Socialism or Social Insurance?

The political air is charged these days with claims that various policy ideas, like Medicare-For-All and the Green New Deal, are “socialistic.” Such charges have been made in American history since the late 19th century, often in response to bold new policy concepts put forward to address gaps in income and health care security. This leads us to revisit a fundamental question – what differentiates Socialism from Social Insurance?

Social Insurance as Collective Action

In the words of Robert M. Ball, Founding Chair of our Academy: “Social insurance derives its unique strength from the principle that the best form of self-protection is mutual aid on a universal scale; when everyone contributes, everyone can be protected.” Academy Member and historian Edward D. Berkowitz also quotes Bob Ball:

“Through this form of collective action, nearly everyone, old or young, sick or well, could be covered, and everyone would be in the ‘same boat,’ creating ‘broad support for maintaining the well-being of the program and protecting the quality of benefits.’” (Berkowitz, Edward D., Robert Ball and the Politics of Social Security)

Antagonists of social insurance often impede a meaningful conversation by conflating the concept of collective action with that of collective ownership of the means of producing goods and services, which is the original definition of socialism. The former, not the latter, is a key basis of social insurance.

In a recent email conversation with Academy Member Dan Fox, he observed: “Proponents of social insurance recognize a broader definition of collective responsibility. In the United States, this definition has included protecting, and often promoting, the private, commercial interests of institutions, service-providing professions, and private companies in the supply chains that serve them.”

Academy Members Michael Graetz and Jerry Mashaw also remind us: “Americans will remain committed to a market economy with free movement of the factors of production. Indeed, it is this commitment that makes an effective social insurance system so important.” They also note that “society’s willingness to pay for social insurance depends both on what it can afford and, more fundamentally, on how it draws the line between collective and individual or family responsibility.”

They add: “Substantial risks to economic well-being that are not individually controllable should be buffered by collective social insurance, arrangements that reduce those economic risks to a tolerable level.” (Graetz, Michael J. and Jerry L. Mashaw. True Security: Rethinking American Social Insurance)

Opposition to Social Insurance

One of my first messages to Members as the Academy’s Chief Executive in July 2016 focused on this question. As I noted then, in an issue of the Boston Review, Elizabeth Anderson, Professor of Philosophy and Women’s Studies at the University of Michigan, wrote a provocative analysis of the origins and evolution of social insurance worldwide and in the United States. Among her major contentions were the following:

• Ideological opposition to social insurance has portrayed it as a “socialist or communist scheme designed to undermine private property and free markets.” This ideology is based on the assumption that “poverty was either inevitable—in the case of disability or death of able-bodied workers within the family—or caused by vices such as laziness, alcoholism, gambling, and sexual licentiousness.”
• At the same time, social insurance represented a novel way to address poverty — “one compatible with individual liberty, universal dignity, equal democratic citizenship, and distributive justice.” Indeed, for Germany’s Otto von Bismarck, who instituted the first such plans, “social insurance was erected as a defense against communist and socialist revolution, and as proof that a system of private property and markets could deliver a decent standard of living and security to all.”

Historian Nancy MacLean has written that the policies “implemented by elected officials during the Great Depression saved liberal democracy in the United States from the rival challenges of fascism and Communism in the face of capitalism’s most cataclysmic collapse.” Despite this, opponents of the New Deal charged that “it was nothing more or less than the Socialistic doctrine called by another name.” MacLean quotes another opponent as saying, “a small welfare state is perhaps better than a large one, of course, but it is still an evil, as it is the essence of communism-socialism.” In effect, these challengers and their current-day followers define socialism as “synonymous with any effort by citizens to get their government to act in ways that either cost money to support anything other than police and military functions or encroached on private property rights.” (MacLean, Nancy. Democracy in Chains)

Political Charges of “Socialism”

In his series, Covered: A Week-by-Week Look at the 1965 Politics that Created Medicare and Medicaid, Bob Rosenblatt, a Senior Fellow at the Academy, described the American Medical Association (AMA)’s opposition to Medicare, which included “an innovative publicity program in 1962, when the organization financed and distributed a record album featuring the actor and conservative spokesman Ronald Reagan. The 11-minute album, called ‘Ronald Reagan Speaks out against Socialized Medicine,’ delivers a strong warning against the dangers of government involvement in health care: ‘One of the traditional methods of imposing statism or socialism on a people has been by way of medicine,’ he says. ‘It’s very easy to disguise a medical program as a humanitarian project.’” The AMA’s opposition to “socialized medicine” had begun much earlier in the New Deal era and was amplified during the administration of Harry Truman.

