What Happened to Health Care Reform? - Princeton University
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Preferred Citation: Paul Starr, "What Happened to HealthCareReform?" The American Prospect no. 20 (Winter 1995): 20-31.
Paul Starr
It was one year from euphoria to defeat. On the evening ofSeptember 23, 1993,I sat in the gallery of the House of Representatives for PresidentClinton'sspeech introducing the administration's Health Security plan. Forthose of uswho had worked on it, this was the climax of a long, intense, andnot alwayseasy collaboration. I had been one of about ten people on thehealth policyteam in the White House who had written and rewritten the planafter the castof hundreds had left. Now the president had the nation's attentionfocused onideas we deeply believed in, and he spoke with tremendous force.
At first it seemed Clinton would move the country. The nextmorning, StanleyGreenberg, the president's pollster, crowed that the overnightsurveys showedwe were winning two-thirds approval. Commentators were saying thatno matter how the battle over detailsmight work out, the president had established the right principlesandchallenged Americans to a great, historic mission. The principle ofhealthcoverage for all was an achievement, wrote A.M. Rosenthal of theNew YorkTimes, that Clinton could already nail to the wall.
A year later, almost to the day, Senate Majority Leader GeorgeMitchellpronounced health care reform dead. The funeral was private; nocrowds gatheredin mourning. While opinion surveys continued to show strong supportfor theingredients of reform, the complexity of the plans and onslaught ofcriticismhad even left many supporters bewildered and uncertain. Theopposition hadfocused attention on what those with good health care might lose.Commentatorsturned on the president. On the eve of the midterm election, JoeKlein told theCBS Evening News audience that the president had led the countryinto a blindalley with his grandiose reform plan.
Of course, not just the Clinton plan was defeated. Every otherproposal--theCooper, Chafee, Moynihan, Mitchell, Cooper and Grandy, and mainstream groupplans, to mention only the most prominent, consensus-buildingefforts--died in Congress. The question is as much why the centerfailed as whythe president did. Only a few weeks earlier Senator Bob Packwoodhad told hisRepublican colleagues that now that they had killed health carereform, theyhad to make sure their fingerprints weren't on it. Joe Klein'sreaction was notunusual: The Republicans enjoyed a double triumph, killing reformand thenwatching jurors find the president guilty. It was the politicalequivalent ofthe perfect crime.
The Republicans enjoyed a double triumph, killingreform and thenwatching jurors find the president guilty. It was the politicalequivalent ofthe perfect crime.
The collapse of health care reform in the first two years of theClintonadministration will go down as one of the great lost politicalopportunities inAmerican history. It is a story of compromises that never happened,of dealsthat were never closed, of Republicans, moderate Democrats, and keyinterestgroups that backpedaled from proposals they themselves had earlierco-sponsoredor endorsed.
It is also a story of strategic miscalculation on the part of thepresident andthose of us who advised him. In 1993, 23 Republican senators,including then-MinorityLeader Robert Dole, cosponsored a bill introduced by Senator JohnChafee thatsought to achieve universal coverage through a mandate that is, amandate onindividuals to buy insurance. Nearly every major health careinterest group hadendorsed substantial reforms--grandiose ones, in fact. TheAmerican MedicalAssociation (AMA) and Health Insurance Association of America(HIAA), the twogreat, historic bastions of opposition to compulsory healthinsurance, bothwent on record in support of an employer mandate and universalcoverage. Eventhe U.S. Chamber of Commerce endorsed an employer mandate, as didmany largecorporations. Other groups came out variously for reform optionsthat ran alonga spectrum from Canadian-style, single-payerprograms on the left to managed competition and medical savingsaccounts andradical changes in tax policy on the right. Under thecircumstances, it waseasy to believe the country was ready for substantial reform andthat a market-oriented,consumer-choice approach to universal coverage, positioned in thecenter, could become aplatform for consensus.
It was easy to believe, but it turned out to be wrong.
On the political calendar, health care first gave way to otherpriorities.During the presidential transition and his initial year in office,Clintonconcentrated on the economy and the budget. The battle of thebudget dragged oninto the summer of 1993 and threatened his presidency; he hadlittle choice butto focus on winning it. This loss of time on health care, contraryto post-mortems in the media, had little, if anything, to do with the supposed circusof the health care task force and its 500-memberworking groups. The task force may well have misdirectedadministrationenergies, but it was legally dissolved at the end of May; themembers of theworking groups had dispersed weeks earlier, mostly to the federalagencieswhere they ordinarily worked. For months, the health policy teamwas forced totread water, lest further leaks about health care financealternatives like thetrial balloon for a value-addedtax, floated brilliantly on April 15 disturb budget negotiationsunder way.
As the spring unfolded, we all had the sinking feeling thatcritical time wasbeing lost. Senator Robert Byrd, custodian of Senate rules andtraditions,foreclosed the option of moving health care reform into the budgetreconciliation process (where it would have needed only 50 votes topass). Itwas not until the early summer that a detailed draft of the healthplan wasactually committed to paper. Even after the president's speech inSeptember andthe introduction of the health care bill, NAFTA took priority. Somesuggestedthis would help health care by earning the president support frombusiness andopinion leaders, and in fact Clinton did end the year well,maintaining hisreputation as a winner who comes from behind late in the game.
But for health care reform, the season of opportunity was ending.Nineteen ninety-four would begin with a Whitewater feeding frenzy in the press,undermining trust inthe president. The opponents of reform were organizing theirforces,concentrating first on groups with ideological affinities. After aninternalinsurrection, the Chamber of Commerce reversed its endorsement ofa mandate;other business organizations likewise "defected," as one businessrepresentative put it to me at the time. The AMA qualified itsendorsement of amandate limiting it to firms with over 100 employees and therebyexcluding mostprivate doctors, the majority of whom do not cover their ownemployees. SenatorDole and other Republicans abandoned the Chafee bill and theindividualmandate. Dole then cosponsored a bill with Packwood and withinweeks abandonedthat, too, saying that this the second bill he offered had "toomuchgovernment."
Overconfident about the momentum of reform, we misjudged the healthcarepolitics of 1993 as a change in the climate when it was only achange in theweather. We wrongly assumed that the leading Republicans and keyinterestgroups that had endorsed substantial reforms would at leastmaintain theirpositions and might be pulled closer to ours in a final bargain.But by spring1994, they had no reason to accept a deal. Republicans were alreadyanticipating big midterm election gains; killing reform in the103rd Congresswas rational ("Sight unseen, oppose it" was Republican strategistBillKristol's advice on Senator Mitchell's attempt to craft acompromise proposal).With unemployment down, Americans were worrying less about theirjobs andhealth coverage and more about crime. As health care inflationeased primarilybecause inflation was generally under control, businesses worriedless abouthealth care cost containment and more about the politicalimplications of anexpansion of government authority. Under these conditions, theideological andinterest-group opponents of reform were able to change the subject.Instead of health care,the focus of debate became government, which was a debate we weresure tolose.
So were people who had doubts about health reform from the startproved rightby the way it ended? Was defeat inevitable? To some who wereinvolved, this maybe a comforting thought. If the odds were overwhelmingly againstreform, thoseof us who were involved bear no responsibility for the outcome.Unfortunately,I do not believe that. We had a historic opportunity, and we blewit.
Perhaps the fateful choice was the decision to design a proposalinside theWhite House and put the Clinton name on it. Much criticism hasfocused on thesecret deliberations of the White House task force; this is notwhat I have inmind. Every president works up proposals "behind closed doors"beforepresenting them. The real problem was that time was spentdeveloping a planthat should have been spent negotiating it; congressionalnegotiations did notget under way until the midterm elections were within spittingdistance. Thosewho felt shut out responded predictably. On health care, theadministrationignored the first rule of political cooperation, "In on thetakeoff, in on thelanding," which underlay other quieter and more successfullegislativeinitiatives.
By putting his personal signature on health care reform, moreover,Clinton gavethe Republicans an incentive to defeat it and humiliate him ratherthancompromise. The Clinton label also led to confusion of publicfeelings aboutthe president as a person with the entire issue of health carereform. TheFirst Lady's role further muddied the issue. There is no logicalconnectionbetween views on health care reform and, say, gays in the militaryor the roleof women in society. But the identification of the Clintons withthe reform ofhealth care became so strong that sentiments crossed over. TheWall StreetJournal reported showing the same description of a healthreform plan to focusgroups with and without the Clinton label. Without the label, theplan won morethan 70 percent support; with the label, approval dropped 30 to 40points. Itseems likely, therefore, that when polls asked for opinions aboutthe "Clintonhealth plan," they tapped general feelings of confidence inPresident Clintonrather than preferences about the specifics of health policy. Woulddifferentdecisions on alliances, cost containment, and other provisions haveattractedmore public support? Elite opinion might well have been affected,but I am notsure it would have made any difference to the public at large. Infact, somesurvey evidence suggests that although public support for thepresident'sapproach fell, it remained higher than support for any other testedalternative.
