Ours is a country with a political system like no other. We are a Republic, not a direct democracy, as many of the uninformed believe. Furthermore, we have an ever-changing federal form of government that splits responsibilities between the states and the national government in
Washington, D.C. The system has many built-in complexities, which the checks and balances between the legislative (itself bifurcated), executive, and judicial branches of government further compounds.
The Nixon and Kennedy debates in the 1960 election accentuated the health care access issue. Kennedy proposed federal medical aid to senior citizens, while Nixon desired a more market-based system (Kennedy-Nixon First Joint Radio-Television Broadcast). Using many of the ideas first brought forth by Kennedy, Johnson – who was widely acknowledged as a ruthless but effective politician – pushed through passage of Medicare for the elderly and Medicaid for the poor in 1965 before the economic and political costs of the Vietnam War undercut his Congressional clout and the funding for his Great Society programs. Thus began a much more direct federal role in the delivery and financing of health care.
This Great Society legislative success was followed by passage of the 1966 bill creating the Office of Economic Opportunity (OEO), an effort that extended into a wide number of areas, such as Legal Aid and Head Start, two legacy programs that exist today. That law included the establishment of federally funded but locally run neighborhood health centers for the poor, but on a very limited scale.
As is so often true, the creation of Medicare/Medicaid did have more than one unintended effect on the health care market place. One such consequence was that health care inflation increased much more rapidly than it would have due to artificially heightened demand for services under a cost-plus reimbursement system driven by government money. From the standpoint of providers, the incentives were to provide as much care as possible without regard to expense, a practice that generated patient service/expenditure increases.
Subsequently, various governmental regulatory programs were eventually put into effect in the 1970s to control cost. Notable among these were the local Health Systems Agencies
(HSAs) and the State Health Planning Agencies (SHPDAs) created under PL 93-641.
Reviews were mixed on the effectiveness of these efforts and continue to be so to this day, with numerous states retaining these agencies on the state level. (The subject of State Health
Policy will be further addressed in Assignment #4.) Possibly the greatest, albeit unintended, impact of these programs was that they created a cadre of trained comprehensive health planners who soon evolved into private sector hospital planners, assisting in the next wave of procompetition moves in the field as described below. See Bruton (1995) for an explanation of the practical differences between these two related disciplines.
Far more effective in controlling the rate of growth in hospital services was the new
Prospective Payment System (PPS) of reimbursement put in place in 1983 under the Reagan administration, which promoted market-based solutions. Payments were now to be made per an established scale versus a cost-plus arrangement. Thus, gone was the incentive to expand for expansion’s sake and to fill hospital beds. Replacing it was the mantra of efficiency, profitability, and expense reduction. In time, a similar system was put in place for physicians: the resource based relative value system (RBRVS).
The view of Reagan era officials, as told to your professor by James Scott, former head of health affairs for Senator Bob Dole and a key HCFA (Health Care Financing Administration, the predecessor to CMS) figure, was that this put a dose of competitiveness back into the system;
Reagan and those who worked for him believed that market–based solutions were almost always preferable to regulation. In at least this one instance, it appears that they were right given the almost immediate slow down in new hospital construction/expansion and the steady closing of smaller and less efficient facilities over the next 20 years.
The rise of managed care (HMOs/PPOs) also slowed the growth of health delivery services and inflation, although their degree of effectiveness is a matter of debate. The history of
Health Maintenance Organizations (HMOs) is itself very interesting. Early staff model HMOs (such as HIP in NYC or Group Health in Seattle) were often idealistic, collegial, humanitarian organizations with their emphasis truly upon improvement in health status for members.
However, several decades ago this situation began to change, partially due to the rapid rise of for-profit HMOs, encouraged both by legislative initiatives and by pressure on employers to hold down costs. Also, these latter day HMOs did not use the staff model, preferring instead to contract with private practitioners who had less idealistic outlooks (Starr, 1982).
In any case, despite industry propaganda to the contrary, employee complaints to their employers were frequent regarding restrictions to care and providers (see Patient Bill of Rights below). Subsequently, a kinder gentler form of managed care was invented, the Preferred Provider Organization (PPO). The PPO, more popular with many employers and consumers, was created to supply an option that still held down costs, but gave more flexibility in the choice of providers through the establishment of “provider networks.”