Another misleading term often used by some opponents of social insurance is “collectivism,” which they usually contrast with “individual liberty.” During the 2005 debate over private accounts in Social Security, for example, the concept of “ownership” was also deployed as an alternative to “collectivism.” The word “collectivism” itself has an ideological connotation that is different from the notion of “collective responsibility.”

As political scientist Daniel Béland has noted: “Because the American ideological repertoire is centered on individualism and self-reliance, there is little room for discourse about social solidarity in the field of social policy reform.” (Béland, Daniel. Social Security: History and Politics from the New Deal to the Privatization Debate)

Current Health Care Debates and “Socialism”

Nowhere are the charges of “socialism” more rampant today than in the strident debate over health care coverage, access, and costs. For example, television commercials that attack proposals to use an international index to curb drug prices under Medicare label such proposals as “foreign socialist price controls.”

Perhaps most prominently, the renewed debate over health care resurrected such charges. In 2008, as the Affordable Care Act was being developed, Academy Founding Member Merton Bernstein wrote:

“The multi-billion dollar differences in non-benefit costs between Medicare on the one hand and private insurance and public means-tested programs on the other argue for locating insurance where it costs least – in Medicare. Medicare does not own or provide health services any more than private insurers do. Medicare uses private insurers to perform its detailed administrative clerical work. No ‘socialism’ is involved; only practicality and common sense.”

In her recent assessment of health care reform proposals, Expanding Access to Public Insurance Plans, Cori Uccello, Senior Fellow of the American Academy of Actuaries, and Member of the National Academy of Social Insurance, and co-chair with Marilyn Moon of our new Study Panel on Medicare Eligibility, distinguishes “single payer” health insurance from “socialized medicine” as follows:

“(S)ingle payer means the health insurance system covers the health care spending for all of a specified population and is financed by the government, typically from tax revenues. Although the term describes how the system is financed, it does not define who employs the health care providers. The term ‘socialized medicine’ differs from ‘single player’ in that the former refers to a system in which the government not only pays for the medical spending, but also owns the health care facilities and employs the physicians and other health care workers.”

In addition to this critical distinction of ownership, socialism differs from social insurance when it comes to the role, if any, of profit in the provision of benefits. The former eliminates profit, while the latter accepts it.

A personal anecdote

I experienced firsthand such labeling when I was being considered in 2009 for the position of Comptroller General of the United States to lead the Government Accountability Office (GAO). As the position is non-partisan, I met with both Democratic and Republican leaders of Congress to introduce myself and my vision of the agency. When I met with one of the Republican legislative leaders, the first question he asked me in dead seriousness was, “So, are you an Obama socialist?” I was quite taken aback and was tempted to respond, “If you think President Obama is a socialist, you don’t know what socialism is.” Instead, I held back and responded, “No, I’m a business Democrat.”

FLASH CONTEST: See below for details

What’s next?

No doubt, in a Presidential campaign with very high stakes, both parties will seek to attach labels to the other side that are designed to inflame their bases. “Socialistic” continues to be one of the weaponized terms. Countering such labels will be essential to a more informed and enlightened debate on policy differences.

Finally, the previously cited Professor Elizabeth Anderson’s conclusion is one that proponents of social insurance need to emphasize, especially as the United States remains an outlier on social policy among advanced nations:

“Robust and universal social insurance is a constitutive feature of a sound economy based on private property and markets, not a threat to it.”

FLASH CONTEST: The first dues-paying Academy Member to correctly identify the Republican quoted above will win one (1) full registration to our March 2020 Policy Conference on Medicare eligibility. Send your answer to me at warnone@nasi.org.