Health Policy and Politics

Deborah Stone introduces us to the two most important values in health care. We cannot have all we want of both fairness and efficiency, so we have to think about trade-offs between them. In the process. we Learn a more fundamental Lesson: How to think about values in health policy?

Two powerful ideals- fairness and efficiency-drive health - policy debates. These ideas unite us around lofty goals. only to divide us the minute we get down to details. That's not only because there is an inherent tension between fairness and efficiency. but also because each ideal has multiple mean- ings. Different interpretations of fairness and efficiency define different kinds of community. They draw different boundar- ies. boundaries that include or privilege some people while excl ud ing or disadvantaging others. Inside these grand ideals lurk many dilemmas for those who would use them as ya rd- sticks for policy evaluation.

EFFICIENCY Let's start with efficiency, for though it is less inspiring than fai rn ess. it is more o ft en taken for granted as an objective stan dard and an incontrovertible value in health policy.

Efficiency is another word for a bargain . It is getting the most for t h e least or. in slightl y more economic terms . producing the most output fo r a given input. All policy

reformers promise to give the country a bargain. Every per- son with a program to peddle promises that this program will save more than 1t costs. Efficiency is one of those motherhood values that everybody 1s for. so long as no one spells out exactly what it means-but 1t papers over a lot of conflicts

The idea behind efficiency is engagingly simple: First. we measure the costs and benefits of any program. proposal. or procedure. Then with measurements in hand. we compare them and choose the course of action with the highest ratio of benefits to costs That's all eff1c1ency is: getting the most we can for a given cost. A smart policy analyst or manager should be able to determine the most efficient way of accomplish- ing a goal. Who could be against efficiency? It is obviously a universal good.

Or is it? I want to challenge the assumption that efficiency 1s an empirically measurable fact I want to suggest. instead. that efficiency is a concept that always comes from a point of view. Efficiency can be Judged only from a particular vantage point. and just as there are multiple vantage points in society.

I I APT ER I • Values in I lea Ith Policy: Understanding Fairness and Efficiency

so there are muluple effic1enc1es From a political science per- spective. efficiencies are like poht1c1ans-they are tied to con· stJtuenc1es And 1f we understand eH1c1ency this way. 1t will be easy to see why someone might be against a policy reform that promises efficiency let me illustrate with five examples.

The \Vaiting Room A phys aan's wa ting room 1s set up to be eff1c1ent With long tra n ng and very expensive expertise. a phys1c1an 1s a valuable resource A phys1c1an cant know in advance how much time each pauent will need so to use the resource most eff1c1ently, the receptionist schedules patients so that there are always several wa tmg in th waiting room and often two or three in different examining rooms The phys1c1an never has an un· used minute The patients kill a lot of time (You know the dn I-how much time have you killed in phys1c1ans' waiting rooms? 111 b t 11 s more time than you have bought yourself by watching your cholesterol.)

The wa1tmg room game 1s efl1c1cnt only 1f we regard 1t from the physician's point of view The phys1c1an . as a resource. 1s betng used to the max His or her time 1s never wasted. Now loo at 1t from the pauents' point of view Some of their time is always wasted In order to say that the waiting room system produces the most medical care for the least expenditure of time we have to ignore all the patients' wasted time or value pauents' ume much less than the physician's time. or both.

The point 1s simple One person's eff1c1ency 1s another per· sons waste Even 1f we thin that organrzing medical care so that patents w.11t for phys1c1ans 1s the most eff1c1ent use of medial resources for society as a whole. we still buy societal eff c1ency at the cost of lots of wasted time for lots of people. Somebody 1s hurt The phys1c1an's waiting room 1s a good metaphor for the core notion of eff1c1ency itself-every gain and every loss belongs to somebody

The \lillion-Dollar atheter Lab e headhne uoctors :>ay They Can Save Lives and

StJ I Save Money the New York Times touted the Geisinger Foundation in Minnesota as the wave of the future because It had figured out how to increase efficiency in medical care. Among its tnc s was a grand version of the waiting room game The health plan avoided "duplication of costly equip· rr.em· by doing all cardiac cathetenzations at one hospital. ·rhlS does mean: the reporter allowed "that some patients have to travel up to 100 miles for maJor procedures that in

a less efficient system might be available at a community hospital."'

It might be more efficient to have only one cardiac cath· etenzat1on lab for the entire community served by a specialty provider. but we should't leap to that conclusion before we tally up all the costs of centralization. First. there are the costs of patients' time: second. the time of their spouses. friends. or whomever accompanies them: third. the travel and lodging costs for all the people who have to travel so far from home. There are the emotional costs of making this procedure into an even bigger deal than 1t already is by embedding 1t in a tnp away from home There may be still more costs associated with leaving home-paying someone else to mind the kids. for example, or the burden to yet another relative who comes into the home to mind the kids . One can imagine an 1nfin1te chain of disturbance : John needs a cardiac cathetenzat1on. his wife Janice goes with him. her sister Janeen takes time off from work to mind their kids. Janeen's colleagues work harder to fill in for her, and some of Janeen's work doesn't get done. with attendant costs to her employer.

A full efficiency calculus has to take into account the points of view of all the people affected by the remote location or cathetenzat1on labs. Tracing out such chains of consequences is rather like doing genealogy We can decide to go only so far as our great·grandparents. but drawing any limit 1s an arbitrary decision This represents what I call the boundary problem in efficiency measurement How do we know where to draw the boundaries in assessing the ripple effects of any way of organ· izing medical care? There are no natural or correct or obvious boundaries because people live embedded 1n social networks. iust as they are born into unbounded genealogical trees

The Paycheck Every paycheck 1s an expenditure to a hospital and a livelihood to an employee. and therein lies a tale. Whether a paycheck goes on the output side or the input side of an efficiency ratio depends on who rs doing the accounting

We could adopt the point of view of a hospital CEO and measure the cost of providing hospital care. How much input does 1t take to produce our output? To the CEO. a paycheck 1s input. The CEO wants to write as few paychecks as possible and to keep each one of them as low as possible.

But the hospital is also a community inst1tut1on and a ma· jor local employer. To the governor. the mayor, and even the neighbors. the hospital's role rs not only to make sick people

PART I • Ideas and Concepts

well but also to provide economic stability to the neighbor-

hood. From the point of view of the local community. each hospital payroll check is output many times over. It means a livelihood to a hospital employee and her family. Because em- ployees will spend most of their paychecks. each check also means revenue to local businesses and. in turn. paychecks for

those businesses· employees.

Econom ies produce not only goods and services but also

jobs. In standard market models. labor counts as an "input" to production. But from the point of view of the Secretary of Labor. President. and for that matter, most elected politicians. employment is also an economic output that citizens expect their governments to deliver. Societies whose economies pro- duce more employment for their members are usually better

off than those whose economies produce less. and politicians who preside over declining employment had better watch

their electoral backs.

Thus. reformers like Bill Clinton and Barack Obama are only half right when they say, "We can't fix our economy without doing something about health care costs." The half

they forget is that the health care system is the strongest part of our economy in terms of generating jobs. Between

2000 and 20 I 0. the US economy lost 3.2 million jobs. Every sector of the economy experienced job loss. except

for two-education and health. whose annual rates of JOb growth were 2.9 and 2.8%. respectively. Looking into the

future. between 20 IO and 2020. jobs in health care. home health care. and personal care are expected to account for

almost half of all job growth. 2

There is a nasty double bind here. Health care expenditures are eating up our gross national product (GNP) and raising the cost of American goods. but every health care expendi- ture is income to someone employed in the health sector or to someone employed by someone who makes things for the health sector. We can't get a handle on health care costs un-

less we are willing to put a lot o f people out of work.

There is another wrinkle to the paycheck story. Jobs. on balance. probably contrib ute to people's health: Paychecks feed families and pay medical bills. Jobs give people pride. satisfaction, and a sense of worth. For the lucky employees of large businesses. jobs provide health insurance and ac-

cess to medical care. To be sure. not all jobs provide decent wages. stress-free work. or even safe and healthy work. much

less health insurance. But to the extent that jobs do provide

these things. reducing the input side of health production by

reducing paychecks doesn't necessanly increase the ratio of

output (health) to input (dollars).

Only from the vantage point of someone whose vision

stops at the hospital walls does cutting staff increase

efficiency.

The Leaky Bladder During the 1990s. New York had the most extensive. gener-

ous. and costly Medicaid home health care program in the nation. To save money. the state department of social services decided to make home care more efficient. The department

devised a system to define precise client needs such as feed-

ing. toileting. and bathing and then designated an amount of time necessary for an aide to complete each task. The goal was to pay home care workers only for the time necessary to

do these instrumental tasks and to cut out the unproductive or "dead time." Dead time 1s time a home care worker spends chatting with the client-schmoozing. Joking. JUSt being to-

gether in a human relationship. or. as 1s so often necessary in home care. coaxing adults to feel okay about being treated like

children who cannot bathe. toilet. or feed themselves.

Under the new system. an elderly woman whose chief prob- lem was incontinence would have her care allotment reduced from having a full-time. live-in attendant to having someone

come in for I 0.5 hours per week. (You figure out how many times a day the woman might be able to have her clothes and sheets changed and the maximum amount of time she might

spend sitting in her own urine.) The department thought of paying for her care in the same way an auto mechanic would figure out how much time 1t takes to service a car with a leaky

gas tank. The pursuit of instrumental efficiency reduced this woman to a leaky container that needed mopping up.3

To talk about making health care more efficient requires

us to think of health care production hke widget produc- tion. Economists traditionally measure productivity in manufacturing as output per labor hour-how many widgets

does each worker produce in an hour? In the service sector. this definition becomes something like "number of people

processed per hour of labor," since handling people is what service industries do. If physician product1v1ty is measured as number of patients treated per hour (and it often is), the

most efficient physician becomes the one who spends the least time with patients. In hospitals. more personnel such as

C H \PTE R I • Val ues in I lca lth Policy: Unde rsta nding Fa irness a nd Eflkiency

nu rses and aides no doubt add to patients' comfort and sense of well-being. and maybe even to their health. but they lower product1v1ty stat1st1cs because now there are more workers spread over the same number of patients.

If we adopt the point of view of consumers, patients. and fam rhes instead of CEOs and budget directors. productivity looks very different In choosing a hospital or a nursing home for a relative. you would look for a high staff.to· patient ratio. In choosing a phys1c1an for yourself. you probably want one who will ta e time to hsten to your concerns. explain things well invite your questions. and preserve your sense of dignity and hope in drfftcult situations The very qualities that make hosp tals and healers more attractive and helpful to consum· ers ma e them less productive m efficiency statistics

In health care 1t rs hard to tell what efficiency is because we don t now what Moutput " 1s tn the first place Those intangible qualtt1 s of good doctonng or home care that patients really value arc hard to deftne precisely. let alone observe. mea sure. and put a pnce on For example. when considering whether insurance should cover hip transplants for people over age 80, we know what the price tag is. and we can av rage rt out over their life expectancy-but how should we value th benefit to them and their families of be· ing independent and not having to use a wheelchair for the rest of their hves1 Like hip transplants . all health care goods and services have known prices. but hke independence, most ol what peopl valu about their health doesn't carry a price tag In fact most of what the health system produces rs not so easily defrnabl and measurable - things such as better lunct1on1ng. lowered nsk of future disease . reduced pain. education about caring for oneself. and . let us not forget . reassurance hope and a sens of well· being.

Our mabrhty to measure intangible values makes calculat· mg efrroency devilishly drfftcult and leads those who try cal· cu attng 1t to omit the thmgs they can't easily measure and thereby omit the things that matter most Worse. when pay· ment systems reward provtders for scoring well on efftcrency measures the measurable drives out the unmeasurable. Sup· pose for example. we could provide an incontinent woman with three changes a day instead of more frequent changes without any increase in skin problems or urinary tract infec· t1ons The outcome data and the cost of the new protocol wou d loo h e an efficiency gain-until. that 1s. we count her ncreased discomfort and humiltat1on and her friends'

reluctance to visit her because of the odor. An efficiency· driven home care program would likely be bhnd to such hu · man costs as lost dignity and eroded social networks.

The Cost-Ineffective TB Program4 Paul Farmer physician. anthropologist. and international medical activist. was troubled by the large number of cases of drug-resistant tuberculosis in Haiti and Peru . When he and his colleague Dr. Jim Yong Kim tried to interest the World Health Organization (WHO) in funding public health campaigns against MOR-TB (rnult1drug-res1stant tuberculosis. as the dis· ease 1s nicknamed). they learned that WHO had deemed treat· 1ng the disease in developing countries as not cost-effective. Indeed . 1t did cost about S 15,000 a year to treat one person with MDR·TB . Treating the simpler forms of TB that do re· spond to standard ant1biot1cs was much cheaper. And so. in the deadly iargon of policy analysis . WHO had declared 1n one of its manuals: "In settings of resource constraint [read poor countries!. it is necessary for rational resource allocation to prioritise TB treatment categories according to the cost· effectiveness of treatment of each category.Ms In other words. phys1c1ans like Farmer and Kim were supposed to ignore patients with MDR·TB because they could cure more people by putting all their resources into treating those with ordinary TB.

With WHO's seal of disapproval for treating MOR-TB in developing countries. it was nearly impossible for Farmer and Kirn to raise money to support their programs. They were so committed to treating the disease. though . that they went ahead treating a small number of patients. begging and bor· rowing the money and drugs to do 1t. (At one point , they were "found out" by Brigham and Women's Hospital: they had taken $92 .000 worth of drugs from its pharmacy to Ha1t1 and Peru . But they never intended to steal: they had a phi - lanthropist in their corner who wrote a check to the hospi· tal. with a note saying he thought the hospital "ought to be more generous toward the poor." ) They were determined to prove that at least the disease was curable And they were incensed by the way that cost-effectivenes:; analysis. as they saw 1t. "rationalized an irrational status quo: MOR treatment was cost-effective in a place like New York. but not in a place like Peru ."

farmer and Kirn had been buying some drugs to treat MOR-TB in different places. They noticed that one of the drugs.

PART I • Ideas and Concepts

manufactured by Eli Lilly. cost $29.90 per vial at the Brigham and Women's Hospital in Boston. $21.00 per vial in Peru. and only $8.80 per vial in Paris. When their Paris supplier suddenly refused to sell them any more drugs. a light bulb went on: The price of drugs is set by the pharmaceutical manufacturers. and they set radically different prices for different markets. If that were true-and it still is-then the "cost" of treating MOR-TB was not a given cost. The "cost" in cost-effectiveness analysis

was an artifact of the drug manufacturer's pricing policies.

Dr. Kim. Dr. Farmer. and their allies browbeat. jawboned.

and negotiated. They persuaded some manufacturers to lower their prices for the MDR-TB drugs. and persuaded one of

them, Eli Lil ly, which had a patent on one of the most effec- tive drugs. to donate large amounts of its drug. Suddenly. the

cost of curing a case of drug-resistant TB plummeted from $ 15.000 a year to $1.500 a year, and cure rates were very high.

But it wasn't enough to get one or two companies to lower prices for a small amount of drugs. Farmer and Kim set about

trying to change the market for MOR-TB drugs, to change the entire system of supply and demand. They knew they needed to get someone to manufacture large quantities of these drugs for less money. They joined forces with other nonprofit organ- izations to stimulate smaller drug manufacturers to make ge- neric versions of MOR-TB drugs. In order to convince generic manufacturers to develop and produce the drugs. they had to show that there was a market for them. meaning that a lot of TB projects would use (and buy) them. They masterminded a plan to get MDR-TB drugs listed on WHO's official list of "essential drugs." a list that in itself symbolically signaled a market demand. If a drug were on WHO's essential list. then firms should manufacture it regardless.

Farmer's and Kim's public-health coup turns cost- effectiveness analysis inside out. Cost-effectiveness and cost-

benefit analyses depend on knowing the cost of whatever outcome you are trying to produce. You've got to plug some price into your equation. But if cost is simply a matter of what a supplier charges. then it. in turn. depends on the power rela- tionships between buyers and sellers. When the WHO evalu- ated the cost-effectiveness of treating MOR-TB in developing countries. it took the price of drugs as a given-something fixed and unchangeable. Implicitly, then. WHO also took as a given the political economy of pharmaceuticals-the domi- nant market position of large American pharmaceutical com-

panies. the monopoly pri cing permitted by American patent

protection. the power of manufacturers to dictate prices. and WHO's power to dictate what diseases public-health

programs would treat and therefore which drugs they would

purchase.

If. instead. we regard the cost of inputs as themselves

outputs of a polit1cal-econom1c system. then they are not objective measures. and the cost-benefit analysis that derives

from them is no more objective. Prices and cost-effectiveness judgments are captives of the political status quo. and cost- effectiveness analysis is a recipe for preserving the current

distribution of resources.

These five stones illustrate some of the traps that await

health care efficiency experts. Without carefully specifying whose costs count. what kinds of costs we want to control and what kinds of output we want from the medical system efficiency-driven reforms could merely shift costs to people and places where they are less v1s1ble and produce health

services that give people less value for their money instead

of more.

FAIRNESS Elsewhere in the world. medical insurance 1s called "sickness

insurance." and it covers sick people. In the United States. we have ''health insurance." and as befits its name. insurers strive to weed out sick people and cover only the healthy

This is about as perverse a system as one can imagine. and one that poses an extraordinary puzzle: Why and how does

a country's political system produce a health system whose result is absolutely antithetical to its public purpose? The result can best be explained as a long history of political conflict between worldviews about fairness and equity. This

conflict 1s vividly illustrated-quite literally. illustrated with photographs-in the advertising campaigns of health insur- ance companies.

In the late 1980s. the trade associations of the health and life insurance industry sponsored an advertising campaign to persuade the public that "paying for someone else's risks

is a bad 1dea. 6 In one of these ads. a photo of a worker in a hard hat and tool belt straddling the girders of a steel tower was captioned "If you don't take risks . why should you pay for someone else's?" Another ad showed a young man and

woman playing basketball one on one. and asked "Why should men and women pay different rates for their health

H PTE R I • Value in H ealth Policy: Under tanding Fairne sand Efficiency

and hfe msurancer The choral refrarn at the bottom or each ad in the series went "The lower your risk, the lower your premium: and the small print explarned the relevant facts . For example.

Women under 55 normally incur more health care expenses than men of the same age, so they pay more for mdivrdual health msurance than men After age 55. women generally have lower claims costs . so they normally pay less for rnd1v1dual health insurance than men of the same age

Thats why insurers hav to group people with s1m1 - lar ns s when they calculate premiums. If they didn't, people with low risks would end up subs1d1zmg people with high risks And that wouldn't be fair.

In 1991. with 8111 Clinton runnrng on a platform of untver- sal access to health care. larger companies began to distance themselves from the trade association's " bear·your-own·nsk" campa gn For example the Prudential Insurance Company of America ran a full page ad featuring a chest X-ray captioned. "Because he works for a small company. the prognosis isn't good for hrs fellow workers either· The ad went on to decry the industry practice of not rnsuring small compantes wrth one or a few very sick workers Another Prudential ad showed a drawing of a heart under the headline: "If you ever need one there's an rnsurance company that has one.'' Still. de- sp te the more moderate tone of some ads trymg to change the insurance mdustry s image. the rndustry contrnued to deny coverage to people with any preex1st1ng cond1t1on " and to charge higher premiums to those with high risk of needrng med cal care

By the time of Barack Obama 's first presidential run. pruxistmg cond111on . once a little known term or tndustry lega ese had became a household word and the emblem of popular anger agarnst mdustry unfairness. In his stump speeches Obama did not need to def me st Of his many heart-rendmg stones about people denied access to medi- cal care. the one about his mother grabbed the nation most. She had died of breast cancer and spent her last months fightmg her " insurance company that deemed her cancer a preexisting cond1t1on and refused to pay for her treatment. In the summer of 2009. as Oba ma's health reform got seri- ously underway the chastened and worned trade assoc1at1on

of health insurers. now renamed America's Health Insurance Plans. ran a TV ad calling for a strikingly different concept of fairness .

Let's Fix Health Care .. .. If everyone's covered. we can make health care as affordable as possible. And the words " pre-existing condition" will become a thing of the past.7

Indeed. only two weeks after Obama's victory in 2008. seeing the handwriting on the wall the trade association of health insurers announced in a press release that 1t would give up the " lower·your-nsk/lower-your·premium· principle " as part of a universal participation plan 1n which all ind1v1duals were required to maintain health insurance."8 Without di - rectly saying so. the industry was calling for a mandate to buy health insurance. If everyone has to buy 1t. insurers wouldn't have to worry that only sick people will buy 1t. (And insurers would get a lot of new customers. to boot.)

These ads and stories have many layers of meanrng. On the surface. the issue rs how commercial insurers ought to pnce their health insurance policies. Below the surface. these narra- tives offer competing visions of communtty. They suggest how Americans should think about what ties them together and what they owe each other. In one vrew. no one should feel an obligation to pay for the medical care of those who get iniured while doing constructive work for society Similarly, though women of childbearing age are exhorted daily to ensure the health of their babies. even those not yet born. the men wrth whom they create the next generation have no obligation to help finance their extra medical care . Alternatively. said the Prudential ad. Obama. and the health insurance trade assoc1a · t1on rn 2009. we should not abandon those who are sick or attached to people who are sick: sick and healthy. we are all one community.

At still another level. the ads reflect the long·runntng politJcal struggle over health insurance reform . The underlying question rs whether medical care should be d1stnbuted as a nght of c1t1· zenship or as a market commodity. If. as the lower-your-nsk the lower-your-premium pnnciple commends. we charge people as closely as possible for the medical care they need and consume. then we are treating medical care hke other consumer goods distributed through the market If. like President Obama. we are unwilling to throw sick people out of the insurance lifeboat.

if we think that the healthy should help pay for the care of the sick. then medical care becomes more like things we distrib- ute as a basic right. such as education. These ads and stories symbolize two very different logics of insurance: the actuarial fairness principle and the solidarity principle.

Actuarial fairness-people paying for their own risk-is more than an idea about distributive justice. It is also the business strategy used by the private insurance industry. which provides coverage for well over half of people under age 65 who have health insurance. 9 The driving aim be- hind the Affordable Care Act (ACA) of 20 I 0 was to restruc- ture American health insurance according to the solidarity principle. and much of the conflict over implementing the act is best understood as a struggle between these two principles of fairness as the basis for health policy.

The Solidarity Principle Social insurance operates by the logic of solidarity. Its pur- pose is to guarantee that certain agreed-upon individual needs will be paid for by a community or group. This is the logic of mutual aid societies and fraternal associations. as well as government social insurance programs. Having decided in ad- vance that some need is deserving of social aid. a society un- dertakes to guarantee that the need is met for all its members. The argument for financing medical care via social insurance rests on the belief that medical care should be distributed ac- cording to medical need.

If medical care were financed like most market goods. by charging people for exactly the goods and services they con- sume. medical care would be distributed only partially accord- ing to need. Only those who are sick and need care would seek to purchase it. but only those who could also afford to pay would actually receive it. In addition, some who are not sick but who have plenty of resources might purchase more care than they need. People who could not afford to buy care would not receive any, regardless of their need for it.

Social insurance unties the two essential connections of the market: first. the link between the amount one pays for care (or any good) and the amount one consumes: and sec- ond. the link between the amount of care one buys and one's ability to pay. Under a social insurance scheme. individuals are entitled to receive whatever care they need. and the amounts they pay into the scheme are totally unrelated to the amount or cost of care they actually use. (Of course. to the extent

there are coinsurance and deductibles in a social insurance scheme. the amount a person pays is partially related to the

amount one consumes.)

Even social insurance doesn't guarantee that medical care will be distributed exactly according to medical need. how. ever. Need . after all. is a rather elusive concept. all the more so in medicine. Unlike most consumer goods. the value of medical care depends on 1t being customized Whether so~­ one can benefit from a particular medical procedure doesnt hinge on personal tastes and preferences. as economic theory would have it. but rather on a correct match between a med~ cal procedure and a person's pathology. The degree to which social insurance results in allocation of care according to need is mediated by the professional skill of medical personnel in matching procedures to pathologies. Many other factors unre- lated to medical need influence the distribution of care. such as local professional norms about the appropriate use of pro- cedures. the supply of medical facilities and personne· and financial incentives for providers to offer diagnostic tests and treatments (or not). 10 All of these factors mean that even un· der a system of pure social insurance. medical care will not be perfectly distributed according to medical need. But the ideal of the solidarity principle is that we should strive to distribute medical care according to medical need and to limit the mflu· ence of ability to pay.

The solidarity principle doesn't require that medical care be distributed equally in the sense that everyone gets the same amount. Social insurance 1s not a fixed-shares arrangement. where each contributing member gets an equal slice of the pie. When people pool their risks and their savings in a so· cial insurance program . they are taking their chances that they may never become sick or need expensive care. and that most of their contributions will go to help the members who do incur a need for expensive care. As in any lottery. they pay into the pot. regardless of whether they ultimately get to draw out of it.

In fact. only some members of a risk pool will get sick enough to need care. Since only those who get seriously sick will receive a payr• ' the others necessarily pay to help them. Thus. redistribution from the healthy to the sick is built into insurance. Health-policy analysts and corporate benefits man· agers frequently discover with great alarm that a small portion of insured people accounts for a huge proportion of claims ex· penditures. as though this skewing means that something is

HAPTER I • Values in I lca lth Po licy: Understa nd ing Fa irness and Efficicnc:r

amtSS But subsidy from the vast maJonty or insured people to a small minority 1s precisely what 1s supposed to happen 1n in - surance Such s ewing 1s what people agree to when they JOin a social insurance nsk pool They accept 1t because they don"t know. when they 1oin. whether they will be on the giving end or the receiving end and they want to protect themselves in case they are part of the unlucky minority. They accept 1t. too . because they believe that sickness 1s one or those contmgen· c1es when society should rally around the md1v1dual.

Actuarial Fairn Commercial insur r t s. private firms selling insurance as a profit makmg venture-operate on a deep contrad1c· t1on They prov1d for pooling of nsks and mutual aid among po 1cyholders much as social insurance does: yet they select their pol cyholders categorize them into groups with similar risks and medical needs and pnce their pol1c1es according to ma et logic When they speak of equity. commercial insur· ers espouse the principle of actuarial fairness: Premium rates shou d be d1frerent1ated so that "each insured (person) will pay in accordance with the quality of his nsk .. 11 By quality of nsk insurers mean the likelihood a person will incur whatever loss he or she 1s insured against. say. fire for fire insurance or accidents for auto insurance Health insurers are interested in factors that affect or predict a person's use of medical care. These include one's occupation. hobbies (since some are very dangerous) personal medical history. and any medical mfor· mat on such as family history or a genetic marker that predicts d sease even 1f the disease hasn t yet occurred

Insurers assert that actuanal fairness requires them to seek the most comp et ns information on applicants They must assess applicants ns by loo mg at their medical records. and then create class1ficat1ons to recognize the many differences which ex st among md1vtduals Ultimately. an insurer has the "respons b lity to treat all its policy holders fairly by establish· mg premiums at a level consistent with nsk represented by each ndiv1dual policyholder 12 "Medical underwriting" 1s the name for this process of exammmg people's medical history. categorizing their nsk and pncmg their insurance according to their nsks or refusmg to msure them at all. According to the actuarial fa mess principle people who have diseases or serious ns s to their health are getting a more valuable msur· ance po cy than those with lesser nsks . so they ought to pay more for the extra value Or. to see the matter another way.

ir insurers did not identify people with higher nsks. separate them from the general pool or poltcyholders. and charge them more. insurers would be causing a "forced subsidy from the healthy to the less healthy.'"i3 "An applicant presenting a low nsk or loss to the insurer should not be required to subsidize another applicant who presents a higher degree or risk: ·i4

Here is the crux or the conflict: The very redistribution from the healthy to the sick that is the essential purpose of medical insurance under the solidarity pnnciple 1s anathema to commercial insurers under the actuarial fairness pnnc1ple . Tellingly. insurers virtually never use the word subsidy with· out a peiorative mod1f1er such as coerced. forced. or un{atr. Although all insurance entails a subsidy from the lucky to the unlucky (whether luck concerns car accidents. diseases . or fires) . commercial insurers eschew subsidy from one '"class" or policyholders to another. Class. in insurance 1argon. means nsk class. or a group or people with s1m1lar probab1ht1es of becoming sick (or perhaps more accurately. with s1m1lar prob· ab1ht1es or generating costs to the insurer) . To commercial insurers . subsidy 1s not what they pursue but the unwanted result of their failure to segregate people mto homogeneous nsk classes.

If the actuarial fairness principle could be perrectly 1mple· mented. if we had perfect predictive information and precise ratings. each person would pay for himself. This. of course. would be the antithesis of insurance. In fact. in a world of perfect predictive information. there would be no need and no market demand for insurance because no one would stand to gain by "beating the odds ." Smee each insurance policy would be priced according to the medical care actu · ally consumed by each policyholder. people would do better to pay for their care directly and avoid paying for insurance companies' adm1nistrat1ve and marketing expenses. not to mention profits. And since the pnce of insurance would be the same as the pnce of needed medical care. those who couldn 't afford to pay for their own care couldn't afford to pay for insurance either.

Actuarial Fairness and the Politics of Exclusion To put the matter simply the Umted States got a "health msur· ance~ system instead of a "sickness insurance" system because unlike the governments or other industrialized countries. our government fostered pnvatization of the social welfare function

PART I • Ideas and Concepts

from the beginning. Because government all~wed. the pnvate sector to provide the first line of defense ag~inst illness. a~d because the private sector operated on the logic of actuanal fair- ness. the door was open for a politics of exclusion.

The first battles over insurance company underwriting prac- tices concerned race. specifically. life insurers' use of race as an underwriting criterion. As early as the 1880s. sev~ral s~ates tried to prohibit life insurance companies from charging higher rates to blacks than whites. 15 Insurers found it quite easy to avoid public interference with their "scientific principles.". In 1900. Frederick Hoffman. then chief statistician of Prudential. complained that many states had passed laws .. compelling Industrial [life insurance] companies to accept Negro risks at the same rates as those charged the white population. Fortu- nately." he boasted. "the companies cannot be compelled to solicit this class of risks . and very little business of this class is now written by Industrial companies. practically none by the Prudential." 16 (Translation: You try to make us charge the same rates to blacks and whites; we just won't sell to blacks.)

In the ensuing 130 years. the public and private sectors have skirmished many times over the way insurers use race and other social groupings. Civil rights agencies have fought against "redlining" by banks-using a borrower's race and the racial composition of a neighborhood in deciding whether to issue home insurance and mortgages. In the 1970s. activ- ists challenged the use of gender as a factor in pricing life. disability. and auto insurance. Disease-based interest groups (notably Tay-Sachs disease. sickle cell anemia. and DES moth- ers and daughters) challenged the use of "their disease" as a criterion in underwriting life and health insurance and suc- ceeded in winning protections in several states. In the late 1980s. insurers' use of sexual orientation as a proxy for AIDS risk and then HIV tests became a contentious issue. followed quickly by the use of genetic tests for hereditary diseases. Various states and the federal government have tried to curb many of these practices but with little success against an in- dustry that fiercely defends its right to use them.

Commercial insurers have been ab le to preserve their ac- tuarial practices in part by captu ring public regulators and in part by maki ng subst antial campaign contributions to state and federal legislators. Most state insurance departments and commissions are controlled by men and women who come from commercial insurance and will return to lucrative jobs there. They share the insurers' worldview in which equity means actuarial fairness. In the 1980s. when the battle over

HIV testing by health and life insurers was largely perceived as a struggle about taking gays aboard the insurance lifeboat. a state comm1ss1oner told the Office of Technology Assessment

(emphasis added)·

We encourage insurers to test where appropriate because we don't want insurance companies to issue policies to people who are sick. likely to be sick. or likely to die.17

When public regulators see their job as protecting private health insurers from covering sick people. we get a system of "health insurance" instead of "sickness insurance.'

Insurers have been able to block state and federal legislatM restrictions on their underwnting criteria. either by defeating bills and regulations or by inserting narrow language to permit the use of criteria that are "actuarially sound." For example. the Genetic Information Nondiscrimination Act of 2008 prohibits health insurers from adjusting premiums based on genetic in- formation but allows them to increase premiums or deny cover- age based on the actual presence of a genetic disease. The law forbids insurers from requesting. requiring. or buying genetic information about ind1v1duals who want to enroll in a group plan. but if insurers happen to obtain genetic information "in- cidentally" in the process of requiring or buying other medical information. they cannot be held 1n v1olat1on of the law.

18

Whatever nsk class1ficat1on and actuarial pricing insur- ers cannot accomplish through direct medical underwrit- ing. they can often accomplish through targeted marketing or pricing. Health maintenance organizations (HMOs) and other managed care plans feature their maternity and fitness club benefits in their advertising as a way of attracting the young and healthy Some health plans quietly avoid contract- ing with phys1c1ans in minority neighborhoods an indirect way of making their insurance inaccessible to populations against whom they cannot discriminate outright. If all else fails. insurers can play hardball with legislators who try to curb actuarial practices that exclude sick people or price them out of the market. Prudential's strategy of simply "not solicit- ing" Negro business was the prototype. During the first year of the ACA. health insurers stopped offering policies to chil- dren rather than comply with the prohibition on preex1st1ng condition exclusions. In order to make good on its promise of insurance for children with cancer. autism. heart defects. and other serious illnesses. the Obama administration had to back down and permit insurers to price policies according to health status.19

H A PTE R I • Value , in I lea lth Policy: Understanding Fairness and Efficiency

The ACA goes farther than any other rederal or state leg1slat1on in restraining health insurers' use or the actu· anal fairness principle and strengthening the solidarity pnnc1ple 20 But eradicating actuarial rating remains an elusive goal Under the new law. most health insurance for people under 65 will still be provided by private com· pames steeped in their beliefs about actuanal ra1rness and lured by its profit potential. The law permits certain

nds of actuarial rating notably. pricing according to age and tobacco use Because the states will oHer multiple insurance plans with d1Herent benefit levels and pnces. there will inevitably be some self sorting into plans. with healthy and wealthy people choosing plans with very high deductibles and sick or high-risk people seeking plans with low deductibles and co-payments The act provides an elaborate and complicated system or "nsk adjustment" whereby plans With relatively healthy members will subs1· d1ze plans with relatively sick members. However. past ex· penence with nsk adiustment suggests that 1t only weakly compensates for the ability of some private insurers to avoid the sick 11

From an efficiency perspective. the ACA might look hke a bad bargain. The cost or gathering data and administering risk adjustment depletes the amount of people's premiums that comes back in the form of medical care And yet. one might argue that the Rube Goldberg contraption that 1s the health reform was the only politically reasible one. and 1r It SUbstant1ally m1t1gateS exclusion or the SICk from health insurance. It was a grand bargain arter all 22

Err1c1ency and ra1mess are fine asp1rat1ons ror public pro · grams. but no one should be lulled into thinking they are neutral criteria ror judging the virtues or health care sys· terns or reform proposals. The words are more hke empty packages. gift-wrapped with glitter and bows. tempting us to imagine their contents. Stakeholders in the complex world or health insurance conduct much of their politics by oHenng v1s1ons of what might be in these boxes un· der different political and economic scenarios When the boxes are finally opened. some people will find useful and lucrative gifts: others will go away empty·handed Every conception of efficiency and equity has winners and losers.

1. What 1s a ~ey assumption behind the view that policy eH1c1ency entails simply choosing the course of action with the h ghest ratio of benefits to costs?

2. What does Stone thin about a ·universal· concept of efficiency as "what is best for society as a whole"?

J . If we assume that the most efficient system is to have patients wait ror physicians. what seems to be undervalued?

4. What 1s the boundary problem of efficiency measurement?

s. Suppose erfic1ency es considered to be the ratio or benefits (the numerator) to expenditures (the denominator) Shou d hospital staff paychecks be counted as benefits or expend1tures7

6. What are the two different perspectives on health care labor product1v1ty?

7. How and why did the message of health insurers· advertising change between the 1980s and 2009?

8. Which two health insurance schemes and underlying principles does Stone contrast?

9. How do social insurance and sohdanty hold medical care 1deally be distributed?

10. Would 1t be remarkable ma social insurance scheme for a small portion of the insured people to account for a huge proportion or claims expenditures?

11 . According to Stone. what 1s the basic contradiction in commercial insurance?

12. What is actuarial fairness? 13. Why does Stone think the United States has a health insurance system rather than a sickness insurance system?

ENDNOTES I. Eckholm. 1991.

2 . Henderson, 2012. table I. p. 66.

3. This story is from Bennett. 1992. 4, I take the details of this story from Kidder. 2003. All quotations in this section are from this book unless otherwise noted.

s. World Health Organization. Treatment of Tuberculosis: Guidelines for National Programmes. 2nd ed .. Geneva. 1997. quoted in Kidder, 2003. p. 141.

6. Stone. 1994. gives a longer analysis of health insurance industry ads through up to and during Chnton·s health reform .

7. You can see the ad on You Tube at http://www.youtube.com/watch7v=R36YJl8SagU (viewed May 8. 2012)

8 . America's Health Insurance Plans. 2008.

9 . Cohen and Martinez. 2012.

IO. Hillman et al.. 1990. 1604-08.

I I. Bailey. Hutchinson. and Narber. 1976.

12. Clifford and luculano. 1987.

13. Clifford and luculano. 1987.

14. Hoffman and Kincaid. 1986-1987.

I 5 . James. 1947.

16. Hoffman. 1900.

17. Statement made at a meeting (February 17. 1987) of the Advisory Panel to the Office of Technology Assessment for its study, Medical Testing and Health Insurance (US Congress. 1988). I was a member of this panel.

18. Associated Press. 2008; U.S Congress 2008. Pub. L. 110-233. Genetic Information Nondiscrimination Act. Title I.

19. Pear. 2011.

20. Kaiser Family Foundation. 2012.

21. Weiner. Trish. Abrams. and Lemke. 2012.

22. Jacobs and Skocpol, 20 I 0.

REFERENCES America's Health Insurance Plans. 2008. "Health Plans Propose Guaranteed Coverage for Pre-Existing Conditions and-

Individual Coverage Mandate." Press Release. November 19.

Associated Press. 2008. "Senate Passes Genetic D1scnminat1on Ban." Apnl 24. 2008. Retneved from http://www.msnbc. msn.com/id/24293216/from/ET/ on September 29. 2008.

C H PTE R I • Va l ues in I Jcalth Polic): Under tanding Fairness and Emcicnc}

Baley H T T M Hutchinson. and G R Narber. 1976. "The Regulatory Challenge to Life Insurance Class1ficat1on." Dra e Law Reu1ew 25 779-827.

Bennett J 1992 Home Care m New York, a Model Plan. Awaits Cuts.'" New York Times. November 20. p Al.

01fford K and R luculano 1987 "AIDS and Insurance The Rationale for AIDS-related Testing." Harvard Law Review 100 1806-24

Cohen R A and M E Martinez 2012 Uune) "Health Insurance Coverage Early Release of Estimates from the National Health Interview Survey 2011 " National Center for Health Stat1st1cs. D1v1s1on of Interview Statistics. Retrieved from http I www cdc gov/nchslfastats/hmsure htm.

Eckho m E 1991 Doctors Say They Can Save LNes and Still Save Money" New York Times, March 18. p. A I

Henderson R 2012 Uanuary) "Employment Outlook 20 I 0-2020 Industry Employment and Output Proiect1ons to 2020 Monthly Labor Reu1ew I 65-83 Retneved from http·//www.bls gov/opub/mlr/2012/0 I /art4full pdf on May 7 2012

H man B J C A Joseph M R Mabry. J H Sunshine. S D Kennedy, and M Noether. 1990 "Frequency and Costs of Diagnostic Imaging m Office Practice-A Companson of Referring and Rad1olog1st-Refernng Phys1c1ans.'" New England journal of Med1cme 323 1604-08

Hoffman F L 1900 History of The Prudential Insurance Company of Amertca (lndustrtal Insurance) 1875-1900 Newark NJ Prudential Press

Hoffman J N and E Z Kincaid 1986-1987. ·AIDS The Challenge to Life and Health Insurers' Freedom of Contract " Drake Law Review 35 709-71

Jacobs L and T Skocpol 2010 Health Care Reform and Amencan Politics. New York: Oxford University Press

James M 1947 The Metropolitan Life A Study rn Business Growth . New York: Viking Press .

Kaiser Family Foundation 2012 (September) "Health Insurance Market Reforms: Pre· Existing Cond1t1on Exclusions." fact sheet publication 8356 Retrieved from http·//www kff.org/healthreform/8356.cfm.

Kidder T 2003 Mountains beyond Mountains The Quest of Dr Paul Farmer, a Man Who Would Cure the World New Yori, Random House

Pear R 2011 Insurers May Raise Fees for Ill Youth - New York Times. October 14. p. A I.

Stone 0 1994 Ad Miss ons How Insurance Companies Sell Ideology· Amencan Prospect.

US Congress Office of Technology Assessment 1988 Medical Testing and Health Insurance. OTA H·384. Wash ngton DC U S Government Pnntmg Office

US Congress 2008 Genetic Information Nond1scr1mmat1on Acl. Pub. L. 110·233. 122 Stat. 881

Wener J P E Tnsh C Abrams and K Lemke 2012 "Adiustmg for Risk Selection m State Health Insurance Exchanges Will Be Cnt1cally Important and Feasible. But Not Easy." Health Affalfs 31 (2)· 306-15.

Jn this chapter. Thomas Rice explains how economists think about th e two most important concepts in health care economics-markets and government.

Since the publication of Adam Smith's Wealth of Nations in 1776. economists have been enamored with markets This 1s understandable. Smith and subsequent analysts demonstrated that markets can. through an "invisi ble hand." make the self- interested actions of disparate individuals result in-at least by some definitions- an "optimal" allocation of society's resources. But can Smith's "invisible hand" guide American health care? Or does health care need government regulation? This chapter unpacks the two concepts-economic markets and government regulation.

MARKETS The logic of markets is now well understood. People "de mand" the things that they want most. ensuring that they purchase the market basket of goods and services that maxi- mizes their "utilities" given their limited budgets. Suppliers produce only those things that are demanded by consumers. and in doing so must use inputs as efficiently as possible so

as to price their products low enough to attract buyers. Thus. people are able to buy the things they desire. and these things are produced using the least costly set of inputs. Furthermore the profit motive encourages firms and would-be firms to be innovative in developing new products and techniques to meet future consumer demands.

Economists have shown that 1f certain assumptions are met. then a market economy will result in a state called MPareto optimality," named after Italian economist Vilfredo Pareto Under Pareto optimality. 1t is impossible to make someone bet- ter off without making someone else worse off. This might seem to be an odd criterion for optimality. but upon ref'ec- t1on 1t 1s logical. If an economy were not in Pareto optimality. then it would be possible to make someone better off without harming another person. But if that were the case. then things hardly would be optimal. Rather. changes could be instituted to help those who might benefit without resulting in any harm to others. Only when no such changes are possible any longer would the economy be in a Pareto-optimal state.

Aside from It s re liance on certain assumptions . 1t is critical to understand that Pareto optimality does not ad· dress issues of equity or the desirability of the distribution of income that results from the workings of a compet1t1ve economy Thus . a market outcome in which one person has nearly all of the output , and another has almost none . could still be consistent with Pareto optimality. In fact. this can easily occur 1f the former person begins with the vast ma1onty of in1t1al wealth or input Amartya Sen makes this point graphically

An economy can be [Pareto) optimal ... even when some people are rolhng in luxury and others are near starvation as long as the starvers cannot be made better off without cutting into the pleasures of the nch . If preventing the burning of Rome would have made Emperor Nero feel worse off. then letting him burn Rome would have been Pareto-optimal In short. a society or an economy can be Pareto-opumal and sull be perfectly d1sgust1ng.1

Although 1t might seem desirable to transfer wealth from the rich person to the poor person. doing so cannot be viewed as 1mprov1ng the economy from a Pareto-optimality standpoint because the change will involve making the rich pe rson worse off.

In summary, under a market· based economic model. com· pet1t1on 1s designed to enhance efficiency: it does not neces· sa rily improve equity In thinking about the impact of markets on health care. we will need to consider both the appltcab1ltty of the model's assumptions as well as any concerns we have about the resulting d1stnbut1on of wealth

DERLYING

-:-n .s no smgl .,6 , u uP\111 .... t of assumptions on which the compet1t1ve economic model 1s based. A simple. abbrev1· ated hst emphas1Z1ng the 1mphcat1ons for health pohcy would include the following key requ1rements:2

• lnd1v1duals are rational . they know what goods and services are hkely to make them best off. and they can effectively use available information to achieve this best- off pos1t1on given their wealth.

C HAPTER 2 • Ma rkets a nd Politic in l lea llh Ca re

• Individuals' tastes for goods and services are predetermined and cannot be unduly influenced by phys1c1ans or other providers. or even advertisers

• The distribution of wealth is approved by society. and furthermore . tnd1v1duals care only about their own resources and not those of others

What happens if these cond1t1ons are not met (as. I will argue. is the case 1n health care)? One policy alternative to markets 1s government intervention 1n the marketplace. Government can try to correct imperfections through direct regulation or control or. alternatively. institute policies to counteract some of the potentially undesirable consequences of market competition To make this more concrete. sup· pose that direct-to-consumer advertising results m patients demanding prescription medications from their physicians that are both medically inappropriate and cost-increasing- result1ng 1n poorer health and higher costs. A way to address this problem might be to further regulate the content and extent of such advertising (as was the case 1n the past). A different strategy would be for government to engage in its own advertising campaign to counteract what 1t believes to be misleading messages from industry Sometimes both strategies are employed. In the case of cigarette smoking. government has banned or severely limited various types of advertising and concu rrently created its own advertisements aimed at convinc· ing smokers to quit and at others not to start.

The alternative to government action is for government to do nothing. Even 1f markets do a poor job 1n some areas. gov- ernment might perform even worse. There are several possible reasons for this. Government officials may lack the expertise of those in the private sector. Moreover. they may be beholden to special interests. particularly those that contribute materially to these officials' power or wealth . And even in the absence of such undue influence. government is often inefficient because 1t does not face competition for the services 1t prov1des.3

Over the years. many economists have weighed in over this issue. Henry S1dgwick ( 1887) once stated that Mlt does not fol · low that whenever laissez-faire falls short government interfer- ence is expedient: since the inevitable drawbacks of the latter may. in any particular case. be worse than the shortcomings of private enterprise "4 More than I 00 years later Mark Pauly expresses a similar view when noting that Ma government staffed by angels could undoubtedly do a better job than mar- kets run by humans .~· he 1s less sure when humans run the

PART 1. Ideas and Concepts

government. Charles Wolf ( 1993) adds. "The actual choice is among imperfect markets. imperfect governments. ~nd v~n­ ous combinations of the two. The cardinal economic choice concerns the degree to which markets or governments-each with their respective flaws-should determine the allocation. use. and distribution of resources in the economy. "6 We will return to the issue of how markets and government can work together to improve the health care.

I sought?" This inevitably presents challenges for the most discerning of consumers Burton Weisbrod concludes that "the noteworthy point is not simply that it is difficult for the consumer to judge quality before the purchase ... but that 11 is difficult even after the purchase."8

Dec1s1ons about whether to obtain care. what to obtain and from whom to obtain it present extraordinary challenges to the consumer because markets are ill equipped to assist r. answering counterfactual questions . But consumers also face a second set of challenges involving which health plan. hospt- tal. or physician generalists and specialists to choose.

MARKETS IN HEALTH CARE: ARE THE ASSUMPTIONS MET? This section briefly reviews evidence drawn from health care systems about the three assumptions underlying markets dis- cussed earlier.

• A ssumption I : Individuals are rational: they know what goods and services are likely to make them best off. and they can effectively use available information to achieve this best-off position (given their wealth).

Jn most areas, health included. individuals tend to act fairly rationally and know what is best for themselves . at least as evaluated by conventional norms. There are obvious excep- tions. People ride motorcycles without helmets. Some desper- ate people in developing countries sell their own organs. a practice that reduces rather increases their economic status 7 Others kill themselves when an objective observer might have viewed the person's circumstances as remediable. In general. though . government does not interfere too much with mar- kets to deal with these issues: rather. it lets people make good or bad decisions for themselves.

