Medicine and the Welfare State; M. Palyi

France's Henry IV in the sixteenth cen tury promised a chicken in every pot. Her brilliant Colbert in the seventeenth century and Prussia's enlightened Frederick the Great in the eighteenth, these forerunners of Dr. Palyi (1892-1970) taught at the Universities of Kiel, Gottingen, Berlin, Chicago, Wisconsin, and at Northwestern University. This essay was adaptedfrom Compulsory Medical Care and the Welfare State (Chicago: National Institute of Professional Services, 1949). modern dictators, gloried in calling them selves the first servants of the nation. Their police state used the welfare state as its instrument, fa~ade, and justification, as do modem dictatorships. In democracies the welfare state is the beginning and the police state the end. The two merge sooner or later, in all experience, and for obvious reasons. The "mercantilist" princes of the six teenth and eighteenth centuries developed the basic tenets of the modern welfare state in a piecemeal fashion. Originally their prime concern was the balance of trade-the want of gold and silver. To that, domestic policy was subordinated, except when po litical motives were uppermost, such as the fear of hunger riots which occurred time and again in England under the Tudors and Stuarts, forcing them to dispense humani tarianism. The craving for export surpluses led logically to promoting production. Am ateurish welfare policies followed and soon became a determining factor in domestic politics.

The Welfare-Police State In central Europe the eighteenth century was marked by the "Despotism of Vir tue," exercised by benevolent rulers like Joseph II of Austria. The intolerance and intransigence of the "humanitarian tyrant" had no small role in provoking revolutions. The German Kameralists of the period, who taught the technique of civil government, developed systematically the blueprint of 421 422 THE FREEMAN • NOVEMBER 1993 the welfare state (Wohlfahrtstaat) of a ter ritorial scope, far beyond medieval city limits and as the heart of the police state (Polizeistaat). Even the words are eigh teenth-century German. This tradition of bureaucratic rule-for the alleged good of the subjects-was the heritage taken over by Bismarck. Bismarck's fundamentally significantrole in modern history is rarely understood. His middle-of-the-road socialism was the con necting link between the old autocrats and the coming totalitarians. He thought he could overcome Marxism by his own brand of state socialism-just as Fabian socialists, Keynesians, and New Dealers profess that their middle-of-the-road statism keeps the totalitarian wolf from the door.

What Bismarck did accomplish was to revolutionize the old authoritarian school by giving it a quasi-democratic twist and by basing it on a superbly organized, techni cally well-trained, and thoroughly disci plined bureaucracy. His police-welfare (or welfare-police) state had firm roots as none had had before. The substance of a military monarchy was wrapped in a parliamentary cloak. Share-the-wealth popularity was to be dispensed legally by an all-powerful and efficient administration. Welfarism in Operation Even more interesting than to follow the historical records of the welfare state is to witness directly its contemporary gyrations and its ties with other facets of public policy. This writer was "conditioned" to the prob lems by early acquaintance with the petty inside-politics in the welfare monarchy of the Habsburgs. His conscious interest dates back to his studies in German univer sities from 1910 on, when the great masters of the German Historical School still were exerting intellectual leadership. The Ger man public, and most Europeans for that matter, stood under the spell of Bismarck's forceful personality, without realizing where that spirit was leading. The intelli gentsia was infatuated already with the then still misty ideal of the welfare-dispensOtto von Bismarck (1815-1898) ing Iron Power. So was the populace on the street.

It was my good fortune, in particular, to come in close contact, as their student and assistant, with the two most original think ers and most brilliant personalities of the period: Lujo Brentano and Max Weber, the foremost social scientists of their age. They were scholars of encyclopedic scope and of statesmanly stature, animated by the ethos of their belief in liberty and justice. As true liberals, they stood in matters oflabor policy for trade unionism, the eight-hour day, and for factory legislation, as far as compatible with domestic free enterprise and interna tional free trade. They were opposed to dogmatic laissez-faire-which meant pater nalism in labor relations-as well as to paternalism in government. Realizing that history is the record of the eternal battle between the power and the people, they saw clouds rising that most of their contempo raries ignored: the aggressive economic na tionalism and the congealing, overbearing bureaucratism of the Neo-Welfare State.

