The Failure of Health Care Reform

Christopher Lasch's obituary was written before the Health Security Act's was--he died in February 1994, the health care reform effort some six months later--so there's no knowing how he would have viewed the undertaking. But from his writing, notably the posthumously published The Revolt of the Elites, it's not hard to make an educated guess. Our have and have-not health care system epitomizes the "two-class society" he abhorred, in which "the favored few monopolize the advantages of money, education, and power." That monopoly of advantage threatens not just equality of opportunity, Lasch believed, but quality of life. In the case of health care, it can threaten life itself. But it also seems likely that Lasch would have found the effort to reform the health care system equally disturbing. "Having effectively been excluded from public debate on the grounds of their incompetence," Lasch wrote in The Revolt of the Elites, Americans "have become almost as incompetent as their critics have always claimed." As several new books show, the health care "debate"--the word seems overly generous given the quality of the exchange--affirmed his tautology. To start, the Clintons deliberately obfuscated the details of their plan, keeping the discourse of the debate as vague as possible. Their opponents--whether Rush Limbaugh, the small business lobby, or GOP strategist Bill Kristol--saw the public's ignorance as a weapon, not a problem. And journalists did too little to fill the breach of understanding. The result was a confused, then fearful, public. In March 1994, in one of the press's more enlightening moments, The Wall Street Journal's Hilary Stout published a story headlined "Many Don't Realize It's the Clinton Plan They Like." Polls showed that most Americans opposed the Clinton bill; but a focus group indicated that may have been because they didn't understand it. "No one [in the focus group] expresses support for Mr. Clinton's sweeping proposal," Stout wrote. "In fact, no one can explain it." (Among their misimpressions: Under the Clinton plan, using a doctor other than the one you'd been assigned would land you in jail.) When asked to evaluate an unnamed plan with the Clinton plan's features, however, poll respondents--and the focus group--were overwhelmingly approving, even preferring it over rival proposals in Congress. There were few starker illustrations of the failure, by all sides, to educate the public or argue the issues on their merits. Health care reform was one of the most ambitious legislative undertakings in the history of American government; its success could have bettered the lives of millions of Americans. And in an age of mass media and perpetual polling, public opinion was destined to play a major role. Yet those conducting and reporting the debate deliberately ducked their responsibility to create an informed public--not just on the specifics, but on the broader issues (such as spiraling costs) and choices (such as how to finance the new system) that underlay reform. The result, of course, was not dramatic change, but the entrenchment of a flawed system. The tragedy of failure was twofold: Quality, affordable health care is still out of reach for millions of Americans, and their numbers are growing. What's more, we damaged an already fragile democratic process--and thus our ability to confront serious societal ills. By combing through the wreckage of health care reform's ignominious end, perhaps we can avoid being condemned to repeat its mistakes. Word GamesIn retrospect, it might seem impossible for the Clintons to have succeeded in passing a sweeping health care reform package. They were seeking massive change in an industry that generates billions in annual income. Thousands of businesses had a life-and-death stake in the status quo. Meanwhile, trying to legislate reform in the rabidly partisan political environment of 1993 was something akin to dancing in quicksand. When the Clintons tried to compromise, their opponents grew coy. ("Every time I start in the middle, Bob Dole moves the middle to the right," Clinton lamented at one point.) The famous Bill Kristol memo--which instructed the GOP to oppose any reform proposal sight unseen--was proof of their disinterest in debating an honestly defined statement of the Clintons' facts and logic. In researching their book The System, Haynes Johnson and David Broder had unequaled access to the charismatic, volatile, and ego-driven personalities who were driving the process. By promising not to publish until the debate was long past, they were able to elicit an honesty that day-to-day coverage could not. Among the revelations: Long before Clinton even launched his plan, Newt Gingrich was telling Broder and Johnson that he had no intention of letting any reform through. Behind the scenes, he bided his time, then stepped in to help organize the congressional-business coalition that would first defeat health care reform and then drive the Contract with America. Events also conspired against Clinton with Job-like intensity: the public relations fiascoes of gays in the military and Whitewater; the bloody Somalia intervention; an