Medical care before the state

This thread is my own indulgence on the underlying impact of societal institutions on the economy looking through the lens of the health care market.

The fear of what would happen if health care (and welfare in general) was not dominated by Government has been raised as a reason why they do not embrace liberty. The gross misunderstandings of the USA's so-called "free market" health care have often been mentioned to scare people into believing that Government health programs like Medicare, Medicaid, the NHS etc are essential to mollify the "nasty" tendencies of the free market. The misunderstandings of the US system have previously been discussed in other threads (including HERE). Hence, I don't want to discuss it here. Rather I wish to provide some information about health care in the time before the British national insurance program was introduced in 1911 when liberalism and voluntarism was essentially at its peak in British society.

To aid understanding, it is helpful to remember that the culture plays a large role in defining the social institutions. 19th century England (more specifically the period of 1834-1911) was a culture predominantly based on fierce individualism but coupled with recognition that individuals are frail and subject to the vicissitudes of life. Consequently, ideas of civic duty, social capital and mutual support were a core part of forming a wide range of social institutions developed for the mutual benefit of self-interested individuals. The Friendly Societies were a substantial part of everyday life and were growing rapidly to encompass more and more parts of the population with a greater and greater range of services (including unemployment benefits, sickness benefits, disability insurance, death insurance, aged pensions and many more). Besides the development of good actuarial methods, the primary way that the societies functioned and thrived compared to the (more expensive) commercial insurance agencies, was by a strong reliance on building and maintaining social capital essentially a network of voluntary but reliable mutual assurances and relationships that engendered trust amongst strangers.

As Adam Smith recognised, it is possible for a society to hang together if it is based only on mutual advantage. Self-interest does not always mean selfishness; there is much scope for harmonious agreement; and people with selfish intentions will find that the discipline of competition tends to channel their energies into serving others. However, as Adam Smith also acknowledged in The Theory of Moral Sentiments, such claims only take us so far and for Smith and other early pioneers of classical liberalism, people ought to be guided in their lives not only by self interest but also by duty, indeed in Smith's view "Christian duty".

The freedom celebrated by Smith was not only a theory accounting pragmatically for social cohesion amidst self-interest, it was also an ideal which challenged every person to discover his or her better self. As Michael Novak has written, a free society 'demands much of individuals, because it expects them to be free. The source of a nation's beauty, and of the love its citizens bear it, is that it asks so much of them'.

Most (but not all) of the material used in the following posts I have sourced from David G. Green's 1993 book "Reinventing Civil Society"; Penelope Ismay's 2010 thesis "Trust Among Strangers"; and, P. Chalupnicek and L. Dvorak's 2009 essay "Health Insurance Before the Welfare State". All of these are probably available as free PDF's.

 

Medical care at the turn of the century was being provided in a variety of ways. The extremely poor relied on the Poor Law while provision for the majority of the population fell into three main categories:

First, many simply sought medical care as private patients and paid a fee to the doctor of their choice.
Second, a large section of the population obtained care free of charge through charities such as the outpatient departments of the voluntary hospitals or free dispensaries.
Third, there were a wide variety of pre-payment schemes, commonly called contract practice, based on the payment of a fixed fee.

Importantly people may have used different methods for obtaining medical care, either during the same period of their life or, more likely, during different periods of their life. It is therefore best thought of a system of overlapping options, each with their own advantages and disadvantages (for both consumers and suppliers). Overall, however, the absence of a state monopolist gave freedom to experiment during the period before 1911 which:
1. Allowed consumers to protect themselves against the demands of the organised medical profession to force up pay and free doctors from accountability to patients for the standard of care.
2. Enabled different methods of paying for medical care to be attempted and threw up valuable lessons from which others could learn and on which future progress could be based.

To a significant extent it is probably fair to say that the underlying cultural attitude across the UK during this period was basically 'classical liberal'. In classical liberal thought, helping the poor should be done via self-help, mutual aid and charity in that order. The freedom to exercise one's talents led to the improvement of the lot of the oppressed, of the have-nots, of the disadvantaged, of the poor. Self-help was promoted by the elimination of obstacles to self-help and the active assertion of personal responsibility. Classical liberals actively promoted and took part in a variety of "friendly societies", "fraternal societies", and "mutual-aid societies" that pooled both the efforts and the risks faced by persons of limited means. Charity assisted those who have fallen on hard luck or who need assistance from others, which is best provided by voluntary associations. The key for classical liberals was to avoid conditions of permanent dependence. The purpose of charity was not to further dependency but to foster the ability of the recipients of charity to take care of themselves and their families.