Recriminations, Left and Right
The defeat of reform has set off a festival of recriminations.Among thecriticisms, one often hears two complementary I-told-you-so's.From the left: If only Clinton had endorsed single payer or anexpansion ofMedicare, he would have had a simpler plan, and by rallying thepublic againstthe insurance industry, he could have won. And then, fromconservativeDemocrats: If only Clinton had endorsed the Cooper plan or someother moremoderate proposal, we would have substantial reform today.Since we cannot rerun history, these critics are safe from everbeingdisproved. However, no serious observer believes that Congressmight havepassed a national single-payer plan. Paul Wellstone, single-payer'sleading advocate in the Senate, had only four cosponsors for hisbill; reaching50 votes, much less 60, was inconceivable. Some single-payeradvocates acknowledged that congressional passage was implausiblebut thoughtthe president should take the issue to the public in a populistcampaignagainst special interests. However, the defeat of California'ssingle-payerballot initiative by a margin of 73 to 27 percent should put torest thenotion that a popular uprising against the insurance industry wasready to beawakened. The supporters of single payer enjoyed the illusion thattheir planwas simpler and more popular only because the Clinton plan was thelightningrod for criticism.
The harder question is whether President Clinton should have movedat theoutset toward the conservative Democrats led by Representative JimCooper andthe Senate Republicans who initially followed Chafee's lead. Inretrospect, thepresident would clearly have done better to identify himself withtheconservative Democrats and moderate Senate Republicans to lock insupport forreform from when they were offering it. But the cross-pressuresat the time were enormous, and support for these plans might wellhavedissipated if the president had embraced them and they had beensubjected tothe same intense public scrutiny that the president's planreceived. In fact,the Chafee and Cooper plans lost support among their originalbackers as theimplications of their financing provisions became clearer.
Strategy: Right, Left, Right
The Clinton strategy took three political turns or rather, it tooktwo turnsand then aborted the third. The first turn, a move to the centerright, tookplace in August and September 1992. In the final stretch of thecampaign,Clinton embraced managed competition "within a budget" as aframework for aprogram of universal health coverage. (I was one of those whoadvocated thisshift.) Managed competition was heresy to many of thecongressional Democratson whom Clinton would later have to rely to pass his program, andClinton'ssupport for it was not mere campaign rhetoric. The principlesadopted beforethe election guided work on his health plan after he becamepresident.The second turn--a move left--came in the period between Januaryand October1993, when the president sought to consolidate support among themany Democratsand constituency groups unhappy about his adoption of amarket-orientedapproach. One intense debate in the White House, for example,concerned thephasing in of reform and whether coverage would begin with aminimal,"barebones" benefit package or a comprehensive one. The presidentopted forcomprehensive benefits (although the final benefit package wasclose to themedian of private insurance policies today). At several keydecision points, hewent for the bolder option, such as more inclusive purchasingalliances (whichI favored in part because they could offer more choices tofamilies thanemployers do). The program would cover abortions, and it wouldinclude a numberof expensive elements designed to appeal to older Americans: aprescriptiondrug benefit to be added to Medicare, a new program of home-basedlong-termcare for the elderly and disabled, and generous healthinsurance subsidies forearly retirees.
While the basic framework of the Clinton plan involved consumerchoice amongcompeting health plans under rules designed to increase sensitivityto cost,the Congressional Budget Office (CBO) was unwilling to count muchsavings fromcompetition in its estimate of the future costs of anyproposal--Cooper's andChafee's as well as ours. CBO's "scoring" would have considerablepoliticalimpact, and one of the president's highest priorities in healthcare reform wasto assure that the budget deficit continued downward in the late1990s. So tokeep projected costs in line, the plan included tight caps onpremium increasesafter reform was introduced. With the bigger program came tighterregulation--tighter than many of us had anticipated or wanted.
Two theories in favor of this bigger, tighter program hadconsiderableinfluence within the administration. What I now think of as the"enthusiasmtheory" held that since there would be fierce opponents of reform,we neededequally passionate supporters. We had to give ordinary peoplesomething worthfighting for. A minimal program of barebones insurance or a programthat wasonly directed toward the poor would fail to appeal to the middleclass that hadelected Clinton. (Good managed care also requires a broad benefitspackage.)And to win the support of the elderly, the president had to includesignificantbenefits for them--hence not only prescription drugs but alsolong-termcare and early retiree benefits.
A second argument, which I now think of as the "bargaining chip" or"onion" theory, held that the administration should go to Congress with abig programintentionally including elements that we would have to bargain awaylater. Inexchange for support, some benefits could be cut, the caps relaxed,thealliances scaled back or sacrificed entirely. Layers of the onioncould bepeeled off, but we would still retain the core of theprogram--universalcoverage, consumer choice, and a backup system of cost containment.Theparadigm was a complex negotiation: "You don't go into anegotiation with yourfinal offer on the table." By proposing a comprehensive plan,Clinton wouldsignal he appreciated the legitimate concerns of diverse groups; atthe sametime, he would indicate an open mind and a readiness tocompromise.
The final lap would necessarily require a turn right; as Iunderstood it, thequestion was only when this turn would come and how far it wouldgo. There wassimply no other way to pass a bill than to get conservativeDemocrats andmoderate Republicans on board. However, besides the desire to havea strongprogram that could generate public enthusiasm, an immediatepolitical rationalefor delaying the right turn was that leading congressionalDemocrats did not want the administration to make premature concessions. To getpast the gatekeepers in Congress, particularly Pete Stark, whodominated healthcare legislation on the House Ways and Means Committee, it was notat allobvious that the wisest approach would be to negotiate with arelatively juniorcongressman from Tennessee, Jim Cooper. So compromise would have tocome in thelater stages of congressional deliberation.
To say these judgments about strategy were mistaken is anunderstatement; theyproved to be a disaster. Despite the comprehensive benefit packageand theextras such as prescription drug coverage for the elderly, we didnot receivepassionate support from the groups we were counting on. We didsucceed,however, in mobilizing the opposition. The scale of the program anditsregulatory features also caused sympathetic groups in the businesscommunityand opinion leaders in the media to think twice about support forreform.Because we had failed to edit the plan down to its essentials andfind familiarways to convey it, many people couldn't understand what we wereproposing.There were too many parts, too many new ideas, even for many policyexperts tokeep straight.
The original political impulse behind the managed competitionstrategy was tofind common ground with moderates and conservatives. Instead, muchof therhetoric used to defend the president's plan made it sound almostas if it werea single-payer proposal. Although the administration repeatedlysought to link the HealthSecurity plan to the concerns of the middle class, universalcoverage becamethe one clear theme, suggesting a focus on the poor. The presidenthad investedso much in the proposal that one might have expected more of aneffort todefend it. But after Mrs. Clinton's bravura performance at theinitialcongressional hearings and the submission of the bill, the WhiteHouse focusedentirely on the principles of reform and made little effort todefend the partsof the proposal. The administration had gone to the trouble ofwriting a billand then left it like a foundling on the doorstep of Congress.
The Failure of Congressional Compromise
In late 1992 and early 1993, there seemed to be the makings of aconsensusaround the principles of universal coverage and managedcompetition. TheClinton, Cooper, and Chafee proposals all called for consumerchoice amongcompeting health plans, the establishment of health insurancepurchasingcooperatives, a standard benefit package set or interpreted by anationalboard, similar reforms of the insurance market, and premiumsubsidies for low-incomefamilies. The Chafee and Clinton plans included mandates to makethemuniversal; Cooper saw that as a second step. By adopting a managedcompetitionframework, it seemed, the president was laying the basis foreventualcompromise with Cooper and Chafee. If the administration startedout with astructurally similar plan, it would be much easier to split thedifference onany number of provisions.But the sharply partisan climate of 1994 and fear-mongeringby the opposition were hardly conducive to splitting differences.Many peoplesimply didn't want to see compromise succeed interest groups thatpreferred tosee no legislation; Republicans that preferred to stymie progresson an issuethat symbolized the president's agenda; Democrats who did not wantto offendone or another constituency by supporting legislation thatunavoidablyalienated some supporters. After saying he was flexible on almostevery aspectof reform, the president boxed himself into a corner by threateningto veto anybill that fell short of universal coverage.