A more troubling issue is people's ability to successfully use information about health-related issues. This involves both care and coverage decisions. They face at least two types of problems. One relates to the concept of the "coun - terfactual. " Counterfactual questions are those that are hypothetical in that they concern what would have hap - pened if history had been different. Questions such as these can never be answered with certainty. Some examples in health include "Would the problem have gone away if I had left it untreated?" "What would have happened 1f l had sought the care of a specialist instead of a primary-care physician?" and "Would the result have been different if I had seen a different primary-care physician than the one

We focus here on choosing a health plan. There are many types of health plans available in the United States 1nclud1ng health maintenance organizations (HMOs) point-of-se rvice plans (POSs). preferred provider organi- zations (PPOs). traditional or indemnity plans, and. most recently, h1gh -deduct1ble health plans (HDHPs). HDHPs are often coupled with a tax-favored savings options. as m the case of health savings accounts (HSAs) Usually HMOs. POSs. and sometimes PPOs are referred to as examples of managed care while indemnity and HDHP plans typically are not. H consumers are going to choose the plan type that 1s best for their own preferences and circumstances. 1t be· hooves them to understand managed care-not just general issues but very particular ones. such as whether they can seek care directly from specialists and even what financial incentives their physicians and hospitals face .

When surveyed. however. most consumers do not under- stand even rudimentary issues. such as the difference between fee-for-service medicine and managed care plans.9 Consumers are particularly bad at understanding certain key features of their own health plans. One US survey. for example. found that whereas 62% of plan members believed that plans had to approve specialty referrals. in reality approval was needed iust 28% of the t1me.10

An area in which consumers need to be particularly skilled at using information is "report cards- on their health plans People often obtain these report cards from their em· ployer and then are supposed to choose a health plan by we1gh1ng such factors as quality. convenience flexibility. and costs. Currently. there 1s no one standard report card format.

Good report cards should be easy to understand Some items. such as satisfaction ratings. are comprehensible to most

people. but other elements are more problematic. It 1s not clear. for example. that consumers know how to make effective use of information on ut1hzat1on rates for alternative services or that they understand the relative importance of survival rates from high-incidence (1 e . heart disease) versus low-incidence (1.e. kidney failure) diseases As a result. more recent 1terat1ons of report cards tend to be somewhat simpler than previous ver· s1ons. presenting a hm1ted number of items and often rating health plans by showing. say. between one and five stars for each measure or quality. Even then. consumers often do not know how to interpret the information being presented 11

Some of the early work on consumer response to health plan report cards was discouraging· Not only did people not understand the report cards. but their ava1lab1hty did not seem to draw people to better rated health plans 12 There 1s some evidence that things may be beginning to change. however. One study that examined employees of General Motors found that although there 1s no evidence that people gravitated to health plans that receive high report card scores. there 1s evidence that they avoid plans with low scores One hm1ta· t1on with the study. however. 1s the d1Hrculty of determining whether the report cards themselves or. alternatively. other attnbutes of the health plans that receive low scores cause people to move away from such plans. 13 In contrast. a study of 86 hospitals from Ontario. Canada. found no effect from the pubhc release or hospital performance information about the quality of care for two cardiac cond1t1ons.14

Challenges remain 1f we are to rely on the market to develop and d ssem nate report cards Marc Rodwin notes a number of prob ems with the report cards One problem 1s that they 1g· nore key aspects concemmg how health plans operate such as the stnngency of ut1hzat1on review and the financial incentives that prOVtders face Another IS that many or the tasks preVlOUSly performed by health plans have now devolved to cap1tated phys c1an groups. whose performance 1s only occasionally ava1 able from report cards A third 1s that report cards-in order to simplify-tend to be aggregated and not focused on performance for particular medical cond1t1ons. It 1s the manage· ment of chrome cond1t1ons. however. that 1s perhaps the most important barometer of the success of a health plan since most senous illnesses are chrome ones and because they are respon· s1ble for the large maJonty of health care costs.1s

• Assumption 2 Individuals' tastes for goods and services are predetermined and cannot be unduly influenced by phys c1ans or other pl'OVlders. or even advertisers .

Cl I APTER 2 • Markets a nd Politics in I lea Ith Ca re

Economists often have a peculiar view of the genesis of human preferences or tastes. They are believed to be endemic to the individual-that 1s something that 1s not influenced by the environment in which a person exists . (This may seem odd in light of the way in which advertising tends to work.) In economic theory. according to Lester Thurow. individual tastes and preferences "simply exist-fully developed and im· mutable "16 This is what Kenneth Boulding has referred to as the "Immaculate Conception of the Indifference Curve" be· cause "tastes are simply given. and ... we cannot inquire into the process by which they are formed ." 7

How else could one account for the following statement by Nobel Prize winners George Stigler and Gary Becker. who write that "(Tjastes neither change capriciously nor differ 1mpor· tantly between people ... [O)ne does not argue over tastes for the same reason that one does not argue over the Rocky Mountains-both are there. will be there next year. too. and are the same for all men ." 16 (Becker has also wntten that "pref· erences are assumed not to change substantially over time. nor to be very different between wealthy and poor persons. or even between persons m different societies and cultures." 19)

One natural application of this theory of the sovereignty of consumer preferences 1s the firm belief that physicians cannot "induce" demand among their patients. convincing them to receive services they would not want 1f they had the same medical expertise as the phys1c1an Perhaps no topic in health pohcy has generated more disagreements among economists. as well as between economists and other d1sc1plines.

The existence of physician-induced demand would be at odds with a health care marketplace that is operating com· pet1t1vely Two examples will help clanfy why this 1s the case. Economists would normally expect that an increase 1n phy· s1c1an supply would lower prices. but that 1s not necessanly the case if phys1c1ans induce demand . Furthermore. we would also expect physicians to supply fewer services if they are paid less per service. but again. this would not necessarily be true 1f demand inducement were present.

Unfortunately. whether demand inducement exists and 1s an important element of the health care marketplace 1s terribly difficult. if not impossible. to demonstrate-there are many reasons for this.20 but the most important 1s simple: To know for certain if physicians are inducing demand, we would have to know what patients would demand 1f they knew as much about medicine as the physician-but testing that appears to be nearly 1mposs1ble.21

11!1 PART I• Ideas and Concepts

The types of policies a society migh t develop regarding phys ician supply and payment depend crucially on behefs about the importance of demand inducement. If the amount of patient demand induced by phys1c1ans is n~g~1g1 ble. then poli cy makers may wish to encourage the tra1 ni~g of more physicians and payment on a fee-for-service basis. In con· trast. if demand inducement is commonplace then ph~s1c1an supply should perhaps be controlled and phys1c1ans ?aid in a way whereby they do not have an inc~n~1ve to provide more services (e.g .. sa lary or capitation). A similar argu~en~ can be made about the app ropri ateness of public policies aimed at regulating the diffusion of medical technologies

• Assumption J: The distribution of wealth is approved of by society. and furthermore. individuals care only about their own resources and not those of others.

Markets are not designed to solve problems of income dis· tribution. Rather. the outcome of the competitive process will be a distribution of income that is highly correlated with how many resources an individual brought into the process in the first place. Clearly then . if there is dissatisfaction with income distribution. government needs to intervene.

Where disagreements arise 1s how to interven e. If one believes Assumption I ("Individuals know their own inter· ests " ). then cash subsidies are the best method beca use individuals would know the best use of add1t1onal monies If there is some doubt about the assumption, then 1t might make more sense to provide poorer people with add1t1onal wealth through services- for example. health care or housing-than cash . An equally important reason to provide services 1s tha t wealthier people are much more likely to willingly pay taxes or voluntarily contribute to charities 1f they know that their contn butions will be used in the way they intend . As David Collard notes. " any reader who believes himself to be entirely non· paternalistic in his concern 1s asked to perform the following mental experiment. I notice that my neighbour 1s bad ly fed and badly clothed so I give him some money which he then spends on beer and tobacco. Do I feel entirely happy about this or do I somehow feel that my intentions have been thwarted 7"22

A final assumption is somewhat more abstract but eets at some of the key differences between markets and regula tions It is the assumption that ind1v1duals care only about their ab solute wealth rather than how 1t compares to others. This goes by the technical economic term externali11es of consumplton If there are positive externalities of consumption, then p rson B

1s happ 1f person A has more wea th If there are wnal ues person B woufd be less happy pro bty due to A casual observatK>n of human natu is that peop! positive external ties toward those who h ve t and external t toward thos with more than them--cortSiStt':! with th quotation by H L Menc n. who r put d y de "wealth as "any incom that 1s at least on hundred d more a ~r than the income of ones wif 's saster s husband

This m1ngly absuact issue becomes real when one consid- ers a new scarce medical technology that is only avadab! to very nch Is society made beu r off by allowing th m to purchasc 1t7 The concept of Pareto opt1mahty would give an unam "yes" -allow someon to be made bett r orr so long as no one is made worse off But 1f people care about how they com to others then providmg somethmg to a wealthy person thl a poor person cannot afford could md d mak th latter psyd» logically worse off Thus. allOW1ng the form r to purchase rt ambiguous 1mplicat1ons for overall social welfare 1~

A similar and p rhaps I ss abstract example of a pos • externahty of consumption 1s altruism-your consumption d a good. l1k medic I car • might not only male you better but me better off as well Since markets und rproducc pos tJVt externaht1r.s of consumption. one would expect that exter channels would b n cessary to produce the "rinht" amount as discussed in the following s ct1on

H E An ahern u to all0W1ng mark ts to opcrat unencumber 1s tor gulat them lher ar various theories r gardmg the mot1vauon for r ulat1on The trad1t1onal viewpomt 1s some tim s called the public inter t mod I which hypothes zcs that r ulat1ons ar inst1tut d to h Ip th pubhc An oppos; v1 wpomt sometimes called th economic theory of r lat1on (and not t rribly d1ss1m1lar to pubhc choice theory in political science) is that regulations ar instituted to seM special inter t groups for examp 1t has been eta med tha th Am nc n M d1c~I Assoc1at1on and affiliated orgamzatJOnS us d th u political power to k p liMOs out or the med mar etpl durm th middle or the 20th c ntury-not as a way of pre Mn quah y but r ther to further mcrease phys

Undoubt dly th r 1s n el ment or truth tion Som do appear to rvc the PLI*

mt r t nd som do n And som cla 1c po ica! th

suggest a "life cycle" of regulatory agencies-governments aeate regulatory agencies with good public-interest intentions (often after a tragedy or a crisis). but. over time. the regulators slowly fall under the political influence of the most interested groups or parties (who continue to lobby the agency long after

e general public has stopped paying attent1on) .21

Regulation is a rather vague term . however. encompassing many different strategies. some of which intervene 1n market act1v1ty far more than others Stepping back for a moment. consider the various ways that government can intervene in a market. One can come up with any number of continuums of government involvement. One useful set. developed by Ph1hp Musgrove. lists five types. ordered from the least to most in- trusive: (I) provide information: (2) regulate by. for instance. selling rules for private providers. (3) mandate by. for exam- p e. stipu lating that private ent1t1es act in a certain manner. such as requiring employers to provide health insurance cov- erage, (4) finance with pubhc monies: and (5) have govern· ment provide services directly 2e

It is perhaps noteworthy that ·regulation· appears on this I st a the second-least intrusive To see why this 1s the case. cor .1der the case of health insurance Private markets can in- d ed provide coverage, but they are imperfect because they w1I strive to avoid the most costly ind1v1duals. IL as 1s the case in most countries. policy makers find this unaccept· able, there is a continuum of approaches . One would be to regul ate the market-for example. require that insurance be community rated " so that everyone 1s charged the same pre-

m um. and require that there be · open enrollment" so people are not excluded from coverage because or their health sta- tus This essentially permits a hidden network of cross sub· s dies to develop-when everyone pays the same price the good risks (healthy. young. and affluent) subs1d1ze the poor

s (ill. old, and poor). This is what Deborah Stone called the solida rity principle in Chapter I A more intensive way for overnment to become involved would be to directly finance

t e insurance because in doing so. 1t will undoubtedly set ~ry stringent rules (e.g .. coverage requirements. fee controls. or global budgets). The most 1ntrus1ve involvement. of course would be to replace the private insurance market with government-provided coverage.

Up till now the discussion has 1mpl1ed that regulation 1s !ely earned out by government. but that 1s not necessarily

the case To give just two of many possible examples. health pans exercise regulation when they require physicians to

C H APTER 2 • Markets and Politics in Health Care

obtain perm1ss1on before hospitalizing a patient or require a patient to obtain a referral from a "gatekeeper" primary-care phys1c1an before consulting a specialist.

There is an important distinction between "microregulation" and "macroregulat1on:·29 M1croregulation implies direct observa- tion and. potentially, control over the organization or individuals being regulated. whereas macroregulation is more indirect: setting the ground rules and stepping back. letting the organization or individuals choose how to respond Other developed countries rely on macroregulatJon much more than the United States. using such tools as regional global budgets. where private entities (hospitals and nursing homes) must act under strict financial limits (say an annual budget) but do not face much direct over- sight. The United States relies much more on microregulat1on that 1s earned out privately. Examples include utilization man· agement techniques such as precert1f1cation requirements for hospital stays. monitoring physicians· utilization patterns. and the like. Many Amencans are surprised to learn that while foreign phys1c1ans face more stnngent fiscal constraints (from macroreg· ulations). they enjoy considerably more professional autonomy over medicine itself than their American counterparts (who face a wide array of intrusive microregulations}.

POLICY CHOICES Economists often distinguish between two broad sets of pol· icy levels: those aimed at the demand side of the market and those targeting the supply side.30 In general. those espous- ing market solutions tend to favor demand-side policies. while those who believe in greater government regulatory action tend to favor the supply side

Demand-side pohc1es seek to improve the workings of the price mechanism. To illustrate. economists often cite in· efficiencies m the health care system due to overinsurance. which . 1t is claimed. causes people to consume services that they do not value very much . This theory. originally applied to health care markets by Mark Pauly. postulates that society incurs a "welfare loss. estimated by some to be on the order of IO to 30% of total health care costs m the United States.l1

The idea behind welfare loss is as follows . Economic theory postulates that people will purchase goods so long as the util- ity they confer to a person exceeds the pnce. Insurance brings down the price of services-sometimes to zero-meaning that people will find 1t advantageous to use services even 1f they convey very little utility. In such instances. the social

PART I • Ideas and Concepts

costs of producing the services may far exceed the utility a person derives from their consumption.32 If one compares the costs and benefits. it is argued that the former exceeds the lat-

h t f . ty 33 ter. leading to a welfare loss on t e par o soc1e .

Patient cost sharing is one way to reduce the welfare loss of overinsurance. If people have to pay more for services. then they will. it is theorized. demand only those services that con- vey higher utility. Indeed, cost-sharing requirements are ris- ing rapidly in the United States as a way of trying to quell the increased demand for services-although this is also a simple way to shift costs from larger payers (employers. gov- ernments) to the consumers themselves. For example, in the period between 2006 and 20 I 0. average annual deductibles for those with single coverage rose by 71 o/o in HM Os and 43% in PPOs.34

The fastest-growing health plans in the United States are high-deductible plans. Legislation encouraging their adoption was approved during the administration of President George W. Bush. As recently as 2005. their market share was zero . but it had risen to 13% of the employer-sponsored market in 20 I 0. 35 There are two main types: those that are simp ly high-deductible and those that are HSAs that allow indi- viduals to accumulate savings in individual accounts that are treated on a tax-advantaged basis. In HSAs. the policy holder agrees to purchase high-deductible insurance (currently av- eraging about $2.000 annually for individual coverage and twice that for family coverage). Premium contributions can be made by the individual or employer. These contributions are tax deductible, can accumulate year to year if unspent. and therefore can be used for future medical expenses. in- cluding those in retirement. They can be withdrawn to pay for eligible medical care.

High deductibles are designed to make people think twice before using services. and the attraction of a savings account that accrues over time may do the same. These plans are often an alternative to managed care because. rather than having an HMO say "no" to patients. these plans provide financial incentives for people to say no to themselves. Their success will depend on many factors. Most crucial are challenging is- sues surrounding favorable se lection (i .e .. healthier people joining them, leaving sicker individuals in the risk pools of other plans. which could potentially cause their premiums to spin out of control) and consumers' ability to make informed choices about whether to seek services in the face of large deductibles. There are equity issues as well: Lower-income

people are less likely to be able to pay the full cost of se1V1ces during the period before they have paid off the deductible

A final issue about demand·s1de strategies concerns equity Robert Evans and colleagues eloquently state the issue.

... when health care 1s paid for from taxes. people with higher incomes pay a larger share of the total cost: when 1t is paid for by the users. sick people pay a larger share . .. Whether one 1s a gainer or loser. then. depends upon where one 1s located in the d1stnbution of both income ... and health. In general. a shift to more user fee financing redistributes net income .. from lower to higher income people. and from sicker to healthier people.le.

The alternative to demand-side policies are those focused on the supply side As Joseph White explains in Chapter 23, most developed countries rely far more on supply-side pol - c1es. These include global budgets. control of the diffusion of medical technologies. limits on the number of hospital beds and physicians. hospital and physician payment incentives. practice guidelines. and utilization review.

Supply-side methods have two main advantages over those aimed at the demand side. First. with respect to ef- ficiency. informational problems often make demand-side policies less effective As noted above. consumers often do not respond to information about health-plan quality by choosing more cost-effective plans Second. unlike demand-side policies such as increased patient cost sharing. those aimed at suppliers are not. by nature. regressive. In short. proponents of these policies claim that they are more effective at controlling costs and more equitable across the population

Supply-side approaches do have their problems. however Several of the methods just noted. especially limits on tech- nologies and hospital beds and funding. may result in long waits for services. Conversely. reliance on price-the key market mechanism-tends to result in shorter waits because services are rationed on ability to pay. It is difficult to gener· alize much more than this. however. because waiting times vary a great deal between countries. and each has its owr way of grappling with the problem. However. it 1s possible to have a nationa lized system with universal coverage that does not result in long waiting times. A survey of eight countries from The Commonwealth Fund found shorter waiting times in Germany than in the United States for elective surgery and seeing a specialist. 37

-

CO:\CL ""'1v .; •he broad statement that the United States tends to rely more on markets m health care and other coun- tries more on regulation. rew generalizations are possible This 1s not surprising Every nation mixes markets and regulation As James Merone describes in the Introduc- tion more than hair of all health care spending in the United States 1s by government , and private providers (1f not private financing) play a dominant role in most deve oped countries

It should b apparent by now that markets and govern- ments are not all or nothing propos1t1ons Rather. they need to be used in conjunction with each other Private ma ets he p ensure that government 1s not too inefhc1ent or too beholden to special interest groups. government heps ensure that nsurers do not select only the healthiest people that access to providers 1s available to the general publ c and that people can afford such access to care (to name jUSt ii rew things) The real issue IS the balance be- tween the two It 1s noteworthy that the new health care rerorm leg1slat1on in the United States takes advantage or both the private market (through subs1d1es and insur- ance exchanges) and government (through an expansion of low income coverage through Medicaid) to reduce the number of uninsured

Can we say unambiguously what this balance should be7 Unfortunately the answer 1s no There are at least four reasons why countries may want to approach these issues d fferently

• D rrerent countries want different things from their health systems Some may want to emphasize access others cost control. some opt for eff1c1ency over equity and others the opposite Moreover. historical and cu tural factors are cnt1cal determinants of how different countries' health services systems have developed. making 1t nsky to suggest that any one country s system be replicated by others.

• It 1s probably 1mposs1ble to come up with an agreed -upon set of weights among the different outcomes How does one weigh . for example. the

CHAPTE R 2 • Markets and Politics in Health Care

short waits (a characteristic of the market-based us system) against the equity or health system rinancing (a characteristic of the government- controlled Bnt1sh system)7 Selecting between such clashing values is the heart or politics When it comes to these basic tradeoffs. the often heard plea-"Can't we get beyond polit1cs?"-1s a sure sign of political naivete

• It is also hard to characterize the countries according to the reliance of each on markets versus regulation Germany offers a good example Although there is little exphctt government involvement an health care rinancing. which 1s largely lert up to the insurers. which are called '' sickness funds ,'' there 1s a great deal of government oversight and direction . particularly on the supply side. Further comphcat1ng matters 1s that health system~ change. sometimes fairly rapidly. Both Great Britain and the Netherlands , for example. went from fairly non · marketlike systems to ones relying much more on competition: while Britain has stepped back somewhat. the Netherlands has continued its trends toward markets through the use or private insurance .

• Although cross -national measures or access and costs are reasonably good. little 1s known about the quality or care provided in different countries

Ultimately. we should see markets and regulation as tools that can be combined in very d11ferent ways. Each choice involves complicated tradeoffs between different values such as equality. efficiency. freedom. solidarity. fairness , and the acqu1s1t1on or wealth Health services researchers perform a vital function by developing empirical comparisons of the performance of countries that rely on alternative mixes of markets and regulation. But. in the end. basic health system choices involve more than evidence and computation. They require nations to make judgments about their own ideals.

PART I • Ideas and Concepts

STUDY QYESTIONS _ _ I. What state of equilibrium do economists claim a market economy will eventually reach?

2 . Is a market that is Pareto optimal guaranteed to be equitable with respect to distribution. for example. of wealth?

3. What are some assumptions economists make about the workings of a competitive. free market?

4. What could the government do if in a particular area the market model does not seem to be working well because one or more of the common assumptions do not hold?

s. Why might government intervention make things worse than what happens in an unfettered market? 6. What are some reasons to question the assumption that individuals have the ability to use available information to

make the best health care choices to improve their health?

7. What is the reason to question the assumption that individua l preferences for health care are predetermined and not influenced by the environment?

8. What are some reasons to question the assumption that individuals ca re only about their own resources and that society approves of the current distribution of wealth?

9 . Hr.w does the United States tend to differ wi th other developed countries in the way health care is regulated?

IO. How c~ , demand-side policies differ from supply-side pol1c1es. and who tends to favor each type7

11 . Wi. is it difficult to generalize across all countries on the question of the proper balance between markets and go1 ernment regulation in health care7

ENDNOTES I. Sen. 1970. p. 22.

2 . For a fuller discussion-including 14 assumptions-see Rice and Unruh. 2009. Chapter 3.

3 . For further discussion of "government failure," see Wolf. 1979. 1993. 4 . Sidgwick. 1887.

S. Pauly, 1997. p. 470.

6 . Wolfe, 1993. p. 7.

7. Goyal. Mehta. Schneiderman. and Sehgal. 2002

8. Weisbrod. 1978, p. 52.

9. Isaacs. 1996.

I 0. Cunningham, Denk, and Sinclair. 200 I.

11 . Faber, Bosch, Wollersheim. Leatherman. and Grol. 2009.

12. Hibbard and Jewett, 1996; and Chernew and Scanlon. 1998.

13. Scanlon. Chernew. Mclaughlin. and Solon. 2002. 14. Tu et al .. 2009.

15. Rodwin, 2001.

CHAPTER 2 • Markets and Politics in Hea lth Care

16. Thurow. 1983

17. Boulding 1969. p 2

18. Stigler and Becker. 1977

19. Becker. 1979 p 9

20. For a more complete hstmg and discussion see Rice and Unruh. 2009 . chapter 6.

2 I . Mooney, 1994

22 . Collard 1978. p 122

23 . This quotation was obtained from Frank. 1985. p 5.

24. For further discussion of this and other examples. see Reinhardt. 1992 .

ZS . For one of the earliest and most readable essays on the economic theory of regulation. see Stigler. 1971.

26. Kessel. 1958

27. Downs 1993

28. Musgrove 1996

29. For a discuss on of this distinction. see Rice. 1999.

30. A good d1scuss1on of one aspect of supply· versus demand·s1de policies. involving cost sharing. 1s in Ellis and McGuire. 1993

31 . Pauly. 1968

32. Feldman and Dowd. 1991

33. for a critique of this theory. see Rice. 1992 or Rice and Unruh. 2009.

34. Kaiser Family Foundation and Health Research & Educational Trust. 2010.

JS . lbd

36. Evans Barer. and Stoddart. 1993, p 4

3 7. DaVJs Schoen and Strem1k1s 20 I 0

RE FERENCES Becker G S 1979 "Economic Analysis and Human Behavior .. In L. levy-Garboua. ed. Sociological Economics. Beverly

Hills. CA Sage Pubhcat1ons

Bou d ng K E 1969 " Economics as a Moral Science" American Economic Reuiew 59 (I): 1-12.

Chernew M and D P. Scanlon 1998. 'Health Plan Report Cards and Insurance Choice." lnqwry 35: 9-22.

Co lard. D 1978 Altruism and Economy A Study m Non-Selfish Economics. New York. Oxford University Press.

Cu11n ngham. P. J. C Den . and M Sinclair. 2001 "Do Consumers Know How Their Health Plan Works7" Health Affairs 20 (2) I 59-66

Davis K .• C Schoen and K Stremk1s 20 IO. June Mirror. Mirror on the Wall. How the Performance of the US. Health Care System Compares lnternat1onally. New York. The Commonwealth Fund.

PART J • Ideas and Concepts

Downs. A. 1993. Inside Bureaucracy. Long Grove. IL· Waveland Press.

Ell . R p d T G McGuire. 1993. "Supply-Side and Demand-Side Cost Sharing in Health Care." journal of Economic 1s. . .. an . .

Perspectives 7 (4): 135-51. Evans. R. G .. M. L. Barer, and G. L. Stoddart. 1993. "The Truth about User Fees." In Policy Options Montreal, Quebec

Institute for Research on Public Policy.

Faber. M .. M. Bosch. H. Wollersheim. S. Leatherman. and R. Grol. 2009 "Public Reporting in Health Care · How Do Consumers Use Quality-of-Care Information? Medical Care 47 1-8.

Feldman. R .. and B. Dowd. 1991. "A New Estimate of the Welfare Loss of Excess Health Insurance." Amencan Economic

Reuiew81(I):297-30.

Frank. R.H. 1999. Luxury Feuer. New York: Free Press

Frank. R. H. 1985. Choosing the Right Pond· Human Behavior and the Quest for Status. New York: Oxford University

Press.

Friedman. M. 1962. "Occupational Licensure." In Capitalism and Freedom (pp. 13 7-60). Chicago University of Chicago

Press.

Goyal. M .. R. L. Mehta. L. J. Schneiderman. and A. R Sehgal 2002 "Economics and Health Consequences of Selling a Kidney in India." journal of the American Medical Association 288 ( 13 ) : 1589 93

Hausman. D. M .. and M. S. McPherson. 1993. "Taking Ethics Seriously: Economics and Contemporary Moral Philosophy." journal of Economic Literature 31 (2) 6 71-731.

Hibbard. J. H .. and J. J. Jewett. 1996. "What Type of Quality Information Do Consumers Want in a Health Care Report Card?" Medical Care Research and Review 53 (I): 28-47.

Isaacs. S. L. 1996. "Consumers' Information Needs: Results of a National Survey .. Health Affairs 15 ( 4 ): 3 1-41.

Kaiser Family Foundation and Health Research & Educational Trust. 20 I 0. Employer Health Benefits. 20 I 0 Annual Survey." Retrieved from http://ehbs.kff.org/pdf/20 I 0/8085 .pdf

Kessel. R. A. 1958. "Price Discrimination in Medicine:· journal of Law and Economics I (I) 20-53.

Kuttner. R. 1997. Everything for Sale: The Virtue and Limits of Markets. New York: Alfred A. Knopf.

Labelle, R .. G. Stoddart, and T. Rice. 1994. "A Re Examination of the Meaning and Importance of Supplier-Induced Demand." journal of Health Economics 13 (3) 347-68.

Lohr. K. N .. et al. 1986 ... Effect of Cost Sharing on Use of Medically Effective and Less Effective Care." Medical Care 24 (Supplement): S3 I - S38.

Mooney. G. 1994. Key Issues in Health Economics. New York: Harvester Wheatsheaf.

Musgrove, P. 1996. Public and Private Roles in Health. Theory and Financing Patterns. Discussion paper no. 339. Washington. DC: The World Bank.

Newhouse. J. P .. and the Insurance Experiment Group. 1993 . Free for All? Lessons from the RAND Health Insurance Experiment. Cambridge. MA: Harvard University Press.

Pauly. M. V. 1968. "The Economics of Moral Hazard: Comment." American Economic Review 58 (4) 531-7.

Pauly, M. V. 1997. "Who Was That Straw Man Anyway? A Comment on Evans and Rice." journal of Health Politics. Policy and Law 22 (2): 467-73.

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C HAPTER 2 · Markets and Politics in Health Care

Pre er A S . A Harding and P Travis 2000. • 'Make or Buy· Dec1s1ons in the Production of Health Care Goods and Services New Insights from lnst1tut1onal Economics and Organizational Theory." Bulletin of the World Health Organization 78 (6) 779-90

Reinhardt U E 1992 "ReOect1ons on the Meaning of Efficiency: Can Efficiency Be Separated from Equity?" Yale Law & Policy Review I 0 302-15.

Rice T 1992 An Alternative Framework for Evaluating Welfare Losses in the Health Care Market. .. journal of Health Economu:s 11 (I) 88-92

Rice T 1999 Macro Versus Micro Regulation:· In S H. Altman. U E. Reinhardt. and D Shactman. eds .. Regulating Managed Care Theory, Practice. and Future Options San Francisco Jessey Bass

Rice T and L Unruh 2009 The Economics of Health Reconsidered. Chicago. Health Administration Press.

Rodwin M A 2001 Consumer Voice and Representation in Managed Healthcare." journal of Health Law 34 (2) 233- 76

Scan on D P M Chernew. C Mclaughlin. and G Solon 2002 . "The Impact of Health Plan Report Cards on Managed Care Enrollment journal of Health Economics 21 19-41 .

Sen A K 1970 Co/lec11ve Choice and Social Welfare San Francisco: Holden -Day.

Sen A K 1987 On Ethics and Economics Oxford. UK: Basil Blackwell

Sen A K 1992 Inequality Revisited Cambridge. MA Harvard University Press.

S dgw1ck H 1887 Principles of Pol1t1cal Economy. London: MacMillan

Stigler G J 1971 The Theory of Economic Regulation." Bell journal of Economics and Management Science 2: 3-21.

Stigler. G j . and G S Becker 1977 "De Gust1bus Non Est Disputandum ." American Economic Reu1ew 67(2): 76-90 .

Thaler R H 1992 The Winner's Curse Paradoxes and Anomalies of Economic Life. New York: The Free Press . Macmt an and Co

Thaler R H and C R Sunste1n 2008 Nudge Improving Decisions about Health. Wealth. and Happiness New Haven. CT Yale University Press

Thurow l C 1983 Dangerous Currents The State of Economics New York. Random House.

Tu j V et al 2009 Effectiveness of Public Report Cards for Improving the Quality of Cardiac Care." journal of the Amer can Medical Assoc1at1on 302 2330-37.

Wagstaff A and E van Doorslaer 2000 " Income Inequality and Health: What Does the Literature Tell Us?" Annual Rev ew of Public Health 21 543-67

We sbrod B A 1978 Comment on Paper by Mark Pauly .. In W. Greenberg. ed .. Competition in the Health Care Sector Past Present and Future (pp 49-56) Washington. DC: Bureau of Economics. Federal Trade Commission.

Wolf C Jr 1979 A Theory of Nonmarket Failure: Framework for Implementation Analysis .. journal of Law and Economics 22 (I) 107- 39

Wolf C Jr 1993 Markets or Governments Choosing Between Imperfect Alternatives. Cambridge. MA: MIT Press

PART I • Ideas and Concepts

It is always useful to try to summanze what we have learned from past experience. Here is one classic list of observations and reflections on health pol1t1cs and policy over the past 40 years. See how many you can find m the chapters of this book

I. Every na tion's health care system is unique. based on its own social. political. cultural. and economic history.

2. All modern health care systems. built as they are around so· ph1st1cated medical technology. are inherently costly.

3. Regardless of spending levels. all governments (state. federal. and international) have found that health care spending 1s crowding out other forms or spending.

4. Efforts to attain health reform are more likely to succeed when couched in terms or cost containment. rather than improved access to health care.

S. Universal coverage alone will not alter the wide gaps in housing. living conditions. and morbidity and mortality rates between the poor and middle classes.

6. Government efforts to reduce expenditures for health services programs by transferring their costs. without appropriate finan- cial safeguards. to lesser levels or government or rec1p1ents or services do not effectively reduce the overall costs or the ser- vices but merely shift the financial burden to those least able to bear it while depnving those most in need.

7. States vary in their fiscal ability and political willingness to un· derwrite care with those most in need often the least able or willing to do so.

8. States are wary or generalizing from successful local experi- ments. Promising ideas face all kinds of unexpected problems when policy makers try to implement them on a larger scale. Small pilot programs rarel y look as good on the state level: state-level experiments rarely look as good on a national sca le.

9. Programs covering only the poor must be carefully designed so as to avoid adverse incentives and inequities 1n which some receive substantial assistance and others equally in need or deserving (the near-poor. the working poor. or adults without children) receive nothing or practically noth ing. Med1ca1d. be- fore the passage of the Affordable Care Act (ACA) was a classic example or this problem.

10. Pinning one's hopes on an employment· based health are system 1s increasingly risky in a dynamic. global econol'lY

11. Even very well·des1gned programs must be effectl\ely adr.: nistered . All health programs must change with the tunes with developments in health care, and with the benefic a es themselves.

12. No nation has ever enacted a comprehensive health insurance program over the oppos1t1on of its medical profession without negotiating concessions and winning over some 1mportart health care factions .

13. Although any government system 1s likely to seek to impose restrictions on the autonomy and prerogatives of providers.ma system like the United States where the private sector is domi· nant. such controls can neither be arbitrary nor capricious bLt rather seek the cooperation of provider interests through the use of financial incentives and rewards that increase costs.

14. While open·ended reimbursement of proYlders on the bass of costs 1s innationary. inadequate. and unrealistic, persistently low payments or picayune controls tend to be self-defeating. leading providers to increased cost shifting or opting out of the system That. in tum. reduces the choices available fOf recipients. This rrz/ even lead to an increase 1n costs as program recipients respond b'( delaying care (making their conditions 'M>rse) or seeking 1t m emer· gency rooms. wtuch are the most expensive locus of care.

IS. Health policy 1s dominated by the tyranny of the budget.

16. Any maior domestic health care reform. especially one that imposes buyer costs. must enjoy a broad base of public support to succeed.

17. Politics will always dominate policy analysis in the legislat1~e process.

18. The expansion of government or public intervention in health and health care in the United States has essentially been incrementa l. the result of compromise involving a number of competing interests as well as Judicial interpretation .

19. The execut11 mg unsymp leg1slat1on 1 regulations appropriate<

19. The executive branch may thwart leg1slat1ve intent by appoint· mg unsympathetic administrators Other ways to undercut legislation include delay or failure to promulgate enabling regulations issuing contradictory orders. or failing to spend appropriated funds

CHAPTER 2 • Ma rkets and Polit ics in 1 lcallh Ca n!

20. Whatever the future role of government in health care 1n the United States IS to be, it will be the product or a deliberative dec1s1on made in the political arena and will likely embrace the unique features of the nation's social, political. economic. and health care systems.

PART II

National Political Institutions

CHAPTER 3

CHAPTER 4

CHAPTER 5

CHAPTER 6

CHAPTER 7

CONGRESS

Mark A. Peterson

THE PRESIDENCY

James A. Morone

THE COURTS

Timothy Jost

FEDERALISM AND HEALTH CARE POLICY

Frank J. Thompson and Joel C. Cantor

WHY HEALTH REFORM HAPPENED

Jacob S. Hacker

EYEWITNESS: DILEMMAS OF REPRESENTATION: HOW A

MEMBER OF CONGRESS SEES HEALTH REFORM

James A. Morone

We cannot understand health politics and policy without understanding Congress. In this chapter. Mark Peterson explores the logic of our Legislature, shows how it is unique, and explains why it matters.

Congress has been both friend and foe of health policy. What it enacts. what it ignores. and what 1t actively defeats all re- veal a good deal about the legislative process in the United States and echo the changes that. over time. remake American lawmaking. As reflected in the landmark displays of congres· sional action. stalemate. and obstreperousness during the Obama administration, it is national politics writ large played out in the most important crucible of policymaking.

The cumulative effects of what Congress has enacted are substantial by any measure. Since the 1930s. as a result of legislative attention to hospital construction. biomedical re· search. medical manpower training. drug safety. public health. and workplace safety. as well as direct provision of public health insurance and tax subsidies for private coverage. Con- gress has constructed a fa r-reaching national health-policy domain with enormous financial consequences. Just in mon- etary terms. a comprehensive analysis of all federal expendi- tu res and tax benefits in 1999 estimated that federal dollars represent 40.8% of the nation's overall health care spending. Throw in state funding for the federally established Medicaid program and the total hits 47.3%.1

But for all of its engagement with hea lth policy. Capitol Hill has presented a nearly insurmountable hurdle for par- ticular kinds of pol icies . Except for leg1slat1on that cuts proiected spending for public programs like Med icare and Medicaid. Congress has consistently reiected proposals designed to contain health care costs systemwide. even when overall health care expenditures have increased at more than two or three times the overall rate of rnflat1on. far faster than economic growth . and well beyond the de- mographic pressures of an aging society. It forthrightly reiected. for example . President Carter's initiative for hos· p1tal cost containment. 2 Moreover. until the enactment of the Patient Protection and Affordable Care Act of 201 0 (generally referred to as the ACA). for nearly 65 years the legislative branch refused. time and again. all attempts to establish a system that moves toward universal health in· surance coverage. As every other advanced democracy in the world achieved. each rn its own way. the "interna- tional standard" that combines effective cost containment and universal coverage. Congress has reiected comparable efforts in the United States. 3 As we will see later 1n this

chapter. even the enactment of the ACA. with all of its substantive shortcomings. required extraordinary political circumstances.

How are we to understand these dynamics of the American leg1slat1ve process. with its emphasis on distributive policy- making . bursts of regulation. episodic focus on particular populations and const1tuenc1es. and enormous resistance to broad·scale strategies to d1mphne health care spending and provide universal insurance coverage? What does one need to know about Congress to explain this mix of act1v- 1sm. struggle. and denial. to ascertain "the logic of congres· s1onal action· and inaction in health policymaking?~ In this chapter. I describe the core features that define Congress as an mst1tut1on and as a collection of md1v1dual legislators. I also consider how unusual election results as well as changes 1n the structure of Congress alter the internal politics of law· ma mg. on occasion permitting dramatic pohcymakmg. With these fundamentals of the leg1slat1ve branch in hand, I turn to the issue that 1s often of paramount interest to students of heath poht1cs and pohcy. offenng a fairly detailed analysis of the repeated failures of comprehensive health care reform m the legislative arena and the sources of the relative success in 20 IO finally. I assess the nse of extreme partisanship and 1deolog1cal d1v1s1on in Congress and consider its 1mplicat1ons for the future of health policymaking

THE BA E CONGRESS One fact about Congress stand~ above all others : "Among the national legislatures of ma1or countries. Congress is the only one that still plays a powerful independent role in public po cymaking Only Congress 1nit1ates leg1slat1on. makes decisions on ma;or provisions. and says ' no· to executive pro· posals ·s Consider the stark difference between the United States and the United Kingdom. Three maJor empmcal studies rMal that Congress in the postwar penod adopted. typically only in part. 1ust 6 m IO presidential 1nit1at1ves. Some pres1· dents fared especially poorly-Gerald Ford and Jimmy Carter could get Capitol Hill to accept only about a third of their leg- islative agendas 6 In contrast, Bnt1sh Prime Minister Tony Blair was in offtce for more than eight years before the parliament defeated-for the first ttme-one of his maier legislative pro- posals 7 Congress no only frequently exercises its authonty to block or substantially alter m1t1at1ves from the executive. 1t often plays a cnt1cal leadership role in the formative stages of policymaking Pohcy ideas "proposed· by presidents often

CHAPTER 3 • Congre

begin as bills drafted much earlier by members of Congress.8

Based on his detailed h1stoncal analysis of 28 maier statutes enacted from 1947 to 1990. Charles 0. Jones determined that the impact of the legislature was "preponderant" for a quarter of the laws. and in more than half the cases Congress shared roughly equal influence with the president.9

What permits Congress to be so different from other na· t1onal legislatures and therefore of such unique consequence to health policymaking 1s the "separation of powers" and attendant checks and balances established by the US Const1· tut1on This system of independent legislative. executive and iud1cial branches of government each with a formal claim over some aspect of lawmaking and implementation-more accurately captured by Richard Neustadt's phrase. "sepa· rated 1nst1tut1ons sharing powers -ensures that Congress is a central player in national policymaking .'0 It also fosters dec1sion·making complexity by injecting multiple perspec· tives into the legislative process. Both the Constitution and institutional arrangements that developed later (through law. rules. and interpretation) make enacting statutes difficult. Successful legislation requires assembling a daunting series of l1ke·minded coalitions in numerous venues-committees and subcommittees within the House and Senate. while also garnering the support of the president (or sufficiently large maiorit1es in both the House and Senate to override a pres1dent1al veto). Just about everything engineered by the Constitution makes that tricky to do. such as the separate constituencies and election timetables for the president. the House. and the Senate.

Elaborating on the comparative context illustrates the point. Arend L1iphart identified two ·· ideal types" of demo· cratic constitutional design "majoritarian" and "consen· sus." 11 Majoritarian systems simplify the burdens of dem1on making by concentrating power in the hands of the leadership of the political party that won the most recent election. They dramatically limit the opportunities for independent action by legislatures Such systems have a prime minister as the sin· gle executive leader. The prime minister and the cabinet (to· gether forming "the government") are generally members of parliament. thus fusing the executive and leg1slat1ve author· ity. The legislature has only one body with policy-making power. In addition. only two parties compete meaningfully in elections and on issues that clearly differentiate the parties. In those elections. a legislative district is represented by the candidate who won a plurality of the vote. Lower-level gov- ernments are under the authority of the national government.

PART II • National Political Institutions

The constitution 1s unwritten. interpreted largely by the parlia- ment itself instead of an independent judicial branch of gov- ernment. Majority party members in parliament are expected to follow the lead of their prime minister and ca binet. New Zealand's political system fits this image nearly perfectly. 12

The United Kingdom and Canada come close to this model.

choices of the individuals elected to serve as representat1~ and senators One starting assumption is that members of Congress are "single-minded seekers of re-election •15 That proposition may be too analytically narrow and pol1t1ca ~ cynical. but even when members are primarily intent 00 wielding power or pursuing the public interest through gOOd public policy. reelection is the necessary predicate and thus an inescapable objective. 16 However. that goal creates differ. ent behavioral incentives in different systems. In many parfia. mentary systems. the political parties maintain close contro over the slates of legislative candidates not only determining who will run (or stand") for election and reelection but even what districts or constituencies they will represent. Electora success in such settings. therefore. hinges first on satisfying the party's needs. including supporting the expressed po cy

Alternatively. nations that comport with "consensus" arrangements have govern ing systems in which taking action requires the nurtu ring of pervasive agreement among myriad policy makers located in multiple institutional set- tings. Everything about these systems fragments power where majorita rian systems concentrate it. As a result. consensus systems invite any interest group with a la rge stake in any policy question to work the institutional crevices of dispersed policymaking in order to shape laws more to their liking or to "veto " provisions with which it disagrees.13 positions of the party once in office.

The United States possesses a number of majoritarian at- tributes (executive power concentrated in a single president. a two-party system. single-member legislative districts. and "first-past-the-post" plurality elections for Congress and the president). However. because of the separation of powers and the equal authority granted the two chambers of Con- gress. each with distinctive constituencies; federalism that protects the autonomy of the states (further reflected back in the Senate and tensions between the House and Senate); and a written constitution with the independent judiciary as the final interpreter. this system tilts heavily in the direction of the consensus model. In addition. the United States has few of t~e other ~~cial institutions-such as muscular political par- ties. a_ trad1t1on of a strong administrative state. and a widely or~anized_ a_nd i~fluential labor movement-that bridge insti- tutional d1v1des in other countries.14

Knowing that Congress matters more than most national legislatures as a policy-making body, and that legislating is a complicated endeavor. does not yet tell us how and why ~ongress a_cts_. or fails to act. in response to particular policy issues. For insights on these issues. we must first examine the role and orientation of legislators in the American context and the effects of specific features of Congress as an institution on legislative decision making.

The Legislator Congress is ultimately an aggregation of its members. even du~ing perio~s of heightened partisanship and intrapa rty unity. Its ac ti ons reflect the motivatio ns. preferences. and

Although there have been times in American history when the major political parties have played a significant role in candidate selection and promotion. congressional candidates and incumbents running for reelection are usually independ· ent agents who promote their individual pol1t1cal interests (including pressuring their party to adopt greater 1deolog1ca purity). In some instances. party figures ranging from loca leaders to the president try to entice particular individuals to seek election to Congress. with promises of support. but most candidates launch the race for office under their own volition . The party's nomination 1s determined by voters in primary elections. not the party·s leadership. In 1938. incum- bent conservative Southern Democrats who opposed Frank n D. Roosevelt's (FDR) New Deal easily won renomination and reelection despite the president's bold efforts to defeat them In 1990. GOP leaders were embarrassed when the white supremacist David Duke ran as the Republican challenger to incumbent Democratic Senator J Bennett Johnston in lou1s1ana The scores of winning WTea Party• candidates in the 20 I 0 midterm election. who helped engineer the new Re- p~blican ma1ority in the House. thrust themselves into the po- !1t1cal arena. In general elections. various party organizations inside and outside of Congress may provide some campaign funding_. media assistance. or campa ign v1s1ts by their partisan luminaries. such as the president or congressional leaders-a I now con:imon practices-but for the most part ma1or-part) congressional candidates reflect the1r own coalitions of voters. assemble the1r own electoral teams. hlfe the" own consult- ants. do their own polling, and craft thelf own themes attuned to their particular inclinations and const1tuenc1es. As a result.

both congressional campaigns and leg1slat1ve decision making are especially responsive to local considerations even when the campaign issues are of national consequence. Members of Congress must. at least m part. judge policy issues like educating health care professionals. funding Medicaid. and re structunng Medicare through the lens of their const1tuenc1es The late Thomas "Tip" O'Neill of Massachusetts. Democratic Speaker of the House lrom 1977 to 1987. famously endorsed the well·worn line that "all politics is local." 17 In more part1· san times. perhaps 1t 1s not all. but surely 1t remains a lot.

Congrc · ional Organization- Legi lathe Partie Pol.t1cal parties r 1g.'" are probably the single most important orgamza11onal feature of the legislature. In both the House and Senate. the party that wins the ma1onty or seats in the election chooses the leaders of the chamber who. in turn. determine which committees will be assigned bills and organ· 1ze Ooor dehberat1ons Committee and subcommittee chairs come from the ranks of the maJonty party. and they determine the schedule of the committee's work and hire most of its pro· fess1onal staff. Even dunng periods of weaker. less coherent legislative parties. party aH1liat1on 1s also the best single pre d1ctor or how members of the House and Senate will vote on pending rules and leg1slat1on.18

That. however. is where any apparent similarities between Congress and other national legislatures end. In many parlia mentary systems. the maJOnty party has to hang together or. in the extreme case. the government "falls" and new elec· t1ons are called In purely maJOrttarian systems. a govern· ment (pnme minister and cabinet) can almost always secure a leg1slat1ve victory, even lor the most sweeping and con· trovers1al leg1slat1on Congress. with few exceptions. could not be more d1frerent Because most members of Congress have their own independent constituent base. Democratic and Republican leaders olten have had trouble motivating mdMdual members to support the party's pos1t1ons. House and Senate leaders ol both parties understand the strong lo· cal ties They rarely try to compel members to comply with party pos1t1ons 11 1t would risk severe electoral damage. and few mavericks have been punished when they have broken ranks on even major party pnonties.19 The exceptions prove the rule After President Clinton and House party leaders pushed a number or moderate to conservative Democrats to join a party·hne vote for the president's budget plan in 1993.

and similar pressures were applied for the vote on the ACA in 20 IO. many or these accommodating representatives lost their seats 1n the next election and the maionty swung to the GOP. When a member's vote 1s essential for a success- ful outcome. 1t 1s the representative or senator who has the leverage in the negot1at1ons with party leaders. One or the more memorable examples 1s the so-called Cornhusker kick· back. when conservative Democratic senator Ben Nelson of Nebraska was promised a Med1ca1d exemption for his state as part of wooing his vital vote to break a Republican filibus· ter in 2009 on health care reform 20

From 1956 to 20 IO. for example. Democratic party unity on all such votes in the House ranged from a low or 58% 1n the early 1970s to a peak or 92% in the late 2000s (Republicans followed a similar pattern although they acted with more sus· tamed unity than Democrats from 1995 to 2003: the Senate also closely matches the House).21

Congressional Organization- Structural Characteristics Any legislature has structural design features-established by constitutional prov1s1ons. laws. or the rules of each chamber-that largely determine who in the legislature can s1gnif1cantly aHect lawmaking. Put bluntly. are inst1tu- t1onal power and resources concentrated in the hands or the maiority and its leadership. or are they more widely dispersed? With Congress. we start with the knowledge that authonty is const1tut1onally evenly divided between two coequal houses with very diHerent organizational characteristics. const1tuen· cies. electoral schedules. and incentives.

