American Medicine

Summary

American medicine followed a trajectory so distinctive that Paul Starr called it a study in the conversion of cultural authority into market power and legal privilege — a process that took two centuries to complete and was never inevitable. From its colonial origins, medicine in America confronted an unusually hostile environment: a democratic culture that distrusted professional expertise, a dispersed rural population that made practice economically marginal, and a political tradition that treated licensing as aristocratic privilege. The Jacksonian era swept away the first wave of licensing laws entirely. Yet by 1930 American physicians had achieved one of the most thoroughgoing professional monopolies in the world, with incomes four times average worker earnings and statutory control over the definition, treatment, and financing of disease. That sovereignty proved fragile: the same political structure that had once blocked professionalization also blocked the European-style social insurance that would have anchored it permanently, leaving American medicine exposed to corporate reorganization by the 1970s.

Democratic Resistance to Medical Authority, 1760–1850

The institutional infrastructure of American medicine appeared quickly. The first licensure law requiring prospective examination was passed in New York City in 1760; the first medical school was chartered in Philadelphia in 1765; and the first provincial medical society was organized in New Jersey in 1766. At the Revolution there were approximately 3,500–4,000 physicians in the country, only 400 of whom held formal medical training, concentrated almost entirely in the larger cities.(Starr, 1982)

The tension between physicians’ aspirations to professional status and popular resistance reflected a deeper conflict in American life between democratic culture and social stratification.(Starr, 1982) Alexis de Tocqueville’s observation that democracy changed mutual relations between classes rather than eliminating inequality frames the structural context.(Starr, 1982)

That hostility found expression in an enormous popular literature of domestic medicine. William Buchan’s Domestic Medicine (1769; Philadelphia edition 1771) argued that “everything valuable in the practical part of medicine is within reach of common sense” and went through at least thirty American editions — probably the most influential book of its kind in the United States.(Starr, 1982) Antebellum professional identity was derived not from privileged scientific knowledge but from the willingness to act therapeutically; the physician who withheld intervention was seen as professionally derelict.(Warner, 1986)

The dominant early nineteenth-century medical system was Benjamin Rush’s heroic therapeutics: one disease (“morbid excitement induced by capillary tension”), cured by aggressive depletion via bloodletting and heavy cathartics, including calomel dosed until salivation.(Starr, 1982) Rush believed physicians should actively cut short disease and that nature acted capriciously to the patient’s detriment.(Warner, 1986) Rush’s system dominated American practice in the first decades of the century, providing sectarian targets with both a genuine empirical grievance and a political vocabulary to exploit.

By 1850 the United States had forty-two medical schools compared to three in France; most post-1820 growth occurred in the West, with many founded in rural areas lacking hospitals or clinical facilities.(Starr, 1982)

The Thomsonian Movement

Samuel Thomson obtained a federal patent for his botanic medicine system in 1813, claimed 100,000 family-rights sold by 1839, and organized his followers into “friendly botanic societies” with journals and conventions.(Starr, 1982) Thomson’s political ideology was explicitly class-based: learning and property were instruments of aristocratic oppression; medicine was shrouded in unnecessary obscurity, and “mystery” had to be stripped away so that practice could be “combined with common sense.”(Starr, 1982)

The Repeal of Licensing Laws

The political outcome was decisive. State legislatures repealed medical licensing laws in rapid succession from the 1830s onward: Alabama (1832), Mississippi (1836), South Carolina, Maryland, and Vermont (1838), Georgia (1839), New York (1844), and Louisiana (1852). What destroyed licensure was the popular conviction that it was an expression of favor rather than competence.(Starr, 1982) American physicians’ quest for professional status was blocked by popular resistance, internal division, and an inhospitable economic environment; their licensing authority had little more than honorific value, and the Jacksonian backlash crippled their ambitions for half a century.(Starr, 1982)