The failure of congressional compromise also stemmed, however, fromtheweaknesses of the centrist proposals. While rejecting an employermandate, theCooper and Chafee plans included no other source of revenue capableoffinancing the broadened coverage each called for. The Cooper plancovered upits inadequate financing by forcing health plans to eat losses fromunfundedsubsidies for the poor. The Chafee plan had nowhere near enoughrevenue to payfor the subsidies it envisioned for households with incomes up to240 percentof the poverty level. These inadequacies were typical of recentmoderate andconservative proposals. The reform plan that President Bushpresented inFebruary 1992, for example, included no financing provisions atall. Dolebacked out of the Chafee bill and later out of the bill hecosponsored withPackwood when he saw the fiscal difficulties they posed.
The financing provisions in the Chafee and Cooper plans also raisedotherobjections. Studies showed that Chafee's individual mandate andsubsidies wouldsharply increase costs for middle-classhouseholds; both the Chafee and Cooper plans created strongincentives againstwork. If the president had embraced either proposal, the spotlightwould havefallen on these problems.
The employer mandate in the Clinton plan helped to resolve theseobjections butat the cost of raising others. If there is a simple answer to thequestion,"Why did universal coverage fail?" it is simply this: Congresswould not enactthe employer mandate in any form, and when the mandate failed, sodid universalcoverage, because there was no willingness to consider abroad-basedtax. At the inception of the debate, the employer mandate enjoyedmore interest-groupsupport than ever before as well as approval by a wide margin inpublic opinionpolls. It was by far the most plausible financing strategy forexpandedcoverage; after all, Richard Nixon had proposed it. But whilegroups like theAMA and the health insurers had accepted a mandate as preferable toa tax-financedsystem, they would never fight for it, nor would other interestgroups. On theother hand, the National Federation of Independent Businesses(NFIB), the small-businesslobby, fiercely resisted the mandate and targeted its effortsstrategically todistricts of swing members of key committees.
The Clinton plan anticipated opposition by small-business ownersand limited their obligations under an approach that the Chamber ofCommerce had suggested, but it was to no avail. The press almostalwaysreported that employers would have to pay 80 percent of premiums;few smallemployers understood that this obligation was limited to a share ofpayroll,ranging from 3.2 to 7.9 percent, depending on the size and averagewage of afirm. In fact, most small businesses that currently insure wouldhave seensignificant declines in cost under the Clinton plan. As in otherareas, theplan's complexity impeded our ability to communicate it, but themisunderstandings may have made little difference. Business simplydid nottrust the administration. Subsidies, the small-businesslobby argued, might be temporary, while the mandate would beforever. The lackof trust in the president and the government undermined everyattempt to adjustthe proposal to make it acceptable.
I had supposed that employer contributions were the kind of issueperfectlysuited to bargaining. For example, instead of an 80 percentcontribution, thelevel could be set at 50 percent. The smallest employers, withfewer than 10 or20 employees, could be entirely exempt or pay a minimum rate of 2or 3 percentof payroll. These were precisely the compromises that SenatorsEdward M.Kennedy, Daniel P. Moynihan, John Breaux, Mitchell, and othersincorporatedinto their plans or floated as options. If Clinton had had ten moreDemocratsin the Senate, as Lyndon Johnson did when Medicare passed in 1965,a deal ofthis kind might have worked, but the Democratic margin was just toonarrow. Itwas not simply southerners like Sam Nunn who opposed the mandate.Bob Kerrey(see box), Dianne Feinstein, and JosephLieberman--all running for re-election--would not vote for the mandate in any form.
Business groups did not become implacable opponents of the Clintonplanimmediately after its release in October 1993. It took severalmonths for themto resolve their own differences and uncertainties. By midwinter,they weredecisively against the president's plan; by late spring, theywanted nothing topass. In his effort to find a majority for a reduced program inAugust, SenatorMitchell gave up the premium caps, made the alliances voluntary,and deferredthe possibility of an employer mandate (for 50 percent of premiums)until 2002.At that point, the mandate would be triggered only if twoconditions were met--coverage hadn't reached 95 percent of the population in a state, andCongresshad failed to do anything else to raise it.
These concessions made no difference to the mandate's opponents;nothing wouldmollify them now. House Majority Leader Richard Gephardt hadcombined the twobills that passed House committees into legislation that was farmore liberalthan Mitchell's. Many Democrats made no secret of their desire touse theMitchell bill as a stratagem to get the legislation into conferenceand thenbring back a much stronger bill to the Senate. It is hard toimagine anapproach better designed to increase distrust of Mitchell'sproposal amongconservative Democrats and moderate Republicans. But Gephardt'sbill probablynever had the slightest chance of passing the House. Rather thandevelop acompromise, Gephardt had largely accepted the bill that had emergedfrom theWays and Means Committee. To business interests and conservativeDemocrats,this was even less palatable than the Clinton plan because itcreated a newMedicare Part C for the under-65 population, which they believedwould screw down payment rates, shift costs toprivate insurance plans, and ultimately bring about a collapse ofthe privatemarket. In fact, the only conceivable scenario for legislation bythe summerwas that the House would finally defer to a more conservative billdeveloped inthe Senate. The unwillingness of House Democrats to acknowledgethis realitywas a premonition of coming disaster.
The final act was played out in the Senate and starred the"mainstream group,"a bipartisan coalition of roughly 18 Senators, led by Chafee andBreaux. Of allthe centrist proposals that included significantly broadenedcoverage, themainstream plan was the only one that was fiscally defensible. Itfinanced anextension of coverage up to 91 or 92 percent of the population byimposing acigarette tax, a tax on high-costhealth plans, and cuts in Medicare. Coverage of pregnant women andchildrenwould have been nearly universal. The proposal also includedinsurance marketreforms and voluntary purchasing alliances along the lines of theJackson HoleGroup's version of managed competition. For all its flaws, the billwould havebeen a historic advance.
There was only one problem: It didn't have much public support. Itwas too bigfor conservatives, too little for liberals. Democrats in Congresswho genuinelywanted a compromise found that hardly any organized constituencieswouldswallow the bitter pill the mainstream group was offering. Theelderly saw theproposal as cutting Medicare without providing anything in return;unions sawit as taxing high-costhealth plans--the kind some union members still enjoy--without theguarantee ofcoverage "that can't be taken away." The mainstream group andMitchell mighthave overcome these problems and in a different political seasonsecured amajority, but the clock ran out.
From the beginning, the proposals in the center had failed togenerate anypublic excitement. Economists and conservative intellectuals maylike theindividual mandate in the Chafee plan and the cap on tax benefitsthat both theChafee and Cooper plans originally included, but no one has builtpublicsupport for these measures. Most of the initial business backingfor the Cooperplan seems to have been expedient. Business interests backed Cooperwhen theyfeared worse; they lost interest when the feared alternativesevaporated.
During the spring and summer of 1993, in what may really have beenthe crucialshift, the nation's elites abandoned health care reform entirely.They hadbecome impatient with its complexity and nervous about its cost.While therewas a general swing in the national mood at the same time, eliteviews areparticularly critical. In 1992 and 1993, the Jackson Hole Group andthe NewYork Times editorial page seemed to be prodding the nation'sestablishment intoassuming leadership in a restructuring of the health care market.The Senatemainstream group was this establishment's congressionalincarnation. The effortmight have actually succeeded if the debate had come to a head inthe summer of1993 instead of the summer of 1994. The moment has now beenlost.
Divided We Fall
Before the 1992 elections, Democrats were split into severaldifferent factionson health care reform, and these divisions carried over into theClintonadministration and the Congress. Important figures in both theexecutive andlegislative branches were never committed to comprehensive healthcare reform;they favored reforms of the insurance market and some limitedexpansion ofaccess but not universal coverage. Another group strongly preferredreform onthe Medicare model--that is, primarily based on fee-for-servicemedicine with price controls. A significant minority wanted asingle-payer system.