 

1. Private patients (self-help)
The 1832 Royal Commission on the Poor Laws found that there were "many" people, including some from the "poorest working class" who opted to pay for medical care through fees as private patients rather than join the variety of medical clubs. There was evidence that this had been so for many years. In 1853 the Association Medical Journal reported that many workers receiving only 12-15 shillings a week paid the standard private fees. A large part of what made this practice feasible was that doctors during this period charged patients according to income, thereby making the lowest fee within the grasp of low-paid workers. (With rent usually being used as a rough indicator of income.)

This scaled tariff system was a very simple, non-coercive method of cross-subsidisation. An official tariff quoted in Whitaker's Almanack for the year 1900 distinguished three payment scales based on annual rent: those paying 1025 a year; those paying 2550; and those paying 50+. Although it stated that the minimum fee for a surgery consultation for the poorest class was 30 pence, in reality fees were often much lower. For example, fees for a surgery consultation varied from 1230 pence while a home visit (including medicine) varied from 1842 pence. Although the most common fees were 24-30 pence, the very poor were charged the lower rates.

On the eve of National Insurance being introduced in 1911 fees had, if anything, fallen slightly. It was reported that in working class areas it was difficult to charge even 12 pence per consultation while among the "better classes" it was difficult to charge the previously accepted 42 pence.

Such fees, as long as they had to be paid only occasionally were within the means of wage earners. For example, in 1906, the average weekly wage for unskilled workers was about 1 and 2 shillings (264 pence); about 1 and 8 shillings (336 pence) for the semi-skilled; and about 1 and 17 shillings (444 pence) for skilled workers.

According to a Government survey in 1910, in addition to qualified medical practitioners, many people also sought medical care from unqualified medical practitioners thereby containing costs. Such people included chemists, herbalists, bone setters, abortionists and VD specialists. In mining areas such as Northumberland, Durham and Wales, bonesetters were particularly prized, enjoying equal standing with doctors.

 

2. Free care (charity)
In most large towns there were voluntary hospitals and charitable dispensaries that provided medical advice and medicines free to those on low incomes. At the Newcastle upon Tyne free dispensary, for example, patients with a subscriber's letter of recommendation received attendance and medicine free, whilst 'casuals' paid 2 pence for any medicine prescribed.

Of greatest importance for the supply of free medical care were the outpatient departments of the voluntary hospitals. The numbers are difficult to reconcile and differed greatly year-to-year and from city to city. It is also difficult to know the number of repeat visitors versus single people, but to give an indication of the importance of these services, in 1887 when the population of London was just over four million, there were one and a half million free outpatient attendances at London hospitals. In the same year there were also 162,000 consultations at twenty-six free dispensaries and 102,000 at part-pay dispensaries.

[Unfortunately, to date I have been unable to find information on the level of free care for inpatients nor have I been able to definitively understand how the free medical services were funded.]

 

3. Contract practices (mutual aid)
The third class of services provision is probably the most interesting as there were a wide range of different methods used to service a range of different requirements. Importantly, this was also the area in which the greatest amount of experimentation happened and which greatly benefitted consumers receiving medical care in the other areas.

Each type of contract practice was based on the principle of a flat-rate annual contribution, usually payable quarterly but sometimes more frequently, entitling the contributor to any number of consultations during the period covered. Some such clubs were based at factories, others were organised by charities, some were run on commercial lines, some by individual doctors or groups of doctors, but by far the most important numerically were the various friendly society schemes.

