to emphasize that other than his tenure as incorporator and then-officer of Industrial Indemnity, from 1920 to 1944, Kaiser had never been associated with an insurance company or any medical-care organization other than his own. In 1946, HIP was informed in no uncertain terms that he did not consider himself an officer, director, employee, stockholder, member, or trustee of that plan. Kaiser attorney Paul Marrin said privately that “I wish we could also say that he had not been an incorporator of the [New York] Health Plan, but apparently this is not correct.”

27. Sidney R. Garfield to “Boss,” 14 March 1944, Kaiser Papers, Carton 175; Garfield, “Paper on Postwar Industrial Health,” February 1944, Kaiser Papers, Carton 330; Garfield, “Report on Trip to New York Re: Mayor La Guardia's Health Plan,” 9 June 1944, Kaiser Papers, Carton 37. Despite this illustrious company, Garfield was not distracted from his firm belief in closed-panel group practice, and told the bevy of enthusiastic reformers that HIP would not succeed as Permanente Health Plan had it operated on a combination closed- and open-panel basis. The New Yorkers felt they must provide a choice to members of either arrangement in order to gain the support of organized medicine, or at least not provoke its opposition. Garfield told the group he thought that it was impossible to succeed with this dual setup. He saw other “stumbling blocks” as well, such as “medical politics” in the east, the fact that facilities were owned by outside interests, and that the plan would be partly operated through Blue Cross. A total integration of the medical group, facilities, and financial mechanisms was the basis of Permanente quality and efficiency. Yet no other plan would accomplish this strict integration on the scale of the Kaiser organization in Kaiser's and Garfield's lifetimes.

28. U.S. Senate Committee on Education and Labor, 77th Congress, Hearings, reprinted in JAMA 120:12 (21 November 1942), 940; George L. Dealy to E. E. Trefethen, Jr., 11 November 1942; Clay Bedford to U.S. Maritime Commission, 30 January 1943; Charles H. Day to Garfield, 12 November 1942, Kaiser Papers, Carton 330. For those workers whom Permanente could not accommodate, management offered a similar plan under Banker's Life Insurance Company. Government employees of the U.S. Maritime Commission were also clamoring for health plan coverage, and company management was working out an alternate system for this group as well.

29. Garfield to Margaret C. Klem, Federal Security Agency, 2 November 1942; Klem to Garfield, 18 September 1943; Sally Bolotin to Klem, 18 September 1943, Kaiser Papers, Carton 330; Chart and report, Dr. Riese, 16 December 1943–6 January 1944, attached to “The Changes in Population and Medical Care Facilities in Vancouver, Washington, v. Portland, Oregon,” Kaiser Papers, Carton 183.

30. James W. Routh to Garfield, 12 July 1944, attached to “Analysis of Proposed Health Plan for Harbor Gate Residents,” Kaiser Papers, Carton 330; Garfield to “Boss,” 14 March 1944, Kaiser Papers, Carton 175.

31. Dr. Sidney R. Garfield, taped interview by Mark S. Foster, 16 January 1984.

32. Starr, 311–12; 325; Lichtenstein, 240; Garbarino, Joseph H., Health Plans and Collective Bargaining (Berkeley, 1960), 18–20.Google Scholar; JAMA, Special Edition, Part 1 (17 January 1959), 56; Anderson, Odin W., Blue Cross Since 1929: Accountability and the Public Trust (Cambridge, Mass., 1975), 45.Google Scholar; Davis, Michael, Medical Care Tomorrow (New York, 1955), 231–32.Google Scholar; Somers, Anne R., ed., The Kaiser-Permanente Medical Care Program: One Valid Solution to the Problem of Health Care Delivery in the United States, Proceedings of a Symposium in Oakland, California (New York, 1971), 199.Google Scholar. According to Somers's statistics, at the end of 1947 only 3 percent of 32,000 group members in the Kaiser Health Plan in the San Francisco Bay Area had employer payment of benefits; by mid-1955 this number had risen to 33 percent of 226,000 group members. Total membership in northern California in 1955 was 301,671.

33. Memo, T. T. Inch to Garfield, 13 September 1945, Kaiser Papers, Carton 183; Mimeo., “Origin and Development of the Principles of the Kaiser Health Plan,” n.d., c. 1945, Kaiser Papers, Carton 330.

34. Garfield to Charles Kramer (Pepper Committee, Union Health Subcommittee), 23 November 1945, Kaiser Papers, Carton 330; chart, c. 1956, “Membership Growth,” 1943— 1955, Kaiser Papers, Carton 124.