The managed competition approach adopted by the president wassupposed to bringthese groups together, but this proved impossible. Constantin-fightingamong the factions resulted in hostile leaks to the press frominside theadministration and Congress, disparaging comments about thefeasibility ofdifferent options or the integrity of cost estimates, and theproliferation ofoptions until no mortal could keep them straight. The in-fightinghelped mightily to confuse the public, slow the momentum of reform,andeventually kill it.
The rise of managed care has produced a particularly deep riftamong reformers.Those who favored the Clinton plan and other variants in Congressaccept healthmaintenance organizations (HMOs) and other forms of managed care asa positiveforce or a necessary evil to carry out systemic reforms, controlcosts, andmake universal coverage affordable. However, the rise of managedcare has splitoff two wings of the reform coalition. Many progressives prefer asingle-payerapproach in part because they detest managed care and the insuranceindustry;the Clinton plan was not too little for them--it was unacceptable.This was alsothe view of many liberal physicians, notably specialists. At thesame time,many in the business world who previously wanted more governmentinterventionnow think that managed care gives them the key to cost control. Soif you hatedmanaged care, you didn't want the Clinton plan (no matter thatClinton wouldrequire every alliance to offer fee-for-service plans); and if you were an employer and liked managed care, you probably didn'tthink the Clinton plan was necessary.
But how about the opposition of special interests, particularly themillions ofdollars spent on the Harry and Louise commercials and otheradvertising,lobbying, and campaign contributions? No doubt these groups helpedto createpublic anxiety and political paralysis, but their influence iseasilyexaggerated. Several of the key interest groups were actually lesshostile toreform than in any prior battle over health insurance since the1930s. Theproblem was not so much that the opponents had more resources, butthat thesupporters could not mobilize theirs. While the antagonists hadgreat clarityof purpose, the groups backing reform suffered from multiple andcomplexfractures and were unable to unite.
At the outset, I thought we could overcome interest groupopposition byoffering a proposal that would attract, or at least not disturb,many of thekey interest groups. After all, the large insurance companies coulddo wellunder a managed competition approach. The American HospitalAssociation andCatholic Health Association favored the same approach to reform asthe Clintonplan. Major national organizations of physicians supporteduniversal coverage;even the AMA was no longer dedicated simply to obstructing change.Theadministration did receive support from the American College ofPhysicians, thepediatricians, neurologists, and family practitioners, as well asthe AmericanNursing Association, retail pharmacists, and other provider groups.But itfailed to close the deal with the insurance companies. And bycalling for majorcuts in future Medicare spending growth, it lost the support of thehospitalindustry; for the same reason, the American Association of RetiredPersons(AARP) decided not to endorse a specific plan until it was toolate.
Many people have written about the politics of health reform on thebasis ofwhich groups would be "winners" and which "losers" under differentapproaches.We expect the losers to resist, and on health care reform they did;thewinners, however, don't necessarily support change. They mayinstead focus onlesser provisions of a plan that hurt them or on the risk that thebalance ofeffects will turn negative as legislation moves through Congress orin thefuture. During 1993 and early 1994, many winners focused theirefforts onchanging provisions that adversely affected them and devoted littleenergy toensuring that reform would pass. Some winners opposed the Clintonplanoutright. For example, the manufacturing sector which now "exports"insuranceto spouses working in other sectors and carries a heavy load ofolder workersand early retirees would have seen its health insurance costs godowndramatically. But some provisions, like the generosity of thebenefit package,would have raised employer costs; the early retiree provisions wereunlikely tomake it through Congress; and the expansion of government authorityposed therisk of new burdens in the future. So although individual companiesbacked theClinton plan, the National Association of Manufacturers came outagainst it.
While many groups sympathetic to reform were lobbying to win oneprovision oranother in the reform plans, the health insurance andsmall-businesslobbies were focused unambiguously on defeating change. Thepoliticaladvertising reflected this difference. Advertisements by groupssupportingreform typically didn't back any particular legislation, just thegeneralideas. The opponents' advertisements, however, specificallyattacked theClinton plan, even after it was no longer an option.
The reform coalition suffered from a disease often fatal inpolitics: cross-cuttingcleavages. Policy factions and interest groups could not put asidetheirdifferences. Perhaps if they had seen the change coming in themidtermelections, it would have concentrated their minds. Now they've losttheirturn.
The Republicans' Turn
For the moment, the agenda for health care reform belongs to theRepublicans.Whether Senate and House Republicans can agree on a single bill isas yetunclear; in the Senate, the differences on health care between PhilGramm andJohn Chafee are enormous. But the Republicans in the new Congressare far morelikely to reach agreement than were Democrats in the last.
Any bill that passes this Congress, however, is unlikely to do muchto solvethe problems of coverage or cost. Covering the uninsured requirescrediblefinancing. The Republicans are not likely to approve a tax increasefor healthcare, and they will need Medicare and Medicaid savings to pay forpromised taxcuts. A balanced-budget amendment, in fact, will require far deeperretrenchment in these programs thananyone has yet contemplated. Medicaid may well be eliminated as anentitlementprogram. A Republican health care bill will likely include someinsurancemarket reforms (limiting the use of pre-existingcondition exclusions for someone with prior insurance coverage);limits ondamages in malpractice liability suits; measures to facilitate theautomationof health care transactions; and individual medical savingsaccounts designedto encourage people to enroll in catastrophic health insuranceplans thatrequire them to pay the first $2,500 or $3,000 in medical expenses.Many of thehealthy affluent will be attracted to such accounts. As a result,those whocontinue to enroll in conventional insurance plans with lowerdeductibles willbe a poorer and sicker population, and their rates will go up, ifplans of thattype continue to be available at all.
If such a program were to pass, the most likely prognosis is thatinequalitiesin health care would increase sharply. The supply of jobs thatcarry broadhealth and pension protection has been shrinking. The number ofAmericanswithout health insurance has risen over the past decade, but itwould now beeven higher if Congress had not expanded Medicaid in the 1980s toinclude morelow-incomechildren and pregnant women. The Republicans arepromising to eliminate the"unfunded mandates" on the states that brought about this expansionof Medicaid;they also want to reduce the number of families eligible forwelfare. With bothemployment-based and government health coverage shrinking, we willalmost certainly see anincrease in the uninsured. At the same time, hospitals will find itmoredifficult to shift the costs of the uninsured to privately insuredpatients, asthose patients increasingly belong to managed care plans thatnegotiatediscounted rates. Thus, nonprofit hospitals are likely to offerless charitycare, and public hospitals serving poor people are likely to bemired infinancial difficulty.
Many conservatives also want to require managed care plans tocontract with"any willing provider," which would limit the ability of HMOs tocontrol theircosts. The view of these conservatives seems to be, first, theprivate sectoris solving the problem of cost containment and, second, it shouldbe stoppedfrom solving the problem. How "any willing provider" fits with theefforts ofRepublican governors to shift Medicaid to managed care is a mysterythat onlythe magic of political rhetoric can resolve. It would be yetanother irony ofreform if a movement that began with liberal proposals to controlcosts andexpand coverage ended up producing conservative legislation thatraised costsand reduced coverage, but stranger things have happened.
Is there any way to avert this future? Yes, the Democrats have torecover theirnerve in the wake of the elections and patiently explain why theRepublicanproposals will compound America's health care problems. Accordingto exitpolls, this is one issue on which even the voters in the 1994elections stillpreferred Democrats. The president and Democrats in Congress needto rallyaround a smaller, defensible program perhaps focused on expandingsubsidies tocover children and providing greater latitude for the states,particularlyexemptions from ERISA, the federal law regulating employee benefitplans. Thetobacco tax and employer contributions should remain as preferredmethods offinancing broader coverage, although the employer mandate should bereconceivedas an increase in the minimum wage--perhaps to $4.25 plus a50-cent-an-hour health insurance contribution. If the Republicans succeedin passing individualmedical savings accounts (and this does seem likely), the minimumwagecontribution and tax credits could create a base for covering thelow-wageemployed population that does not have health insurance today.
The lesson for next time in health reform is faster, smaller. Wemade the errorof trying to do too much at once, took too long, and ended upachievingnothing. Oh, yes, I was thrilled when President Clinton waved hispen beforeCongress and threatened to veto anything less than universalcoverage. Likemany others who supported reform, I failed to appreciate the riskof losingeverything. We were too confident that reform was inevitable, justas some arenow too certain that defeat was inevitable. Strategy and speedmatter inpolitics as in sports. But, in both, new seasons bring new lineupsand newopportunities. Health care will remain in the center of ourpolitics for a longtime to come.
