AT FIRST BLUSH, the findings of a study group called the Committee on the Costs of Medical Care might not seem particularly surprising. It’s no longer news that millions of American families face financial ruin or physical catastrophe because they have no way to pay medical bills. Nor is it a great revelation that, as a committee staff member put it, “[v]ery few of these families are indigent in the accepted meaning of the word. They have a home, they buy their own food and clothing and pay their doctor’s bills in ordinary illness.” But it’s not the novelty of the committee’s findings that makes them so compelling. It’s the timing. The report appeared in 1932.

It was the culmination of a five-year study, sponsored by a group of philanthropies, designed to provide the first comprehensive survey of health care spending in the United States. Back then, medicine was just entering what we now consider the modern era. Thanks to anesthesia, the sanitary method, and other innovations, health care had suddenly gotten a lot more effective—and a lot more expensive. For the first time, worrying about illness inevitably meant worrying about paying doctors and hospitals—a situation, the committee knew, that wouldn’t go away after the Great Depression.

The committee’s report was pretty big news. And, to the liberals then serving in Franklin Roosevelt’s new administration, the response was obvious: The United States should follow the lead of Germany and create a national insurance system for medical care. Everybody would pay a premium in the form of taxes; the government would then pay everybody’s medical expenses, drawing the money from the collected premiums. The New Dealers perceived national health insurance as a logical extension of what they were trying to do with Social Security: insulate people from the whims of the free market and the full fury of chance. They wanted to save capitalism from its own failures, which in this case meant making sure nobody would become indigent just because he or she had the misfortune to get sick.

FDR ultimately decided against pushing national health insurance, deeming it an unacceptable political risk. Two generations later, the job remains unfinished, only now our health-care crisis is a lot more complicated. One thing, however, has changed for the better. Unlike in 1932, there is today broad agreement that the system needs fixing. Perhaps nothing better symbolizes this consensus than the existence of a coalition called “Divided We Fail,” whose members include longtime health reform advocates like the Service Employees International Union and longtime opponents like the Business Roundtable.

As a result, the prospects for sweeping changes to our health care system seem brighter than at any time in recent history. But the consensus is as fragile as it is broad. While the environment might now be conducive to bold changes, such political moments can prove maddeningly ephemeral. Once the squabbling over details begins, the obstructionists will get louder. National health insurance, they will vow, is a form of socialism—a charge they deployed during the New Deal and in every health care debate since.

But, just as the critics reach back to history to formulate their offensive, proponents of reform can find ammunition there, too. They must reprise the arguments for reform that were offered during the 1930s—and explain why they have only grown more urgent in the past few decades. Moreover, just as New Dealers were willing to take what they could get—to settle for imperfect but politically tenable programs rather than hold out for more ambitious measures and risk ending up with nothing—reform advocates may have to accept proposals that come up short of their ideal solution. Finally, they must press the case that, in the best New Deal tradition, health care reform isn’t an effort to chip away at capitalism—but rather a bid to save it.

FOR MUCH OF the twentieth century, it looked like we were well on our way toward making health care affordable for all. By the late 1920s, patients weren’t the only ones suffering because they couldn’t pay medical bills. Hospitals were struggling, too, as their wards filled up with non-paying patients or simply remained empty. And, since the government wasn’t rising to the challenge, they decided to address it themselves by creating the first modern insurance plans—which eventually evolved into the Blue Cross system, on which U.S. health insurance remains based today.

The hospital plans focused on recruiting groups of employees, since that made the insurance math work. (Once you had a sufficiently large group of workers, you were basically guaranteed that premiums from the relatively healthy majority would cover the high medical expenses of the small minority with serious health problems.) But they soon started selling some policies on an individual basis, too. They generally made the policies available to anybody who could afford the relatively reasonable premiums, even to people with known health problems, in order to create a larger class of paying customers.

