II. How we Got Here--Hill-Burton, Medicare, and Medicaid

From the late eighteenth century forward, Congress “repeatedly declined invitations to regulate even minimally in the health field . . . .” When Congress did enter the health field in a significant way after the Civil War, it did so awkwardly and with poor results, struggling to determine how large a role the federal government should play in administering health care in the Southern states. Following the Emancipation Proclamation, the federal government had taken responsibility for the health of former slaves or freedpeople. Able-bodied males generally joined the Union Army; however, little provision was made for their families and children. After the war, the Freedman's Bureau, which included a medical division, set up hospitals in the South to care for those freedpeople who were unable to support themselves. Because of Congress's ambivalence over whether such hospitals would cause freedpeople to become dependent on the federal government, the federally-operated hospitals did not last past the end of Reconstruction--those that did not close reverted to state or local government control. From that point forward, medical care in the South became subject to the same Jim Crow strictures as every other aspect of life.

This state of affairs remained largely unchanged until after World War II, when the federal government again took an interest in expanding access to health care and addressing health disparities. Even as it did so, the federal government chose to reserve much of the control over the actual federal health programs to the states, establishing a tradition of cooperative federalism. This Part will describe some of those post-World War II health care programs, discuss their place in the civil rights struggle, and explain how they helped set the stage for the enactment of EMTALA in the 1980s. Further, it will show that while the federal government was attempting to address health disparities, it also was pouring resources into the development of our modern American medical system, creating the circumstances that ultimately would necessitate the reforms contained in the ACA.

A. The Hill-Burton Act

Forty-six years to the day before the Supreme Court began hearing oral arguments in NFIB v. Sebelius, Dr. Martin Luther King, Jr. made his famous pronouncement on health care: “Of all the forms of inequality, injustice in health care is the most shocking and inhumane.” King undoubtedly was familiar with the segregated hospital system encouraged and perpetuated by the Hill-Burton Act, also known as the Hospital Survey and Construction Act, signed into law in 1946. Hill-Burton was the only part of President Truman's three-pronged program of comprehensive health care reform legislation that was enacted by Congress. Hill-Burton was a program of cooperative federalism that worked in a manner similar to the way that the Medicaid program operates today. The legislation authorized matching federal grants for the construction of public and nonprofit private health facilities. Each state designated an agency to administer the program, survey the state's health facility needs, and develop a state plan acceptable to the federal government, revising the plan every two years.

From 1947 to 1971, the Hill-Burton Act provided billions of dollars of federal funding to the states, ostensibly to address the disparities in access to acute care in inpatient hospital facilities that existed across the country after World War II. However, Hill-Burton also contained the unique provision, inserted by Senator Lister Hill of Alabama, that while the facilities built with federal funds were to be available to all persons “without discrimination on account of race, creed or color . . . an exception shall be made in cases where separate hospital facilities are provided for separate population groups, if the plan makes equitable provision on the basis of need for facilities and services of like quality for each such group.” Thus, Hill-Burton may have been the only twentieth century statute to specifically incorporate the doctrine of separate but equal into its language. This is not to say that Hill-Burton created the segregated system of medical care in the South that existed in 1966, but it also did nothing to alleviate it, either.

By the time Dr. King gave his speech on health care, he was riding a wave of progress that would significantly improve the access to health care for African Americans and, indeed, all poor Americans. In 1963, the United States Court of Appeals for the Fourth Circuit ruled that Hill-Burton's separate but equal provision was unconstitutional, and in 1964, the Supreme Court denied certiorari, thereby upholding the lower court's ruling. That same year, the Civil Rights Act of 1964 was passed. In 1965, President Johnson signed into law the legislation that created Medicare--which covered hospital care and physician services for elderly Americans--and Medicaid--which covered medical care provided to welfare recipients. Both programs were set to begin operating on July 1, 1966.

Accordingly, Dr. King was encouraging activists to cement those victories by continuing to prod the Department of Health, Education, and Welfare (HEW) to enforce the anti-discrimination provisions of Title VI of the Civil Rights Act of 1964 in Southern hospitals. In 1965, those activists had filed hundreds of complaints against hospitals across the South. HEW was sufficiently chastened to launch an investigation and a drive to bring some 9000 hospitals across the country into compliance with Title VI before the Medicare program went into effect on July 1, 1966. Despite a predictable Southern backlash against HEW's campaign of Title VI enforcement, the federal government cleared most hospitals to receive Medicare funds by the program's implementation date.