Over the last decade or so, another form of managed care has come into vogue, Pharmacy Benefits Management (PBM). As the name implies, these firms contract with drug companies for price concessions as part of insurance frameworks. If sufficient concessions are not made, the consumer (i.e., the employee) pays a higher deductible. In addition, generics are encouraged through lowered deductibles. The real issue with PBMs is not so much whether or not they save money for employers – they do – but rather, how much of the savings is in reality just costshifting (moving cost to the consumer).
As is true of so much in the field, the ultimate success of managed care remains to be seen. Certainly, it is indisputable that some costs were avoided. At the same time, other administrative overhead costs were added. Further, the case can be made that costs were often not eliminated, but rather passed on to the patient as in the instance of PBM higher deductibles.
Along these lines, it should be noted that President Bush was on record as supporting Patient Bill of Rights legislation regarding HMOs, although the Administration failed to pressure the
Republican-controlled House and Senate to reconcile the different versions previously passed by those bodies.
Another offshoot of the change in regulation and managed care was the tremendous growth in multi-hospital systems, both for-profit and not-for-profit. Smaller and/or less efficient hospitals simply could not survive in the new climate of extreme competition. Many were either acquired or closed altogether, especially in rural areas and the inner city.
The American Hospital Association (AHA) technically represents all hospitals. However, for-profits have their own trade association as well: the Federation of American Hospitals (FAH), an effective lobbying group. Whether or not for-profits are more efficient or just in better, more affluent locations is a subject of controversy. The Wall Street Journal and various free-enterprise groups such as the Hoover Institute have made the argument that they are more efficient (Kessler, 2003).
In the early 1990s, Democrat William Clinton was elected, running on a moderate platform that included health policy change. At least within the national Democratic Party leadership, there existed support for health care reform. Clinton, widely considered then and now by leaders of both parties to be a master politician, immediately set out to make the most dramatic change to the delivery and financing of health care in the history of the country. As
Clinton said in his 1993 inaugural address, “But when most people are working for less . . . when the cost of health care devastates families and threatens to bankrupt many of our enterprises, great and small . . . we would need dramatic change from time to time. Well, my fellow citizens, this is our time.”
However, problems were evident from the start, technically and politically. As a result, the ultimate plan was supremely complex, relying on little understood “health alliances.” We will analyze the Clinton Plan in depth as this course progresses, but suffice it to say that there were many flaws, both in the way that it was developed and the way it was presented. It ultimately failed miserably and created political problems for Clinton and the Democrats, causing both Democrats and Republicans to shy away from health reform for a decade. More drastic reform measures, such as those proposed by Physicians for a National Health Program (Himmelstein & Woolhandler, 1989), have since been largely ignored by politicians.
This leads us to the present day, with the current emphasis on terrorism, the war, and foreign policy in our national conscience. Health policy, with the exception of a convoluted prescription drug program for seniors, was a relatively minor issue in the first Bush Administration and in the campaign for a second term. Indeed, various Democratic groups have argued that Kerry made a major mistake in allowing Bush to control the agenda and push religiously-oriented values and foreign policy versus domestic issues, such as health. Kerry did propose an expansion in coverage, essentially through governmental programs. Unfortunately, he did not adequately explain how this program would be financed other than through rescinding tax cuts for the wealthy. He also attacked the Bush FDA policy of restricting drug imports from
Canada. From a purely political standpoint, Kerry had little to lose in that the insurance and pharmaceutical industries have long been major contributors to the Republican Party, giving relatively little to the Democrats.
Health care policy is generally considered to have three components: quality, access and cost. Bush, in his health reform proposal, chose to push one particular aspect related to cost: tort reform (malpractice suits), not a subject on the minds of many Americans but a subject of vital importance to physicians in key states and a core GOP constituency (Brooks, Menachemi, Hughes, & Clawson, 2004). The clear implication was that controlling trial lawyers and settlement amounts would cure many of the ailments associated with defensive medicine, such as over-ordering unnecessary tests.
