PRRAC Poverty & Race Research Action Council
Home About PRRAC Current Projects Publications Newsletters Resources Contact Us Support PRRAC Join Our Email List

"Stealth Capture: The Civil Rights Movement and the Implementation of Medicare,"

by David Barton Smith April-June 2016 issue of Poverty & Race

July 1, 2016 marks the 50th Anniversary of Medicare’s inauguration. After Lyndon Johnson’s landslide victory in 1964, the passage of the Medicare Act in 1965 surprised no one. The surprise, concealed and never fully acknowledged, came with its implementation. Rather than the typical pattern, the regulatory process was captured not by the industry being regulated but by a social movement seeking to transform it. Almost overnight the nation’s hospitals were transformed from our most racially and economically segregated private institutions into our most integrated ones. I tell that story in The Power to Heal: Civil Rights, Medicare and the Struggle to Transform America’s Health System (Vanderbilt University Press, 2016). I summarize this story and lessons it offers for current efforts to expand access to care and assure greater equity here.

American Hospitals at the Time of Medicare’s Passage

Even though it involved a massive infusion of federal dollars, no one expected the implementation of Medicare to fundamentally change the patterns of racial and economic segregation in the nation’s hospitals.

While Title VI of the Civil Rights Act of 1964 prohibited racial segregation and discrimination in institutions receiving federal funding, its implications were never mentioned in the deliberations over the passage of Medicare in 1965. Title VI relied on complaints but provided no funding for the investigation of complaints and imposed no reporting requirements. In 1965 it had already proved ineffective in changing racially segregated patterns of care in hospitals that had received federal Hill-Burton funds for construction and in the allocation of Elementary and Secondary Education Act of 1965 funds to public schools.

Racially and economically segregated patterns of medical care had existed in the United States ever since the beginning of modern medicine. In the Jim Crow South Blacks were mostly relegated to separate and unequal accommodations in basement wards, racially separate facilities or excluded altogether. In most northern cities, with the more invisible result of residential segregation, racially exclusionary privileging of medical staffs and informal understandings about admitting practices, hospital care was just as racially segregated as in the South. The economic segregation of that care further exacerbated its racial segregation.

Public hospitals provided much of the care for the indigent and private voluntary ones concentrated on attracting patients that were privately insured or could otherwise pay for their care by providing attractive private accommodations well removed from the stark open wards offered the indigent. Many even provided three sets of china, silverware and menus to help reinforce their preference for private paying patients and the stigma associated with receiving indigent care.

Patterns of use reflected these separate and unequal arrangements. Those with higher incomes and more private insurance received more care, whether it was visits to doctors, hospital stays or other related services. Differences in patterns of use were even greater between Blacks and whites. Indeed, such differences had existed unchanged throughout a half century of the development of the nation’s modern health care system, contributing to consistently higher morbidity and mortality rates for lower income populations and blacks. The amount of care one received was directly related to one’s income and race and inversely related to one’s need for that care. Such patterns of use made a mockery of professed hospital and medical ethical obligations to serve those in need. Yet, few could conceive of such patterns of use ever changing.

Unlike in most other developed countries, the majority of hospitals in the United States were private, nonprofit entities designed to be well insulated from any public accountability for more equitable patterns of use. Only as a result of a landmark court decision in 1964 were these institutions redefined as essentially public entities with the same obligations for racial integration imposed by the Brown decision on public schools a decade earlier.

Almost all of these hospitals had received federal funds for construction made available by the Hill-Burton Act of 1946, which explicitly permitted the use of federal funds for the construction of racially segregated facilities. The Simkins v. Cone decision ruled that: (1) hospitals by virtue of the use of these funds as part of a state plan were an “arm of the state” and essentially public institutions and that (2) the provision of the Hill-Burton Act allowing for use of federal funds to construct segregated hospitals was unconstitutional. (Simkins v. Cone, 323 F.2d 959 (4th Cir. 1963), cert. denied, 376 U.S. 938 (1964)). This ruling helped seal the inclusion of Title VI in the pending Civil Rights Act of 1964, prohibiting the allocation of any federal funds to racially discriminatory institutions.

