III. WELFARE CAPITALISM IN THE
UNITED STATES: POLICIES, PRACTICES,
What Might Have Been:
Earl Warrens Alternative to
Employer-Based Health Insurance
Daniel J. B. Mitchell
University of California, Los Angeles
is widely assumed that the United States and Canada differ in their health
insurance systems because of deep-rooted cultural factors. Moreover, the
defeat of government-provided health insurance in the United States is
often dated as 1949--when the Truman plan was defeated in Congress. However,
California--under Governor Earl Warren--might well have adopted a Canadian-style
plan in the mid-1940s, had Warren not made some crucial political misjudgments.
If Warren's proposal had been adopted in California, other states might
well have followed. The United States would then have developed a system
of state-administered single-payer health insurance plans.
Economists have been content to take note
of the U.S.-Canada divergence on social issues as a "natural experiment,"
useful in exploring policy outcomes (Card and Freeman 1993:2).1
Political scientists and sociologists, however, attribute the policy discrepancy
to deep-seated cultural forces going back to the American revolution (Lipset
1990). In this view, Canadians are inherently more likely than Americans
to prefer collective approaches and government remedies. Presumably, that
explains why the United States relies on incomplete employer-provided
health insurance--a system that leaves many individuals uncovered--while
Canada relies on universal insurance provided by the provinces. As for
when the United States rejected government-provided health insurance,
the usual answer is 1949, the year President Truman's proposal for federally
provided health insurance was defeated (Poen 1979).
There is great temptation to take current
reality as inevitable and to view history is deterministic. In the case
of health insurance, however, I believe that it was not inevitable that
the United States followed the route it did. A Canadian-style system--with
state-run insurance--might have developed in the United States had Earl
Warren been successful in promoting such a plan in California in the mid-1940s.
I also suggest that the critical date for the United States came with
Warren's defeat rather than Truman's.
Most people would be surprised that Earl
Warren's name arises in this context. Indeed, many who recognize Warren's
name as that of a famous Chief Justice of the U.S. Supreme Court are unaware
of his California origins. In fact, Warren was an ambitious California
Republican politician and the only Californian to be elected three times
as governor (1942, 1946, 1950). Warren first proposed a system of state-provided
health insurance funded by a payroll tax in 1945, and suffered final defeat
for his plan in 1947. At the time, the current web of interest groups
committed to private, employer-provided coverage had yet not developed.
Had Warren succeeded in putting his plan across, other states would likely
have followed; California was already a trendsetter in politics and culture.
What could have emerged was a state-based program along the lines of workers'
compensation or perhaps a state-federal program similar to unemployment
Warren and California
Warren's political career developed in
a California shaped by the Progressive Republican political movement.
The Progressives sought to downgrade traditional politicians and parties
and to create institutions through which nonpartisan individuals committed
to the public good would govern. Warren began as District Attorney of
Alameda County (containing Oakland) and received national attention for
effective operation of that office. From there, he became the state's
attorney general, capturing both the Republican and Democratic nominations
in 1938. He then moved on to defeat incumbent Democratic Governor Culbert
Olson in 1942. As governor, Warren was again heralded as a particularly
effective administrator, bringing about development of freeways, expansion
of higher education, and other major endeavors.
Warren's goal after the governorship was
the presidency. He turned down New York Governor Thomas Dewey's entreaties
to accept the vice presidential nomination in 1944, reasoning that the
Republicans had little chance of beating Franklin Roosevelt in the midst
of World War II. But after failing to win the Republican presidential
nomination in 1948, he accepted Dewey's invitation to be the vice presidential
candidate in that year, having received assurances that as vice president
he would play a major role in the Dewey administration.
The Dewey-Warren "dreamboat" ticket--uniting
the governors of New York and California--was viewed as a sure thing against
an embattled Harry Truman. Of course, things did not turn out as expected.
And one of the reasons Truman promised to fight for federal health insurance
during the campaign was to exploit the divide between Dewey and Warren.
Governor Dewey had strongly opposed government health insurance in New
York; Warren pushed for it in California.
