Commentary: Health Care Mutual Aid (October 2014)

by John McClaughry John McClaughry

A recurring argument of those favoring a government takeover of any large sector of the economy – such as health care – is “the free market has failed!”  These people are invariably oblivious to the effects of a hundred years of government intervention that has restricted what a free market might otherwise achieve.

Admittedly some of that intervention has been beneficial. Governments required would-be doctors to obtain a license before offering medical services to the public. They required infirmaries and sanitariums to meet standards for cleanliness, fire safety, and trained caregivers. After 1930, state governments required the newly-appeared health insurance companies to make truthful claims and maintain adequate reserves to pay claims.

On the other hand, to take one example, government licensing creates opportunities for those already licensed to gain control of the licensing board and make it very difficult for competitors to qualify.

Another example is the “Certificate of Need” (CON) process in effect in 36 states, including Vermont. The purpose of CON is to disallow “excess capacity”. The main target of this process is non-hospital clinics that propose to deliver better medical services – such as ambulatory surgery – at lower cost than competing general hospitals with large overhead costs. Hospitals and other threatened interests will turn out in force to argue against government approval of a CON application from a competitor.

But leaving aside the unhappy effects of government health care regulation, it’s worth looking back to see how a free people dealt with their health problems before government intervention accelerated in the 1930s.

Health care a century ago relied largely on “friendly societies”, that first appeared in the UK as early as 1793. These were self-governing mutual aid societies that promoted ethical behavior, healthy lifestyles, and “the temperate interchange of social feeling” for the afflicted. They also provided medical care, sick pay, and funeral arrangements for members and their families.

After passage of the National Insurance Act of 1911, a combination of the medical societies and the insurance industry slowly stamped out the UK friendly societies. The National Health Service Act of 1948 (“socialized medicine”) finished the job.

In the US clones of the friendly societies began to appear in the early 1800s under the name “fraternal organizations”, exemplified by the Odd Fellows and the Loyal Order of Moose. These lodges established orphanages, hospitals, banks, schools, retirement homes, newspapers, and insurance companies. They sponsored “lodge practice”, where the local lodge members selected and employed a doctor.

The American Medical Association and its state and local affiliates viciously attacked lodge practice. They claimed that only independent doctors approved by them could be allowed to practice and enjoy hospital privileges. The commercial insurance industry joined in to hammer down their fraternal competitors.

Beginning in 1982 new mutual aid health benefit model began to appear. Now organized as Christian Health Sharing Ministries, their membership is limited to committed Christians who abstain from illegal drugs, tobacco, and sex outside of marriage, and refrain from abusing legal drugs and alcohol. These ministries reject the insurance model and do not employ doctors.

When a member needs medical attention, he or she goes to ordinary health care providers. Each month the ministry notifies its membership of the amount needed to cover the health care bills incurred by sick members. The membership sends their checks directly to the member being treated, who pays cash to the providers (often with a cash discount.) The membership also prays for the return to health of those being treated.

The Affordable Care Act exempts members of health sharing ministries from the individual mandate penalty, provided they were in operation in 1999. (No newer groups need apply.).

What’s in the future? As government-run health care collapses from promising more services than its tax resources can pay for, and from its own bureaucratic waste and inefficiency, a free people will again begin to look for voluntary ways to preserve their health through mutual aid.

As Greg Scandlen, a well-known health insurance expert, says, “As the State fails, people will once again look to mutual aid and self-help for shelter from the storms. There is no other choice. The old style of fraternal organizations, with its silly rituals, handshakes, and costumes may be long gone. But the principles of thrift, civility, charity, modesty and self-reliance are never out of date, and new mutual aid organizations will emerge to get us through the hard times.”


John McClaughry is vice president of the Ethan Allen Institute

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