Bill Clinton deputized his wife to explore the most nightmarish thicket in politics –– the nation’s out-of-control health-care system –– and he promised she would emerge by early May with a plan to reform it. We will soon learn just how smart (and brave) Hillary Rodham Clinton really is. Reforming health care is like solving a Gargantuan puzzle with a fiendishly complex maze of interlocking parts. It requires nothing less than restructuring a major industrial sector that sprawls profitably across one eighth of the national economy.
But even harder is solving the politics. This is a thicket guarded by an array of hostile interests –– doctors, hospitals, drug makers, insurance companies and allied groups. Each of them stands to lose big if this problem is solved in favor of citizens; together, with their lobbying power and campaign donations, they have always managed to thwart change.
Senator Paul Wellstone of Minnesota, who is sponsoring legislation to create a Canadian-style national health system, thinks the health-care debate dramatizes a deeper malady. “Do we have a democracy for the few or a democracy of the many?” he asks. “This is a classic test of that question. I’ve been in meetings with other senators who say: ‘Yes, a single-payer system [like Canada’s] would get rid of the administrative bloat and really reduce costs, and we agree it makes the most sense. But the groups won’t accept it.’
“What they mean by the groups,” says Wellstone, “are the insurance companies and the health-care industry and so forth. Who are we going to take care of – the interests or the people?”
With a brilliant sense of strategy, Bill and Hillary Clinton are positioning themselves to break through the encrusted barrier of the status quo. They may even accomplish real reform, if not the total overhaul envisioned by Wellstone and others. The Clintons’ strategy is boldness: to shock the system with reform proposals far more dramatic and disruptive than anything the insiders assumed possible. “The bigger the change, the bolder it is, the more the public will be for it,” predicts Stanley Greenberg, the president’s pollster. “And the more reluctant the interests will be to go against the historic forces for change. The main strategy is to undermine the legitimacy of the special-interest claims. People said, ‘Wow,’ after they heard the president’s economic plan, and the interests were silenced. Their ‘wow’ will be even more audible when they see the health-care proposal.”
The president is capitalizing on the popular climate of disgust with business as usual, which has already served to put the status quo interests on the defensive. They’re hastily trying to reposition themselves as good guys. After years of unconscionable price gouging, drug companies have offered to implement voluntary price controls. The American Medical Association, the reactionary voice of rich doctors, has begged for a seat on Hillary’s task force. The insurance industry, which gobbles hundreds of billions in health-care dollars, announces that now it, too, is for reform.
The Clintons want to exploit this confusion –– dividing the natural opposition to reform and splintering the forces that have always blocked it in Congress. While her task force conducts mind-numbing discussions on the details, Hillary Clinton sits in the back room wheeling and dealing in the best tradition of power politics, offering carrots to some players, sticks to others.
Such hardball is absolutely necessary, of course, but it also reflects the deformed condition of the country’s politics: A leader must broker terms with the big interests in order to do something the people clearly want and need.
George Kohl, an active player as research director of the Communications Workers of America, describes the reality: “As you put the package together, you have to figure out how to beat the medical industry and the drug industry. To do that, you need to enlist someone’s muscle besides the people’s, because the people don’t count for enough.”
The quite real danger is that fashioning a plan that will win might also produce a reform package that doesn’t reform much. Next month, if the big mules are happy with what the Clintons have wrought, then ordinary citizens should be alarmed. “One’s instinct,” Stan Greenberg concedes, “is to worry that reform gets hijacked by the interests who are well organized to control it. That’s certainly what’s happened in the past.”
The fundamental problem is this: Exploding price inflation in the healthcare industry is eating up the national economy. In 1980, health care consumed nine percent of the gross national product. By 1992, it gobbled up half again as much –– fourteen percent of GNP, or more than $800 billion. By 2000, if nothing is done to control it, health care is expected to swallow eighteen percent of GNP.
That rising burden strangles everyone from families to Fortune 500 companies. It has created a system that effectively rations health care on the basis of income. The 37 million who have no insurance are people who simply cannot afford it –– the young, the unemployed, the families with grave medical problems.
The vicious consequence of these price pressures is a chaotic game in which every player tries to shift costs onto someone else. Hospitals may treat the uninsured, but they will spread the cost over the bills of paying customers, including corporate health plans. Insurance companies protect their profit margins by passing costs on to their policyholders –– cutting coverage and adding copayments for families.
In other industrial nations, where health care is treated as a social guarantee and governments take responsibility for ensuring equitable access, costs are dramatically lower –– averaging only eight percent of GNP. Among other things, those nations restrain profit incentives and cut out expensive middlemen like the insurance companies.
Though you don’t read much about it in the media, there is a lively grass-roots movement pushing for a similar solution in the U.S. (the plan embodied in the Wellstone bill). A national health service like Canada’s – where all citizens carry cards that entitle them to care and the government pays all the bills – is known as a single-payer system, partly to avoid the odious label of socialized medicine.
Its great political drawback is that a major payroll tax would be required to pay for it. But its great virtue is that it would establish universal access instantly and save real money upfront, principally by cutting out the insurance industry. The Congressional Budget Office, the General Accounting Office and Consumers Union have variously estimated that anywhere from $35 billion to $200 billion can be saved by eliminating administrative paperwork and overhead, including insurance companies’ marketing costs. As a result, a typical family would actually get better health care for less money than it now spends on premiums –– an estimated savings of $1500 a year.