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Preferred Citation: Paul Starr, "What Happened to HealthCareReform?" The American Prospect no. 20 (Winter 1995): 20-31.
Paul Starr
It was one year from euphoria to defeat. On the evening ofSeptember 23, 1993,I sat in the gallery of the House of Representatives for PresidentClinton'sspeech introducing the administration's Health Security plan. Forthose of uswho had worked on it, this was the climax of a long, intense, andnot alwayseasy collaboration. I had been one of about ten people on thehealth policyteam in the White House who had written and rewritten the planafter the castof hundreds had left. Now the president had the nation's attentionfocused onideas we deeply believed in, and he spoke with tremendous force.
At first it seemed Clinton would move the country. The nextmorning, StanleyGreenberg, the president's pollster, crowed that the overnightsurveys showedwe were winning two-thirds approval. Commentators were saying thatno matter how the battle over detailsmight work out, the president had established the right principlesandchallenged Americans to a great, historic mission. The principle ofhealthcoverage for all was an achievement, wrote A.M. Rosenthal of theNew YorkTimes, that Clinton could already nail to the wall.
A year later, almost to the day, Senate Majority Leader GeorgeMitchellpronounced health care reform dead. The funeral was private; nocrowds gatheredin mourning. While opinion surveys continued to show strong supportfor theingredients of reform, the complexity of the plans and onslaught ofcriticismhad even left many supporters bewildered and uncertain. Theopposition hadfocused attention on what those with good health care might lose.Commentatorsturned on the president. On the eve of the midterm election, JoeKlein told theCBS Evening News audience that the president had led the countryinto a blindalley with his grandiose reform plan.
Of course, not just the Clinton plan was defeated. Every otherproposal--theCooper, Chafee, Moynihan, Mitchell, Cooper and Grandy, and mainstream groupplans, to mention only the most prominent, consensus-buildingefforts--died in Congress. The question is as much why the centerfailed as whythe president did. Only a few weeks earlier Senator Bob Packwoodhad told hisRepublican colleagues that now that they had killed health carereform, theyhad to make sure their fingerprints weren't on it. Joe Klein'sreaction was notunusual: The Republicans enjoyed a double triumph, killing reformand thenwatching jurors find the president guilty. It was the politicalequivalent ofthe perfect crime.
The Republicans enjoyed a double triumph, killingreform and thenwatching jurors find the president guilty. It was the politicalequivalent ofthe perfect crime.
The collapse of health care reform in the first two years of theClintonadministration will go down as one of the great lost politicalopportunities inAmerican history. It is a story of compromises that never happened,of dealsthat were never closed, of Republicans, moderate Democrats, and keyinterestgroups that backpedaled from proposals they themselves had earlierco-sponsoredor endorsed.
It is also a story of strategic miscalculation on the part of thepresident andthose of us who advised him. In 1993, 23 Republican senators,including then-MinorityLeader Robert Dole, cosponsored a bill introduced by Senator JohnChafee thatsought to achieve universal coverage through a mandate that is, amandate onindividuals to buy insurance. Nearly every major health careinterest group hadendorsed substantial reforms--grandiose ones, in fact. TheAmerican MedicalAssociation (AMA) and Health Insurance Association of America(HIAA), the twogreat, historic bastions of opposition to compulsory healthinsurance, bothwent on record in support of an employer mandate and universalcoverage. Eventhe U.S. Chamber of Commerce endorsed an employer mandate, as didmany largecorporations. Other groups came out variously for reform optionsthat ran alonga spectrum from Canadian-style, single-payerprograms on the left to managed competition and medical savingsaccounts andradical changes in tax policy on the right. Under thecircumstances, it waseasy to believe the country was ready for substantial reform andthat a market-oriented,consumer-choice approach to universal coverage, positioned in thecenter, could become aplatform for consensus.
It was easy to believe, but it turned out to be wrong.
On the political calendar, health care first gave way to otherpriorities.During the presidential transition and his initial year in office,Clintonconcentrated on the economy and the budget. The battle of thebudget dragged oninto the summer of 1993 and threatened his presidency; he hadlittle choice butto focus on winning it. This loss of time on health care, contraryto post-mortems in the media, had little, if anything, to do with the supposed circusof the health care task force and its 500-memberworking groups. The task force may well have misdirectedadministrationenergies, but it was legally dissolved at the end of May; themembers of theworking groups had dispersed weeks earlier, mostly to the federalagencieswhere they ordinarily worked. For months, the health policy teamwas forced totread water, lest further leaks about health care financealternatives like thetrial balloon for a value-addedtax, floated brilliantly on April 15 disturb budget negotiationsunder way.
As the spring unfolded, we all had the sinking feeling thatcritical time wasbeing lost. Senator Robert Byrd, custodian of Senate rules andtraditions,foreclosed the option of moving health care reform into the budgetreconciliation process (where it would have needed only 50 votes topass). Itwas not until the early summer that a detailed draft of the healthplan wasactually committed to paper. Even after the president's speech inSeptember andthe introduction of the health care bill, NAFTA took priority. Somesuggestedthis would help health care by earning the president support frombusiness andopinion leaders, and in fact Clinton did end the year well,maintaining hisreputation as a winner who comes from behind late in the game.
But for health care reform, the season of opportunity was ending.Nineteen ninety-four would begin with a Whitewater feeding frenzy in the press,undermining trust inthe president. The opponents of reform were organizing theirforces,concentrating first on groups with ideological affinities. After aninternalinsurrection, the Chamber of Commerce reversed its endorsement ofa mandate;other business organizations likewise "defected," as one businessrepresentative put it to me at the time. The AMA qualified itsendorsement of amandate limiting it to firms with over 100 employees and therebyexcluding mostprivate doctors, the majority of whom do not cover their ownemployees. SenatorDole and other Republicans abandoned the Chafee bill and theindividualmandate. Dole then cosponsored a bill with Packwood and withinweeks abandonedthat, too, saying that this the second bill he offered had "toomuchgovernment."
Overconfident about the momentum of reform, we misjudged the healthcarepolitics of 1993 as a change in the climate when it was only achange in theweather. We wrongly assumed that the leading Republicans and keyinterestgroups that had endorsed substantial reforms would at leastmaintain theirpositions and might be pulled closer to ours in a final bargain.But by spring1994, they had no reason to accept a deal. Republicans were alreadyanticipating big midterm election gains; killing reform in the103rd Congresswas rational ("Sight unseen, oppose it" was Republican strategistBillKristol's advice on Senator Mitchell's attempt to craft acompromise proposal).With unemployment down, Americans were worrying less about theirjobs andhealth coverage and more about crime. As health care inflationeased primarilybecause inflation was generally under control, businesses worriedless abouthealth care cost containment and more about the politicalimplications of anexpansion of government authority. Under these conditions, theideological andinterest-group opponents of reform were able to change the subject.Instead of health care,the focus of debate became government, which was a debate we weresure tolose.
So were people who had doubts about health reform from the startproved rightby the way it ended? Was defeat inevitable? To some who wereinvolved, this maybe a comforting thought. If the odds were overwhelmingly againstreform, thoseof us who were involved bear no responsibility for the outcome.Unfortunately,I do not believe that. We had a historic opportunity, and we blewit.
Perhaps the fateful choice was the decision to design a proposalinside theWhite House and put the Clinton name on it. Much criticism hasfocused on thesecret deliberations of the White House task force; this is notwhat I have inmind. Every president works up proposals "behind closed doors"beforepresenting them. The real problem was that time was spentdeveloping a planthat should have been spent negotiating it; congressionalnegotiations did notget under way until the midterm elections were within spittingdistance. Thosewho felt shut out responded predictably. On health care, theadministrationignored the first rule of political cooperation, "In on thetakeoff, in on thelanding," which underlay other quieter and more successfullegislativeinitiatives.
By putting his personal signature on health care reform, moreover,Clinton gavethe Republicans an incentive to defeat it and humiliate him ratherthancompromise. The Clinton label also led to confusion of publicfeelings aboutthe president as a person with the entire issue of health carereform. TheFirst Lady's role further muddied the issue. There is no logicalconnectionbetween views on health care reform and, say, gays in the militaryor the roleof women in society. But the identification of the Clintons withthe reform ofhealth care became so strong that sentiments crossed over. TheWall StreetJournal reported showing the same description of a healthreform plan to focusgroups with and without the Clinton label. Without the label, theplan won morethan 70 percent support; with the label, approval dropped 30 to 40points. Itseems likely, therefore, that when polls asked for opinions aboutthe "Clintonhealth plan," they tapped general feelings of confidence inPresident Clintonrather than preferences about the specifics of health policy. Woulddifferentdecisions on alliances, cost containment, and other provisions haveattractedmore public support? Elite opinion might well have been affected,but I am notsure it would have made any difference to the public at large. Infact, somesurvey evidence suggests that although public support for thepresident'sapproach fell, it remained higher than support for any other testedalternative.