They saw the unique part Bismarck's Sec ond Reich played in the revival of authoriMEDICINE AND THE WELFARE STATE 423 tarianism and fought it as a threat to the progress of occidental civilization. As early as 1881, Lujo Brentano warned that adventuring into governmentalized medicine is the first step toward the Neo Welfare State, which in turn opens up a road to national catastrophe-in the long run. The run was too long and too slow to be understood. Other more urgent problems occupied our minds. The warning was prac tically forgotten by 1919when I gave my first courses as an instructor at the Munich Graduate School of Commerce on Insur ance and on Cooperatives. Compulsory medicine seemed to be well established and a minor problem. In-between years, spent on (unfinished) medical studies, provided no inkling of its practical functioning. The pre vailing academic pattern naively accepted a governmentalized pseudo-insurance as a chapter of Sozialpolitik (welfare policy), differing from other insurance only by its nonprofit character. And it was defended as an alleged necessity in industrial society.

Intermezzo We were preoccupied with the Versailles treaty, the great inflation and domestic and international reconstruction, and the sweep ing out of the moral and material debris left over by Ludendortf. Europe's fatal fourteen years of transition after World War I began under the Lenin nightmare and ended with the Hitler chimera. True liberals were driven into an unholy and futile alliance with the middle-of-the-roaders. After years of experience and study in international banking and public finance, I began to see that what most of my academic colleagues accepted and defended as an accomplished fact, the Bismarckian social insurance, was worm-eaten at its very roots. What have "high finance" and international affairs to do with the poor man's compulsory social insurance? A great deal, as I found out, and with more than finance. For one thing, the social insurance funds gave the welfarist Weimar government a dangerous foothold in the nation's capital market and taught it to grab for other footholds.

For another thing, I stumbled upon the discovery that German compulsory medi cine was more expensive than private health insurance and gave less in exchange. On top of that, it was badly infected with corruption. Insight into some of these shortcomings came about through my friendship with an outstanding socialist leader, old Eduard Bernstein. He was one of the three or four early apostles of the Marxian creed. But he lacked the fanatic dogmatism of the others. He became famous by speaking out in the 1890s what every Marxist knew and none dared to say-that history was not marching according to the timetable of the class warfare theory. For this, he was temporarily ostracized by his own party. Through his honest eyes, I began to see that everything was not in order in the medical Utopia. The more I looked into it, the more disquieting the picture became. From Weimar to Hitler The welfare state was moving into the great depression. My work at the very center of German and international banking put me at a vantage point from which to observe closely the worldwide growth of Welfarism. It was intimately tied up with the political scene of the 1920s, with its global money management and fictitious pacifism.

It was supported by monopolistic wage structures, governmentally promoted inter national cartels, inflated gold exchange stan dards, by a centrally manipulated capital flow on the one end and by reckless spend ing on the other. It had to break down sooner or later. In many ways Hitler's rise was startlingly revealing. That one-third of the otherwise sober German people voted Nazi, and over 10 percent Communist, was bad enough. But what about the rest, the three or four bourgeois parties and the Social Demo crats? Why didn't they resist instead of letting the power slip without a single shot into the hands of notorious gangsters? The Social Democrats and the trade unions behind them constituted the world's 424 THE FREEMAN • NOVEMBER 1993 oldest, largest, best organized, and most intelligent labor movement. Why did they surrender shamefully and let themselves be disarmed? The Weimar Republic catered to the trade unions and raised the wage level artificially, at the same time bestowing subsidies and high tariff protection on the heavy industries and the big landowners, the Prussian Junk ers. Once a nation is entangled in the meshes of the welfare state, the demagogue who can draw out of his hat more welfare for more people has every chance in a crisis. The Bismarckian paternalism could be turned into Ludendortf's planned economy by a mere switch of the bureaucratic gear, which then could be shifted without grinding into the welfare state of the Weimar Republic.

