The self-help, self-governing fraternal societies, male and female, white, black, and immigrant, were being undermined at every turn. The medical elite attacked their provision of medical care, the insurance regulators and commercial insurance companies were after their provision of life insurance benefits, and the sickness benefits were eroded by Workers’ Compensation laws.
These developments were all the outcome of the “Progressive Era,” which saw little merit in self-help, preferring state benevolence managed by a bureaucratic elite. But the Progressive movement wasn’t done. One leader, in explaining his support of a compulsory health insurance program said in 1916, “Democracy is the progress of all, through all, under the leadership of the wisest” [i] a sentiment shared by most of the educated elites of today.
When Great Britain enacted its compulsory insurance law in 1911, it tried to incorporate a role for the friendly societies, and in fact was trying to extend the benefits of friendly society membership to the rest of the working class. American Progressives had no such sentimentality and wanted to ban fraternal involvement. They much preferred the German model of exclusive reliance on the State. One report of the Progressive Party stated, “These lodges have a further defect from a patriotic standpoint, in that they form centers of association for the different foreign nationalities instead of creating through a strong local sick fund, a nucleus for loyalty to the state.” [ii]
Ultimately, the proposal failed. It was the brain-child of the American Association for Labor Legislation (AALL), but organized labor was divided. The American Federation of Labor (AFL) opposed it thinking they could do better at the bargaining table. Organized medicine was also divided at first, but increasingly hostile when they realized it would double down on the most objectionable aspects of lodge medicine – low pay and supervision by laymen. And, of course, the fraternal societies were vehemently opposed. The bill was defeated in the first fifteen states that considered it (This was strictly a state-based effort. The idea of federal action in this area was unthinkable at the time.)
Finally, California held a referendum on the proposal in November of 1918. California had a progressive governor and proponents lined up the support of the state medical society, the president of Stanford University, the state Federation of Labor, and even former President Theodore Roosevelt. But for all of that, the measure was defeated nearly three-to-one by a vote of 358,324 to 133,858. [iii]
Beito’s discussion of this movement provides an interesting comparison to the more recent debate over Obamacare, especially with the current interest in “libertarian populism.” He quotes extensively from the publication Fraternal Monitor --
“… the Fraternal Monitor warned, the AALL was primarily an organization of ‘social reformers and college professors.’ Support of compulsory insurance by ‘professional social workers’ was not only paternalistic but demonstrated their need to ‘make a noise in order to earn their salaries.’ The Monitor clearly did not share the fascination with professional expertise that was so prevalent during the Progressive Era: ‘ Theorists in the classroom have produced few measures of practical progress. The application of their doctrines usually has led to oppression and bloodshed.’ The editorial concluded that the academics and reformers in the AALL subscribed to the elitist notion that people of ‘superior intelligence should do something for the lower class.’” [iv]
Interestingly, one of the leaders of the California effort to enact this law largely agreed. Isaac Rubinow reflected on the experience in 1934, saying, “And who was for it? An energetic, largely self-appointed group… which carried with it the profession of social work, to some extent the university teaching groups, the economics and social sciences, and even the political progressive organizations, but very little support beyond these narrow confines.” [v]
Moving Into Hospital Care
Fraternal societies were resilient. They had beaten back the proposals for compulsory health insurance, but were still handcuffed by the medical resistance to lodge medicine, the regulations on their life insurance offerings, and the advent of Workers Compensation laws. Their next move was to focus on hospital care.
The Women’s Benefit Association never had lodge physicians. Instead it had endowed beds in hospitals for the use of its indigent members. By 1919 it had contracts with 87 hospitals in thirty states, but defining who did and didn’t qualify for services was difficult. Eventually it moved toward outpatient clinics and disease prevention for all its members. By 1931 it was operating thirty-six such clinics in seventeen states. [vi]
Unlike today, ethnic societies directly owned and operated their own hospitals. Beito mentions two Latino facilities in Tampa, Florida, aimed mostly at cigar workers, but also French and German societies in San Francisco and Los Angeles. [vii]
But the most ambitious effort was launched by the Security Benefit Association (SBA) in Topeka, Kansas. This facility was free to members who were enrolled in the organization’s life insurance program. The original facility had 40 beds and two operating rooms. From 1925 to 1928 it served 5,246 patients from twenty states, which prompted the building of a larger facility in 1930. The new hospital had 250 beds in two wings and was considered one of the best hospitals in Kansas.