With reinforcement from the government—which, among other things, decided to make employer-sponsored health insurance tax-deductible—the system became entrenched. It was good for employers, who started paying for their workers’ health benefits as a way to cement their loyalty and win labor peace; it was good for employees, who had access to affordable coverage; and it was good for doctors and hospitals, who got a steadier, more reliable stream of payments for services. It was also good for opponents of national health insurance, who cited the success of Blue Cross to validate their opinion.

But this was not a system established to protect individuals from financial risk, at least not primarily. It was, instead, a system created to make money for doctors and hospitals—and, subsequently, to give employers a relatively affordable way of placating workers. As a result, the guarantee of protection it offered Americans—not all of them, but most of them—turned out to be fleeting.

By the 1970s, the cost of medicine was going through the roof, right at the time that foreign competition began to crush U.S. manufacturers. Soon the calculus for all employers began to change. Whereas before it had been in their obvious financial interest to be generous about employee health insurance, it was now in their obvious financial interest to be stingy. The steady rise in employer-sponsored insurance halted and began, inevitably, to reverse itself. Insurance products had changed, too, as the old non-profits run by hospitals gave way to commercial insurers primarily interested in making money. Instead of charging everybody the same “community rate,” they screened for people in good health, charging higher rates for—or simply excluding—those with histories of anything from hay fever to cancer.

At one key historical juncture, back when these problems were first emerging, the federal government intervened to address them. It happened right after President Lyndon Johnson won reelection in 1964, bringing with him huge Democratic majorities. Together, they created Medicare and Medicaid, offering coverage to the elderly and the poor, two groups that were disconnected from the workplace and thus still struggled to get insurance. The effort succeeded: Medicaid led to large gains in health among the poor, while Medicare vastly reduced poverty among the elderly. But, while the architects of these programs hoped they’d be a stepping stone to national health insurance, the rise of conservative politics, with its signature hatred of the state, squelched that hope.

In the absence of further government intervention, the insurance system deteriorated. The result is the situation we have today. At any one time, according to the most recent census figures, about 46 million people, or roughly 15 percent of Americans, have no health insurance. Conservatives note that this is just a snapshot in time, that very few people actually lack insurance for the entire year. But the fact that people are constantly moving in and out of coverage is not a sign of our health care system’s strength; it’s a sign of its weakness. Another way to look at the numbers is that, over the course of a two-year period, more than one-fourth of the population will go without health insurance for some time.

And it’s not as if having insurance guarantees financial protection. Many people have coverage with gaps that expose them to onerous medical bills. According to a recent study conducted by researchers from the Commonwealth Fund and published in the peer-reviewed journal Health Affairs, in 2007 some 25 million Americans with health insurance were “underinsured,” meaning they had high out-of-pocket expenses. Nearly half reported trouble paying bills, and more than half said they went without appropriate medical care—whether it was choosing not to fill prescriptions, skipping doctor visits when sick, or failing to get recommended tests and treatment.

Nor are all, or even most, of the people without adequate health insurance among society’s most destitute. The majority in the Commonwealth Fund study were in working families. And a substantial minority were middle class, with household incomes of more than $40,000 per year. “Insurance erosion has spread up the income distribution well into the middle-income range,” the authors concluded—reprising the very warning that researchers had made back in the 1930s.

ALAS, THAT’S NOT ALL that’s wrong with U.S. health care today. The main reason health insurance coverage is presently declining is that it’s gotten so expensive, with the nation’s overall bill consistently rising faster than inflation. This is the product of many factors, chief among them the development of ever-more-powerful technology and the huge demand for it. If the expense of medical care simply rose at a more reasonable rate, we’d still have a problem of people without adequate insurance. But the problem wouldn’t be getting worse—or adding to the financial burden that falls on employers and government.

To be fair, there’s no iron law of economics that says we cannot choose to spend 16 percent of our gross domestic product on health care—or more. But it has become apparent that we’re not getting much for all of this extra money. While U.S. medicine excels in certain areas, like breast cancer treatment, it lags in others, like ongoing diabetes care. On the whole, the data suggest that the United States does not have health care outcomes superior to countries like France, Germany, or Switzerland—all of which have universal coverage yet spend substantially less money.