As that got into trouble, the ultimate of demagoguery, the combination of ultra nationalism and super-welfarism, had a field day. By that time, the socialists as well as the middle classes were so intoxicated with the ideas of an allegedly inevitable state paternalism that the moral fiber had become too weak to generate resistance. Humanitarians in Disguise Perhaps the most spectacular "social" aspect of Nazism was its emphasis on na tionalism. That was not accidental. The health, or rather sickness, propaganda em ployed by Bismarck elevated that aspect of social welfare to a prime political issue. Just why were such ruthless men as Bismarck and Hitler so profoundly interested in the physical well-being of their subjects-and in high birthrates !-while totally indifferent, nay, inimical to their mental integrity! But after a fashion so were their predecessors in the Mercantilist age, especially the minis ters of the imperialistic Bourbons and the power-lusty Hohenzollerns. And so are their successors to this day.

Evidently, more than humanitarianism was at stake. Watching the worldwide growth of compulsory health insurance, from Icelandic fishermen to coal miners in China, I noticed something that seemed to be overlooked: that all modern dictatorsCommunist, fascist, or disguised-have at least one thing in common. They all believe in social security, especially in coercing people into governmentalized medicine. A selected list of men who have claimed credit for, or have been credited with, in troducing or strengthening and expanding governmentalized medical care reads like an extraordinary Who's Who: Prince Otto von Bismarck, Chancellor of Germany (1884); Franz Joseph I, Emperor of Austria (1888); Franz Joseph I, King of Hungary (1891); Wilhelm II, "the Kaiser" of Germany (1911); Admiral Miklos Horthy, reorganizing the scheme as Regent of Hungary (1927); Nicholas II, Czar of Russia (1911); Vladimir Lenin-Ulianof, founder of modern dictatorship in Soviet Russia (1922); Joseph Stalin-Dzhugashvili, almighty Prime Minister and dictator of the U.S.S.R.; Joseph Pilsudski, Marshal and para-dictator of Poland (1920); Alexander I, King and dictator of Yugosla via (1922); Antonio de Oliveira Salazar, the professor dictator of Portugal (1919 and 1933); Benito Mussolini, Prime Minister and the Duce of Italy (1932 and 1943); Francisco Franco, military dictator of Spain (1942 and 1945); Yoshihito, Mikado of Japan (1922); Hirohito, Mikado of Japan (1934); Carol II, pseudo-constitutional King of Ro mania (1933); Joseph Vargas, President and wouldbe dic tator of Brazil (1944); Juan Peron, President and boss of the mil itary junta of Argentina (1944); Adolf Hitler, Chancellor, the Fahrer of Germany (1933, etc.); Pierre Laval, Prime Minister of France (1930), later executed for his fascist ac tivities; Ambroise Croizat, Communist Minister of Labor in France (1945); Georgi Dimitrov, the late chief agent of the global Comintern, Premier of Sovietized Bulgaria (1948); MEDICINE AND THE WELFARE STATE 425 Josip Broz, alias Tito, Prime and Foreign Minister, dictator, general secretary of the Communist Party of Yugoslavia (1947); Boleslaw Bierut, President and dictatorial figure-head of Satellite Poland (1947); Klement Gottwald, President of the Soviet ized Republic of Czechoslovakia (1948).

This list of power dynamos-or symbols of power-with bleeding hearts for human suffering is by no means complete. Com plete data on some of the Satellite and Latin American bosses are not available. Some others are missing because they do not qualify technically for membership in the club of recognized full and semi-dictators and of paternalistic rulers "by the grace of God" or otherwise, having been elected in ordinary democratic procedures and still exposed to new elections. But who would have foreseen that an easygoing, money grabbing politician like Laval was to become a sort of second-hand Mussolini? Most cer tainly Laval claimed and wielded, about 1930,less than a fraction of the discretionary and arbitrary power the British Health Min ister wields at this writing. And there are more Pierre Lavals and Aneurin Bevans around in what we call the democratic world than the unsophisticated might assume.

