Matthew Holt

Why Hillarycare failed…and what we need to learn from that failure


In July 2005 George W Bush had relatively recently won a Presidential election in which the Republican won the popular vote (something that will likely never happen again) & the Republicans controlled all three branches of Government. Those of us liberals at the bottom of a dark trench were wondering if and how we’d get to health reform. So in another reprint to celebrate THCB’s 15th birthday, here was my then take on what went wrong in 1994 and what would happen next–Matthew Holt     

There are lots of versions about what killed the 1993-4 health care reform effort.  Hillary Clinton has now decided that the problem was the lack of incrementalism in her plan.  Last week the New York Times said that since becoming a Senator:

“She has deliberately avoided the major mistake she made as first lady, namely trying to sell an ambitious plan to a public with no appetite for radical change. <SNIP>. She summed up her approach in the first floor speech she delivered in the Senate about four years ago, when she unveiled a series of relatively modest health care initiatives. “I learned some valuable lessons about the legislative process, the importance of bipartisan cooperation and the wisdom of taking small steps to get a big job done,” she said, referring to the 1994 defeat of her health care plan.”

On the other hand, some people are still claiming victory for the plan’s defeat even if they were at most modest bit players.  Here’s what one fawning bio says about former New York Lt Governor Betsy McCaughey

“A 35-year-old senior fellow named Elizabeth McCaughey…wrote an article for The New Republic on what she discovered in a close reading of the 1,431-page document containing the Clinton Health Care Plan: Namely, that it would put every citizen in a single government-operated HMO. That one article shot down the entire blimp, and Betsy McCaughey became a 35-year-old Cinderella. One of the richest men in America chose her as his wife, and George Pataki made her lieutenant governor of New York.”

Ignoring the fact that McCaughey spent her time thereafter putting poor New Yorkers into those HMOs she so despised, and then went off the deep end en route to divorce from Pataki, the rich guy, and reality (not necessarily in that order), it’s not really true that one article in The New Republic can be quite that influential. (Sorry Jon!).  Even if the overly geeky Clintonistas in the White House did feel that they had to come out with a point by point rebuttal. And anyway, the article only came out in January 1994 by which time the die was more or less cast the other way. Again we have to look elsewhere for the explanation.

If you want to go back and spend a few minutes wallowing in the era of trial balloons and secret task forces, there’s a very interesting time line of the whole process on the NPR website, as well as a briefer information over at the Clinton Health Plan Wikipedia site. It seems like there was a moment when it could have succeeded, and indeed there may well have been. What has been missing from the whole discussion over multiple blogs over the last couple of months has been the understanding that there’s a real world outside Washington and that sometimes (but not too often) what’s going on there has an impact inside the beltway.

The debate over health care had been building for quite a while by the time of the 1992 election even though it wasn’t a big factor in the Clinton victory. Harris Wofford had won a Senate seat in 1991 in Pennsylvania with some slogan about the right of every American to go to a doctor. And the debate was being picked up amongst the SCLM elite, with the NY times having several articles about it. In fact my only ever mention on the front (or any other page) of the NY Times (as the third banana author of a piece on Japanese health care) came in very late 1992. That was one of many tiny indications that the discussion about what was wrong with American health care which had been brewing in academia for some time, was starting to come to the notice of the politicos.

So why was that debate becoming politically important? The answer was recession and middle-class insecurity. The recession of 1991-2 was brief but deep and somewhat local (centered around Los Angeles — remember “Falling Down“?)….and it was the first time that a significant number of white collar workers were asked to pay towards their health benefits. It was also the second time that heath care costs rapidly went up much faster than economic growth (the first time was in the Reagan recession of the early 1980s) which woke up employers, and it was the first time that Americans were being put into managed care plans by their employers. But by far the most important factor was the fear that no job meant no health insurance.  And even though the recession in fact was over by the end of the election season, the carry-over effect of the “no job = no health care” fear went on into 1993.

Clinton was not elected to change the health care system — the slogan was “It’s the economy, stupid!”. But rational wonk that he was, when he started to look at the economy and the rate of growth of the health care sector, he realized that he had found the biggest problem, and he set out to fix it. But he wasn’t really a wonk about health care, and neither was Hillary. So after the election they decided that they had to study the problem first and then come up with a solution. As a more recent opportunist politician would say, Beeg mistake!

Instead what was important was the opportunity given to the reformer crowd by the recession. Harris has asked questions about Americans’ attitude to the health care system since 1982. They published a historical retrospective a couple of years back which I urge you to read if you only click on one link in this post. The proportion saying that the system needed to be completely rebuilt (the most negative of 3 choices) went from 19% in 1987 to 24% in 1989 (via a weirdly high 29% in 1988) to 42% in 1991. There’s always a big group in the middle looking for “fundamental change”, but the fact that 42% were looking for a complete rebuilding meant that there was an appetite for something real to be done.  But of course there was only so much of a window, and as the economy picked up by 1993 the number was down to the mid-30%s where it basically stayed until the boom of the 1990s took health care off the radar and it fell to hover around 30% and below.  (Note of course the 30% is still a pretty high number and a much higher “base of dissatisfaction” to start from when we have the next debate).