There are numerous biographical studies
of Earl Warren. What emerges is a man of contradictions. As part of his
1942 gubernatorial campaign, Warren pushed for wholesale interning of
California's Japanese-origin population. The same Warren who justified
the roundup in explicit racial language would later preside over a Supreme
Court that desegregated the public schools and other institutions. The
Warren Court championed defendants' rights in the Miranda case,
but as district attorney--in what he considered to be his most important
case--Warren held a suspect incommunicado in a hotel where his lawyer
couldn't find him until a confession was obtained. The Warren Court required
the apportionment of state legislatures by population. But as governor,
Warren strove to maintain the disproportionate representation of rural
(and Republican) districts.
Warren managed to contain these contradictions
because he did not recognize them. Introspection was not part of his makeup.
He had no lack of what later Californians would call "self-esteem." Indeed,
in the phrase of one recent observer, Warren had "an egotism so great
as to be heroic" (Starr 2002:266). That egotism seems to have been a major
factor in the uncharacteristic defeat of his health insurance proposals.
Background of the Warren Plan
There had been attempts in California--going
back to 1918--to promote some form of state health insurance before Warren
became governor. These had been vigorously resisted by doctors who feared
that any such plans, and even private insurance, would lead to price caps
on their services. Yet in 1935, the doctors had briefly toyed with their
own plan for state insurance--physician-controlled, of course--when it
appeared possible that some other plan might be adopted. In 1939, doctors
had defeated a plan proposed by Warren's ineffective predecessor, Culbert
Olson. Despite doctor aversion to any form of insurance, the California
Medical Association (CMA) created California Physicians Service (Blue
Shield), as an alternative to the Olson plan.
Warren conceived his proposal for state
health insurance in 1944, the same year he received national prominence
as a possible presidential or vice presidential candidate. The timing
was no coincidence. If Warren could create a successful state plan, he
would receive still more national attention and strengthen his position
for a later run at the presidency. Moreover, a state plan would be an
alternative to federal proposals that liberals had been pushing since
the mid-1930s. It would have conservative appeal because it would tend
to block postwar expansion of the New Deal.
A state health insurance plan would also
be helpful to Warren in the upcoming gubernatorial election of 1946. California
until World War II had been an elderly state, a land of cheap housing
where folks could retire in the sunshine. As a result, the state was the
breeding ground of crackpot pensionite movements, notably the Townsend
Plan and the Ham and Eggs scheme. The latter, which appeared on the state
ballot in 1938 and 1939, would have provided all Californians over age
50 "$30 Every Thursday" (financed by a new state currency)--and came close
to passing the first time around. In his 1942 gubernatorial campaign,
Warren cut a deal with the pensionites to obtain their support (Mitchell
2000). But, thanks to the vast expansion of aircraft, shipbuilding, and
other military-related industries, California had begun attracting a flood
of young workers for the new war plants. Moreover, a further influx of
returning GIs could be expected after the war. Pensions would not appeal
to these new voters, but state health insurance would.
Although the political appeal of state
health insurance can be readily enumerated, Warren would have been unlikely
to put the issue in those terms. In light of his Progressive leanings
and lack of introspection, he would have seen the proposal as simply the
right thing to do in the public interest. As he stated in his autobiography,
"I had given much thought to health problems, and felt the necessity of
doing something about them. . . . I concluded that if anything was to
be done to relieve this tragic situation, it must be a public program,
and it should be based on the insurance principle" (Warren 1977:186-87).
But Warren's belief that the need for state-run health insurance was self-evident
was probably the proposal's undoing.
The First Plan
Unlike Olson, who was a general failure
in achieving legislative objectives, Warren had an effective approach.
Typically, he would first condition public opinion--perhaps through creation
of a state commission that would examine the issues, woo the affected
interest groups, and build support for its recommendations. Armed with
public support, Warren would then take these recommendations to the legislature,
where he had prepared the ground through friendly relations with key politicians
in both parties.