But we can go further One can imagine three possible "pure types· of organizational arrangements in each cham· ber. The first would be a "centralized" structure. with the majority party leadership in command or dem1on mak1ng- agendas. organization of the committees. staff resources. legislative markups. floor debates. and so on Given the pre- vious discussion it should not be surprising that the most centralized form 1s the Westminster-style parliament found in New Zealand or the United Kingdom When the ma1or- 1ty party leadership wishes to act. those in opposition do not have the 1nst1tut1onal assets needed to block the way. The second form or legislative organization would be a "decentral- ized" institution in which power and resources are distributed beyond the majority party·s leadership. For example. consid- erable authority 1s often granted to standing committees of

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PA RT II • National Political Institutions

jurisdiction. and thus their chairs (or the members) . which provide detailed review of all bills introduced in their areas of policy jurisdiction. The consequences are most pronounced when the policy preferences of a committee-the chair. the committee members. or both-differ measurably from the rest of the party members or the chamber as a whole. In this setting. committees might become veto points. unwill- ing to report out bills that would otherwise be agreeable to the whole chamber. Powerful committees might also be able to help move an initiative forward that the majority leader- ship may prefer to avoid. Other members of the chamber from both parties turn to the committee of jurisdiction for substan- tive policy cues and know that their future legislative interests in that particular policy area may be well served by supporting legislation favored by the committee. The final type of legisla- tive structure-"fragmented"-disperses power even further. In its most pronounced form, individual legislators are pro- vided with the kind of staff resources. institutional positions. and access to the bill-amending process that permits them to influence the course and substance of legislation . Work- ing coalitions are difficult to orchestrate and maintain when so many individuals have a claim on the legislative process. Such diffused power, however. also offers multiple legislative pathways to overcome the opposition of the leadership or a single committee.

What kind of structure best describes Congress ? As a complex institution, one finds attributes of all three types. but historically there have also been some clear central tenden- cies. which. in turn . have changed over time. Power m the Senate has almost always been more "fragmented"' than in the House. Individual senators possess more resources and larger staff. Senate majority leaders have remarked that try- ing to manage the chamber is like herding cats. 22 In addition . the opportunity to filibuster during floor debates-long ago forbidden in the House-grants each senator the potential capacity to bring the institution to a halt (a powerful bargain- ing tool). Especially for Republicans since the mid-2000s. the filibuster. along with other delaying tactics. also became a frequent. orchestrated tool to block the majority party from t aking action on both legislation and executive branch appointments (such efforts were used against only 6% of sig- nificant bills in the 1960s but rose to 70% in the 2007-2008 I I 0th Congress). 23

Since 1900 the House of Representatives has cycled through pronounced manifestations of all three forms of legisla· t ive organization. 24 Very early in the 20th century, there was

considerable centralization . The majority party leadersh p commanded the agenda and shaped legislative outcomes. Af- ter an earlier revolt against the leadership (in 1910). the mst- tution eventually evolved mto what the congressional hteratu':t sometimes calls the "textbook Congress" (roughly 1920to 1960). The work became decentralized. A limited numDeIG autonomous or sem1autonomous committees run by power£; chairmen-known as " barons'" or "whales" -dominated l'.t agenda and often thwarted leg1slat1on desired by the leade- ship. the majority. and the president of their own party. Map political shifts that culminated in the 1970s led to what was then referred to as the '" reform " Congress. liberal Democrats in particular wanted to get around conservative comm1ttet chairs who stood m the way of progressive legislation. Lad· mg the wherewithal for a frontal assault on the chairs. they instead pursued new rules that ended up fragmenting power by shifting authority and resources to innumerable subcom- mittees and ind1v1dual representatives . The 1980s witnessec the .. postreform .. Congress While much power remained frcg· mented. leaders took more control and committees (and their chairs). became less out of step from the House as a whole regaining their influence.2) The election of 1994 ushered in not only the first Republican House majority smce 1954 but also Speaker Newt Gingrich and leadership allies who implemented procedures that brought a return to a highly centralized House reminiscent of the early I 900s.26 This latest manifestation ol House structure helped set the stage for the enactment of both the Medicare Prescription Drug. Improvement. and Moa- ern1zation Act (also called the Medicare Modernization Act or MMA) of 2003 and the ACA of 2010

Organized Interests Present and Accounted For Congressional policy deliberations do not. of course. oc· cur in a vacuum. free of efforts at intervention by organized interests with stakes in the legislative outcomes. Although there is some controversy about whether or not parhamen· tary systems are more resistant to interest groups. there is no question that Congress 1s an open target for attempts at influ· ence. both directly through lobbying and indirectly using the tools of media. grassroots mobi11zat1on. and other methods to pique congressional constituents Act1vat1ng large mem· berships. leveraging skilled lobbying operations. fertilizing congressional access with hefty campaign contribut ons and sometimes financing sophisticated public-relations dnves. well-endowed interest groups-especially large, commerc1a

I I

interests-seek to gain entry to and shape the views of the wielders of congressional power. This meant targeting the committees for much of the 20th century.21 Indeed. health care policy in the United States has often been character- ized as the natural product of interest group polit1cs .2s The Amencan Medical Assoc1at1on (AMA) was the parad1gmat1c case of interest group influence for a long penod.

The rise of social movements in the 1960s and 1970s altered this picture. These gave birth to new organizations representing consumers. women. environmentalists. and oth ers dedicated to social change and competing with the older interests for the attention of policy makers. New "patrons of pohucal action: including foundations and wealthy in- dividuals. emerged to help these organizations acquire the resources they needed to organize and maintain themselves by overcoming the inherent difficulty of mobilizing large. dis- persed groups of ind1v1duals for collective action 29 The new mix of organized interests could at times make 1t more dif- ficult for the established interests to work as successfully with Congress. They opened up the policy-making process and broadened the agenda to include popular issues like environ- mental protection and occupational safety. Their act1v1t1es and successes also helped to prompt the counter mobilization of c1t1zen groups on the right. including the Tea Party organiza- tions that arose during the Obama presidency. and the adop- tion of grassroots techniquec: by commercial interests

The Legi lathe Con equence Put these pieces together-the near e f selection of locally embedded legislators who can act independently; parties in Congress generally unable and rarely willing to force the ad- herence and discipline or their members: leg1slat1ve power for a long penod concentrated in committees (and later dispersed even more widely), and the open access of the inst1tut1on to organized interests. especially those with strong constituency ties-and 1t is easy to ascertain what members of Congress cou d consider to be ·po1iucally attractive· pollcies.30 They create 1dent1f1able benefits that can be broadly allocated and traced back to the votes and actions of ind1v1dual legislators. who can happily claim credit for their enactment. If the law entails costs. they are designed to be widely diffused. w1th- ou• imposing s1gmf1cant burdens on targeted payers. In short. they are · d1stnbut1,_e· pohc1es that look a lot like Hill-Burton hospital construction and expansion. training of the health professions and development of their schools. and fund- ing for b1omed1cal research Proposed leg1slat1on that would

CH APTER 3 • Congre IN - yield obscure benefits sometime in the relatively distant future (e.g .. a less expensive health care system) or whose returns are not obvious for attentive citizens but would demand the bearing or substantial up-front costs by powerful interests. or a bill that would explicitly redistribute the tax dollars of politically engaged constituents. such as the insured. to the benefit or the politically withdrawn. such as the uninsured. are the most difficult to enact or retain It was this kind of characterization that led to the 1990 repeal of the Medicare Catastrophic Coverage Act of 1988. 3

Changing circumstances. however. have modified this "baseline" dynamic of the legislative process The rise of the enwonmental and consumers movements. for example , transformed the otherwise antagonistic politics of regulation by bringing competing organized interests to the leg1slat1ve arena. making the costs of inaction starker and clarifying the benefits or pollution control for the middle-class elector- ate.32 Elections have brought the most dramatic shifts that disrupted the underlying distributive dynamic of Congress . The election of 1932 not only put FDR in the White House but also brought huge new Democratic majorities to Con- gress that temporarily led to greater centralization or the House and a willingness to enact programs hke Social Secu· rity. The election of 1964 gave Lyndon B Johnson (LBJ) an unprecedented landslide and infused Congress with liberal Democrats who overwhelmed the House Ways and Means Committee. which had been blocking Medicare.33 In 1994. Republicans-under the leadership of Newt Gingrich- successfully nationalized the election , breaking the hold of the local 1mperat1ves 1n Congress Capturing both chambers of Congress in that election . the GOP enjoyed bicameral legislative majorities for the first time 1n two generations. unified their ranks. centralized House dem1on making , and passed leg1slat1on (only to be thwarted by President Clinton s veto) that would have privatized Medicare . block· granted Medicaid to the states. and carved out hundreds of billions or dollars in projected spending for these programs. which would have imposed substantial costs on benef1c1· aries and providers . 3~ The new and then enhanced Demo· crat1c majorities resulting from the 2006 and 2008 "wave" elections set the stage for passage of the ACA. while the historic reversal of the House Democrats 1n 20 I 0 permitted the Republican majority to pass a budget plan that would fundamentally transform the entire realm or federal domestic policy. including Medicare . Medicaid. medical research. and the implementation of the ACA

PART IJ • Nationa l Pol itical Institut ions

Elections also need not be so dramatic as to reconfigure the internal politics of Congress. After great battles lea~ to stalemate (and the appearance of failed legislative respo~s1~e­ ness to the public). the coming of the next election can incite both parties to reach agreement on lesser programs _that they deem to be sufficiently distant from partisan ideological cleav- ages. popular with voters. and providing benefits that incum- bents can bring home to their constituents. For example. the Health Insurance Portability and Accountability Act (HIPAA) of 1996 passed with bipartisan votes in the wake of_ health care reform's defeat. 35 Alternatively. the continued policy and electoral success of one party in a policy area may entice the other party to poach the issue. in the hope of eviscerating the original partisan advantage. Clinton and centrist Demo- crats tried that with welfare reform. President George W. Bush and the Republican Congress. in turn. exploited every institu- tional advantage of their majorities and centralized control of the House to enact their conservative version of the Medicare Modernization Act of 2003.36

COMPREHENSIVE HEALTH CARE REFORM: A WINDOW INTO CONGRESS The history of comprehensive health care reform reveals all of the elements of congressional policymaking presented in this chapter. from the legislative barriers to nondistributlve policy to the changing community of interest groups. from the role of partisanship to the potential effects of modifications 1n the institutional structure of legislative power.

We can begin by returning to the apparent puzzle of American health care policy. All industrial nations and many poorer developing ones endow their citizens with some form of universal health insurance coverage. The latter half of the 20th century brought the emergence of the near universal and reasonably consistent "international standard" of cover- age and financing for medical services. albeit using quite dif- ferent institutional arrangements across nations. 37 Even the Anglo countries with the most pronounced traditions of per- sonal responsibility-England. Canada. and Australia-have long recognized the degree to which ill health has to do with genetic and experiential bad luck and so provide universal care. The United States has been one startling exception. Despite repeated preside ntially led attempts beginning in the 1940s. until 20 Io Congress had killed every attempt at com- prehensive health care reform that had the goal or universal

coverage What about congressional dynamics made enact. ment so difficult for so long? What finally permitted action 0 the I I I th Congress7

Not Coming to Our Con en us The lack of some kind of insurance coverage for all Ame·r cans was not for want of general popular support. At least as reflected in opinion polls. substantia l public maiontes consistently affirmed that individuals ought to have cover- age for medical services regardless of their incomes and sooa standing Even in the context of the 2000 elections. wh1c produced the first conservative. unified Republican go\ern. ment in nearly a half century. 64% of the public agreed the: "it 1s the responsibility of the federal government to make sure all Americans have health care coverage." S1gn1f1car.; majorities-in the range of 70 to 90% for the last 20 years- have found fault with the existing arrangements for f1nanc ng and delivering health care and called. in some fashion . f01 major changes. Typically that support comes with the under· standing that government would have to play an 1mpor1am role Js But general support does not translate into endorse· ment of specific policies. something that reform opponents have long been able to exploit.

Though un iversal health care had strong advocates by the 191 Os. it was not until 1939. when New York Senato· Robert Wagner introduced a relatively modest. state·basec health care reform bill, that something resembling nat1ona health insurance formally entered the congressional arena That set the ball rolling. In 1943 Wagner was JOined by Sena· tor James Murray ( D-MT) and Representative John D nge (D-MI) to introduce the first bill to develop a national. com- prehensive. universal health insurance program. this one ~te to Som I Security (Dingel l's son replaced hrs father m 1955 and reintroduced the national health insurance b11l 1n evtri Congress since: he sat next to President Obama at the Slf ing of the ACA) . In the fall of 1945. shortly after he assu~ the presidency. Harry Truman seized the plan that had btef1 developed for the dying FDR and became the hrst sit: n$ president to propose a national. compulsory health 1nsuranct initiative He granted it a prominent place on his legLS a:Nf agenda throughout the late 1940s. Some 30 years later. po! ti· c1ans like Democratic Senator Ted Kennedy and Repub j(l' President Richard Nixon returned national health insurance:: the poht1cal agenda. By early 197 4. President Nixon offered a· expansive Comprehensive Health Insurance Program (CH P designed to use employer mandates and public co\erage 101

the working poor and unemployed to yield universal coverage. Nixon's plan, along with the competing Democratic plans. was the first health care reform proposal to engender serious congressional attention. President Jimmy Carter proposed uni· versal coverage m 1979 to be provided by competing private health care plans financed by both employers and govern· ment Although President Ronald Reagan avoided the issue, President George H W Bush offered modest leg1slat1ve over· tures to expand insurance coverage. a defensive posture stim· ulated by rapidly escalating calls for comprehensive health care reform and the 1ntroduct1on or ma1or proposals by both Democratic and Republican leaders in the House and Sen ate Bill Clinton went even further. campaigning m 1992 with heath care reform and universal coverage as a centerpiece of his platform He made his Health Security Act a lead feature on his subsequent pres1dent1al agenda The issue then ani· mated the compet1t1on among John Edwards. Hillary Clinton. and Barack Obama to be nominated by the Democratic Party for president m 2008 . once elected. President Obama made 1t a centerpiece of his opening agenda after passage of the Amencan Recovery and Reinvestment Act (the stimulus bill)

The most remarkable attribute of this litany of attention to the issue of health care reform. from Wagner's first bill 1n 1939 to Chnton's proposed Health Security Act in 1994. was that not a single health care reform initiative came to a vote on the floor of either chamber of the US Congress. They were all deflected by wanton congressional inaction The first for· mal health care reform floor debate . held in the Senate, did not even ensue until the 103rd Congress and the presentation of Clinton's plan Then. during 2009-20 I 0. House and Senate committees marked up and reported out reform leg1slat1on. each chamber debated 1t at length, and ultimately Congress enacted, and the president signed. the Patient Protection and Affordable Care Act Why was 1t that Congress had proven so incapable. or so unw1lhng. to JOIO the international standard or universal coverage? Sven Steinmo and Jon Watts. students of cross-national poht1cs and social policymaking. offered a simple answer · 1rs the Institutions. Stup1d1 · 39 first written before the failure of Clinton's health care reform effort. their article. subtitled · why Comprehensive National Health Insur· ance Always Fails in America ." argued that the architecture of American governing arrangements . especially Congress and its relat1onsh1p with other mst1tut1ons as described ear· her. made and would always make 1t 1mposs1ble to enact such sweeping reform How. then . do we explain. in that mst1tu· t1onal setting, what finally transpired 1n 20 IO. even in the face

CHAPT ER 3 • Congress ifi

of policy complexity. enormous controversy. deep ideological divisions. and intense partisan rancor?

However profound and sustained the differences noted ear· her between the governing structures of the United States and the other industrial nations. American institutional arrange· ments. including 1n Congress. and health care politics have 1n reality vaned considerably over time They took on a h1stori· cally unique configuration in the first two years of the Obama administration. dramatically altering the prospects or reform.

Barriers to Coalition Building in Congress My earlier d1scuss1on of shifts from the congressional baseline noted that new opportunities emerge m the legislative set· ting when a changed context boosts the potential for pull· ing together winning coalitions Let us here return to three dimensions important for defining the congressional setting at any given time I will call them "party" (the percentage or seats held by the pol1t1cal party that generally favors the policy change). "cohesion·· (the level of unity or agreement among the members of that party). and "structural coherence" (the degree to which the legislature's dec1sion·makmg authority 1s concentrated rather than dispersed and thus can be coord1· nated by the maiority party)

When examining an issue like health care reform. we would like to know what proportion or a leg1slat1ve chamber's mem · bership has a pred1spos1t1on to support a general course of action. such as assuring universal coverage. That informa· t1on 1s not available. especially over an extended number of years. On many issues. though. including health care reform. a reasonable surrogate 1s the relative stature or the political party most likely to endorse such a policy approach . Although through the years many Republicans 1n Congress have worked earnestly for health care reforms (the late Senator John Charee of Rhode Island comes to mind) , the most ardent advocates of universal coverage have consistently been Democrats. and they have been a fairly numerous bunch . Between 1933 and 20 IO (during which the health care reform debates tran· spired). Democrats held maiorities in the House of Repre· sentat1ves 80% of the time (all but 1947-1948. 1953-1954. and 1995-2005) and in the Senate for 75% or the time (all but 1947-1948. 1953-1954 1981-1986. 1995-2000. 2003- 2006) Sometimes those majorities were stunning in their size Dunng FDR s Second New Deal. Johnson's Great Society, and Jimmy Carters first two years. Democrats contra 1ed 77.

PART Il • National Political Institutions

68. and 67% of the House. respectively, and roughly the same proportions of the Senate. When in the majority since 1932, Democrats have held on average of close to 6 in I 0 House and Senate seats. These are healthy margins. and with major- ity control the Democrats have held the House speakership. leadership positions. considerable leverage over the floor agenda. the chairs of all committees and subcommittees. as well as the bulk of the staff and other legislative resources. Since the 1930s universal coverage should have had a leg up in Congress. In a parliamentary setting. with these numbers. it would have been enacted long ago.

However, the second dimension of relevance to coalition building. cohesion, draws attention to how limited the utility of party majorities ca n be in the American context. Continue with political party as a proxy for the potential coalition base. A deeply divided party. even if nominally in the majority, will not be able to deliver reliable votes for significant policy initia- tives like health care reform. Recall that for both Democrats and Republicans unity has never been universal. and it sank quite low in the 1970s.

The evidence from 1955 to 1994. during which Democrats enjoyed generations of continuous control of the Hou se of Representatives. illustrates the potential problem of achieving what might be considered a reliable majority (one that would be of sufficient size and unity to produce. on average. an ex- pected majority vote in favor of the party's policy approaches when presented on the floor). If one multiplies the number of seats controlled by the Democrats (the starting base in the calculation) by the mean percentage of Democrats who voted with their party on party unity votes (a measure of how likely it was at that time for individual Democratic members to vote with their party), in only 18 out of the 40 years does the result-let us call them "solid " votes-produce a slim expected reliable majority. For only 5 of those 18 years was a Democrat in the White House (thus a chief executive who would have endorsed Democratic health care reform efforts): Kennedy's third year. the 89th Congress during Johnson's Great Society. and President Bill Clinton's first two years. Comprehensive reform was pursued by neither Kennedy nor Johnson-for reasons that have never been well explored. Johnson secured passage of Medicare and Medicaid when the combined size and unity of the Democratic majority in the House was at its postwar zenith but chose not to offer a more expansive health reform age nda.40 On ly Cl inton attempted health care reform when Democrats had something re sem bling a sol id majority

in the House. but here emerges the first significant advantagt enjoyed by Barack Obama By this kind of calculation, so Democratic votes under Clinton numbered about 219 (218 constitute a maJonty). while for Obama the figure rose to afai more comfortable 231

The s1tuat1on in the Senate has been even more prob- lematic for reform Because of the filibuster. which allows any individual senator or a small group of senators to bod floor action by conducting endless debate. legislation ca· be thwarted unless a supermaJority of 60 votes 1s ava able to enforce cloture on debate (pnor to 1974. cloture oc a filibuster required the votes of two -thirds of the senators present). Even during LBJ's heyday in the 89th Congress. t·.e combined Democratic seats and unity produced sohd ~ that nudged only a bare majority in the Senate. well short of a susta ined coalition that would be needed in the fm OI serious opposition on the floor During the debate over Clinton's reform effort. the Democrats did not even ha'lt enough senators. at I 00% unity to end a filibuster. In L".e period since Truman became the first president to push con: prehensive health care reform. 1t was only during the Oba,,.~ adm1nistrat1on-briefly-that Democrats could overcome! filibuster. if they all stuck together That edge was suffirn! to enact. in December 2009. the Senate version of health m reform on the road to the ACA 4

The historical challenge to health care reformers becomes even more complicated-and daunting-when we mt·o- duce the third dimension of coaht1on building· the structim coherence of the legislature itself. Consider the features asso- ciated with centralization decentralization. and fragmentaoo' that I noted earlier in this chapter. Using extensive emp ·ia: measures of the inst1tut1onal attributes of spec1f1c relevancetJ legislating in the realm of health care reform . I developed md ces to represent the presence of factors associated with cer. tralizat1on decentralization and fragmentation in the HoB of Representatives and Senate from 1909 to 2000. wh er later replicated for 2009-20 I o.~2 The House of Truman's d; for example. ranked low in centralization and fragmenta!JO' but high on the second dimension, decentralization-th• 1s. the committees and their chairs wielded significant po'>\~ In Truman's time. the committees that had 1unsd1ct1on o~ health care reform legislation were more conservatM tha~ t• House as a whole. and their chairs vehemently opposed L~ president's national health insurance plan. Veto they coc d and veto they did.

Fast forward to Carter's administration and one discov- ers a fundamentally changed legislative institution . The Democratic majority m the House was much larger but also much more d1v1ded within itself. The power of the commit- tee chairs (decentralization) had been diminished by rule changes that led to widespread fragmentation . Every com rn1ttee was required to have subcommittees or jurisd1ct1on with their own staff resources and agenda control. and every subcommittee throughout the chamber was chaired by a different member of the House Democratic maiority. Rank- and-hie members also had more staff and increased influ· ence (the House came to look a lot more like the Senate. the always more fragmented inst1tut1on) .'° Although the consid· erable 1deolog1cal overlap at the time between the ranks of Democrats and Republicans could have fostered an oppor· tumty for b1part1sansh1p. the Carter years (and Nixon's iust before) did not offer an opportune institutional context for putting together a coalition on an issue as significant. com· phcated. and threatening to so many stakeholders as health care reform and universal coverage.

The Congresses during which Bill Clinton ran for president and took office. however. showed more promising signs for reformers 44 Many features of fragmentation remained . How ever. the committees of 1urisd1ct1on-by then all with chairs act111tly supportive of reform and members more liberal than the House as a whole-had regained some of their influence (the decentrahzat1on index was higher). and there were more rules that enhanced the influence of the Speaker to coordi- nate the leg1slat1ve process. 1f he chose to use them. Although there were still plenty or mst1tut1onal barriers to policymak· mg. including the underlying fragmentation of authority in the Senate. the I 03rd Congress of 1993-1994 probably of· fered up to that time the most advantageous set or leg1slat1ve mstrtut1onal arrangements for a health care reform-minded president But once again. the leg1slat1ve context for Obama and the Democrats was even better. Nancy Pelosi as the Dem· ocrat1c Speaker inherited the considerably more centralized House engineered by Gmgnch in 1995 and left relatively intact by his successors and subsequent Republican maionties. The House committee chairs were equally dedicated to health care reform as m 1993-1994 and were even more willing than their predecessors to coordinate their committee work with one an· other under the Speaker's guidance. The situation in the Sen· ate was roughly the same as in the Clinton period. but with the add1t1on of a Finance Committee chair more committed

CHAPTER 3 • Congress @pi

to health care reform and the momentary benefit of a 60-seat Democratic maionty.4S

Congress in the Web of Interests For much or the 20th century. the politics or health care re- form seemed to be a classic example of the power or organ· ized interests with strong stakes m the status quo. The AMA in particular possessed all of the instruments of interest group influence 1n Congress. including an enormous membership residing in every leg1slat1ve district. unity of purpose and the authority to speak for its membership. unrivaled expertise and cred1b11ity on the issues. and vast organizational and finan· cial resources to lobby legislators and support candidates for office Under its leadership. physicians. hospitals. insurers . and employers are thought to have channeled their way into the open congressional arena. striving effectively to preserve their own interests and fend off health care reform and um· versal coverage.46 For a long time . that imagery was consist· ent with the observable patterns of policymaking on issues both small and large. 47 When Roosevelt contemplated health care coverage next to Social Security and Truman proposed national health insurance. the AMA led a powerful antireform alliance that included medicine. insurance. and business It dominated the interest group scene and overwhelmed what we might term the stake challengers. mainly labor unions who endorsed national health insurance For the most part. in the decentralized Congress of that era. this antireform al· hance found ready partners among the chairs and members or the committees or JUrisdict1on As presidents for the first time were moving universal coverage to their program agen· das. reform did not stand a chance m Congress . Anticipating the result. FDR pulled back from even launching an in1t1at1ve. and Truman's proposal could garner no more than a single. brief committee hearing 48

By the time that Richard Nixon and Jimmy Carter were engaged in their own health care reform efforts . the inter· est group world had begun to change. Their administrations came at the time of the 1mmed1ate wake of the social move- ments of the 1960s and 1970s. Many or the new citizen organizations born at the time would eventually join with or· ganized labor in challenging the health care industry interests and promoting universal coverage 49 However. the ant1reform alliance remained unified in its opposition to such large-scale government intervention. Although the reform debates of the 1970s remained largely "inside-the-beltway" contests.

PA RT II • National Political I nstitutions

reformers faced significant challenges due to the idiosyncratic features of presidential politics at the time (e.g .. the ramifi- cations of Nixon's Watergate scandal). the general div1s1ons among congressional Democrats. and the chaotic setting of the increasingly fragmented House and Senate. Congress. though. did more than hold brief perfunctory committee hearings-considerable committee attention was devoted to the issue. One possible compromise on health care reform even eme rged and might have passed. so More on that story

in a moment. Between Jimmy Carter's return home to Plains. Georgia. in

1981 and Bill Clinton's bus trip from Jefferson's Monticello to his inauguration in 1993, a metamorphosis took place in the community of organized interests focused on health care re- form. More than a decade of sharply rising health care costs. partial cost control initiatives implemented by government and business. huge disparities in coverage provided by large and small employers. and increased medical specialization splintered the old antireform alliance. The divisions emerged both across and within the domains of medicine. insurance. and business. In the meantime. more citizen groups arrived on the scene. Most were sympathetic to universal coverage but some. such as the Christian Coalition, reflected a conserva - tive counter mobilization against greater government taxation and economic regulation. 5 1 Ironically. the two leading antago- nists in the health ca re reform wars of the past-the AMA and organized labor-had both diminished considerably in strength. Instead of including nearly all practicing phys1c1ans. as in the past. the AMA's membership had slipped to JUSt 4 in I 0 physicians by the early 1990s. labor's ranks had declined from representing better than a third of the labor force at their 1950s zenith to just under I 5%.s2 By the late 1980s. these "peak associations" that once spoke for whole sectors of the economy had become "just another interest group .. or ''just one more P~C." 53 The AMA. for all intents and purposes. dropped entirely from t he relevant set of organized interests on health care reform. labor remained a player but became weakened on this issue by its shrunken base and its commit- ment to em ployer-based insurance.S4

On both sides of th e reform debate new orga nizational leaders wou ld emerge. The National Federation of Independ- ent Bus1n.ess (N FIB), the hard- right point organization for small business: the Health Insurance Association of America (HIAA). the trade association for co mmercial i nsurers· and the Pharmaceutical Research and Manufacturing Associ~tion

(PhRMA). representing the drug companies. took up l"e charge against government -led reform. On the other S"• the AARP (formerly the American Association of Retired?; sons). Fam1l1es USA. and C1t1zen Action-all either rela recently founded or newly rev1tal1zed groups-pr0V1ded rrl(J(!J of the organizational wherewithal and grassroots mob IZ« t1on for the proreform forces .ss The interest group dynamKS~ the early 1990s. and thus the Congress of that time, olfered new opportunities for each side of the health care reform de· bate. Clinton was presented with a potenttally more favorable arena of group politics than any previous president in sea d: of assembling a winning coalition on health care reform. rf ttt organizational proponents of reform could be unified and mc- b1l1zed. Although it constrained the types of pohcy optioo Obama could employ. compared to Clinton he had the ac dit1onal political advantage that a number of the mainru of the earlier antireform alliances-the AMA, commema surers. and the pharmaceutical industry-were wilhng to Pl1 their considerable collective leverage behind a major govern ment role 1n coverage expansions. 1f the approach taken pro- tected their interests.st•

Presidents in the Legi lathe Arena The leg1slat1ve dictum of the modern era 1s that the presider.: proposes and Congress disposes. Like most maxims. that one is too s1mphst1c Even with the postwar enlargement of tne presidency's aura in all matters of policy, foreign and domes· tic . Congress has continued to be the source of much egsla- t1ve energy and policy innovat1on .s7 Nonetheless. 1t \IJOU a be difficult to env1s1on the enactment of a reform as expansm as universal health care coverage without the collabora!JO indeed the leadership. of the chief executrve.sa The only· mes that health care reform has been seriously on the agenda rr- gardless of the trends in the ranks of the uninsured or tt.t costs of the health care system. has been when pres aer.ts have initiated formal proposals. That 1s not to say that tne• involvement has always been purely voluntary. Both Richard Nixon . with his comprehensive plan tentatively earned for· :-vard by Gerald Ford. and George H. W . Bush. with h1smort incre~ental approach . were responding to the Democrats potential advantage on this issue. Many presidents. of courst hav~ also used their influence to thwart any reform 1mpuses by simply ignoring the issue Still if one wants to assess I.host moments when something substantive about reform was the air. one has to look to the actions of particular pres dents

-

= Three possible congressional strategies have been available

for presidents interested m health care reform: combat. collab- orat on. and co-optation And all three have been trred. Per haps befitting his personali ty. and clearly lrnked to the context in which he served. Harry Truman chose combat Hts plan for compulsory national health insurance, publicly financed and lr nked to Social Securrty. was 1mt1ally favorably received by the publrc but ran entirely counter to the constellation or organized interests and the preferences of members or Con. gress who dommated the committees that dealt with health care leg1slat1on . especially (but not only) during the Repub- lican Congress of 1947- 1948 This was no effort to engage the su eholder interests or skeptics in Congress He sought to · give 'em hell ," to attack the "do nothing Republican Congress: and to mob1hze publrc opinion (although far too casually to be err ct1ve) No matter what he might have tried. however an rnst1tut1onal analysis reveals that no strategy was available that could break the congressional lock against health care reform Defeat was ensured by the partnership of the antireform interest group allrance's policy monopoly with the relevant committee chairs and members m Congress who were antagonisuc to maior government intervention m health care financing

A second strategy 1s collaboration. To a large extent. that was the theme or the 1970s. befitting a period or 1deolog1cally heterogeneous parties m Congress and institutional fragmen- tation that lrm1ted the control or the maiority party. An ag gressive strategy dependent on a single party clearly was not gong to wor · for Republican Richard Nixon. who was serving dunng a period of divided government. nor would 1t succeed for Democrat Jimmy Carter given the general d1v1s1ons among Democrats at the time of fairly weak instruments or party leadersh p Both Nixon and Carter instead sought to build universal coverage on the ex1st1ng system of employer· sponsored insurance. filling in the gaps with a publrcly fi- nanced program Private insurers would not be put out of bus ness but rather would be given increased business. and employers (along with labor) would continue to have a pri- mary role m offering coverage By collaborating with both stakeholders and oppos1t1on party members or Congress. each president envisioned a grand compromise.

A collaborative. b1part1san process might have had a chance In August 1974. Congress was possibly very close to enactmg universal coverage predicated on employer man· dates and lrm1ted public financing . A compromise appeared

CH APTER 3 • Congress iii

to be in motion among President Richard Nixon (later Gerald Ford). Senator Ted Kennedy (who had earlier advo· cated full public funding). Senator Russell Long (the fairly conservative Democratic chair or the Senate Finance Com· m1ttee). and Wilbur Mills (the conservative Democratic chair of the House Ways and Means Committee) who was always seekmg ways to control the agenda on his terms. Losing some Southern Democrats but picking up a few Republrcans. as well as holding onto all or the liberal Democrats on the Com· m1ttee, Mills came within a vote or two or reporting out a bill that would have given universal coverage some momen · tum .59 One can only speculate whether such a bill sent to the floor on a deeply split vote would have survived in the full House and then the Senate Several Democrats. for ex· ample, were anticipating massive Democratic gains m the fall 1974 midterm elections followmg Nixon's res1gnat1on . Many were further convinced that 1976 would bnng the election or a Democratic president committed to more expansive health care reform . They might have thwarted Mills' efforts m prepa - ration for an ant1c1pated better package in the future .60 In any case. two clear results stand out from the collaborative efforts of the m1d· I 970s First. congressional committees (including Senate Finance) marked up pertment legislation for the first time in history. suggesting that some version or reform had emerged into the realm or the possible. But. second. universal coverage died again-failing to make 1t out of committee- and kept from the floor or either chamber.

The substantive and institutional politics or health care reform shifted dramatically after the 1980s and opened up a new era or opportunity for enacting comprehensive health care reform. perhaps indicating the utility or a new strategic approach. Both Bill Clinton and Barack Obama entered office with better prospects than their predecessors on the issue. al· though Obama gained the most leverage between the two. both in terms or the larger setting and the electoral m1cropolr · tics at the start of their respective admm1strat1ons .

In the early 1990s. the indicators of problems 1n the health care system were more pronounced than ever before. The overall performance or the system declrned even further by the time Obama entered office. elevating the stakes of a polrcy stalemate. Health care costs continued to escalate rapidly. For the first time the United States became an un· mistakable outlier. spending far more than any other nation on health care per capita and as a percent or the gross do· mest1c product. The impact was pronounced on government.

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PART JI • Nationa l Political Institutions

52 seats in the House and 13 in the Senate in 2006 and 2008. If we think in terms of "critical Junctures·· in politics- which I will define as the president winning a clear maionty of the popular vote and sweeping the Electoral College vote the president's party holding close to or more than 60% of the seats in both the House and Senate. and that party picking up at least 20 seats in the House and 5 in the Senate in the previ- ous two elections-only three presidents since the inst1tut1on of popular voting for the Senate have met that bar Franklin Roosevelt. Lyndon Johnson. and Barack Obama Obama 1s the only one of those three to tackle health care reform. and Clinton missed on three of the criteria Finally Clinton began his term with 58% public approval. while Obama·s was at a near historic high of 68%.63

The overall differences in the 1nstltut1onal and political con- text between the two adm1rnstratlons were not determinative- Clinton could perhaps have acted differently and succeeded. and 1t takes little imagination to env1s1on that Obama could have lost-but Obama entered the leg1slat1ve fray on health care reform better positioned than any previous president. m· eluding Clinton . Obama. in the end. also made more effective strategic and tactical choices in the legislative setting.

employers. and the public alike. In addition. commencing around the mid- I 980s. the percentage of people with health insurance coverage started to shrink. reversing the advances of decades of steady broadening of employer-based insurance and the enormous coverage gains achieved by Medicare and Medicaid. Between the Clinton and Obama presidencies yet more millions of Americans joi ned the ranks of the uninsured. and employer-sponsored coverage for those with insurance became less secure. The newly emerging measures of qual- ity in health care also told a story of widespread shortcom- ings. In another first, the AMA was hardly relevant as a health care power any longer. and to the extent it was involved in the debate. it even endorsed universal coverage. And because of splits in the former antireform alliance. the interest group politics of health care reform were up for grabs. As I noted earlier in this chapter. too. Clinton could work with a Con- gress in which the size of the Democratic majorities and the general unity within them offered an unusual. albeit narrow. window of opportunity. The congressional party foundation was even stronger for Obama. The institutional character of the House afforded coalition-building advantages for Clinton not found in previous periods. Further institutional evolution toward centralization in the House brought even greater lev- erage for Obama and Democratic leaders. Taken together. by 1993 almost all the participants in health care reform politics and policymaking. even the stakeholders vehemently opposed to the idea. had concluded that some version of reform would soon be enacted. After the failure of Clinton's plan despite those initial expectations. about 25 years later a sense of in- evitable change materialized again.61

In response to the political environment each faced-with more reliable Democratic legislative ma1ont1es . supportive com· mittees. and more tools in the hands of the House leaders- both Clinton and Obama could have chosen to return to the combative stance of Truman . relying on reinvigorated uni· fied government to des ign and push through their reform initiatives. But the razor-slim reliable House majority of the Clinton era. the ongoing inst1tut1onal barriers to action such as the Senate filibuster. and all of the remaining opportuni- ties for members of Congress to delay or thwart legislative ac· tion. 1f they chose to do so. made that a steep hill to climb The challenge was accentuated when previous Democratic party-based plans fed Republican rhetoric about Democrats as the "tax-and-spend" party. At the same time. the repeated b1part1san collaborative efforts of Nixon . Carter as well as the Pepper Comm1ss1on and the bipartisan collective negotia· t1ons among members of the Senate Finance and Labor and Human Resources Committees around 1990. failed to bear any fruit. So instead of adopting the "single-payer" or Medi· care for All" approach favored by the Democratic base. the "play-or-pay" scheme of robust employer mandates and public financing advanced by the House and Senate Democratic lead· ersh1p in the early 1990s. or attempting once again an explicit

Any resemblance between Clinton and Obama ends. however. when one considers their electoral political capital as they launched their reform initiatives. further accentuat- ing the more favorable institutional ci rcumstances presented to the Obama administration. 62 In 1992 Clinton. in a three- way race for the presidency. could muster only 43% of the popular vote. the smallest vote share for a winning presi- dent since the election of 1912. Obama garnered 52 .9% of the popular vote in 2008, the largest first-election result for a Democrat since FDR in 1932 and higher than any previ- ous chief executive who sought to enact health care reform. When Clinton assumed the presidency, the Democrats had lost two seats in the House and added just one in the Senate as a result of the 1990 and 1992 congressional elections. In the lead up to Obama's presidency, the Democrats had gamed

bipartisan collaboration, Clinton and Obama each landed on an 1mt1al strategy Of CO·Optation, but 1n very different forms. 64

Clinton's approach. reflected an the managed competi- t on under a budget· rubnc or the Health Security Act. was intended to co-opt the left and right simultaneously and along the way capture the voters. interest groups. and centnst mem- bers or Congress Liberals would be energized by his commit- ment to universal coverage, achieved through a combination or employer mandates and an expanded public program that replaced Med1ca1d for the poor and unemployed, the cost- control d1sc1phne ensured by imposing a form or budget on heal:h care expenditures backed up by insurance premium caps. and the standard1zat1on of basic coverage for people regardless or their SOCIO conom1c standing. Conservatives would resonate with the ·private: market-oriented features or the in1tiattve-the primary use or private insurance earners. the role or compet1t1on among insurance plans participating 1n "health alliances· to discipline costs and give people. as consumers. choices over insurance products. and the move- ment or Med1ca1d benehc1anes into private insurance.6s Other provisions and subs1d1es would m1t1gate concerns about the employer mandate·s impact on small businesses. With the left and nght ioined. health provider organizations. maior main- stream business groups, insurance earners. and other moder- ate stakeholders would enlist rn the coalition and bring along both Democrats and Republicans in Congress.

To avoid the pitfalls or the previously futile bipartisan efforts. however. the process toward enacting leg1slat1on wou d follow the pattern Charles Jones descnbes as "copar- tisansh1p "66 Clinton. with his secretive White House task force led by his wrfe. Hillary. working in concert with only the congressional Democrats (many or their senior staff par- ticipated on the task force). would 1rnt1ally craft the presi- dents \'ers1on of health care reform: the Republicans would pursue their own Then-each plan falling somewhere in the general domain of managed compet1t1on among pnvate heath insurance plans-a f mal compromise could be struck with b1part1san support that was more expensive and regu- latory than Republicans favored and launched more slowly and with greater vanab1hty m insurance arrangements than Democrats preferred

That was the pro1ect1on But the process of formulating the Health Security Act took more than a year. delaying the full debate until the onset of the midterm election season By then, too. Clinton had lost political allies and capital due

to his budget. the figh t over the North American Free Trade Agreement (NAFTA). and foreign policy setbacks. In the end. no one liked the policy approach taken in the plan-it was an abstraction not ever seen before in practice-including many of the reform-oriented Democrats in Congress. The plan. too. was a bust in the interest group community The president initially had the opportunity to build a new and influential proreform alliance to take on the weakened antag- onists among stakeholder interests. The holdup in introduc· ing the initiative gave the oppos1t1on time to come together. Even more importantly. the architecture of the Health Secu· nty Act left reform advocates confused and d1spinted Mike Lux. the White House liaison to health care interest groups. wrote 1n a May 3. 1993. confidential memorandum to Hillary Clinton. Tm beginning to grow a little concerned that . . we may end up with a reform package that excites no one except our oppos1t1on-in other words. we could end up with a bill that generates intense opposition from several powerful special interests. but only lukewarm support from the people we've counted on to be our base.''67 In a survey I conducted or health care interest groups (N = 120) after the end or the reform debate. the results are exactly as Lux pre· dieted Among groups that held positions and had resources that made them likely allies of Republican opponents to re form. almost 60% actively fought to defeat the Health Secu nty Act. Among those organized interests that should have been targeted by Democrats and been fully mobilized advo· cates or reform. only about one-quarter endorsed the presi· dent's plan. Another quarter favored it but did not formally lend their endorsement. The other one half of these groups remained neutral (they liked some features of the plan but firmly opposed others. thus preventing them from becoming active members or a coalition favorable to reform) These in· terest group results. I believe. closely parallel the reactions of both the public and members of Congress.f>S

Despite full engagement by several House and Senate com· mittees. intense ongoing negotiations over alternatives and possible compromises. and even formal debate in the Senate chamber. universal coverage died once again without a single vote being taken on the floor of either the House or Senate. It is impossible to know whether Clinton could have pre· vailed taking a different tack legislatively but in comparison to Truman. Nixon and Carter. he arguably worked in the most favorable circumstances for health care reform in the 20th century and suffered the worst kind or policy defeat.69

Instead of designing an abstract policy and then striving to orient practical pol itics around it. as did Clinton. Obama embraced a strategy of cooption that started with accepting the political lay of the land and then overseeing a process ~hat built an eclectic policy bundle to match it. 70 Although m a debate during the nomination process he admitted to a con- ceptual preference for the single-payer model if one were con- structing the health care system from scratch. he rejected it as unviable and refused to follow the clamoring of many Demo- crats that he lead a partisan challenge to the Republicans in the guise of FDR or Truman. Obama strove to assemble a coa- lition that congressional Republicans would join because they would recognize the pieces he appropriated from past GOP initiatives. The law that Republicans would later denigrate as "Obamacare" could be fairly described as the most Repub- lican health care reform plan ever presented by a president. including Richard Nixon's. The relatively modest employer mandate had origins in Nixon's CHIP. The individual man- date had roots in ideas from the conservative Heritage Foun- dation . the Dole-Chafee Republican Senate bill in the early 1990s, and Republican governor Mitt Romney's plan enacted in Massachusetts. The insurance exchanges also harked back to Romney's initiative and have somewhat the character of the approach used in the Federal Employees Health Benefits program. also endorsed in the past by conservative health policy specialists as a model of reform. Permitting competition among insurance plans across state lines followed from other Republican proposals. 71 The congressional Republicans in the

fill m the details and craft the actual legislation. This kind of "decentralized " approach to pres1dent1ally led lawmaking can threaten the coherence of the plan and risks burdening it with extraneous provisions. which happened m the case of the ACA . but it elevates substantially the probabtltty of fi- nal enactment by Congress. 72 Second. unlike Clinton's more distanced and often antagonistic engagements with provid- ers. insurers. and pharmaceuticals. Obama brought them into direct negot1at1ons with the White House. That. too. had its policy costs-especially from the perspective of liberal Demo- crats in Congress. who believed that commercial interests gamed excessive protections m the ACA for too little return- but 1t completely altered the interest group dynamics that had proven so problematic for Clinton. Influential and nominal~ "Republican" interests were now either on the president's side or neutralized . 73

In the last stages of the process . m the face of intense Republican dissent in Congress and conservative mobiliza- tion around the country. Obama made at least two essential tactical legislative moves. One was to avoid Clinton's mis· take of letting the process draw out so long that. with the opposition hammering away. public support would collapse He helped push House and Senate enactment of reform bills roughly at the commensurate time in the congressional cal- endar that Clinton's Health Security Act was finally just be- ing in troduced. The public remained evenly divided when the ACA became law. but support remained higher than when Clinton's plan was moving through Congress. The other was to hold firm to his policy ob1ect1ves following the death of Ted Kennedy. the decades-long leader among Democrats of health care reform m the Senate. and his replacement by Republican Scott Brown. ending the Democrats' capacity to overcome filibusters Going against advtce to shift to an incre· mental policy approach and take what he could get in areas of congressional consensus-which could also have been a lesson learned from the 1990s experience. when Clinton did not narrow his focus and lost everything-Obama chose to follow Speaker Pelos1·s recommendation to press ahead with comprehensive reform. Compared to the Clinton years. the larger reliable Democratic ma1orities 1n Congress (includmg the initial 60-seat ma1ority m the Senate). the greater sup· port and coordination of the committees of 1urisdict1on. the enhanced centralization of authority in the House. the more favorable coalition alignment of organized interests. Obama·s more robust electoral political capital. as well as the strategic

I 11th Congress. however. had shifted well to the right of their predecessors. and only one was willing to support the ACA as it was presented in either the House or Senate. However. these elements. among others. were probably essential to se- curing the votes of the remaining moderate to conservative Democrats. which were essential to legislative success-all 60 Democrats were needed to get a version of the health care re- form bill out of the Senate, and the final House version passed by a slim majority. 2 19-2 12, with 34 Democrats casting votes against it.