unexpectedly protracted battle over his deficit-reduction plan. As a result, Johnson and Broder, and Theda Skocpol in her new book Boomerang, conclude that Clinton never should have attempted comprehensive reform with the aim of deficit reduction. Skocpol says he should have gone for an "Old Democrat" big-spending bill, so Americans would have felt like they were getting something besides a bunch of new regulations. And Broder and Johnson say Clinton should have gone "faster, smaller"--that is, opting for incremental change over comprehensive reform. Elected with only 43 percent of the vote, they say, his ambition exceeded his mandate. Boomerang is cogent and informative. The System, with 600 pages of compelling detail and drama, is often riveting and usually insightful. But both books' overarching conclusions about where Clinton erred are off the mark. A budget-busting plan would have crashed and burned politically; as Skocpol herself notes, Clinton had to grapple with not only Reagan's fiscal legacy but also the public's worry that government couldn't live within its means. Broder and Johnson, meanwhile, misunderstand why Clinton went for comprehensive reform in the first place: Not because (or not only because) of grandiose ambition, but because he understood that the interwoven nature of the American health care system made it impossible to pull one string without unraveling other parts of the tapestry. The strengths and weaknesses of the American health care system are like parts of a puzzle. Although we arguably have the best health care in the world, it comes at great cost and with yawning gaps. We spend more than any other industrialized country on health care--approximately 14 percent of GNP--but 15 percent of the population has no insurance at all; many more, including the elderly, are severely undercovered. Most of the insured are dependent on their employers for coverage, which leaves them vulnerable to the caprices of job security and employer beneficence. Many without insurance simply can't afford it. The country's 1,500 private insurers have created massive bureaucracies that absorb substantial amounts of the system's funds. Technological advances, such as magnetic resonance imaging, are prolonging lives but also swelling bills and premiums. Doctors' fears of medical malpractice suits and an excess of specialists--both leading to often unnecessary procedures--drive up costs still more. The army of uninsured, in turn, pushes up costs for everyone. Those without insurance tend to put off seeking care until they are sick as dogs, then surface in emergency rooms, with their ailments well-advanced--and therefore more costly to treat. Hospitals that are unwilling to turn away the uninsured shift the costs to other payers. So "smaller" reform could easily have been counterproductive. An attempt to, say, expand Medicare to cover the uninsured could send costs for everybody farther into the stratosphere; if the government used its bargaining power to hold down payments, providers would shift the costs to private insurers. And "faster" was thus also impractical: Comprehensive reform would affect one seventh of the American economy; that's hardly something to rush through Congress. The Clintons deserve credit for seeing clearly the pitfalls of incrementalism. They also understood the requisite principles that would have to guide comprehensive reform: a standardized benefits package that would be available regardless of preexisting conditions or employment; universal coverage; pooling the risk of all individuals to distribute the financial burden; standardizing payment forms to reduce bureaucracy; and finally, a built-in mechanism to ensure cost control. Their mistake was not in what they chose to do--but in how they chose to do it. To meet their goals, the Clintons had several options. Early on, they rejected "single payer," which would establish the government as the only payer to doctors and hospitals. Under this scheme, the government would negotiate overall "global" budgets with providers, but then leave them discretion within those budgets. It would most likely be funded by some kind of sales tax, which would end employees' dependence on employers for insurance, and the burden that insurance places on employers. Cutting out the middlemen--the private insurers--would substantially reduce administrative costs; neutral experts, such as the Congressional Budget Office, estimated significant savings over time. It would also preserve doctor choice. It could, however, mean longer waits for nonemergency care, and some rationing of expensive procedures. And--for good or ill--it would put private health insurers out of business. In 1991, Theodore Marmor, a Yale professor and single-payer proponent, was called upon to debate the merits of single payer in front of then-candidate Clinton. Marmor's debating opponent was advocating pay-or-play, a market-based option that was eventually abandoned by the Clintons. At the end, as Marmor wrote in the Washington Monthly in 1994, Clinton turned to him and said "Ted, you win the argument." But then he quickly turned to Marmor's opponent and said, "But we're going to