Sadly, Warren did not handle his health
insurance plan in this fashion. The reason for this deviation can never
be known for sure. Most probably, because the need for a state plan was
obvious to Warren, he assumed it would be so to everyone else. He did
meet with CMA representatives to inform them of his intent, but the physicians
went away thinking the proposal was a longer-term objective and that they
would have time for input. When it turned out the basic outline of the
plan was already developed and was announced without further consultation,
they were incensed and went into battle mode. Similarly, the business
community was not consulted. Organized labor was then divided into the
rival AFL and CIO. The two state federations were informed, but no effort
was made to harmonize their reaction. Thus, labor split with the AFL backing
the Warren plan but the CIO insisting on its own version.
Under the Warren plan there would be a
3 percent payroll tax, split between employer and employee, on the first
$4,000 of income. The tax would fund a state insurance program that would
pay doctor and hospitalization expenses on a fee-for-service basis covering
employees and their dependents. A new state board--with representatives
from business, labor, agriculture, and the medical profession--would administer
the system. Announced at the end of 1944, the Warren health plan was to
be the centerpiece of the governor's 1945 agenda.
In short order, the CMA denounced the
plan, the business community came out against it, and the CIO insisted
on an alternative bill based on "capitation"--what we would now call an
HMO model--rather than fee for service. California was home to early HMO
prototypes such as Kaiser Permanente, under which providers received a
fixed payment per patient. Because it was unclear how organizations such
as Kaiser would be incorporated into a fee-for-service model, the proto-HMOs
could not support the Warren plan. And there were complaints from other
providers that were left out: chiropractors, visiting nurses, Christian
Science healers, and optometrists. Naturally, they wanted to be covered
by any state system. Had Warren followed his normal pattern of creating
a commission or taskforce to hash out these concerns before submitting
a plan, deals could have been cut and accommodations made before opposition
could crystallize. As it was, a fait accompli was dropped into the legislative
hopper without advance preparations.
Belatedly, it became evident to the Warren
administration that a major public relations campaign would be necessary
to enact its proposal. Two radio addresses were quickly planned. In the
first broadcast, Warren outlined his health plan. The second radio address
attacked the opposition's argument that the proposal would lead to state
budget deficits and new taxes. But radio could be used by both sides.
In CMA broadcasts, the Warren bill and the CIO bill were treated as if
they were one, in an effort to tar Warren with CIO radicalism.
CMA hired an early Republican political
consulting firm--Whitaker and Baxter, a husband-and-wife team--to plot
strategy. Clem Whitaker, who had developed a personal animosity to Warren,
was delighted to take up the opposition, but he advised CMA that it would
have to beef up its Blue Shield plan as a private alternative to a state
system. Whitaker and Baxter had developed a distribution network that
provided local newspapers with free editorials. They used their network
to offer newspapers around the state editorials opposing the Warren plan.
Last-minute efforts by Warren's staff
to provide an expert witness on behalf of a state plan proved embarrassing.
The staff brought in Dr. Nathan Sinai of the University of Michigan to
testify. But Sinai's academic degrees were in veterinary medicine and
public health, and he was ridiculed as a "horse doctor" with expertise
in "mosquito abatement." His travel expenses also became a focus of questioning,
leading to Sinai's plaintive cry, "What has all this to do with the validity
of my testimony concerning this legislation?"
The Assembly Public Health Committee refused
to send the Warren bill (and the CIO bill) to the floor in spring 1945.
Thus, the test came when Warren pushed for an assembly vote to force his
bill out of committee. The effort failed, 39-38. That one vote margin
in 1945 may well have been the death knell for a public health insurance
system in the United States.
The Second Plan
Rather than accept defeat for the centerpiece
of his legislative agenda, Warren came back with a second plan. This proposal
scaled back the original bill. It covered only hospitalization up to 30
days for employees and dependents. Because the new plan did not include
doctor bills, it was to be financed by only a 2 percent payroll tax split
between employer and employee. Hospitals around the country had been less
resistant to health insurance than doctors. Their early Blue Cross plans,
for example, had originated before the doctor-run Blue Shields came along.
So Warren hoped for less opposition to a hospital-only bill than his first
plan had produced. But Warren's new bill engendered the same opposition
as his original plan.