They manage to be reelected again and again and strive to rule by blank delegations of power, immune from judicial controls and supported by rubber-stamp parliaments typical of "advanced" welfare states of twentieth-century vintage. Socialist Nationalism Indeed, out of the ashes of the welfare states that went down unsung in the tumul tuous depression new and much more im posing ones have risen since. It seems that history·· is running in cycles, progressing from what is known as National Socialism to what is recognized as Socialist Nationalism. Ever since Bismarck, great dictators and little demagogues compete with one another and with the humanitarians in courting the favor of the ailing, the lame, the blind, the poor, the underprivileged, and the aged. In World War I, Ludendorff used Germany's social insurance, then Europe's most "pro gressive," for propagandizing Teutonic so cial and cultural superiority. Today, British and French propagandists vie with each other in eulogizing the respective security plans. But Stalin outdoes all of them. "Gov ernment insurance in the U.S.S.R. is a source of pride of the Soviet workers before the whole world. It is one ofthejewels in the colossal edifice of Socialism. It is one of the testimonials to Stalin's deep solicitude for his fellow men by which we are all warmed and heartened, " said Trud, the organ of the Soviet trade unions, in 1937.

The great French visionary, Alexis de Tocqueville(De la Democratie en Amerique, 1840), warned more than a century ago that democracies like ours may succumb to a new and soft technique of governmental benev olence that .subdues all individuality. The suspicion that the solicitude of notorious tyrants for the welfare of their subjects must have something to do with the political nature of the medical security systems was one consideration that inspired this study. From Bismarck to Lenin: Origin and Rise of Compulsory Medicine Obligatory health insurance started mod erately enough-in Prussia. Compulsion un der a law of 1845 was left in the hands of municipal administrations, with no govern ment subsidy involved, and no contribu tions from employers. The anti-socialist law of 1878 suppressed many of labor's volun tary associations for sickness benefits. The next step was the governmentalization of the associations' functions.

It was no mere accident that the ideolog ical forefathers of Nazism, Adolf Wagner and Eugen Diihring, happened to be the "brain trusters" behind Bismarck's "na tionalistic socialism to end international so cialism," using his own terms. When, on January 1, 1884, his compulsory sickness scheme went into operation it literally started a new era-a new age in the history of welfarism.

426 THE FREEMAN • NOVEMBER 1993 Bismarck's role in modem history is rarely spoken of nowadays. Undoubtedly, his political and administrative "genius" has shaped history down to our times. His revolutionary innovation in welfare policy was preceded five years before, in 1879, by the imposition of a protective tariff that started Europe's internecine commercial warfare which endures to this day. And it was followed by the introduction in 1889 of universal military service covering even the middle-aged manhood. This started a re armament race leading into total wars with the objective of annihilating entire nations. The shrewd Iron Chancellor-the dictator in constitutional disguise, quoting M. J. Bonn's epigram-meant to kill several birds with one stone when he embarked on his program of appeasing labor. The reason, announced in the November 17, 1881, mes sage of Emperor William I, to offer some thing positive to labor, not merely the re pression of socialists by police force, may have been born of genuine worry over the unrest of the working classes due to the long depression that had engulfed Europe since 1875. But the true motive has been pointed out in the penetrating Bismarck biography (Vol. III, pp. 370-371) of Erich Eyck: "To his mind the State, by aiding the workers, should not only fulfill the duty ordered by religion, but it should obtain in particular a claim on their thankfulness, a gratitude that was to be shown by loyalty to the govern ment and by loyal pro-government votes in elections. " In other words, it was the old fashioned attempt of the monarchy to ally itself with the plebs against the "aristocra cy" in between the two. However, the social insurance legislation did not stop the Marxists from returning in increasing par liamentary strength. The attempt to subdue the socialist movement by appeasement ended in a political fiasco.