do what he says." As Marmor wrote, "Even considering [single payer], everyone in the room agreed, would prompt GOP cries of Ôsocialized medicine'--cries that the press would faithfully report." And so with no public debate, Bill Clinton ruled single payer out. Little did he know that the anti-government attacks he feared on single payer would dog his plan, too. Whether failing to adopt single payer was a mistake is debatable--as Clinton rightly pointed out, the policy arguments were in its favor, but the political ones seemed against it. What's certain, though, is that the refusal to debate the options publicly was a missed opportunity to educate the American people about the choices that would have to be made to enact comprehensive reform. This is what Lasch passionately advocated: Use explanation and discussion--the presentation of arguments for and against something--to develop a public understanding of the choices necessary to govern. Had that been done--in speeches, town meetings, congressional hearings, the press--the public would have been educated about the principles behind reform. Principle number one: Lower costs and wider coverage would have some social cost in the short term, most likely new taxes of some sort, and limitations on either choice of providers or the availability of expensive care. Instead, the Clintons chose a reform path privately and shaped it privately. Not only was input from the public not sought, but advice from knowledgeable potential allies in Congress or the industries facing reform was ignored. Representative Fred Grandy, a moderate Iowa Republican supportive of reform, told Johnson and Broder, "Anything you would suggest, [project staff director Ira Magaziner] essentially never said no. I mean, he gave a great meeting. And then right behind him was the First Lady É But of course, once the details came out, we realized that while they had no problem collecting our input, they never intended to use it." These books suggest this was largely attributable to pure hubris, particularly on the part of Hillary Clinton and "the brilliant but politically challenged" Ira Magaziner, as Eleanor Clift and Tom Brazaitis describe him in their new book, War Without Bloodshed. It was, Broder and Johnson argue convincingly, the "best and the brightest"--the elite arrogance that helped mire us in Vietnam--all over again. The plan that emerged reflected the brains behind it: Every byway of the system had been thought through, every potential policy objection anticipated. The Clintons opted for managed competition, which would rely on the market--with some government intervention--to control costs. Most importantly, the plan would offer standardized benefits and universal coverage. It would rely heavily on managed care, thus somewhat limiting patient choice of doctors and hospitals. To bargain for more affordable coverage, it would create regional purchasing alliances to pool individuals and small-to-medium sized employers; alliance members would "shop" from plans offered by a few large insurers and a network of providers. Small and medium-sized insurers would be eliminated. Limits on premiums would be the essential cost control mechanism. The system would be financed by mandating that all employers, large and small, purchase insurance for their employees. The plan's thoroughness made Clinton's September 1993 launch speech all the more disappointing. If Clinton were being graded, he would have gotten an "A" for rhetoric and delivery--and an "F" for exposition. While he dramatically brandished his symbolic "health security" card, he made no effort to explain why the task force had made the choices it did. He barely made mention of employer mandates, which were the key to funding the plan. He referred not at all to the regional alliances. The alliances, as Skocpol notes, had no precedent in American public life, no model to which policymakers could point. Here's how the Congressional Budget Office explained them: "regional alliances--as the front-line agencies responsible for orchestrating the flow of funds through the health care system--would É combine the functions of purchasing agents, contract negotiators, welfare agencies, financial intermediaries, collectors of premiums, developers and managers of information systems and coordinators of the flow of information and money between themselves and other alliances." That may have been crystal clear to Magaziner, but it would need a lot of explaining before Americans were comfortable with it. "Voters want more details about the plan," Clinton pollster Stan Greenberg wrote after Clinton's launching speech. But few details were forthcoming. Both Clintons had an unsurpassingly thorough grasp of the nuts and bolts, and the gift to explain them. But they made the critical--and wrong--decision that there was more risk than reward in getting specific. Even worse, they turned the marketing of the plan over to political consultants who had been brilliant in a win-at-any-cost political campaign, but had little head for the consensus and compromise required to govern in Washington. Hillary Clinton, in turn, seemed to think she could master public opinion by