Recriminations, Left and Right
The defeat of reform has set off a festival of recriminations.Among thecriticisms, one often hears two complementary I-told-you-so's.From the left: If only Clinton had endorsed single payer or anexpansion ofMedicare, he would have had a simpler plan, and by rallying thepublic againstthe insurance industry, he could have won. And then, fromconservativeDemocrats: If only Clinton had endorsed the Cooper plan or someother moremoderate proposal, we would have substantial reform today.Since we cannot rerun history, these critics are safe from everbeingdisproved. However, no serious observer believes that Congressmight havepassed a national single-payer plan. Paul Wellstone, single-payer'sleading advocate in the Senate, had only four cosponsors for hisbill; reaching50 votes, much less 60, was inconceivable. Some single-payeradvocates acknowledged that congressional passage was implausiblebut thoughtthe president should take the issue to the public in a populistcampaignagainst special interests. However, the defeat of California'ssingle-payerballot initiative by a margin of 73 to 27 percent should put torest thenotion that a popular uprising against the insurance industry wasready to beawakened. The supporters of single payer enjoyed the illusion thattheir planwas simpler and more popular only because the Clinton plan was thelightningrod for criticism.
The harder question is whether President Clinton should have movedat theoutset toward the conservative Democrats led by Representative JimCooper andthe Senate Republicans who initially followed Chafee's lead. Inretrospect, thepresident would clearly have done better to identify himself withtheconservative Democrats and moderate Senate Republicans to lock insupport forreform from when they were offering it. But the cross-pressuresat the time were enormous, and support for these plans might wellhavedissipated if the president had embraced them and they had beensubjected tothe same intense public scrutiny that the president's planreceived. In fact,the Chafee and Cooper plans lost support among their originalbackers as theimplications of their financing provisions became clearer.
Strategy: Right, Left, Right
The Clinton strategy took three political turns or rather, it tooktwo turnsand then aborted the third. The first turn, a move to the centerright, tookplace in August and September 1992. In the final stretch of thecampaign,Clinton embraced managed competition "within a budget" as aframework for aprogram of universal health coverage. (I was one of those whoadvocated thisshift.) Managed competition was heresy to many of thecongressional Democratson whom Clinton would later have to rely to pass his program, andClinton'ssupport for it was not mere campaign rhetoric. The principlesadopted beforethe election guided work on his health plan after he becamepresident.The second turn--a move left--came in the period between Januaryand October1993, when the president sought to consolidate support among themany Democratsand constituency groups unhappy about his adoption of amarket-orientedapproach. One intense debate in the White House, for example,concerned thephasing in of reform and whether coverage would begin with aminimal,"barebones" benefit package or a comprehensive one. The presidentopted forcomprehensive benefits (although the final benefit package wasclose to themedian of private insurance policies today). At several keydecision points, hewent for the bolder option, such as more inclusive purchasingalliances (whichI favored in part because they could offer more choices tofamilies thanemployers do). The program would cover abortions, and it wouldinclude a numberof expensive elements designed to appeal to older Americans: aprescriptiondrug benefit to be added to Medicare, a new program of home-basedlong-termcare for the elderly and disabled, and generous healthinsurance subsidies forearly retirees.
While the basic framework of the Clinton plan involved consumerchoice amongcompeting health plans under rules designed to increase sensitivityto cost,the Congressional Budget Office (CBO) was unwilling to count muchsavings fromcompetition in its estimate of the future costs of anyproposal--Cooper's andChafee's as well as ours. CBO's "scoring" would have considerablepoliticalimpact, and one of the president's highest priorities in healthcare reform wasto assure that the budget deficit continued downward in the late1990s. So tokeep projected costs in line, the plan included tight caps onpremium increasesafter reform was introduced. With the bigger program came tighterregulation--tighter than many of us had anticipated or wanted.
Two theories in favor of this bigger, tighter program hadconsiderableinfluence within the administration. What I now think of as the"enthusiasmtheory" held that since there would be fierce opponents of reform,we neededequally passionate supporters. We had to give ordinary peoplesomething worthfighting for. A minimal program of barebones insurance or a programthat wasonly directed toward the poor would fail to appeal to the middleclass that hadelected Clinton. (Good managed care also requires a broad benefitspackage.)And to win the support of the elderly, the president had to includesignificantbenefits for them--hence not only prescription drugs but alsolong-termcare and early retiree benefits.
A second argument, which I now think of as the "bargaining chip" or"onion" theory, held that the administration should go to Congress with abig programintentionally including elements that we would have to bargain awaylater. Inexchange for support, some benefits could be cut, the caps relaxed,thealliances scaled back or sacrificed entirely. Layers of the onioncould bepeeled off, but we would still retain the core of theprogram--universalcoverage, consumer choice, and a backup system of cost containment.Theparadigm was a complex negotiation: "You don't go into anegotiation with yourfinal offer on the table." By proposing a comprehensive plan,Clinton wouldsignal he appreciated the legitimate concerns of diverse groups; atthe sametime, he would indicate an open mind and a readiness tocompromise.
The final lap would necessarily require a turn right; as Iunderstood it, thequestion was only when this turn would come and how far it wouldgo. There wassimply no other way to pass a bill than to get conservativeDemocrats andmoderate Republicans on board. However, besides the desire to havea strongprogram that could generate public enthusiasm, an immediatepolitical rationalefor delaying the right turn was that leading congressionalDemocrats did not want the administration to make premature concessions. To getpast the gatekeepers in Congress, particularly Pete Stark, whodominated healthcare legislation on the House Ways and Means Committee, it was notat allobvious that the wisest approach would be to negotiate with arelatively juniorcongressman from Tennessee, Jim Cooper. So compromise would have tocome in thelater stages of congressional deliberation.
To say these judgments about strategy were mistaken is anunderstatement; theyproved to be a disaster. Despite the comprehensive benefit packageand theextras such as prescription drug coverage for the elderly, we didnot receivepassionate support from the groups we were counting on. We didsucceed,however, in mobilizing the opposition. The scale of the program anditsregulatory features also caused sympathetic groups in the businesscommunityand opinion leaders in the media to think twice about support forreform.Because we had failed to edit the plan down to its essentials andfind familiarways to convey it, many people couldn't understand what we wereproposing.There were too many parts, too many new ideas, even for many policyexperts tokeep straight.
The original political impulse behind the managed competitionstrategy was tofind common ground with moderates and conservatives. Instead, muchof therhetoric used to defend the president's plan made it sound almostas if it werea single-payer proposal. Although the administration repeatedlysought to link the HealthSecurity plan to the concerns of the middle class, universalcoverage becamethe one clear theme, suggesting a focus on the poor. The presidenthad investedso much in the proposal that one might have expected more of aneffort todefend it. But after Mrs. Clinton's bravura performance at theinitialcongressional hearings and the submission of the bill, the WhiteHouse focusedentirely on the principles of reform and made little effort todefend the partsof the proposal. The administration had gone to the trouble ofwriting a billand then left it like a foundling on the doorstep of Congress.
The Failure of Congressional Compromise
In late 1992 and early 1993, there seemed to be the makings of aconsensusaround the principles of universal coverage and managedcompetition. TheClinton, Cooper, and Chafee proposals all called for consumerchoice amongcompeting health plans, the establishment of health insurancepurchasingcooperatives, a standard benefit package set or interpreted by anationalboard, similar reforms of the insurance market, and premiumsubsidies for low-incomefamilies. The Chafee and Clinton plans included mandates to makethemuniversal; Cooper saw that as a second step. By adopting a managedcompetitionframework, it seemed, the president was laying the basis foreventualcompromise with Cooper and Chafee. If the administration startedout with astructurally similar plan, it would be much easier to split thedifference onany number of provisions.But the sharply partisan climate of 1994 and fear-mongeringby the opposition were hardly conducive to splitting differences.Many peoplesimply didn't want to see compromise succeed interest groups thatpreferred tosee no legislation; Republicans that preferred to stymie progresson an issuethat symbolized the president's agenda; Democrats who did not wantto offendone or another constituency by supporting legislation thatunavoidablyalienated some supporters. After saying he was flexible on almostevery aspectof reform, the president boxed himself into a corner by threateningto veto anybill that fell short of universal coverage.