Prince"Bismarck found other satisfaction. The state socialism of His Highness was directed against the business interests and Liberal (free trade) Party. The latter had accepted the principle that workers should be forced to insure themselves but stood for their freedom to choose their own, nongovernmentalized agencies. What was even worse from the militarist point of view, the Liberals were blocking time and again the Chancellor's requests for armaments. The Reich he created had almost no revenues of its own other than from import duties and excises. It had to rely on contributions from the states which were available only through unpleasant parliamentary procedures. The new social insurance organizations were to place their resources at the federal govern ment's disposal, saving Bismarck the em barrassment of going, when need arose, with his hat in hand to a reluctant Reichstag. Above all, the new system was an off shoot of his economic and political philos ophy. Bismarck was a tradition-bound re actionary, altogether resentful of modern industrial development, although he himself owned a small paper mill. As did many of the ultra-conservative contemporaries of his Junker class, he trusted agriculture and handicraft but frowned on large-scale indus trial enterprise and on trade unionism. To check both, if they had to be tolerated, was one of his goals. Governmentalizing and thereby controlling, through an appropriate bureaucratic apparatus, the providing of medical, accident, and old-age care and of death (burial) benefits seemed an obvious way to put the reins on laissez-faire capital ism as well as on labor.

The Spread of the Idea This approach conformed to the paternal istic make-up of his mind-as it conforms to the paternalism of modern dictators and of humanitarian social workers. It is no mere accident if pseudo-liberals bubble over with praise of the arch-reactionary Prussian Junker's medical security legislation. It was especially palatable to the bureaucracy of the Habsburg Monarchy. The West resisted at first. It still was imbued with the nineteenth-century tradi tion of individual freedom and responsibil ity. But even before World War I its resis tance began to soften under the fascination of the power emanating from Wilhelminian Germany and under the German propaMEDICINE AND THE WELFARE STATE 427 ganda that labor's patriotism has to be bought by social concessions. Shortly be fore or during that war, Britain, Norway, Iceland, Russia(!), etc. introduced modified replicas of the German compulsory panel system, followed by more countries after 1918. A dead and defeated Bismarck proved to have a wider spiritual influence than the living and victorious one ever enjoyed.

The triumphant march of authoritarian medicine received a fresh boost at the outset of the great depression when, among others, France, after a decade of political oratory and wrangling on the subject, instituted a system of its own. It was modeled on the German but with significant modifications. However, 1943-46 was the most crucial time since 1881-84 in the Western history of compulsory health service. It was the hour of the liberation from Nazi occupation, with the parliamentary systems of the liberated nations in a semi-chaotic condition, and with Communists either in cabinet posts or having decisive influence in public affairs. As a result, far-reaching legislation was hurried through, which under normal con ditions, would have run into serious obsta cles. In France, in November 1944, a new social security law of communistic coloring was voted in a virtually empty Chamber of Deputies. Leftwing rule in Belgium was responsible for its sickness scheme of 1944.

It was also under abnormal wartime and post-war conditions that Italy and Holland "reformed" their sickness plans. New plans were put into operation or the old ones were revamped thoroughly in Australia, Argen tina, Brazil, Chile, Spain, the Russian sat ellite countries, Costa Rica, Ecuador, and of course in Britain. Legislation has been passed, but is not as yet in effect in three Canadian provinces and in Sweden. Hitler, the Humanitarian It is a fact, and a very remarkable one, that the great demagogues of our age appear to be greatly worried about the health of their subjects. Noone was more so than Adolf Hitler. His racism was the last word in "biological" demagoguery, unless the new anti-hereditary biology of the Soviets exceeds it, an expression of the identical nationalistic purpose. In terms of political results, it was a most effective demagoguery due to its emphasis on health and virility. As a committee report on health insurance of the Canadian House of Commons put it (March 16, 1943): "During the early years of Hitler's regime, the government's medical program was looked upon by many observ ers as one of the greatest props of the totalitarian state."