Within the co-optation framework and drawing lessons from the experience of the Clinton admin istration. Obama made two additional strategic choices that directly countered the approach taken by Clinton. First. rather than drafting a detailed plan in the White House. Obama set broad param- eters and then left it to the Democratic leadership in Con- gress. working with the comm ittee chairs and members. to

dec1s1ons he made (informed. to be sure. by the Clinton re- form episode). explain the difference between the past. in wt11ch Congress was always the graveyard of reform, killing it even before being subject to full debate and floor votes. and the 2010 enactment or t'ie N"A 7"

HEA LTH POLICY I A IDEOLOGI ALLY RIVEN PA RTISA CO GRESS Starting many decades ago a nurr.ber or pol1t1cal sc1en- l sts have called for a system of Mrespons1ble party govern - ment · s Each of the political parties would present to the e ectorate clear and d1stmct1ve policy platforms and . fol · IOW1ng elections. the instttut1ons of government splintered by the const1tut1onal separation or powers would be joined under the umbrella of cohesive. unified party government (the same party would control the presidency. House. and Senate) Presumably such an arrangement would create en · hanced incentives for legislators to focus on national con- cerns and perspectives. as well as provide enhanced political "glue· to bind leg1slat1ve coaht1ons led by the president. For a long time. such a conception of American government also seemed entirely farfetched . After 1954. the government was more frequently part1sanly d1v1ded than unified . Both parties were internally split 1deolog1cally. hardly projecting clear and distinctive policy images to the electorate. As George Wallace famously said m his 1968 third-party bid for the presidency. Theres not a dime's worth of difference" between the two

pames In the 93rd Congress ( 1973-197 4). based on roll·call votes there was considerable overlap between Democrats and Republicans Perhaps a third of the House was populated by the members or the center of the 1deolog1cal spectrum and could have comfortably resided en either party (numerous Democrats were m fact conservative. while a number of Re· pub JCans voted I ke liberals) 76

Start ng m the 1980s but becoming most pronounced smce the tum of the century, that profile has changed Largely as a resu t of Republican Mconservat1ves replacing more moderate Republicans outside of the southern states and conservatives rep acing moderate and conservative Democrats m the South."' the congressional parties in both the House and Senate have become both more 1deolog1cally coherent within their respec· tJve ranks and mcreasmgly separated from one another. The 1deolog1cal distance between the parties m the legislature 1s

the largest 1n about a century and the most su bstantial since the current party system emerged in the midst of the Great Depression 1n the 1930s. 77 By the I 07th Congress (2001- 2002). the "center" had all but disappeared Fewer than 3% or the House members inhabited the middle. and under 4% were encompassed by the entire ideological range in roll-call voting in which both Republicans and Democrats could be found (m contrast to more than three-quarters or the House during 1973-197 4). 78 Throw in unified party government- dunng the Republican George W Bush administration from 200 I to 2006 (the Democrats had a bare majority for a rela· t1vely brief period) and Democratic Obama administration until 20 I I-and the opportunities for effective legislative action would seem to be particularly pronounced.

Both parties did in fact have historic legislative successes in health policy in this new era or congressional partisan clar· 1ty. Bush. working in concert with the Republican leadership m Congress. pushed through the Medicare Modernization Act. arguably the most expensive and expansive piece or so· cial policymaking since the establishment of Medicare itself that also incorporated more than any previous law conserva· t1ve. private-sector approaches to social policy. President Bush and his Republican allies in Congress succeeded with this program , drafted almost entirely in their terms over Dem· ocratic objections. only because or unified party government. solidari ty within Republican ranks. and the capacity or the House Republican leadership to exploit its command of the rules and procedures to reverse a I 5-vote defeat at the close or the normal I 5-minute voting penod (in an unprecedented move. the Speaker held open voting period for nearly 3 hours to orchestrate winning arm-twisting) '9 I have already de· scribed the passage or Obama s ACA. which is projected to provide insurance coverage to 29 m1ll1on more Americans: it dramatically alters the rules governing the private insurance market. provides for a series or demonstrations to expen· ment with changes in the health care financing and dehv· ery system. expands and secures funding for public health , promotes new strategies in population health, among many other features .

The breadth or experience reveals. however. that highly partisan leg1slat1ve politics do not sit well within the separa· tion of powers framework . Their interaction with a system based on multiple competing institutions-the proverbial system or checks and balances-can exacerbate. rather than m1t1gate. the complexities of policymaking As Obama

PART II • National Politica l Institutions

discovered in the struggle over health care reform . when the ideological policy differences are so stark that the minority opposition party is willing. as a party. to wield the threat of filibuster on every significant vote. the policy-making process risks being routinely derailed even under unified party gov- ernment. After passage of the ACA. the battle simply shifted

to other terrain.

Since the administration of George Washington. the Sen- ate . under its "a dvice and consent" powers. with relatively rare exceptions has con fi rmed the president's nominations of individuals to appointed positions in the executive depart- ments and agencies. But in 20 IO. the GOP minority used the filibuster to block. among many others. Obama's nomination of Dr. Dona ld Berwick to head the Centers for Medicare and Medicaid Services (CMS), even though he is widely renown in the medical and health services research community and would have been a likely shoo-in in past political environ- ments (he nonetheless became CMS administrator as a tem- porary "recess" appointment but as such was limited to just one year after which he stepped down for another acting di- rector. Marilyn Tavenner).

It is perhaps ironic that in the American institutional setting ideologically focused parties in Congress can lead to greater legislative dysfunction . instead of less.Bo The di stributive im- pulses of the House and Senate. for example. are not neces- sarily mitigated by the rise of divisive partisanship. Indeed. in some respects they grew worse. reflecting the continued self-selection. autonomy. and local orientation of individual legislators. as well as the capacity of favored interest groups to gain unchecked entree through the majority party.Bl Prior to the national debt becoming the focus of attention in 20 I I. under GOP control members of the House requested about 35.000 "earmarked" individual spending requests for their districts. attempts to "secure federal dollars for pork-barrel projects by covertly attaching them to huge spending bills." In 2005. in a Republican-dominated Congress. about 15.000 earmarks were incorporated into enacted legislation. a jump from 4.000 about IO years earlier.B2

Of perhaps greater significance. the system of separation of powers-with the multiple perspectives and constituen- cies represented by the different branches of government and house of Congress-by intention requ ires accommodation and compromise for action to be taken .B3 Moderate mem- bers of Congress. who have credibility with both parties.

may be a necessary ingredient. Sarah Binder has determined

empirically that

[a]s Congress moderates 1deolog1cally stalemate be- comes less likely. Although single party control of the branches may help to break deadlock. there are clearly limits to the power of political parties to smooth the way for legislative agreement. Intense polarization seems counter-productive to fostering major policy change [because] parties have an electoral. as well as a policy- based. incentive to distinguish their records and posi- tions. and a less incentive to bargain and compromise.84

At the current levels of partisan conflict. such leg1slat1ve 1m· passes are likely to be a staple of American politics and health policymaking. They will be exacerbated by divided govern· ment. Five years before the Republican takeover of the House in the 20 IO elections. Paul Quirk and Sarah Binder. who co- chaired the Annenberg lnst1tut1ons of American Democracy commission on the status of the leg1slat1ve branch. offered a particularly worrisome assessment

With the relative strength of the two parties quite com- parable. divided control-especially with a Democratic president and a Republican Congress-is highly likely. In the most recent period of divided control. from 1995 to 2000. the President ... allowed the federal government to be shut down for several days in a budget impasse: and spent a full year contesting a doomed effort to remove Clinton from office through impeachment. The next round of d1v1ded party control ... could witness even more destructive conflict.85

Their pred1ct1on was borne out The new Repub can House majority elected in the 20 IO midterm election took a no-holds-barred approach to shifting the agenda and achieving its policy objectives. even though the Democrats retained control of the Senate and White House and thus could thwart its 1n1t1at1ves. For Republican office holders and their electoral base. policy compromise was tagged as a sign of weakness. not the virtue envisioned by the found- ers or the reality of a separation of powers system. Ener- gized by the conservative Tea Party movement-of the 87 Republican freshmen (36% of the Republican caucus). 68 have links to Tea Party organizations-the House majority immediately voted to repeal entirely the ACA . made every effort to strip the funding required to implement the health

.......-- CHAPTER 3 • Congress EiM ~----~~~~~~~~~____:::~~~~----~

-

care reform law. and with near unanimity (only four Repub- licans defected) approved a budget plan that would eventu- a ly transform MedJCare and MedJCaid in ways completely unacceptable to Democrats Once in place. all Medicare benef1c1anes would purchase private insurance with the equrvalent of vouchers. but their value would increase at a rate well under the historic increases 1n medical care costs . Total Med1ca1d spending would be reduced considerably. and the federal share would be sent to the states as block grants with few stipulations other than the funds be used to provide health care to the poor. The preeminent battle of 2011 involved the need to raise the federal debt limit. wh ch the Republicans in the House (Joined by their Senate colleagues) sought to leverage into unprecedented reduc- t ons m spending and vast structural changes in entitle- ment programs. mcludmg in the realm or health care. Even

It IS rar too early to ant1c1pate the future of increasing partisan polarization m Congress and its impact on poli - cyma 1ng Only the results of several election cycles and the act1v1t1es of the Congresses they produce will reveal

ST s

issues that once had attracted b1part1san support. such as promoting comparative-effectiveness research. were now rejected by the congressional Republicans.86 A public back- lash . at least as expressed in numerous polls. caused some Republicans to use their inherent leg1slat1ve independence and local ties to shield themselves from potential retribu- tion at the polls. a characteristic or leg1slat1ve behavior familiar from the past. but. as shown by the losses or sen ior Democratic incumbents in 20 I 0. one that may now be harder to achieve. Many observers had expected still an other wave election following close on the heels or the wave elections or 2006. 2008. and 201087-but in 2012. Democrats made modest gains in both chambers and Con· gress remained divided between a Republican House and a Democratic Senate. Early indications suggested no decline or the partisan tensions.

the extent to which an ideologically divided and confron- tational legislature. with hyperpart1san polarization, 1s truly the new "baseline" Congress .

I. Accord ng to the author. what two problems m health care has Congress failed to adequately address. though other advanced d mocrac1es have addressed them7

2. Compared to other national legislative bodies. what is distinctive about the US Congress?

3. For someone serving m Congress. what are some 1mplicat1ons or Tip O'Ne111's observation that "all politics 1s local"?

4, In what ways do poht1cal parties affect how Congress works. and how 1s this different than m other democrac1es7

s. Do interest groups mnuence Congressional policymaking? 6. What does the author mean by the "baseline" dynamic of the Congressional legislative process?

7. Why does the author think 1t so d1ff 1cult to enact health care reform?

8. What changes have occurred in the interest groups relevant to health care reform?

9. What three strateg es of dealing with Congress can be adopted by presidents interested in health care reform?

10. Expla n the possible effects of the existence or uniform. distinctive. and clear party 1deolog1es on the process or

enacting leg1slat on

PART II • National Political Institutions

ENDNOTES I. Himmelstein and Woolhandler. 2002. p. 92.

2 . Jones. 1988.

3 . White. 1995. pp. 5-7.

4. Arnold. 1992.

S. Binder and Quirk. 2005b. p. xix.

6 . Barrett and Edwards. 2000; Peterson. 1990, p. 232; Rudalev1ge. 2002 . p. 13 7.

7. Regan. 2005.

8. Peterson. 1990. pp. 47-48.

9 . Jones. 1994. Chapter 7.

I 0 . Neustadt. 1960. p. 42.

11 . Lijphart. 1984.

12. The consequences for health care policy making can be seen m Gauld. 2000. p 815: White. 1995

13. lmmergut. 1992; Adolino and Blake. 200 I.

14. Jacobs. 2005; Adolino and Blake. 200 I; lmmergut. 1992. Longstreth . Stemmo. and Thelen. 1992. IS . Mayhew. 197 4. p. 5.

16. Arnold, 1992. pp. 5-6; Fenno. 1973. Chapter I.

17. Novak and O'Neill. 1987.

18. Cox and Mccubbins. 1993.

19. Davidson. 1992; Hertzke and Peters. 1992; Jacobs and Shapiro . 2000: Mann and Ornstein. 1981 · Rhode. 1991. Sinclair. 1982. 1983, 1989.

20. Daschle. 20 I 0. pp. 228-29; Jacobs and Skocpol. 20 IO

2 1. Congressional Quarterly. 20 I 0.

22. See. for example. Lott. 2005.

23. Sinclair, 2008.

24. Peterson. "The Time Was Right."

25. Shickler. 2005; Davidson. 1992. Rhode. 1991.

26. Owens. 1997.

27. The extent to which interest groups wield influence over Congress remains a complicated and unsettled issue. the subject of an enormous literature. A useful overview can be found in Ainsworth. 2002

28. Alford. 1975: Feldstein. 1977: Quadagno. 2005; Starr. 1983; Weissert and Weissert. 1996. 29. Olson. 1965; Walker. 1991.

30. Arnold, 1992, p. 75.

31. Himelfarb. 1995 .

32 . See. for example. Bosso. 1987.

---

>

I: Rhode. 1991:

:ettled issue. :he

33, Marmor. 2000. especially Chapter 4: Oberlander. 2003. Chapter 16

34. Peterson. 1998 pp. 197-208

35. Peterson. 1998. pp. 214-18

36. Toner 2006 pp Al. Al7

37. White. 1995

38. Ga up po I. September 200 I. Jacobs and Shapiro. 1995.

39. Stemmo and Watts. 1995

40. See Fem 2010. pp 74-79

41 . Peterson. ·The Time Was Right -

42. Peterson '1he Time Was Right - My measures mclude the characteristics and allocation of staff resources. legislative mark up and heanng actMtles the process of selecting committee chairs. and the availability of rules that empower leadership.

43 . Davidson. 1992. Hertzke and Peters. 1992. Mann and Ornstein. 1981 : Rhode, 1991 Sinclair. 1982, 1983. 1989. Oeenng and Smith. 1984

44, Peterson. -The Time Was Right •

45. lbd

46. Peterson. 2001

47. Quadagno. 2005

48. Campion. 1984. Peterson. 1994. "The Time Was Right": Poen. 19 79.

49. Peterson. The Time Was Right "

so. Wamess. 1999 pp 305-33 SI. Peterson The Time Was Right". Skocpol. 1996

52. Feder 1993. p A22, Goldfield. 1987, Gottschalk. 2000.

S3. Heinz Laumann Nelson. and Salisbury. 1993. Peterson. 2001. "The Time Was Right": Sammon. 1992.

S4. Gottschal 2000

SS. Johnson and Broder. 1996. Peterson. -The Time Was Right.''

S6. Jacobs and S ocpol, 2010 Chapter 2

S7. Jo es 1994

SS. Peterson. 1990

S9. \Vaness. 1999

60. Starr, 1983

61. Peterson. 1992 1998

62. Peterson ·rhe Time Was Right·

63. Jones 2009

64. Peterson 1998 ·The Time Was Right •

6S. Hae er 1997, Starr. 1994

PART II • National Political Institutions

66. Jones. 1994. 67. Memorandum for Hillary Rodham Clinton . from Mike Lux. subject Positioning Ourselves on Health Care May 3

1993. Privileged and Confidential. I.

68. Brodie and Blendon. 1995; Hacker. 1997; Jacobs and Shapiro. 2000· Brady and Buckley. 1995.

69. See. for example. Gottschalk. 2000; Hacker. 1997; Jacobs and Shapiro. 2000; Broder and Johnson. 1996; Martin 2000; Mayes, 2005; Peterson. "Stalemate": Quadagno. 2005; and Skocpol. 1996.

70 . Hacker. 2008.

71. Quadagno. 2012. Manuscript.

72 . Rudalevige. 2002.

73 . Peterson, "The Time Was Right."

74. Ibid.

75 . Schattschneider. 1942: Committee on Political Parties. 1950.

76. The estimate is based on using the NOMINATE scores developed by Keith T. Poole and Howard Rosenthal and the distribution of House members in the 93rd Congress. with "center" defined as in the range of -0.1 to +o.I on the NOMINATE liberal-conservative scale (the full scale goes from -I 0 (most liberal) to 1.0 (most conservative).

77. Poole. 2005. p. 8; Sundquist. 1973. Chapter 10.

78. The "entire range" is defined as the range on the Poole-Rosenthal NOMI NATE liberal-conservative scale that 1s inclusive of the left-most voting Republican and the right-most voting Democrat.

79. Oliver, Lee, and Lipton, 1965.

80. Fiorina. 2006.

81 . Binder and Quirks, 2005a. p. 541. The most extreme example is the scandal surrounding lobbyist and former Repub- lican congressional staffer Jack Abramoff. as well as the general difficulties confronting Representative Tom Delay. who was forced to resign from his post as Republican maiority leader in the House See Cochran. 2005, 2006; and Koszczuk and Ota, 2005.

82. Flake. 2006; Hulse. 2006.

83. See Peterson. 2007.

84 . Binder. 2005. pp. 12-13. See also Binder. 2003.

SS . Binder and Quirk. 2005a. p. 546.

86. Millenson. 200 I.

87. Rothenberg, 20 I I.

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0111 de Po 11 cal Parlres and the Future of Act1v1st Government Washington. DC. and New York: Brookings

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Poole. K. T. 2005. "The Decline and Rise of Party Polarization 1n Congress during the Twentieth Century." Extensions.· A journal of the Carl Albert Congressional and Research Studies Center (Fall): 8.

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__ ... ~-===------------------------............................................................... Iii .... ..

Th is chapter examines the president's role in health politics and policy. Presidents are the only nationally elected officials, and major health policy changes rarely occur without their active leadership. The chapter first examines the institution itself. then reviews four modern presidents and their health care Legacies. and concludes with health policy Lessons from presidential history.

Presidents energize health care policy-they set the politi- cal agenda. propose solutions. and organize programs. Bold health policies almost always require presidential leadership. How do presidents play their role? The answer requires us to ask two completely different kinds of questions.

On the one hand. scholars focus on the institution of the presidency: the rules. roles. powers. and limits that define the presidency as an organization. Each president operates in a well- defined setting and manages an office of some 500 employees (up from just three when Franklin Roosevelt took office in 1932). On the other hand. the presidency is uniquely personal. Only 19 men held the post across the entire 20th century. Each brought strengths and weaknesses to the job: each redefined the office. For example. John Kennedy used his charisma to become the first tel- evision president and speak directly to the people. Bill Clinton ran the White House like an invigorating and chaotic Oxford seminar. and George W. Bush turned to a corporate business model.

This chapter explains the dynamics of the presidency by exploring both the institution and the individuals. Under· standing where health care fits in the presidency means un· derstanding what was unique about each president-and what they all shared in common We begin by explaining the essential dynamics of the office. then take a closer look at the health care legacy of four presidents. and finally conclude with generalizations-health policy do's and don'ts-that seem to hold across all modern incumbents.

AMERICAN PARADOX: DEFINING THE PRESIDENCY "We give the president more work than a man can do." wrote John Steinbeck. "more responsibility than a man should take.and more pressure than a man can bear." Thomas Jefferson (presi- dent from 180 I to 1809) called the job "a splendid misery."

The crush of people seeking favors made James Garfield (1881-1883) "cry out in the agony of my soul .. One dissat- 15f ed pleader shot him-though 1t was his phys1c1ans who eventua ly killed him when they prodded his wound with .,()V.-ashed hands One 19th-century observer sarcastically de- e red that the first 15 presidents-from George Washington to Ulysses Grant-refuted Darwin 's theory about evolution th'.OUgil suMVal of the fittest 1 The choir of complaining rings nght down to the present and tells us something important about the presidency itself The office straddles a national paradox Amencans both cheer and fear strong presidents

The Limited Pre idcnt On the one hand. Arr s arc wary of their own leaders. Even Alexander Hamilton- the great proponent of executive pa.ver--conceded that Amencans rind "a vigorous executive .. 1ncons1stent with the genius of republican government."2 The Cons t1tut1on 1s studded with l1m1ts to government power: to cl nch the po nt. the Founders announced that all powers that are not exphotly granted to federal officials are "reserved to the states" or "to the people "3 Henry David Thoreau spoke for many Amenca ns when he wrote. "the government that governs least g<Mms best · President Ronald Reagan began his first inaugural address with a steelier version of the same idea "Government 1s not the solution to our problem . government will no longer 'ride on ourback.'"4

ThJS Wilrmess 1s inst1tut1onahzed in all the checks a presi- dent faces. especially in domestic policies Congress. the courts. rival parties. state governments , interest groups. and the Washington bureaucracy all check the executive. When pres1den:.s propose national health insurance. they are invari· ably surprised by the sheer force of the resistance-interest groups run ads. lobbyists swarm Congress. the states refuse to cooperate. Congress balks. and anything that passes faces tough scrutiny from the Supreme Court

The Ponerful President On the 01 1es the powerful American presidency. ··En- ergy in the executive 1s the lead mg character in the definition of good government." insisted Alexander Hamilton . "A feeble exearuve IS but another phrase for . . bad government. "S The presdem wears an 1mpress1ve number of hats (and helmets) He IS commander in chief (a const1tut1onal prov1s1on): He is respons be for a smooth economy (thanks to the Full Employ- ment Act of 1946). he faces up to national problems. repre- sents Amenca to the world, embodies our cultural values . and occupies a great bully pulpit. The highly regarded presidents

CHAPTER 4 • T he Presidency

were forceful leaders. "Give 'em hell Harry! .. shouted Truman's supporters-and their man is still best remembered for doing just that.

Crises empower presidents. In particular. the president exercises almost unchecked power over foreign crises. Some observers even detect two presidencies-a vigorous inter- national office and a feeble domestic one. Presidents regu- larly try to tap their strong side by declaring "war" on maJOr problems-a war on poverty. a war on crime . a war on drugs. a war on inflation. a war on terror. Presidents draw on their powers more easily when they can make the war metaphor- the sense of crisis-stick.

Still. when Presidents Lyndon Johnson ( 1963-1969) and Richard Nixon ( 1969-1973) pushed the boundaries of presi- dential power. historian Arthur Schlesinger warned that an .. imperial presidency" t hreatened the republic: legislators forced Nixon to resign. and Congress eagerly promulgated new rules to reign in the powers of the office Talk of impe- rial presidency waxes (Reagan. Bush. and Obama) and wanes (Carter and Clinton).6

So what do Americans want? A powerful president who shapes the nation's destiny? Or a robust republic that firmly checks its chief executive? American history offers a clear answer: We want both. From the very start. the presidency span ned the great America n contradiction and the tension between an energetic executive on the one hand and a weak president operating in a vibrant republic . The tension only grew stronger as the United States grew more powerful.

Ambiguous Powers The presidential paradox is increased by the puzzling way the Const1tut1on defines the office. The Constitution's Article I gives Congress a detailed and specific charge In contrast. Article II. on the presidency. is short and dominated by an enigmatic phrase-"the executive power shall be vested in a president." What precisely is that executive power? The Founders did not say. The presidency had to be defined-and still has to be defined-in actual practice. Even very basic questions have been hammered out in the political hurly-burly

Each president remakes his role and bargains over the hm1ts of his powers. Great presidents do not simply solve problems. sign laws. and launch programs. They redefine the office it- self. In contrast. other presidents seem overwhelmed by events President Jimmy Carter told Americans. m July 1979 that a crisis of confidence ··at the very heart. soul and spirit of our national will . . . 1s threatening to destroy . . America ."

PART II • National Political Institutions

Many Americans thought the crisis lay in the Oval Office. A mischievous typesetter at the Boston Globe captured the na- tional mood with a mock headline that slipped into the first edition: "More mush from the wimp."

The Individual and the Context What makes some presidents strong and others weak? The answers fall into two categories. Some analysts focus on the individual, others on the context.

Popular writers highlight the presidents themselves . They emphasize the genius of a Franklin Roosevelt ( 1933-1945) or a Ronald Reagan ( 1981-1989). Both Roosevelt and Reagan adroitly worked the machinery of Washington politics. Both skillfully used the media to go directly to the people. Each articulated a new vision of politics. "These dark days will be worth all they cost us." said Roosevelt in the trough of the Great Depression ... if they teach us that our true destiny is ... to minister to ... our fellow man. " Ronald Reagan invoked Franklin Roosevelt even as he called the United States away from a collective ideal and back to a kind of rugged individualism. It's easy to imagine that presidential greatness lies in the vision of such men and their adminis- trations. Outstanding individuals succeed where weaker and less skillful men fail. 7

On the other hand , the president operates in a tangle of constraints. Different men confront problems with more or less political capital. How big was the president's electoral vic- tory? Members of Congress tread far more deferentially if the president got more votes in their district than they did . Does the president's party control Congress? How big is the ma1or- ity? Is the party united? Fractious? What is the economic situ- ation ? The international situation? The mood of the country? The strength of the opposition?

Political scientists often analyze the president's con - straints through the lens of "political time"-the cycles of a party's waxing and waning influence. For example. Franklin Roosevelt rode a fo rmidable political wave into power af- ter a long period of Republican dominance (the Democrats had elected only two preside nts in the past 70 years). He enjoyed very large majorities in Congress. and the Demo- crats had a long series of reforms - from Socia l Security to national_ health insurance-that they were eager to try. Pol1t1cal scientists. following Stephen Skowronek. say the Democrats built a new political regime in the 1930s. Over time regimes wear out. The excitement wanes as fresh ideas

fade into old saws: coalition members begin to clash:"""' problems pose fresh challenges . By the time Jimmy Carte· came along. more than 40 years later, the New Deal or~:· was springing apart at the seams. Following Carter. Ronad Reagan constructed an entirely new majority coalition dra-w-. mg on new regions (the Sunbelt) . new groups (the Chns. tian right). and new ideas (less government. lower taxes

1 Never mind the talents of the individual. say many polit1ca scientists. There is a more important question about pres- dential power: Where does the president stand in the greot cycle of regime evolution? Is his coalition fresh and vigor. ous? Or is it tired and falling apart?8

Analyzing the presidency always means striking the rg~: balance. A talented president can wield great power. but the political context empowers and constrains every administra- tion . The policy analyst's job 1s to sort out the individual and the context. to appreciate each president's talent while loca! ing him (and. someday. her) in political time.

THE THREE FACES OF THE PRESIDENCY Scholars have explored every aspect of the pres1dency- personality. elections. rhetoric. regimes . and even presiden· tial doodles. Health care introduces a unique set of pressures and demands. Three d1mens1ons are especially important for understanding how presidents negotiate health politics and policy: the president as an individual agenda setter. as a pofi~­ cal operator. and as a manager of the policy process.

The Individual: Setting the National Agenda Presidential studies begin with biography Presidential person· alities invariably stamp the times . The president is the onl/ nationally elected official. the only politician who answers to all Americans. That gives the presidents their first and. 1n some ways. their most formidable power: putting ideas before the nation.

Presidents pick our problems and suggest solutions When the president identifies a problem. 1t immediately zooms to the top of the political charts. For example. in early 1977 political scientist John Kingdon interviewed members of Congress and reported that only 18% mentioned controlling hospital costs as a priority. Later that year. President Carter in· troduced a hospital cost containment plan Kingdon returned

..

= to Congress and found the members buzzing about the issue (81 % brought 1t up). Jimmy Carter had taken hospital cost control from the pile of health care problems and placed it at the top of the political agenda.9

To take another famous example. in 1985. less than I % of Americans tagged illegal drugs as "the number one prob- lem facing the nation today:· In September 1986. President and Mrs. Reagan delivered an impassioned 101nt address from the White House in which they declared their war on drugs. For the sake of our children,'' said the First Lady. "I implore each of you to be unyielding and inflexible 1n your oppos1t1on to drugs." The number of Americans who 1dentif1ed drugs as America's number one problem quickly leapt to 54% 10

When President Obama came to office he chose health reform as one of his signature issues. Many advisors-and almost the entire economic team-wanted him to put off health reform and focus on economic recovery. Other Demo- crats thought there would be more political payoff in fighting for 1mm1gration reform or environmental action The presi dent overruled his advisors and insisted on health reform- turning the effort into what may be the ma1or legacy of his administration

or course , illegal drugs, hospital costs. and a troubled health care system were all real problems. but there were plenty or other issues the presidents might have emphasized. Senator Ted Kennedy (D·MA) illustrated the point by blast- ing Carter for focusing on hospital cost containment rather than on universal health insurance. The power to choose 1s sues comes with a strong warning The president can only p ck a few items for national attention. If he (and someday. she) chooses too many. they will elbow each other on the airwaves and crowd out one another on the congressional docket. hery president faces the same question: Of all the issues and problems that face the nation. which two or three or four will they emphasize 1

There are many reasons to propose a major program- campa1gn promises. interest group pressure. political rivals, popular opinion. a dangerous cns1s But beneath all the polit1· cal push and shove hes the ultimate question: What do the presidents really care about? How do they want to define their legacies? This becomes especially important for health care policy where the big issues-controlling costs and extending coverage-always raise fierce political resistance and can be numbingly complicated

CHAPTER 4 • The Presidency Ml

Even so. every modern president has proposed a major expansion of health care coverage. Why? For two reasons First. some presidents care about health care. As usual. Lyn· don Johnson ( 1963-1969) put it with the most flair when he promised to fund any Medicare bill that Congress passed.

1·11 go a hundred million or a billion on health or education I don't argue about that any more than I argue about [my wife] Lady Bird buying flour. You got to have flour and coffee in your house and (you got to have] education and health. 1

Second. political pressures push presidents into health care. The health care system appears to demand attention . Even presidents who try to resist find health care forcing its way onto their agenda. George H. W Bush. for example. wanted nothing to do with the issue. It almost seemed to track him down.12

In many policy areas. we measure the presidents by the programs they pass. In health. there 1s also a more subtle metric. Every president shapes the national conversation: each reframes both problems and solutions. We can ask the same question of every administration· How did they change the way Americans think and talk about health policy? What legacy did they leave?

The Political President Great ideas may change the world. but every administration faces a more basic test: How skillfully does 1t operate the po- litical machinery? Can it run the government smoothly? Meet its goals? Get things done?

Between 1900 and 1975. almost all presidents ( 12 of 13) entered the White House with experience-in some cases a lifetime of experience-in the federal service. Then. in 1976 Jimmy Carter ran for the White House with none at all His outsider's stance fit the national mood after Watergate as well as the more enduring American distrust of government. Fol- lowing Jimmy Carter's surprise election only one president (out of five) came to power with any significant national gov- ernment experience on his resume.

Running as an outsider-denouncing Washington's busi- ness as usual and promising a fresh approach-is an effective campaign strategy. But no admin1strat1on can govern from the outside. Presidents do not accomplish anything until they learn to master the political system. and that means managing both Congress and the public.

PART II• National Political In stitutions

Congress As President Lyndon Johnson once put it. "there is only one way to deal with Congress and that is continuously. inces- santly and without interruption." 13 Johnson himself had .been the Senate majority leader. and he knew the Congress1on~I folkways better than any man alive. He tracked each of his bills through the legislative process-advising. cajoling. and arm-twisting the members of Congress.

Speed is crucial. "Every day in office." said John son on ano- ther occasion. "I lose part of my power. Every day ... I have less power left. .. In a landmark study. Paul Light dis- covered how right Johnson had been. Legislation submitted in the first three months of a presidency succeeded 73% of the time; legislation submitted just 6 months later (between July and September) had a 25% success rate. The congres- sional docket gets crowded. the president begins to use up his political capital. and politicians start positioning them - selves for the next election. By the end of the president's first year. Washington is already focused on the midterm election the following November. The key message for pres- idents who want to reform the health care system could be delivered the day after the election: Hurry up. you're almost out of time. 14

Some presidents take an issue to the public simply to gtt. on the agenda. to get the nation talking. For example wf1t.. President Harry Truman proposed national health insurance in 1946. Congress flatly turned him down . Truman unexpeq. edly won reelection in 1948 by thumping national heath - surance and tarring the "do nothing" Congress No mattei Congress turned him down again . Undaunted, Truman Lie. lessly championed his lost cause and. by doing so. hel:iec turn national health insurance into an essential liberal reform When Lyndon Johnson won Medicare in 1965 , he flew to ' dependence. Missouri. and signed the bill s1tt1ng alongside a' aging Harry Truman-a rare homage to the man who had PtJt expanding public health insurance on the national agenda

Going to the People Presidents often try to nudge Congress by speaking directly to the people. Going public involves an entirely different set of skills from the insider game of maneuvering Congress. Presi- dent Franklin Roosevelt was a master of the radio. and John F. Kennedy-young. handsome. and charismatic-became America's first television president. Today, media operations are a major White House function. and presidents who fail to invest in them. such as George H. W. Bush. pay a high political price. Campaigning for an issue involves constant polling to find the best way to cast the message; big media "roll outs" involve speeches. talk shows. newspapers. biogs. tweets. and coordinating allies and interest groups. 15

Going public is an alluring strategy for the only polit1c1an elected by the entire nation. Congress cannot ignore an avalanche of phone calls and e-mails. However. rousing the nation to prod Congress is a tricky business. Opponents of- ten undermine the president's program by dragging out the process and riding out the surge of public opinion. Even savvy media campaigns wear thin . Time takes it toll on every presi- dent's agenda.

The President as Policy Maker The presidents are the policy makers in chief They manage a great federal bureaucracy tasked with running the nations programs. They frame new policies to take to Congress or to put before the people

The Executive Branch The president 's own branch- I. 7 million workers strong- is both a source of power and a management problem Tht president coordinates three centers of power his own White House staff: the Executive Office of the President (EOP). which includes agencies directly under presidential control like the Office of Management and Budget and the Council 01 Economic Advisors : and the vast federal bureaucracy headed by the president's cabinet members. Each administration rec· alibrates the balance of power Every incumbent trnkers with executive branch organization-another illustration of the American presidency as a constant work in progress.

Over time. power has gradually slipped from the cabinet agencies and toward the president's advisors-turning the executive branch ever more political Early presidents simpfy relied on their cabinets to develop policy and submit 1t directfy to Congress . President Franklin Roosevelt changed all that Facing the Great Depression he made his first term a whirl· wind of proposals and programs. Roosevelt seemed positively exuberant about his overlapping advisors. committees. and programs-he called 1t all his "three nng circus. President Roosevelt left Democrats a seductive but dangerous model- the freewheeling administration long on creativity and short on discipline. Democrats have often emulated the free-form Roosevelt style with advisors playing multiple and loosely de· fined roles-at least until President Barack Obama. who. like

-

--

= most Republicans. preferred tightly organized and carefully speCtf1ed administrative lines

The growing power and soph1st1cat1on of the White House bureaucracy 1s a double-edged sword. In an earlier era. Pres1· dent Johnson could negotiate Medicare with down· home metaphors about flour and coHee. Today. a hive or EOP economists and policy specialists would be buzzing cautions in Johnson's ear The director of the Office of Management and Budget (OMB) warns or budget deficits . the head or the Counal of Economic Advisors weighs m with macroeconomic cautions. and the US trade representative might be on hand to spell out the 1mphcat1ons on international markets And that 1s all before the pollsters and the communication directors barge into the presidents office The most powerful agency m this hive of actl\1ty 1s OMB. which has the authority of cen · tral clearance the power to review and clear (or approve) any· thing any executNe agency proposes or any executive official says or writes m public. If OMB officials rule that something does not fit within the budget. 1t goes nowhere .

Over time. the president's office has grown more technical. more soph1st1cated . more powerful. and more overtly pollt1· cal Every president must learn how to manage his own office. decide how much to delegate to the cabinet agencies. and then find a way to coordinate the entire enterprise. Every ad· mm1strat1on faces the same structural dilemma: A very small group or men and women in the Oval Office must find a way to control the great executive leviathan.

finally the executive branch 1s also a source of policy and power Congressional dehberat1ons generate publicity and de· bate In contrast. adm1mstrat1ve dec1s1ons are generally silent. a most stealthy They often slip through with no publicity. Yet even small technical changes can have very large impacts on hea th policy and health care delivery After the long. loud debate over President Obama's health reform (the ACA). the entire process shifted to the executive branch for 1mplementa· bOn though officials were making crucial dec1s1ons about the Amencan health care system and how 1t would operate. the media almost entirely ignored the process. The bureaucracy runs qu etly

Presidents have recently discovered a new way to bypass Congress. executive orders. These are pres1dent1al decla- ratJons with the force of law based on existing pres1dent1al powers and requmng no act of Congress. Contemporary ad· m mstrat1ons issue between 35 and 45 executive orders a year. Recently. presidents have begun to rely on executive orders to

CH APTER 4 • The Presidenc) @I

get around the constraints of the political system. President George W Bush bluntly asserted the right to override con- gressional laws dealing with torture. surveillance. and secu· rity. President Barack Obama had criticized the Bush policy However. when a Republican House of Representatives began to reject his programs. he too began to issue more execu· tive orders. Both presidents used the tool to renegotiate the boundaries between congressional and presidential authority.

Frami11g Policies Of course ideas have to be hammered into policies before they can be taken to Congress or promulgated by executive agencies Presidents generally delegate this job. They cham· pion the big idea . carry them through the political system , and leave the program details to others.

To whom? The president is surrounded by institutions designed to hammer out policies. He can charge a cabinet agency. task his advisors. name an informal committee. or an· nounce a formal commission Naturally. each method has its own strength and weakness. But all presidents must negoti· ate twin perils as they translate general ideas into concrete policies.

First. some presidents get too deeply enmeshed in policy detail Successful presidents almost all leave the fine print to subordinates Franklin Roosevelt. Lyndon Johnson. and Ronald Reagan laid out the guiding philosophy. They did not delve into the minutiae of the programs they championed. On the other hand. President Carter famously dove into the details or almost every policy In one health care memo . the president scrawled in the margin .. -and don't forget about PSROs. which were phys1c1an review committees." Getting this deep into the details or a policy IS a sign or trouble. Such deep involvement distracts presidents from tasks that only they can perform-like persuading Congress and the nation to buy into the policies.

A second problem comes at the other extreme with a president who 1s not engaged (or wise) enough to broker the policy battles within his administration . The president is sur· rounded by agencies with their own turf to protect. advisors with their own axes to grind. and supporters with their own interests to promote. Ultimately. a successful president learns to draw on a range or policy advisors without becoming cap· tive to any one.

Finally. careful policy design often clashes with the 1mpera· t1ves or time and diminishing presidential capital. As a result.

PART rI • National Political Institutions

successful presidents often enter the White House with ma1or policy proposals in hand. This. in turn. puts a premium on the issue network-the informal group of thinkers. advisors. and policy entrepreneurs that surrounds candidates and par- ties. If the president's influence usually wanes a little every day. administrations need to enter office with their plans all ready to go.

This was the personal pres idency in its purest fo·~ Truman felt health care 1n his bones. Why7 When an . terv1ewer put the question to him. Truman pointed co first political triumph as a county Judge (or commiss1o~:· in Missouri. An old army buddy induced the Prenderga;i political machine to run Harry for the post. Rather tha n s ply dole out special favors like other machine po lit1c1ans

INDIVIDUAL PRESIDENTS Health is a personal issue that reflects the men inside the of- fice. Presidents suffer heart attacks. live with painful condi- tions. and lose people they love. They deal with (or duck) health issues as governors. legislators. or county commis- sioners long before ascending to the Oval Office. Moreover. the archives are full of moving letters from people who got tangled in the medical system and write to the president-in hope or sadness or anger. Health care troubles surround every president.

Judge Truman raised the money (through a bond issue) for a hospital. "There were derelicts who had lost all they had and they didn't have any amb1t1on," explained Truman late· "We took good care of them . And then there were thost who were JU St making a living . .•. If sickness o~ertook thest fam1l1es they were sunk. I've seen people turned awa y fro- the big hospitals in town to die . JUSt because they did nc.: have the money to get in. I built a hospital to take careo' these people "This experience gave Truman a special aff nit, fo r health care reform .17

President Truman inherited national health insurance His predecessor. Franklin D Roosevelt had asked his adv· sors to devise a national health insurance plan . He d1ec before the plan was ready and so this report landed on Truman's desk-rt was almost like a legacy from the grave (Truman had only been vice president for a month and barely knew FDR.) In November 1945 a month after the end of World War II. President Truman issued a spew message to the Congress recommending a comprehens11e health program· hospital construction. maternal and ch1d care. medical research. health insurance. and disab 1111) insurance.18

However. expanding health care coverage or controlling its costs is a tough job that tests the political mettle of even the best leaders. Some presidents make it a signature issue. Oth- ers approach the topic reluctantly-prodded by allies or nerv- ous about a looming election.

Regardless of how they come to the issue. health reform draws on every aspect of the presidency-the personal. the political. and the policy maker. Watching the presidents take on health care offers a window on the presidency itself. and it helps explain the great arc of American health care policy by showing us how each president reshaped the American pro- grams. institutions. and aspirations and the ways Americans think about health policy.

Every administration has a history with health care policy. As noted earlier. and illustrated in Table 4-1. no modern president (since 1932) has been able to duck the issue. In the following sections. we look at four health care presidencies. 16

Harry Truman (1945-1953) Ha rry Truman is the Democrats' patron saint of national health in surance. Truman's status as the icon of the lost reform shines a light on what Americans admire in a president-he did not design national health insurance or come close to winning it. but no one ever fought more passionately for a reform than Truman did for health care.

The national physicians committee responded with a dra· mat1c emergency bulletin: "This is the beginning of the fina showdown on the collectivist issue. Not one day da re be lost. .. 9 For all the operatic drama they injected into the issue the American Medical Association did not matter. Congress had no intention of passing the legislation.

Senate hearings on the national health insurance bil began on April 2. 1946. Senator James Murray. the committee ch a11. asked that out of respect for the president. the legislation not be described as socialistic or communistic. Robert Taft (the ranking Republican from Ohio) interrupted. "I consider 1t so- cialism. ft is to my mind, the most socialistic measure this Congress has ever had before 1t. .. After an extended screaming match. he left the room. The Ways and Means Committee in the House of Representatives took an easier route: The cha11 flatly refused to schedule hearings at all. 20

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CHAPTER 4 • The Pre idency El

TABLE 4· 1 The Modern Presidents and Their Health Policies

President Years in Office Party

Franklin D. Roosevelt 1933-1945 Democrat

Harry S. Truman 1945-1953 Democrat

Dwight Eisenhower 1953-1961 Republican

john F. Kennedy 1961-1963 Democrat

Lyndon Johnson 1963-1969 Democrat

Richard Nixon 1969- 1974 Republican

Gerald Ford 1974-1977 Republican

Jimmy Carter 1977-1981 Democrat

Ronald Reagan 1981-1989 Republican

George H. W. Bush 1989- 1992 Republican

Bill Clinton 1993-2001 Democrat

George W. Bush 2001-2009 Republican

Barack Obama 2009- Democrat

Most Important Health Care Effort

Designed but did not sponsor first national health insurance (NHI) plan.

Proposed NHI twice. Failed both times. Became a fierce advocate of the idea.

Locked into place a tax break to encourage private employers to provide workers health insurance.

Fought for Medicare.

Passed Medicare. Medicaid.

Pushed HMOs; rethought concept of NHI with government filling in gaps of private insurance system.

Signed health planning legislation.

Proposed hospital cost containment; proposed NHI. Both failed .

Introduced prospective payment to Medicare; won catastrophic coverage for Medicare; tax cuts (and antigovernment rhetoric) changed political calculus

Repealed catastrophic coverage ; new Republican NHI proposal

Ambitious NHI plan failed. Legislated SCHIP.

Added prescription drug coverage to Medicare-largest expansion in the program ·s history

Won Affordable Health Care Act-most ambitious health care initiative 111 US history

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PART JI • ational Political Institutions

The health debate offered an early contest between the two great arguments that always greet national health insurance. Truman and the Democrats argued that a rich. powerful. mod- ern society should guarantee security for all its citizens: they would extend the New Deal welfare state to include health insurance. Compu lsory health insurance. retorted Republi- cans and conserva tive Southern Democra ts. was socialism. The Republica ns framed their health care arguments within a larger attack: Democrats subverted America's strength before the commu nist danger.

In the 1946 midterm election. six months after defeating health insurance. the Republ icans retook Congress after 16 years in the New Deal wilderness (picking up 13 seats in the Senate and SS in the House). Truman did not back off. In his 1947 state of the union message. he bravely made civil rights his first priority and national health insurance his second. In 1948. he ran for reelection by attacking the Republ ican Con- gress for blocking health care. To everyone's surprise. Truman won reelection and the Democrats regained thei r congres- sional majorities.

National health insurance was back in play, but it did not get much further on Truman's second try. "There was noth- ing unusual about a President being rebuffed by Congress." wrote historian David McCullough. "What was novel was a President who. when repeatedly rebuffed. refused to change his tactics."21

Once again Truman delivered his health care message. Once again. allies and enemies mobilized. Once again Con- gress defeated the plan. After this defeat. some officials began to reduce universal health insurance to health insurance for the elderly-an idea that would finally bear legislative fruit more than IS years later.

Harry Truman remained a feisty. dogged supporter of his favorite reform. He constantly tried to set people straight on the matter. "I fear some of our Senators and Representatives ... are still living in 1890," he wrote a West Virginia congress- man. "Perhaps like Rip Van Winkle they will come out of their slumber and find how the world has progressed." Even after he left office. Trum an wrote letter after letter chas ing what now seemed a pol itical ch imera. "I ha d some bitter disap- pointments as President." admi tted Truman. "but the one that has troub led me most in a personal way has been the fail- ure to defeat the orga nized opposition to the national health insurance progra m." 22 Long after the architects of t he policy are forgotten. we still celebrate its pol itical champion. Truman

took the idea of national health insurance and supported it- ardently. vigorously, and to the last. In doing so. he inspired reformers through the generations.

Truman illustrates how a presidential passion can echo

through the years.

Lyndon B. Johnson (1963-1969) On November 22 . 1963. President Kennedy was murdered in Dallas. Texas. The event defined an entire generation-as the attack on Pearl Harbor had done for an earlier age and the attack on 9/ I I would a later one. Americans gathered around their television screens and watched numbly. At the very moment he was killed. Wilbur Cohen. Kennedys effervescent health care policy advisor. was meeting with Wilbur Mills in an effort to revive Medicare. a top Kennedy administration proposal to offer health insurance for people over 6S.

For political scientists. Kennedy's legacy lies in the way he made direct appeals to the people. Yet. even as he remade the presidency around television . Kennedy illustrated the age-old dilemma of all presidential politics: Even a very popular bill can be blocked in Congress-and not 1ust in Congress . but by a handful of members on a key committee in Congress.

Like Harry Truman. John Kennedy's major health care legacy lay in setting the political agenda. Lyndon B. Johnson (LBJ) came up through the Senate ranks and understood Congress better than any modern president. Johnson took office. seized the Kennedy agenda. and-invoking the fallen president- began pulling laws out of Congress. He won Kennedy's stalled tax cut in February 1964. persuaded moderate Republicans to help break an 87-day filibuster and pass the blockbuster Civil Rights Act of 1964 (in July). and launched the War on Pov- erty (in August 1964)

Medicare was more complicated. The usual story- featured in Johnson's own autobiography-goes like this: The Ways and Means Committee remained opposed until a Democratic landslide in November 1964 made Medicare inevitable. Wilbur Mills. chairman of the Ways and Means Committee. then switched sides and led the Democrats to the victory he had long denied them. Mills took the admin- istration's Medicare proposal and. in a move that stunned Washington. linked it to two rival bills. tripling the size of the program. The administration proposal covered hospital costs: an alternative proposal would cover physician fees. and a third would shift the focus from the elderly to the poor

and create a federal-state partnership program Taken by happy surpnse . Johnson cheerfully acquiesced in Mills's coup and watched the new and improved Medicare sail through Congress

Recently released telephone recordings paint a differ· ent picture. Johnson reintroduced Medicare less than three months after Kennedy's death Through the spnng of 1964. Johnson courted Wilbur Mills. In one of their conversations. Wilbur Mills fretted that he had to give conservative Demo· crats who had long opposed Medicare some cover for chang· ing their vote Suppose, said Mills. we combine all the rival heath insurance proposals that are floating around Congress into one great package •tr you give me that bill. I'll under· wnte 1t, responded Johnson. who then urged Congressman M Is to go big and add even more As Mills warmed up, LBJ flattered him. ·1t will be the biggest thing you have ever done for the country We will come m and applaud you: he said Mills would get all the credit. In typical fashion. Johnson added . · 1 am not trying to go into details ... I trust your 1udgment on that •23

Wilbur Mills would eventually come around. but not that spnng When 11 became clear that the Ways and Means Com· mrttee would not release the bill to the House. LBJ worked on the Senate. He wheedled and caioled and managed Medi· care's hrst win. 49-44 "I don t want to leave the impression we twisted arms or forced individuals:· exulted the president. "but I'd say we did what we do on a lot of legislation .. Some a des wanted Johnson to emulate Kennedy and go public to pressure the House to JOin the Senate. Johnson refused. He WiS an inside player and knew the limits of public pressure (a:id perhaps also the limits of his own stiff telev1s1on style). Med care never made 1t through the House 1n 1964. With a touch of Texas populism. Johnson explained how the admin- istration would use the quest for Medicare 1n the November e ectJon We are really trying to do something for the peo- p e We think the average mother wants peace. she wants her husband to have a JOb. and they're looking for somethin' to Ll e care of 'em in their old age, and that's what we're try- ing to do ·2•

The 1964 election. held 1n the shadow of President Kennedy's murder. produced the biggest Democratic victory since 1936 House leaders promptly packed the Ways and Means Committee with liberal supporters. The Democrats singed out Med1care·s importance by labeling 1t HR I and SI-the first bill m the queue on both sides of Congress.

