Sick

The True Story of How American

Jonathan Cohn

• Publisher: Harper
• Year: 2009
• Print ISBN: 9780060580469
• eBook ISBN: 9780061863950
• Subtopic: Personal Success

ONE

GILBERTSVILLE

New York’s Leatherstocking Country sits at the northern foothills of the Catskill Mountains, a few hours’ drive from Manhattan. The name is a reference to the leggings that colonial settlers wore during the 1700s, but it was James Fenimore Cooper who immortalized the region in the early 1800s, when he used it as the setting for his five books about the frontier hero Natty Bumppo, a collection that later became known as the Leatherstocking Tales. To see the area today is to glimpse a landscape remarkably like the one that first captured Cooper’s imagination: a “succession of hills and dales” rolling through the countryside; “beautiful and thriving villages” nestled in the “narrow, rich, and cultivated” valleys, with only the occasional gas station and roadside pizza shack to pierce the “romantic and picturesque character.” For the people who live in Leatherstocking Country now, this largely unmolested geography provides precious insulation from the rest of New York—even, it would seem, from modernity itself.

Perhaps nowhere is this more evident than in the village of Gilbertsville. Gilbertsville is a two-hour drive from Syracuse, the closest city with a major airport, and the last part of the journey takes place along a winding road, more than 1,000 feet up in the hills. Gilbertsville becomes visible only after the final turn, when the road descends into a valley, depositing drivers near the entrance to Major’s Inn—a Tudor-style building that hosts such events as the annual Gilbertsville Quilting Fair. Here Gilbertsville’s commercial district begins and nearly ends, with a small grocery store, a quilt shop, and a few offices operating out of more Tudor-style storefronts that line one side of the street. The buildings look almost precisely as they did when they were built in the 1890s, after a fire destroyed the old business district. The effort to replicate a small English town was apparently the inspiration of Joseph T. Gilbert III, whose great-grandfather, Abijah Gilbert, helped settle the township in the 1780s after migrating from Great Britain.

Some of Abijah’s direct descendants still live in Gilbertsville. In fact, say the locals, many of the 377 people that the 2000 U.S. Census placed in Gilbertsville have roots in the area that go back at least 100 years. More than surnames were handed down over the generations. The people in this part of New York have a long-standing reputation for hard work, conservative values, and attachment to the land—a reputation that still seems fitting today. The inhabitants attend church regularly and strongly prefer conservative politicians, electing mostly Republicans to the five-member village governing body. As for their awareness of their heritage, perhaps the most celebrated episode in Gilbertsville’s modern past came in 1982, when its residents won a seventy-year fight to block construction of a proposed dam that would have flooded most of the village. They prevailed by methodically cataloging the architectural heritage of every local building, commercial and residential, then successfully lobbying to have the entire village placed on the National Register of Historic Places, forever protecting it from disturbance.

It was four years after that victory that Gary and Betsy Rotzler moved to Gilbertsville, fitting into the community fabric almost seamlessly. They’d grown up together in neighboring Delaware County. Although Betsy was born in the Bronx, Gary’s Leatherstocking lineage went back a dozen generations, to its very earliest days as a settlement in the New World. (Family legend had it that one of Gary’s ancestors came from Britain to the United States on the ship immediately following the Mayflower.) The long hair Gary wore during his adolescence was typical for boys in the 1960s and early 1970s, but in most other respects he and Betsy were remarkably traditional. They had become high school sweethearts after going on a date to the county fair in 1975, while Gary was a junior and Betsy still a freshman, then continued dating after Gary went to college upstate. On June 25, 1978, just one day after Betsy’s graduation from high school, the two were married in a small ceremony held at the home of Betsy’s parents. A year later they would have their first child, a daughter named Sarah. Two more would follow: another daughter, Amanda; and then a son, Luke.