Anxious to receive the new infusion of federal dollars promised by the Medicare legislation, hospitals were unconcerned about any threat Title VI posed to receiving that money. No one anticipated that its vague prohibition of discrimination, dependent on local complaints from vulnerable patients and their families, unsupported by any funding to staff a response, engage in enforcement, levy penalties or even to collect information from hospitals would do much.

Indeed, the issue of the Title VI requirement never came up in the congressional discussions around Medicare’s passage. For those in the Social Security Administration that had long prepared for the responsibility of implementing such a program, the new Title VI requirement presented, at best, an unanticipated and unwelcome last-minute complication. Most politicians and hospital leaders just assumed that the racial desegregation of hospitals would proceed with the same “all deliberate speed” of public schools—providing token paper concessions but postponing any real desegregation indefinitely.

The federal track record throughout 1965, the year of Medicare’s passage, certainly supported such a prediction. The Johnson administration faced many pressing matters that seemed more urgent (e.g., the Voting Rights Act, the Watts riots, a growing white backlash and the escalation of the Vietnam War). Medicare became a backburner issue and one more technical than political in nature, best left to the Social Security Administration (SSA) and the Department of Health, Education and Welfare (HEW) to work through.

For its part, HEW had little to show for its efforts in trying to enforce Title VI. Their initial attempts to encourage voluntary compliance weren’t working and they were uncertain what, if any, more forceful actions were feasible. That summer and fall, HEW had been deluged with more than 300 Title VI complaints about Hill-Burton funded hospitals from local civil rights groups, but had been able to do little to resolve them. Even in March 1966 when a special office was finally set up to certify hospital Title VI compliance for Medicare funding, it had a skeleton staff of five, and about six thousand hospitals to certify in less than four months. It was also still unclear if anything more than pro forma paper compliance would be backed up the chain of command.

In October 1965, in HEW’s first attempt to enforce Title VI of the Civil Rights Act of 1964, it had held up the distribution of Elementary and Secondary Education Act funds to the Chicago Public Schools pending a review of a Title VI complaint brought by local civil rights groups. Johnson over ruled that decision, insisted on the immediate release of the funds and removed the HEW official responsible for it. Most assumed a similar fate lay in store for any Title VI attempts to withhold Medicare funds from hospitals.

Stealth Capture

“Regulatory capture” is typically used as a critique of government regulation whereby the industry being regulated captures the regulatory process and uses it to insulate itself from external control. “Stealth capture” involves the clandestine capture of a regulatory process by an external group making changes possible that would not have happened if all parties had been aware of the attempt.

In this rare and perhaps unique case, well-hidden below the surface, an amorphous coalition of civil rights advocates in the HEW bureaucracy and grass roots movement activists in local communities seized control of the Title VI Medicare certification process for hospitals. That seizure caught hospitals, legislators, and many top government officials by surprise. The participants in this vertically and horizontally integrated takeover included Black medical professionals and civil rights groups that brought the original the legal challenges against segregated hospitals.

These physicians, along with representatives from the Medical Committee for Human Rights, the National Medical Association, the NAACP Legal Defense Fund, Urban League, Student Nonviolent Coordinating Council and Southern Christian Leadership Council, participated in the training sessions for hospital inspectors and later served as consultants to the office responsible for directing the certification process. Key insiders, staff in the HEW Secretary’s civil rights office, shared the general consensus of the movement that Medicare’s implementation offered a golden opportunity to push for the full desegregation of the nation’s hospitals that should not be lost. Derrick Bell, for example, recruited directly from the NAACP Legal Defense Fund, served as legal counsel to this office.