Four months later. in the middle of a packed Ways and Means Committee meeting. Wilbur Mills made his celebrated move. bundling three competing bills into a single "three-layer cake' -eventually known as Medicare Part A (hospital serv- ices). Medicare Part B (physician services). and Medicaid. "Like everyone else in the room I was stunned by Mill's strategy." averred Wilbur Cohen. the innuent1al health advisor. "President Johnson was also surprised and amused." reported a prominent journalist. Only after the White House telephone transcripts became available did we discover that Lyndon Johnson had been in on the surprise and had pushed Mills to expand 1t As LBJ had promised. all the credit went to Wilbur Mills 2'

Johnson swooped in every time he saw a potential road- block Three days after the Ways and Means Committee vote. President Johnson wickedly cleared a potential hurdle. He in· v1ted Senator Harry Byrd (D-VA). the chairman of the Com· m1ttee on Finance. to the White House. Byrd was a powerful Southern conservative who had always voted against Medi· care White House advisors thought he might bury the bill by postponing heanngs. Johnson had also invited Medicare's congressional supporters and surpnsed them all by ushenng them before the press. With television cameras rolling. the president smiled and ambushed Harry Byrd.

• LBJ . I know that you will take an interest in the orderly scheduling of the matter and give it a thorough hearing.

• Byrd· (taken aback] If I had known all this was going to happen I would have dressed more formally.

• LBJ: Would you care to make an observation [regarding Medicare]?

• Byrd [shaking his head] There is no observation I can make now. because the bill hasn't come before the Senate. Naturally I'm not familiar with 1t.

• LBJ [pressing him by the elbow] And you have nothing that you know or that would prevent [heanngs] coming about in reasonable time. not anything ahead of 1t 1n the committee?

• Byrd: (softly] Nothing in the committee now.

• LBJ : [leaning forward] So ... you will arrange for prompt heanngs and thorough heanngs?

• Byrd· [barely audible] Yes.2b

Byrd kept his word and did not delay the bill Presiden- tial advisor Larry O'Bnen later commented that Senator Byrd "was enough of an old pro himself to recognize a pro 1n

PART U • National Politica l Institutions

action and probably admired it a little bit." The coup was. continued O'Brien. "pure LBJ-none of his advisors were in on the plan. "27

Even after all that. passage was no cakewalk. In the crucial House vote on whether to bury Medicare back in committee. Medicare passed by 45 votes-44 of them from newly elected members (both Democrats and Republicans) . It was only after the relatively close vote that the bill enjoyed a 3 13-1 15 victory.

The Medicare victory invariably raises two questions. First. did the president matter. or is the story all about the elec- toral constraints? Not even Lyndon Johnson could get the bill through in 1964. Perhaps any president could have won the legislation in 1965. Researchers put the question to Wilbur Mills more than 20 years later-Would John Kennedy have won the program had he been president in 1965? .. No. No." responded Mills. "and that's where Johnson doesn't get the credit. He had the greatest ability of any president to get things done. "28 With time. we can see the potential hurdles more clearly: Compromises in Ways and Means might have made the bill smaller rather than larger: the House Rules Com- mittee might have delayed it; the Senate Finance committee might have delayed further: the administration itself might have been tempted to rethink the legislation and put it off.

Second, could Johnson have won even more? Given the reforms flying out of Congress after the 1964 landslide. might the Democrats have won a full national health insuran ce plan? More than 40 years after the fact. it is easy to imagine Truman's ideal as another irresistible feature of the Great So- ciety. But delve into the details-the caution of Wilbur Mills. the 45 -vote margin in the House . the reluctance of Harry Byrd . the long negotiations on every side-and 1t becomes clear what an immense leap it would have been. In fact. as LBJ so often warned. delays might have lost the entire bill. Im- merse yourself in the fears of the era and a full-blown national health insurance seems like a great stretch-it is no surprise that none of the president's advisors suggested it.

The question itself suggests both strength and weakness in the Johnson White House. His most successful programs- Medicare. Medica id. and civil rights-came to him carefully crafted and ready to go. ·with a program already in hand . LBJ could do what he did best: negotiate the pol itics of passage.

The administration was not always as effective when it was planning or packaging new programs. Johnson was impatient with abstract ideas. fo rmal policy studies. and

budget analyses . "Those fools had to go to projecting it [mt health program) down the road five or six years.M he grumblec to Senator Ted Kennedy. 29 'You JU St make this thing WOil don't give a damn about the details." Johnson told the archi- tects of the War on Poverty. "I'm not trying to go into de· tails," he said to Wilbur Mills. about Medicare.30

Lyndon Johnson's executive branch was loose and cha- otic. There was no Office of Management and Budget to hod everyone's feet to the numbers . There was very little forma policy analysis and few links between policy development and budgeting until new advisors like Joseph Califano began im· posing some order in late 1965 Ironically. the nse of a more robust policy analysis framework-introduced in the follow· ing years-would yield more careful policy development but inhibit dec1s1ve action on domestic problems.

For two years. Johnson acted like a supermaionty leade· and-together with a rare Democratic supermajority-won programs like no other modern president except Franklin Roosevelt. Medicare and Medicaid transformed American social pol icy. Together they would make the federal government the largest purchaser of health care services. eventually add up to the second largest item in the federa! budget. and comprise almost 40% of all health care spending

Still. Lyndon Johnson's great reforms mark the end of the Democratic era . There was no future administration to build on the legacy. Four out of the next five presidents would be Republicans . Bogged down by Vietnam. race nots. student protests. and economic trouble. Johnson declined to run another term. His successor would construct an entirely new regime in American health politics and policy.

Richard M . N ixon (1969- 1974) President Nixon stands at the crossroads of American health politics. An era of expansion-marked by a freewheeling de· bate over spreading health care benefits-turned into an era of retrenchment marked by concern over cost control. In this changed context. Nixon devised the first new universal health plan since Roosevelt.

Health care mattered to Nixon. He had been deep ly affected by his brothers· painful. expensive. and fatal bouts with tuberculosis. Right after taking office. Nixon requested a health care study from Health. Education. and Welfare (HEW) secretary Robert Finch. Six months later. report in hand. the president told the nation. "The problem is much greater than

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I had realized We face a massive crisis in this area and unless action 1s taken ... to meet that crisis within the next 2 to 3 years. we will have a breakdown 1n our medical care system."ll

What to do7 The Finch report pointed to prepaid groups or HMOs. Poltcy entrepreneurs had taken an old idea . prepaid group practice. and repackaged 1t as a way to inject market com- petioon into the health care chaos The administration came to see the idea of HMOs competing for enrollees as the solution to every problem . In July 1969. the adm1ntstrat1on floated the idea of HMOs for Med1ca1d . In February 1971. the administra- tion unveiled a nauona l health strategy that would push the entire population toward HMOs "An HMO ... cannot afford to waste resources that costs more money in the short run." ex- plained the president "But neither can 1t afford to economize in ways which hurt patients for that increases long-run expense." They would solve the age-old problem of getting high quality at low costs Assistant Secretary of Health Lewis Butler speculated that 90% of all Amencans might be tn H MOs by 1980. 32

Prepa id group health plans had been tn operation for dec- ades. They were not very well known or especially popular. Few people 1mag1ned that HMOs were a "solution" to any pohcy problem-much less costs. access. coord1nat1on. and preventive care. The Nixon administration plucked the idea from a small group or poltcy entrepreneurs. placed It before the public, and turned 1t into a perennial solution to American health poltcy woes 33

In the short run. however. the adm1n1stration's HMO 1nit1a- t1ve foundered in the political maelstrom . Liberals . led by Ted Kennedy, seized on the concept for their own goals. The Nixon adm1msuat1on found itself f1ght1ng expensive add-ons that. in 1ts eyes. threatened to turn a cost cutter into a budget buster. The final poltcy result. the HMO Act of 1973 p1eased almost no one and did nothing to help the fledghng HMO market.

The N1X0n adm1msuation introduced another important break with Democrat.Jc proposals by re1ecttng a universal government heath insurance program on the Social Security model : "there simply 1s no need to eltm1nate an entire segment of our private economy: said the president. Instead. he proposed "a partner- sh p" between "government and our people. business and labor. the insurance industry and the health profession " Employers would continue to cover employees through private plans: gov- ernment would fill in the gaps and cover the poor and old.

Nixon's comprehensive health insurance program (known by its acronym , CHIP) became part of the national debate

in 1971. although it was not formally introduced until 1974. Inevitably, the CHIP proposal joined rival bills in Congress. Senator Ted Kennedy submitted a classic national health in- surance package that looked like an extension of Medicare The Nixon adm1nistrat1on would extend the private health in- surance system and fill in its gaps while Kennedy countered with a universal public program.

Time ran out on the Nixon administration In August 197 4. he became the only president to resign and leave of- fice. National health insurance was lost in the storm Liber- als. expecting to win back the presidency at the next election. saw no reason to compromise with the conservative public- private "partnership" tossed up by a s1nk1ng administration . Of course. getting big health care change through Congress is never easy. Winning the reform under the looming shadow of impeachment and disgrace was. perhaps. impossible.

However. the Nixon administration left behind what may be the most ironic legacy in health care poltcy. It shifted the fo- cus from a national health program to a government program that fills gaps in the private sector. Nixon's proposal-with its public-private partnership-would become the prototype for almost every subsequent effort. Nixon flew off to his disgrace leaving behind a bitter fate for liberal reformers: They would spend the rest of the century unsuccessfully chasing varia- tions of the reform they rejected from Richard Nixon .

Barack Obama (2009- 2013) On the campaign trail. candidate Obama competed with Hillary Clinton to sound the social insurance themes. He wrapped his campaign in the classic style and rhetoric of the social gospel the moral call to feed the hungry. lift the poor. and care for the 111. The idea got plenty of play for example. in a famous debate with Joe the Plumber-a large man with a goatee who challenged Obama about taxes and prompted a now famous comment from the candidate: "My attitude 1s that 1f the economy's good for folks from the bottom up. it's gonna be good for everybody. If you've got a plumbing busi· ness. you're gonna be better off 1f you've got a whole bunch of customers who can afford to hire you. and right now everybody's so pinched that business is bad for everybody and I think when you spread the wealth around. it's good for everybody."

Republtcans pounced on the last line-spread the wealth- and branded the Democrat a socialist On the campaign trail, candidate Obama stuck to his pos1t1on. articulating the social

-~p~~~R~T~I~I~·~N~a~ti~o~n~a~I~Po~lit~ic~a~l~I~n~st~it~u~ti~o~n~s----------------------------------------------~~~-­ r-- democrat's canon: "When you spread the wealth around. it's good for everybody."

Once in office. the president did the first thing exactly right: He moved very quickly. Within three months of taking office. health care legislation was before five different commit- tees in Congress.

The legislation that took shape relied heavily on private in - surance markets. First. the bill established new rules for the private insurance markets: companies could no longer refuse to cover preexisting conditions or cap the amount they pay for an illness or chronic condition. Second , the federal gov- ernment extended Medicaid coverage to everyone making less than 133% of the federal pove rty level (or about $30.000 for a family of four). Third. a tax deduction helped most middle- class families buy health insurance. Statewide insurance exchanges were meant to guarantee a large pool of premium payers-and drive down costs. Fourth. a mandate required people to carry private hea lth insurance or pay a fine: large employers would either offer health insurance or pay a fine. Finally. a host of new rules pushed the health care industry to become more efficient. Examples range from encouraging electronic medical records to adopting new quality standards.

In the great sweep of national health insurance. this was a modest bill-a far cry from the Truman. Johnson. or Kennedy bills that created a government program (like Medicare) . which paid the health care bills for everyone who qualified. Liberals fought long and hard to include such a provision as a volun- tary matter-individuals could join a Medicare-type program (this was known as the public option). But two Democratic senators refused to go along. As the bill needed 60 votes to break a filibuster in the Senate. any single Democrat could . if he or she wanted. dictate terms to the administration.

The classic Democratic idea known as social insurance leaked out of the proposal. The Democrats lost the public op- tion . a weak form of a single payer. and then a Medicare buy in (permitting younger people to buy into the Medicare pro- gram). which was. in turn. a weak form of the public option.

The reliance on priva te health insurers seemed briefly to wink across the aisle . A small knot of Republicans . led by Cha rl es Grassley (R-IA) negotiated long and hard- underscore long-with Senator Max Baucus. the cha ir of Sena te Finance. The subtext of their negotiations can be summarized like t his: Keep the soc ial insurance out of this package and a couple of us Republicans might just support it. In truth. there is a thin area of agreement where the health

care wonks of the center left and the center right find com- mon ground. Beltway Republicans aim to unleash the power of markets on American health problems: the Democrats turn to regulation with a more cautious dose of competition. The mix of government regulation and health care markets shades across party lines. However. the solutions-whatever their technical merits-are politically unstable because the true believers in both parties despise them . In every generation. the progressive impulse-fix the machinery-crashes into the unyielding politics.

Both the Washington consensus on health care and the administration's own broader vision pulled in the same direc- tion: A careful. managerial health reform heavy on technologi· cal solutions. It went light on social insurance (we are all in this together) and relied. instead . on regulation . technology. and markets. In a less charged political season. a handful of Republicans might very well have negotiated an agreement and signed on to the legislation.

The most dramatic turn in the debate came in the long hot summer of 2009 . Right-wing populists. self-styled Tea Pa rty activists. roared into the health policy discussion screaming their familiar critique: "socialized medicine." This time. they managed a new rheto rical variation on the antigovernment cri tici sm: This plan would introduce government-run death panels- a pungent. memorable. simple. and effective symbol of the evil state. In the past debates. the opposition came from well-oiled . richly financed corporate lobbies like the phy· sicians or the insurers. This time it came from an explosive grassroots movement. the Tea Party conservatives Repo rts suggest that conservative organizations richly funded the Tea Party activists too. However. it 1s generally a mistake to dis- miss populist energy. The furious outbursts tapped a powerful idea that stretches back over time. They may have been well funded . but ordinary people responded to the health care pro- posals with their veins bulging.

The health care debate has always turned into a debate about what kind of nation the United States is. It is no coincidence that the most deeply felt issues of our time-race. 1mm1gra- tion. welfare. the role of government. and abortion-all roiled up with health reform. It was the issue of illegal immigration that moved Congressman Joe Wilson (R-SC) to shout "You lie" as the president spoke before Congress: 1t was abortion that almost derailed the reform among the Democrats in the Hou se. And. as always. there were plenty of hints that race and religion were roiling somewhere in the mix.

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Perhaps every nat1on"s health care system offers a snapshot of essential nattonal charactenst1cs. of the kind of community the nation aspires to be It may be that health care in the United States ra!SeS the deepest communal question- Who are we?

In this case. the nght·wmg populism grew so hot that even Senator Charles Grassley (R·IA) turned and pandered. "You have every nght to fear You shouldn't have counseling at the end of hfe . We should not have a government program that determines 1f you're going to pull the plug on grandma:· Dem· ocrats in Washington . who thought they were prepared for the standard inflated rhetoric about socialism. were gobsmacked about death panels Where was this coming from? There is no reason to be surpnsed It comes from a venerable national well spnng It 1s the great American fear of government

The Obama health reform weathered the storm The House squeezed out its version of the reform ( 220-215) on November 7. 2009 The Senate managed its own vote on December 24. without a single vote to spare Now. all that remained was to square the two different bills-a process that is done in a con · ference committee where the House and Senate negotiate their differences and come up with one bill It 1s worth pausing and contrasting the Clinton expenence. By this point in his adminis· trabon. Clinton had still not submitted a bill to Congress. Obama would have fa tled too 1f he had been on the Clinton timetable.

Suddenly, in m1d·January. before the conference could be held. a ttle·known Repubhcan named Scott Brown won an up· set victory in a special Massachusetts Senate race to fill the seat ofTed Kennedy. the hon of health reform . Brown had run pledg· mg to stop Obama's health reform . And he was in a pos1t1on to deliver on the promise. for he was replacing the 60th Democratic vote With JUSt 59 votes. the Democrats had no way to break the fi buster when the bill came bad: from conference.

Democrats panicked and the health reform appeared to de· !late in the Washington winter. Many Democrats proposed that the admm1strat1on pivot away from health care: Go for someth ng else. or try for more modest reforms .

Instead President Obama remained committed to the full reform For the fi rst time. he went out and-a year after the debate began-launched a full-throated rhetorical defense. The president began to barnstorm in defense of the plan . At one typical Democratic fundra1ser in February 20 I 0. Presi- dent Obama hushed the audience with a story he did not tell lightly An uninsured Obama volunteer from St Louis was dy- ing from breast cancer (Unspoken: just like Obama's unin- sured mother died from ovarian cancer).

CHAPTER 4 • T he Presidency 14 "She 1ns1sted she 1s going to be buried in an Obama T-shirt."

the president continued. "How can I say to her. 'You know what. we're giving up'? How can I say to her family. 'This is too hard'? How can Democrats on the Hill say. 'This 1s politically too risky'? How can Republicans on the Hill say. 'We're better off just blocking anything from happening'?" The president did what only a president can do: He used the bully pulpit.

Emboldened. Democrats bypassed the committee The House simply passed the Senate version of the btll. then slipped ad1ustments into a budget bill that only needed a s1m pie maionty-no filibuster permitted.

The Obama admm1strat1on had won a program that Demo· crats had been struggltng to win since the Roosevelt admtn· 1strat1on It succeeded where its predecessors-Roosevelt. Truman. Kennedy. Nixon. and Cltnton-had failed . Only one Republican (m the House) voted for the legislation. The Dem- ocrats won a great victory-with a bill whose provenance was almost entirely Republican-although from an earlier. much less conservative. generation of Republicans. Still. there is no gainsaying the skill it took for the White House to negotiate the largest (and most complicated) health reform m history.

The battle continued-there are few precedents for a con · flict that rages on quite so fiercely after Congress has passed major legislation. Republicans took the administration to court. and. in June 20 12. the Supreme Court surprised observ ers by upholding most of the reform (Natrona/ Federation of Independent Business u. Sebe/ius) . 5-4. The usual swing vote on the court. Justice Anthony Kennedy. voted to strike down the entire leg1slat1on. A trusty member of the conservative bloc. Chief justice John Roberts. voted to uphold However. by a 7-2 maionty the court ruled that Congress could not re· quire states to expand Medicaid to all poor people-it had to be an option. not a mandate.

Even after the court victory. the conflict continued. The issue shifted to the 2012 election campaign. Republicans promised to do the JOb the Court had refused to do (by a single. unex· pected vote): Win the election and repeal the entire program. Democrats did not so much defend thetr program as much as they hung gnmly on. When President Obama won handily and extended his Senate maiority (while Republicans kept con- trol of the House). the battle shifted to implementation on the state level. where Republican governors and legislators contin- ued to announce their opposition (while. backstage-as you will see 1n Chapter 9-many appeared to be slowly coming to terms with the ACA) .

PART JI • National Political Institutions

CONCLUSION Reading health care across presidential history suggests a different way to understand the presidency. Rather than simply measuring success in winning programs. consider how each administration reshaped the health care de- bates. Presidents introduce ideas. redefine problems. and propose solutions. Each changes the way Americans think and talk about health care.

Harry Truman. for example. left an enduring mark not by winning-he never came close-but by fiercely cham- pioning an idea that the Roosevelt administration had half-heartedly passed down to him. His fight inspired lib- eral reformers for generations. Richard Nixon plucked the idea of health care competition out of the policy stream: although his proposals never got very deep into the leg- islative process. he fundamentally reorganized the debate by championing both competition and public-private part- nerships. Even liberal plans would soon reflect the Nixon approach. Presidents Lyndon Johnson. George W. Bush. and Barack Obama won major health care reforms- Medicare. Medicare part D (covering prescription drugs). and the ACA.

Every president-enthusiastically or grudgingly-has joined the health care battle. Every modern president has contrived a plan. But presidential efficacy in this domain requires passion and a willingness to take major risks for an uncertain goal. It requires enormous presidential skill as both politician and policy maker. Health care is in many ways the ultimate domestic test of presidential effective- ness. which is perhaps why so few appear to have suc- ceeded in achieving their health care goals.

What advice can we offer after our survey of the presi- dents and their efforts to extend health benefits to Ameri- cans? Of course, the context is always crucial and ever changing. Still. across all the differences. we find the same patterns.

M ove Fast, Act Early The day after the presidential election. the savvy health policy analyst ought to slip her president-elect a message: Hurry up. you are almost out of time. Administrations

------ begin spending their political capital from the moment they take office. and they rarely acquire more. Health care in particular. requires every shred of capital a president can muster.

The contrast between Clinton and Obama tells the story dramatically. Obama was running out of political capital as his reform staggered across the finish lme: Clinton was losing political capital just as fast-but hrs reform went into Congress at the same point in the admin1strat1on as Obama's reform had been passed through both houses and faced only the problem of reconciling what the chambers had done

Lyndon Johnson reinforces the lesson. Historians look at that 1964 landslide. count the votes on the Ways and Means Committee and conclude that Medicare enjoyed. in Theodore Marmor's memorable phrase. the "polrtrcs of legislative certainty." Medicare proved a certain winner partially because Johnson hustled the bill through both the House and Senate whrle the November vote count was still warm.

M aster the L egislative Process Modern presidents have extraordinary resources at their disposal. Yet many administrations have been maladroit at managing the congressional process. As Tip O'Neil told Jimmy Carter. "Pennsylvania Avenue is a two way street." There rs no escaping the duet. President and Congress "legislate together." as political scientist Mark Peterson put it If the president is not effective at working the other end of Pennsylvania Avenue. he needs to find skillful staff members to do the JOb. 3~

Mast er the White House When Franklin Roosevelt came to power. he could sit down with his entire staff in the Oval Office. Over time the White House Staff grew until hundreds of staff mem· bers (thousands if you count the larger EOP) encircle the president. There is always an economic advisor buzzing in the president's ear. The policy detail can be overwhelming. The president has to constantly focus on the brg picture

wh e mastenng enough detail and information to keep the b g picture grounded President Jimmy Carter famously lost sight of the former. and President George W Bush the latter.

Big picture aside. the pres1dent1al office takes manage- men~ Here. for the most part. Republicans have been more s 11lful than Democrats Democrats keep 1mag1ning that they can leash the creative chaos of a Franklin Roosevelt or a Lyndon Johnson They cannot-not any more. not to· day. There are plenty of ways to keep the windows open to new ideas But the modern presidency needs careful or- gamzauon around a nimble and experienced chief of staff.

Beyond the simple pressures of smooth organization I es a formidable political question. The president has his own White House advisors. directs the Executive Office of the President and leads the sprawling executive branch of government What 1s to be the relat1onsh1p between these mst1tut1ons1 The key is not finding the perfect a gnment-each model has strengths and weaknesses- but ma mg the three pieces of the executive branch work together smoothly Or put more realistically. the adm1nis· tration must manage the executive branch's inherent ten- dency to chaos

What/.\ tire Bix Tlli11g? Presidents can normally win only a few big things . Each admin stration has to focus on a few important objectives 1f they are to win their agenda. Jimmy Carter lined up his do-good reforms Mbumper·to·bumper.- and lost most of the b g ones Clinton complained that events constantly d stracted him and nocked him off his main concerns. Pres dents do well to keep their big idea-health care for Truman reducing government for Ronald Reagan . home- land security for George W Bush. and the ACA for Barack Obama-at the center or their attenuon To succeed. first focus then push. push, push

This rule can also inform voters as they Judge candi- dates The key test of any president is very simple and often overloo ed What does this man or woman care 1n· tensely about7 What 1s the passion? Voters should take the candidate's gut·deep obsession seriously because that is what he or she ts most likely to achieve Voters who care about health care should not expect much from presidents

who lack passion on the issue The issue is too tough and too risky. The fate of health care reform 1s sealed. in many respects. on election day

The Power of Ideas Political sc1ent1sts often rate presidents by how many bills they get through Congress. Presidency watchers publish "scorecards" with their success rates. But the deepest power of the office lies in the ideas that the president promotes. Harry Truman and Ronald Reagan succeeded more at projecting a set of ideals than in crafting laws or winning programs. The presidency 1s the one institution 1n American life that 1s geared for projecting ideas to the country and the world One of the great health care lega· c1es for any president 1s the power to imagine a new health care idea to leave his successors a new set of options.

lessons of History Before coming into office. Reagan administration officials carefully studied what their predecessors had done right and wrong. From the start. they organized their administration around the history lessons . The Obama administration scrutinized Clinton's failed health reform for what not to do and by and largely avoided the snares that caught the Clintons. Every administration is a learn· mg process. each holds important clues about running an effective White House.

Of course. administrations learn Presidents and their advisors often grow into their roles. By the time they do. they have lost that early advantage. Moving fast and early means working the White House-working the govern· ment machinery-smoothly nght from the start. The best way to do that 1s to master the lessons of the past ad· ministrations: How did they organize the White House? The relations with the cabinet agencies? With Congress? With the media? Each prior administration is rich in do's and don'ts. An incoming administration ignores them at its peril.

Successful administrations examine the health legacies or previous administrations without the blinders of politi· cal distaste or personal pique for predecessors. Clinton's faith that he could design a new proposal that was fun· damentally better than anything to come before may have

PART II • ational Political Institutions

sunk his program and his party (for more than a decade). In contrast. President Johnson's willingness to embrace the Kennedy legacy gave him a huge head start: The pol- icy work was already done.

What 's Next? Every president is, in his own way, an extraordinary per- son. Each brings a different set of talents i nto the Oval Office. Each. of course, also arrives with frailties and lim- its. Some accomplish great changes in American health care: most fail to do so. And each inevitably passes on

health care dilemmas to the next president. Even great policy victories. when they come. create new problems to

be resolved.

In the end. health care politics and policy simply stretch indefinitely into the future. It 1s. after all. the place where politics and interests meet the human condition. the issue that reflects the greatest challenge to any society: How well do we minister to our fellow humans? Seen this way. health care will always challenge the head and the soul of the vulnerable human who sits

in the Oval Office.

STUDY QUESTIONS - ------------- I. Do Americans want a strong president?

2 . What three dimensions help us understand how presidents influence health policy?

3. How does the president function as an agenda setter?

4. How does the president function as a political operator or legislator?

S. How does the president function as a manager or administrator?

6 . Why is the Office of Management and Budget (OMB) important?

7. Why does a president use executive orders?

8 . What are the two "perils" presidents face in translating their general ideas into concrete policies?

9. In the author's opinion. what are noteworthy health care proposals. plans. and programs involving specific presidents

since FDR?

IO. Based on the history of the presidency and health care reform efforts. what are some words of advice the author

offers future politicians?

ENDNOTES I. Dalleck. 1996. pp. xii-xiii.

2. Ibid.

3 . Constitution of the United States of America . Amendment Io.

4. Thoreau. 1848. The quote is often mistakenly attributed to Jefferson P"' •dent Ronald Reagan's first inaugural address.

S . Hamilton, Federalist 70.

6 . Schlesinger. 1973 .

·-

p

1. Roosevelt. 1933. For a perspective that emphasizes the talents of the presidents themselves see Landy and Milk1s. 200 I.

8. See Skowronek. 1993 . 2006.

9. Kingdon 1984

10. President and Mrs Reagan. 1986. Morone. 2003, pp 466-68.

11. Lyndon Batnes Johnson. White House Tapes . Lyndon B. Johnson Presidential library. C.7024-7025. Hubert Hum- phrey. March 6, 1965. 11 :25 a.m.

12. Michael Decourcy Hinds. 1991 : Hacker. 1997. p. IO (on 40-point lead).

13. The quote. from historian Dons Kearns Goodwin. is reprinted in Weissert and Weissert, 1996. p. 75.

14. Light used data from 1960 through 1977. Some recent studies have questioned his findings though for health care they hold up extremely well (Light. 1982); Johnson quoted by Burns. 2006. p 83.

IS. Jacobs. 2006. Jacobs and Shapiro. 2000

16. If your favorite president 1s not mentioned. or 1f you want more detail. see Blumenthal and Morone. 2009. which cov- ers the health care story of every president from Roosevelt to Obama.

17. Truman Pres1dent1al Library. October 5, 1953 .

18. Truman. No...,ember 19. 1945. The draft data gathered in considerable detail in the Papers of Samuel I Rosen man .

19. Harry Truman Library. Papers of Samuel I. Rosenman.

20. US Senate. National April 2-16, 1946. 47 ff. For discussion. see Starr. 1982. p. 283.

21. McCullough . 1992. p. 473 .

22. Blumenthal and Merone. 2009. p. 67

23. LBJ library. White House Tapes. Citation 3642. Wilbur Mills. June 9. 1964. 9:55 a.m. (telephone): Citation 3686

Larry O'Brien June 11, 1964. 3:55 p.m.

24. LBJ Library, White House Tapes . Citation 5444. Myer Feldman, September 3, 1964. 11: 14 a.m.

2S. Harns. 1966, pp 187-88 26. LBJ library Lawrence F. O'Brien Oral History. Interview XI July 24. 1986. By Michael L. Gillette. Internet Copy. Full

quotation in Harns. 1966. pp. 190-91.

27. LBJ Library Lawrence F O 'Brien Oral History. pp. 24-25.

28. Wilbur Mills. Oral History. March 25. 1987.

29. LBJ library, White House Tapes. C.6718, Edward Kennedy. January 9. 1965, 11 :32 a.m.

JO. lsserman and Kazin. 2000. p. 109 .

JI. Richard M Nixon. 1969.

32. Richard M. Nixon. 1971 . Special Message to Congress Proposing a National Health Strategy.

33. For an outstanding account of HMOs m this period. see Brown. 1983.

34. Peterson. 1990

PART ll • National Political Institutions

REFERENCES Blumenthal. D. , and J. A Morone. 2009. The Heart of Power: Health and Politics in the Dual Office Berkeley: University

of California. Brown, L. D. 1983. Politics and Health Care Organization: HMOs as Federal Policy. Washington. DC: Brookings

Institution. Burns, J. M. 2006. Running Alone: Presidential Leadership-JFK to Bush II . New York: Basic Books.

Califano, J. 1981. Goueming America: An Insiders Report from the While House and the Cabinet. New York: Simon and

Schuster.

Dalleck. R. 1996. Hail to the Chief. New York: Oxford University Press. Dickinson. M. 2006. "The Executive Office of the President: The Paradox of Politicization." In J Aberbach and P.

Peterson. eds .. The Executiue Branch. New York: Oxford University Press

Fraser, S. 2005. Euery Man a Speculator: A History of Wall Street in American Life. New York Harper.

Hacker. J. 1997. The Road to Nowhere. Princeton. NJ: Princeton University Press.

Harris. R. 1966. A Sacred Trust. New York: New American Library. lsserman. M., and M. Kazin. 2000. America Diuided: The Ciuil War of the 1960s. New York: Oxford University Press.

Jacobs. L. 2006. '"Communicating from the White House." In J. Aberbach and P. Peterson. eds .. The Executiue Branch. New York: Oxford University Press.

Jacobs. L., and R. Shapiro. 2000. Politicians Don't Pander. Chicago: University of Chicago Press.

Kingdon,J. 1984. Agendas. Altematiues and Public Policy. Boston: Little Brown.

Landy. M .. and S. Milkis. 200 I. Presidential Greatness. Lawrence: University Press of Kansas.

Light. P. 1982. The President's Agenda: Domestic Policy Choice from Kennedy to Carter Baltimore. MD Johns Hopkins University Press.

Lowi. T. J. 1985. The Personal President. Power lnuested. Promise Unfulfilled . Ithaca. NY Cornell University Press.

McCullough, D. 1992. Truman. New York: Simon and Schuster.

Marmor. T. J. 1973. The Politics of Medicare. Chicago: Aldine.

Milkis, S. M. 2003. The President and the Parties New York: Oxford.

Morone. J. 1998. The Democratic Wish: Popular Participation and the Limits of American Gouernment. New Haven. CT: Yale University Press.

--· 2003. Hellfire Nation: The Politics of Sin in American History. New Haven. CT: Yale University Press.

Morone. J .. and A. Dunham. 1985. ··slouching to National Health Insurance: The New Health Care Politics." Yale journal of Regulation II (2): 263-291.

Peterson. M. A. 1990. Legislating Together: The White House and Capitol Hill from Eisenhower to Reagan. Cambridge MA: Harvard University Press.

Ouadagno, J. 2005. One Nation Uninsured: Why the US Has No National Health Insurance. New York: Oxford University Press.

f-" CH APTER 4 • The Presidency - ,----~~~~~~~~~==2-1---~

Schlesinger. A. 1973. The lmpenal Presidency. New York: Popular Library.

Skowronek. S 1993 The Politics Presidents Make: Leadership from john Adams to George Bush. Cambridge, MA: Harvard University Press.

_ 2006. " Presidential leadership in Political Time." In M. Nelson. ed .. The Presidency and the Political System. Washington. DC· CQ Press.

Starr, P 1982 The Social Transformation of American Medicine . New York· Basic Books.

Thoreau. H D 1848. On the Duty of Ciuil Disobedience. Lecture given at the Concord Lyceum [originally published. 1949). Retrieved from http://www.gutenberg.org/etext/71 on March 30. 2007.

Weissert . C . and W. Weissert. 1996. Governing Health . The Politics of Health Policy. Baltimore. MD: Johns Hopkins.

The courts produce their own version of health politics and policy. Of course, the legal process is very different from the legislative and executive branches described in the preceding chapters. In this chapter. Timothy Jost introduces the American courts as policy makers by explaining the four different roles that the courts play in the American system.

Courts play a vital role in shaping American health policy. In - deed. they play a number of roles. Courts make law. as Anglo- American courts have for centuries . through the explication and development of the common law. Courts enforce the law by deciding cases initiated by prosecutors. administrative agencies. and sometimes private parties. Courts interpret the law that is made by the legislative and executive branches. Finally, courts decide on the permissibility of law as made by the legislature or executive branches when regulations are contested as violating the law or legislation is chal lenged as unconstitutional. The courts assume each of these roles in disputes involving hea lth policy.

In each of these instances . the decision s of the courts are driven by public policy-by the courts' vision of the po li- cies the law was intended to promote or shou ld promote. As courts develop and apply the co mmon law. they bring to bea r the policies that underlie common law doctrine. As courts interpret and enforce the law, they attempt to promote

the policies embodied in the law. As courts adjudicate the constitutionality of laws or regulations promulgated by the other branches of government. they seek to protect the poi Cf choices enshrined in the Constitution.

Courts are also affected by politics in a conventional sense. The role of pol1t1cs in judging and the role of judges in poli· tics are much debated but beyond the scope of this chapter. Suffice it to say that judges are not immune from politica considerations and pressures and that judicial decisions can have a profound effect on the other "political" branches o! government. One need merely consider the Supreme Court's abortion rulings. which have on the one hand shaped legisla- tive responses to abortion over the past four decades by taking some legislative options off of the table while making others more attractive, and on the other have profoundly affected electoral politics by focusing voting behavior on a highly divi· sive issue about which many Americans have deeply held be· liefs. The litigation challenging the Affordable Care Act (ACP.

presented the spectacle of over half of the states-almost exclusively Republican-led states-suing the federal govern- ment to en1oin the 1mplementat1on of a federal health reform law enacted entirely by a Democratic Congress. 2

This chapter begins with a brief overview of the role of law in society. intended to provide a context for discussing the role of the courts specifically. Then it offers a concise description of the American courts and how they function. The chapter explores at greater length the role of the courts

1n making. enforC1ng . interpreting, and judging the law and the role or public policy in driving the decisions of the courts aflect1ng health care.

THE ROLE OF LAW Courts are 1egal inst.tut1ons. But what 1s law?1 First. and per· haps most obviously. law provides rules that channel human behavior. This 1s often referred to as the social control func- tion or law Law IS only one of the forces that shape human behavior SO< ·1al norms. religious beliefs. financial incentives and disincentives. and personal morals probably have a more 1mmed1ate and pervasive effect on behavior than does law For example. ree·for·serv1ce payment. medical education. profes- sional concern ror patients. and the dec1s1ons of courts ap· plying med1Cal negligence law all play a role in encouraging physicians to provide unnecessary medical care. often referred to as derensive med1cine.6 Law 1s only one of a number of fac- tors dnV1ng defensive medicine. but 1t does play a role

Second. law resolves disputes or conflicts 1 These could be disputes between ind1v1duals. between firms . between ind1· viduals and r1rms. or with public inst1tut1ons Conflict can be resolved through formal legal institutions established for this purpose-most obviously, the courts-or 1t can be resolved informally Although most human conflict is resolved without resort to law. conflict 1s often resolved "in the shadow of the law."8 Conflicts involving medical staff privileges. for example. may end up in court but are far more likely to be resolved Within a hospital's medical staff committees or through infor- mal negotiations.9 Regardless of how a staff-pnvileges dispute is resolved. the hospital 's counsel will likely advise the hospi- tal as to the relevant federal and state law. including govern- ingjud1c1al decisions, and this law will inform the resolution of the dispute.

Third. law establishes institutions and procedures for gov- ernance. This 1s the primary function of the US Constitution. for example This 1s also the purpose of laws establishing and

C H APTER 5 • The Courts

defining the 1urisdiction and authority of the executive depart· ments and agencies and of the courts. and the justification for procedural rules. One example is the law through which Congress has delegated to the Department of Health and Hu- man Services authority to interpret the fraud and abuse laws. including the creation of "safe harbor" rules that describe conduct a health care provider can engage in without fearing prosecution under those laws.10

Fourth. law governs the distribution of benefits and privi- leges by the state. These have traditionally taken the form of licenses or economic privileges. such as professional licenses or "certificates of need." In the past half-century. however. benefits have often taken the form of goods. services. or cash. distributed through research funding or programs such as Medicare and Medicaid.'

Finally. law has an expressive function: It articulates values for a society. 2 The civil rights and environmental laws not only lay down rules for conduct. they also art1Culate a soci- etal commitment to equality and to protection of the environ- ment. The Supreme Court's abortion or "right to die" cases articulate societal values. which remain highly contested. concerning medical privacy. individual choice. and the sanc-

tity of life.

Although the courts tend to be seen primarily as institu- tions for resolving conflict. they in fact play a role in perform- ing each of these law functions. They establish rules through the common law process described later in the chapter. They lay down their own procedural rules and interp ret statutes and regulations establishing other governmental institutions. They interpret laws providing licenses and enforce rights to benefits. Finally. through their decisions they articulate val - ues. Each of these functions will be discussed in the following

sections.

THE AMERICAN COURT SYSTEM To understand the role of the courts in the American health care system. it is useful to understand how the American JU· d1C1al system is organized.'3 In the United States. we have two parallel court systems. the state and federal courts. The state courts have jurisdiction (or authonty) to hear any dis- putes involving state or federal law except for disputes in- volving a few areas of law-such as patent. copyright. and bankruptcy cases-where the federal courts have exclusive

1urisdiction.

I 11 I I I

PART II • National Political Institutions

The federal courts have limited jurisdiction. 14 They are only allowed to hear cases over which they are explicitly given juris- diction by the federal Judiciary Act. This includes any dispute involving federal law and cases between citizens or different states involving large sum s or money (currently $75,000 or more). 1s The federal courts can also hear claims involving state law that are "pendant" or supplemental to federal claims that are otherwise before them. 16

Jn civil law systems. all conceivable legal issues are ad. dressed by a comprehensive statute the c1v1I code. The role of the courts in a civil code system 1s to interpret the coee on a case-by-case basis. In the Anglo-American commo" law system. statutes are not comprehensive 9 Rather they address specific issues to which legislatures have turned their attention in the context of the background common law. which otherwise governs. The common law or COO· tracts . for example. governs consensual relationships among individuals and firms The common law of torts provides fo· redress of 1n1unes one person causes another. while prop· erty law defines relationships among persons with respec: to things. Where a statute. such as the Uniform Commercial Code. has been adopted by a legislature. 1t supersedes the common law. but in the absence of a statute the common

Both the federal and state courts have trial courts and appel- late courts. Trial courts decide questions of fact based on the evidence presented by the parties and make initial decisions on questions of law. 17 In the United States. factual disputes can be resolved by juries. although they are far more often decided by judges witho ut a jury. Judges always decide questions of law. In most states and in the federal system. the legal deci- sions of a trial court judge can be appea led to an appellate court. Appellate courts are supposed to decide only questions of law and not to retry the facts decided by the trial court.

law governs.

The common law is judge-made law. It 1s the law that has emerged from the Anglo-American courts over the centunes as they have addressed disputes that came before them The law as enunciated by the highest court of a particular iuns· diction is binding on the lower courts as to the question decided . The law as it emerges from decisions or courts from other jurisdictions-of another state. a parallel appellate court within a state. or even another common law country-is con· sidered as potentially persuasive authority in common law cases but is not binding.

Finally, the United States and most states also have a second-level appellate court. a supreme court. which has discretion to hear appeals from the appellate courts. The US Supreme Court also hears appeals of federal questions from the state courts. Most cases heard by th e US Supreme Court are presented by ce rtiorari petitions-requests that the court exercise its discretion to hear a case.is The Supreme Court hears only a small fractio n of the cases for which review is requested. Whereas intermed iate appellate courts are responsi ble for correcting errors of law made by trial court judges based on existing law. supreme courts have somewhat greater discretion as to revising existing interpre- tations of the law.

Making Law: Courts and the Common Law One or the most important functions of courts in our Anglo- American system is to make the common law. The law of England and or countries that derive their legal systems from England (including the Un ited States. Canada. Australia. New Zealand. India . and other cou ntries) is often described as the common law system. This is in contrast to civil law systems. found in contine ntal Eu rope and in countries. such as Japan or Korea. whose legal systems have been influenced by European civi l law. (Confusingly, we also use the term civil law in contrast to criminal law to mea n disputes not involving crimes.)

Common law courts decide questions of law through a process of analogical reasoning When a dispute comes before them. they look to decisions in earlier cases involving similar issues. Advocates for each party argue that earlier precedents are either just like the case before the court and thus bind· ing (if they are the decisions of the same court or a higher court in the same jurisd1ct1on) or are distinguishable from the current case and thus irrelevant. The court will usually defer to precedent or precedents most clearly on point. but courts also consider polrcy arguments and are sometimes swayed by sympathetic facts before them . A court may overrule an ear· lier precedent if 1t is persuaded that the earlrer dem1on was wrong or is no longer sound.

Considerations of policy play a central role in common law adj ud ication . Courts interpret and apply common law precedents in light of the policies grounding those precedents. When courts decide to overrule or modify (or even ign ore) earlier precedents. they do so because they be· lieve that the policies that supported the earlier precedents

are no longer valid or important. or because they be- lieve that other policy cons1derat1ons have become more

pressing.

The common law approach through which courts make law 1s well illustrated in a Mleading case" that is found in every health law treatise and most health law teaching books- Canterbury u Spence.10 Canterbury is widely seen as estab- lish•ng the doctnne of informed consent.

Canterbury •'· Spence Canterbury was decided in 1972. Mr. Canterbury. a 19 year- old. was experiencing back pain. Mr Canterbury sought treat- ment from Dr Spence. who performed a laminectomy. The followmg day, Mr. Canterbury fell out of bed while attempting to unnate into a bedpan. Several hours later. paralysis set in. Dr. Spence performed a second surgery. but Mr Canterbury was left permanently partially paralyzed and incontinent. He sued Dr. Spence and the hospital for negligence. He also sued Dr. Spence for failure to inform him before the surgery of the risk involved.

The tnal court directed a verdict against Mr Canterbury at the close of his case without waiting for the defense. The trial 1udge held that Mr Canterbury had not proven negligence on the part of Dr Spence. noting that Mr Canterbury's attorney had not presented the testimony of an expert establishing negligence. Mr. Canterbury appealed to the District of Colum- bia Court of Appeals 21

Canterbury 1s a long case. with over 13 .000 words and 149 footnotes. Judge Spottswood Robinson Ill . who wrote the opinion in the case. cited dozens of earlier cou rt opin- ions and most of the relevant academic literature Although the court of Appeals reversed the trial court on all issues. for Judge Robinson the primary issue was whether Dr. Spence had adequately informed Mr. Canterbury of the risks that were inherent in the procedure before obtaining his con- sent to the surgery-whether he had obtained "in formed consent·

Canterbury u Spence did not originate the doctrine of informed consent. As Judge Robinson noted early in the opinion. the general requirement of consent to medical treatment had been around for at least a half century. and the term informed consent had first been used in a 195 7 case .21 By the time Canterbury was decided the term in- formed consent had been used in about I 00 reported court decisions.

CHAPTER 5 • The Courts

Judge Robinson's original contributions were. first. a coher- ent. comprehensive. integrated analysis of all of the elements of an informed consent claim. and second. a reorientation of the doctrine to focus the definition of the physician's duty of disclosure on the patient's need for information-and thus on the patient's decision rather than on the standard of care of the profession.

Judge Robinson's opinion is a masterful example of com- mon law judging. He began by noting that there was no bind- ing precedent in the District of Columbia on the precise issue at stake and also that there was disagreement between the courts and commentators on the key issues. As he proceeded. however. he consistently sought to ground propositions of law in earlier reported appellate court dern1ons. But he also based his dec1s1on in larger public policy considerations; spe- cifically. the nght of an individual to make an informed dec1- s1on with respect to " what shall be done with his body" and the relationship of trust between a physician and patient that grows out of the "well-nigh abject" dependence of the patient on the phys1c1an for information. 23

After thoroughly examining existing law and relevant public policy considerations. Robinson finally parted with the ma- JOrity of earlier court decisions by holding that a physician's duty to disclose is not determined by professional custom (as 1s normally the case when questions of medical negligence are at issue) but rather by the patient's need to receive infor- mation material to the patient's decision.24 This 1s the logi- cal outcome of grounding the disclosure requirement in the patient's need for information to facilitate the exercise of his right to decide. The court also held that since the duty to dis- close was grounded in the patient's need to know. it was not necessary for the patient to produce expert medical testimony as to the practice of the profession . a burden that had im- peded claims in the past because of the reluctance of physi- cians to testify against each other.

As judge Robinson played out the ramifications of ground- ing the obligation to disclose in the patient's need for infor- mation. however. the decision became much less favorable to the patient. Policy concern about putting the physician at risk of a patient's hindsight led Judge Robinson to decide that a physician needs only disclose information that a rea- sonable. objective patient in the specific patient's pos1t1on would need to know. 25 He also concluded that in emergencies or when disclosure of information would be damaging to the patient. the phys1c1 an might be privileged not to disclose.26

I I

PART II • National Political Institutions

Finally. he decided that causation between nondisclosure and a resulting injury can only be proven if it can be shown that a reasonable patient would have declined the treatment if prop- erly informed.27

Throughout. the court grounded its conclusions in prior court decisions whenever possible. and where it went be- yond existing decisions and took a different tack. the court grounded its decision solidly in the policies that the court saw as underlying the law. The court relied heavily on a law- review article written by a prominent law professor pointing the way to the new. patient-based theory of informed consent (as well as on a studen t article t hat had thoroughly canvassed the existing court decisions). 28 The court broke new ground. endorsing a doctrine much more solicitous of patients than existing doctrine. but also tried to ba lance the interests of physicians. who received much greater protection from the preexisting doctrine. The court moved forward, but incremen- tally. looking backward toward established doctrine. Judge Robinson's decision remained grounded in policy but also in the facts before the court-a sympathetic plaintiff who had been badly injured and who received no help from the preex- isting law.