3.a Work Clubs (Medical Aid Societies)
Work Clubs were organised by the general body of workers (or occasionally the employer) where they arranged with their employer to deduct an agreed sum from their pay for the provision of medical attendance and medicines for themselves, and usually for their families. Doctors were employed directly by the club with the doctor being paid either an annual fixed sum or an amount per patient. It was standard practice for the employees at a factory or mine, or working in a particular district, to hold a general meeting where they chose the medical attendant and elected a committee to manage the scheme. The most resilient of the works clubs were the 'medical aid societies' founded by the miners and steelworkers of the Welsh valleys. [ASIDE: It's worth noting that these were significantly more dangerous professions at the time and were often excluded from the mutual aid schemes arranged by most friendly societies. In response, miners, steelworkers and people in other high risk professions, either joined friendlies where the risk of workplace injury or death did not matter for receiving other benefits, set up their own friendlies and/or used alternative means of obtaining support such as the medical aid societies.]

3.b Provident Dispensaries
Combining both the elements of mutual aid and charity, the provident dispensaries were founded as alternatives to the free dispensaries. Free dispensaries were felt to create a permanently dependent section of the population and the provident dispensaries aimed to enable the poor to make as much a contribution to the cost of their medical care as they could afford.

It was felt that the beneficiaries would feel greater self respect if they were able to pay at least something towards their own health care. They therefore paid a low annual contribution, felt to be within the means of the very poor, and the balance was paid by (non-benefitting) honourary members. One of the strongest provident dispensaries was the Leicester Provident Dispensary. In 1907 it had 50,798 members and ran a small maternity home and cottage hospital. Fees were a penny a week for adults, half for children or three pence halfpenny a week for a man, wife and all children under fourteen.

 

3.c Medical Aid Companies
This class of contract practice was based along fully commercial lines. They were essentially insurance companies providing medical aid services (sometimes used as an inducement to the sale of life assurance). Such companies differed from the friendly societies and works clubs, which had been founded for the benefit of members and their dependants.

These companies provided valued alternatives for the poor. Usually a candidate for life assurance was required to pass a medical examination, but there was provision for those persons contributing a very small sum to be admitted without medical examination at the discretion of the agent. As the agents received commissions from the premiums they collected that had a strong financial incentive to admit such small contributors. Hence, by this method individuals who would have failed a medical examination for admittance to a friendly society were still able to obtain the services of a doctor.

3.d Doctors'Clubs
As a great example of the competing pressures of the market, there were a large number of clubs that were organised by the doctors themselves. These originated in response to the commercial pressures being applied to the profession from the range of organised consumer groups. Although not all doctors supported such clubs, a survey by the British Medical Association revealed that many were supportive:

 

3.e Friendly Society Schemes
Among the great variety of arrangements made by the friendly societies for the supply of medical care, three proved most popular: the lodge system, medical institutes and approved panels.

Lodge practice: The traditional system in large federations was for each branch to employ a a single medical officer. Usually the appointment was made by a free vote of all members present at a general meeting. Sometimes doctors were invited to submit tenders before the election. In some areas several medical officers were appointed to a branch or a combination of branches, and the members enjoyed a free choice among the available doctors. Sometimes medical officers were appointed at the pleasure of the branch, and sometimes for a fixed period of three months, six months, or a year.

The medical officer's duties were threefold. First, they would examine candidates for lodge membership. Second, they would examine members who were sick to determine whether or not they should receive sickness benefits. And third, they would provide medical attendance and medicines for each lodge member in return for a fixed fee per member, usually payable by quarterly instalments.

Medical institutes: From about 1869 a movement developed for the friendlies to found medical institutes to employ full-time medical officers serving the whole family. Groups of lodges banded together, raised funds and purchased or rented premises. Organisation was under the control of a committee of delegates which appointed one or more full-time medical officers, who usually received a fixed salary plus free accommodation. The medical officers' duties usually included general medical and surgical attendance, but not the dispensing of medicines. Dispensing was carried out by the medical institute's own dispenser to ensure use of the highest quality drugs.

Approved panels: By the turn of the century the closed-panel system, under which the friendly societies appointed doctors to an approved list, was growing in popularity. To be eligible to join the panel, doctors were required to observe the conditions laid down by the friendly society and particularly to accept prescribed fees. The most sophisticated scheme was that of the centralised National Deposit Friendly Society.