Some defenders of the status quo argue that the high cost of U.S. health care is the price for our unparalleled record of medical innovation. But it’s direct government spending on research, through the National Institutes of Health, that generates the scientific breakthroughs necessary for miracle cures. And, while the drug and device industries perform the necessary work of turning these breakthroughs into treatments, they also churn out products that turn out not to be innovative at all. As writers like Shannon Brownlee and Merrill Goozner have documented persuasively, we pay for a great deal of “over-treatment”—much of it in the form of high-tech cures that don’t really help and sometimes hurt patients.

Our health care crisis, then, is really several, intertwined crises. If people didn’t get so much inappropriate or wasteful care, they might not run up such big individual bills. If they didn’t run up such big bills, insurance premiums wouldn’t cost so much. If insurance didn’t cost so much, more people could pay for it. It makes sense to think about these problems together and, if possible, to work on solving them simultaneously.

TO MANY activists and experts on the left, one solution in particular seems uniquely capable of having such a broad impact: single-payer health insurance. The term “single-payer” reflects the fact that, in the purist form of such a system, the government is responsible for everybody’s medical bills. In practice, though, single-payer systems usually reserve at least some role for private insurance.

Advocates of single-payer systems complain frequently that the mainstream political debate doesn’t give their idea the attention it deserves. They are right. Public insurance programs enjoy huge economies of scale; they don’t fritter away money on profits or efforts to skim healthier patients from the population. When it comes to billing, they tend to be a lot simpler than, say, a system with dozens of competing insurance plans. All insurance systems require providers to file a lot of paperwork; single-payer systems, though, require just one set. The centralized power of single-payer systems also gives them unparalleled sway over not just the amount of money they pay but how they dole it out; with that kind of leverage, they can push the medical system toward making key improvements in quality.

Conservative critics of single-payer raise the perfectly respectable question of whether a government program could really wield such power judiciously. But it’s telling that, when Taiwan set out to create a universal coverage system for its newly prosperous society a few years ago, it carefully studied schemes from around the world—and settled on a single-payer system, because it seemed to deliver the best, most equitable medical care at the lowest price. Today, experts say Taiwan has one of the world’s most efficient, convenient, and effective health care systems.

In an ideal world, then, single-payer would almost certainly be the best option. But is it politically feasible? Single-payer advocates like to point out that Representative John Conyers has a singlepayer bill in Congress with close to 100 co-sponsors. But many of those co-sponsors have signed on because, until now, it has been a cheap, meaningless way to win points with liberal interest groups. In the Senate, meanwhile, declared support for single-payer is virtually non-existent. Polling on the question is ambiguous, suggesting the public doesn’t yet have a strong opinion about the single-payer option. But even now, as the country seems to be moving left, voters remain deeply skeptical of massive government programs.

THAT IS WHY the present consensus among Washington reformers, starting with President Obama, leans toward a different set of reforms. Under these plans, most people with insurance would continue to get coverage the way they do now—through Medicaid, if they are poor, or through employer-sponsored insurance, if they have it. But, for those people who don’t have insurance and for anybody not satisfied with their present arrangements, these reforms would create a third option: a purchasing cooperative, designed to mimic the system federal employees use, in which people could choose among a set of regulated insurance plans. The private insurers participating in this cooperative couldn’t discriminate against people with pre-existing conditions by charging higher rates or excluding them altogether. Every plan would have to provide the same core benefits package, although insurers would be free to offer extra benefits as well. To make sure everybody could afford a policy, the government would offer subsidies, scaled to income. To finance these subsidies as well as the necessary expansions of Medicaid, the government would tap money available elsewhere in the budget, some of it from expiring Bush tax cuts, then raise additional revenue—by, among other things, requiring medium and large employers that don’t offer coverage on their own to pay a tax.