The guidelines they approved for Title VI certification of hospitals for Medicare were concrete, specific, wiggle proof. They insisted that no hospital would be certified to receive Medicare funds without full compliance with all of them. There would be no “all deliberate speed” for hospitals. Many up the chain of command probably doubted the wisdom of such insistence. Yet, with the clock ticking and many other matters to attend to, no-one ever challenged them. John Gardner, who had become Secretary of HEW a few weeks after Medicare’s passage, was a willing participant in this takeover. He redefined HEW as a civil rights organization in a memo at the end of December 1965. Title VI compliance, he argued, was too important and sufficient staffing was essential for its success. He ordered HEW’s agencies to assist in arranging the necessary temporary transfers to staff the effort. The home agencies would pay the salaries and travel costs of these temporary transfers and the “real” budget of the compliance effort would remain invisible.

As a result, the legislative oversight committees, many controlled by southern legislators, would be left in the dark. The success of this subterfuge would depend on getting sufficient transfers capable of carrying out this difficult assignment while keeping it as low key and invisible as possible to prevent the development of any organized opposition. Almost 1,000 civil servants volunteered for this temporary reassignment. The volunteers included a motley collection of public health service officers, bench scientists, VD inspectors and local Social Security office staff united only by a passionate commitment to its mission. Many had already participated in civil rights activities as private citizens and welcomed the opportunity to do it as a part of their day job. An additional sixty similarly motivated medical students were hired for temporary summer jobs to assist in fleshing out the field inspection teams. With at most two days of training they were sent into the field to complete a transformation that seemed, given the time constraints, impossible. No hospital would be cleared for Medicare funding if there were any distinctions by race in how beds were assigned, where patients sat in waiting rooms, who was employed, where employees ate their lunches or changed or in the awarding of hospital privileges to physicians.

The final arbiters were those in an even more secret army of local hospital workers and civil rights activists that served without compensation and assumed the most risks as the boots on the ground gatherers of intelligence. They made it impossible for hospitals to conceal noncompliance. The unity and fierceness of this coalition and the rapidity of the takeover cowed critics, both in the federal government and the hospital industry, into silence. While many were fearful of disaster it was too late to turn back. The dice had been rolled in the highest stakes gamble in domestic policy history.

As the deadline drew near, perhaps only when it was clear that there could be no turning back, Johnson and his White House staff got fully on board. A Medicare “war board” map went up at Social Security headquarters identifying potential trouble spots. A crisis team, including the Attorney General, Director of the Veteran’s Administration and military brass met at the White House in the last days before Medicare’s implementation. The National Guard and military helicopters were placed on alert and VA and military hospitals prepared for a potential influx of Medicare patients denied access to local hospitals.

What Happened?

Medicare went into effect with 97% of the acute hospital beds in the United States compliant with Title VI and participating in the Medicare program. No National Guard helicopters and transfers to federal facilities were required. As Johnson noted on the occasion, Medicare “is a test for all Americans— a test of our willingness to work together…. I believe July 1, 1966 marks a new day of freedom for our people.” However imperfect, it marked a watershed, one that nothing in more recent times has been able to reverse.

Hospitals were, as a result, soon transformed from our most racially and economically segregated private institutions into our most integrated ones. Many Black and public hospitals closed or were converted to other purposes in this racially and economically integrated system of care. The welfare wards and wooden bench charity clinics disappeared. Even in private medical practices in the Deep South, separate colored waiting rooms disappeared soon after similar arrangements had been forced closed in hospital- based clinics.

Medicare patients whether Black or white, had choices where they received care and both physicians and hospitals got paid the same generous amounts without racial distinctions. Patterns of use of hospital care and most other services are now higher for Blacks and low-income populations, making care for the first time actually related to medical needs and the ethical obligations of health professionals.

Racial differences in infant mortality and life expectancy narrowed in the first twenty years after Medicare and Medicaid’s implementation. The remaining differences in morbidity and mortality have since been redefined as “disparities,” differences that all providers share a responsibility to eliminate and whose elimination their professional associations have set as a goal. No one could now argue that the high stakes and, some might argue, high handed gamble in the implementation of the Medicare hadn’t paid off.