Enforcing the Law

payment of "remuneration " for referrals in federa l health care programs a felony. has been used to prosecute a va nety or ar· rangements in which health care providers have made direct or indirect payments to phys1c1ans or other persons who are in a pos1t1on to refer patients to generate business n Cnm·na prosecutions are also used to enforce the provisions or t·e federal food and drug laws and controlled substances laws f,. nally. state criminal law addresses Med1ca1d fraud and abuse unlicensed or illegal professional practice. and controlled sub- stances violations

Criminal prosecutions are not the only cases. however. m which the courts enforce the law. In civil false claims cases. for example. courts can impose substantial c1v1l penalties 00 defendants who are found to have "knowingly" subm itted fa lse claims to the government. for example in the Medicare or Medicaid programs. 33 Civil false claims cases are often brought by the government but can also be brought by "qu tam relators.'' private whistleblowers with inside knowledge about fraudulent act1v1ties. 34 If a case brought by a qui tam relator succeeds. the relator can claim a share (as much as 30%, but usually less) of the recovery. Enforcement actions are also brought by administrative agencies to collect adm1 n· istrative fines or for jud1c1al injunctions (court orders that m be enforced by fines or even imprisonment) to stop activity that violates regulatory laws. Regardless of how law enfo rce· ment actions are initiated. courts consider the policies th at those laws are intended to promote.

U11ited States v. Greber a11d U11ited States v. Porter

A second function of the courts is to enforce the law. The most familiar example of this function is the role the courts play in the enforcement of the criminal law. 29 Criminal pros- ecutions are normally initiated by a local prosecutor, which in federal court would be the district's US attorney. The defend- ant appears (often with retained or appointed counsel). and the court either accepts a plea bargain or tries the case. find- ing the defenda nt guilty and imposing a sentence or finding the defendant not guilty and dismissing the case. Because of the seriousness of crimi nal cha rges and sanctions. which can include lengthy prison terms or even death. special procedural rules apply in criminal cases and defendants must be found guilty "beyond a rea sonable doubt," a very high standard. Ap~eals are also common. as are ha beas corpus procedures. which allow a challenge to imprisonment outside of normal appeal procedures.

Cri minal prosecutio ns have become increasingly common in health care. 3° Fed era l law prohibits the submission of false claims and false statemen ts to obtain payment under federal health care programs. and specific laws prohibi t Medicare and Medicaid fra ud. 31 The "a nti-kickback" law. which makes the

A 1985 case from the Third Circuit US Court of Appeals United States u Greber. 35 illustrates the role of the courts in law enforcement. The United States brought this action against A. Alvin Greber. an osteopathic physician. boa rd certified in cardiology. In addition to his medical practice. Dr. Greber was the head of Cardio-Med. Inc .. an organiza tion that provided phys1c1ans with d1agnost1c services. including Holter monitors . A Holter monitor 1s a device that 1s worn by a patient for approximately 24 hours that records the patient's cardiac activity over that period of time. Dr. Greber prov1deo physicians with Holter monitors. billed Medicare for the serv· ice. and paid the physicians "interpretation fees" of 40% of the Medicare payment (up to $65 per patient). Dr. Greber contended that the fees were for consultation and for explaining results to the patient. but the government argued that the fee was pa id regardless of the service provided by the referring physician-it

was essentially a kickback for the referral.31 The government also charged Dr Greber with making false statements and with mail fraud for claiming that tests were performed for 8 hours or more (the minimum time penod Medicare would pay for) when in fact the monitors were used for a much shorter time. and for order- ing tests that were not needed .

Dr Greber was convicted by a jury on 20 of 23 counts. On appeal. Greber raised several issues . The most important. however. was whether his conduct had violated the anti- kickback statute. The statute provides:

Whoever knowingly and willfully offers or pays any remuneration (including any kickback . bribe or rebate) directly or indirectly. overtly or covertly in cash or 1n kind to induce such person .. (B) to purchase. lease. order. or arrange for or recommend purchasing ... or ordering any . service or item for which payment may be made .. . under this title. shall be guilty of a felony.37

The government contended that Dr. Greber's payments to other physicians were "remuneration" for ordering a service. Dr. Greber had admitted in an earlier proceeding that "If the doctor d1dn t get his consulting fee. he wouldn't be using our service. So the doctor got a consulting fee "38 The judge be- low instructed the Jury that 1f "a purpose" of the fee was to induce the ordering of a service. the payment violated the anti- k1ckback law 39 Dr. Greber contended on appeal. however. that the payment compensated phys1c1ans for services actually ren dered and that unless the "only purpose" of the payment was to induce a referral. there was no violation of the law

In fact. at least one earlier court decision, United States u. Por- ter. supported the pos1t1on of Dr. Greber.40 In that case. labora- tories had paid physicians a "handling fee " for ordering blood tests from the laboratories. The court had rejected the conten- tion that the fees were a "kickback." the word used in the statute at that lime. because the case did not involve corruption. breach or trust. or some other independent violation of the law.

The court in Greber. however. noted that Porter had been decided under an earlier version of the statute that did not contain the word remuneration . Citing a dictionary definition of the term remuneration . the Greber court concluded that

II the payments were intended to induce the physician to use Card1o·Med's services. the statute was violated. even if the payments were also intended to compensate for professional services.41

The court found pe rsuasive the fact that Congress had used the term remuneration intentionally in the amended statute to broaden the conduct covered by the statute.42 The policy grounding the amendment. the court concluded. was "to combat financial incentives to physicians for order- ing particular services patients did not require."43 The court also concluded that the defendant was properly convicted of making false statements because he had been paid for Medi- care claims that he would not have been paid for had he filed claims accurately describing the service rendered (tests lasting less than 8 hours).44

The Greber case has proved very influential and is now gen- erally accepted as the correct interpretation of the law. It is representative of the approach courts commonly take to inter- preting statutes in enforcement proceedings. considering the plain meaning of terms used in statutes as well as the inten- tion of Congress in using that language. Although the gov- ernment must still prove in kickback cases that a defendant "knowingly and willfully" made or received a payment for a referral. health care professionals and providers must be con- stantly vigilant that they do not engage in business arrange- ments or transactions that are intended to encourage referrals or sales. no matter how well the arrangement may be justified by other considerations. This promotes policies of cost con- trol as well as fidelity to the best interests of the patient.

The earlier case. Porter. however. also illustrates a characteristic approach of courts determining guilt in criminal proceedings-interpreting a statute narrowly-which in turn promotes an alternative policy-giving the benefit of the doubt to the defendant where the meaning of a statute 1s unclear or confusing. Recognizing the seriousness of crimi- nal convictions. both in terms of the sanctions and the so· cial stigma they impose. courts interpret criminal laws strictly. resolving any ambiguity in favor of the accused.45

Interpreting the Law A third function of the courts 1s to interpret statutes adopted by legislatures and regulations adopted by administrative agencies. 46 This is a function that they often perform as they enforce the law. but one that is also operative in cases brought by one individual or firm against another or in cases brought against an administrative agency. The role of the courts in in- terpreting statutory or administrative law 1s often described as discerning the meaning of the statute or administrative regula- tion in the context of the problem at issue. As statutory and

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PART II • National Political Institutions

administrative law have become increasingly pervasive. this function has become one of the most common and important

roles played by the courts.

A traditional approach to interpretation of a stat~t~ or r~g­ ulation has been to examine the legislative or adm1nistrat1ve history of the disputed provision to determine the intent of the drafter.47 A court could, for example. consider speeches made in Congress by supporters or opponents of a piece of legislation or the reports of legislative committees. In recent years. however. some courts have moved to a more textual- ist approach, attempting to discern for themselves w.hat the statu te means.48 Courts taking this approach question the usefulness of legislative history. noting that proponents or opponents of a pa rticular interpretation of a law often at- tempt to get statements supporting their positions into the legislative record when they cannot convince the legislature to adopt the precise legislative language they advocate. Tex- tualist judges believe they can best interpret the meaning of a statute by focusing on the literal language of the provision. Courts seeking the meaning of a provision also rely on the so-called canons of statutory interpretation . such as .. inclu- sio (expressio) unius est exclusio alterius"-if a statute lists a number of factors that are to be considered in applying a law but does not list others (and does not indicate that the list of factors is meant to be incomplete) . the statute should be interpreted to exclude consideration of the factors not listed.49 Whether a court purports to be discerning legislative intent or to be itself parsing the plain meaning of a statute. it will normally attempt to discern and promote the policy underlying the provision.

In interpreting statutes and regulations. courts often take an approach that resembles common law adjudication. That is. courts establish precedents in interpreting the law that they follow in later cases. Indeed. courts presume that once they have interpreted a law. the legislature is aware of how they have done so. If the legislature takes no action in response. the legisla tu re has effectively accepted the court's interpretation of the law. 50

When cou rts revi ew t he regulations or decisions of adm i nistra tive age ncies. they normally show some def- erence to the agen cy on issues within the ju risdiction of the agency. A co urt should also not reverse an agency's determination of fact unless that determination is arbitrary and capricious or not supported by substan ti al evidence.s 1

Where an agency interprets the law. the federal courts

reviewing the interpretation normally apply a two-step test. commonly called the Chevron rule after the case lror.i

which it is derived.s2

• Fi rst. always. is the question whether Congress has spoken directly to the precise question at issue. II the intent of Congress is clear. that 1s the end of the matter: for the court as well as the agency must give effect to the unambiguously expressed intent of Congress.s3

• Second. if the court determines Congress has not directly addressed the precise question at issue. the court does not simply impose its own construction of the statute Rather. "(l]f the statute 1s silent or ambiguous with respect to the specific question. the issue for the court is whether the agency's answer 1s based on a perrmssible construction of the statute."s4

Under this test. which has been modified and limited in more recent decisions with respect to specific kinds of administra- tive guidance. an administrative agency's interpretation of the law is generally upheld. This seems to be particularly true with respect to cases challenging administration of the Med· care program. ss

Aetna Healtlz Inc. v. Davila Aetna Health Inc. u. Dauilas6 is one of the most recent in a long line of Supreme Court cases interpreting the Employee Retirement Income Security Act (ERISA) of 1974.sr ERISA was adopted in the mid- I 970s to reform pension law. but ·t also applies to employee health benefits. It thus governs most health insurance plans in the United States. as 87% of Amen· cans with private health insurance are enrolled in employee benefit plans.58

Congress intended in adopting ERISA to assert federa sovereignty over the regulation of employee benefits plans At the time ERISA was adopted. however. the states exer· cised almost exclusive authority over insurance regulation. and Congress did not intend to displace state regulation completely. Section 514 of ERISA attempts to reconcile these intentions:

a) Except as provided in subsection (b) of this section. the provisions of [ERISA) shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan.

(b )(2)(A) Except as provided in subparagraph (B). noth· ing in this subchapter shall be construed to exempt or

: relieve any person from any law of any State which regu- lates insurance. banking. or securities.

(Bl Neither an employee benefit plan nor any trust es- tablished under such a plan. shall be deemed to be an insurance company or to be engaged in the business of insurance or banking for purposes of any law of any State purporting to regulate insurance companies. (or] insur- ance contracts 59

Although this prov1s1on has resulted in endless litigation. in - cluding a number of Supreme Court dec1s1ons. 1t has been generally interpreted to mean that states can regulate insur- ers that insure employee benefit plans but cannot regulate the plans themselves. and in particular cannot regulate self- insured plans (plans 1n which the employer bears the risk of employee claims)

A separate prov1s1on of ERISA has also been interpreted by the courts to preempt" some state laws governing health in- surance Section 502 or ERISA permits a plan enrollee to sue m federal court.

To recover benefits due to him under the terms of his plan. to enforce his rights under the terms of the plan. or to clarify his nghts to future benefits under the terms of the plan .. . 60

The Supreme Court has interpreted this provision to mean that 1f plan enrollees believe that they have been denied benefits improperly. their only recourse 1s to sue in federal court under Section 502-they may not sue 1n state court for breach of contract or other common law or state statu- tory claims. Plan part1c1pants and beneficiaries are also. the Supreme Court has held, only entitled to recover the benefit den ed . not additional damages caused by the denial of the benefit. 61

As managed care came to dom inate the health insur- ance industry in the 1980s and 1990s. however. health insurance plans increasingly gained the power to decide not only whether to pay for a service but also whether the service would be provided at all Indeed . staff-model health maintenance orga ni za t1ons ( H MOs) del 1vered services directly to their members. and occasionally did so negligently, causing 1n1ury.

A series of cases in the 1990s held that health plans could be held liable for injuries caused through the negligence of their employees or agents and that the plan

CHAPTER 5 • The Courts 1$1

itself could even be held liable if it caused a negligent in- jury.62 This might be the case where a physician employee of a staff-model HMO injured a patient. Other cases. however, held that if a plan simply denied payment for a service. it could only be held liable for the cost of the service denied. not additional damages caused by the de- nial of the benefit. If a plan member is denied coverage for an extended hospital stay and is therefore discharged from the hospital. for example. an employee benefits plan cannot be held liable for the additional medica l costs or pain and suffering that would result if the patient suffers a relapse and 1s rehospitalized.

Moreover. in 2000 the Supreme Court , in Pegram u. Herdrich . held that members of an HMO could not sue it for breaching its fiduciary obligations under ERISA for damages caused by "mixed treatment and eligibility" decisions that were made by its physicians in denying services to its mem- bers. 63 Although ERISA effectively considers a plan adminis- trator to be a trustee. owing an obligation to administer the plan "solely in the interest of the participants and benefic1ar- 1es."64 that obligation does not extend to medical decisions made by plan physicians. which are governed by state law rather than ERISA.

In 2002. however. the Supreme Court held in Rush u. Moran that a state could requi re an insured employee ben- efits plan (but not a self-insured plan) to subject its decisions denying or limiting services to external (to the plan) review by an independent review organization.65 The court reasoned (over a vigorous dissent by Justice Thomas) that the external review was not really a state remedy imposed on the plan but rather a "second opinion" process.

Aetna u. Dauila tied together all of these strands of ERISA law.66 Davila consisted of two cases. which the court combined for purposes of review. In one. a plan member claimed that his managed care plan had required him to take a less expensive drug than the one prescribed by his physician and that he had suffered serious side effects. In the other case. the plan member alleged that she had been discharged from the hospital prematurely at the insistence of her insurer and had experienced serious complications that would not have occurred had she been able to stay in the hospital for the time her physician recommended. The injured plan members both sued in state court under a Texas state law allowing managed care plan members to sue their health plans for negligent health care treatment

PART II • ational Political Institutions

decisions. In both instances. the defendant insurers had the cases transferred from the state courts in which they had been brought to federa l court. In both cases. the trial court dismissed the claims. The Court of Appeals in both cases. however. reversed. holding that the decisions of the insur- ers were .. mixed eligibility and treatment decisions." and that the cases were more like standard negligence claims. which had been allowed against HMOs in state court, than like benefit denial decisions. which must be reviewed under ER ISA in federal court.

The Supreme Court reversed. with Justice Thomas. who had dissented in Rush u. Moran (the 2002 case upholding state external review statutes) writing the opinion. Justice Thomas argued that Congress had intended in adopting Section 502 to create a complete and exclusive remedial scheme. preempting any and all state court claims and remedies. 67 It was thus proper to remove the initial liti- gation from the state court into the federal courts. 68 It was also appropriate for the federal court to dismiss the state statutory claim. which was "preempted" by the .. comprehensive civil enforcement scheme .. es ta bl ished under Section 502. justice Thomas concluded that the claims brought by the defendants. even though framed as negligence claims. were essentially aimed at denials of benefits under an employee benefits plan and thus had to be brought in federal court under Section 502. 69 The plaintiffs. he asserted. could have avoided any injury in the first place by paying for the services they needed out of pocket and then suing their plans for the cost of the service: therefo re the cost of the services was all they were entitled to. 70

The claimants attempted to argue that the Texas statute was a state regulation of insurance. saved from preemption by Section 5 14. but the court held that where a claim for compensation was filed in court. Section 502. not Section 514. governed.71 The court also rejected the plaintiffs' argu- ment tha t their cases were mixed treatment and eligibility decisions under Pegram. and thus not governed by ERISA. Justice Thomas noted that Pegram was a case involving a physician-run HMO. while the case before the court was not.

72 The court concluded that the plaintiffs could not file a

claim against an employee benefits plan or an insurer under the Texas statute and were li mited to whatever remedies were avai lable under ERISA.

Although the court claimed that 1t was simply interpreting and applying the ERISA statute. in fact the result 1t reached 1s a far from obvious interpretation of the statute. Nowhere does Sec· tion 502 identify itself as the exclusive remedy for claims brought by members of employee benefit plans. Not only does Section 502 not provide for exclusive federal junsdiction over ERISA ben· efit claims. it expressly permits state jurisdiction. 73 Moreover. the one provision of ERISA that expressly preempts state law. Sectior 514. does not preempt state laws regulating insurance. which ar· guably includes the Texas law challenged in Davila.

Nevertheless. Justice Thomas·s interpretation of the law built on a series of Supreme Court cases holding Section 502 to provide an exclusive remedy and was consistent with those prior interpretations of the law. Moreover. in a broader sense. Justice Thomas's decision was intended to promote a part1cu· lar public pol icy vision . Justice Thomas asserted that his in· terpretation of the law was necessary to promote a uniform national regulatory scheme for employee benefit plans Jusace Thomas believes that such a uniform scheme was necessa ry so that employers could offer employee benefits anywhere in the country and not have to deal with conflicting state law.74 Ultimately. the interpretation the court placed on the statute in Davi la was not based on the language of the statute. which is far from clear. but rather on a vision of the polic ies promoted by the statute.

No justices dissented from the Davila holding. Justices Ginsburg and Breyer. however. wrote a concurring opi nion. acknowledging the correctness of the majority decision but raising another policy issue-the completeness of the remedy availab le under ERISA 75 They suggested that the court revis t earlier decisions limiting the claims that could be brought under ERISA to the value of services denied so that claim· ants who had suffered serious injuries from a denial of service might have a chance at receiving justice. Although Davila was ostensibly a case about the meaning of ERISA's Section 502. rt 1s fundamentally about how to resolve the conflicting poliCJ es ERISA promotes.

Judging the Law Finally. under the constitutional system of the United States. the courts are the ultimate arbiters of the constitutionality of legislation and of administrative regulations. 76 It 1s in exer· cising their power of Judicial review that courts most clea rly apply and evaluate public policy. It is also here that political

considerations seem most obviously to influence the deci- sions of the courts and where the courts have the greatest influence on national politics.

Courts can find laws unconstitutional under a number of const1tut1onal provisions. but constitutional cases tend to fall into several categones. First. state laws are unconst1tut1onal 1f they con01ct with federal law Under the Supremacy Clause. the federal law 1s the supreme law of the land. and state laws must yield before 1t 77 This 1s clearly true if the state law squarely conn1cts with the federal law. but a state law can also be found to be 1nvahd 1f 1t addresses a subject matter wholly sub1ect to federal law or 1f 1t would otherwise prevent the ap- pl cation of federal law

The ERISA cases discussed earlier are ultimately grounded in the Supremacy Clause as they deal with preemption of state law by federal law. The Supremacy Clause 1s even more clearly an issue 1n cases brought against the states challeng- ing their operation of state Med1ca1d programs. Med1ca1d 1s a federal and state cooperative program. funded jointly by the federal and state governments. 78 Congress has established the program under its Spending Clause authority and may impose conditions on the grant of funds to the states under the Spending Clause.79 Although the states have consider- able nex1b1hty in administering their programs. they must ul - timately comply with these conditions When the states fail to do so. Med1ca1d recipients or providers have sued to ask the federal courts to enforce the requirements of the Med1c- a d statute. In a recent case. the Supreme Court sidestepped the question of whether such cases brought directly under the Supremacy Clause are permissible. but four members of the court argued in a vigorous dissent that such cases cannot be brought EO State laws that violate federal law can often be chal enged through other means 1n the federal or state courts.

Second. laws can also be held to be unconstitutional if they infnnge on rights spec1f1cally protected by the Consti- tut.on Thus . for example. a law prohibiting pharmaceuti- cal compounders from advertising their services was struck down by the Supreme Court as abridging the freedom of speech.11 Courts have also occasionally recognized under the doctrine of *substantive due process" rights that are im- phc1tly rather than expl1c1tly recognized by the Constitution. such as a right to make choices regarding medical treatment. discussed later 82

C HAPTER S • The Courts

Third. laws are unconstitutiona l if they violate the Due Process Clause by failing to provide adequate procedures to protect "l ife. liberty. or property."83 Procedura l due process cases typically raise at least two questions. First. is there a protected interest at stake? "Liberty" interests can include. for example. reputational interests. and property rights can include an interest in the continued receipt of a benefit to which one is legally entitled.84 Not every interest. however. is constitutionally protected. Second. the question must be ad- dressed regarding what "process." that is. procedure. is "due." In many instances. due process requires a notice and hearing before a right can be taken away if questions of fact particu- lar to the s1tuat1on (as opposed to broad policy questions) are involved. but depending on the importance of the interest and on other factors. due process can range all the way from a full trial-type hearing with judicial evident1ary standards and assistance of counsel to proceedings that are very informal in- deed. The most often recited formula in federal law balances (I) the interests of the individual at stake in the proceeding. (2) the risk of error through the procedures used and the probable value. 1f any. of additional or substitute procedural safeguards. and (3) the costs and administrative burden of the additional process and the interests of the government in ef- ficient adjudication.85

Fourth. government laws or practices can be challenged as violating the Equal Protection Clause of the Fourteenth Amendment to the Constitution if they discriminate imper- missibly. Laws must necessarily categorize. and the courts are reluctant to reject laws that do so unless they discrimi- nate against minorities or threaten fundamental rights. When classificatory statutes or regulations impinge on "fundamen- tal rights." such as freedom of speech. courts must find a necessary relationship to a compelling governmenta l interest and also demand that the legislature choose the "least re- strictive alternative" for achieving its goal.86 When economic interests are at stake rather than fundamental rights. courts tend to uphold legislation that is rationally related to a leg1t1- mate governmental interest. This body of law is complicated. however. with intermediate standards that apply under vari- ous circumstances. such as where gender discrimination 1s involved. The Equal Protection Clause is supplemented by a host of federal. state. and local laws that prohibit discrimina- tion on the basis of grounds such as race. nationality. age. disability. gender. or religion.

PART II • National Pol itical Institu tions

Fifth. the Constitution limits the authority of the federal government. The federal government's powers are estab- lished and limited by the Constitution. Whereas the states have general police power to protect t he public's health. safety. and welfare. Congress can only exercise authority where permitted by the Constitution. A number of the "enu- merated powers" granted Congress are quite specific. such as the power to grant patents or to create uniform bankruptcy laws; other powers are quite broad. 87 The broadest powers relevant to health policy are the powers to regulate interstate and foreign commerce. to tax and spend for the general wel- fare. and to adopt laws "necessary and proper" for carrying out its other enumerated powe rs. These powers have been interpreted ve ry broa dly in the past half century but are not unlimited. A major issue recently liti gated was w hether the Commerce Power is sufficient to authorize the ACA·s provi- sions requiring individuals to purchase minimum insurance coverage.

Washington v. Glucksherg and Vacco v. Quill The twin c- .s of Washington v. Glucksberg88 and Vacca v. Qui/189 illu ,trate t he role of constitutional litigation in health porcy and the role of health policy in constitutional litigation. Both cases involved challenges to state laws pro- hibiting physician-assisted suicide-Glucksburg challenging a Washington state statute and Vacca a New York statute. Glucksberg focused on a "substantive due process" claim-a claim that the Fourteenth Amendment protected a "liberty interest" on the part of"a "mentally competent. terminally ill adult to commit physician-assisted suicide. "90 The plaintiffs in Vacca claimed that the state violated the Equal Protection Clause by allowing persons in the final stages of a terminal illness to hasten their deaths by removing life support sys- tems but by not allowing terminally ill persons who were not on life support systems to hasten their death by self- admin istered prescribed drugs. 91

In both cases. the Supreme Court held that the statutes were constitutional. Chief Justice Rehnquist wrote the opin- ion for the court in both cases. There were no dissents. but in both cases there were multiple concurring opin ions written by justices who agreed that the state statutes were constitutional but varied in their reasoning as to why.

By way of background. in 1990. the Supreme Court had held that the state of Missouri could require "clear and con- vinci ng" evidence before a surrogate decision-ma ker could

decide to terminate nutrition or hydration for a person in a persistent vegetative state that the incompetent person had stated that he or she would want treatment terminated if eve1 in this condition. "Clear and convincing " 1s a higher stand- ard of proof than the typical "more likely than not" standard applied in civil lit1gat1on . although how much higher snot always evident. In so holding. the court (again throu gh Justice Rehnquist) held that a "liberty interest in refus ing unwanted medical treatment may be inferred from our pri or decisions. " 92

In Glucksberg. the plaintiffs argued that this liberty interest extended to "a personal chorce by a mentally-competent. ter· minally ill adult to commit physrcran-assrsted surcrde." They further contended that the state of Washington's ban on as· sisted suicide was unconstitutional because rt placed an un· due burden on this right.

The court recognized that

The Due Process Clause guarantees more than fair pro· cess. and the "liberty" it protects includes more than the absence of physical restraint. The Clause also provides heightened protection against government interference with certain fundamental rights and liberty interests. In a long line of cases. we have held that. rn addition to the specific freedoms protected by the Bill of Rights. the "liberty" specially protected by the Due Process Clause includes the rights to marry; to have children. to dr· rect the education and upbringing of one's children . to marital privacy: to use contraception: to bodily integrity: and to abortion. We have also assumed. and strongly suggested. that the Due Process Clause protects the traditional rrght to refuse unwanted lifesaving medical treatment. 93

The court proceeded to state. however.

But we "ha[ve] always been reluctant to expand the concept of substantive due process because guideposts for responsible dec1sionmaking in this unchartered area are scarce and open-ended." By extending constitu- tional protection to an asserted right or liberty inter- est. we. to a great extent. place the matter outside the arena of public debate and legislative action. We must the refore .. exercise the utmost care whenever we are asked to break new ground in this field." lest the liberty

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protected by the Due Process Clause be subtly trans - formed into the policy preferences of the Members of this court.

The court then observed that two methods guided substan- t1\e due process analysis:

First. we have regularly observed that the Due Process Clause specially protects those fundamental rights and liberties which are. obiectively. "deeply rooted in this Na- tion's history and trad1t1on." and "implicit in the concept of ordered liberty: such that "neither liberty nor 1ust1ce would exist 1f they were sacrificed .. Second we have required in substantive·due·process cases a 'careful de- scnpt1on" or the asserted fundamental liberty interest. Our Nation's history. legal trad1t1ons. and practices thus provide the crucial "gu ideposts for responsible dec1s1on- making."94 [quotations from Palko u. Connecticut. 302 us. 319. 325] The question then became how to characterize the asserted

right. The plaintiffs had claimed a "liberty to choose how to die." a nght to "control of one's final days. · "the right to choose a humane. dignified death." and the "li berty to shape death." Justice Rehnquist reframed the issue as "the right to commit suicide which itself includes a right to assistance in doing so."9s

Once the issue was so framed. the conclusion was fore- gone Justice Rehnquist described the 700-yea r history of suicide 1n Anglo·American law. establishing quite clearly that there was no nght to suicide enshrined in the Constitu· tion 96 Rehnquist also offered policy arguments for reiecting a "nght to su1c1de": the state's interests in the preservation of life. 1n protecting the integrity and ethics of the medical profession. in protecting vulnerable groups. and in avoid · mg the slippery slope toward "volunta ry or perhaps even involuntary euthanasia ·97 These policy concerns drove the dec1s1on.

While the other justices concurred in the court's dec1s1on. they did not see the case in such starkly simple terms. Justice O'Connor observed that the court was only deciding the case before 1t and was not concluding that dying patients could not obtain pal 1at1ve care. even though 1t might hasten their deaths 98 Justice Stevens noted that although the statute was not unconst1tut1ona on its face. the interests of the state

listed by Re hnquist were not absol ute. an d it was possible that there might be particular cases where a statute prohibit· ing assistance in dying might "impose an intolerable intru· sion on the patient's freedom.99 Justices Souter and Breyer also wrote separately, contending that the court may have overstated the law. In sum. the concurring justices noted that other policies were also at stake in the case. including the in- terests of individuals who were undergoing intolerable suffer- ing to relief from pain.

In the companion case of Vacca u. Quill . Justice Rehnquist rejected the argument that New York's prohibi· t1on on assisted suicide discriminated illegally by allowing terminally ill persons on life supports to end their lives by terminating treatment while not allowing those not on life support to obtain assistance in suicide. The matter. he argued. was one of "fundamental legal principles" of causation and intent.

First. when a patient refuses life-sustaining medical treat· ment. he dies from an underlying fatal disease or pathol- ogy; but 1f a patient ingests lethal medication prescribed by a phys1c1an. he is killed by that medication.

Furthermore. a physician who withdraws. or honors a patient's refusal to begin. life-sustaining medical treat· ment purposeful ly inte nds. or may so intend. only to respect his patient's wishes and "to cease doing use· less and futile or degrading things to the patient when [the patient] no longer stands to benefit from them." A doctor who assists a suicide. however. "must. necessar· ily and indubitab ly, intend prima rily that the patient be made dead." 100

The court upheld the rationality of the distinction made by New York in prohibiting assisted suicide.

It is politically significant that the court upheld the constitutionality of the state laws. as compared to the abortion cases, where the earliest case. Roe u. Wade. had held the challenged state abortion law to be unconstitu- tional. In the "right to die" setting, states have continued to experiment. with three states (Oregon. Washington. and Montana) now allowing physician-assisted suicide and the rest prohibiting it. Although the Supreme Court deci- sion was based on a particular art1culat1on of public policy. it left the states free to pursue their own public policies. and they have.

PART U • National Political Institutions

CONCLUSION Courts decide cases-making law. enforcing law. in- terpreting law. judging law. As they do so. they apply policy. In common law adjudication. courts articulate policy themselves. either recognizing the continued rel- evance of long-standing policy decisions or concluding the policy considerations have changed and therefore the law must as well. In enforcing and interpreting the law. courts claim to apply policies chosen by other branches of government. although they often take it on them- se lves to articulate and weigh policy considerations

STUDY QUE~TIONS

themselves as they apply the law. Finally. 1n making con· stitutional dec1s1ons the courts decide the policies that they believe the Constitution is meant to promote ard apply those pol1c1es in evaluating laws adopted or applied by coordinate branches of government. In articulating and applying policy. the courts are influenced by poltt1ca cons1derat1ons and in turn affect future pol1t1cal deos1ons Court dec1s1ons are inextricably entwined with policy and politics. and that 1s at least as true with respect to health care as it 1s in any other field.

I. What are four functions of the courts pertaining to the law that are relevant to shaping the modern health care system?

2. Courts are concerned with the law. How are courts also concerned with public policy?

3. What 1s the "social control" function of law?

4. Can law establish a government agency?

S . How can laws enshrine societal values?

6. Trial courts can decide which two kinds of question?

7. Appellate courts are commonly asked to decide what kinds of question?

8 . What type of court functions as a second-level appellate court existing for states or for the country? 9 . Can courts make law?

I 0 . How have the courts decided cases. such as Canterbury u. Spence. involving patient rights to obtain informed consent before proceeding with medical treatment? What policies. values. or norms have the courts relied on?

11 . How have the courts decided cases. such as Dar/mg u. Charleston Community Memorial Hospital. involving hospi- tal liability for physician errors? What policies. values. or norms have the courts relied on?

12. In what two ways relevant to modern health care do courts function to enforce the law?

13. How have the courts acted to enforce laws against kickbacks and fraud. such as in United States u. Greber?

14. How do courts normally approach reviewing the regulations or dec1s1ons of an administrative agency? I 5 . In what ways has court interpretation played a role in the meaning of ERISA?

16. In what ways can the courts. through judicial review, find law to be unconstitutional?

17. Describe how the US Supreme Court decided that state laws prohibiting assisted suicide (now more commonly called "physician-assisted death"-PAD) were not unconstitutional. What factors were considered?

>

p

t--- CHAPTER 5 • The Courts i!M r--------___:~~:.....W-----

ENDN OTES I. The literature on the role of politics and policy in judging 1s vast. vaned. contested, and rapidly evolving. For a sam-

pling of recent discussions of the topic. see Bybee. 20 IO. Friedman. 2009: Miller. 2009: Porto, 2009: and Sunstein. Schkade. Ellman. and Sawicki. 2006.

2. Weiner. 2012.

3. See generally, on the "jobs" of law. Llewellyn. 1940.

4. See Vago. 2009. Walsh and Hemmens. 2008.

S. See Tyler. 2006, Ew1ck and Silbey, 1998.

6. Studdert. Mello.and Brennan. 20 IO.

7. Vago. 2009 (endnote 4). pp 271-330.

8. The metaphor of bargaining in the shadow of the law originated with Mnookin and Kornhauser in 1979 and has spawned a vast literature on dispute resolution 1n various contexts. See Mnookin and Kornhauser, 1979.

9. See Furrow. Greaney. Johnson. Jost. and Schwartz. 2008.

10. 42 U.SC §§ 1320a-7c. 1320a-7d.

11. See Furrow et al.. 2008 (endnote 9). pp. 115-58. discussing professional licensure. and pp 767-848. examining Medicare and Med1ca1d law.

12. Sunstein. 1996

13. For an introduction to the American legal system. including the court system. see Abernathy. 2006: and Burnham. 2002

14. Wright and Kane. 2002. pp. 27 32

15. 28 U.S.C. § 1331 (1urisd1ct1on based on a federal question): 28 U.S.C. § 1332 (jurisd1ct1on based on diversity of c1t1zensh1p) .

16. 28 U S.C. § 1367 (supplemental jurisdiction)

17. Burnham. 2002 (endnote 13). pp. 167-73.

18. Wright and Kane. 2002 (endnote 14). pp. 777-808

19. The classic description of common law reasoning is found in Llewellyn. 1960. Also see Berch. Berch. Spritzer. and Burch. 2010: Burnham. 2002 (endnote 13). p. 37. Burton. 2007: Ginsburg. 2004.

20. Canterbury u Spence. 464 F.2d 772 (D.C. Cir. 1972). A good discussion of Canterbury is found m Johnson. Krause. Saver. and Wilson. eds .. 2009. This book discusses leading health law cases. the persons and situations that they involved. the dec1s1ons the cases reached. and the impact of the cases.

21. As noted earlier. the 1urisd1ct1on of the federal courts 1s primarily limited to deciding questions of federal law. They rarely decide issues involving the common law except when they are deciding cases between citizens of different states. and then they apply state law. At the time that Canterbury was decided. however. the federal district courts of the District of Columbia heard civil cases arising in the district. and the decisions of those courts were appealed to the District of Columbia Circuit Court of Appeals. (This is no longer the case). Thus the Court of Appeals sat as a

common law court.

PART II • Na tional Political Institutions

22. Sa/gov. Leland Stanford Jr. Univ. Bd. of Trustees . 154 Cal.App.2d 560. 3 17 P.2d 170. 181 ( 1957).

23 . Canterbury. 464 F.2d at 782 .

24. Ibid. at 786.

25. Ibid. at 787.

26. Ibid. at 788-89.

27. Ibid. at 790-9 1.

28. See Waltz and Scheuneman . 1970; Anonymous. 1967.

29. See generally Lafave. 2010; Lafave. Israel . King. and Kerr. 2009.

30. See Gosfield. 201 1. pp. 207- 12.

3 1. 18 U.S.C. § 287 (false claims); 18 U.S.C. § I 00 I (false statements); 42 U S C § I 320a· 7b(a)(Med1care and Medicaid

fraud).

32. 42 U.S.C. § 1320a-7b(b) (anti-kickback law).

3 3. 31 U.S.C. § 3729 (Civil False Claims Act) .

34. 31 U.S.C. § 3730 (qui tam relators) .

35. United States u. Greber. 760 F.2d 68 {3rd Cir. 1985).

36. Ibid. at 70.

37. Ibid. at 71.

38 . Ibid. at 70.

39. Ibid. at 71.

40. United States u. Porter. 591 F.2d I 048 (5th Cir 1979).

41. Greber. 760 F.2d at 72.

42. Ibid. at 72.

43. Ibid.

44. Ibid. at 72-73.

45 . Lafave. 2010 (endnote 29). pp. 92-96.

46 . See Eskridge. Frickey, and Garrett. 2006. pp. 1- 17.

47. Ibid. at 221-30 and 303-22.

48. Ibid. at 23 1-38.

49. Ibid. at 263- 64.

SO. Ibid. at 288-90.

5 I . Pierce. Sha piro. and Verkuil . 2009. pp. 384-92.

52 . Chevron U.S.A .. Inc. u. Na t. Resources Defense Council. Inc .. 46 7 U.S. 837 ( 1984). See Pierce. Shapiro. and Verkuil. 2009 (endnote 51 ). pp. 397-407.

53. Chevron. 467 U.S. at 842-43 .

-e and Medicaid

1. and Verku1I.

S4. Ibid at 843.

SS. See Jost. 1999.

S6. Aetna Health. Inc. u. Dauila. 542 U S. 200 (2004).

s1. 29 u.s.c. §§ I()() I et seq . (ERISA) SB. See DeNavas-Walt. 2010. pp. 21-28.

S9. 29 U SC § 1144 (ERISA's relationship to state law)

60. 42 USC § I I 32(a)( I )(B) (private lawsuits to enforce ERISA).

61. See Mass Mutual Life Ins. Co u Russell. 4 73 U S I 34 ( 1985 ): Pilot Life Ins. Co. u. Dedeaux. 481 U.S. 41 ( 1987)

62. See. for example. Dukes u. US Healthcare Inc. 57 F.3d 350 (3rd Cir. 1965).

63. Pegram u .Herdnch. 530 U.S. 21 I (2000).

64. 29U.SC.§1104(a)( I) (ERISA plan administrator's obligations as a fiduciary).

6S. Rush Prudent1a' HMO. Inc. u Moran. 536 US 355 (2002).

66. Dautla . 542 US 200 (2004).

67. Ibid at 200

68. Ibid. at 207-09

69. Ibid. at 210-14.

70. Ibid. at 211.

71. Ibid. at 216-18.

72. Ibid. at 218 - 21.

73. 29 U.SC. §I 132(e) (concurrent state and federal JUnsdiction to enforce ERISA).

74. Moran. 536 U.S. 355 . at 402 (Thomas J. . dissenting). 7S. Ibid.at 222-24.

76. See Nowak and Rotunda, 20 I 0. pp. 1- 21 .

77. US Constitution. Art. VI. par 2.

78. Furrow. Greaney. Johnson. Jost. and Schwartz. 2008 (endnote 9). pp. 837-45.

79. US Const1tut1on. Art. I. Sec. 8 .. par. I.

80. Douglas u Independent Liumg Centers. 132 S.Ct 1204 (2012).

81. Thompson u Western States Med. Ctr .. 535 U.S 357 (2002).

82. Cruzan u Director. Mo Dep't of Health. 497 U.S. 261 ( 1990).

83. US Constitution. Arndt. 14.

84. Nowak and Rotunda , 2010 (endnote 76). pp 642-80.

8S. See Mathews u. Eldndge. 424 U.S. 319. 355 ( 1976)

86. Nowak and Rotunda . 2010 (endnote 76). pp. 747-59.

PART JI• National Political Institutions

87. US Constitution. Art. I. Sec. 8.

88. Washington v. Glucksberg. 521 U.S. 702 ( 1997).

89. Vacco v. Quill, 521 U.S. 793 ( 1997).

90. Glucksberg. 521 U.S. 702. at 708.

91. Vacca. 521 U.S. 793. at 798.

92. Cruzan. 497 U.S. 261 ( 1990).

93. Glucksberg. 521 U.S. 702. at 719-20.

94. Ibid. at 720-21.

95 . Ibid. at 722-23.

96. Ibid. at 710-19.

97. Ibid at 728-35.

98. Ibid. at 736.

99. Ibid. at 73 7.

100. Vacco. 521 U.S. 793 at801-802.

REFERENCES Abernathy. C. F. 2006. Law in the United States. St. Paul. MN: West.

Anonymous. 1967. "Comment. Informed Consent in Medical Malpractice ... California Law Review 55: 1396.

Berch. M. A. R. W. Berch. R. S. Spritzer. and J. J. Burch. 20 IO Introduction to Legal Method and Process. Cases and Materials (5th Ed.). St. Paul. MN: West.

Burnham. W. 2002. Introduction to the Law and Legal System of the United States (3rd Ed ) St. Paul. MN: West.

Burton, S. J. 2007. An Introduction to Law and Legal Reasoning (3rd Ed) New York: Aspen. Bybee. K. J. 20 I 0. All judges Are Political-Except when They Are Not: Acceptable Hypocrisies and the Rule of Law.

Stanford. CA: Stanford University Press.

De Navas-Walt. C. 20 I 0. Income. Poverty. and Health Insurance Coverage in the United States. 2009. Washington. DC Bureau of the Census.

Eskridge. W. N .. P. P. Frickey. and E. Garrett. 2006. Legislation and Statutory Interpretation (2nd Ed.). New York: Foundation Press.

Ewick. P .. and S. S. Silbey. 1998. The Common Place of Law: Stories from Everyday Life. Chicago: University of Chicago Press.

Friedman. B. 2009. The Will of the People. New York: Farrar. Straus and Giroux.

Furrow. B. R .. T. L. Greaney, S. H. Johnson. T. S. Jost. and R. L. Schwartz. 2008. Health Law. Cases. Materials. and Problems (6th Ed.). St. Paul, MN: West.

Ginsburg, J.C. 2004. Law and Legal Reasoning (Rev. Ed .). New York: Foundation

6 -

Gosf1eld A G 2011. Medicare and Medicaid Fraud and Abuse. St. Paul. MN: West.

Johnson. S. H . J. H. Krause. R. S Saver. and R. F Wilson. eds. 2009. Health Law & Bioethics: Cases in Context. New York: Aspen .

Jost T S. 1999. "'Governing Medicare.' Administrative Law Review 5 I: 39.

Lafave. W. R 2010. Criminal Law (5th Ed ). St. Paul. MN West.

Lafave. W. R. J. H. Israel. N. J King. and 0 S. Kerr. 2009. Criminal Procedure (5th Ed.). St. Paul. MN: West.

Llewellyn . K .. 1940. "The Normative. the Legal. and the Law Jobs· The Problem of Juristic Method." Yale Law journal 49: 1355 .

Llewellyn, K 1960. The Bramble Bush: On Our Law and Its Study New York. Oceana Publications.

Miller. M 2009 Exploring judicial Politics. New York: Oxford University Press.

Mnookin. R H .. and L Kornhauser. 1979. "'Bargaining in the Shadow of the Law: The Case of Divorce." Yale Law journal 88 950

Nowak. J. E., and , R D. Rotunda . 2010. Constitutional Law (8th Ed.) St. Paul. MN: West.

Pierce. R. J . S. A Shapiro, and P. R. Verkuil. 2009. Administrative Law and Process (5th Ed.). New York: Foundation Press.

Porto. B. 2009. May It Please the Court: judicial Processes and Politics in America. Boca Raton. FL: CRC Press.

Studdert. D M . M. M Mello. and T A. Brennan. 2010. "Defensive Medicine and Tort Reform: A Wide View." journal of General Internal Medicine 25 380-381

Sunstein. C. 1996. "On the Expressive Function of Law." University of Pennsylvania Law Review 144: 202 1.

Sunstein. C.R .. D Schkade. L. M. Ellman. and A. Saw1ck1. 2006. Are judges Politica/7 An Empirical Analysis of the Federal judiciary. Washington. DC Brookings lnst1tut1on Press.

Tyler. T 2006. Why People Obey Law. Princeton. NJ: Princeton University Press.

Vago. S 2009 Law and Society (9th Ed .). Upper Saddle River. NJ: Pearson/Prentice Hall.

Walsh. A . and C Hemmens. 2008 Law. justice. and Society A Sociolegal Introduction. New York: Oxford University Press

Wa tz.J R . and T W Scheuneman. 1970 "Informed Consent to Therapy." Northwestern Law Review 64 628

Weiner, R 2012 (May 4) ~Politics by Other Means." Balkinizatron Retrieved from http://balkin.blogspot.com/2012/05/ poht1cs·by-other·means. html on May I I. 2013.

Wnght. C A. and M K. Kane. 2002 . Law of Federal Courts (6th Ed.). St. Paul. MN: West.

The balance of power between federal and state government constantly ebbs and flows . In this chapter. Frank Thompson and Joel Cantor describe the history of federal-state relations in health care policy; show how the regulation of the health sector has been shifting from the state to the federal level; explore the complicated politics in federal health grants to the states; and show how the fate of the Affordable Care Act's implementation lies. to a large extent. in the intricate dynamics between federal and state officials.

On March 23. 20 I 0. President Barack Obama signed the Pa - tient Protection and Affordable Care Act (ACA)-an epic policy breakthrough in a century-old effort to extend health insurance to all Americans. At virtually the same time. Florida Attorney Genera l Bill McColl um (R) filed suit in a federal district court to have the law declared unconstitutional. McCollum . who made an unsuccessful run for governor later that year, pursued the time-honored tacti c of seeking a court sympa- thetic to his arguments. Even though his office in Tallahassee was six blocks from a federa l di strict court. he filed the suit 200 miles away in Pensacola. The partisan ba ckgrou nd of

the judges in the two courts drove his decision. President B I Clinton had appointed the Judge in Tallahassee. In contrast. President Ronald Reagan had selected the judge in Pensacola. who also had a reputation for hewing to conservative pohcy positions in his ru lings. Eventually. more than 25 other state attorneys general. nearly all Republicans . joined the Florida suit. In January 20 I I. McColl um and the other attorneys general prevailed when Judge Roger Vinson ruled the entire ACA unconstitutional. By this time. other federal courts had reached the opposite conclusion. and observers waited for the Supreme Court to resolve the matter. In the meantime

*Part of this chapter draws directly from a previous version that frank Thompson coauthored with James Fossett.' Thompson also wishes to thank the Robert Wood Johnson Investigator Award Program for research funding that helped inform this chapter.

>-

the newly elected governor of Florida, Rick Scott (R). pra ised Judge Vinson's dec1s1on and vowed not to let the state "spend a lot of time and money" preparing to implement the new law until "we know exactly what is going to happen." 2

While the founding fathers of the United States would be surpnsed at the magnitude of government and the intricacies of health policy at the dawn of the 21st century. they would certainly recognize this episode as a natural outgrowth of an institution they established-federalism. Writing over 200 years ago in support of the new Constitution. James Madison in the Federalist Papers observed that the founders were call · ing for "neither a national nor a federal Constitution. but a composition of both ." Madison understood that the system forged in 1787 would in many ways preserve the "facul ty" of national and state governments "to resist and frustrate the measures of each other."' 1

It would. of course. be a mistake to portray issues of fede ral- ism and health policy as a saga of unremitting contention and connict between the federal government and the states. The two levels of government often collaborate and forge productive partnerships to address health problems.4 But even in programs marked by substantial cooperation between the federal govern - ment and the states. differences of perspective often surface. These differences fuel an elaborate intergovernmental poli tics that involves chief elected executives. legislative bodies. courts. administrative agencies. private stakeholders. and others. This politics yields a balance of power between the fede ral govern· ment and the states that ebbs and nows and shapes who gets what. when. and how from government's health policies.

Federalism animates the behavior of a wide range of health policy stakeholders jockeying for advantage. Hence pos1t1ons on the appropriate balance of power between federal govern· ment and the states tend to be opportunistic They flow less from abstract political theories than from concrete interests and preferences about policy. In recent years. for instance. leading Democrats have generally seen the states as less sym- pathetic to the interests of low-income c1t1zens than the fed- eral government; Democrats have resisted many Republican proposals to devolve more responsibility for health programs to the states. But both parties often shift their stance on fed· eralism depending on the issue and the circumstances.