President Barack Obama has shifted attention back to health care reform as a means “to control rising health care costs, guarantee choice of doctor, and assure high-quality, affordable health care for all Americans.” (http://www.whitehouse.gov/issues/health_care/) According to this whitehouse report,Comprehensive health care reform can no longer wait. Rapidly escalating health care costs are crushing family, business, and government budgets. Employer-sponsored health insurance premiums have doubled in the last 9 years, a rate 3 times faster than cumulative wage increases. This forces families to sit around the kitchen table to make impossible choices between paying rent or paying health premiums. Given all that we spend on health care, American families should not be presented with that choice. The United
States spent approximately $2.2 trillion on health care in 2007, or $7,421 per person – nearly twice the average of other developed nations. Americans spend more on health care than on housing or food.
The Administration believes that comprehensive health reform should:
• Reduce long-term growth of health care costs for businesses and government
• Protect families from bankruptcy or debt because of health care costs
• Guarantee choice of doctors and health plans
• Invest in prevention and wellness
• Improve patient safety and quality of care
• Assure affordable, quality health coverage for all Americans
• Maintain coverage when you change or lose your job
To understand the complicated and apparently uncoordinated system of health care in the U. S., one must first be aware of the historical evolution of the U. S. model (or nonmodel, as the case may be). To start with, America has a very different history than the other developed nations of the world, virtually all of which have instituted centralized national
health care insurance.
America was, and still is, the Promised Land for many, built on rugged individualism.
From the Pilgrims in New England to the convicts sent to populate Georgia, our nation represented a new way of life, leaving behind the ties, history, and culture of the old country.
While much of our societal success is built on this strong foundation, there are trade-offs.
Promoting individualism can be destructive to the collective spirit and the idea of a common community of interests. As you will note below, this philosophy directly affects the evolution of health care policy in our country.
Modern Europe evolved from the feudal system of the Middle Ages. Under that system, the population counted on a noble to rule paternalistically, providing the necessities of life. Sometimes the system worked; very often, it did not. Without going deeply into
European history, in recent times a much stronger tradition of unionism, socialism, communism, and fascism has existed, quite different ideologies but all having as a central ideological theme the common good; in other words, “collectivism.”
The weaknesses of the above collectivist systems are obvious to anyone who studies the history of 20th century Europe and Asia. Nevertheless, this ideology produces adherents who possess certain defined characteristics: “Collectivists, compared with individualists, enjoy working together more, are generally more cooperative” (Chen, Chen, & Meindle,
1998, p. 285).
On the other hand, America has historically been a country in which the individual and the free enterprise business model have been central to our being. Although labor unions
– a key advocate for universal health insurance in the U. S. and elsewhere – were prominent earlier in this century, they have never had the political clout here that they have had in England or France, for example. Likewise, compared to elsewhere in the world, left-of-center concepts, such as socialism or communism, have never had much of a following or impact in the United States, with the possible exception of the Depression era.
The Stock Market Crash of 1929 and the subsequent depression that followed were traumatic for the nation’s middle class, which had prospered after the World War I. As a direct result, Democrat Franklin D. Roosevelt was elected in 1933 on a liberal reform platform, repudiating much of what Hoover and his conservative administration stood for ideologically. The New Deal changed the federal government’s historical role forever;
Washington became much more active regarding domestic policy and regulatory affairs, including health care.
The legacy of the New Deal is still with us, with traditional Democrats generally attempting to expand the role of government in health care and Republicans generally believing that the market place is a better solution, as expounded by former President Reagan and his disciple George W. Bush (Kemper, 2004). This divergence is especially true given the recent polarization of the parties, with Democrats going further to the left and Republicans to the right.
Health care was not the primary national issue for most Americans in 2004. Only
12% of Americans listed it as such in the 2004 presidential election, according to a USA Today/CNN poll taken just before the election (USA Today, 2004). In 2008, registered voters ranked health care third as an election issue.