Before coming to power, the Nazis were violently critical of the social insurance set-up, considering it a weapon in the hands of their enemies, the Social Democrats. They objected especially to the extrava gance and corruption in compulsory medi cine and to its alleged effect in "softening" German manhood. Thereby they earned the applause of doctors as well as of business men and the approval of the disgruntled middle classes. They promised thorough going reform and drove their opposition home so forcefully that Chancellor Bruning was constrained to introduce in 1931-32 several measures affecting the medical care system which were most unpopular with labor. A three-day waiting period before cash benefits became available was made mandatory. A small tax ("deductible") on prescriptions and a levy of 50 Pfennigs on each quarterly sickness ticket of the patient were imposed. This charge of 20 cents in American money per quarter, imposed on patients many of whom were unemployed, resulted at once in cutting the number of applications by about one-quarter! But these "deflationary" measures, together with the liquidation of the totally bankrupt unemployment insurance, also had the con sequence of arousing an ill-feeling among the workers which had no small influence in bringing down the house of the Weimar Republic. Bruning took the blame; Hitler got the credit.

Once in power, the latter soon reversed his strategy. The ill-famed Dr. Ley, boss of the Nazi labor front, did not fail to see that the social insurance system could be used for Nazi politics as a means of popular 428 THE FREEMAN • NOVEMBER 1993 demagoguery; as a bastion of bureaucratic power; as an instrument of regimentation, and as a reservoir from which to draw jobs for political favorites and loanable funds for re-armament. Briining's extra tax on panel patients was cut in half. By 1935, with Hitlerian full employment under way, the few pennies of extra tax represented a purely nominal charge. The sting was taken out of it. The Fuhrer gained in popularity by reduc ing to negligible proportions an unpopular measure which he himself had instigated. He lost no time in making a positive contri bution of his own to the organization of compulsory medicine by extending it in 1939 to small business (handicraft), by tightening it in Austria (1938), and by establishing compulsory health care in occupied Holland (1941).One of his last "social" measures, in March 1945, was to have workers in certain irregular types of employment included. But his attempt to abolish the autonomy of the panels and to regiment them by centraliza tion had been checked by the concerted resistance of the medical profession, the panel bureaucracy, and public opinion. Sim ilar abortive attempts at complete bureau cratization of the panels were made under the Kaiser in 1909 and in the Weimar Re public's revolutionary days in 1919. The same goal is on the Social Democratic Par ty's agenda again in 1949.

Of all totalitarians who have written their names in the book of medical economics and politics, Lenin's will have to be printed in the largest capital letters . His was (1917)the first complete cradle-to-grave plan, the first plan embodying complete nationalization of medicine. His influence on the West did not make itself directly felt until World War II. Since then, wherever Russian bayonets take over, the Soviet blueprint of social security follows. Even more important to us is his ideological influence, embodied in the Bev eridge Plan of 1943, that in turn appears to be spreading over Western Europe, Latin America, and the Antipodes. Lenin and Bismarck had in common the paternalistic philosophy of government which included the supremacy of a trained and solidly disciplined bureaucracy over what they both considered the anarchy of the unregimented marketplace. To both, the "little man" was either financially or at any rate morally incapable of caring for his own future. Both were motivated by an insatiable thirst for power and utilized to their own political advantage the alleged responsibil ity of the State for controlling the insecuri ties of industrial life. Social insurance or social security was essential to their concept of the Good Society. It involved a regimented society ruled by their own superior wisdom.

