Chapter Four. The Living Schemes: Voluntary and Compulsory

UThe genius 01 bureaucracy con sists in copying from other bureaucracies." Lujo Brentano. c H A P T E R F o u R The LivingSchemes:Voluntaryand Compulsory T IDEA, of popular health insurance was nobody's brainchild. Bismarck merely govern mentalized the already existing private schemes that originated with the late medieval guilds.1 A. Free and Semi-Free Panels THE FREE From Portugal to Finland, ever since the onslaught PANELS of the industrial revolution, workers had banded together in cooperative, autonomous associations of a fraternal character to meet collectively the financial haz ards of sickness. They are referred to as the original panels, German krankenkassen, French caisses de maladie, Dutch ziekenfondsen, sickness benefit societies, mutual aid associa tions, Danish sick clubs, Swedish "orders" and "lodges," etc.2 Growing industrialization and urbanization, together with the breaking up of the old guilds, induced men of moderate means, especially those living on day-to-day earnings, to pool their resources. In England the trade unions insured their members against illness long before Lloyd George. In 1909 the purely voluntary Friendly Societies-some of them financially mis managed due to insufficient supervision-registered 14 million members without being subsidized. Everywhere, cash benefits and/or hospitalization were the mainstay of the movement.

One government after another has put this sort of non-profit organization under supervision and regulation starting with the British Friendly Societies Act of 1793 and a Prussian law of 1794. Piecemeal local regimentation began, as one might have 34~ 35 J THE LIVING SCHEMES: VOLUNTARY AND COMPULSORY expected, in Prussia. In.' 1845 compulsion was introduced, especially for miners.3 But that did not ,interfere with the growth of the voluntary krankenkassen, many of them off springs of the trade union movement1 They had reached a membership of 869,000, organized in 5,239 panels, before most of. th'em were dissolved by Bismarck under the drastic anti-socialist legislation of 1878. In Austria. more than 2,000 flourishing mutual aid societies were governmentalized when compulsion stepped in. Where medicine is not governmentalized, or partially only, as in Switzerland, Portugal, Sweden, Denmark and Finland, the state supervises these fraternal units. In Switzerland, by 1912, almost 30% of the total population was insured to some degree, mostly for cash benefits only. As of 1949, the Swiss mutuals provide most or' all of the needed medical insurance for 'some 60% of the population. In Denmark about 66% of the people are covered within the framework of quasi-volun tary memberships.

In short, the rational interest of those concerned fosters the spontaneous growth of self-protective organisms, leaving aside the health insurance business of purely.commercial character that also has reached a substantial measure of development, especially in Germany. Of course, the system of voluntary cooperatives means different things in different countries, depending on government subsidies and on other circum stances. DENMARK In Denmark the free associations present (since 1891) the essentialfeatures of a compulsoryscheme in· a setting of apparent freedom. Self-insurance in the Danish sickness clubs-confined to the low income brackets-is being forced gently by limitation of the right to old age and disability pensions to at least "passive" membership in a panel. But the passivem.ember's obligatory contributions are almost nominal. However, well over one-half of the total cost is carried by sub sidies.The state covers most of the medical and dental expenses incurred, including the cost of transportation to the .doctor, an important item in an agricultural country. Hospitalizationand surgical costs are cared for by the municipalities. The "active"

members' contributions amount, in effect" to not more or even COMPULSORY MEDICAL CARE AND THE WELFARE STATE [ 36 to less than the cost of cash benefits. In view of the burden incurred by the taxpayer, it should not be surprising that in one essential the Danish system approaches the Russian pattern: it limits the beneficiary's right of choosing his doctor. SWITZERLAND Another pertinent characteristic of a voluntary system, competition among the panels, is non-existent in Denmark. Her sicknessfunds are monopolies within their respective geographic boundaries, thus eliminating the competitive incentive for better management, cost saving and better service,that playa substantial role in the complex krankenkassen set-up in Switzerland. There, a comparatively mild and partial (cantonal or municipal) compulsory scheme, similar to the Prussian before Bismarck, was introduced in 1918. The system keeps growing. It embraces at present some 2.7 million people out of a total population of scarcely 4.6 million.