The fundamental economic constraint was not the direct physician’s fee but the prohibitive indirect price of care — the opportunity cost of travel time — which effectively cut most rural families off from ordinary recourse to physicians. Mileage charges in the 1840s typically amounted to four or five times the basic visit fee at distances of five to ten miles, making distance the decisive variable in healthcare access.(Starr, 1982)(Starr, 1982) Between 1790 and 1850 the number of physicians rose from roughly five thousand to forty thousand — faster than population growth — while practitioners complained continuously of overcrowding.(Starr, 1982) Mental asylums emerged during the 1820s–1840s as the first major institutional medical market, driven by urban growth and the “moral treatment” imported from Pinel and Tuke; superintendent salaries reached $1,000–$2,000 per year, offering physicians an unprecedented secure income.(Starr, 1982) General hospital numbers then exploded from fewer than 200 in 1873 to over 4,000 in 1910 and over 6,000 by 1920, propelled partly by changes in family structure that reduced homes’ capacity to manage acute illness.(Starr, 1982) Karl Polanyi’s concept of the “double movement” — market expansion continuously met by social protectionism — applies directly to this period: economic liberalism supported abolishing licensing, while medical societies simultaneously tried to restrict entry and commercial behavior.(Starr, 1982) Earnings for those practitioners were modest: in New England in the 1830s, practitioners rarely received more than $500 a year in gross income, much of it paid in kind rather than money, and in five New England counties between 1790 and 1840 the proportion of medical school graduates among practicing physicians ranged only between 20 and 35 percent.(Starr, 1982)

Urbanization transformed the medical marketplace in the later nineteenth century. The proportion of Americans living in towns of 2,500 or more rose from 6 percent in 1800 to 46 percent by 1910; between 1870 and 1910 the number of physicians per 100,000 in large cities grew from 177 to 241 while it fell in the rest of the country, showing that urbanization concentrated the medical profession.(Starr, 1982) The telephone and automobile then dramatically reduced physicians’ unit costs: by 1910 surveys showed automobiles cut house-call time in half, and the first telephone exchange (Hartford, 1877) had connected twenty-one local doctors. Physicians estimated a 300 percent productivity gain between the mid-1800s and early 1940s.(Starr, 1982) The shift from home to office and hospital practice followed naturally: the telephone enabled orderly appointments, rising physician incomes made doctor time more valuable than patient travel time, and the growing use of clinical equipment required fixed settings.(Starr, 1982) In England the widening middle-class medical market in the nineteenth century reversed the doctor-patient power relationship; whereas in the eighteenth century the patient was the dominant figure dependent on aristocratic patronage, by the nineteenth century power positions were reversed — a pattern Starr identifies operating in America with a generational delay.(Starr, 1982)

The Sectarian Era: Thomsonianism, Eclecticism, Homeopathy

Jacob Bigelow’s 1835 Harvard address on “self-limited diseases” catalyzed a shift from heroic therapy toward “rational medicine” that acknowledged nature as the chief agent of cure.(Starr, 1982)

Homeopathy, founded by Samuel Hahnemann (1755–1843), centered on three doctrines — similia similibus (“like cures like”), extreme dilution enhancing efficacy, and the “psora” theory as the root of most chronic disease — and by 1871 represented approximately 13 percent of practitioners, with irregular practitioners overall reaching roughly 20 percent of the medical market by 1880.(Starr, 1982)

The Paris school of clinical medicine (1800–1830) broke decisively with classical “systems,” combining clinical observation with pathological anatomy to correlate symptoms with internal lesions at autopsy; Laennec’s 1816 stethoscope allowed physicians to “see” inside the living body.(Starr, 1982) John Harley Warner’s analysis of this therapeutic transition identifies a more fundamental shift: American physicians of the mid-nineteenth century moved away from rationalistic systems of disease (in which therapy was deduced from a fixed theory of pathology) toward clinical empiricism, adjusting treatment to the particular patient, locality, and season rather than deriving it from doctrine.(Jackson (ed.), 2011)

Starr’s most striking finding about the sectarian era is that homeopathic and Eclectic schools did not decline because orthodox medicine suppressed them — they declined precisely after being accepted into the profession. Eclectic school enrollment peaked at 1,000 in 1904, then fell to 256 by 1913; homeopathic schools dropped from twenty-two in 1900 to six by 1918, all of which ceased being homeopathic within a few years. When shunned and denounced, the sects thrived; as they gained legal privileges, their numbers collapsed.(Starr, 1982)

AMA Consolidation and Professional Sovereignty, 1850–1930

The Founding Weakness of the AMA

The American Medical Association was founded in 1847 by younger, less established physicians rather than the elite; it had only 8,000 members in 1900 out of roughly 110,000 practitioners because it lacked selective incentives to compel participation.(Starr, 1982) The decisive shift came through a 1901 reorganization that created a House of Delegates fed by state societies that themselves federated county organizations, converting the AMA from a voluntary debating club into a disciplined hierarchy; membership shot from 8,000 in 1900 to 70,000 (half of all physicians) by 1910.(Starr, 1982)

The 1888 Supreme Court decision in Dent v. West Virginia unanimously upheld medical licensing as a legitimate state power, ruling that states could require professional education and examination to protect society from incompetent practitioners, since “few professions require more careful preparation.”(Starr, 1982)