The failure of congressional compromise also stemmed, however, fromtheweaknesses of the centrist proposals. While rejecting an employermandate, theCooper and Chafee plans included no other source of revenue capableoffinancing the broadened coverage each called for. The Cooper plancovered upits inadequate financing by forcing health plans to eat losses fromunfundedsubsidies for the poor. The Chafee plan had nowhere near enoughrevenue to payfor the subsidies it envisioned for households with incomes up to240 percentof the poverty level. These inadequacies were typical of recentmoderate andconservative proposals. The reform plan that President Bushpresented inFebruary 1992, for example, included no financing provisions atall. Dolebacked out of the Chafee bill and later out of the bill hecosponsored withPackwood when he saw the fiscal difficulties they posed.
The financing provisions in the Chafee and Cooper plans also raisedotherobjections. Studies showed that Chafee's individual mandate andsubsidies wouldsharply increase costs for middle-classhouseholds; both the Chafee and Cooper plans created strongincentives againstwork. If the president had embraced either proposal, the spotlightwould havefallen on these problems.
The employer mandate in the Clinton plan helped to resolve theseobjections butat the cost of raising others. If there is a simple answer to thequestion,"Why did universal coverage fail?" it is simply this: Congresswould not enactthe employer mandate in any form, and when the mandate failed, sodid universalcoverage, because there was no willingness to consider abroad-basedtax. At the inception of the debate, the employer mandate enjoyedmore interest-groupsupport than ever before as well as approval by a wide margin inpublic opinionpolls. It was by far the most plausible financing strategy forexpandedcoverage; after all, Richard Nixon had proposed it. But whilegroups like theAMA and the health insurers had accepted a mandate as preferable toa tax-financedsystem, they would never fight for it, nor would other interestgroups. On theother hand, the National Federation of Independent Businesses(NFIB), the small-businesslobby, fiercely resisted the mandate and targeted its effortsstrategically todistricts of swing members of key committees.
The Clinton plan anticipated opposition by small-business ownersand limited their obligations under an approach that the Chamber ofCommerce had suggested, but it was to no avail. The press almostalwaysreported that employers would have to pay 80 percent of premiums;few smallemployers understood that this obligation was limited to a share ofpayroll,ranging from 3.2 to 7.9 percent, depending on the size and averagewage of afirm. In fact, most small businesses that currently insure wouldhave seensignificant declines in cost under the Clinton plan. As in otherareas, theplan's complexity impeded our ability to communicate it, but themisunderstandings may have made little difference. Business simplydid nottrust the administration. Subsidies, the small-businesslobby argued, might be temporary, while the mandate would beforever. The lackof trust in the president and the government undermined everyattempt to adjustthe proposal to make it acceptable.
I had supposed that employer contributions were the kind of issueperfectlysuited to bargaining. For example, instead of an 80 percentcontribution, thelevel could be set at 50 percent. The smallest employers, withfewer than 10 or20 employees, could be entirely exempt or pay a minimum rate of 2or 3 percentof payroll. These were precisely the compromises that SenatorsEdward M.Kennedy, Daniel P. Moynihan, John Breaux, Mitchell, and othersincorporatedinto their plans or floated as options. If Clinton had had ten moreDemocratsin the Senate, as Lyndon Johnson did when Medicare passed in 1965,a deal ofthis kind might have worked, but the Democratic margin was just toonarrow. Itwas not simply southerners like Sam Nunn who opposed the mandate.Bob Kerrey(see box), Dianne Feinstein, and JosephLieberman--all running for re-election--would not vote for the mandate in any form.
Business groups did not become implacable opponents of the Clintonplanimmediately after its release in October 1993. It took severalmonths for themto resolve their own differences and uncertainties. By midwinter,they weredecisively against the president's plan; by late spring, theywanted nothing topass. In his effort to find a majority for a reduced program inAugust, SenatorMitchell gave up the premium caps, made the alliances voluntary,and deferredthe possibility of an employer mandate (for 50 percent of premiums)until 2002.At that point, the mandate would be triggered only if twoconditions were met--coverage hadn't reached 95 percent of the population in a state, andCongresshad failed to do anything else to raise it.
These concessions made no difference to the mandate's opponents;nothing wouldmollify them now. House Majority Leader Richard Gephardt hadcombined the twobills that passed House committees into legislation that was farmore liberalthan Mitchell's. Many Democrats made no secret of their desire touse theMitchell bill as a stratagem to get the legislation into conferenceand thenbring back a much stronger bill to the Senate. It is hard toimagine anapproach better designed to increase distrust of Mitchell'sproposal amongconservative Democrats and moderate Republicans. But Gephardt'sbill probablynever had the slightest chance of passing the House. Rather thandevelop acompromise, Gephardt had largely accepted the bill that had emergedfrom theWays and Means Committee. To business interests and conservativeDemocrats,this was even less palatable than the Clinton plan because itcreated a newMedicare Part C for the under-65 population, which they believedwould screw down payment rates, shift costs toprivate insurance plans, and ultimately bring about a collapse ofthe privatemarket. In fact, the only conceivable scenario for legislation bythe summerwas that the House would finally defer to a more conservative billdeveloped inthe Senate. The unwillingness of House Democrats to acknowledgethis realitywas a premonition of coming disaster.
The final act was played out in the Senate and starred the"mainstream group,"a bipartisan coalition of roughly 18 Senators, led by Chafee andBreaux. Of allthe centrist proposals that included significantly broadenedcoverage, themainstream plan was the only one that was fiscally defensible. Itfinanced anextension of coverage up to 91 or 92 percent of the population byimposing acigarette tax, a tax on high-costhealth plans, and cuts in Medicare. Coverage of pregnant women andchildrenwould have been nearly universal. The proposal also includedinsurance marketreforms and voluntary purchasing alliances along the lines of theJackson HoleGroup's version of managed competition. For all its flaws, the billwould havebeen a historic advance.
There was only one problem: It didn't have much public support. Itwas too bigfor conservatives, too little for liberals. Democrats in Congresswho genuinelywanted a compromise found that hardly any organized constituencieswouldswallow the bitter pill the mainstream group was offering. Theelderly saw theproposal as cutting Medicare without providing anything in return;unions sawit as taxing high-costhealth plans--the kind some union members still enjoy--without theguarantee ofcoverage "that can't be taken away." The mainstream group andMitchell mighthave overcome these problems and in a different political seasonsecured amajority, but the clock ran out.
From the beginning, the proposals in the center had failed togenerate anypublic excitement. Economists and conservative intellectuals maylike theindividual mandate in the Chafee plan and the cap on tax benefitsthat both theChafee and Cooper plans originally included, but no one has builtpublicsupport for these measures. Most of the initial business backingfor the Cooperplan seems to have been expedient. Business interests backed Cooperwhen theyfeared worse; they lost interest when the feared alternativesevaporated.
During the spring and summer of 1993, in what may really have beenthe crucialshift, the nation's elites abandoned health care reform entirely.They hadbecome impatient with its complexity and nervous about its cost.While therewas a general swing in the national mood at the same time, eliteviews areparticularly critical. In 1992 and 1993, the Jackson Hole Group andthe NewYork Times editorial page seemed to be prodding the nation'sestablishment intoassuming leadership in a restructuring of the health care market.The Senatemainstream group was this establishment's congressionalincarnation. The effortmight have actually succeeded if the debate had come to a head inthe summer of1993 instead of the summer of 1994. The moment has now beenlost.
Divided We Fall
Before the 1992 elections, Democrats were split into severaldifferent factionson health care reform, and these divisions carried over into theClintonadministration and the Congress. Important figures in both theexecutive andlegislative branches were never committed to comprehensive healthcare reform;they favored reforms of the insurance market and some limitedexpansion ofaccess but not universal coverage. Another group strongly preferredreform onthe Medicare model--that is, primarily based on fee-for-servicemedicine with price controls. A significant minority wanted asingle-payer system.