Whose Success Was It?

Success claims many parents while failure remains an orphan. What is clear from reviewing the surviving records of this effort and interviews with participants is that it followed no consciously developed plan and no carefully calculated decision at the top was ever made on how to proceed. Just as in the civil rights movement that captured it, it involved mostly seat of the pants improvisation, little centralized control, guided by gut instincts on the ground. The effort, indeed, had many parents.

The implementation of Medicare became the culmination of 20 years of effort by Black medical activists that had challenged racial exclusions. They had shaped the creation of Title VI and their professional association, the National Medical Association, served as the only organized medical group advocating for the passage of the Medicare legislation. (Indeed the leader of this effort, Montague Cobb, was the only medical or hospital professional invited to attend the signing of the bill at the Truman Library). Five participants in these efforts served as consultants to HEW’s Title VI Medicare certification effort, insistent on assuring that race could play no role in hospital practices if they were to receive Medicare dollars.

Certainly Lyndon Johnson and Secretary of HEW, John Gardner, deserve credit. Johnson, during the last six months, never wavered in his general support for the effort and did some of his famous arm twisting toward the end. Without Gardner’s insistence on the transfers and willingness to conceal their number and budget implications, the initiative could never have been mounted.

The volunteer temporary transfer field inspectors were the nameless heroes. In completing this assignment they were subjected to all the difficulties of civil rights workers faced in general: jailing on trumped up charges, bullets fired at their rental cars, high speed chases to outrun local Klan groups, and, in at least two cases, crosses burned on their front lawns. The real heroes of the field effort, however, were the hospital and civil rights workers that assisted in providing the intelligence. All risked retaliation and the loss of their jobs. Several had their homes bombed and one may have even been murdered.

Much credit must also be given to the leaders in the vast majority of hospitals that quietly integrated their accommodations, often never even creating a ripple in the local communities they served. Their insulation from local retaliation as private voluntary hospitals now worked to the advantage of accomplishing this transformation. “I am so glad,” one administrator observed after the certification was complete. “I only have to run one hospital now.”

Yet, for all the difficulties and the risks, for most of the participants in this effort it was one of the most fulfilling times in their lives. “We were really doing something,” one of the volunteer civil service inspectors said later. It was something larger than what could be done just in careers as medical professionals, civil servants or administrators.

The Lessons

So much has changed but so much is the same.
Today, just as then, money is more important than individual or group racial and ethnic prejudices. Similar federal funding restrictions, encouraged by the success of the hospital desegregation effort, eliminated almost as quickly most sex segregated colleges and the male dominance of admissions to medical, law and business schools. The question in the end was never “what does my organization feel most comfortable doing?” but, “how do we get the money?” The challenge continues to be how to design the answer to that question in ways that assures greater racial and economic equity.

“Freedom of choice” was the last defense offered by hospitals that resisted and wanted to remain segregated. Hospitals were integrated not by changing people’s attitudes or feelings but by eliminating choices. One door replaced the “colored” and “white” entrances and one waiting room and cafeteria replaced similarly labeled facilities. The message of the Medicare inspectors to the hospitals and their patients was, you don’t have to participate in the Medicare program or receive care in a hospital that Medicare pays for. However, if you choose to do so, everyone has to be treated the same. Universal entitlements are not free market goods.

The Medicare program, at least in how it was implemented, was the gift of the civil rights movement. It said for the first time that everyone is all in it together. Everyone, at least every senior, will get the same benefit, same providers and those providers will all get paid by the same rates. It said, through the way it was implemented, that we have the power to heal.

David Barton Smith is Emeritus Professor, Program in Health Management and Policy, Temple University and Research Professor, Dornsife School of Public Health, Drexel University. A documentary film related to this story (produced by Barbara Berney, working title "The Power to Heal" and supported by the National Endowment for Humanities) is currently in the editing process and tentatively scheduled to air on PBS stations later this year. dbs36@

Join Our Email List
Search for:             
Join Our Email List