Medical Education Reform

Charles Eliot’s 1869 reforms at Harvard Medical School — salaried faculty, nine-month year, three-year program, required laboratory work, mandatory passing of all courses — established a model for university-based medical education that rivals could not ignore.(Starr, 1982) Johns Hopkins Medical School, opened in 1893, required college degrees for admission, offered a four-year curriculum rooted in basic science and hospital clinical work, and created the first residency system; its graduates spread the model nationally.(Starr, 1982)

Abraham Flexner’s 1910 Bulletin Number Four (Carnegie Foundation) exposed fraudulent claims by proprietary medical schools, but the schools were already dying from economic forces. Changing licensing requirements, not Flexner, primarily caused the drop from 162 schools in 1906 to 81 by 1922.(Starr, 1982) The Rockefeller General Education Board directed $91 million between 1910 and 1936 to a select group of medical schools, with seven institutions receiving over two-thirds of funds, actively imposing the research-oriented Johns Hopkins model.(Starr, 1982)

Medical education consolidation actively excluded women, black physicians, and immigrants: women’s admission quotas held at about 5 percent for a half century; five of seven black medical schools closed; by 1930 only one in 3,000 black Americans was a physician.(Starr, 1982)

The Market Power of Professional Authority

The AMA’s 1905 campaign against patent medicines — closing its Journal to nostrum advertising, establishing a Council on Pharmacy and Chemistry, and collaborating with muckrakers — redirected pharmaceutical purchasing through physicians, converting cultural authority into economic and organizational power.(Starr, 1982) New diagnostic technologies — stethoscope, ophthalmoscope, X-ray, spirometer, electrocardiograph — shifted the locus of medical evidence away from patients’ self-reported symptoms toward physician-interpreted data inaccessible to lay understanding, deepening the asymmetry of information.(Starr, 1982)

By 1928 physicians’ average net income was $6,354 (AMA data), among the highest of any profession.(Starr, 1982) Simon Kuznets and Milton Friedman concluded that the excess was due to monopolistic barriers to entry into the professions.(Starr, 1982) Starr’s central synthesis: scientific knowledge must be converted into cultural authority, and authority converted into market power and legal privileges, before scientific advances can be privately appropriated by a profession.(Starr, 1982)

Professional Consolidation and Escape from Corporate Control

By 1900 American physicians felt beleaguered by numerous threats: sectarian competition, druggist encroachment, excessive graduates, hospital competition, and public dispensaries — before successfully consolidating authority over the following three decades.(Starr, 1982) Railroad and mining companies had first appointed company doctors after the Civil War, and by 1900 over six thousand railway surgeons treated workers’ injuries, making contract practice a pervasive feature of the American medical landscape.(Starr, 1982)

The emergence of group practice represented a distinctive American adaptation. In the 1880s, William and Charles Mayo expanded their Rochester practice and later hired Dr. Louis B. Wilson, who developed a rapid tissue staining method for use during surgery — one of the key breakthroughs in clinical pathology.(Starr, 1982) Private group clinics were concentrated in small cities of the Middle and Far West rather than large eastern cities, because eastern voluntary hospitals already provided the specialized diagnostic services that clinics supplied where hospitals were absent.(Starr, 1982)

Physicians were able to escape corporate domination because their personal relationships with patients gave them a form of capital — patient loyalty — that limited the power of any employer organization over them.(Starr, 1982) The medical profession controlled the division of labor in American healthcare by subordinating non-physician occupations — nurses, technicians, anesthetists — preventing them from independent practice or market access.(Starr, 1982) Starr argues that neither neoclassical economics nor Marxist interpretations adequately explain the distinctive structure of American medicine, which requires structural and historical analysis of professional power.(Starr, 1982)

Between 1905 and 1917, courts in several states ruled that corporations could not engage in the commercial practice of medicine even if they employed licensed physicians.(Starr, 1982) The AMA’s opposition to any third-party profit from medical services effectively required that capital investment in medical care be socialized through public subsidy while physicians retained full income from their labor.(Starr, 1982)

The Hospital Transformation

From Almshouse to Workshop

In 1800 only two American voluntary hospitals existed — Pennsylvania Hospital (founded 1752) and New York Hospital (opened 1790s) — making hospitals a negligible feature of antebellum medical care.(Rosenberg, Charles E., 1987) The earliest of these institutions had evolved out of almshouses and primarily served isolated individuals — seamen, travelers, homeless paupers — rather than the general sick population.(Starr, 1982) Between 1870 and 1910, American hospitals moved from the periphery to the center of medical practice, transforming from charitable refuges for the homeless poor into market institutions — financed increasingly by patient payments — and from places avoided by regular practitioners into doctors’ essential workshops.(Starr, 1982)