The managed competition approach adopted by the president wassupposed to bringthese groups together, but this proved impossible. Constantin-fightingamong the factions resulted in hostile leaks to the press frominside theadministration and Congress, disparaging comments about thefeasibility ofdifferent options or the integrity of cost estimates, and theproliferation ofoptions until no mortal could keep them straight. The in-fightinghelped mightily to confuse the public, slow the momentum of reform,andeventually kill it.
The rise of managed care has produced a particularly deep riftamong reformers.Those who favored the Clinton plan and other variants in Congressaccept healthmaintenance organizations (HMOs) and other forms of managed care asa positiveforce or a necessary evil to carry out systemic reforms, controlcosts, andmake universal coverage affordable. However, the rise of managedcare has splitoff two wings of the reform coalition. Many progressives prefer asingle-payerapproach in part because they detest managed care and the insuranceindustry;the Clinton plan was not too little for them--it was unacceptable.This was alsothe view of many liberal physicians, notably specialists. At thesame time,many in the business world who previously wanted more governmentinterventionnow think that managed care gives them the key to cost control. Soif you hatedmanaged care, you didn't want the Clinton plan (no matter thatClinton wouldrequire every alliance to offer fee-for-service plans); and if you were an employer and liked managed care, you probably didn'tthink the Clinton plan was necessary.
But how about the opposition of special interests, particularly themillions ofdollars spent on the Harry and Louise commercials and otheradvertising,lobbying, and campaign contributions? No doubt these groups helpedto createpublic anxiety and political paralysis, but their influence iseasilyexaggerated. Several of the key interest groups were actually lesshostile toreform than in any prior battle over health insurance since the1930s. Theproblem was not so much that the opponents had more resources, butthat thesupporters could not mobilize theirs. While the antagonists hadgreat clarityof purpose, the groups backing reform suffered from multiple andcomplexfractures and were unable to unite.
At the outset, I thought we could overcome interest groupopposition byoffering a proposal that would attract, or at least not disturb,many of thekey interest groups. After all, the large insurance companies coulddo wellunder a managed competition approach. The American HospitalAssociation andCatholic Health Association favored the same approach to reform asthe Clintonplan. Major national organizations of physicians supporteduniversal coverage;even the AMA was no longer dedicated simply to obstructing change.Theadministration did receive support from the American College ofPhysicians, thepediatricians, neurologists, and family practitioners, as well asthe AmericanNursing Association, retail pharmacists, and other provider groups.But itfailed to close the deal with the insurance companies. And bycalling for majorcuts in future Medicare spending growth, it lost the support of thehospitalindustry; for the same reason, the American Association of RetiredPersons(AARP) decided not to endorse a specific plan until it was toolate.
Many people have written about the politics of health reform on thebasis ofwhich groups would be "winners" and which "losers" under differentapproaches.We expect the losers to resist, and on health care reform they did;thewinners, however, don't necessarily support change. They mayinstead focus onlesser provisions of a plan that hurt them or on the risk that thebalance ofeffects will turn negative as legislation moves through Congress orin thefuture. During 1993 and early 1994, many winners focused theirefforts onchanging provisions that adversely affected them and devoted littleenergy toensuring that reform would pass. Some winners opposed the Clintonplanoutright. For example, the manufacturing sector which now "exports"insuranceto spouses working in other sectors and carries a heavy load ofolder workersand early retirees would have seen its health insurance costs godowndramatically. But some provisions, like the generosity of thebenefit package,would have raised employer costs; the early retiree provisions wereunlikely tomake it through Congress; and the expansion of government authorityposed therisk of new burdens in the future. So although individual companiesbacked theClinton plan, the National Association of Manufacturers came outagainst it.
While many groups sympathetic to reform were lobbying to win oneprovision oranother in the reform plans, the health insurance andsmall-businesslobbies were focused unambiguously on defeating change. Thepoliticaladvertising reflected this difference. Advertisements by groupssupportingreform typically didn't back any particular legislation, just thegeneralideas. The opponents' advertisements, however, specificallyattacked theClinton plan, even after it was no longer an option.
The reform coalition suffered from a disease often fatal inpolitics: cross-cuttingcleavages. Policy factions and interest groups could not put asidetheirdifferences. Perhaps if they had seen the change coming in themidtermelections, it would have concentrated their minds. Now they've losttheirturn.
The Republicans' Turn
For the moment, the agenda for health care reform belongs to theRepublicans.Whether Senate and House Republicans can agree on a single bill isas yetunclear; in the Senate, the differences on health care between PhilGramm andJohn Chafee are enormous. But the Republicans in the new Congressare far morelikely to reach agreement than were Democrats in the last.
Any bill that passes this Congress, however, is unlikely to do muchto solvethe problems of coverage or cost. Covering the uninsured requirescrediblefinancing. The Republicans are not likely to approve a tax increasefor healthcare, and they will need Medicare and Medicaid savings to pay forpromised taxcuts. A balanced-budget amendment, in fact, will require far deeperretrenchment in these programs thananyone has yet contemplated. Medicaid may well be eliminated as anentitlementprogram. A Republican health care bill will likely include someinsurancemarket reforms (limiting the use of pre-existingcondition exclusions for someone with prior insurance coverage);limits ondamages in malpractice liability suits; measures to facilitate theautomationof health care transactions; and individual medical savingsaccounts designedto encourage people to enroll in catastrophic health insuranceplans thatrequire them to pay the first $2,500 or $3,000 in medical expenses.Many of thehealthy affluent will be attracted to such accounts. As a result,those whocontinue to enroll in conventional insurance plans with lowerdeductibles willbe a poorer and sicker population, and their rates will go up, ifplans of thattype continue to be available at all.
If such a program were to pass, the most likely prognosis is thatinequalitiesin health care would increase sharply. The supply of jobs thatcarry broadhealth and pension protection has been shrinking. The number ofAmericanswithout health insurance has risen over the past decade, but itwould now beeven higher if Congress had not expanded Medicaid in the 1980s toinclude morelow-incomechildren and pregnant women. The Republicans arepromising to eliminate the"unfunded mandates" on the states that brought about this expansionof Medicaid;they also want to reduce the number of families eligible forwelfare. With bothemployment-based and government health coverage shrinking, we willalmost certainly see anincrease in the uninsured. At the same time, hospitals will find itmoredifficult to shift the costs of the uninsured to privately insuredpatients, asthose patients increasingly belong to managed care plans thatnegotiatediscounted rates. Thus, nonprofit hospitals are likely to offerless charitycare, and public hospitals serving poor people are likely to bemired infinancial difficulty.
Many conservatives also want to require managed care plans tocontract with"any willing provider," which would limit the ability of HMOs tocontrol theircosts. The view of these conservatives seems to be, first, theprivate sectoris solving the problem of cost containment and, second, it shouldbe stoppedfrom solving the problem. How "any willing provider" fits with theefforts ofRepublican governors to shift Medicaid to managed care is a mysterythat onlythe magic of political rhetoric can resolve. It would be yetanother irony ofreform if a movement that began with liberal proposals to controlcosts andexpand coverage ended up producing conservative legislation thatraised costsand reduced coverage, but stranger things have happened.
Is there any way to avert this future? Yes, the Democrats have torecover theirnerve in the wake of the elections and patiently explain why theRepublicanproposals will compound America's health care problems. Accordingto exitpolls, this is one issue on which even the voters in the 1994elections stillpreferred Democrats. The president and Democrats in Congress needto rallyaround a smaller, defensible program perhaps focused on expandingsubsidies tocover children and providing greater latitude for the states,particularlyexemptions from ERISA, the federal law regulating employee benefitplans. Thetobacco tax and employer contributions should remain as preferredmethods offinancing broader coverage, although the employer mandate should bereconceivedas an increase in the minimum wage--perhaps to $4.25 plus a50-cent-an-hour health insurance contribution. If the Republicans succeedin passing individualmedical savings accounts (and this does seem likely), the minimumwagecontribution and tax credits could create a base for covering thelow-wageemployed population that does not have health insurance today.
The lesson for next time in health reform is faster, smaller. Wemade the errorof trying to do too much at once, took too long, and ended upachievingnothing. Oh, yes, I was thrilled when President Clinton waved hispen beforeCongress and threatened to veto anything less than universalcoverage. Likemany others who supported reform, I failed to appreciate the riskof losingeverything. We were too confident that reform was inevitable, justas some arenow too certain that defeat was inevitable. Strategy and speedmatter inpolitics as in sports. But, in both, new seasons bring new lineupsand newopportunities. Health care will remain in the center of ourpolitics for a longtime to come.
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