American federalism not only features an ever-changing balance of power between national and state officials. it also plays a catalytic role.s When the federal and state govern· ments share the cost of a health program. 1t may well lead

CHAPTER 6 • Federa lism a nd Hea lth Ca re Po licy

government in general to be more dominant vis-a-vis the pri- vate sector than would be the case if one level of the fede ral system had to absorb all the costs of the program.

In seeking to describe the complexities of federalism. ob- servers have tu rned to cakes fo r metaphors. Some people have seen federalism as a layer ca ke with federa l and state govern· ments each having distinct. clearly defined responsibili ties. In an earlier period of the nation's history. the crisp division suggested by this metaphor at least partly captured political reality. A kind of "dua l federalism" prevailed. However. politi· cal scientists today generally hold that federa lism has become more like a marble cake-with rules. regulations. responsibili· ties. functions. and funding all blurred and intermingled.6

Federalism intersects in myriad ways with efforts to enhance the nation's health. Some important intergovernmental initia· t1ves have little to do with the delivery of health care. In this vein. various policies seek to head off death. disease. disabil- ity. and discomfort by reducing hazards in the environment and by encouraging personal lifestyles conducive to health. For instance. government initiatives to ensure that c1t1zens have safe drinking water. minimize their exposure to asbes· tos. and cut down on their smoking all feature a fascinating politics of federalism. 7 In this chapter. however. we confine our focus to the intergovernmental dynamics shaping the delivery of health care services. These dynamics have played out in programs for constructing hospitals. educating health professionals. assuring access to care for low-income citizens. providing long-term care services for the elderly. assisting peo· pie with disabilities. and elsewhere. These intergovernmental relationships have indelibly shaped the balance among access. cost. and quality in the American health care system.

This chapter zeroes in on four crucial aspects of feder- alism and the heal th care system. First, we provide a brief historical sketch of fede ral ism and health care. pointing in particular to the 1960s as a watershed. Second. we as· say the intergovernmen tal dimensions of regulatory policy that shape a majo r pillar of the American health insurance regime-private coverage provi ded by employers or pur- chased by individ uals. Wh il e states had long led the way in regulating insura nce. the federal government has become much more involved. Th ird, we target one very important policy instrument that ha s loomed especially large in the health care arena over the last half century-federal grants to state and local governments. Starting in the 1960s. federal grants to the states grew rapidly and increasingly targeted

PA RT II •National Political Institutions

health relative to other policy spheres. Finally. we examine the impl icatio ns of the ACA of 2010 for federalism . Th rs health reform leans heavily on the states for implementa- tion . It greatl y alters the fabric of intergovernmental relation- ships in the health care arena.

HISTORICAL SNAPSHOT: THE SIXTIES AS WATERSHED --------------- ---- In broad historical perspective. issues of federali sm and health policy sort themselves into four general phases. The minimal- ist period ran from the founding of the republic in 1789 until the end of the Civil War. During this time . grand issues of federalism revolved around basic questions of whether the federal govern ment could enter certain policy arenas (e .g .. es- tablish a national bank. fund public infrastructure like roads and canals). whether states could nullify legislation approved by the federal government. and whether states could secede from the union. To the degree that any level of government did much about health care . local governments were in the forefro nt. While the federal government provided some health care to soldiers and veterans and some states operated mental institutions. their roles were modest. Nor was the activity that did exist intergovernmental. The layer-cake metaphor-each level of government in its own distinct layer-pretty much captured the essence of federalism during this period .

The emergent period extended from the end of the crvil war in 1865 to 1965. Both federal and state governments became increasingly involved in the health arena. By the late 19th cen- tury, the development of a better science rooted in the germ theory of diseases fueled the creation of government instrtu- trons committed to fostering public health through sanitation. immunization, and health education. In 1869. Massachusetts developed the first viable state hea lth board. States also be- came increasingly active in licensing medical professionals, operating laboratories to deal with diseases (especially epi- demics), and funding medical schools .8 Later in the period. inte rgovernmental grant programs for health ca re began to su rface. Of pa rticular note. Congress approved the Sheppard- Towner Act in 192 1-a grant program to the states designed to promote the health and welfare of mothers and chi ldren . Fo llowing World War II. national policymakers approved th e Hill - Burton Act. wh ich proffered federal grants to stoke the construction of local hospitals. Through the Kerr-Mills Act of

1960 and other measures. the federal government also pro- vided grants to the states to subsidize nursing home care 10! the elderly.9 In these and other ways. the federal and stare governments became more active on the health care stage

Th e growth period of health policy and federalism comm enced rn 1965 and continued rnto 20 I 0. It featured massive increases rn publrc funding for health care services to a substantial segment of the population while stopping sho rt of universal insurance. In July 1965 President Lyndon B. John son signed two landmark measures into law- Medicare and Medrcard . The federal government operated the former. whrch covered the elderly and certain younger peop le with drsabilrties In turn . the federal government re lied on grants to the states to implement Medicaid a program that funds health services for low-income ind1V1du- als. The brrth of Medicaid had a profound impact not only on health care but also on federalism During this growtn period . the rmage of federalism as a "marble cake- with no neat hori zontal stratrficatron of functions among dif- ferent levels of government became rncreasrngly germane. Medicaid and the proliferation of other gra nt programs kindled a mingling of national and state officials rn the health policy arena. An intergovernmental politics featuring conflict and cooperation flourished.

The post-reform period began wrth the passage of the ACA in March 20 I 0. As we discuss later. the ACA significantly altered the balance of power and the nature of relationships between the federal government and the states. At least over the short term. rt sparked a new fractiousness between the two levels of government Whether the ACA stays on course for implementation-as now seems likely-or whether its op- ponents somehow manage to derail it. this epic health reform will leave its mark on federalism.

INSURANCE REGULATION: STATE DOMINANCE AND GROWING FEDERAL INVOLVEMENT Most Americans obtain health insurance "privately," pn· marily through therr employers. but some purchase 11 themselves. From an early point. state officials became rn· terested in making sure this insurance met certain standards Modern priva te health insurance emerged out of the Great

·-

Depression as providers faced severe declines in demand and the ability or patients to pay for their services. To remedy this problem. they created broad -based plans where enroll- ees would prepay for services in exchange for having access to care when they needed it. Early experiments with this kind or prepayment grew into a movement. spreading hospi· tal (Blue Cross) and physician (Blue Shield) financing plans across the states Initially key stakeholders viewed these prepayment plans. which came to be called the "Blues." in a different light from trad1t1onal life. property. and casualty insurance. Nonetheless. the New York State insurance com- missioner 1n 1933 deemed that hospital plans should be regulated as insurance. This would impose premium taxes. state oversight, and requirements that the plans have signifi- cant financial reserves. But the New York Blues pushed back. and subsequent legislation exempted them from trad1t1onal insurance regulation .10

Eventually. each state had a nonprofit Blue Cross and Blue Shield plan dedicated to operating in the "community" in- terest with limited regulatory oversight These plans 1nit1ally faced little market competition from other insurers. They em- ployed community rating (i e .. with subscribers paying the same premium regardless or health status. age. or other fac- tors) as well as guaranteed issue and renewal (1.e .. taking all comers regardless or their health). But this communitarian ap- proach did not last. By the 1940s. commercial companies be· gan to offer health insurance. Unlike the Blues. these for-profit companies offered low premiums to large employer groups with the "best" health risks. Their efforts to insure healthier people through experience rating left the Blues to cover d1s- proport1onately sicker people . which made their premiums less compet1t1ve and prompted them to abandon community rating The tension between the worldviews of the Blues and commercial earners. one stressing "social solidarity " and the other "actuarial fairness." came to define the debate over the proper role or state health insurance regulation for more than a generation 1

With the Blues and commercial insurers front and center. private health insurance grew apace in the postwar period. increasing from coverage of I 0% of the population in 1940 to more than half by 1950 and peaking at over 80% in the m1d·l970s 12 Federal policies did much to stoke this growth. A national wage freeze during World War II led employers to substitute health benefits for wage increases to attract work- ers. The 1947 Taft-Hartley Act made health benefits subject

CHAPTER 6 • Federalism a nd Health Care Policy

to collective bargaining, and unions placed a priority on win- ning concessions from management in this area. In 1954 . Congress amended the Internal Revenue Code to reinforce the favorable tax treatment of employee benefits.12 But while fed - eral policy fueled the growth or private insurance. its regula- tion remained with the states. In fact. Congress in the 1945 McCarran-Ferguson Act expressly delegated the regulation of the "business or insurance" to them.

In the period of rapid growth up to 1974. the layer-cake model or federalism characterized health insu rance regula· tion. States developed regulato ry regimes focused largely on assuring the financial solvency or insurance carriers. on their ability to fund contractual obligations to the insured. and on mmimlZlng fraud. In 197 4. however. federal policy- makers terminated this era of state hegemony by approving the Employee Retirement and Income Security Act (ERISA). In addition to addressi ng serious problems in private retire· ment plans. ERISA barred states from regulating self-funded health plans opera ted by large employers. Under this arrange- ment. the employer assumes the financial risk to provide a health plan for its workforce out of its own revenues rather than contracting with an insurance company. Larger com- panies with over I 00 employees increasingly opted for this approach. Smaller firm s, in contrast. continued to use the Blues and commercial carriers because self-funding exposed them to risks of financial ruin (e.g .. where one employee with cancer might incur huge medical costs and threaten their sol- vency). After 197 4. state governments continued to regulate those who did not self-fund-primarily the small-group and individual (non-group) markets but also a smattering of large employers who con tinued to purchase insurance. In turn . ERISA made the federa l government the primary regulator of the health plans of most larger fi rms. In itially, federal officials engaged in limited oversight of these plans. but. over time. some additional regulations were added .

Furthermore. federal policymakers increased their regu- lation of all insurance plans. Of particular note. Congress approved the Consolidated Omnibus Budget Reconciliation Act (COBRA) in 1986 and the Health Insurance Portability and Accountability Act (HIPAA) a decade later. Among other things . this legislation gave persons with health insurance through their jobs more rights to continue this coverage at their own expense after severance from their employers. It also limited discrimination against workers due to their health status in certain employer health plans. Other federal statutes

PART II • National Pol itical Institutio ns

required carriers to cover specific services. such as breast re- construction surgery following a mastectomy. minimum ma- ternity stays in hospitals. and mental health benefits.'3

In comparison to state regulation. federal oversight of health insurance remained largely piecemeal following ERISA. Ironically. ERISA freed states to be more active in regulating health insurance as large. self-funding employers no longer had much incentive to lobby against state intervention. 14 In- creasingly, states approved laws mandating that private health in surers cover dozens of specific services or types of provid- ers. In the early 1990s. states launched an array of bold exper- iments in health insurance regulation. Many states (especially in the Northeast) tried to reaffirm notions of social solida r- ity in the insurance market by reintroducing requirements for community rating and gua ra nteed issue in the small-group and individual insurance markets. Unlike the early period. when the Blues followed the communitarian approach while commercial insurers "cherry picked" people with fewer health problems. the new state laws applied to all carriers. State poli- cymakers hoped this would guarantee broad access to afford- able coverage.

This aspiration largely went unfulfilled. A considerable body of research documents that these laws did not increase coverage. although they changed the composition of the insured population. 15 Specifically. high-risk individuals had an easier time obtaining coverage while many healthier in- dividuals dropped insurance due to rising premiums. In their purest form , regulations requiring community rating and guaranteed issue have proven largely unsustainable. The voluntary nature of health insurance purchases goes to the crux of the matter. When state regulation compels insurers to cover high-cost individuals at the same rate as healthier people. premiums rise, causing the latter to drop coverage. The only state that sustained a reduction 1n the number of uninsured under a communi tarian regulatory scheme is Mas- sachusetts. which mandated that (nearly) all residents ob- tain coverage.

In sum. health insurance regulation began as a layer cake where states held sway and varied greatly in their ap- proaches. How insura nce markets were st ructured and regulated depended substantially on where one lived. Over ~ime . however. the fede ral government became increasingly involved. ERISA sorted out a division of labor between the two levels of government. but this began to blur in the 1980s and 1990s as federal policymakers expanded their scope of

regulation . The enactment of the_ ACA creates a sea cna"gt in health insurance regulation with the federa l go\ ernme·• playing an even larger role. We return to this developme:· later in the chapter

GRANT PROGRAMS AND THE FABRIC OF FEDERALISM The workhorse of health care federalism is the intergovm mental grant. These grants feature a mix of incentives and reg· ulation . To entice states to ameliorate some health problems national policymakers promise to provide fund ing States ao not have to participate in grant programs. but they usua lyfi·d the money irresistible In exchange for the subsidy. nationa policymakers impose certain requirements concerning goa s and processes (whether in the statute or via administratr.t regulation) that reflect the preferences of federal pnncrpas and constrain state discretion. As of 20 I I. the federal gO'iem· ment funded nearly 1.000 grant programs to states and loca · ties. dozens of which focused on health. 16 Many of the hea th grants claim a small share of the federal purse and target spe· cific groups or diseases . For instance. the federal Centers for Disease Control and Prevention provides monies to states to support early detection programs for breast and cerv1· cal cancer. At the other end of the scale stands Medicaid. a major entitlement program that funds a broad range of hea tn services for over 60 m1ll1on low-income people and consumes a major share of federal and state budgets.

Over the past 45 years . health grants have grown in impor· tance. As Table 6-1 indicates. all grants to state and local gO"r· ernments in 2010 were over 55 times greater (seven times in constant dollars) than in 1965 while health grants were 465 times greater {66 times in constant dollars). At the inception of Medicaid. health programs accounted for 6% of all federa grants to states and local1t1es By 20 IO. this share had growr to 48%. Within the health sector Medicaid loomed large accounting for nearly 95% of all federal health grant dollars flowing to state and local governments 7

Health care grants vary along an array of dimensions. Some are project grants where states or localities compete fo r a limited pot of federal money to undertake a specific act1v1ty. The ACA. for instance. encouraged states to apply for "early innovator" awards to help them establish information tech· nology systems for health insurance exchanges. Under the

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TABLE 6-1 Federal Outlays for Grants to State and Local Governments: Health and Other (in Millions of Dollars)

I All

Year Grants

1965 10.910 624 6

1970 24.065 3. 849 16

1980 91 ,385 15 .758 17

1990 135.325 43 ,890 32

2000 284.659 124 843 44

2005 428.0 18 197.848 46

2010 608.390 290.168 48

Source· U .. Oflice of Management and Budget, " Histori- cal Tables. Budget of the United States Government, Fiscal Year2012." Retrieved fromhllp://www.whitcho u e.gov/sites/ defaull/files/omb/budgct/f y2012/asscts/hisl. pd f.

ACA. these exchanges will provide health insurance options to those without coverage. In February. 20 11. the federal bu- reaucracy announced that seven states would receive these grants 18 Formula grants. such as Med1ca1d. cut a much larger profile in the health arena and are the primary focus of this chapter These grants allocate federal monies to states or thelf subd1v1s1ons according to a specific formula prescribed by law or adm1nistrat1ve regulation. They support "act1vit1es of a continuing nature not confined to a specific proJect." 19

Formula grants may be categorical or block depending on how much discretion policymakers want states to have. In the federal government's terminology. "the typical categorical grant permits funds to be used only for specific. narrowly de- fined purposes and populations and includes administrative and reporting requirements that help to ensure both financial and programmatic accountability." In contrast. "block grants award funds to state or local governments. to be used at their discretion to support a range of activ1t1es aimed at achieving a broad national purpose." Block grants tend to have "limited administrative and reporting requ1rements :·20 While useful

CHAPTER 6 • Federaljsm a nd Hea lth Ca re Po licy

conceptually. the distinction between categorica l and block grants is much fuzzier that these definitions imply. For in- stance. many block grants spin a substantial regulatory web on participating states.

Not surprisingly, state officials usually prefer generously funded block grants. National policymakers. in contrast. go through cycles. Typically. they like to pursue thei r own policy goals through narrowly defined categorical grants. But the resulting administrative complexity leads to spasms of sup- port for combini ng existi ng categorical programs into block grants (often accompanied by funding reductions). For in- stance. Congress moved in this direction in the early 1980s under President Ronald Reagan. But after consolidation. the desire to control programs and win credit from constituents for fighting a specific problem (like AIDS) led Congress to cre- ate a new generation of categorical grants.21

Certain fiscal arrangements also distinguish grants from each other. Federal grants vary in terms of requirements for the state share of financing (or match). In some instance. the fed- eral government promises to pay the entire cost of the grant. For example. the ACA will in 2015 fully fund the Children's Health Insurance Program (CHIP) for cert ai n low-income states. In other cases. such as Medicaid. states must commit money from their own coffers to trigger the release of federal funds. Finally, and of critical importance. grants vary in terms of whether they are entitlements or capped. The overwhelm- ing majority of health grants are capped. For instance, the leg- islation authorizing CH IP in 1997 set aside a fixed allocation for states depending on a number of factors. States that opt for a separate CHIP program can suspend enrollments once they have exhausted their federal grant. In contrast. Medicaid. as the king of the hill in the intergovernmental arena. 1s an entitlement in a twofold sense. First. the federal government must match whatever states choose to spend on the program. The minimum federal share is 50%. and some poorer states receive 75% or more. Second. once a state decides to make certain individuals eligible for specific Medicaid services (e.g .. prescription drugs). it cannot abruptly suspend enrollments or access to these services. 22

Grants and Representational Federalism The importance of intergovernmental grants as a policy tool intersects with basic questions of what political scientists call "representational federalism." This concept focuses on the

PART II • National Political Institutions

degree to which and ways in which state officials influence federal policy processes. With the growing activism of the federal government in the 1960s, concern mounted in some quarters that state governments were losing a meaningful role in American federalism. In the late 1970s. however. Harvard political scientist Samuel Beer challenged this view. 23 While acknowledging "a large and sudden surge upward in the growth of the pub lic sector. largely under the impetus of the central government." he did not see this development as mas- sively shifting power to the national level. Instead he stressed "the emergence of new arenas of mutual influence among lev- els of government" that "is adding to our national system of representation." Beer identified two primary vehicles for state representation- the activities of the intergovernmental lobby and implementation processes.

affecting the states. The Democratic Governors Assoc iation. founded in 1983. pursues similar goals from its side or tne partisan d1v1de. The degree to which governors tread partJcu. laristic. b1part1san . or partisan paths to influence health pollC) varies with the issue and context. In the polarized c1rcu:n- stances of 1995. for instance. Republican governors pursue: a partisan approach in supporting the efforts of House SpeNi Newt Gingrich ( R) to convert Medicaid to a block grant Two years later. governors worked in more bipartisan fashlOfl through the NGA to shape legislation establishing the St.te Children's Health Insurance Program

State Power i11 Implem entation Processes Although federal grants constrain state d1scret1on. they ~i no mean s eliminate the ability of states to shape processes outputs. and outcomes in the health arena. Prior to the mil war. one of the great federalism debates revolved around the issue of nullification-whether state legislatures could annul federal laws within their jurisdictions. While the Civil War effectively ruled out such action. states in many respect pos- sess de facto nullification powers. at least over the short term. as implementing agents. Without officially challenging the law. states can drag their feet and take other action to thwart federal intent in the 1mplementat1on process. The image of states as puppets with the federal government pulling strings seldom. if ever. applies even in the case of highly specific cat- egorical programs

Tile Intergovernmental Lobby States and loca lities have associations that seek to promote their interests in Congress and the Wh ite Hou se. In the health arena. these groups include the National Association of State Medicaid Directors. the National Association of Insur- ance Commissioners. and many others. Within the intergov- ernmental lobby. governors loom especially large . Governors rely on particularistic. bipartisan. or partisan vehicles to shape federal health po licy. They frequently wo rk in particularistic fashion outside forma l associations to influence national poli- cymakers in ways that benefit their own states. In this regard. 35 governors representing over 85% of the nation 's popula- tion have offices in Washington. 24 Governors also work through bipartisan organizations. By far the most important of these is the National Governors Association (NGA). Born in 1908. this association adopted its current name in 1977. The NGA has several standing committees, including one on health policy, and a staff of about I 00. The governors typi· cally convene at winter and summer meetings at which two- thirds of those present and voting can approve an NGA polJCy position. The executive director of the NGA frequently testi- fies before Congress on health policy issues. The NGA also employs lobbyists who monitor developments on Capitol Hill and seek to protect the interests of states on Medicaid . health reform. and related matters.

Governors also turn to partisa n organizations or coalitions to present their views to Congress and the preside nt. Estab- lished in 1963 , the Republican Governors Association not only seeks to elect more governors from that party, it also works to leave its ideological stamp on public policy issues

The symmetrical power relationships between the federa government and the states in grant programs spring from several sources federal administrators often lack enough in- formation about state program activities to fathom whether they are effectively implementing policy in a manner consist- ent with the law and administrative regulations. The federa government's paltry staff and inadequate information systems make the monitoring of state behavior difficult. While reform- ers have called for performance-based accountability in the case of grant programs. success in establishing them 1s the exception rather than the rule.25 Gaining agreement between the federal government and the states on goals and suitable output and outcome measures often proves d1fficuft. Efforts to develop information systems that produce valid, reliable. and timely data concerning state performance typically prove daunting. Officials in different states often want to preserve their own terminology and data management practices. mak- ing it impossible to compare the performance of one state to another. A substantial lag in acquiring data from state officials

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also exacerbates the problem . By the time some issue shows up on the federal radar screen. state officials can claim they have long since dealt with it.

When federal administrators uncover state failings. the tools they possess to bring state grantees into line also have limits. Some state problems stem less from willful resistance than flawed national policy. The grant may be too small for states to achieve the ambitious goals embedded in a statute. Or the law may rest on a mistaken theory of how to ameliorate a health problem In other cases. a state may lack the admin- istrative capacity (e.g., enough capable staff. adequate infor- mation systems) to implement the grant effectively States vary considerably in this regard So too . the enduring view that states have a special const1tut1onal position and that the federal government and states ought to be "partners" inhibits federal officials from being too assertive in dealing with the states. Moreover. the sanctions at the federal government's disposal to compel state action are often difficult to employ. The "nuclear option" in the intergovernmental grant world is to withhold all federal funds from errant states. But federal ad- ministrators find this unappealing because 1t would often hurt the very people they wish to help (e.g .. low-income children in need of health care). Moreover. efforts to impose sanctions can kindle state lobbying efforts directed at its congressional delegation or the White House to put pressure on fed eral ad- ministrators to back off.

All this 1s not to suggest that states can blithely ignore the law and preferences of federal officials. Executives in the national bureaucracy typically seek to prod and coax lag- ging states to do better in implementing health programs. At times. they can turn to calibrated. smaller penalties to incen- t1vize states (e.g .. reducing the flow of federal funds if the state Med1ca1d program has made payment errors) . In this vein federal "quality control" systems have encouraged states to avoid false positive ehg1b11ity decisions when reviewing ap- plications for Medicaid (e.g .. signing up people who make too much money to qualify). Furthermore. advocacy groups at times use federal statutes as the basis for suits to require state and local officials to do a better JOb of implementation. These groups have constituted a kind of unofficial enforce- ment arm of the federal government In the late 1990s. for instance. the administration of Mayor Rudolph Giuliani (R) tn New York City adopted enrollment procedures designed to discourage people from applying for public assistance. Among other things. intake workers routinely accepted an application

CHAPTER 6 • Federa lism and Hea lth Care Policy

for Medicaid only after an individual visited their offices a sec- ond time. Aware that this practice violated fede ral regulations, the Legal Aid Society jo ined other advocates for the poor in suing the city. When a federal district judge ruled in their fa- vor. city officials brought their procedures into compliance with federal law.

On balance. the federal government can seldom compel state compliance through "command and control." Power dy- namics vary from one intergovernmental grant program to the next. But in general. the management of the programs tends to feature negotiation and bargaining when differences be- tween the federal government and the states surface.

Variations in State Capacity and Commitment Who gets what from federal grant programs substantially depends on the capacity and commitment of the 50 state governments. The governing capacity of states refers to their ability to formulate coherent. creative. responsive policy in re- sponse to a grant and to implement it efficiently. effectively. and accountably. Fiscal capacity denotes their total taxable resources and their formal right to tap them for public pur- poses. Policy commitment in turn focuses on whether the preferences of the dominant political coalition within a state support the letter and spirit of the federal grant's goals.

The Flow a11d Ebb of State Govemillg Capacity States are widely touted as having appreciably enhanced their governing ca pacity over the last half century. Supreme Court decisions insisting that legislative districts at the state level reflect the principle of one person. one vote . and the passage of the civil rights laws in the 1960s helped remove the taint of racism and undemocratic governance from the states. Many states also took steps to enhance the capacities of their leg· islative. judicial. and executive branches. By the 1980s states were. as one observer put it. no longer perceived as "no-talent spear carriers worthy only to serve the federal prima donna. they were moving to center stage and win ning an unaccus- tomed share of the limelight. "26

No handy scorecard exists that allows us to define . measure. and track trends in state governing capacity with precision . However. a strong case exists that most states can under the right circumstances effectively implement health care grants. Or stated differently. they stand at least

I I

PART H • National Political Institutions

as good a cha nee of doing so as the federal government. (In part. this reflects the possibility that the ~a~t th~ee decades have featured an erosion of federal admin1strat1ve capacity.) 27

The fiscal capacity of a state not only reflects its tota ta 1 .

able resources but also the rules that govern its taxing a·d spending dem1ons . Drawing primarily on ballot propos bon; presented to the voters in states that permit the in1tiatve •11: referendum . the ant1tax movement has often succeeded i handcuffing states fiscally As the 21st century dawned. CM· half of the states had added tax or expenditure lim1ta:ions to their const1tut1ons or statutes. These provisions come " many guises Some impose stnct caps on how much states expenditures can increase in a year. Others require any:a. hike to win the approval of a supermajonty in the leg1sla:u:? or the voters in an election Whatever their precise man.'fs. tat1on. these restnct1ons have one common charactensuc- they make it harder for states to tap their wealth to pay'or health programs.

While states have bolstered their governing capacity over the last half century. certain factors caution against exuber- ance in assessing their ability to implement grants. Above all. assessments of governing capacity need to acknowledge more fully its fluidity and potential for backsliding. The 1960s and 1970s featured a great leap forward in state capacity. The period after that presents a more mixed picture. For instance. the success of the term limits movement has undercut leg- islative expertise and professionalism. The increased use of mecha nisms of direct democracy (the initiative and refer- endum) in states like California has led to a jumble of laws that foster policy incoherence. fuel gridlock. and undermine prospects for deliberative democratic institutions. Moreover. an ideology of bureaucratic downsizing. which at times can more aptly be termed dumbsizing, and occasional reces- sions have in many states eroded government workforces and the administrative infrastructure needed to implement public programs efficiently and effectively. The worst reces- sion since the Great Depression . sta rting in late 2007. created enormous fiscal stress for many states with public employ- ees furloughed. laid off. or not replaced upon resignation or retirement. In these and other ways, one cannot assume a steady march toward greater state capacity. Moreover. states vary considerably with some of them much more capable of '"good government" than others. 28

The anti tax provisions that have taken root reinforce an· other fa ctor that can make 1t hard for states to come up W1u· their share of the tab for health care grants-limited abi1;t

1 to run budget deficits during recessions. When the econonr

1 sours. federal policymakers often see continued public spend· ing and deficits as a way to counteract the slump. Nearly al states. in contrast. face requirements to balance their budgets even if it means slashing public programs. To be sure. states at times find ways to borrow money to tide them over o· employ an arsenal of fiscal gimmicks to dodge budget cuts But these palliatives do not negate the fact that states ha;t less fiscal capacity during recessions than the federal govern· ment. In recognition of this situation the Obama admin1stra· tion responded to the severe economic recession by pushing a federal stimulus bill through Congress that temporarily n- creased the federal match rates to the states for their Medic· aid programs

State fiscal capacity also affects the vigor states evince in implementing federal grants. The taxable resources available to all levels of government increased over the last two dec- ades largely because the economy grew. But this rising tide has not lifted all boats equally. Substantial variation persists among states in the monies they can marshal to fund health programs. In 2008. for example. the total taxable resources ranged from a low of $38,000 per capita in Mississippi to a high of $84.000 in Wyom ing. 29 Variations such as these can be particularly important when a federal program makes re- ce ipt of the gra nt contingent on a state spending a certain amount of money from its own purse. Under this circum- stance. less affluent jurisdictions will be at a disadvantage un- less the fede ral government calibrates the fundin g fo rmu la so that it requires no greater fiscal effort from them than it does from richer states.

Substantial Variations in State Commitment Where there is a way. there may not be a will The dorr1• nant political coalitions within a state may have limited in· terest in or sympathy for the goals served by a federal heai:h grant. In the case of competitive grants. this may well lead them not to apply. On rare occasions. they may even return grant money. In early 2011. for instance. the newly elected Re- publican governor of Oklahoma. Mary Fallin. announced that the state would return a $54 million innovator grant that the sta te had won to expedite the creation of an insurance ex· change under the ACA. In doing so she affirmed that this step '"accomplishes my goal from the very beginning: stopping the

implementation or the president's rederal health care exchange in Oklahoma." A key legislator praised her action as "rederal- ism at work."' 30

In the case or formula grants. variations in state commit- ment to the program may lead to sta rk differences in 1mple- mentat1on effort. Medicaid provides a graphic example or this variation since the federal government has given states vast discretion to make their programs more or less gener- ous Consider in this regard two indicators or state Medicaid effort-program expenditures and enrollees per poor per- son. (We control for poverty because 1t is a rough proxy for the degree to which a state has more ind1v1duals that need Medicaid.) As or 2008. Medicaid spending per poor person ranged from a high of $17. 700 in Vermont to a low of $4. 700 in Nevada . Among the five most populous states. the gap was only slightly less. ranging from $I 7.400 rn New York to $5.600 in Texas. As ror enrollees. Vermont leads the way with 2.6 beneficiaries per poor resident while Montana ranks 50th with less than I Among the five states with the most people. Calrfornra sets the pace at 2.3 enrollees per poor person. more than twice as many as Texas at 1.1.31

As the single largest federal grant program. issues of state Medicaid effort intersect with the concept of competitive fed- eralism. This perspective sees interstate economic competition as a force constraining state spe nding on social programs that redistribute benefits from the haves to the have-nots. States purportedly vie with each other to keep their tax burdens low rn order to retain and attract businesses and the affluent. All else equal . this dynamic makes states reluctant to raise taxes to enhance Medicaid coverage. A second and related dimen- sion of interstate competition focuses on state fears of be- coming welfare magnets.32 This view holds that low-income people gravitate toward states with more generous health benefits. States with bountiful Medicaid programs presumably encourage needy people within their boundaries to remain wlu e attmting low-income migrants from other states. 33 The val d1ty of theones of competitive federalism depends not just on whether firms. the affluent, and the needy actually vote with their feet in the predicted way but on whether policy- makers perceiue that they do .

Whatever the exact implications of interstate economic compet1t1on. one fact stands out in the case of Medicaid: The dynamic has not kindled a race to the bottom among states in therr Medicaid effort. To the contrary, all 50 states increased

CH APTER 6 • Federalism and Health Care Policy

their Medicaid spending (in inflation-adjusted dol lars) and en- rollees per poor person from 1992 to 2008. This does not. of course. mean that the forces of interstate competition had no effect. Perhaps Medicaid growth would have been greater had these forces been less in play. It also deserves note that Med- icaid effort tends to be lower in less affluent states with higher percentages of poor and uninsured residents. Whatever the precise causal dynamics. this finding is consistent with a core thesis of competitive federalism-that states with larger pro- portions or needy residents will pursue more penurious Med- icaid policies.34

Formula Grants and Targeting Targeting refers to federal efforts to channel funds to states that need rt most. One form of targeting involves the provi- sion of more generous grants to poorer states. Political dy- namics make highly calibrated targeting of this kind difficult. To build a broad supportive coalition for the program. policy- makers typically must funnel substantial funds to less needy states. Again. Medicaid provides a useful example. In creat- ing this program in 1965. nationa l policymakers attempted to compensate for disparities in wea lth among states through a formula that increases the federal match rate for states with lower per capita incomes. However. it also constrained target- ing by guaranteeing that the federal government would shoul- der at least 50% of Medicaid costs for the most affluent states. The Medicaid formula has drawn criticism. For instance. a Government Accountability Office (GAO) report asserts that targeting would improve if Congress eliminated the 50% floor on the federal match and adopted a more refined measure of state fiscal need. 3 5 The GAO contends that state per capita income suffers from many limits as an indicator and should be replaced by a form ula that more fu lly takes into account a state's total taxable resources . population below the poverty line. and health care prices.

But members of Congress know that any effort to modiry an existing formula opens a political can of worms. Notions of targeting collide headlong with the desires of senators and representatives to protect the amount of funding flowing to their jurisdictions. The constitutional guarantee that each state has two senators assures that even formula changes that would benefit the most populous states face roadblocks. For instance. the modification in the Medicaid formula rec- ommended by GAO would direct more rederal monies to the four most populous states-California. Texas. New York. and

PART 11 • National Political Institutions

Florida. 36 United. the congressional delegations from these states possess substantial clout in the House of Representa- tives with nearly one-third of all members coming from them. In the Senate. however. these four states comprise only 8% of the votes.

State Manipulation of the Formula Whether well targeted or not. formulas establish objective criteria for allocating grant monies to the states. But this does not always mean that states cannot game the formu - las during the implementation process. The potential for states to extract more federal dollars than the formula al- lows becomes greater to the degree that the federal govern- ment requires states to put up some of their own money to obtain grant funding. In this regard. states have been particularly entrepreneurial in shifting Medicaid costs to the federal government by using "free" money to comply with federal matching requirements. This practice picked up steam in the early 1980s. Faced with acute budget problems. policymakers in West Virginia persuaded hos- pitals to "donate" (in fact loan) some $22 million to the state Medicaid program. This donation became part of the state's Medicaid match needed to draw down federal dol- lars. Because West Virginia has a low per capita income and hence a higher federal match rate. this move generated over $60 million in federal Medicaid funds. Once West Vir- ginia officials received the federal dollars. they found a way to return the $22 million to the donor hospitals. The state used the remaining federal money to support various Med- icaid services. Other states soon followed West Virginia's lead. By 1990, all but six states operated a donation or pro- vider tax program designed to inflate the federal match rate via the use of free dollars for the state's contribution . The effect on the federal purse was substantial. Medicaid law generally envisions that the federal government's share of all program costs will approximate 5 7%. By 1992. its pro- portion of the Medicaid tab had, by one estimate. climbed to over 65%. 37

Co ncerned about state legerdemain, federal policymak- ers responded with proposals to curtail this gami ng of the Medi caid form ul a. When the NGA and other elements of the intergovernmen tal lobby complained that these propos- als would hurt t he poor, Representative Normal Lent from New York (R) retorted that these complaints were akin to catching a bank cashier embezzling funds to support his

wife and children Should he be allowed to do it for anot."K year lest we lower the standard of living for his fam1fyr Given strong lobbying from the governors and sympathy!u- their positron in the Democratically controlled Congress was not until 1991 that the administration of George H \\ Bush successfully negotiated approval of a law that c osec some of the loopholes that had allowed states to inflate tiler match rates.

While these and related measures curbed fiscal gamm6 by the states. they by no means eradicated it. Throughw. the 1990s and into the 2000s, many states continued toel· evate their match rates by exploiting payment prov1s1ons fo· hospitals that d1sproport1onately served the uninsured and Medicaid enrollees Intergovernmental transfers of funds be· tween state and local governments or between state agencies helped lubricate this manipulation . Typically. use of mtergav- ernmental transfers involved two steps. First. the state wo111G use its discretion to reimburse public hospitals (or another kind of institution) at the maximum Med1ca1d payment rate permitted under federal law (the upper payment limit) Ths would trigger the release of federal matching funds to the state. Second. hospitals would then retroactively accept reimbursement for less than the upper payment limit and transfer funds back to the state. Like provider donations and taxes. intergovernmental transfers essentially provided states with "free money" to apply to their share of the Medica id match . By one estimate. state manipulation of this mecha· nism had by thf' e~r1y 2000s raised the federal share of Med· rcaid costs three percentage points above what the formu i specified. 39

Executive Federalism: Waivers Galore40 Federal grant programs are not set in concrete. They ofte· change appreciably due to congressional modifications 01

the original legislation or court dec1s1ons. Programs may also undergo a more subterranean transformation through the im· plementation process via "executive federalism."4 This inter· governmental pattern emphasizes interaction between the executive branches at the national and state levels to modify grant programs primarily through the administrative process Over the last two decades. a burgeoning reliance on Med1ca1d waive rs has been the hallmark of executive federalism . To an unprecedented degree , these waivers have allowed states to reinvent their Medicaid programs without significant changes

-

it-

in federal law. They have afforded presidents. governors. and other policymakers new opportunities to surmount the veto points that frequently delay or block action in the American political system.

A waiver 1s a congressional delegation of authority to the executive branch to permit selective dev1at1ons from the law. Two kinds of waivers figured prominently in the transformation of Medicaid during the 1990s and 2000s- demonstrat1ons and program waivers to promote home- and community-based services (HCBS). The demonstration waivers derive from Section I I 15 of the Social Security Act. Endorsed by President John F Kennedy and approved by Congress in 1962. this provision gives the federal bu - reaucracy authority to waive statutory requirements so that states can experiment with alternative approaches to social programs It requires that the demonstrations be formally evaluated to foster policy learning The federal government approved relatively few Medicaid demonstrations in the pro· gram's first quarter century-about 50 in all. This changed markedly when President Bill Clinton came to office in 1993 . Clinton wasted no time in signaling his openness to state waiver proposals Many states. including Massachusetts , Minnesota. New York. and Tennessee. responded promptly. They won approval for waivers that moved the bulk of their Medicaid enrollees into managed care plans while expand- ing eligibility to new groups of low-income people . Clinton's successor. President George W Bush. continued to encour- age waivers. renewing many that had commenced during the Clinton years and encouraging states to submit others under his administration's Health Insurance Flex1bil1ty and Accountability in1t1at1ve.4 The recept1v1ty of the Clinton and G W Bush admin1strat1ons to waivers fueled an outpouring of state in1t1at1ves. By the end of the Bush years. about 45 states and the District of Columbia had won approval of at least one demonstration waiver. many of which were com· prehens1ve and transformative .4 l

Among these demonstrations. none loomed larger in sig· mf1cance than the waiver Massachusetts received in 2006 to forge near universal coverage for its residents . This devel· opment hearkened back to the mid· I 990s when Massachu· setts successfully applied for a demonstration waiver called MassHealth to expand eligibility for Medicaid while mandat· mg that many beneficiaries enroll in managed care. In 200 I. federal administrators approved a three -year extension of the waiver with little negotiation When state officials again

CHAPTER 6 • Federalism and H ea lth Care Policy

moved to renew MassHealth in 2004. however. the Bush ad· ministration signa led that it wanted significant changes in the waiver as a condition for its continuation. In particular. fed· eral officials wanted to redirect MassHealth monies that had flowed to certain major providers toward coverage expansions for the uninsured. They warned that if Massachusetts failed to do this , it risked losing $385 million in federal Medicaid funds. This prospect kindled intense intergovernmental bar· gaining. Eventually Governor Mitt Romney (R) and Senator Edward Kennedy (D) negotiated an agreement with the Bush administration to retain the funds to help subsidize a ma· jor coverage expansion. The state's legislature approved this plan in April 2006. and the federal bureaucracy signed off on it as an amendment to the original MassHealth demonstra· tion. Subsequent implementation helped earn Massachusetts the distinction of havi ng by far the lowest proportion of un· insured residents of any state in the country.44 The Massa· chusetts model became the template for health reform at the national level in 20 I 0.

While the Section 111 S demonstrations afforded oppor· tunity for states to try bold and sweeping Medicaid rein ven· tion . other statutory provisions opened the door to a steady stream of incremental changes that yielded a substantial cumulative effect. Section 191 S of the Social Security Act. which Congress approved in 1981. allows states to peti· tion for Medicaid waivers to provide HCBS to the elderly and people with disabilities who otherwise tend to receive care in nursing homes or other institutions. Spurred on by advocates. a major Supreme Court decision.45 and a wide· spread preference for HCBS over institutional care, the federal government approved large numbers of Section 191 S waiv- ers. By 2008. the number of these waivers in ope ration had grown to 280 with all but two states providing some portion of HCBS through them. 46 Forty percent of all Medicaid en· rollees receiving HCBS did so via waivers and the program allocated two-thirds of its HCBS dollars through them .47 Medicaid spending on HCBS grew from I 5% of its long-term care costs in 1992 to 40% near the end of the G. W. Bush administration. 48

The rise of waivers means that major decisions about Medicaid get made within the executive branches of the federal and state governments.49 Consider. for instance. the Massachusetts waiver discussed earlier This reform derived from a highly discretionary decision within the federal ex· ecutive branch to shift its posture on the kind of waivers 1t

PART II • National Politica l Institutions

would approve. No congressional action required the Bush administration to alter its position on the contents of the Massachusetts waiver in 2005. The Centers for Medicare and Medicaid Services could have continued it as is. Instead. however, federal officials stood their ground in promoting a new perspective on Medicaid waivers-that they should di- rect monies away from institutions to coverage expansions for individuals. This shift in the exercise of federal adminis- trative discretion was probably a necessary. if not sufficient. condition for the birth of Massachusetts health reform . The Massachusetts case also captures the degree to which waiv- ers involve bargaining and negotiation between the national and state governments. Power tends to be symmetrical with neither level getting all it wants.

It deserves note that HCBS waivers tend to depart from this model of intergovernmental bargaining. Instead, processes associated with these waivers typically reflect a "licensing" modeP0 While some negotiation between national and state officials occurs over HCBS waivers . much interaction is rou- tine. State administrators present the requested information as a boilerplate application. Federal officials check to make sure the waiver application is complete and conforms to program requirements. They seldom attempt to impose their particular policy and administrative preferences on the waiver. Once ap- proved. federal officials conduct little oversight and tend to renew them routinely. The waiver process becomes more like obtaining and keeping a driver's license.

FEDERALISM AND THE AFFORDABLE CARE ACT The passage of major health reform in 20 IO dramatically al- tered the federalism playing field . Developments in three arenas deserve particular note-insurance regulation. the cre- ation of subsidized exchanges so that individuals can comply with the mandate to obtain coverage. and a major Medicaid expansion. These developments along with the rise of the Tea Party and partisan polarization have fue led an outburst of fractious fede ra I ism.

Implications for Insurance Regulation The ACA crea tes something of a federalism role reversal for health insurance regulation. As discussed earlier in this

chapter. states had dominated the regulation of carrie-s since the advent of health insurance. Even after the 1974 enactment of ERISA. states remained in the driver's sea: especially for the small-group and individual markets. The ACA creates a comprehensive regulatory regime for a' pri- vate health insurance. with state decision making relegated to the margins. To be sure. states will continue to play a roie in the enforcement of consumer protection. insurer solvency and other matters. But federal law will guide many of their activities .

The ACA regulatory regime mirrors the communitarian approaches of early Blue Cross and Blue Shield plans and the policies some sta tes adopted starting in the 1990s. Spe· cifically. the law proh1b1ts insurers from re1ecting or fading to renew coverage for ind1v1duals based on their health. in· eluding "preexisting cond1t1ons ." It bans lifetime and annua limits on how much an insurance company will pay to meet the health care needs of a beneficiary. It also prevents the carriers from rescinding health insurance coverage except in cases of fraud. The ACA requires carriers to coveradut children up to age 26 under family plans. It also strictly lim- its variations in health plan premiums to three to one (the highest group may be charged no more than threefold the lowest). It permits variation within this range based on such factors as age. geographic area. tobacco use (smokers may be charged premiums 1.5 times more than nonsmokers). and family structure (e.g .. single. couples. married people with children). Of particular note. the ACA ends the prac- tice of charging higher premiums to women. The ACA also calls for greater standardization of plans so that consum- ers can better understand them. The standard plans will fo· the first time include a federally defined "essential benefit package." The ACA requires states to subject all health pre- mium increases to rigorous review. Overall. health reform will promote greater uniformity in state regulatory practices although it .. grandfathers" in some plans that do not mee• the new standards.

This entire regulatory regime depends on a controver- sia l lynchpin. a mandate that all individuals obtain cover- age or face a financial penalty. The failed experience of the Blues and earlier state regulation with guaranteed issue and community rating demonstrated that the communitarian approach is not viable in voluntary markets. The ACA sig- nificantly raises the bar for most state regulatory regimes.5'

t -

It also permits more progressive states to go beyond its standards For instance. four states require insurers to of- fer adult children coverage under their parents' family poli- cies above the ACA age limit of 26. and others may do so in the future. 52 States may also impose coverage mandates that exceed those of the federal "essential benefit package." However. the ACA requires states to pay for these "extra .. benefits for those receiving federal subsidies to purchase in- surance through the newly established exchanges. This will create a strong d1sincent1ve for states to exceed the basic service package 5

The apparatus set up to review increases in health in - surance premiums points to some of the nuances of the new federalism under the ACA The McCarran-Ferguson Act of 1945 ceded to states the authority to review and approve health insurance premiums But prior to the ACA only about half the states chose to regulate premiums. 54

The ACA encourages sta tes to implement rate review and imposes sanctions on insurers that cannot Justify increases above a federally established threshold (initially. a I 0% an- nual increase). The federal government launched a $250 million grant program to help states build their capacity to perform this regulatory function States with review proce- dures that the federal government deems adequate will con- duct annual reviews. The federal government will step in to perform these reviews 1f a state falls to forge an acceptable process.

Implications of the Insurance Exchanges The health nsurance exchanges may come to be the most visible manifestation of post-ACA federalism. The exchanges are intended to promote "more efficient and competitive (health insurance) markets for individuals and small em- ployers" when the law's 1nd1v1dual mandate goes into effect in January 2014 .55 The ACA permits. and federal authorities have strongly encouraged . states to take the lead in design- ing and operating exchanges. But if states fail to do so. the federal government will establish and run them . Whether states choose to part1c1pate or turn the function over to the federal government will markedly affect the fabric of federal- ism. In the first 15 months after passage of the ACA. JUSt over one-third or the states had begun to lay the foundation for the exchanges with I 3 passing laws to establish them . But

CHAPTER 6 • Federalism and Heal th Care Po licy

legislation to create the exchanges had failed to win approval in 15 states; in several others. no such legislation had even been introduced. 56

The country's success in expanding health insurance de- pends heavily on the effective implementation of the ACA's exchange provisions. The law provides that uninsured lega l residents with incomes between I 33 and 400% of the federal poverty level (FPL) obtain insurance through the exchanges or face a tax pena lty. The federal government subsidizes the premiums for those in this income cohort through tax credits. The lower a person's income, the more federal assistance he or she wi ll receive. The ACA also requires exchanges to ad- minister enrollment for those with incomes below I 33% of the FPL who will be on Medicaid. Finally. the exchanges will provide an enrollment portal for individuals and small busi- nesses ineligible for any federal subsidy but interested in using the services of the exchange.

At the most basic level, the exchanges are supposed to function like the benefits offices of large corporations. ar- raying health plan choices and expediting enrollment. They are to protect consumers by ensuring that the plans offered by private carriers through t he exchanges meet high stand- ards. They will collect and array information about health plan qua lity. provider networks. costs. and other fea tu res to aid consumer decision making. By 20 I 3. the exchanges must offer consumers the opportunity to obtain pertinent informa- tion on the web and through a toll-free telephone service. Exchanges will also provide "Navigators" who offer cultur- ally tailored outreach and enrol lment assistance to individu- als. Prior to the ACA. individua ls without access to human resource (HR) offices in large corporations or public agencies had largely been on thei r own to deal with the complexities of purchasing health insurance. Small businesses without resources to invest in benefits administrators have relied on agents or brokers compensated by insurance companies. In concept, the exchanges will significantly red uce the complexi- ties and high information costs faced by individuals and small firms. Policymakers hope that these efforts to create "smarter markets" through the excha nges will spark vigorous compe- tition among carriers to offer attractive insurance options at reasonable prices.

