San José State University
Department of Economics
Thayer Watkins
Silicon Valley
& Tornado Alley

Michael Shadid and Cooperative Medical Care

Michael Shadid was born in 1882 in a village of Lebanon when it was part of the Ottoman Empire. The poverty of his family is revealed in its mortality statistics. There wer 12 children born, Michael being the last, but of that twelve only three survived infancy. By the time Michael was a teenager he had moved to Beirut and some of his relatives migrated to the United States. Contact with a physician at the American University in Beirut where he was securing his high school education convinced him that he should become a physician to minister to the health needs of the needy.

At age 16 he migrated to American to join relatives there. As Lebanonese emigrants have done all over the world, he first supported himself as a pack peddler. He must have been at least moderately successful at this occupation because he enrolled in John Tarleton College in Stephenville, Texas in 1902. He must have been an individual of outstanding intellectual ability because he completed enough of his education to be admitted to the medical school of Washington University in St. Louis. He settled in St. Louis and sold jewelry door-to-door to earn his living.

He completed his medical degree in 1906 or 1907 and took a position as an assistant to a general practitioner in rural Missouri. He married the woman whom his family had betrothed him to in Lebanon years before. The couple then relocated to Oklahoma. Conscientous physicians take specialty medical training courses to update their expertise. Michael Shadid went to Chicago to attend such specialty training courses. While there he became acquainted with Eugene Debs' Socialist Party and subsequently joined it. People like Michael Shadid who come from a strongly knit, almost tribal, community feel more comfortable with the ideology of socialism. Other members of the party from Oklahoma advised him to establish a medical practice in the small town of Carter where it was alleged that everyone was a socialist. His practice did well in Carter and later (c. 1923) he relocated to the larger city of Elk City, Oklahoma.

Michael Shadid perceived that something was not right with standard medical practice in America. He felt that the emphasis on fee-for-service for the sick left out the opportunity to advise and assist people on maintaining their health. In other words, he felt that doctors should devote more of their time to preventive medicine. This was a new idea at the time.

Although Michael Shadid probably was not aware that a conspiracy of the medical establishment had effectively created a medical cartel. By artificially limiting the admissions to medical schools the American Medical Association (AMA) had reduced the supply of physicians and was raising the income of physicians. One element of the cartel was that the physicians could practice price discrimination, charging whatever the traffic would bear. This meant that the poor were charged a lower fee for the same service than the wealthier. This was billed as a way in which the rich were subsidizing the medical care of the poor. This was not the case at all. The cartel was simply setting the fees for each segment of the market at the level which maximized profit. As Michael Shadid would find out later the cartel did not intend to tolerate any deviation which might endanger the arrangement. Thus the contrast was not between socialism and free market enterprise; it was between a profit maximizing cartel protected from competition by the power of the state and socialism.

Michael Shadid may have felt he was fulfilling the principles of socialism but he was equally well fulfilling the principles of free enterprise. He wanted to create a medical enterprise that would provide prepaid medical services, a service he saw there would be a demand for. Such an enterprise would have an incentive to provide preventive care to reduce the cost of providing medical care to its clientel in the future. The medical cartel did not want prepaid medical service available because it would compete with their program of discriminatory monopoly pricing at the time the services were desperately needed.

In 1929 Michael Shadid started organizing the building of the Community Hospital of Beckham County, Oklahoma. The Beckham County Medical Society expelled him although he had been a member in good standing for twenty years. This normally would be a devastating blow to a physician's practice because a physician can treat patients at most hospitals unless he or she is a member of the county medical association. This is why the creation of a hospital outside the control of the medical establishment was such an essential first step. An important factor in the successful creation of the Community Hospital is that Shadid had the political backing and financial support of the Oklahoma Farmers' Union.

Against the worst efforts of the AMA, the Oklahoma Medical Association and the Beckham County Medical Association the Community Health Association began operations in 1931 and Shadid's program grew. In 1934 the Oklahoma Farmers' Union took over the program which was serving about fifteen thousand patients. The doctors who participated in Shadid's program did so knowing that they would be subject to the same ruthless persecution by the medical establishment that had been applied to Michael Shadid.

Michael Shadid had been proselytizing all along his career. In 1912 he wrote The Self-Physician: Or How to Get Well and Keep Well. In 1947 he was one of the founders of Cooperative Health Federation of America and served as its president from 1947 to 1949. In 1956 he wrote and published Crusading Doctor: My Fight for Cooperative Medicine.

Michael Shadid's advice and guidance were instrumental in the founding of other medical cooperatives such the Group Health Cooperative of Puget Sound in the region around Seattle. This started with a speaking tour Shadid made in the Pacific Northwest in 1945.

Michael Shadid died at age 84 in 1966.

Cooperatives as voluntary, self-supporting enterprises might not be successful, but in no way are they socialist. As experimental enterprises there are no reasons that they should be suppressed. As experimental enterprises they are the market economy functioning just as it should be functioning.

HOME PAGE OF applet-magic
HOME PAGE OF Thayer Watkins