When registered voters were asked to choose the most important issue affecting their vote among a list of issues, health care ranked second among those who said they intended to vote for Senator Obama and tied for fourth (with the war in Iraq) among those intending to vote for Senator McCain. The majority of registered voters indicated that the presidential candidates’ stands on issues were more important than the candidates’ characteristics in making their voting decision. However, the majority of McCain voters said candidate characteristics were more important, whereas the majority of Obama voters said that issues were more important in their voting decision. When asked to choose their top health care priority for the new administration from a list of five problem areas, registered voters overall, McCain voters, and Obama voters ranked affordability as the top priority. Second among voters overall was expanding health insurance coverage for the uninsured. (http://content.nejm.org/cgi/content/full/359/19/2050) There seems to be little common ground for compromise due to vastly different ideological and philosophic principles that now influence Americans. In the words of one health futurist, “Health care is something that everyone cares about deeply, but it is not an area in which there is a clear solution” (Flower, 2004, p. 1).
Throughout the history of our nation, the intricate form of governance detailed in
Assignment #1 has meant that radical ideas were not rapidly adopted and that there were few ideological coups by fringe groups – right or left – who took over the government. In general, internal change, although inevitable and desirable, has come about relatively slowly and only after much debate and soul-searching. That is the nature of our system. We are by structure an individualistic, conservative nation that changes slowly relative to other nations, a fact that has many consequences for both health policy and our daily lives. Take, for example, the issue of public smoking. The pro-individualistic bent in America is explored in an excellent article detailing the battles of the public health lobby against smoking: “The strictures imposed by the cultural and ideological antipathy to paternalism may serve as an impediment to the further development of policies designed to alter the normative and public context of smoking in America” (Bayer, 2002, p. 949). In other words, although Americans are fully aware of the hazards of smoking, we are hesitant to impose restrictions upon our fellow citizens.
All this is to say that collectivism, as an ideology, is not particularly well established in our national conscience, especially as regards the rest of the civilized world. Therefore, as indicated in your text, efforts in the first half of the twentieth century to put in place a universal health care system modeled after the English or German precedents were largely unsuccessful.
From my professional dealings with the four western Canadian Provincial Hospital
Associations, the executives with whom I dealt were almost condescending on this particular point. Virtually none could understand why a country as wealthy as our own and as technically advanced in medicine could not manage to provide a guarantee of health care to all its citizens. Similarly, our national failure to control pharmaceutical prices astounds
Canadians, both consumers and health providers, who buy the same drugs from the same companies but at a much lower price. (Pharmaceutical companies claim that they sell drugs at lower prices to countries with socialized health care because those countries buy in such large quantities that the drug companies will at least make back the money they put into research. In order to provide future research, however, they say that they must make a profit and, therefore, must sell at a profit in the U. S.)
Obviously, the reasoning behind our different policies is not only financial; the underlying cause is a different set of values. Within this context, it should be noted that although most Canadians speak like the residents of the U. S. and are similar in many other ways, their culture and history is also quite different. The documentary Bowling at
Columbine (2002) points this out in regard to another health issue: gun deaths, a primary cause of mortality among some American sub-populations, such as African-American youth.
As indicated by Michael Moore, Canadians have more guns than Americans per capita yet their homicide rates are a fraction of ours. Why? They have a different mind-set and culture.
In the 1960 election, Nixon and Kennedy debated the health care access issue on national TV, with Kennedy advocating medical aid to the elderly and Nixon calling the Democrats proposal “too extreme,” indicating that there should be a “choice of having either government insurance or private insurance” (Freedom of Communications: Final Report of the Committee on Commerce). Although it was a much more civil time in the political realm and the divisions between the parties were not as stark as today, the right-of-center commentators of the time called Kennedy’s proposal socialized medicine. Johnson’s Great
Society theme, based in large part on the ideas coming from Camelot and politically energized by the murder of a popular President, finally resulted in the passage of Medicare for the elderly and Medicaid for the impoverished in 1965. It was not socialized medicine as critics claimed, but certainly the beginning of a more direct government role in the financing, and thus the delivery, of care.