The hospital transformation followed three phases: (1) voluntary and public hospitals c.1751–1850; (2) religious, ethnic, and specialized hospitals c.1850–1890; (3) proprietary physician-owned hospitals c.1890–1920 — a pattern reflecting class relations, immigration waves, and surgical profitability.(Starr, 1982)

Antebellum authority was shared between lay trustees and physicians, with trustees insisting on day-to-day control over admissions, finances, and personnel; this balance did not survive past 1900.(Rosenberg, Charles E., 1987) By 1922, receipts from patients amounted to 65.2 percent of general hospital income; between 1911 and 1921 charity ward cases fell while ward paying patients rose from 18 to 45 percent of the total.(Starr, 1982)

Average hospital length of stay fell dramatically during this transformation: from 27 days to 17.8 days at Boston City Hospital over thirty years, and from 32 to 13 days at Bridgeport Hospital between 1900 and 1920, reflecting the growing concentration on acute rather than chronic care.(Starr, 1982) Hospital architecture tracked the shift: before 1880 hospitals consisted almost entirely of large wards, but by 1908 large wards had declined to 28 percent of beds in newly designed hospitals while single rooms accounted for nearly 40 percent, reflecting the growing admission of paying middle-class patients.(Starr, 1982) The proportion of physicians with hospital access grew correspondingly: in 1873 only about 2 percent of American physicians had hospital privileges; by 1907 about 10 percent in Manhattan and the Bronx held hospital positions; and by 1928 almost two-thirds nationally held staff appointments.(Starr, 1982)

Nursing and Surgery

Three training schools for nurses established in 1873 (New York, New Haven, Boston) grew to 432 by 1900 and 1,129 by 1910; the reform was initiated by upper-class women reformers and provided hospitals with cheap labor in the form of unpaid student nurses.(Starr, 1982) Joseph Lister’s antiseptic method was not generally adopted until around 1880; thereafter surgery expanded explosively — the Mayo brothers performed 54 abdominal operations 1889–1892 but 2,157 in 1905.(Starr, 1982)

Hospital Control as Professional Power

Ethnic and religious hospital segregation in America prevented state consolidation: Catholic, Jewish, and Protestant groups retained hospital control to protect communal interests, and a cross-national study found that in all countries with one prevalent religion hospitals were run by the government, while religious competition preserved private hospital ownership.(Starr, 1982) Hospital authority itself passed successively from trustees to physicians and then to administrators, leaving American hospitals with three competing centers of power; private practitioners’ access to hospitals without becoming salaried employees became a distinctive and consequential feature of American medical care.(Starr, 1982) By the 1920s, membership in the local medical society had become an informal prerequisite for hospital staff appointments; in 1934 the AMA tried to institutionalize this by requiring accredited hospitals to appoint only society members, enabling exclusion of black doctors and dissenters.(Starr, 1982)

Starr characterizes American hospitals as a case of “blocked institutional development”: a precapitalist institution radically changed in function and moral identity, but only partially transformed in organizational structure — remaining incompletely integrated both as organizations and as a system.(Starr, 1982)

The cumulative effect of Flexner-era reform and Rockefeller-funded consolidation was visible to foreign observers by the early 1930s. Henry Sigerist, visiting America in 1932, observed how a nation that was once a medical backwater, dependent upon Europe for its ideas and education, was rapidly becoming a dominant force in world medicine.(Jackson (ed.), 2011) Within a generation, the country that had sent its best students to study in Berlin, Vienna, and Paris had become the primary destination for international medical talent.

The Failure of Social Insurance, 1915–1950

Why America Did Not Get Health Insurance

European social insurance originated not as healthcare financing but as income stabilization for the working class; Germany’s 1883 program and Britain’s 1911 program were defensive responses to socialist political threats, not humanitarian initiatives.(Starr, 1982)

America lagged in adopting health insurance because of its highly decentralized government, absence of a serious socialist political threat, and conservative labor leadership under Gompers that opposed state-based social insurance.(Starr, 1982) Samuel Gompers and the AFL opposed compulsory health insurance not from ideological hostility to social welfare, but from the strategic concern that government programs would weaken union organizing by displacing benefits unions used to attract members.(Starr, 1982) The insurance industry — especially Prudential and Metropolitan Life — was a leading opponent because reformers’ proposed funeral benefit directly threatened the industrial life insurance business that was the foundation of both companies.(Starr, 1982)