maintaining semantic control of the debate. Pollsters warned against the word "tax," so she avoided it--even though, to the untrained ear, mandating premium payments from employers sounds a lot like a tax. Similarly, she was told "price controls" wouldn't fly politically, so she denied they were in the plan. (There were "premium controls.") Broder and Johnson describe one encounter between Hillary Clinton and a powerful CEO who questioned her euphemisms: "You've said that these regional alliances that you're thinking about aren't regulatory bodies," the CEO said. "[T]hey sound like regulatory agencies to me." Hillary slammed the table, according to one observer, and "Ôwith daggers coming out of her eyes," said, "ÔI said they were purchasing cooperatives, and that's what they're going to be!'" Particularly damaging was the Clintons' failure to make the practical case for universal coverage--that it was essential for cost control. Universal coverage was portrayed as the right thing to do, but never as the smart thing to do. Hillary Clinton viewed universal coverage through a prism that was part ambition--"Our place in history is contingent on universal coverage," she said--and part moral crusade. It was on the latter grounds that she made her case to the public, despite repeated warnings from allies. "Cost control is the reform Americans most need, want, and are willing to pay for," Senator Jay Rockefeller wrote in an early memo to the Clintons. "Fear, much more than compassion, drives support for universal guarantees of coverage." The statement that "Americans deserve or have a right to health care is a dead-end approach." The Clintons mistakenly assumed that Americans shared their altruism. Their opponents understood that Americans had little interest in opening another front in the War on Poverty. If the Clintons overestimated Americans' compassion, they underestimated their understanding of basic economics--that you don't get something for nothing. Public opinion polls showed that Americans were willing to consider higher taxes or support employer mandates; in other words, they understood reform would have some social cost. Yet the Clintons tried to pretend there would be no such cost. And they avoided discussing the employer mandates. Americans were understandably suspicious. How could a plan expand coverage, lower costs, improve the quality of care, and reduce the deficit, as the Clintons asserted, without some cost? It wasn't only people in the heartland who were suspicious. So was Daniel Patrick Moynihan, the chair of the Senate Finance Committee, where any bill would have to pass muster before reaching the floor. Moynihan's enthusiasm for health care reform had been tepid from the start, and his distaste for the Clintons developed early. Still, the First Couple embarked on an elaborate courtship of Moynihan and his wife Liz--the ladies lunched; there were movie nights at the White House and daily phone calls from Bill to Pat. To no avail: Moynihan never got on board. The senator was one part prima donna, one part professor, and one part Machiavelli--a combination Clift and Brazaitis capture superbly. Moynihan was frustrating to the Clintons--never more so than when he parroted the Bill Kristol "there is no health care crisis" line on national television--but on some things, he was also right. From the start, he warned the Clintons they needed bipartisan support. They pooh-poohed him, thinking that public support for reform was so strong they could ram their plan through Congress. Moynihan also understood, as the Clintons did not, that employer mandates would arouse fierce opposition from small businesses, which were convinced that mandates would either cut into their profits or drive them out of business. Therefore, any plan calling for employer mandates would have a hard time getting out of his committee--unless the Clintons specifically rallied public support for the financing mechanism they had settled on. The chief opponent of employer mandates was the National Federation of Independent Business, which claimed to represent 600,000 small businesses across the country. The NFIB is the classic example of the "crypto-political parties" that Broder and Johnson say now control the system. They wage issue-based campaigns similar to political campaigns, but on behalf of much narrower economic interests. Legislators increasingly owe them more fealty than they do their own political parties. Their real power, as the health care debate demonstrated, lies in their capacity to mobilize large blocs of votes, and they understood early that the battle over health care reform would be won or lost outside the Beltway. As one Republican pollster says in War Without Bloodshed, "Members of Congress are driven by public opinion, and if public opinion becomes unsustainable they change. There are no profiles in courage." Rather than chance reform it didn't like, the small business lobby preferred to kill it altogether. Small and medium-sized insurers who faced extinction under the plan joined the NFIB in turning the public against the plan, as did ideologues and Republican strategists who knew defeating health care reform