From Social Insurance to Social Security Actually, Lenin and his followers were thoroughgoing admirers of the Prussian bu reaucracy. Soviet planning was built, at the outset, on the pattern of German military management in World War I. But there the ideological community of the two authori tarians ended. Bismarck presented his project in the name of the Christian idea of the state, confusing it with the state idea of eighteenth-century enlightenment. (His much vaunted "Christianity" did not inter fere with Bismarck's violent opposition to any sort of factory law, such as to enforce minimum hygienic requirements.) Lenin was a genuine revolutionary, basing his Communism on a purely materialistic phi losophy. To the one, private ownership of the means of production was sacrosanct but was to be regimented; for the other, it was to be wiped out altogether. Bismarck had to compromise with resisting parliamentary forces led by the industrialist Stumm. Even the trade unions were opposed tooth and nail; they could not foresee-nor did Bis marck, of course-that some day they them selves would have the power to use the scheme for more power. Lenin, by 1922, having wiped out parliamentary resistance, possessed power absolute as no sovereign has had since Genghis Khan.

Two basic types of governmentalized medicine resulted. The Prussian bureaucrat created the obligatory health insurance of a comparatively limited scope. What the RusMEDICINE AND THE WELFARE STATE 429 sian Bolshevist has bestowed might be de scribed as compulsory health security of an unlimited medical orbit. Perhaps they should be distinguished as governmental ized vs. socialized medicine. In the one, the beneficiaries are "insured"; in the other, they are "registered." That social insurance a la Bismarck and social security a la Lenin are different in degree only-that the dynamic potentials of the one tend to carryover into the other may astonish those who do not realize that Bismarck's famous "personal rule," that was to wreck his nation's democracy, was a conscious if abortive attempt aiming basi cally at the same political goal which was to materialize in the Politburo (and in Hit lerism).

Lenin vs. Bismarck Bismarck's system meant to be, in ap pearance at least, what its name indicated: insurance, even if without a true actuarial foundation, and a subsidized, involuntary plan. At the outset, the insured were to be classified according to risks and to receive cash benefits in proportion to their contri butions; a surplus, the equivalent of profit, was to be accumulated as an emergency reserve to guarantee the insurers' (panels') solvency; each type of risk incurred was to be offset by appropriate premiums; prefer ably, the risks were to be distributed by re-insurance; etc. These are axioms of sound insurance management, most closely approximated at present by the Swiss panels among European cooperative systems of medical care. Nothing of the kind is aimed at in the Bolshevist pattern, the all-embracing pro gram of Comrade Lenin. The same holds in principle for the compulsory set-ups based on Leninian security ideals now in operation in France and Britain. There, too, the pre tense of businesslike management has been almost totally abandoned.

Bismarck's humanitarianism was limited originally to the worker dependent on hourly wages. Thus the range of persons falling under the compulsion was defined. This type of legislation, which still predom inates on the Continent, restricts panel membership to employees and their fami lies, or to the "economically weak" groups comprising the income brackets not above skilled factory labor. In Lenin's kind of world there is, suppos edly, one kind of income recipient only. All are in the same boat; all need the same support. The idea of medical insurance for the underprivileged is inflated into equal medication for everybody. Everyone ac cording to his needs is the underlying axiom. From a humanitarian device of restricted confines, the idea has grown into all embracing, Communistic dimensions-on paper. In reality, the industrial population only is "secured." In Soviet Russia, from 1922 to 1938, nationalized industry-i.e., the govern ment-carried the cost of socialized medi cine in the form of a 6.5 percent "payroll tax" (25 percent for all social security) with recourse on the national budget to cover eventual deficits. Industries, not labor, were to pay the bill. Similar systems with minor modifications are now being set up in the satellite countries. In the 1948 Bulgarian scheme, for example, the self-employed are the only ones to pay contributions-which is one way to hasten their elimination-with all benefits of medical service freely dis pensed to everyone.

Of course, Lenin's promises and Stalin's practices are worlds apart. Since 1938, the trade unions, the workers, had to take over about 8 percent of the total cost. Hazard classes were reintroduced, and the contri butions graded accordingly. Medical bene fits have been greatly deflated, while the number of persons covered has risen four fold in the decade since 1928.And the Soviet health plan has developed into a forceful method of disciplining labor. Cash benefits to adult workers, for instance, are available only at the rate of 50 percent of their wages after two years of uninterrupted work in the same industrial unit; 60 percent, 80 percent, and 100 percent accrue if they stay three, six, and more years, respectively. Mother hood benefits are guaranteed by the Soviet 430 THE FREEMAN • NOVEMBER 1993 constitution but are paid only to women who have worked at least seven months in the same plant.