It is supported by federal and local subsidies, but they amount altogether to barely 20% of panel revenues, to less than the amount disbursed in cash benefits alone. The federal subsidies are forthcoming under several provisos. The panels must submit periodically to examinations. They must fulfill minimum standards of operation, such as matching special hazards by adequate premiums, accumulating properly invested reserves, re-insuring the tuberculosis risks, charging (10 to 20 per cent) "deductibles" on benefits in kind and guar anteeing the members' right to transfer 'from one panel to another. They must provide a minimum of services-. the floor for cash benefits is an almost negligible one franc (23¢) per day-and they must accept compulsory members allocated to them. This last provision is the least acceptable and financially the most dangerous. But on the whole the economic and social ingredients of the free, voluntary panel systems have been preserved.

Once partial compulsion is established, govemmentalization tends to progress-unless it is stopped. It was first rejected in Switzerland in 1899, and then stopped, and thisis significant, on May 22, 1949, when a popular referendum crushed by a three-to-one majority the attempt to impose a federal obliga tory scheme. After 30 years of experience with varieties of partial compulsion under local administrations, the Swiss people forcefully disavowed their own legislators who were 37 ] THE LXVING SCHEMES: VOLUNTARY AND COMPUIfSORY almost unanimous in attempting to generalize medical com pulsion and to put it on a federal. footing. VOLUNTARY PANELS Private schemes survive in Po~tug~l WITHIN COMPULSORY where the scope of compuls10n 1S FRAMEWORKS limited. So does a particular fonn of French independent mutuals (caisses .chirurgicales mutuelles) in spite of thesemi ...centrali zation since 1945. Previously, they insured for services not included in the Laval scheme. Now, they cover some 2,000,000 members, people.of\moderate means, ·for 40% of surgical.costs which is the difference, as arule, between the actual· costs and what the official scheme provides.

Similarly, the Western German independent handicraft and peasantry insure themselves in their own mutual organizations with hundreds of thousands of.members. In England, the working man could take out hospitalization insurance including surgery for himself and his wife· in the so-called Hospital Funds. They charged a weekly premium equivalent to a nickel, and less on a monthly or longer. sched.. ule. Even the unemployed could afford. to pay that much. By 1948 the Hospital Funds counted a total of eleven million members with 25 to 30 million eligible for benefits. Persons with more than $1,700 income could be insured for hospitali zation plus additional benefits at the annual rate of $7.50. The administration was fairly inexpensive-about tro of revenues -.because its biggest item, the collection of membership fees, was taken care of by voluntary forces. The English Hospital Funds still retain about 8 millionmem ...

bers. Of course, they haye had·to change·their program, since the new (Bevan) scheme offers free hospitalization to every body. Presently, the largest of. the Funds pays weekly cash benefits of about 4 shillings (56; ) for men, 2 shillings for (wives, and 1 shillingfor each child, for a total weekly premium of 4 pence (5¢) per family, "the cost of a cigarette or two." SWEDEN One of Europe's oldest voluntary systems is to HESITATING be scrapped. Sweden's socialist dominated legislature in 1947 adopted a diluted version of the new British sickness security ·program to nationalize some COMPULSORY MEDICAL CARE AND THE WELFARE STATE [ 38 1,300 free panels. It was scheduled for July 1, 1950 but has been postponed for a year. It looks, at this writing, as though it will be deferred for another year or two. Lack of sufficient hospital facilities was given as the official reason for the post ponement. Possibly, the declining power of the socialist party plays a role, or the Swedes may be watching the outcome of the Bevan experiment.

The case of Sweden is paradoxical indeed. Here is a coun try that claims the world's lowest death rate. (Is this the case in spite of there being only 4,300 doctors-Europe's best paid -for a population of 7,000,000, or because of that fact? Also, access to medical schools is more limited than anywhere else.) Health conditions are as good as, if not better than, in neigh boring Norway, although the latter has "enjoyed" for almost 40 years the fruits of medical compulsion. The Swedish volun tary panels, heavily subsidized since 1935, insure over 50% of the population. They constantly gain new members. A relatively high per capita national income provides most peo ple with the means to take care of their own health problems, by insurance or ·otherwise, especially in view of a modem, highly subsidized hospital system. Yet they are faced with the prospect of being forced into the compulsory system.