The insurance industry naturally has an alternative solution –– a horribly complicated thing called managed competition –– in which the magic of the marketplace would supposedly yield similar benefits without government intrusion. Consumers, instead of being free to choose their doctors as in the single-payer approach, would be compelled to enroll in large “purchasing cooperatives” that would bargain on their behalf with healthcare providers for the lowest prices. Insurance companies –– surprise –– would play a central role in running this system.
The logic behind managed competition is essentially the same wishful thinking that produced such disasters for consumers as airline deregulation. As the Eighties demonstrated, corporate economies of scale do not necessarily lead to real price competition; they often lead to price collusion.
“Old snake oil in new bottles” is what Bruce Vladeck, Clinton’s health-care financing administrator, calls the insurance industry’s approach. “The reason so many providers support managed competition,” he says, “is because they don’t believe its cost-containment mechanisms will really work, and they’re afraid the mechanisms in other proposals for healthcare reform would.”
As a candidate, Clinton confidently embraced managed competition and expressed skepticism of government control, not to mention the huge taxes needed upfront for a Canadian-style solution. The dynamics of solving the puzzle, however, seem to be driving him and his wife toward more radical solutions. As they put their plan together, the Clintons are talking up managed competition, but they keep tacking on other provisions that contradict its logic and amplify the government’s authority to run things.
Bill and Hillary Clinton are essentially trying to straddle the vast differences between the two camps. The hybrid plan they’re fashioning will create purchasing cooperatives in the hope of generating price competition, but it will also impose price controls and state-by-state budget ceilings. It will give insurance companies a major role but also authorize the states to experiment with versions of the Canadian approach. “If it doesn’t work,” says Greenberg, “it won’t be because this administration was thinking small.” Aetna, Cigna, Metlife, Prudential – As of now they all seem pretty happy. The president might have taken them on frontally in a populist campaign; instead he has made common cause with them. They will be given a large role in managing the new system. It is the hundreds of smaller insurance companies that will get screwed – literally pushed out of the business. Thus, Clinton’s reform promises a vast consolidation of market share for the big guys. So naturally they will help him get it passed. The Health Insurance Association of America, once a bastion of resistance to change, has been crippled by defections as major companies have gone over to join the reformers. Hardball politics ain’t always pretty to watch. Sector by sector, the Clintons seem to be pulling together a muscular business-labor coalition that can win. Whether reform will be fatally deformed in the process is the question.
Certain elements of corporate America have offered the White House a hoggish deal –– special treatment in exchange for support. The largest Fortune 500 companies are an important force for reform because the current system does direct damage to their balance sheets. Anything that controls costs will benefit them, but some bigger companies are demanding even more. They want a provision that allows them to opt out of the purchasing cooperatives and continue to run their own independent health plans. Thus they want to profit from lower costs while still avoiding any link with high-cost patients.
The issue has been described by the corporate reps as a “deal breaker.” Without it, they won’t support reform. In the White House, some have argued that the compromise would be nuts, a loophole that would foster exactly the kind of two-tiered health system that already divides the country. But some insist they have no choice but to accept it.
On other fronts, the White House has been working out the potential for divide-and-conquer politics. Despite the AMA’s stance, many physicians ardently support reform. Some want even more radical change than Clinton. The White House hopes to neutralize the hostile docs by offering them reform of malpractice lawsuits along with a much simplified system of insurance paperwork. The Clinton team is also exploiting the fact that like doctors, many small-business owners are more progressive than the trade associations that speak for them. Two thirds of smaller firms provide health coverage and are gouged themselves by the system. The other third may be softened up by temporary tax credits or other subsidies that would help them to absorb the added cost. The drug industry, which Clinton has already effectively bashed as a greedhead, is pleading to be left out of the whole scheme so the government won’t control drug prices. But there’s no room for compromise of this. Drugs will be subject to price controls, a White House insider says, because that provision will ensure the support of the elderly, who are the most cohesive and powerful bloc of citizens. “The only way we buy off the old folks is putting in drug coverage,” the insider says. “If we give that to them, then the AARP [American Association of Retired Persons] will come with us. If the AARP goes crazy on this, we are in big trouble.” The last big piece in the Clintons’ coalition is organized labor. Like other players, the major unions are split. Industrial unions –– machinists, garment and textile workers, communication workers and others –– are zealous advocates of the more radical Canadian solution. The building trades and other unions that operate their own health funds, like many corporations, want to keep that power. So instead of providing the momentum for a full-throated campaign that might have pushed Clinton toward a more progressive plan, labor is bargaining defensively.
Until the final package is on the table, any commitments of support are contingent. But it appears that the pieces are falling in place for a breakthrough – the first fundamental reform in three decades. The congressional struggle will focus on defending reform against intense lobbying that would gut it. Bill and Hillary Clinton can win this fight and secure their place in history as landmark reformers, but history’s verdict must await actual results. Even if the Clintons give too much and the special interests come out on top again, this year’s fight will likely remake the debate, the crucial first step toward a national health-care system.