The US could have ended up with a British-style health care system: Here is why it didn’t

The role of government in the U.S. health care system has been contentious long before the recent emergence of Medicare-For-All proposals among Democratic presidential candidates. Advocates of so-called free-market health care have long described government intervention as “un-American” and “socialist.” Their arguments can perhaps be best summarize in the phrase let’s “get government out and let markets work in health care.

Yet a closer look at the development of the U.S. health care system paints a starkly different picture. Indeed, publicly owned hospitals – that is, hospitals run by local, state, and federal governments – have played an important and substantive role throughout the country’s history. Government has always been extensively involved in the provision of health care in one form or another.

And to the surprise of many today, events could have taken a very different turn. The U.S. could potentially even have ended up with a British-style, government-run health care system. Yet, the country went a different route. Instead of expanding, public hospitals have been closing since the 1960s in large numbers. How come?

In my recent academic paper on the subject, I analyzed the creation and closure of public hospitals in California, the state with one of the most extensive public hospitals system in the nation. My findings indicate that when state and federal governments extended health coverage through programs like Medicaid and Medicare, all but the most well-resourced local governments in turn began closing their hospitals.

My findings bear implications for policy debates today. Advocates for any large-scale health reform effort such as Medicare-For-All should be mindful of the eventual unintended side-effects they may trigger.

Different systems

There are many different types of health systems depending on the extent and type of government involvement.

In a British-style system, government fully owns, operates, and staffs all health care facilities. Because government provides both funding and services, this system can rightfully be described as socialist.

At the other end of the spectrum is a health care system where government fully stays on the sidelines. That is, government provides neither funding nor services. Individuals are thus left to fend for themselves, no matter their health or financial status. Given the ubiquity of government today, a more realistic derivative of this system involves government taking on a certain amount of regulatory function.

The Veterans Affairs Hospital in Denver Oct. 4, 2017. David Zalubowski/AP Photo
The current system in the United States is somewhat of an amalgam of both extremes and everything in between. The Veterans Affairs and other government-run hospitals serve as a bookend on one end, and the individual market where consumers choose health care plans offered by private companies as one on the other.

Yet in the context of the U.S. system, it is important to note that public hospitals have played a role in this system since colonial times. For example, two of country’s most famous hospitals, Philadelphia General Hospital and New York’s Bellevue Hospital, were founded in the 1730s. Even today, public hospitals, run by both state and local governments, serve millions of Americans.

At the same time, federal and state governments have become significantly involved in the health care field. However, most of this involvement revolves around shouldering extensive funding obligations. And virtually all Americans benefits from this involvement in the form of Medicaid, Medicare, and tax deductions for employer-sponsored health insurance. However, only rarely does government directly take on the provision of services.

Notably, while policy details remain vague, Medicare-For-All would likely expand this role by eliminating any non-governmental payer while maintaining the private provision of services.

The unintended consequences of public programs

Grady Memorial Hospital in Atlanta in January, 2014. David Goldman/AP Photo
In their earliest days, public hospitals served as little more than holding areas for the poor. Yet over time, they have contributed tremendously to the improvement of the health of the nation.

These contributions ranged from providing services to the blind, the deaf, the disabled, the aged, and the mentally ill, to containing contagious diseases and epidemics, such as smallpox, tuberculosis, typhoid, leprosy, and venereal diseases.