As another example of the ideological gap between Europe and the U. S., I recall one particular incident. As an employee of the Atlanta poverty program Economic Opportunity
Atlanta (EOA), I toured an Office of Economic Opportunity (OEO)-funded Neighborhood
Health Center in 1971 with Gunnar Myrdal, an internationally known Swedish academic and political figure. (Myrdal was the author of the classic academic treatise on segregation in
America, American Dilemma: the Negro Problem and American Democracy. Myrdal’s work was cited by the Supreme Court in its 1954 decision outlawing “separate but equal” schools, hospitals, and other public facilities.) Myrdal was impressed with the tour, but asked why there were not more such centers. Upon hearing the comment that we in the U. S. could not afford the expense, Mr. Myrdal’s simple but profound response was, “Why not?” (Personal
Conversation, 1971)
This story illustrates the vast gulf that exists between the American view of the appropriate role of government in social welfare/health care and that of Europeans. However, it is not just Europe that believes American health care is less than adequate regarding access for the less fortunate. Virtually all developed nations have addressed this issue directly through governmental means in a much more comprehensive way than our country.
Another interesting ideological aspect of health care is the role that religious ideology has had in the evolution of our nation’s health care system. As opposed to the experience of the Civil Rights Movement, for example, the religious community is currently widely divided as to what our health care priorities should be. Pressure from the right exists both through evangelical Protestants (including well-known national evangelical figures, such as Pat
Robertson and Jerry Falwell), and the Catholic Church concerning issues such as abortion and stem cell research. Certain Bishops went so far as to insert themselves directly into the 2004 Presidential race on the abortion issue. Of the voters believing that abortion should always be illegal, 77% voted for Bush according to CNN exit surveys (White, 2004, D1).
There is a somewhat muted push from some clergy on the left – notably the Rev. Jim
Winkler, General Secretary of the United Methodist Church – to see national health insurance enacted. Of these two sides, clearly the Bush supporters were the most vocal and had the most impact on the election. According to polling, “70 percent of political conservatives say that their religious beliefs very much determine their political choices” (Witt, 2004, p. 18).
It is interesting that the religious right has gained prominence on the health care issue when the matter is so important to the left in building a winning coalition and when the moral problem, if not the remedy, is so easily stated. According to one source who reviewed Your Money or Your Life, a recent book by Harvard economist David Cutler, “An estimated
20,000 adults under the age of 64 die each year in the United States for lack of health insurance. Close to 45 million Americans are without medical coverage; consequently, they receive less care, belated care and inferior care, studies have shown. Their sickness and premature deaths represent a huge leak in the potential value of the nation’s health care investment” (Weber, 2004). Cutler’s estimate is that it would cost $20 billion a year to cover the uninsured, a lot of money but a lot less, for instance, than we are spending in Iraq each year. As is true in all of American government, it is simply a matter of spending priorities.
Most Americans are more concerned about terrorism than they are about health care.

Assignment 3 Material:
Bill Clinton was elected in 1992 with only 43% of the popular vote but with what he thought was widespread support across the country for health care reform. Although not elected with a mandate, as LBJ was in the 60s, Clinton was a master politician, as well as a scholar and intellectual who had once been a college professor. He was also a moderate who had helped found the conservative Democratic Leadership Council (DLC) and vowed to make the party more appealing to the middle-class. Along these lines, he viewed health care reform as both the way to build a new and lasting Democrat majority and his personal vehicle to re-election in 1996 (Heclo, 1995, 86).
Comprehensive reform of the health care system had been on the Democratic agenda for decades, going back to the time of the New Deal. Indeed, there had been a debate within the Roosevelt Administration about whether or not to include health care as part of Social Security. Because physicians were so powerful locally, Roosevelt decided to leave that battle for another day. Although the party had not become strong or cohesive enough, especially in the conservative South, to push through Universal Health Insurance, it had been able to make incremental changes, including the notable passage of Medicare and Medicaid in the Johnson years.