could mean winning Congress. They used the media, including the notorious "Harry and Louise" ads, to raise questions that dovetailed perfectly with the absence of accurate information about the plan. (One gauge of the ads' effectiveness: Democratic operatives pressured the actress who played Louise to come out publicly for the Clinton plan; when she balked, there were unpleasant insinuations about her future in Hollywood.) When the attacks came, the Clintons were hog-tied by their verbal serpentining and some Faustian policy choices. Any attack on government "bureaucracy," for example, could have been rebuffed by pointing out the much more expensive bureaucracy of private insurers--but the Clintons needed the support of large private insurers for managed competition. Without such wells of explanation to draw from, when powerful constituents and public opinion turned against the plan, it was dead. "I'm left with an emotion of real pessimism," one doctor said to Johnson and Broder after the failure of reform, "about how America will ever have the maturity to address complex issues of public policy." PLAYING IT SAFEThat pessimism is certainly warranted, but it's not necessarily insurmountable. Leaders--including the Clintons--need to have more faith in the public's ability to process information. And the press needs to do a better job of providing that information. Both The System and Boomerang criticize the press for poorly explaining the various options to the public and for covering the horse race at the expense of the issues at stake. The press failed to debunk misinformation put out by opponents of the various plans, and it treated interest group opposition as the real substance. The New York Times's Robert Pear, for example, would quote representatives of the Health Insurance Association of America as an authority on why premium controls wouldn't work--without explaining what the HIAA had at stake in the fight. And while the Clintons pretended reform would have no cost, much of the press coverage sent the message that any cost would be too much. ("Emerging Plan is Still Costly, Still Complex" read one Times headline. What major reform wouldn't be complex and costly? ) Unfortunately, both Skocpol and Johnson and Broder--having produced two authoritative works on this debacle--themselves fail to explain certain crucial facts. Skocpol, for example, doesn't explain alliances--although she repeatedly refers to them--until more than two thirds of the way through her book. The System discusses the controversy surrounding Elizabeth McCaughey's influential "No Exit" piece in The New Republic, which delivered a scathing and, as it turned out, largely inaccurate critique of the Clinton plan. But Broder and Johnson avoid saying where she was right and wrong about the facts of the plan, let alone her analysis of its weaknesses. Only many pages later is there an oblique reference to her "mendacity." Like the President, the press needs to learn how to educate the public on public policy issues. And that includes the abiding need for comprehensive health care reform. To say that we should seek small change because attempts at something grander failed once is to resign ourselves to all the inequities and injustices of the status quo. Approximately 39 million people will be without insurance in 1996, according to a recent Urban Institute report. More than 3 million more will also lose their insurance at least temporarily. Health care costs in 1995 consumed approximately 14.5 percent of GNP, and cost increases continue to outpace those of personal incomes. The market, in the form of managed care, is helping to control costs somewhat. But it's doing so partly by tying doctors' hands in making decisions about care, and by limiting Americans' choice of providers--specters, ironically, that were raised to derail the Clinton plan. And the savings won't necessarily be passed on to patients--or "consumers," as they're now called; they more likely will increase profit margins for the corporations now dominating the health care market, and the salaries of their executives. Indeed, health insecurity is high enough that Senators Kennedy and Kassebaum are on the verge of passing a bill that would allow those who change jobs to retain health insurance, even with preexisting conditions. Their bill exemplifies the kind of incrementalism that observers now say the Clintons should have attempted. The bill has its merits--primarily health security for those without job security. But in the long run, it's likely to do more harm than good. It does nothing to control costs or increase access to insurance, nor is it a first step on the path to do so. The result, most likely, will be higher insurance premiums across the board. And even if people with preexisting conditions can no longer be denied insurance, it can still be priced so high that they won't be able to afford it. Nor is there any mechanism to stop employers from continuing to shift more people to part-time, temporary, or contract work that doesn't offer insurance; Kennedy-Kassebaum could even accelerate that trend. The lesson? Incrementalism may be safer, but it's not necessarily smarter.