Health Policy, Health Insurance, and the Social Contract

27 Pages Posted: 13 Jan 2002

See all articles by Robert Rich

Robert Rich

University of Illinois College of Law


Ever major western democracy is currently engaged in renegotiation of the social contract, which serves as the foundation for the social welfare state. This "contract" between the State and society represents a negotiated agreement between the government and citizens over respective responsibilities and duties. The agreement specifies what benefits government agrees to provide to citizens in return for tax-based financing of these benefits; it also recognizes the role of government in designing and administering the programs, which ultimately provide the desired benefits. This essay examines the development of the social contract as it relates to the development of the structure of the health care system in the United States and the performance of that system in terms of providing health services. It argues that the social-political debates in Europe had a very limited influence on the development of the American health care system and that the transatlantic connection may have greater applicability in the health care debates of the early 21st century than it did in the 18th, 19th, and 20th centuries. The current system of managed care in the United States is being adapted in Germany and other European countries as opposed to the adaptation of the European health care model in the United States. In other words, many political leaders and academics foresee a great similarity in the future between the U.S. and European health care systems. Others would argue that the traditions and practices of these countries differ sufficiently that a narrowing of the gap is neither desirable nor feasible.

Until the 20th century, the American health care system was essentially a non-system. At the same time, there was very little support in the United States for government financing of health care programs similar to those being developed and adopted in Europe. The defeat of national health insurance proposals in the early 1900's through 1946 helped to bolster the position of private insurance companies and organized medicine. With the passage of Medicare and Medicaid, the role of the federal government was fundamentally changed. These programs represented a major change in the government's approach to the design, financing, and delivery of health care.

Subsequent to Medicare and Medicaid, Congress enacted the Health Maintenance Organizaation Act of 1973. Federal involvement in health care was augmented in 1986 with the enactment of the Emergency Medical Treatment and Active Labor Act of 1986, the Health Insurance Portability and Accountability Act of 1996, and the Children's Health Insurance Program of 1997.

During the period between 1865 and 1995, the influence of the transatlantic connection was very limited. Social policy makers in the United States were aware of the innovations and programs being adopted in Europe. Some of these policy proposals were introduced in the United States and rejected. In contrast, concepts of employer mandates and compulsory insurance were commonplace and fully accepted by most segments of society in Europe.

Over the last fifteen years, with the growing economic pressure on the European social welfare state, there is growing pressure to reform the health care system and adopt some of the U.S. concepts of managed care. The managed care experience of the United States and the employment crisis of Europe may be leading to a convergence in the organization and financing of our respective health care systems.

Keywords: Health policy, health insurance, managed care, health law, regulation

JEL Classification: H1, H5, H7, I1, K2, N4

Suggested Citation

Rich, Robert F., Health Policy, Health Insurance, and the Social Contract. Available at SSRN: or

Robert F. Rich (Contact Author)

University of Illinois College of Law

504 E. Pennsylvania Avenue
Champaign, IL 61820
United States

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