In 1914, the American Association for Labor Legislation found prominent physicians, including AMA leaders, sympathetic to its model health insurance bill and willing to help secure legislation.(Starr, 1982) American entry into World War I in 1917 killed the Progressive health insurance movement; opponents successfully reframed it as a German import incompatible with American values, and a California referendum was defeated 358,324 to 133,858 in 1918.(Starr, 1982)

The bacteriological revolution had shifted public health from environmental sanitation to individual-focused medical interventions, creating new jurisdictional conflicts with private practitioners.(Starr, 1982) The laboratory established in 1892 under Hermann M. Biggs and William H. Park became the first outside Europe to produce diphtheria antitoxin, selling it in drugstores and offering it free to needy patients.(Starr, 1982) Private practitioners and manufacturing chemists denounced New York City’s antitoxin production as “municipal socialism,” forcing the health department to curtail outside sales by 1902. In the American South, the public health burden remained distinctive: malaria, yellow fever, and hookworm disease persisted as major causes of morbidity and mortality well into the early twentieth century, making the region a special focus for sanitary campaigns funded by the Rockefeller Sanitary Commission (founded 1910) and the Rockefeller Foundation’s International Health Division.(Jackson (ed.), 2011)(Starr, 1982) Winslow identified three phases of modern public health: empirical environmental sanitation (1840–1890), bacteriological applications (1890–1910), and the “new public health” beginning around 1910 emphasizing personal hygiene education and organized medical examination of the population.(Starr, 1982) A bill with backing from public health, social welfare, labor, and farming groups was opposed by the medical profession, whose opposition proved fatal; a 1923 law authorizing state aid omitted health centers and funded only standard public health functions.(Starr, 1982) The artificial separation of diagnosis from treatment — enforced by professional resistance — was a root cause of the fragmentation of American medical care.(Starr, 1982)

The Committee on the Costs of Medical Care published twenty-seven reports (Starr, 1982). It gave the first reliable national health expenditure estimates, totaling about $3.66 billion a year in 1929 (Starr, 1982). An AMA Journal editorial endorsing the minority view called the majority’s proposals an “incitement to revolution” (Starr, 1982).

At the end of the 1920s, medical costs exceeded lost earnings due to sickness by 20 percent for families with incomes under $1,200 and by nearly 85 percent for families between $1,200 and $2,500.(Starr, 1982) During the Depression, physicians’ average incomes dropped by nearly half and two-thirds of their bills went unpaid; the crisis temporarily weakened AMA solidarity as economically distressed doctors in some states endorsed compulsory health insurance.(Starr, 1982)

Health insurance was deliberately excluded from the 1935 Social Security Act because Roosevelt and his advisors judged AMA opposition strong enough to defeat the entire bill. In a 1943 remark to a Senate committee chairman, Roosevelt said: “We can’t go up against the State Medical Societies; we just can’t do it.”(Starr, 1982)

The AMA’s Anti-Insurance Campaign

The AMA’s 1949 campaign against Truman’s health insurance plan — costing $1.5 million and involving 1,829 organizations — was at the time the most expensive lobbying effort in American history; it successfully linked health insurance to communism and drove public support from 58 percent to 36 percent.(Starr, 1982)

The AMA was indicted in 1938 under the Sherman Antitrust Act for conspiring to destroy the Group Health Association of Washington D.C.; the Supreme Court upheld the conviction in 1943, but within the next decade twenty-six states passed laws effectively barring consumer-run medical service plans.(Starr, 1982)(Starr, 1982)

Starr argues that the structure of government and the absence of a serious threat to political stability prevented health insurance reform in America.(Starr, 1982)

Insurance, Medicare, and the Corporate Transformation

Private Insurance and Its Accommodation

The defeat of national health insurance left health insurance predominantly private, but left open what form a private system would take; out of a great variety of early institutional forms, a few organized plans stabilized into a lasting pattern by mid-century.(Starr, 1982) Blue Cross originated in 1929 when Baylor University Hospital agreed to provide 1,500 school teachers up to 21 days of hospital care for $6 per person.(Starr, 1982) Ten years after the war, the Kaiser-Permanente health plan had a half million people enrolled.(Starr, 1982)

The 1949 Supreme Court Inland Steel ruling that health benefits fell within “conditions of employment,” combined with failure of Truman’s national health insurance plan, drove unions to collectively bargain for health benefits; by 1954 twelve million workers and seventeen million dependents were covered by negotiated plans.(Starr, 1982) Commercial insurers employed “experience rating” to undersell Blue Cross by charging low rates to healthy employee groups, forcing the Blue plans to abandon community rating and undermining their mission of pooling risk across the entire population.(Starr, 1982) Blue Cross was disproportionately beneficial to middle-income subscribers: a 1946 New York commission found families earning under $1,000 a year would need to spend 15.7 percent of income for equivalent coverage while families earning $5,000 or more would spend only 1 percent.(Starr, 1982)