FINLAND That will leave Finland as the only European country without any form of compulsory medicine, but with a low death-rate and a lower than average morbidity of the population. However, not to be overlooked, Finnish public health legislation is very comprehensive, especially maternity care, and, in addition, free hospitalization for the needy is provided. B. Compulsory Schemes Compulsion is the keyword in almost every European coun try's health plan for the masses. The schemes have reached different stages in different countries. Disregarding the infinite number and variety of administrative details, the leading schemes operating west of the Iron Curtain may be classified briefly in three major types.4 GERMANY The German system still is the nearest to the orig inal free panel set-up. Membership is compulsory for all wage and. salary earners below a certain level of income 39] THE LIVING SCHEMES: VOLUNTARY AND COMPULSORY (4,500 marks, nominally equal to a little over $1,000). Spouses and children are insured automatically. For 66 years the pay roll taxes which financed the scheme fell on employers and employees in the proportion of one to two. Since June 1, 1949, the ratio has been changed to one to one. Cash benefits, 50% of a so-called "basic" wage, are paid for ~6 weeks while medi cal benefits are forthcoming for as long as "necessary." Special cash benefits accrue for maternity-four weeks before and six after delivery-and for nursing the child, as well as to the family. members of the insured in case of his or her inability to work.

'The scheme is under a semi-autonomous administration of its OWll,DOt under the state managed social insurance set-up, except for the supervisory function of the governmental acci dent insurance institutions. Their doctors serve as medical counselors to the panels. A .minority of the .insured are allocated among 3,400 minor "obligatory" panels of varying sizes organized by professions or by plants. Another 5% voluntarily joined 29 self-constituted mutuals, so-called substitute panels (ersatzkassen). The latter are. residuals, after a fashion, of the old voluntary units and have about half a million members. But the rank and file are forced into upward of 1,200local and regional obligatory pan els, one for each major town and country district (orts-and landeskrankassen). All panels enjoy an appreciable degree of autonomy in determining, with governmental consent and up to a limit, the rate of contributions as well as the amovnt and kinds of services rendered over and above a legally prescribed minimum.

The day-to-day administration of the urban and country panels, which cover almost 65% of all the insured, is in the hands of a permanent bureaucracy that is not part of the regu lar civil service. Ultimate managerial decisions emanate from boards elected as employer and employee representatives in the ratio of two to one in favor of tne latter, i.e., the trade unions. The German panels are supposed to accumulate reserve fundsand used to do so (on and off). The investing of these funds is handled collectively by a governmental agency.

COMPULSORY MEDICAL CARE AND THE WELFARE STATE [ 40 BRITAIN The contrast between German social "insurance" and British (Russian). "security" has been pointed out already. A totally centralized type of organization obtains under the British National Health Service Act of 1946. The panels, which were the backbone of the Lloyd George sys tem, are abolished altogether, and the Minister of Health has all executive power with no appeal from his decisions. Repre sentatives of the professions stand by in an advisory capacity, but the Minister does not even have to publish their reports. Local Executive Councils, 138 in England and Wales, are responsible for the routine of low-level administration and for the policing of the general practitioner, the pharmacies and the ophthalmic services. County and County Borough Councils handle (supposedly) maternity and child welfare, the after care of the sick, health visiting and home nursing. Responsi bility for hospitals, specialists and blood transfusion services rests in England and Wales alone with 146 Local Health Authorities, 14 Regional Hospital Boards, 376 Hospital Man agement Committees and 36 Boards of Governors of Teaching Hospitals. The latter alone retain a relative measure of legal independence. But the Minister has to confirm all major appointments. Similar arrangements are set up in Scotland.