While they should have been petrified about the gradual reduction in concern around the “no job = no health care” issue, Hillary and Ira Magaziner basically ignored 15 years worth of study about what was wrong with the health care system and spent 4-6 months fact-finding. Clinton’s address to Congress about health care, the most important issue of his Presidency not involving interns and blue dresses, was not until  September 23, 1993–Nine full months after he came to office . (That was the speech when the wrong one was loaded into the teleprompter, but he aced it anyway)

While there was some optimism in the immediate aftermath of the speech, nothing got done and politically everything was going to pot. Paul Starr, the Princeton professor who ended up being the ideological parent of the Clinton plan published his version of reality in an article called called What Happened to Health Care Reform?. In the middle of that article he got somewhere near to the truth:

“With unemployment down, Americans were worrying less about their jobs and health coverage and more about crime. As health care inflation eased primarily because inflation was generally under control, businesses worried less about health care cost containment and more about the political implications of an expansion of government authority. Under these conditions, the ideological and interest-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 were sure to lose.”

It didn’t help that the Clinton’s taskforce had mystified and excluded even potential allies.  For example the whole thing was supposed to be an employer mandate based on managed competition a la Enthoven. Sara Singer in Enthoven’s office told me that by putting Medicaid into the Regional Health Alliances, the Clinton plan would kill the employer risk pool and become de facto single payer. I didn’t see too much wrong with that as a policy but it was enough for Enthoven to declare that all 1400 plus pages of the plan should be ripped up. So without the ideological father of managed competition, it’s not surprising the the Jackson Hole Group and the employers they carried with them wouldn’t sign on. And, of course, because of the employer mandate the small employers (including the doctors) and smaller insurers were always going to be opposed, hence the Harry and Louise campaign of late 1993. When it came out around that time that they were going to pay for the plan by cutting Medicare and Medicaid reimbursements, they lost the doctors and providers, and it was all over bar the shouting.

By December 1993 Harvard pollster Bob Blendon was telling the corporate clients we worked with that the only way to save the plan was for Bill to sack Hillary and Ira, and like the Palestinian-Israeli peace process (remember that?) he should take a few trusted Senators to a Norwegian hotel and let them come up with a whole new bill. Magaziner and Hillary continued to press forward, but the meeting in the Norwegian Hotel never came about.

Of course the delays and all the other scandals like Whitewater, Vince Foster, and the various fluffed appointments and nannygates — not to mention the stress of getting the budget passed in 1993, took away attention from the health care reform initiative. But the key point was that a plan as detailed as that coming out of the task force was never going to be more than a first offer, and that it never needed all that time in preparation, or all that detail. Clinton’s six simple principles for health reform, that he announced in the September speech, would have sufficed in February 1, 2003. By the time he tried to bargain away universal coverage in mid-2004 it was too little too late.

Compare and contrast with how a real political operative got stuff done. Here’s a description of the Medicare Act passage, also passed with a Democratic President, House and Senate.

“This act was signed into law by President Lyndon Johnson on July 30, 1965, in Independence, MO. It established Medicare, a health insurance program for the elderly, and Medicaid, a health insurance program for the poor.”

In 1965, the passage of the Social Security Act Amendments, popularly known as Medicare, resulted in a basic program of hospital insurance for persons aged 65 and older, and a supplementary medical insurance program to aid the elderly in paying doctor bills and other health care bills. It was funded by a tax on the earnings of employees, matched by contributions by employers, and was well received. In the first three years of the program, nearly 20 million beneficiaries enrolled in it.

Debate over the program actually began two decades earlier when President Harry S. Truman sent a message to Congress asking for legislation establishing a national health insurance plan. At that time, vocal opponents warned of the dangers of “socialized medicine.” By the end of the Truman’s administration, he had backed off from a plan of universal coverage, but administrators in the Social Security system and others began to focus on the idea of a program aimed at insuring Social Security beneficiaries whose numbers and needs were growing.

Between 1960 and 1965, the health coverage debate was a front burner issue in Congress, with dozens of proposals introduced and testimonies given by representatives of major organizations, including the American Hospital Association, the American Medical Association, and the AFL-CIO. After Congress passed the legislation in the summer of 1965, President Lyndon Johnson decided to sign the bill with former President Truman at the Truman Presidential Library in Independence, MO, in order to recognize Truman’s early effort to establish a national health insurance program.

What that doesn’t tell you is the three key aspects of the Medicare and Medicaid Act; 1) It explicitly bought off the AMA by telling them that Doctors could keep billing at UCR rates and would not be interfered with by the government. 2) It explicitly gave the Blues plans a role in processing Medicare claims, one which they still by and large have, and 3) most important, look at the date. The whole bill was done and dusted less than 6 months after the new Congress was sworn in. So the potential opponents were bought off, and then it was pushed through fast before they realized what was hitting them.

Now Johnson had advantages. He had won a landslide; he had more Democratic Senators on his side (although many were very conservative); he didn’t have to worry about the deficit and thus could afford to buy off his industry opponents, who of course were much weaker than they were 30 years later, and he wasn’t going for universal insurance for everyone (just the most expensive ones). And of course he lied about the cost (Note that that worked for Bush in 2003 too!). But one lesson at least is, if you want to get something done, make it simple and get it done fast before opponents can get it together to stop you. So don’t be too fussed about the details so long as it works for your overall principles.