The structure of American private health insurance by 1945 was fundamentally an accommodation to provider interests: medical societies and hospitals used boycotts and state legislation to eliminate alternatives and restrict competition, biasing the outcome in their own favor.(Starr, 1982)

Medicare and Medicaid

Between 1950 and 1970 the U.S. medical workforce grew from 1.2 to 3.9 million; national health expenditures rose from $12.7 billion to $71.6 billion (4.5 to 7.3 percent of GNP), making medicine one of the nation’s largest industries.(Starr, 1982) All four major postwar federal health programs — NIH research, mental health, VA hospitals, and Hill-Burton hospital construction — shared a pattern of expanding government functions while deliberately restricting political discretion through formula funding, peer review, and statutory prohibitions on federal interference, respecting the sovereignty of the medical profession.(Starr, 1982) The Hill-Burton Act alone distributed $3.7 billion between 1947 and 1971, contributing to 30 percent of all hospital construction projects; for over two decades it included a “separate but equal” provision permitting racial segregation in those facilities, not ruled unconstitutional until 1963.(Starr, 1982)

The postwar expansion of biomedical research was shaped by Vannevar Bush’s 1945 report Science — The Endless Frontier, which articulated a vision of federally funded basic science as the foundation of national health and economic strength, and proposed what became the model for the postwar American research university: government money channeled through a new agency to university scientists chosen by peer review.(Jackson (ed.), 2011) The NIH budget grew from $180,000 in 1945 to $400 million by 1960, driven by the Lasker lobby’s categorical approach of promoting one disease at a time; the NIH extramural grants system ceded control of research to the scientific community through non-governmental peer review panels.(Starr, 1982) The infusion of federal money into research and training led average medical school income to triple in the 1940s, rising to $3.7 million by 1958-59 and $15 million ten years later, while full-time faculty increased 51 percent from 1940-41 to 1949-50 and doubled from 4,212 in 1950-51 to 11,319 by 1959-60.(Starr, 1982) The proportion of doctors reporting as full-time specialists rose from 24 percent in 1940 to 69 percent in 1966, with surgical specialties increasing from 10 percent in 1931 to over 30 percent by 1969.(Starr, 1982)

The house staff shortage — hospitals seeking more than 12,000 interns annually while medical schools graduated fewer than 7,000 — led hospitals to recruit foreign medical graduates, who rose from 10 to 26 percent of house staff in the 1950s and increasingly from Asia in the 1960s.(Starr, 1982) Aime Forand’s 1958 proposal for hospital insurance for the aged was the first Medicare bill; grassroots pressure grew so large that within two years congressmen were receiving more mail on Medicare than on any other pending legislation, the first time a mass groundswell had forced a health insurance issue onto the national agenda.(Starr, 1982)

Medicare and Medicaid were enacted July 30, 1965 as a “three-layered cake”: a compulsory hospital insurance plan (the administration’s measure), a voluntary physician insurance plan (the Republican measure), and a program for the poor (Medicaid).(Starr, 1982) Medicare and Medicaid differed sharply: Medicare had uniform national eligibility standards and acknowledged the dignity of Social Security; Medicaid was state-administered, stigmatized by public assistance traditions, and excluded many categories of poor adults.(Starr, 1982)

OEO-funded neighborhood health centers starting in 1966 provided comprehensive ambulatory care and community participation in low-income areas; studies showed positive effects on community health and significant reductions in hospital use, yet they remained marginal compared to Medicaid because they lacked institutional compatibility with existing provider interests.(Starr, 1982) The decade after Medicare enactment (1965–1975) produced a sharp increase in medical care use by the poor: the nonpoor visited physicians 20 percent more than the poor in 1964, but by 1975 the poor visited 18 percent more; whites visited doctors 42 percent more than blacks in 1964, narrowing to 13 percent more by 1973.(Starr, 1982)

Starr characterizes 1960s health policy as “redistribution without reorganization”: programs improved access but maintained the existing system through accommodation with providers, thereby failing to achieve fundamental structural change and setting the stage for cost crises in the 1970s.(Starr, 1982)