B. Medicaid and Medicare

In a capitalist society, it is not surprising that equal access to health care hinges in part on an individual's ability to pay for health care. Medicare and Medicaid were extraordinary and necessary legislative accomplishments; however, the scope of the two programs was far more limited when they first came into being than it is now. Even though the combined effect of the implementation of Medicare and the accompanying enforcement of Title VI's requirements led to the desegregation of hospitals across the country, that and the implementation of the two new programs still would not be enough to guarantee equal hospital access to all, or even to put much of a dent in health disparities linked to income and race.
Medicare and Medicaid were programs designed to provide health care access only to narrow segments of the population. Initially, Medicare was conceived only as a “compulsory hospital insurance program under Social Security” for the elderly (now known as Medicare Part A). In order to win passage in Congress, its sponsors added a program of “government-subsidized voluntary insurance” to cover outpatient physician bills (now known as Medicare Part B). Medicaid, however, was and remains an insurance program that enabled individuals to gain access to public and private health care providers. The version enacted in 1965 covered only those individuals who were eligible for public cash assistance, such as the Aid to Families with Dependent Children (AFDC) welfare program, Aid to the Permanently and Totally Disabled, and Aid to the Aged, Blind, or Disabled.

The programs also were supported by different payment schemes. The Medicaid Act offered states the option to participate in a federal-state cooperative partnership designed to improve the health access and status of poor Americans. The Act created an entitlement for states to receive federal funding for at least half of the costs of both health care services and the administration of the program itself. States with lower per capita incomes received funding at higher match rates than more prosperous states.

In contrast, Medicare was not stigmatized by an association with welfare programs. Medicare also had “uniform national standards for eligibility and benefits.” It allowed physicians to charge higher rates than Medicaid. Indeed, by establishing Medicare and Medicaid as separate programs--one fully funded by the federal government and the other funded by a combination of state and federal revenue--Congress ensured that the two programs would have different payment rates. Accordingly, Medicare became far more attractive to providers than Medicaid. Thus, while physicians were initially as reluctant to participate in Medicare as Medicaid, those who accepted Medicare soon discovered it was a “bonanza.”

In addition, in the states where Medicaid was needed most--those states identified as being the poorest and therefore entitled to have the largest share of Medicaid costs paid by the federal government--eligibility for the program tended to be the most severely limited. Thus, it became much easier to qualify for Medicaid in New York than in Mississippi. This, in turn, meant that there were more uninsured poor in the poorest states, despite the advent of the Medicaid program.

Finally, there were additional flaws in the Hill-Burton Act. The law ceded virtually all control in the siting of hospitals and awarding of federal funds to state rather than federal control. While Hill-Burton did succeed in equalizing hospital bed access across poor and wealthy states, within the states, hospital construction funds tended to go to fewer low-income communities. This resulted from the requirements that communities raise two-thirds of the construction costs on their own and show that the hospitals supported by federal grants would be financially viable. Thus, the $3.7 billion of federal funds allocated to hospital construction and improvements between 1947 and 1971 produced a modern American hospital system that was often out of reach of the poorest Americans.


C. The Changing Role of the Hospital

As one can easily imagine, this influx of funds into the hospital system made the hospital the focus of the medical profession as the chief location where care should be provided. Unlike other countries that developed their health care systems around local clinics and primary care facilities, the United States focused its resources on technology and hospitals first. As hospitals grew, so did their need to fill beds to compensate for these changes, creating the need for even more specialists capable of filling those beds with patients in need of hospital procedures. Primary care was no longer the place to be for health professionals. Despite significant infusions of funds in the mid-to-late 1960s and early 1970s, neighborhood health centers never became more than a marginal alternative. Much of the federal money dedicated to such neighborhood health centers was temporary funding directed toward demonstration projects (where it was expected that other sources of funding would be identified if the project proved to be effective) and went away after a short period of time.