I remember going to the American Association of Health Services Researchers meeting in DC in 1993, and I, like everyone else, thought that the Clintons were going to get something passed. How naive. But I do remember one speaker saying that he remembered when it failed last time (1973), because everyone’s second best option then was to “do nothing”. He hoped that we had a better second option. We didn’t.

Instead the option was to trust the market. If I had a nickel for every health executive who told me that market reform was happening and that meant we didn’t need government reform, then I’d probably have had two bucks by the end of 1994. But as soon as the “market” (i.e. doctors and hospitals) realized what “market reform” meant they started squealing for government protection. That put the Republicans in a bind that they’ve yet to get out of. We used to call it “The market is working but managed care sucks”,  as exemplified by Republican M. Stanton Evans in The National Review in this 1998 article. Of course nothing that came out of the period of market “reform” was that different to the mechanisms for cost control in the Clinton plan — aggressive managed care plan pricing and Medicare cuts.

The memory of this foul-up may not be enough to matter. Even if employers and the public can’t afford the bill for health care, and even if providers fear that no reform may be worse that reform they have a stake in, it still may be impossible to do. In an article called The Great Health Care Debate of 1993-4 Derek Bok essentially argued that health care reform can’t be done. as it’s just too damn political. He also intriguingly noted that the Clinton plan was very popular in 1994 until it was associated with that name. So politics trumped policy in a triumph of Limbaugh over logic. And if you remember the vitriol over the very moderate Clintons from the newly loud right in the early 1990s maybe nothing would ever have worked. And we are no less polarized today.

But there are some positive points.  If you look at Harris polls taken nearly more than a decade apart, philosophically as a nation we are still in favor of universal health care access. (Below are the 2003 results)

“By 75% to 21% (including a 66% to 30% majority of Republicans), most people agree that “people who are unemployed or poor should be able to get the same amount and quality of medical services as people who have good jobs and are paying substantial taxes”.

By 69% to 27% (including a 63% to 32% majority of Republicans), most people disagree that “it’s fair that people who pay more in taxes (or in health insurance premiums) should be able to get better medical care than those who pay little or nothing.”

In fact despite 15 years of arrant egotism and conservatism this whole series also shows that we’ve only become slightly meaner since 1991. And in principle we as a nation want to move to universal health care. So I think that at some point reform can and probably will be done, particularly as all the pressures of 1991-3 are worse now.

But we unquestionably need to take advantage of the opportunity that the failure of the system is presenting us with. Especially the new equation that “a job doesn’t not equal health care access”. We need to get the debate into gear about how the system isn’t working for most Americans, and how “that means YOU!” for what’s left of the middle class. Particularly the white, male, southern, middle class.

The main lesson of HillaryCare is that when the right moment comes along politically we need to get whatever form of universal reform can be agreed on shoved quickly through the Congress. Make no mistake, universal insurance is a big bang and a necessary big bang.  Getting it through will be a hell of a confluence of opportunity and tactics.  Once we get it done, then we have a while to worry about sorting out the system to the purists’ satisfaction later.

So will you all still please stop arguing about what it should look like!

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2 replies »

  1. On May 7, 1959, Baron C.P. Snow gave a lecture at the Senate House located on the University of Cambridge campus in Cambridge, England. The opening quotation on yesterday’s post is from that lecture.

  2. “I believe the world is increasingly in danger of becoming split into groups which cannot communicate with each other, which no longer think of each other as members of the same species.” Taken alone, this quotation might be viewed as referring to the geopolitical divisions within our nation’s social and civic discourse. However, it was spoken by a physician in England, nearly 60 years ago. Widely recognizable by a few, no doubt, I will post his name tomorrow, if not identified by another Blog visitor.
    As an aside, he was describing his view that a communication gap was evolving between the knowledge realms of the sciences and the humanities. Could it be that the communication gap between these two intellectual realms represents the essential root cause, of root causes, for the problems plaguing our nation’s healthcare industry? And, could it be that the communication gap between the two realms of knowledge also contributes substantially to the level of uncertainty as our nation adapts to a rapidly evolving new world order? To consider the dimensions of this communication gap, the concept of cognitive dissonance may apply as defined nearly 62 years ago by Leon Festinger.

    Please assume that the HUMANITARIAN mandate for each person’s Basic Healthcare Needs and the SCIENTIFIC mandate for each person’s Complex Healthcare Needs represents the essential intellectual realms for healthcare. This duality has attributes that parallel the thoughts of the author quoted above. Could it be that a communication gap has also occurred within our nation’s social discourse regarding the humanitarian and scientific mandates for healthcare? Could it be that a paradigm shift has occurred and the associated communication gaps block any true reform from originating from within the healthcare industry itself OR our nation’s civic discourse?
    During the ?13 year interval since its first publication, your post is a reminder that not much has changed. Unless revealed by someone else, more about the author of the opening quotation above, tomorrow.