The Rotzlers came from relatively modest roots: Gary’s father was a diesel mechanic who worked for the local highway department; Betsy’s parents ran a residential treatment center for alcoholics. But by the time the couple came to Gilbertsville, the Rotzlers had every reason to expect they were on their way to realizing the American dream. Gary was noted for being industrious, having missed not a single day of classes in college. Shortly after graduating, he began working at Bendix, a large aerospace manufacturing company—first as a design technician at a plant in the nearby town of Sidney, later as a field engineer managing the company’s midwestern clients from Dallas, Texas. Another engineering job at the Bendix Sidney plant had lured the Rotzlers back to central New York—where they hoped to remain, for good. Betsy, for her part, had chosen to stay at home and raise the three children, getting involved primarily in activities that revolved around them, like the La Leche League for mothers who were breast-feeding and, later, the Girl Scouts. Around town, she would become known for her artistic flair, particularly the individualized Raggedy Ann–style dolls that were her trademark.

But the American dream would prove fleeting for the Rotzlers, just as it did for much of central New York in the early 1990s. The regional economy depended on defense manufacturing jobs, like Gary’s, that vanished as Washington cut the Pentagon budget and a recession fell over most of the country. One by one, Gary’s colleagues lost their jobs. In 1993, he lost his, too. And while Gary would find ways to replace some of his lost wages over the ensuing two years, he would have a much tougher time coming up with something else: health insurance. Like most working Americans, Gary had always depended on his employer to provide medical coverage; when the job was gone, so was his coverage. And even after Gary finally found full-time work, he still couldn’t get insurance for his family, because his employer—a company for which he’d worked previously—was no longer providing benefits to many of its employees.

None of this was unusual. On the contrary, it was emblematic of a change then taking place across the country: the erosion of job-based insurance, on which the U.S. health care system had been based for most of the twentieth century. The steady decline of job-based health coverage was the primary reason that the number of Americans without health insurance, nearly 40 million people by the time Gary and his family joined their ranks, was rising by the early 1990s. And, like Gary, the majority of these newly uninsured were neither destitute nor truly jobless. Instead, they were people who, as the saying goes, played by the rules of society—finding whatever employment they could, frequently working at several part-time jobs, but with no idea when they’d be able to get medical coverage again.

For some of these people, having no health benefits would eventually mean financial calamity. For others, it would mean a serious, even life-threatening medical crisis. For the Rotzler family of Gilbertsville, New York, it would come to mean both.

Although nobody knows for sure who invented insurance, historians generally trace its development back to ancient Babylonian traders who feared that their shipments across the desert might fall prey to bandits, dust storms, or camels with shoddy knees. In order to protect themselves financially, groups of these merchants decided that they would contribute to a fund; if a merchant’s shipment disappeared, he could then take payment—or make a “claim”—to cover his losses. Later, the Greeks and Romans extended insurance beyond commerce by creating so-called benevolent societies, which pooled contributions from members to finance burials for the deceased. From there, the practice evolved into the mutual protection societies that the guilds of medieval Europe ran for their members, providing financial support in case of disabling injury or death. Eventually companies dedicated exclusively to providing insurance came into existence. The most famous among them was Lloyds of London, whose protection of merchants helped trade to flourish throughout the British Empire.

America’s first private insurance company is believed to have appeared during the colonial era, when Benjamin Franklin established a firm to insure the homes of Philadelphia against the risk of fire. But it was not until the early twentieth century that the idea of using insurance to help people deal with illness started to get serious attention. At that time medicine was just entering what we now consider its modern era. With the development of sanitary techniques (to prevent infection) and sophisticated understanding of opiates (to dull pain), surgery had become more effective and widespread, turning hospitals from places where people were lucky to survive to places where people expected to be cured. Physicians, meanwhile, had developed formal education and certification protocols, giving them a claim to expertise beyond that of quacks and witch doctors. As one scientist of the era famously remarked, “It was about the year 1910 or 1912 when it became possible to say of the United States that a random patient with a random disease consulting a doctor chosen at random stood better than a fifty-fifty chance of benefiting from the encounter.”

But with this progress in medicine came new costs. Doctors and hospitals expected to be paid well for their services, particularly since they were investing so heavily in their training and equipment. And by the 1920s, the bills were becoming more than many Americans could bear. With the onset of the Great Depression, the average cost of a week in the hospital began to exceed what the majority of Americans earned in a month, making illness a scary financial proposition for even the thriftiest middle-class households—and forcing many people to skip medical care altogether. “Very few of these families are indigent in the accepted meaning of that word,” the economist Louis Reed explained in 1933. “They have a home, they buy their own food and clothing and pay their doctor’s bills in ordinary illness. But when a serious illness…occurs, these families are unable to pay their way.”