The Cost Crisis and HMO Experiment

Nixon declared a “massive crisis” in health care in July 1969, and by 1970 Fortune called American medicine “on the brink of chaos”; a 1970 survey found three quarters of Americans agreed there was a health care crisis.(Starr, 1982) By 1980 U.S. health care expenditures reached $230 billion (9.4% of GNP), up from $69 billion (7.2%) in 1970; the rate of growth in medical service costs rose from 3.2 percent annually before Medicare to 7.9 percent annually in the five years after its passage.(Starr, 1982) Third-party, fee-for-service payment was the central mechanism of medical inflation: from 1960 to 1975 the share of health care expenditures paid by third parties increased from 45 to 67 percent.(Starr, 1982) Medicare reimbursed physicians according to “usual, customary, and reasonable” fees, which caused fee inflation as young doctors billed at unprecedented levels; when older colleagues saw what was possible they raised their fees, creating rampant inflation that Blue Shield then copied.(Starr, 1982)

The 1974 National Health Planning and Resource Development Act established approximately 200 Health Systems Agencies with consumer majorities but no decision-making power, requiring all states to establish certificate-of-need programs; AMA President Russell Roth complained that doctors had been “relegated to a minor role.”(Starr, 1982) By the mid-1970s a “second revelation” emerged that health care barely affects health: neoconservative Aaron Wildavsky argued the marginal value of health spending was near zero, Ivan Illich argued medicine caused more disease than it cured, and Victor Fuchs argued more medical care would not reduce mortality.(Starr, 1982) Despite these therapeutic nihilism arguments, age-adjusted death rates actually dropped 14 percent from 1968 to 1975 — the fastest decline of the century — including a 23 percent fall in heart disease mortality and a 38 percent drop in infant mortality from 1960 to 1975.(Starr, 1982) Carter’s 1977 hospital cost containment proposal, which would have capped hospital charge increases at 9 percent, passed the Senate but was defeated 234–166 in the House in November 1979 after a massive hospital industry lobbying campaign.(Starr, 1982)

At a Washington meeting, Ellwood first suggested the term “health maintenance organizations.”(Starr, 1982) On February 18, 1971, President Nixon announced a new national health strategy with HMOs as the major innovation, calling on Congress to establish planning grants and loan guarantees to help create 1,700 HMOs by 1976 enrolling 40 million people.(Starr, 1982) Prepaid group practice, originally associated with the cooperative movement and dismissed as a Utopian idea, was later adopted by conservative, cost-minded critics as a more efficient form of management.(Starr, 1982)

National health insurance had its last serious chance of adoption in 1974, but the Watergate scandal and the political downfall of Nixon and Mills ended that possibility.(Starr, 1982)

Corporate Medicine and the Loss of Professional Sovereignty

Federal aid from 1965 to 1980 increased medical school graduates from 7,409 to 15,135 and active doctors from 377,000 to nearly 450,000, with the doctor-to-population ratio projected to reach 245 per 100,000 by 1990.(Starr, 1982) Between 1970 and 1980 patient visits per doctor dropped 12 percent and per capita physician visits fell 8 percent from 1975 to 1979; by 1979 only 57 percent of office-based physicians said they were working at full capacity, with 25 percent wanting to see more patients.(Starr, 1982) Starr predicted that in the 1980s medical services would become a zero-sum game where gains by one physician come at the expense of others, as the ratio of Americans per doctor dropped from 565 in 1975 toward 404 projected for 1990.(Starr, 1982)

The profit-making hospital chain Hospital Corporation of America grew from 23 hospitals in 1970 to owning or managing over 300 hospitals with 43,000 beds by 1981; Humana, Inc. grew from $4.8 million in revenues in 1968 to $1.4 billion and 92 hospitals by 1980.(Starr, 1982) Starr identifies five dimensions of corporate medicine: shift from nonprofit and governmental to for-profit ownership, horizontal integration, diversification and corporate restructuring, vertical integration, and industry concentration.(Starr, 1982) By 1980 approximately 30 percent of the nation’s 988,000 community hospital beds were in multi-institutional corporations; for-profit chains operated 35 percent of beds in multihospital systems while accounting for nearly 65 percent of the 20,000 new beds added in 1980.(Starr, 1982) A 1981 Lewin & Associates study found that investor-owned hospitals charged charge-payers 23 percent more per day and 17 percent more per admission than comparable nonprofit hospitals, with “home office” expenses 13 percent higher but producing no equivalent local savings.(Starr, 1982) Humana preferred privately insured suburban patients and accepted Medicare or Medicaid patients only when trying to fill empty beds, otherwise avoiding them.(Starr, 1982)