 

The rise of the Medical Institutes
A constant feature of the friendly society medical care was conflict with the organised medical profession. The friendly societies represented the consumer and constantly sought through competition to improve the quality of medical care and to contain the pressures for fee increases. As the nineteenth century progressed, the medical profession organised itself (principally through the doctors trade union, the British Medical Authority, or BMA) with ever-growing determination to eliminate competition by whatever means were available. (Although not all doctors shared the aspirations of the BMA and many worked in close harmony with the friendly societies.)

Besides being another example of experimentation, the rise of the Medical Institutes provides many interesting examples of the ongoing struggles between the medical unions and their power over the health and lives of people against the interests of the everyday, income-constrained consumers who just want good, efficient service provision on notice. The friendly society practice of employing lodge doctors had undercut medical professional's ability to price discriminate against people on "higher" incomes (keeping in mind that most friendly society members were average workers) and the tendering process and purchasing power of the friendlies made it harder for individual doctors to increase their fees. The underlying tensions that had existed since the 1830s came to a head in 1869 when the doctors began a concerted campaign pressing for a 50+ per cent increase in the prevailing charges. Different friendly societies reacted in different ways, some increasing their rates by a lesser or greater amount than that sought. Others refused to respond at all, while in West Bromwich there was a report of a club initially increasing its rate in 1870 but then lowered it in June 1871 below the 1869 rate when two doctors offered themselves at a lower fee.

Of significance, was that in December 1869, the Preston Friendly Society met to consider their response to the demands. The result was that in 1870 they founded the Preston Associated Friendly Societies' Provident Dispensary. Although the demand for increased fees was a trigger, it was also a response to other underlying dissatisfaction with their existing lodge practices, including:
1. The feeling by some members that, particularly in smaller lodges with part-time doctors, the doctors were more interested in building up a private practice rather than focussing on their duties to the lodge members. The medical institutes solved this problem by having enough scale that full-time salaried medical professionals were employed solely for the institute's members and forbidden to take private patients.
2. Whilst doctors in lodge practices would often prescribe very expensive medicines, they would seldom supply them, preferring to advise the patient to pay extra at the chemists. [Although this may seem normal to us nowadays, it was not a universal practice in the mid-nineteenth century.] The medical institutes overcame this issue by buying their drugs at wholesale and supplying them directly through their own dispensaries. Moreover they would also supply a range of other beneficial goods such as nutritional items like cod liver oil and malt.
3. At the time, lodge practice did not usually provide for dependants. The medical institutes were therefore set-up with provision for the whole family and not only the society member. In the 1870s most institutes charged 8 shillings per year for the whole family (approximately double the standard rates for an individual in the lodge practices at the time). Perinatal care was also available at the concessional rate of 10.5 shillings. In addition, widows and orphans were allowed to continue their membership and in some cases orphans were attended free of charge until they reached working age.

Such was the success of the institutes that by 1877 efforts were being made to establish medical institutes, or medical aid associations, throughout England. They had been founded in Preston, Newport, Derby, Worcester, Nottingham, Bradford and elsewhere. For some friendly society leaders the foundation of the medical institutes was another step in the great friendly society crusade, summed up in a phrase subsequently purloined by the welfare state: to provide for members from 'the cradle to the grave'. Leaders of the movement, it was said, would not consider their work complete until this had been achieved.

In 1879, the next natural progression of the continuing success was the establishment of the Friendly Societies Medical Alliance (FSMA) to promote the common interests of friendly society medical institutes. By 1882 the FSMA had established a medical agency (a kind of labour exchange) at which doctors deposited their names and qualifications and to which medical institutes turned when they needed a doctor. In 1883, thirty-two medical institutes with a total of 139,000 members sent full returns to the FSMA. There were institutes in Bradford, Birmingham, Bristol, Derby, Exeter, Greenock, Hull, Hartlepool, Leeds, Leicester, Lincoln, Lowestoft, Newport, Northampton, Portsmouth, Reading, Sheffield, West Bromwich, Wolverhampton and elsewhere. The largest was at York, with 9,300 members.

In 1898 there were about forty medical institutes registered as friendly societies with around 213,000 members, employing about seventy-five medical officers. In addition there were unregistered medical institutes. In 1896 there were at least five with around 19,000 members. At least twenty owned their own premises, combining surgery, dispensary, and doctor's living accommodation. Annual capitation fees varied, but were usually 3s for men, 4s to 5s for wives, and 1s for children. In some cases an inclusive fee for the whole family was charged, varying from 3.5s to around 8s. The fee for peri-natal care remained at 10.5s. The largest institute was at Derby with 11,600 members. York was the second largest with 10,300 members, followed by Wolverhampton with 8,700.

