Comments about technological history, system fractures, and human resilience from James R. Chiles, the author of Inviting Disaster: Lessons from the Edge of Technology (HarperBusiness 2001; paperback 2002) and The God Machine: From Boomerangs to Black Hawks, the Story of the Helicopter (Random House, 2007, paperback 2008)

Thursday, January 13, 2011

State of the Art Health Care, 1944

Following up on my previous post about the industrial boom of World War II on the home front. The severe shortage of workers led to interesting innovations by some employers; one was managed health care.

Americans of the 1940s complained about the costs of medical care, but spent comparatively little of their income on it. (We now spend twelve times more on medical care in constant dollars than we did during the war.) With the exception of wealthy people who frequented topflight private hospitals such as the Mayo Clinic, most Americans made do with local doctors’ offices, with only rare visits to hospitals because of the fees. 

Doctors’ offices (which served several thousand people each) had no access to medical diagnostics. There was no penicillin available to any civilian doctors until the end of the war, so blood poisoning was usually deadly. Many towns and small cities had no ambulance service. They relied on police cars and even hearses to get people to the hospital. 

The emphasis was on treating acute needs only: broken arms, childbirth, and care of accidents. There was no medical intervention to save people near the end of what was seen as the natural life span. Americans didn’t like the medical system much back then either, but one exception was Henry J. Kaiser’s prepaid health care plan.

Why did Kaiser go to the trouble of setting up a parallel medical system, when he was supposed to be focused on building ships? All defense industries suffered greatly from turnover. They spent money to train workers on how to wield expensive tools, then lost them to competitors … except at Kaiser operations. One reason was his health care plan. It was called Permanente, after a creek near one of Kaiser's cement plants. His wife Bess liked the name.

Wartime wage caps prohibited employers from raising wages, but that law didn’t prohibit employers from providing benefits that workers paid for and that they valued. Kaiser had started providing prepaid health care while building Grand Coulee Dam. At the Grand Coulee job, a fee of 50 cents per worker per week had covered the expenses. The economics worked. In three years he paid off all the buildings and all medical equipment (including a new air-conditioned hospital, which even the private hospitals didn’t have).

He continued the practice in subsequent years, discovering that if every worker paid into the system, healthy or not (a critical requirement to make it all work, and one that the unions helped enforce), Kaiser could pay for clinics and hospitals to care for 120,000 shipworkers, and later their families too. 

The Kaiser organization continues today, as the managed health care plan Kaiser Permanente.

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