A hospital-only plan could be a foot in
the door to a later plan covering doctors, something the CMA feared and
therefore opposed. Even worse from the perspective of the CMA was the
prospect that hospitals might offer state-subsidized medical services
in competition with those of doctors. As a result, the outcome for Warren's
second plan was the same as the first. It was tabled by the assembly's
Public Health Committee and proponents failed to produce enough votes
to force the new bill to the floor.
The Third Plan
Although he failed in his 1945 battle
for health insurance, Warren remained popular. In 1946, he captured the
gubernatorial nominations of both the Republican and Democratic parties
in the primaries. Without major party opposition, he was overwhelmingly
elected. Warren viewed his reelection as a mandate for state health insurance.
If the case for a state plan was not self-evident in 1945, surely it was
now. Although noting in his inaugural address that he was "not unmindful"
of the controversy his prior proposals had provoked, Warren again failed
to shape public opinion or to sound out allies and potential opponents
through informal consultations. In late 1946, he announced he would submit
a new health proposal in early 1947.
The third Warren plan was designed to
cover only major hospital expenses. In modern terminology, it was
a "catastrophic" program. But the window of opportunity for state health
insurance was rapidly closing, because of developments in the private
sector since 1944-45. By 1947, there had been a significant expansion
in job-based health insurance, thanks in part to union demands. Thus,
the new Warren plan had to accommodate employer-based health care that
was already in place. Warren's solution was a "play-or-pay" feature. Under
the new proposal, employers could provide employees with insurance policies
that at least met the standard of the state plan. If employers chose not
to provide insurance, they had to join the state system and pay in 2 percent
of payroll split between employer and employee on the first $3,000 of
Despite the cutback, Warren's third proposal
went the way of the first two. But defeat took place in the state senate
rather than the assembly. Warren's bill produced the same opposition from
the medical and business communities that had coalesced in 1945. It was
tabled in committee and never taken to the senate floor. Thereafter, Warren
dropped health insurance from his agenda. Except for Hawaii in the 1970s,
no state has put a health insurance plan into operation. And the Hawaii
plan involves an employer mandate to obtain private insurance, not a state-run
What Might Have Been
By the late 1940s and early 1950s, employer-based
health insurance became entrenched. It produced a network of employers,
human resource executives, unions, and insurance carriers committed to
retaining the system "as is." The Clinton administration in 1993-94--like
the Truman administration in 1949--discovered this fact to its chagrin,
when it tried to tamper with the existing order.
But Earl Warren might well have succeeded
in enacting his plan had he applied the same political skills that he
used to obtain other controversial legislation in California when he was
governor. It was quite possible in 1945, that some form of state health
insurance could have been implemented in California before the current
employer-based system became entrenched. Had California acted, other states
might have followed and the United States and Canada could have ended
with similar systems, despite whatever cultural differences there are
between the two countries. "For of all sad words of tongue or pen, The
saddest are these: 'It might have been!'" (John Greenleaf Whittier, Maud
This paper is based on documents in the Earl Warren collection of the
California State Archives, transcripts of the California State Archives
Government Oral History Program and of the Earl Warren Oral History Project,
newspaper reports, and numerous other sources. Detailed references can
be found in Mitchell (forthcoming).
Card, David, and Richard B. Freeman, eds. 1993. Small
Differences That Matter: Labor Markets and Income Maintenance in Canada
and the United States. Chicago: University of Chicago Press.
Lipset, Seymour Martin. 1990. Continental Divide:
The Values and Institutions of the United States and Canada. New York:
Mitchell, Daniel J. B. (forthcoming). "Impeding Earl
Warren: California's Health Insurance Plan that Wasn't and What Might
Have Been." Journal of Health Politics, Policy and Law.
Mitchell, Daniel J. B. 2000. Pensions, Politics,
and the Elderly: Historic Social Movements and Their Lessons for Our Aging
Society. Armonk, NY: M. E. Sharpe.
Poen, Monte M. 1979. Harry S. Truman Versus the Medical
Lobby: The Genesis of Medicare. Columbia: University of Missouri Press.
Starr, Kevin. 2002. Embattled Dreams: California
in War and Peace, 1940-1950. New York: Oxford University Press.
Warren, Earl. 1977. The Memoirs of Earl Warren.
Garden City, NY: Doubleday.