Reed had gotten his information from the Committee on the Costs of Medical Care, a blue-ribbon commission that had spent five years conducting the first national census on health care. But not all of its findings were so bleak. In particular, the committee observed that large expenses were concentrated among a small group of people, the ones with the most serious medical problems. Since everybody had at least some risk of experiencing such a crisis at some point in his or her life, the committee recommended that Americans do what the ancient merchants had done, and assume some form of collective responsibility for medical costs. In other words, it recommended the creation of insurance for medical care.

The key question, of course, was how. Other industrial countries were starting to give insurance to every citizen, through the government or government-sponsored organizations, thereby spreading the financial burden of medical spending as widely as possible. Health care in these countries was thus on the way to becoming a right, rather than a privilege. But calls to do the same thing in the United States had run into stiff political resistance ever since the late progressive era, when state-level reformers in California and New York first proposed it. Large corporations feared that government management of medicine might lead to interference elsewhere in the private economy. Private insurers weren’t ready to concede a possible line of business. And physicians simply didn’t want the government meddling with their work or incomes. Physicians would prove a particularly potent lobby during the first half of the twentieth century, to the point where Franklin Roosevelt is said to have dropped health insurance from the Social Security Act because he feared that the hostility of state medical societies and the American Medical Association would undermine the whole initiative.

The physicians were so worried about outside interference, private or public, that many would have been content to do absolutely nothing about the financing of medical care during the 1930s. But it turned out that consumers weren’t the only ones struggling financially. Hospitals needed help, too. In the years leading up to the Depression, while the economy was booming, hospitals had gone on a building binge, constructing new wings and outfitting them with the latest, most expensive equipment. Now all those brand-new facilities were either empty or full of patients too poor to pay their bills, presenting the hospitals with a crisis of their own.

One of those institutions was Baylor Hospital in Dallas, Texas, which by 1929 was “just 30 days ahead of the sheriff” because of its mounting debts. But Baylor also had a new administrator, Justin Kimball, with an idea for saving the hospital financially. Kimball, who had come to Baylor from the Dallas public schools, decided to approach his old colleagues with an offer: the hospital would provide up to twenty days of care to any teacher willing to pay a monthly contribution of fifty cents, so long as at least three-quarters of the system’s teachers agreed to be part of the plan. Meeting that three-quarters threshold was crucial: Kimball, who had access to the school system’s personnel records, had calculated that it would guarantee enough contributions from healthy teachers to cover the medical expenses of those few who needed care. But Kimball had no problem recruiting so many enrollees, as the promise of economic security for such a modest price turned out to be an easy sell. On the first day of Christmas vacation in 1929, a teacher who had broken her ankle on the ice showed up at Baylor’s emergency room, becoming the first beneficiary to make a claim under modern hospital insurance.

As word of the success at Baylor spread, hospital administrators around the country copied the model and improved on it—eventually establishing nominally independent plans that paid for services based on fees the hospitals set. In Sacramento and later central New Jersey, hospitals joined together to create a plan that offered beneficiaries care at any local facility, not just one, thereby starting the nation’s first multihospital insurance plan. In 1934, the founder of a plan based in Saint Paul, Minnesota, decided to illustrate his advertising posters with a blue cross. The image caught on as fast as the plans themselves, and by 1938, 2.8 million people were enrolled in “Blue Cross” plans that had established themselves across the country.

Like the original scheme at Baylor, most of the early Blues plans concentrated on offering coverage to groups of employees—or, occasionally, through fraternal societies like the Elks Club—because that was the best way to guarantee a group of subscribers sufficiently large to make the insurance math work. As commercial insurers got into the health business, they, too, focused on large workplaces. A habit was forming—one the government would soon make very hard to break. During World War II, federal officials decreed that fringe benefits were exempt from wartime controls on wages. That encouraged employers to offer more generous health insurance, since better benefits were one of the few enticements they could use to attract new workers in such a tight labor market (with much of the able-bodied workforce busy fighting overseas). Soon the government also decided that money spent on health insurance provided by employers would not be subject to the income tax. This increased the demand for such benefits—since, to a worker, a dollar of health insurance became more valuable than a dollar of salary.

