How Medical Benefits Used to Work and How They Got So Messed Up

In a paper published by the Citizens’ Council for Health Freedom, Greg Scandlen explains how medical care has changed over history in both the United States and Britain.

Historically, medical care in communities in Britain was provided by mutual aid organizations, who cooperated to provide benefits for their members. These groups dominated the social welfare scene in nineteenth-century. Similar fraternal aid societies developed in the United States, first in the colonies and into the twentieth century. These groups emphasized virtues of thrift and self-reliance, and they established orphanages, hospitals, homes and schools. Their biggest activity was providing life insurance, though others focused on providing medical benefits to their members.

What happened? The Progressive Movement of the early twentieth century gave rise to new ideas of the proper role of government; Progressives saw the government, not the individual, as the answer to society’s problems. As Scandlen writes on the NCPA’s Health Policy Blog, “The idea that common workmen could provide for their own needs was offensive to those who thought only an educated elite could order the affairs of society.” The values of mutual aid and self-help, Scandlen explains, were “replaced with newer virtues of charity and service.”

Legal and policy developments contributed to the decline of these societies:

– Fraternal aid groups were gradually replaced as workers’ compensation laws came into being and insurance regulators began regulating their life insurance benefits.
– Additionally, as employer-sponsored insurance rose in popularity (and gained preferential tax treatment), mutual aid group members were placed at a financial disadvantage.
– As the state began to offer more and more welfare benefits, the services provided by these organizations became less and less relevant.

Today’s welfare system is a mess, with unfunded liabilities that cannot be met. According to Scandlen, “As the reality of our inability to keep these promises hits in the next few decades, the old models of neighbors helping neighbors may come back into vogue.”

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