35. Central Labor Council Endorses Permanente Health Plan,” East Bay Labor Journal, 20:15 (8 February 1946).Google Scholar; General release by the Permanente Metals Corp., n.d., but c. late 1945; Kaiser to Sen. James E. Murray, Committee on Labor and Public Welfare, U.S. Senate, 27 June 1949, read into Congressional Record by Murray, Kaiser Papers, Carton 45.

36. Clifford H. Keene speech to U.S. Steelworkers Convention, 18 September 1954, Kaiser Papers, Carton 103; Fleming, 18.

37. Kay, Raymond M., Historical Review of the Southern California Permanente Medical Group (Los Angeles, 1979), 6–7.Google Scholar; Garfield interview by Foster.

38. Dr. Ernest W. Saward, “History of the Kaiser Permanente Medical Care Program,” an oral history conducted in 1985 by Sally Smith Hughes, Regional Oral History Office, Bancroft Library, University of California at Berkeley, 1986, draft transcript, 32–35.

39. Membership figures are calculated on the basis of average four-member-family units and a total ILWU group membership of 4,710. Computed from membership statistics given by Saward, Ernest W. in “Documentation of Twenty Years of Operation and Growth of a Prepaid Group Practice Plan,” Medical Care 6 (May-June 1968), 232–38.CrossRefGoogle Scholar. Also, Table, “Health Plan Membership for Selected Years,” Kaiser Papers, Carton 339.

40. Table, “Health Plan Membership for Selected Years,” Kaiser Papers, Carton 339; Somers, Anne R., ed., The Kaiser-Permanente Medical Care Program, A Symposium (New York; 1971).Google Scholar, Appendix Table 5, p. 199; mimeo. “Essential Key Physician Executives,” a summary statement by Permanente Medical Groups, Kaiser Foundation Health Plan, 6 December 1955, Kaiser Papers, Carton 309; Fleming, 7, 10.

41. Brody, 190–99.

42. Dr. Clifford H. Keene, “Status of Hospitalization Plans for Willow Run,” report, 7 November 1947, Kaiser Papers, no carton number.

43. Poen, 67–73.

44. “Proposed Endorsement of President Truman's Health Message,” n.d., c. 1945, Kaiser Papers, Carton 183; Kaiser to Mrs. Albert D. Lasker, 21 November 1945; Gerald Piel to Chad F. Calhoun, 8 January 1946, Kaiser Papers, Carton 33.

45. Poen, 88–89.

46. Ibid., 67–73; Donovan, Robert J., Conflict and Crisis: The Presidency of Harry S. Truman, 1945–1948 (New York, 1977), 125–126.Google Scholar, 212–18.

47. Garfield to “Boss,” 14 March 1944, Kaiser Papers, Carton 175; Garfield, “Paper on Postwar Industrial Health,” Kaiser Papers, Carton 330.

48. The National Health Plan would provide continuous employment for 1,779,000 people, Kaiser figured, and for 990,000 more in the initial construction phase. Kaiser to Hon. Harry A. Wallace, 13 March 1945; “A National Medical Plan Based on the Existing Facilities and the Operating Program of the Permanente Foundation”; Trefethen to Paul F. Cadman, 21 March 1945; Memo and “Draft of Statement for Pepper Committee,” 29 March 1945, Kaiser Papers, Carton 189.

49. Garfield to Henry A. Wallace, 28 March 1945, Kaiser Papers, Carton 183.

50. Starr, 425; quotation, AMA, Organized Payments of Medical Services (Chicago: AMA, 1939), 150–51.Google Scholar

51. Kaiser to Senator Claude Pepper, 1 June 1945, Kaiser Papers, Carton, 47.

52. “Memo for File,” 29 March 1945, Kaiser Papers, Carton 183.

53. In 1947 the California State Board of Medical Examiners and the Ethics Committee of the Alameda County Medical Association sought to prosecute Garfield for violation of the state Medical Practice Act. In 1945 and 1946, Garfield had employed several doctors as interns or residents who were qualified to practice medicine but did not have California licenses. He also was accused of keeping on staff until 1946 another physician whose license had been revoked in 1943 for drug abuse. The board placed Garfield on a five-year probation and suspended his license for one year. Garfield appealed on the grounds that the interns were in training and were not required to be registered in California. Further, the state attorney general had ruled that it was legal to keep the doctor accused of drug charges on the payroll until his case was decided. In 1950 a judge ruled in the case 99 C. A. 2d 219 (1950) that Dr. Clifford H. Keene was not a legal resident of the state at the time of his employment, and therefore Dr. Garfield had violated the Medical Practice Act. By the time it was decided, however, other circumstances had rendered the case moot. Ironically, Dr. Keene later replaced Garfield as medical director of Kaiser Permanente. Unidentified clipping, “Chief to Take Row to Court,” n.d., c. October 1947, Kaiser Papers, Carton 45; Fleming, 15.