Linking insurance to employment meant that businesses were, in effect, becoming responsible for their employees’ well-being. But that was not a burden corporate America seemed to mind. On the contrary, businesses eagerly pursued this role because they believed it would cement workers’ loyalty while undermining the appeal of national health insurance—something they continued to oppose on ideological grounds. Once the National Labor Relations Board ruled that health benefits could be part of collective bargaining agreements, labor embraced this arrangement, too—recognizing that it made the unions even more important to their workers. Labor didn’t exactly give up on national health insurance; in the late 1940s, when Harry Truman formally proposed and campaigned hard for a universal coverage plan, the AFL-CIO supported him. But some unions were less enthusiastic than others. The United Mine Workers largely sat out the fight, in part because its leaders were pleased with the coverage they’d won for their members and thought that national health insurance, if anything, would lead to less generous benefits.

For another twenty years or so, that strategy paid off for the unions—and, indeed, for most Americans—as the percentage of the workforce receiving insurance through their jobs climbed. By 1980, most full-time workers at large companies had health insurance through their jobs. And the benefits kept getting more comprehensive, too. This encouraged people to use more medical services, which led to more health care spending overall. It also fueled additional investment in medical technology, which drove up the cost even more. But particularly since people seemed to benefit from all of the extra medical attention, nobody seemed to mind that much. The economy was growing so fast that businesses were willing to absorb the higher expenses on behalf of their workers (and the workers, in turn, hardly noticed the way health insurance premiums were eating into their paychecks).

But that neat arrangement started to break down, as the price of health insurance premiums skyrocketed and the long postwar prosperity came to an end. During the 1980s, large manufacturing companies, once the linchpin of the U.S. economy, were suddenly desperate to cut costs because they were struggling to keep up with foreign competitors who could produce goods more cheaply. Retail and service industries were faring better. But, in part because very few of them were unionized, they were less inclined to offer coverage in the first place.

As workers faced higher premiums, some opted against buying coverage even when it was made available to them. Others never even had that choice. Just as cheap health insurance premiums and tight labor markets once created pressure on all employers to provide their workers with decent coverage, now expensive premiums and loose labor markets created pressure not to provide coverage. By the 1990s, the success stories of the U.S. economy were primarily those corporations, like Wal-Mart, that squeezed employee benefit costs by offering skimpy benefits and limiting them to full-time workers who’d been employed at the company for at least two years. As of 2005 less than half of Wal-Mart’s employees had company-sponsored insurance, well below the national average for large firms.

Those companies unable to scale back their commitment to finance generous health benefits, meanwhile, paid a steep price: In 1993, General Motors said that health insurance for its employees alone added more than $700 to the price of every car and truck, or roughly the cost of putting air conditioning into a Chevrolet. By 2004, GM said that the figure was up to $1,400. And the company, not surprisingly, was rumored to be flirting with bankruptcy.

Gary Rotzler was among the individuals caught in this economic undertow. In the early 1980s, at the height of that era’s mergers and acquisitions frenzy, Gary’s employer—Bendix—had attempted to take over a rival aerospace manufacturer, Martin-Marietta. The episode turned into “one of the dirtiest, sloppiest, most wasteful takeover battles in U.S. corporate history,” as one Time magazine writer put it. William Agee, the chief executive officer, walked away from the debacle $4.1 million richer; Bendix was left in the hands of another company, Allied Corporation, and never fully recovered.

Previously, Bendix had a reputation as one of central New York’s best employers, known for its generous pay and its loyalty to workers. The employees, in turn, treated it as part of the community. Once they got jobs at Bendix, many figured they’d stay until retirement. But in the late 1980s, Bendix, then renamed Amphenol, began the inevitable downsizing that would eventually hit virtually every manufacturer in the state. Gary figured he could either get out or be tossed out, so in 1989 he left Amphenol to take a job at ShopVac, a company that had a plant in another nearby town, Norwich. The move actually const...

Table of contents

• Cover
• Title Page
• Dedication
• Contents
• Introduction
• Chapter 1
• Chapter 2
• Chapter 3
• Chapter 4
• Chapter 5
• Chapter 6
• Chapter 7
• Chapter 8
• Conclusion
• Sources and Notes
• Acknowledgments
• Searchable Terms
• About the Author
• Credits
• Copyright
• About the Publisher