Upstart Health Plans Vs. the Medical Establishment in the 1950s

posted on September 14, 2017

Lincoln Cushing
Heritage writer

 

Part 2 of 2: The Permanente Health Plan responds to legal charges by the medical establishment and the similar experiences of Group Health (originally called Group Health Cooperative of Puget Sound) in Washington state. In 2017, Kaiser Permanente acquired Group Health, making Kaiser Permanente Washington our newest region, the first in over 30 years.

During the late 1940s the medical establishment tried mightily to eliminate health plans that it saw as competition. As we saw in part 1 of this article, two of the biggest targets were the Permanente Health Plan (Kaiser Permanente) and Group Health.

Henry Kaiser speaking in New Orleans, 1957.

 

Henry J. Kaiser takes the high road

During these challenges with the medical establishment, Henry J. Kaiser consistently took the high road. When he spoke to a group of physicians in San Francisco on June 9, 1948, he let them know he was “… astounded and horrified to be informed by our attorneys that a group of Alameda County doctors have declared war on the Permanente health program.” He outlined his many legal options, but then offered a more cooperative path because “… we must be sobered at thinking what an all-out fight on the issue of more medical care for more people could mean.” He sought an amicable solution:

I want to believe that tonight is the beginning of a real conscientious effort on the part of everyone here to strive to fulfill the common objectives not only for group medicine, if it be lower in cost, but for that type of medicine which so many want, called private medicine, although it is higher in cost … until the earning power of the nation is greater, all the people cannot participate in private medicine.

His appeal to civility fell on deaf ears. Rather than accept the olive branch, fee-for-service practitioners rolled up their sleeves to knock out the competition.

A legendary event etched into Kaiser Permanente history was the 1953 competition for plan sign-up by 4,000 United Steel Workers of America members in Pittsburg, Calif. Local private practice physicians mounted an all-out campaign, which included provocative leaflets, newspaper ads, billboards, and even a sound truck. On September 3, 1953, the union members voted overwhelmingly for the Kaiser Foundation Health Plan.

Henry J. Kaiser defends Dr. Sidney Garfield, 10/26/1947.

That December, delegates at the annual California Medical Association meeting tried the carrot rather than the stick approach by announcing a pilot prepaid plan to compete with Kaiser Foundation Health Plan. They offered the 9,000 members of the International Association of Machinists at Santa Monica’s Douglas Aircraft plant “free choice of physician and hospital to its subscribers” through the California Physician’s Service. The CMA had established the CPS in 1939 as statewide prepaid medical care organization.

The proposed plan would cover hospitalization and surgical care for all workers earning below a certain salary threshold, charging more for those earning above it. (Newspaper coverage noted that the Kaiser plan had no income ceiling provision.)

Private practice physicians were on the ropes. Dr. Francis Rochex of San Francisco was quoted as saying “Organized medicine has lacked vision in anticipating the extent of penetration of political and socialized pressure groups.” But measures to develop a comprehensive alternative stumbled; CMA delegates were unable to agree on a plan which would cover both prepaid medical care and still observe “the doctors’ traditional independence and maintain professional standards.”

By 1960 the “Long Beach Physicians Health Plan” through CPS had been adopted for all Douglas aircraft workers throughout the world, and Long Beach city employees and school district employees came under the plan in 1959. On its own terms it was successful; the Long Beach Independent bragged that it was “the only plan that has had wide acceptance by so large a number of the people who are seeking a workable medical insurance plan under the free enterprise system.”

 

Group Health Cooperative wins ruling against local medical establishment, 11/16/1951.

The experiences of Group Health

A letter to editor in the Port Angeles Evening News April 16, 1965, presented the story from a proud member’s perspective:

As a member of the Group Health Cooperative of Puget Sound during the Forties, I well remember the efforts of the AMA to put Group Health out of business. Methods used included, denial of membership in local medical societies to Group Health doctors, denial of hospital privileges to Group Health doctors and their patients, and plenty of good old fashioned slander. Needless to say, as a true cooperative, the services of Group Health physicians were not being ‘sold at a substantial profit by a third party.’ Convicted of criminal conspiracy under the antitrust laws, the AMA fought the case to the U. S. Supreme Court — and lost.

The landmark legal decision in this fight was Washington Supreme Court case of Group Health Cooperative of Puget Sound et al., Appellants, v. King County Medical Society et al., November 15, 1951. Group Health fought back after it experienced “unfair and illegal fetters placed upon its service and growth.” In November 1949, it brought this suit asking for an injunction and damages.

An Associated Press news item in the Walla Walla (Washington) Union-Bulletin, November 16, 1951, “Court Ruling Hailed”:

Group Health Cooperative of Puget Sound Friday hailed as a “victory for free enterprise” a state Supreme Court ruling that King County Medical society policies toward the co-op violated the anti-monopoly law.

The Washington Supreme Court ordered the King County Medical Society to stop boycotting Group Health Cooperative. Organized medicine was indicted for violating the Sherman Antitrust Act in its efforts to suppress Group Health. Eventually, both plans established a more collegial relationship with their private practice peers. One of the founding Permanente physicians, Dr. Cecil Cutting, explained:

… the American Medical Association set up a committee to study provision of medicine in the country. They came out and examined us and gave a report that we were providing as good or better medical care as in the community. That sort of set them back a ways and now, we are fully accepted and I think in many times envied because of the practice, the coherence, the fundamentals of our group practice pre-payment that has tested the time and I think proved an excellent way of practicing medicine.

Dialogue about the “best” form of health care remains a vibrant topic of national conversation. Physicians, staff, and resources of the now-joined pioneering health care organizations Kaiser Permanente and Group Health are leading the conversation.

 

Part 1 of this article
Short link to this article: http://k-p.li/2y1SWZj

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