These statistics show that, not only were the institutes demanded by a rapidly growing number of consumers, they also show that over the three decades since their inception they had managed to maintain or even lower average costs of medical care (recalling that they were founded at a time when the profession was calling for a 50% increase).

 

This is an excellent synopsis. The largest impediment to better health outcomes is Medicare. Once this came in that all went out the door. The government PBS will be insolvent within the next 5 years and you saw the reaction to a $7 co-payment. What a joke

Kind Regards
non recourse

 

Probably differs by GP. An after hours home doctor service that bulk bills just started up in Canberra last month by a private company called National Home Doctor Service who apparently have services in a few major urban areas around Australia.

There's been another after hours private company (CALMS) in Canberra for decades that say they do home visits for special patients but we've only ever used their clinics. They charge private fees.

According to both of their websites they imply that home visits are banned by the Government except for after hours and even then with special conditions attached. Yay government.

 

I got a flyer in the mailbox for a local GP that does house visits.

 

Well how dare anyone get home delivered medical care during working hours. It's lazy and immoral.

Australia also took up Britain's restrictions on advertising and canvassing. Until the late 1990s, medical practitioners could do little more than advertise their address and opening hours. Any attempt to advertise special skills or services could result in a breach of the medical practice act in most states with consequent large fines (up to $500,000 for individuals and $10m for companies) and/or the ultimate penalty of de-registration.

Even though the marketing and advertising restrictions have become a teensy bit more lenient since then, the regulations are still quite severe. It is illegal to advertise a discount on services for example or to offer any inducements to attract a person to their business. Can you believe it? It is protectionism for incumbents set under a guise of "looking after patients" etc against "deceptive conduct" etc. Even funnier is that despite the need to obtain the various random qualifications to become a specialist etc (which is another form of protectionism) I believe adverts that state your qualifications and titles are likely to breach the rules. There are many effects of this of course, not least of which is that a doctor is unable to use testimonials or comparisons with other doctors. :O

Supporters of the restrictions will say the standard stuff about protection from shysters and unnecessary medical expenses etc but it is just another barrier to providing consumer-driven accountability and competition and helps protect anyone with the required pieces of paper from needing to provide quality care (especially the actual shysters and bad medical professionals). These issues are nothing new and were around in the 1800's and, as described in my earlier posts, the various consumer groups had a wide variety of protection mechanisms with the simplest being the use of clubs.

 

Interesting article about Concierge medicine currently being undertaken in America.

Full interview

 

Thanks Bordy

This interview, right at the bottom of the quote, talks about the business model for family medicine, which is called general practice here.

Australian health insurance is different to that in the USA. The issue is not with primary care, but with hospital and outpatient specialist services.

The insurer here may cover the hospital care, but too often does not include the total cost of specialist services, eg surgeon and anaesthetist, physician, etc. The gap between between the benefit provided by the insurer and the fee charged by the specialist can be tens of thousands of dollars. That is on top of insurance.

In contrast, family medicine, by its nature, deals with healthcare across the life spectrum, outside of the hospital, whereas medical and surgical intervention is heavily disproportionate in the last decades of life and care towards the hospitalist.

The so-called concierge model may have relatively little application here, given this. It seems an ambit to insert middle-man brokerage, presumably at a fixed fee, hence the name. What is implicated is the shift of doctor to nurse by a ratio of 1:7-10 to 3:1 (without reference to calculation). It is not said how this may happen, but first thoughts are by nurse practitioners, ie turf war.

Will follow your link.

 

It does indeed seem an ambit, but for the low hanging fruit.

Ie, low risk, relatively simple issues. What is interesting is the number of patients seen. A typical concierge doctor apparently sees far fewer patients, yet is dealing with issues that usually are considered 15 minute appts here, or allied health, eg nutrition. The business model will be interesting.

 

Heh, an American discovered that you can provide healthcare cheaply if everyone regularly pays a little bit towards it and people can just go to the doctor whenever they need to.

LOL