In the election of 1992, the public indicated that one of its key issues was health care reform (Skocpol, 1995). Clinton was under pressure, self-inflicted as well as external, to make his mark in history. Indeed, according to one observer, his ultimate proposal was “the health equivalent of reinventing government, proposing as it does the creation of new institutions, new relationships, and new responsibilities for private and public sectors alike” (Zelman, 1994, p. 9). What was the Health Security Act that the President proposed? It had several key aspects. In the words of Zelman, a key architect of the plan, “To the fundamental guarantee of coverage (not just access) and security for all, President Clinton has added five other principles: savings, choice, quality, simplicity, and responsibility” (p. 9).
However, Clinton’s proposal was not the simple-to-comprehend, single-payer system that many citizens understood (i.e., Medicare for everyone in the layman’s view) and that was advocated by the left, including Senator Wellstone (Weiner, 1994). It employed, instead, a highly complex free market approach utilizing “health alliances,” which were to be grouppurchasing vehicles for both driving down cost and providing access for all. By joining a large group-purchasing alliance, the consumer would have “leverage” over the insurance companies. Because the insurance companies would have to deal with large groups instead of individuals, they would have to bargain and, theoretically, compromise more. Much the same approach has been utilized in the supply/pharmaceutical area. Large consortiums of hospitals have gotten together to agree on contracts with suppliers, giving them bargaining power that they would not otherwise have in dealing with large corporations.
Clinton attempted to use a market-based approach that preserved the role of insurance companies. An alternative would have been a single-payer approach similar to a “Medicare for all citizens” as advocated by the left wing of the party. Clinton’s moderation did not help him sway the insurance companies and created only mild support from radical reformers.
Unfortunately for Clinton, instead of being applauded for shying away from the left-ofcenter, single-payer approach, people attacked the Plan for being too complex and for expanding the role of government, leading to significant Democrat losses in the 1994 Congressional elections (Skocpol, 1995).
Why did Congress fail to enact the plan? There are numerous reasons. Initially, national feelings that universal health care should be enacted were high as measured by opinion polls at the time, with 66% wanting change. However, from the start support for major policy modification was minimal among Republicans (Blendon, 1995) and in the traditionally conservative South. This was reflected in Congress, which then contained numerous conservative Southern Democrats, known as “blue dogs,” notable among them Representative Cooper of Tennessee, who put forth a competing health reform plan.
Partisanship, stoked by both parties during the Reagan years, was on the rise and further dampened support from moderate Republicans. In addition, Clinton personalized the issue by placing his wife, not a popular figure among Republicans or conservatives, as the head of the reform effort (Heclo, 1995, 86).
Further, Clinton misread the mood for reform in the nation. While the public wanted to minimize their own out-of-pocket expenses and to widen provider choices restricted by managed care, there was minimal evidence indicating that the public truly wanted to expand health care benefits to cover all Americans if it changed the way that they themselves received care or if it resulted in higher taxes for them (Blendon, 1995). The public supported universal coverage as long as health care remained basically the same for the individual taxpayer. Indeed, from the start there was a discrepancy between what the public believed – that greed and waste were driving the nation’s health care problems – and what many experts believed – that technology and an aging population were the root cause of the increasing costs in health care (Yankelovich, 1995).
Technical aspects aside, the plan was so complex that the general public, and even many health policy people, had difficulty understanding it, much less evaluating the effect it would have on them personally. Daniel Yankelovich (1995), a premier pollster then and now, stated, “Clinton’s health care reform plan was not shaped by discussion with citizens about rising health care costs and what to do about them – the public’s main focus of concern.
Rather, it was the product of experts and leaders alone” (p. 36). He goes on to say that it is hard for people to support a policy they do not comprehend, especially when policy changes affect their direct benefits. The American people also disliked the top-down approach wherein “experts” designed a plan with little input from the public. As elements of the plan were leaked to the media, many began to complain about the President’s wife, who had not been elected to any office, holding secret policy meetings that violated the public trust.
In addition, the Administration clearly underestimated the opposition, lead by the powerful and well-funded Health Insurance Association of America (HIAA). Headed by a widely-respected moderate Republican who was also a former Congressman and senior member of the House Ways and Means Committee, William Gradison, HIAA ran a devastating series of negative ads, spending more than $10 million initially – and more over time. Featuring the fictional characters “Harry and Louise,” who portrayed typical Americans bewildered by the proposal, these ads picked up on