The Blues: A History of the Blue Cross and Blue Shield System

EH.NET BOOK REVIEW Published by H-Business@eh.net and EH.Net (June 1998)

Robert Cunningham III and Robert M. Cunningham Jr. The Blues: A History of the Blue Cross and Blue Shield System. Dekalb: Northern Illinois University Press, 1997. xii + 311 pp. Tables, illustrations, notes, bibliography, and index. $36.00 (cloth), ISBN 0-87580-224-9.

Reviewed for H-Business by Colin Gordon , University of Iowa

The American health care system is an elaborate and chaotic and shifting compromise among doctors, employers, and insurers. As the providers of care, doctors have historically guarded their terrain, alternately portraying themselves as embattled entrepreneurs or selfless professionals, against the onslaught of “third parties,” especially insurers, organized patients, and the state. As the principal consumers of health care in the private welfare state of the postwar era, some employers have juggled their responsibility for employment-based benefits with the increasingly expansive (and expensive) scope of collectively-bargained health provision, the inflationary bias of third party billing, the periodic threat of state intervention, and the determination of other employers to avoid such burdens altogether. As the fiscal and actuarial intermediary between providers and consumers, commercial insurers have played both sides–sometimes (in their negotiations with providers and hospitals) the cost-conscious consumer, sometimes (in their role as HMOs) the parsimonious provider.

In all of this, a number of interests play (or have played) lesser roles. Between the early 1940s and the late 1960s, organized labor bargained a meager policy of wage replacement into an expansive package of service benefits for workers and dependents alike. Over the same era, the state mopped up around the failures of private provision, mostly by financing hospital construction and picking up some of the bad risks with Medicare and Medicaid. And hospitals, increasingly dependent on insurers and the state, played an increasingly passive political role. Perhaps most interestingly and importantly, two massive and intertwined nonprofit institutions–the Blue Cross (hospital insurance) and Blue Shield (physician insurance) Plans–straddled all of these interests to emerge as the principal intermediary between federal health programs and their clients, the nation=92s largest managed care network, and an important insurer in their own right.

For this reason alone, scholars should welcome the publication of The Blues, which pulls together a number of studies of local plans, the valuable but dated scholarship of Louis Reed (1947) and Odin Anderson (1975), and proprietary access to the Plans=92 archives. The early chapters are not terribly original and recount (somewhat woodenly) the early history of prepayment plans and the ways in which the Blues emerged as a middle ground between fee-for-service individualism and state regulation. Through these chapters, the authors persistently celebrate the innovations of the Blues=92 “pioneers,” while casting thinly-veiled aspersions at the extremists to the left (advocating national health insurance) and right (opposing all prepayment and contract practice).

While the middle chapters on the 1940s and 1950s continue to wander and wonder in the footsteps of leading Blues executives, they are valuable for the ways in which they connect the often arcane details of actuarial projection and hospital remuneration to the piecemeal construction of a private welfare state. In their largely futile effort to hold to the principal of “community rating,” the Blues underscored the persistent irony of private health insurance–that it was ultimately an exercise in avoiding risk rather than spreading it. In their increasingly elaborate brokering of the demands of hospitals, employers, and patients, the Blues underscored the limits of private health insurance–which quickly became obsessed with shuffling costs among the covered population and their employers and indifferent to the goal of expanding coverage.

Both the Blues, and this account, hit their stride with the consideration, passage, and administration of Medicare and Medicaid. Through these years, the Blues reacted in much the same way that leading managed care concerns would react during the debate over the Clinton Plan three decades later: vested interests in the private health care market by the 1950s, the Blues were leery that state intervention “would let the camel=92s nose [national health insurance] a little further into the tent” but also poised to administer any new federal program. In the ensuing debate, the Blues juggled the concerns of their various allies–the doctors, the hospitals, and organized labor–and traded politically on their unique experience with insuring the elderly. Indeed the Blues quickly took the administrative lead after 1965, effectively “capturing” a program they had resisted, questioned, and shaped in the decade preceding its passage. For the Part “A” hospitalization program, Blue Cross emerged as the designated intermediary in thirty-one states representing almost 90 percent of participating hospital beds; under the Part “B” medical insurance program, thirty-three of forty-nine designated carriers (covering about 60 percent of beneficiaries) were Blue Shield Plans.

The Blues closes with three chapters covering, in turn, the 1970s, the 1980s, and the early 1990s. The script for these decades is relatively familiar, and the authors place Blue Cross and Blue Shield at the center of a maelstrom of health care inflation, rapid technological change, fiscally-anxious federal programs, cost-conscious employers, and increasingly beleaguered consumers and workers. At times, this vantage point is quite valuable, given the close attention which the Blues necessarily paid to the deepening actuarial and inflationary crisis. At times, the Blues seem more like the Rosencrantz and Guildenstern of a much larger drama, and of which we only get the occasional glimpse.

This is a valuable book, although it is also something of a disappointment. The chronological sweep (virtually all of the twentieth century) is important, but each important episode has been recounted more effectively elsewhere. The relentless (and often celebratory) focus on the Blues lacks the critical consideration of a wider array of interests woven so well by Paul Starr and the leading historians (Rashi Fein, Theodore Marmor, Anne and Herman Somers) of Medicare. And, even on its own terms, The Blues often misses the ambiguities and contradictions of a system (captured nicely by David Rothman[1] and by Rosemary Stevens=92 fine introduction to this volume) which was both a pointedly private alternative to national health insurance and a quasi-public surrogate for the state. More broadly, this is a narrowly institutional account which never broaches the “big” questions about the peculiar trajectory of the American welfare state. Why did national health insurance falter in the United States while a national pension and unemployment system succeeded? What was the logic and implication of organizing private and public social provision around the “family wage” assumptions of social insurance? How did race and racism shape both the formative years of private and public health policies and the backlash against public programs which began in the late 1960s? In what ways did a shifting compromise of private interests–insurers, labor, employers, doctors, hospitals–shape private and public patterns of health provision? And why–in this account and in the larger logic of the American welfare state–are those on the receiving end considered beneficiaries or clients or dependents or consumers, but never citizens?

Note

[1]. David Rothman, “The Public Presentation of Blue Cross, 1935-1965,” Journal of Health Politics, Policy, and Law 16:4 (Winter 1991), 671-693.

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