After Medicare was extended to end-stage renal disease patients in 1972, home dialysis use dropped below 10 percent by 1976 despite costing far less than clinic or hospital dialysis, and a legislative requirement for 50 percent home dialysis was reduced to a goal and then eliminated.(Starr, 1982) A nonprofit hospital could adopt a polycorporate structure with a parent holding company and for-profit subsidiaries to generate profits while protecting its tax-exempt status and reimbursements.(Starr, 1982) Doctors are unlikely to be proletarianized by corporate medicine, but corporate work will entail a profound loss of autonomy, including less control over retirement and more regulation of work pace and routines.(Starr, 1982)

Starr’s final interpretive claim is the great irony of American medicine: the opposition of doctors and hospitals to public control of public programs set in motion entrepreneurial forces that would end up depriving both private doctors and voluntary hospitals of their traditional autonomy. The failure to rationalize medical services under public control meant they would be rationalized under private control — instead of public regulation, there would be private regulation; instead of public planning, corporate planning.(Starr, 1982)

What Made American Medicine Distinctive

Several features set American medicine apart from European comparators:

The “democratic interregnum” of early nineteenth-century American medicine was a transitional period between traditional mystification and modern technical complexity.(Starr, 1982) Science and democracy both share an antagonism to the occult, but science generates the specialization that eventually removes knowledge from lay reach.(Starr, 1982)

2. Ethnic and religious pluralism blocking national organization. In all countries with one prevalent religion, hospitals were run by the government; where religious competition existed, groups retained private hospital control. This structural fact prevented the kind of nationalized hospital system that most European countries developed.(Starr, 1982)

A series of legal decisions between 1905 and 1917 effectively barred profit-making medical care corporations.(Starr, 1982) The exclusion of corporations and the state from medical care helped maintain the collective autonomy of the profession.(Starr, 1982)

4. No serious threat to political stability to compel reform. Without a serious threat to political stability, health insurance reform in America was prevented.(Starr, 1982)

5. Private insurance shaped by provider interests. Rather than an open market outcome,(Starr, 1982) the structure of American private insurance was an accommodation to provider interests, with dominant institutional, professional, and class interests biasing the outcome.(Starr, 1982)

Key Debates

Was Flexner the Turning Point?

The Flexner Report (1910) is conventionally credited with transforming American medical education. Starr’s revisionist reading holds that the schools were already dying from economic forces — changing licensing requirements drove the decline from 162 schools in 1906 to 81 by 1922, not the report itself. Flexner provided the manifesto for a transformation already underway, and the Rockefeller General Education Board used it to determine which schools would dominate rather than which would survive.(Starr, 1982)(Starr, 1982)

Suppression or Co-optation of Sectarians?

The standard narrative holds that the AMA suppressed homeopathy and Eclecticism. Starr’s evidence inverts this: both sects thrived when excluded from orthodox institutions. Their decline coincided with their inclusion, not their suppression. Co-optation by the mainstream dissolved the distinctive identity that had made them viable alternatives.(Starr, 1982)

Public Health’s Subordination

By the 1930s, public health in America had been reduced to secondary status — less prestigious and less funded than clinical medicine — blocked from coordination and direction functions that could have unified the healthcare system. Professional resistance prevented integration of public health and clinical medicine, producing the fragmentation that persists to the present day.(Starr, 1982)

Contemporary Relevance

The structure of American healthcare — high costs, private financing, employer-based insurance, inadequate coverage for the poor, resistance to systemic reorganization — is not an accident of the market but the cumulative product of professional power exercised over two centuries. The corporate transformation Starr observed in 1982 has continued: the HMO became the managed care organization, which became the accountable care organization, each iteration compressing physician autonomy while leaving the fee-for-service incentive structure largely intact. The “great irony” Starr identified — that opposition to public rationalization produced private rationalization on less favorable terms — continues to describe the situation.

See Also

• professionalization — general theory of medical professionalization; European foundations
• eclectic-medicine — one of the sectarian traditions destroyed by consolidation
• homeopathy — the most significant sectarian competitor to orthodox medicine
• medical-education-reform — the Flexner-era transformation of medical schools
• domestic-medicine — the lay tradition that organized popular resistance to physicians
• asylum — parallel institutionalization in psychiatric medicine
• medicalization — the critique of professional expansion as social control

Sources

• Starr, Paul. The Social Transformation of American Medicine. Basic Books, 1982. (source_id: starr-socialtransformation-1982)
• Rosenberg, Charles. The Care of Strangers: The Rise of America’s Hospital System. Basic Books, 1987. (source_id: rosenberg-careofstrangers-1987)
• Warner, John Harley. The Therapeutic Perspective: Medical Practice, Knowledge, and Identity in America, 1820–1885. Harvard University Press, 1986. (source_id: warner-therapeutic-perspective-1986)