One outstanding and unique feature of the British scheme is the virtually complete absence of controls-over the pati ents. Elaborate machinery is available for their complaints against doctors and pharmacies but not for checking their own demands. Dentists have to submit their proposals for appliances to a special board that is supposed to clamp down on "luxuries." The scheme is part and parcel of the comprehensive social security plan but receives a very small share of the obligatory contributions. Out of the average $0.95 or so weekly contri butions by employees, matched approximately by employers, only about 15 cents is earmarked for the sicknessscheme. The bulk of its cost comes out of general tax revenues. Everyone contributes, with minor differences according to age, sex, etc., and everyone is entitled to the same medical benefits. Both the weekly cash disbursements, which are iden tical in amount with the "dole" of the unemployed, and the medical services are available without time limitation. The 41J THE LIVING SCHEMES: VOLUNTARY AND COMPULSORY whole range of services isincluded-doctors, prescriptions, appliances, treatments, hospitalization·- with no strings attached.

Some 3,426 "voluntarY",al1cl."te~~~~eg"hospitals (clinics) are nationalized, theirendowmentfllrlcls taken over by the government, leaving only Catholic hospitals and private "nursing homes" outside the official orbit. Except in Soviet Russia, .medical nationalization nowhere has gone that far not even in some of the·Satellite countries-as yet. FRANCE In many respects the French scheme of 1945 . occupies an intermediate position between the German and the British, especially in matters of administra tive organization. The old independent panels have been consolidated into a system of caisses primaires (primary panels) which retain a residual of autonomy, although to a much lesser extent than do their German equivalents. They are part of an overall Social Security· organization which constitutes a bureaucratic body of its own - a little state within the state. Their boards are strongly socialist, in part communist, elected as they are, half by the beneficiaries and half by professional groups. The boards have limited man agerial influence in the' primary panels, within the scope of which falls the care for short and long maladies, maternity, professional sicknessesand the (separately administered) medi cal care·in industrial accidents.

In principle, similarly to the British, the French scheme covers every citizen. In practice it is closer to the German set-up. So far, all employees including the civil servants and the army personnel are covered, but payroll contributions are to be paid from salaries only up to a certain limit. Several classes of semi-independent workers also are forced into the scheme. Farm hands are organized in a separate securite agricoleunder the Ministryof Agriculture,a set-up that runs into great organizational obstacles due to the nature of farm employment and the difficulties of collection and control. A third basic aspect of the French system is patterned on the Lenin blueprint. All appearance or claim· of being an insur ance is abandoned. No attempt is being made to·accumulate reserves or to equalize risks by special contributions of any COMPULSORY MEDICAL CARE AND THE WELFARE STATE [ 42 kind. Payroll deductions-roughly two-fifths carried by the beneficiaries themselves-are not proportioned in any way to age, sex, or health conditions. On the other hand, the French system operates in a more business-likefashion than do most others by making an almost general use of "deductibles." This last point shall be discussed subsequendy.

COMPOSITE The compulsory systems vary in details CONCOCTIONS from country to country. Literally no two countries have the same institutional or ad ministrative arrangements, but all of them include features of the three major types, and borrow their technique from them-usually referring to the concoction as their national specialty. In southern European and Latin American coun tries the schemes are insufficientlyenforced. The Italian de velopment deservesto be mentioned, for two reasons. It began with compulsory insurance against tuberculosis only and is being expanded to cover all diseases. And it is the one scheme in which all costs are borne by the employers, another proof of the social-mindedness of its fascist author, the late and unlamented Duce. Mussolini started out as a Marxist and remained a socialist all his life, as shown by the posthumous memoirs of his son-in-law, Count Ciano. Interestingly, an exact copy of Mussolini's noble principle appears in the new medical security scheme of Satellite Poland: there, too, the employers have to carryall costs.

The Belgian obligatory sicknessinsurance scheme of 1945has several peculiarities. It retains, as do Holland, Norway, Aus tria, etc., the panel system. .But the Belgian panels compete with one another not only as "insurance" organizations but also by virtue of political affiliations. They are organized in federa tions, one each for the socialistic, Catholic, liberal, "neutral" and professional units. Another uncommon method is that of the bons de cotisation. At the end of each quarter, the em ployer hands the employee a certificate stating the latter's wages and payroll deductions. Each panel receives funds according to the number of certificates made out to it. The work and cost of registration or bookkeeping is thus shifted in part onto the employers, and the insured is spared some red tape.