But it was overbuilt for the need and expensive to operate. The emphasis on this facility weakened the SBA’s appeal to members outside of Kansas and Missouri, as did the growing assessments on members to cover the costs. Hostility from organized medicine took a toll as well. Both the American College of Surgeons and the American Medical Association refused to approve the facility for violating their ban on advertising. This advertising consisted mostly of newsletters and fliers going out to SBA members, but the AMA was adamant.
The fatal blow to mutual aid hospitals was the rise of employer-sponsored health insurance and third-party payment such as Blue Cross Blue Shield. While employer-sponsored health insurance was tax exempt, Beito writes, “Members of groups such as the SBA were the losers because they had purchased policies on an individual rather than a group basis. They could not deduct their dues from their taxable income.”
The pressure became insurmountable and SBA converted to a mutual insurance company, the Security Benefit Life Company, in 1950 and the hospital closed in 1954. [viii]
Other fraternal hospitals experienced a similar fate – growing regulatory interference and in some cases outright governmental preference for hospitals that were members of the American Hospital Association.
Black Hospitals During the Jim Crow Era
How well-intentioned regulations helped destroy these hospitals is starkly illustrated in Beito’s discussion of a couple of facilities in the Mississippi delta. These were established by black fraternal societies and were indispensible to African Americans in an era of Jim Crow and state-mandated segregation. By 1931 there were nine such hospitals in the South, and a scattering of others throughout the country. [ix]
The delta hospitals were both located in Mound Bayou, Mississippi, a town run by African Americans. One was established by the International Order of Twelve Knights and the Daughters of Tabor, the other by a group that broke off from that society, the United Order of Friendship of America. These groups were solidly in the self-help, self-improvement tradition of all fraternal organizations. The Knights/Tabor group dedicated itself to, “Christianity, education, morality and temperance and the art of governing, self-reliance, and true manhood and womanhood.” [x] In addition to running hospitals mostly aimed at black sharecroppers and farm workers, the two orders also were very active in the civil rights movement.
The hospitals were ultimately done in by intrusive government. First was the Hill-Burton Act of 1946, intended to support hospital construction and expansion to serve the new families being formed at the end of World War Two. Hill-Burton provided $3.7 billion in federal funding for hospital construction, which was matched by another $9.1 billion in state and local funds. These funds were aimed entirely at inpatient facilities, bypassing other models of care such as neighborhood clinics, physician offices, or visiting nurse programs. [xi]
But the Act disqualified facilities that were aimed at a single race while allowing funding of segregated facilities. So black hospitals received no funds while predominantly white, but segregated, facilities did.
This disparity was compounded by increasing regulatory burdens, the growth of third-party payment, and ironically, by the Office of Economic Opportunity (OEO) – a major component of Johnson’s “war on poverty.” OEO helped pay for Tufts University to establish a clinic in Mound Bayou to compete directly with the black hospitals in the town. In 1967, OEO bought the hospitals, merged them, and ran them directly as federal programs. Beito writes, “The rapid inflow of federal money dampened the community’s old habits of medical mutual aid and self-help.” There was no longer any reason to belong to the fraternal societies, and they collapsed. [xii]
[i] Beito, op. cit. 145
[ii] Ibid. 147
[iii] Ibid. 157-158
[iv] Ibid. 150
[v] Ibid. 160
[vi] Ibid. 168
[vii] Ibid. 170
[viii] Ibid. 180
[ix] Ibid. 181
[x] Ibid 182
[xi] Greg Scandlen, “100 Years of Market Distortions,” Consumers for Health Care Choices, May 22, 2006. P. 6
[xii] Beito, Op. Cit. 198