The underlying premise of these proposals is caution, at least to the extent that even a tentative overhaul of health care costing well more than $100 billion per year can qualify as “cautious.” In theory, most medium and large employers offering coverage would continue to do so, at least for the short term; that means people who had insurance they liked would, for the most part, get to keep it. Backers of these schemes have said they would create a quasi-independent, permanent commission—modeled on the Federal Reserve Board—to make key decisions, like what benefits all plans must cover. But they haven’t been too specific about this board’s powers, suggesting that it would be a pretty weak institution at first—lest the prospect of government making health care decisions scare off would-be supporters.

If this scheme works out as planned, private insurers would, in effect, operate as a public utility under the close watch of government regulators. But the insurance industry might not be that easy to regulate. That’s why Obama and his allies have embraced an innovation first promoted by Jacob Hacker, a political scientist and health policy expert: the creation of a new public insurance program, which would provide good benefits and be available to anybody through the purchasing cooperative. Ideally, such a plan would be able to exert additional leverage over pricing and quality. And if the plan proved more efficient than its private competitors, over time it would attract so many people that it would evolve into a single-payer system by default. Still, the government wouldn’t force anyone into it. And, because it wouldn’t cover everybody, at least right away, it couldn’t meddle with the same strength as a true single-payer system.

The common thread to these ideas is a clear desire to avoid politically troublesome disruptions. But the political virtue of these schemes is also their key policy weakness. Creating a truly efficient health insurance system—one that minimized waste and forced the medical system to act in ways that improved quality—necessarily involves precisely the disruptions today’s reformers want to avoid. It’s hardly surprising, for example, that a recent Congressional Budget Office report predicted that reforms like the ones under discussion would produce only modest savings in the next few years.

That is why schemes like Obama’s frequently earn derision, not just from single-payer advocates but also from critics on the right who think it’s wrong to expand coverage without first fixing the health care system’s other problems. Typical was a September Newsweek column by Robert Samuelson, in which he suggested that calls for universal coverage were “utterly wrong” and urged policymakers to focus instead on the “unglamorous and probably unpopular” work of forcing down the consumption of expensive medical services.

The desire to prioritize cost and quality over coverage is understandable. It’s also misguided. Critics like Samuelson fail to appreciate the difficulty of fixing anything in a fractured insurance system like the one we have today. To take one obvious example, a key to promoting efficiency is continuous care—that is, making sure people see the same doctors over time—since that tends to cut down on wasteful duplication of services and misdiagnoses. But a trademark of the U.S. health insurance system is its volatility. If people aren’t moving in and out of coverage altogether, they’re moving in and out of different insurance plans, which often means switching doctors, too.

More important, those critics who think coverage should come second fail to grasp—much like some single-payer advocates do—that the probable alternative to a plan like Obama’s is doing nothing, since it’s even harder to enact cost-control reforms, many of which offend particular special interest groups, without the support of a public that thinks it will gain something in the form of guaranteed coverage. No, the plans now on the table in Washington may not slash costs and improve quality right away. But they will make progress. And that may be as good as it gets.

THEN AGAIN, many critics on the right would be perfectly happy with the status quo. Yes, tens of millions of Americans can’t pay for medical care because they lack adequate insurance; yes, many of these people will suffer. That’s the price of having a functioning market economy, they’ll say, one that inevitably imposes some pain as it creates prosperity for everybody.

But the choice between a humane society and a productive society is a false one. And the proof is in history. Conservatives made the same complaint about the New Deal, insisting that Social Security and other government interventions would destroy American innovation and lead to socialism. But the New Dealers weren’t undermining capitalism. They were saving it from shortcomings that, left to fester, might well have destroyed it from within.

Today, capitalism’s most serious shortcoming is a lack of affordable health care; once again, government intervention is the only realistic remedy. The New Dealers anticipated this problem, but they left it to future generations. Seventy years later, the time has finally come to solve it.

Jonathan Cohn is a senior editor of The New Republic.

This article appeared in the February 18, 2009 issue of the magazine.