But the aristocracy of Soviet officialdom and labor receive all the sickness care their country is able to give, including richly endowed sanatoria and rest-homes in the Caucasus and the Crimea. And Stalin claims credit for being the Great White Father dispensing health security to all of his sub jects. Minimum or Maximum to Be Provided? After World War II, Western Europe's medical schemes were not revolutionized by open adoption of Lenin's plan. But the latter gave a tremendous impetus in a direction that has been under way ever since Bis marck. The original German set-up was meant to be, to repeat, health "insurance." The weight of the entire scheme rested on cash benefits per day of lost income. Ben efits in kind-medical services proper were supplementary only, largely left to the decision of the individual panel which had a broad autonomy in disposing of the means on hand, even in determining the percentage levy on payrolls. The emphasis on cash benefits and on the autonomy of the panels was a basic feature of that original plan wrested from Bismarck by the Parliamen tary opposition.

It did not take two decades to reduce to a fraction of the total the share of cash benefits in the disbursements of the German panels. Once services in kind become the mainstay of the sickness scheme, it turns into a queer instrument of wealth redistribution. (All other branches of social insurance, with the partial exception of workmen's compensa tions for accidents, are restricted to cash disbursements.) Contributions cease to bear any relation whatsoever to the risk in volved. Policing by physical controls over a most vital sector of private life takes the place of actuarial calculation. Thus, the difference between the Bismarckian and the Leninian patterns tends to fade out. But still, the contrast between the old and the new approach reaches into every corner of the problem. Paternalistic as the Bismarckian scheme was, it did not intend to free the individual of all responsibility. He or she was to be secured to the extent only of absolute necessities. An irreducible min imum of health care and of income guaran tee was to be dispensed, no more. Accord ingly, cash benefits had to be much smaller than the actual income of the recipient when working. Medical services were to offer as much as was objectively necessary to re store health; but the patient was not to be pampered, and his incentive to care for himself and for his family was not to be impaired.

The postulate of economic self-reliance in spite of compulsory "insurance" permeates all medical schemes built on the Bismarck ian pattern. The beneficiaries are supposed to carry a major share of the costs by their own contributions and partly also by "de ductibles." As to disbursements, they should be kept at a minimum by thrifty administration of the panel and by sharp control over its spending. Otherwise, there is to be no interference with medical prac tice. In short, businesslike management is the idea of compulsory insurance proper, presupposing businesslike units to do the job in a decentralized, more or less compet itive fashion, if under supervision by the authorities. The latest editions of the Welfare State abandon the misleading claim of offering a system of insurance which would imply some sort of quid pro quo between premi ums paid and benefits received. In medicine, instead of providing the barest minimum, it promises the desirable maximum. Its objec tive is to fulfilla social function; the empha sis in lip-service is on what the State alleg edly owes its citizens. The security organization is centralized; its administra tion tends to be fully governmentalized.

Ultimately, all medical personnel is to be nationalized, as we shall see. D THEFREEMAN IDEASON LIBERTY WHATHUNGER INSURANCE COULD TEACH Us ABOUT HEALTH INSURANCE by Joseph Bast T o understand what lies at the heart of the . failure of our current health-care financ ing system, imagine, if you can, what the world would be like if we tried to buy food the same way we buy health-care services. You could go to work tomorrow morning and hear your boss tell you the following: The company has decided to offer a new benefit: hunger insurance. The company will purchase a hunger insurance policy for you that covers about 95 percent of your food costs whenever you enter a grocery store or restaurant, and a smaller share of the miscellaneous snacks and condiments you purchase from street vendors and the corner drugstore. To pay for the new ben efit, the company will withhold some of your pay-about $100 a week or so.