In add ition to serving as the "uber HR office" for indi- viduals and small businesses seeking to buy insurance. the exchanges face the formidable task of conducting eligibility

PART Il • National Political Institutions

determinations for Medicaid and for those between 133 and 400% of FPL . The exchanges must verify whether appli- cants are legal residents. check their income. and administer certain exemptions from the ACA coverage mandate. To accomplish this. the exchanges will need to employ state- of-the-art inform ation technology to tap into federal and state administrative data concerning the taxes. wages. and immigration status of applicants. The technology must also link them to the enrollment systems of insurance carriers participa ting in the exchanges. In their operation of income- based eligibility systems for Medicaid and other social pro- grams. no state has achieved the enrollment efficacy that the exchanges wi ll demand . The implementation challenge of bringing these systems online calls for an unusually high level of state commitmen t and capacity. The ACA proffers grants to the states to help them plan and design the ex- changes. States were supposed to win federal approval of their exchange proposals by January 2013 but have some leeway to take th is step at a later date.

ACA will do so via the program Colleen Grogan·s chapttr in this book (Chapter 9) dissects the impl1cat1ons of the ACA for Medicaid For present purposes we offer a brief ob- servation related to federalism The ACA reversed a trend • place for nearly two decades to afford states more Med1cad discretion . The outpouring of waivers to states under Pres1. dents Clinton and G W. Bush stoked this devolution. So too did various statutory provisions that gave states ne11 options to cover certain populations (e .g .. those needng certain long-term care services) and freed them from othe· requirements (e.g .. concerning provider payment). In con- trast. the ACA imposed a bevy of new mandates. It man· dated coverage of poor uninsured adults . a group which

State regulatory regimes could affect the viability of the exchanges even when the states turn their operation over to the federal government. This stems largely from the fact that the exchanges will not have a monopoly on the sale of insur- ance. This raises the possibility that carriers outside the ex- changes will go all out to market products to the young and healthy. They might. for instance. do this by offering richer maternity or wellness benefits (e.g .. yoga classes. acupunc- ture). Moreover. insurance brokers might be tempted to steer customers to these carriers if state or federal regulation limits or prohibits their fees for referrals within the exchanges. Any such development will create problems of adverse selection for the exchanges: those obtaining insurance through them will be older. sicker. and , hence, more expensive. This will drive up premiums for insurance sold through the exchanges as well as the costs to the federal government of subsidiz- ing these purchases. State regulation of carriers outside the exchanges will help determ ine whether this risk shifting occurs.

The Medicaid Mandates The ACA also mandated the largest expansion of Medicaid since its birth in 1965. Nearly all the uninsured up to 133% of the FPL will be entitled to Medicaid.57 Roughly half the 32 million people projected to gain coverage through the

most states had long neglected (especially adults without children who were previously covered rn only six states) Simultaneously. the ACA required states to preserve their existing elig1bd1 ty criteria at least until the new law takes effect in 2014 . This mandate came at a time when most states faced acute fiscal pressure partly brought on by the Great Recession and the expiration of an enhanced federa Medicaid match that had been part of President Obama ·s stimulus program. Meanwhile. the Obama adm1n1strat1on in mid-20 I I proposed an admrn1strat1ve rule that would place a greater burden of proof on states to show that therr pro· vider payment levels afforded adequate access to care. This occurred when many states had sought fiscal relief by cut· ting provider reimbursement.

These mandates kindled an outburst of fractious federa l· ism. Governors responded to the mandate for a great cover· age expansion almost exclusively on partisan lines. Despite a relatively generous federal match for new enrollees (ult1· mately 90%). nearly all Republican governors denounced the ACA. Their Democratic counterparts stayed loya to the president and backed 1t. But the maintenance-of-effort requirement and provider payment regulations sparked b1· partisan opposition. The NGA sent a letter to Congress in January 20 11 urging repeal of the ACA 's maintenance-of· effort prov1s1ons concerning eligibility.58 The administrat1\t proposal requiring that states better document the rationale for their provider payment decisions galvanized complaints from Medicaid directors in states with Democratic and Re· publica n governors . One claimed that the Obama admm· istration had gone .. overboard " and another termed the proposa l a "power grab. "59 Meanwhile over half the state

_._

attorneys general signed on to a suit claiming that the ACA illegally coerced states through its Medicaid provisions. Ac- cording to the suit. the ACA .. converts what has been a voluntary federal-state partnership into a compulsory top - down program." which violates the Tenth Amendment to the Constitution of the United States. 60 In June 2012. the

CONCLUSION In forging a constitution aimed at strengthening the fed - eral government, the founding fathers recognized that states would play an enduring role in American gov- ernance. Yet 1t was not until the 20th century that the federal and state governments became major actors on the health stage. Those who prefer a neat d1vis1on of la bor between the national and state governments would be sorely disappointed as the century unfolded . After World War II. and especially after the birth of Medicaid. federal grants and other forces did much to take layer- cake federalism off the political menu and replace 1t with marble cake.

Some see the rise of these intergovernmental devel- opments as a sign of growing federal power at the ex- pense of the states Without question. national grant programs and other initiatives have shaped the health policy agenda of the states. The centralizing thrust of the ACA stands out in this regard But it would miss the mark to portray states as the timorous servants of the federa l government in the health arena. The inter- governmental lobby. with the governors paramount. shapes the health legislation and administrative rules that the federal government promulgates . Moreover. states continue to derive considerable clout from their role as implementing agents. The central government cannot easily coerce states into vigorously implement- ing federal 1nit1at1ves and mandates with which they disagree. States can in critical respects practice de facto nulhficat1on of federal mandates through the 1mplemen- tat1on process at least for awhile. Even when the federal piper pays the lion's share of a program's costs. states

CHAPTER 6 • Federalism and Health Care Policy

Supreme Court evinced sympathy for this argument. The court ruled that the federal government cou ld not withhold funds from a state's existing Medicaid program if it failed to implement the ACA's mandated expansion. This had the ef- fect of making the expansion an option for the states rather than a requirement.

typically negotiate and bargain in ways that allow them to at least partially call the tune. Furthermore. focus- ing on the balance of power between the federal gov- ernment and states makes it easy to overlook the way in which federalism enhances the role of both levels. For instance. federal funding formulas for grants have at times created incentives for both the federal govern- ment and the states to do more in the health care arena. The ACA substantially expands the role of both tiers vis-a-vis the private sector.

Of course. the ba lance of power between the federal government and the states fluctuates over time. The centripetal thrust of the ACA dissipated significantly with the Supreme Court ruling on the mandated Med- icaid expansion. Moreover. Republicans may, through the electoral process. gain sufficient control of Congress and the presidency to repeal the ACA. Aside from this possibility, other forces could fuel devolution. The bur- geoning federal debt may well encourage the fede ral gov- ernment to explore ways to red uce the flow of funds to states while giving them mo re opportunity to shape pro- grams. Or the federa l government could use its waiver authority under the ACA to give states latitude to find cost-effective ways to provide near universal coverage. Some states might try market-driven approaches and others single-payer models akin to the Canadian heath ca re system. Whatever the precise developments. is- sues of federalism are destined to remain at the heart of American governance and the quest to achieve a better balance among costs. quality. and access in the heal th care arena.

PART II• National Political Institutions

STUD~ Ql!_ESTIONS I. What are the four phases of federalism and health policy?

2. In what ways have both federal and state governments been involved in health insurance regulation?

J. What kinds of intergovernmental grants does the federal government make available to states?

4. What are the two varieties of state representation in influencing the federal policy process?

5. What three state factors significantly influence who gets what from federal grant programs?

6. How does "competitive federalism .. affect funding for programs such as Medicaid?

7. In what ways can using formulas to allocate Medicaid funds be problematic?

8 . Are states ever granted waivers fro m Medicaid requirements?

9. How might implementation of the Affordable Care Act involve federalism?

ENDNOTES I. See Thompson and Fossett. 2008.

2 . See Sack. Herszenhor. and Pear. 20 I I.

J . Hamilton. Madison, Jay. and Rossiter. 1964. (No. 39). p. 246. and (No 46). p. 295 For a contemporary overview of federalism. see Derthick. 200 I.

4. The Maternal and Child Health Program. for instance. embodies a much more cooperative partnership between the federal government and the states (Frederickson and Frederickson. 2006)

S. Brown and Spa rer. 200 I.

6 . Grodzins. I 960.

1. See, for example. Scheberle, 2004.

8. Starr. 1984. p. 184.

9. See Grogan. 2008. pp. 335-337.

I 0. Morrisey, 2008, p. 7.

11. See Chapter I.

12. Morrisey, 2008. p. I 0.

I 3. This favo rable treatment means that individuals do not pay income tax on the amount they and their employers spend to provide them with health insurance.

14. Kaiser Family Foundation. 2008.

IS . Morrisey, 2008, p. 13.

16. See. for instance. Simon. 2004. Cho llet. 2004. and Monhe1t. Cantor. Koller. and Fox. 2004.

I 7. Estimates of the number of grant programs differ and depend on various definitions and assumptions. This number comes from Dilger. 20 I I. pp. 6-7.

CHAPTER 6 • Federalism and H ealth Care Pol icy

18. US Office of Management and Budget. 2011.

19. Dixit. 2011.

20. US Executive Office of the President. Office of Management and Budget. and General Services Administration. 20 I 0, p. I

21. US General Accounting Office. 1998. p.3.

22. Posner. 2003.

23. In the case of long-term care. some states have obtained federal waivers tha t enable them to cap enrollments and establish waiting lists for the elderly and people with d1sabiht1es who wish to obtain home- and community-based services from Medicaid (Thompson and Burke. 2009)

24. Beer. 1978. p. 9.

25 . Nugent. 2009. p. I 16.

26. For an overview of various efforts to implement performance-based accountability in the context of federal grant programs. see Frederickson and Frederickson. 2006. Among the cases they examine. the maternal and child grant program to the states comes closest to achieving this model.

27. Teaford . 2002. p. 225.

28. See. for instance. light. 2003.

29. See for instance. Mead. 2004.

30. The data come from the Office of Economic Policy. US Department of the Treasury. Total taxable resources generally denote how much wealth state officials could tax. More technically, it is the unduplicated sum of the income flows produced within a sta te and the flows received by its residents that could potentially be taxed.

31. Kliff.2011 .

32. We thank David Rousseau of the Kaiser Commission on Medicaid and the Uninsured for furnishing pertinent data to us. Enrollees represent all individuals on the Medicaid roles for at least part of the year.

33. See. for instance. Peterson and Rom. 1990.

34. For a review of some of the evidence. see Kenyon. 1996

35 . See the data on state vanat1on in Thompson. 20 I 0.

36. US General Accounting Office. 2003

37. Ibid

38. Gilman. 1998. p. 159.

39. Quoted in Thompson. 1998. p. 39

40. Gusmano and Thompson. 2012. and Coughlin. Bruen. and King, 2004.

41. This section draws heavily on Thompson and Burke. 2007. 2009.

42. Gais and Fossett. 2005 . 43 . Among other things this initiative encouraged market-based approaches-greater cost sharing for enrollees. the use

of Med1ca1d to provide premium assistance to purchase private insurance. and greater flexibility to tnm or otherwise

reshape Medicaid's benefit package.

~~===---~~~~~--------------............................................ llllli .... 11111111

PART II • National Political Institution s

44. Thompson and Burke. 2007. p.988.

4S. This account draws on McDonough. Rossman. Phelps. and Shannon. 2006

46. The Supreme Court's (I 999) Olmstead decision interpreted the Americans with Disabilities Act as requiring place- ment or people with disabilities in a home or community setting rather than an institution when certain cond1t1ons were met.

47, See http://www.cms.hhs.gov/Med1cidStWaivprogDemoPGl/MWDL/list.asp?listage=53 (accessed January 22 2010).

48. Kaiser Commission on Medicaid and the Uninsured et al .. 2009. pp. 5-7.

49. Thompson and Burke. 2009. p. 39.

SO. This does not mean that presidents. governors. and civil servants are all powerful in shaping the substance of waivers. A bevy of Medicaid providers and advocates often find ways to influence waivers, as do members or Con- gress and some state legislatures (especially more profess1onal1zed ones). Interviews Frank Thompson conducted in Florida and Minnesota in 20 IO uncovered considerable legislative involvement in shaping major demonstration waivers. For examples of congressional influence. see Thompson and Burke. 2007. p. 996-99.

S I . Weissert and Weissert, 2008.

S2 . Kofman and Pollitz. 2006.

SJ. Cantor, Belloff. Monheit. Delia. and Koller. 20 I 2.

S4 . Conceivably, the federal government could rule that adult dependent coverage for those over age 26 is an "excess" benefit. putting these expansions in Jeopardy.

SS. US Department of Health and Human Services at http://www.healthcare.gov/law/resources/regulations/gu1dance-to· states-on-exchanges.html (accessed July, 2011 ).

S6. Department of Health and Human Services. "Initial Guidance.'' http.//www.hhs gov/ociio/regulations/guidance_to_ states_on_exchanges.html (accessed July. 20 I I).

57. Kaiser Family Foundation. 2011, p. 1-2.

S8. For all practical purposes, the ability of states to disregard certain earnings pushes eligibility up to 138% of the federal poverty level.

S9. Everstine. 2011.

60. Pear. 201 I.

61 . Page 5 of Case 3: I O-cv-00091-RV-EMT obtained from the Web site of the Florida attorney general. http:/I myfloridalegal.com (accessed on January I 6. 20 I I).

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Thompson. F. 20 IO. "Social Program Durability in Good Times and Bad The Case of Med1ca1d." Paper presented at the Annual Meeting of the American Political Science Assoc1at1on. Washington. DC.

Thompson. F .. and C. Burke. 2007. "Executive Federalism and Med1ca1d Demonstration Waivers Implications for Policy and Democratic Process." journal of Health Politics. Policy and Law 32( I): 981-1o14.

Thompson. F .. and C. Burke. 2009. "Federalism by Waiver: Medicaid and the Transformation of Long-Term Care." Pub/ius: The journal of Federalism 30( I): 22-46.

C HAPTER 6 • Federal ism and Hea lth Care Policy

Thompson, F .. and J. Fossett. 2008 . .. Federalism In Morone. J .. Litman. T.. and Robins. L., eds .. Health Politics and Policy (4th Ed .. pp. 153-172) Clifton Park. NY: Cengage Learning.

US Executive Office of the President. Office of Management and Budget. and General Services Administration. 20 I 0. 2010 Catalog of Federal Domestic Assistance and Federal Grants: Government Assistance for People and Small Business. Washington. DC Government Printing Office.

US General Accounting Office. 1998. June 22. ··Design Features Shape Flexibility. Accountability. and Performance Information." Retrieved from http://www.gao.gov/products/GGD-98- I 3 7.

US General Accounting Office 2003 Uuly I 0). "Medicaid Formula Differences in Funding Ability among States Are Often Widened. Retrieved from http://www.gao.gov/products/GA0-03-620.

US Office of Management and Budget. 2011. "fiscal Year 2012 Historical Tables: Budget of the U.S. Government." Retrieved from http://www.wh1tehouse.gov/sites/default/files/omb/budget/fy2012/assets/hist.pdf.

US Supreme Court 1999 Tommy Olmstead. Commissioner. Georgia Department of Human. Resources et al. u. L.C.. By Jonathan Z1mring . Retrieved from http://www.justice.gov/osg/briefs/l 998/3mer/ I ami/98-0536.mer.ami.pdf

Weissert, C .. and W G Weissert. 2008. "Medicaid Waivers: License to Shape the Future of Fiscal Federalism." In Conlan , T .. and Posner, P .. eds .. Intergovernmental Management for the 2 lst Century (pp. I 57-175). Washington. DC. The Brookings Institution.

This chapter tells the tale of health reform from the perspective of a participant in the process, highlighting the many bumps along the road that America traveled on the way to formulation and passage of th e Affordable Care Act.

As the health care debate reached fever pitch in August 2009. an e-mail arrived in my inbox. The subject line was innocuous enough: "comment." The text was less so: "You are work· ing for the enemies of this nation. I was making 6 figures before you were even born you little punk. You have no right to take the liberties that this country has fought and died for and try to destroy it! You should be ashamed of yourself! ... You should be shi pped to Gitmo!" A few days later. a similar message-with some choice words thrown in-was left on my office voicema il, surprisingly to me. in a female vorce. I saved the message, just in case.

Over the coming month s. my hate mail-and yes. fan mail-became a runni ng marker of the polarized debate. I tried to stop reading the full text of the messages. immed1· ately deleting them or saving them to a folder I had created for the particularly th reatening ones. When. in early 2010. Republican Scott Brown captured the Massachusetts Senate seat opened by Ted Kennedy's death. I received the following

reasoned response to an op-ed that another political seen·~ and I had written arguing that Democrats could and shoe. still push ahead:

communist fucking rat. you rat vermin mother· fuckers will be exposed well will tea party freedom and liberty and the const1utt1onal republic and you fuckers will pay for your treason.

i will not go down easy and live in 1984 you fucking animals!

Compared with that missive. the note I received the nt~ day was a model of wit: .. No wonder Americans are ovt· whelmingly against this monstrosity. when PhDs from Yae can't even muster an [sic] cogent defense of it."

Of course. the hate mail I received was a trickle comp<reC with the flood that poured into Congress and the Whte House. Yet Congress and the White House were wnting~'lt

,_

law. I was merely. as one critical article more or less accu- rately put 1t. "an academic who has no medical background and doesn't serve in the Obama administration. and whose original proposal was published in a largely unread book ... 1 My 'largely unread book" was The Road to Nowhere. an account of the rise and fall of the Clinton health plan pub- lished in 1997.2 And while 1t did not contain my "proposal"- ! published the proposal that would provoke so much ire a few years later in 200 l-1t did. unbeknownst to me at the time. launch me on the path that would end with me in the crosshairs of conservative ag1tat1on and the nation with a new health care law. 3

All of which raises two obvious questions: How did I end up in the crosshairs7 And how did the nation end up with a new health care law7 The former question is beyond trivial compared with the latter. The only reason for interest 1n 1t. at least outside my immediate family. 1s that 1t has implica- tions for the latter. Fortunately. 1t can be answered quickly: I became directly involved in promoting what I saw as good policy and, in particular. what came to be called the " pub- lic option"-a public insurance plan modeled after Medicare that would compete with private plans to enroll those with- out coverage. To my great and mostly pleasant surp rise. the public option became a centra l aspect of the original House and Senate bills. It also became a central topic of controversy dividing Democrats from Republicans- and Democrats from Democrats. as became clear when my home-state senator. Joe Lieberman. insisted on its removal from the Senate bill in re- turn for his vote to end a Republican filibuster. Lieberman did constituency service of a sort by c1t1ng my support for a pro- posed compromise public option to which he had agreed as one reason he had backed out of the deal ("Lieberman vs. the Public Option' Patriarch .. headlined a piece on Lieberman's about-face in the New York Times) .4

The second question-Why did health care reform happen?-is the core subject of this chapter. The answer turns out to say a good deal about American politics. It also has something to say about why students of American politics should give public policy a more central place in their investigations. though not necessarily as much of a place as I ended up giving 1t.

The place to begin 1s with a comparison of the 2009-20 I 0 debate with the spectacular failure of health care reform in 1993-1994-the subject of my 1997 book and the political

CHAPTER 7 • Why Hea lth Reform Happened

episode that most informed my prescriptions for reform. Why were things so different 15 years after Bill Clinton lost his cause and then his Congress?

THE 2008 ELECTION The obvious answer is the election of a Democratic presi- dent. the Democratic capture of Congress in 2006, and the strengthening of that majority in 2008-which culminated in Democrats reaching the 60-vote margin in the Senate neces- sa ry to overcome a Senate filibuster with the belated seating of Senator Al Franken of Minnesota in July 2009 (when the former comedian was officially declared the victor of a razor- close race). It was not. of course. so much President Obama's election as any Democrat's election . During the campaign. all of the leading congressional Democratic candidates es- sentially endorsed the same basic health reform framework (about which I shall say more shortly), and many of the key players within the administration would have likely been the sa me had another of these candidates been elected. But given how far apart Democrats and Republicans have become on health care. the election of a Democratic president was a pre- requisite for action of the sort that occurred in 20 IO. 5

No less consequential was the composition of the Demo- cratic majority with which that Democratic president was able to work. As recently as the fight over the Clinton health plan. the Democratic caucus featured a substantia l southern con- servative bloc that posed serious hurdles to intraparty agree- ment on health care.6 This time around. after the loss of more seats in conservative Southern regions and the strengthening of the Democratic position in more liberal regions . a more homogenous. though far from unified. caucus greeted the in- coming president.

Besides the obvious electoral prerequisites-which made reform possible but left plenty of room for failure- three addi- tional factors nudged the probabilities in favor of action. The first was economic context: the second was group conflict: and the third was Democratic coalescence.

ECONOMIC CONTEXT The steep downturn that worsened through the 2008 election was far deeper and longer than the 1991 recession that helped Bill Clinton ascend to the presidency. Widespread economic angst clearly bolstered the Democrats' electoral standing in

PART ll • National Political Institutions

2008 and then fueled continuing public concern about health and economic security during 2009-20 I 0. Reveal ingly. sur- veys done in early 20 IO showed that while a majority of Americans had serious concerns about the Democratic bills. the majority also said they would be " angry " or " disap- pointed" if nothing were done .7 and by a stable two-to-one margin . those polled said that the serious economic problems facing the country made it more. not less. important to act. 8

These findings stand in stark contrast to polls done during the tail end of the 1993-1994 debate. when-amid the same sort of fierce attacks-a majority said they would rather have Congress do nothing than pass a bill.

Still. it is hard to argue that the problems in health care or generalized public support were themselves deci- sive . They may have been necessary conditions for reform. but they were also long-standing. if intensified. conditions , and they were certainly not sufficient conditions. Instead. I would emphasize developments within the health industry and Democratic Party.

GROUP CONFLICT Start with interest groups. The worsening state of American health insurance may not have pointed inexorably toward re- form . But it did have very particular costs for key stakeholders in the medical industry. Over the prior two decades. more- over. all of the key industry actors had become much more reliant on government for their revenues. Indeed . for some once-fearsome groups. the concern about declining revenues centered entirely on the improvement of payments under pub- lic programs. Such was the case with the American Medical Association (AMA). which was worried about steep sched- uled reductions in Medicare payments for physicians under the terms of a 1997 law. In 2009 . with so-far-undelivered promises from Democratic leaders that a permanent " fix " to the 1997 formula would be made. the AMA endorsed not just the Senate health bill but also the more sweeping House bill.

For other industry groups- notably, the insurance. pharma- ceutica l. and hospital sectors-the goal was to guarantee a steady stream of payments and patients in the private sec- tor. In particular. government had a power the industry did not: the ability to require that people had health insurance. It was this "individual mandate" that the insurance industry in particular wanted to harness. The insurance industry's trade

group , America's Health Insurance Pla_ns. played a double game throughout the debate. at some points holding its fire or endorsing reform. at others directing or funding attacks. But it was far more favorable than in the past.

Even more favorable were the pharmaceutical and hos- pital industries. which cut sweetheart deals with President Obama's team early on-deals that the White House fiercefy protected from congressional attempts to undo them . These bargains involved a White House commitment that ne1tner drug companies nor hospitals would be required to give uo more than a modest amount of expected revenues. Implicitly the terms were even blunter: The White House promised to protect hospitals and drug manufacturers from those who be· lieved that government should play a stronger countervailing role. In re turn . the industries would not kill reform. .

The up-front concessions were substantial: They limited the law's ability to deliver tangible benefits to the middle class and largely took off the table tools of cost control used in other nations. such as provider rate setting and government nego· tiations for lower drug prices. But without a single Republican on board by the final votes. Democratic leaders needed all the party backing they could get. The splitting of the juggernaut that had unleashed its barrage on the Clinton plan made that task less daunting. So did another development at the level of elites: the convergence of Democrats around a broad reform approach even before the debate began .

President Obama came into office vowing not to repeat President Clinton 's big mistake and dictate to Congress ex· actly what it should produce. Instead . he would fa cilitate a congressionally centered process. weighing in when neces· sary to ensure key goals were met. Only when the refo rm train was in danger of derailing entirely did this general strategic inclination give way to energetic efforts at pushing reform in a direction of the administration 's choosing or casting the poorly understood legislative packages in a more insp1ringrhe· torical light.

The wisdom of this strategy is now well recognized-even if it also had some clear costs. By strategically forgoing a more, robust attempt to steer the bill or make the case for it. the White House largely accommodated. rather than pushed bade against. the elite focus of the debate that left many Amencans alienated about the product and the process. This choice was. in part. just another manifestation of how the president and his advisers saw the central goal : winn ing over key interest

- •

groups and pivotal Democrats '. not.voters. And however much one might lament this perception. it surely reflected the politi-

cal challenges they faced.

DEMOCRATIC COALESCENCE What is less recognized is that the approach was feasible only because so much intraparty agreement already existed about the proper direction forward The three leading Demo- cratic candidates in the presidential race endorsed not similar reform plans but essentially the same reform plan. This shared Democratic reform vision moved beyond the basic structure of the Massachusetts reform law (an individual requirement to have coverage coupled with an expansion of Medicaid and the creation of new insurance purchasing exchanges) to in- clude stronger cost-containment measures. stricter employer requirements. and the creation of a public option to compete with private insurers. Even before President Obama's election . congressional Democratic leaders indicated they would take

this tack as well.

Now that the law has passed. 1t 1s easy to take this con- vergence for granted . Yet a quick glance back at 1993- 1994-when Democrats endlessly squabbled about the best approach-reminds us it was hardly foreordained. 9 Why didn't such infighting emerge again? It is difficult to overstate the role of the failure of the Clinton plan A deeply scarring experience. the 1mbrogho had led not only to 15 years of inaction and ncrementalism but also the Republican control of Congress that continued through 2006 . Any notion that a near miss on health care dunng 2009-20 IO would allow for a quick recovery and return to the field by reform advocates was implausible at best. Democrats would have one shot when the window opened again. and they had better be ready to use it.

Related to this broad recognition of the imperatives of in- traparty agreement was a concerted effort by policy advocates and Democra t1c-affihated interest groups to bring the party back to the health care issue on stronger political ground . Since I played a role in this effort. I cannot claim to have a wholly objective view of its wisdom or effects. 10 But from my vantage point as an informal adviser to the health pol- icy teams of the leading Democratic presidential candidates . it was clear that the candidates were searching for a formula that would bndge the differences within the party while bring- ing Democrats back to an issue they had left fallow.'

1

CHAPTER 7 • Why Health Reform H appened

That formula. already described. included a major element of the single-payer vision in the form of the publ ic option. Yet this was but one part of a reform package that largely built on. rather than supplanted. private employment-based coverage. More ambitious than what Democrats had been seeking for years. it was an approach less ambitious than many Demo- crats. especially single-payer supporters. wanted. Crucially, this formula had the strong backing of a growing network of interest groups and advocacy organizations on the left side of the political spectrum that were openly pressing for an intra- party compromise. These included the major unions. liberal think tanks. health care advocacy organizations. and left- leaning pressure groups.

By the time of Obama's victory in 2008. then. not only was the interest-group environment more favorable for a re- form push by a unified Democratic government but Demo- crats had converged around a reform strategy that had backing from powerful orga nized forces within the party. These forces. moreover. had been especia lly active during the 2008 campaign in ensuring that Democrats signed on to a politically realistic approach before the party next had an opportunity to pursue its long-standing cause. In 2009. the opportunity arose.

IT'S NOT OVER Could President Obama and congressional Democrats have gotten more? Perhaps. The public option that I pushed for throughout the debate came remarkably close. It would have survived were it not for the intense lobbying of interest groups against it and the hurdle of 60 votes in the Senate to over- come the filibuster. Once a ra re occurrence. the filibuster has morphed into a routine "rule of 60" that departs greatly from the Founders' vision and makes policy change in a polarized Congress much harder.12 So the scope for additiona l victories was small. and reformers could have achieved much less than they did. As limited as the final legislation was . it was a dra- matic breakthrough . The real question now is whether it will be an isolated achievement or a stepping stone to more effec-

tive reforms.

Advocates comfort themselves with the analogy of Social Security, which started small and grew big. But Social Secu- rity expanded in a much more favorable political and fiscal context for liberal policy aims. and it was far more simple and direct than the law now before us. It will take hard work to

PART JI • ational Political Institutions

implement a complex statute. Proponents were buoyed by the bare victory of the law in the Supreme Court. where a 5-4 majority led. improbably. by Chief Justice John Roberts. a Re- publican appointee, upheld the contested individual mandate (but also made the expansion of Medicaid in the law optional for the states). It will take hard work to protect and defend a

CONCLUSION For me. the question of whether it was worth it has a clear answer. When my I 0-year-old daughter woke up with a nightmare about a red-eyed purple monster she called the "health care debate." I realized anew the toll my years of shuttling to and from Washington had taken. But I also thought about the millions of Americans woken up by a crying daughter who wonder whether they have insurance or can afford treatment if she is ill. The health care bill was incomplete and imperfect in many ways but was also a vita I first step.

Nor do I have any regrets about stepping into the realm of policy advocacy. I could not have wished for stronger support from the institutions where I was based. nor from the people who worked so tirelessly to support me. I recognize that this sort of work is not highly val- ued within political science. Why that is may seem self- ev1dent-policy recommendations seem to be a breach of obJect1v1ty and a distraction from real scholarship-but that does not explain why academic economists routinely engage with public issues while political scientists appear more reticent. Political scientists have the potential to say

STUDY QUESTIONS

law that does not deliver big tangible benefits for years against intense Republican challenges. and all of this is to put aside the vital task of bu ilding upon what Senator Tom Harkin rightly described as a "starter home." American politics ba·eJy passed the test in 20 I 0. It remains to be seen whether 1t ca1 do any better in the coming years.

at least as much about how institutions and policies are structured and might be better structured as economists do, and our profession once had far less reluctance about speaking the truth that it discovered to the power that it studied.

Political scientists should not simply leave their desks and enter the political fray. at least unless the calling is so loud that it cannot be ignored. and they should be under no illusion that professional rewards will fol- low 1f they do. But we as political scientists should. I am ever more convinced. be more attuned to the con- tours of public policy and the process by which it 1s made-not because it will make our work more "rele- vant'' (though it will) but because it will make us better political scientists. with a stronger grasp of the forces that drive poltt1cs and of the larger stakes of our research ventures. If we were to let ourselves be guided a ltttle more by the fascination with what government does that first sparked the profession. we might iust see a broader. though not always prettier. picture of how and for whom our democracy works.

I. How did the author come to be involved m the battle for health reform during 2008-2010?

2 . Why did prevailing economic conditions make reform more likely during 2008-20 IO than in the 1990s?

3. What did President Obama do differently from the Clinton administration when it came to shaping health-reform legislation?

4. How did Democratic unity play a role in the passage of the Affordable Care Act?

- CHAPTER 7 • Why Health Reform Happened

ENDNOTES 1. Howard and Gratzer. 2009.

2. Hacker. 1997.

J. The original proposal was entitled "Medicare Plus .. and published in Covering America (Hacker. 200 I). I updated 1t 1n 2007 as "Health Care for America·· (Hacker. 2007). Over the course of 2008 and 2009. I wrote many reports. articles. and op-eds pressing for the public option. including Hacker 2008a. 2009a. and 2009b.

4. Herzenhorn. 2009.

s. Cooper and Bosman . 2008. 6. Lieberman . 1994

1. These survey findings were obtained from Kaiser Health Tracking Polls. See Kaiser Family Foundation. 2010b. p. 10: Kaiser Family Foundation. 20 I Oa. p. I.

8. These survey findings were obtained from Kaiser Health Tracking Polls. See Kaiser Family Foundation. 2010b. p. JO: Kaiser Family Foundation. 20 I Oa. p. I.

9. Hacker. 1997.

10. For good summaries of my work. see Campaign for America's Future. 2007. 2008. and 2009: and Hickey. 2008.

11 . It 1s easy to forget how central the public option was to the campaign proposals of the leading Democrats. John Edwards said that "over time. the system may evolve toward a single-payer approach if individuals and businesses prefer the public plan" (Noah. 2007). Meanwhile. Obama's top campaign adviser on health care. Harvard professor David Cutler. wrote about Oba ma's campaign proposal: "If you don't have health insurance through your employer, you will be enrolled into a new. comprehensive public health insurance plan that emphasizes prevention, chronic care management and quality care. The benefits will be similar to those available today to every federal employee. This plan will enjoy the great efficiencies we see in public plans like Medicare, but. if you still cannot afford it. you will receive a subsidy to pay for it. Of course. you can choose private insurance if you prefer. but the private plans will have to compete on a level playing field with the public plan-without the extra payments that tip the scales in

favor of private Medicare Advantage plans today" (Cutler. 2007).

12. Hacker and Pierson. 2010. pp. 241-44. 269-71.

REFERENCES Campaign for America's Future. 2007. The Evolution of the Health Care Debate. Retrieved from http://ourfuture.org/

fact-sheets-briefs/evolution-health-care-debate on May IS. 20 I 0.

Campaign for America's Future. 2008. Health Care for America and the Presidential Candidates' Health Care Plans. Retrieved from http://wwwourfuture.org/health-care-america-and-presidential-candidates-health-care-plans on

May IS. 2010. Campaign for America's Future. 2009. Public Health Insurance Page. Retrieved from http://ourfuture.org/healthcare/

public-health-insurance on May IS. 20 I 0. Cooper. M .. and J. Bosman. 2008. "Parsing McCain on the Democrats' Health Plans." New York Times. May 3.

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PART IJ • ational Political Institutions

.. · D ·b Ob H alth Plan " Campaign for America's Future. June I. Retrieved from http}/ Cutler. D. 2007 Adviser escn es ama e ·

www.ourfuture.org/blog-entryladviser-describes-obama-health-plan . . 'h R d N h . Th Genesis of President Clinton 's Plan for Health Security. Princeton, NJ :

Hacker. J. S. 1997. 1 . e oa to ow ere. e Princeton University Press.

Hacker. J. S. 2001. "Medicare Plus: Increasing Healthcare Coverage by Expand!ng Medicare." In J. A. Meyer and E. K. Wicks. eds .. Covering America: Real Remedies for the Uninsured. Washington. DC. Economic and Social Research

Institute. Hacker. J. s. 2007. " Health Care for America: A Proposal for Guaranteed. Affordable Health Care for All Americans

Building on Medicare and Employment-based Insurance." Economic Policy Institute Briefing Paper No. 180,

January 11. Hacker. J. S. 2008a. The Case for Public Plan Choice in National Health Reform. Washington . DC: Institute for America's

Future. Retrieved from http:llinstitute.ourfuture.org/files/Jacob_Hacker_Publ1c_Plan_Cho1ce.pdf?# on May 15. 20 10.

Hacker. J S. 2008b. "Putting Politics First." Health Affairs 27 (3 ): 718-823. Hacker. J. S. 2009a. Health Competition: How to Structure Public Health Insurance Plan Choice to Ensure Risk-Sharing

Cost Control. and Quality Improvement. Washington. DC: Institute for America 's Future. Retrieved from http:// www.ourfuture.org/files/Hacker_Healthy_Competition_FINAL.pdf on May 15. 20 I 0

Hacker. J. S 2009b. Public Plan Choice in Congressional Health Plans: The Good. the Not-So-Good. and the Ugly. Washington. DC: Institute for America's Future. Retrieved from http://wwwourfuture.org/files/Hacker_Public_ Plan_August_2009.pdf on May 10. 2010.

Hacker. J. S .. and P. Pierson. 2010 Winner-Take-Al/ Politics: How Washington Made the Rich Richer-and Turned Its Back on the Middle Class. New York: Simon & Schuster.

Herzenhorn. D. M. 2009. "Lieberman vs. the 'Public Option' Patriarch." New York Times. Prescriptions blog. December IS. Retrieved http:llprescnptions.blogs.nytimes.com/2009/ 12/ 15/lieberman-vs·the-pubhc-opt1on· patriarch/ on May 15. 20 I 0. A shorter version appeared on http://query.nytimes com/gst/fullpage.html?res= 9907EFDC 103DF935A2575 IC I A96F9C8B63.

Hickey. R 2008. "Health Care for America Now." Huffington Post. July 7. Retrieved from http://www.huffingtonpost.com/ roger-h1ckey/health-care-for-america-n_b_ I I 1242 html on May 15. 201 o.

Howard. _P .. and D. Gratzer. 2009 (Spring). "How 'Medicare Plus' Will Destroy Private Insurance " The New Atlantis. Retrieved from http:llwww.thenewatlantis.com/publicat1ons/the-road-to-rationing on May 15. 201 o.

Kaiser Family Foundation. 2010a Uanuary). "Health Tracking Poll Uanuary 7-12 2010) .. Rt · d f htt ·// k · f ·i f . . . e rieve rom p. a~ser am1youndat1on.f11es.wordpress.com/2013/0118042-f.pdf. For a summary of results. see http://www.kff.org!

ka1serpolls/ka1serpollsO 1221 Onr.cfm.

Kaiser Family Foundation. 2010b (February). " Health Tracking Poll (February 11-16 2010) .. Rt · d f h ·fl k · f I ~ d · fl d · e neve rom ttp. a~ser am1 y oun at1on. 1 es.wor press.com/2013/0 118051 ·f.pdf. For a summary of results htt ·// kff n /

ka1serpolls/posr0223 I Onr.cfm. · see P· www. .or&'

Lieberman. T. l.~94 "The Selling of 'Clinton Lite.'" Columbia journalism Review (March/April). 20_2.

Noah. T 2007. Edwardscare: A Trojan Horse." Slate. July 5. Retrieved from htt ·// news and politics/chatterbox/2007/07/ d d . p. www slate.com/articles/ - - e war scare_a_troian_horse.html.

CHAPTER 7 • Why Health Reform Happened

This vignette takes us into the world of Congress-from the great hopes on the campaign trail. to the realities of lawmaking. to the tough choices about how to vote. What goes

through a congresspersons mind as he faces the biggest vote of his career-on an unpopular health reform proposal? And what happens as a result?

Dan Maffei grew up in Syracuse. New York He went to Brown University. got a degree in history. and eventually landed in a dream )Ob-policy advisor for New York senator Daniel Patrick Moynihan. As the chair of the Senate Finance Committee. Moynihan was in the middle of every important policy area. Moynihan had one repeated warning Watch out for health care reform It may be necessary. but don't expect the voters' thanks for making 1t happen. Why? Moynihan knew from long years in the Senate that complexity plus partisan division equaled political danger.

After Moynihan retired. Dan went to work as staff for the House Ways and Means Comm1ttee-qu1te possibly the most important committee in the House of Representatives. for 1t 1s in charge of budget and finance A senior staff member on an important commit- tee in Congress gets an astonishing amount of influence. The mem- bers are completely overscheduled. and they have to rely on staff to ne p research issues. draft bills. and brief members on the dozens of issues that pop up every day. Dan had a maior hand 1n crafting legislation.

In 2008. Dan decided to make the big leap. He would run for Congress himself. His district. surrounding Syracuse. New York. had been represented by Republican Jim Walsh for nine terms (18 years). However. upstate New York was slowly trending Demo- cratic, and Maffei threw his hat into the ring. On the campaign ua . he learned a couple of things. Campaigning 1s grueling. It 1s nonstop. and the current system means a constant chase to raise money. If you cannot find donors-a lot of donors-you cannot compete. Every campaign ncludes long hours of what insiders cyruc.illy call • d1ahng for dollars.

In that 2008 campaign, Maffei stressed two things: his opposi- tion to the war in Iraq and the need for affordable health care for a Amencans. His d1stnct suffered from a declining economy, and that meant health care-availability and affordability-was a real problem. When the votes were counted Maffei had almost done something rare in American politics: He almost beat a nine-term 1cumbent. He lost the election. 51-49%

Maffei decided to give 1t another shot. When Dan announced his second run. his opponent surprised observers by announcing his retirement. The next election. in 2008. ended up being far less difficult. Dan was developing a name in the district. and he was down the ticket from Barack Obama. who drew many voters to the Democratic ranks. This time. Maffei won easily. He had " flipped " a long-time Republican district.

Now came the hard part: winning new policies for his district. Congressman Maffei went to the bnefing for new members of con- gress sponsored by the Congressional Research Service in January 2009. iust after the new Congress had been sworn in. As a veteran on Capitol Hill. Dan was way ahead of the other newly elected rep- resentatives. He knew the ins and outs. But. like every new member. he was sobered by the sheer complexity of the institution.

At one session. th e congressional research staff simply de- scribed the process by which a member prepares and submits a piece of legislation. The briefin g took all afternoon-hour afte r hour of the detail and nuance. One of his rookie colleagues rolled his eyes and whispered about submitting legislation ... My God. don't try this at home."

Maffei and the other 53 legislators had to leave the session in a rush because a vote had been called on the Obama administration ·s stimulus package. It was the first of a great many difficult votes. The year was 2009. and the Obama team faced united Republican opposition and. soon, the nse of the raucous Tea Party-hell bent on defeating Democrats like Dan Maffei.

The battle came to a head over health care reform By the time 1t came to a final vote in the House in November 2009. after a full year of debate. the bill had become distinctly unpopular. The Obama administration had been slow to explain and defend the legi sla- tion. Opponents rushed into the breach. Sarah Palin had the most powerful Facebook entry of the political year: "The America I know and love is not one in which my parents or my baby with Down Syndrome will have to stand in front of Obama's 'death panel' so his bureaucrats can decide ... whether they are worthy of health care."

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Maffei believed that many of the specifics m the bill would help his district. Helping middle-class people buy health insurance via a tax credit would be a big plus. So would permitting young people (up to age 26) to stay on their parents' health insurance and. perhaps most important of all. refusing to let insurance companies reject ind1v1dual health insurance policies for preexisting cond1t1ons. In one highly publicized case. a company had refused to cover a pregnancy when a women switched jobs-" preex1stmg cond1t1on:· said the new insurer.

But there was a problem with health reform. It had grown un popular. Those who opposed it were far more mobilized than those who. on balance, supported 1t. Many of the people in the 25th Con· gress1onal District remained confused about what exactly the health care law did. They kept asking 1f this was a .. federal takeover" replete with frightening .. death panels:·

Maffei thought these attacks were more rhetoric than reality. The law went out of its way. he thought. to extend coverage through the private health insurance markets. It was a moderate effort to fix a broken system.

But the debate in the media maelstrom loudly reverberated with charges and claims. He could talk to ind1v1dual constituents. But he could not reach his district over the roar of the debate . For this. he would have to rely on an administration that was strangely silent about defending its proposal. and the people on the line were the new (and therefore vulnerable) congressional representatives who voted for it.

Congressman Maffei faced a difficult choice when he faced the final vote on health care reform one that went to the heart of what 1t means to be a representative. He knew that many people in his district had become adamantly opposed to health reform. A vote for the bill might actually hurt his reelection chances.

Yet he also believed that 1f he could sit down and actually tell people what was-and what was not-in the legislation they would end up supporting it- partisan Republicans aside. He be- lieved the many activists 1n his district were opposed to leg1slat1on that would . on balance. actually help the people of his district What should he do7

He thought about 1t. discussed 1t with his wife Abbey. and talked it through with some of his old friends and professors-including some authors of this book. He was moved when President Obama . in a closed -door session. addressed the Democrats and seemed to speak directly to his quandary: What did we come here for 1f not to address problems like health care?

Finally. Congressman Maffei had to go with what he thought was the right thing to do . popular or not. When he thought about what President Obama had said- What did we come here to Washing- ton to do7 1t was really no contest

Congressman Maffei cast his bill for health reform He was one of a small group of members from swing d1stri1 ts who took a nsk with the vote. He could not help but remember his old boss Senator Dan Patrick Moynihan s warning: You don·t get much thanks for tough votes on health care.

The choice he made 1s a choice that every member of Congress makes over and over You do what you believe 1n the best interest

of the district. But sometimes. the sound and fury that surrounds a debate makes the c1t1zens themselves angry about a pos1t1on. Then 1t 1s gut-check time: Do what you think best for your people? Or do you take the easier route and simply respond to the loudest voices?

There is a theory of representation to guide you. Theorists rely on two different views: A trustee does what is best. as he or she sees it. A delegate does what the people want. Which is right? Both are. Representation in the real world means balancing these two different views . How do most congressional members act7 Simple: Despite the constant charge of pandering. most-conservative or liberal-try to think through what they believe is in the best interest of the district. Then they act on that.

That does not mean they do not listen. If you hear from a lot of people. you learn You change your mind But you still have to do what you think is best. and that is guided by the philosophy you believe 1n and that you take on to the campaign trail

Congressmen Maffei ran for reelection in 20 I 0-the worst elec- tion for Democrats since World War II. His opponent. Ann Mane Buerkle. was a Tea Party favorite who ran hard against Obama and health reform. The Republican national committee drew up a list of vulnerable Democrats. There was Congressman Maffei ·11ay down the list. number 72. In almost any election. that would be plenty safe. In the average election about 5% of incum bents lose their seats-maybe 20 or so. But this election was special. It was a Re- publican tidal wave.

Two weeks before the vote. the Republican National Commit- tee could see the tidal wave coming and decided to concentrate on seats that were a bit of a stretch-like Maffei·s. The committee made a large contribution to Ann Marie Buerkle.

When the votes were counted. 1t was too cl ose to call. The re- count went on for days. then weeks . finally, the result~ were an- nounced : Out of over 200.000 votes cast. Ann Mane Buerkel had won by 567 votes- two-tenths of I% Had the health ca re vote made a difference? We will never know of course. But in an elec- tion this close 1t may have very well been responsible for that two- tenths of 1%. Was former Congressman Maffei sorry ne had cast that vote? No. He had done what he believed in. If he had 1t to do all over again. he would have voted yes with even less hesitation.

Dan Maffei decided to run again for the seat 1n 2012. rematch of the election he had lost. This time. with President Barack Obama at the head of ticket. Dan Maffei won his seat back. Wha will hap- pen next? You can be sure there will be plenty more tough votes ahead, and. for a member of the House, the next election campai gn is never more than two years away.

Is Maffei still in office as you read this? You can easily check by going online and discovering who 1s the congressperson from the 25th District of New York

Whatever the future. Congressman Maffei has no regrets. He has held-and lost. and won again-one of the most exciting and d1f- f1cult jobs in the United States. And. in the health care case. he believes he stood up and voted for something that he believed in.

PA 1f III

The Major Programs

CHA PTERS

CHA PTER 9

CHAPTER 10

MEDICARE: THE GREAT TRANSFORMATION

Jonathan Oberlander

MEDICAID: DESIGNED TO GROW

Colleen M. Grogan

T H E DELEGATED WARFARE STATE

Andrea Louise Campbell and Kimberly J.

Morgan

This chapter describes Medicare, the largest federal health car~ pr~gram. Th e author explains how Medicare has passed through four historical , stages, and he points to the great tension that has marked the p~ogram_ s conflicts. past and present: Medicare 's original vision reflected liberal ideas of solidarity (we are all in this together) , which clash with the contem- porary conservative vision that emphasizes individualism, markets, and competition.

Medicare is a major arena of conflict in American health poli- tics . The fault-line in Medicare politics. while not exclusively partisan. often divides Democrats from Republicans. liberals from conservatives. and advocates of government health in- surance from proponents of private coverage. It is a fight that does not lend itself to easy comp romises or final resolution because Medicare reform ignites fundamental debates about the welfare state. markets. and generational equity.

Time will not ease this clash. As the baby boo mers age into Medicare . the stakes associa t ed with Medicare reform w ill only grow. Between 2000 and 2030. the share of the Ameri- ca n population age 65 and over will increase from 12 to 20% and Medicare enrollment w ill nearly double. from 40 to 78 million benef1mries. The fiscal pressures exerted on and by Medicare will be substantial and un doubtedly w ill intensify

disputes over program reform. Medicare, then. figures to bei prominent issue in American politics for years to come.

T his cha pter explores the dynamics of Medicare po !Jes identifying major themes and changes since the progra~ s adoption in 1965. The chapter 1s organized around four eras in Medicare's history. 1 I begin with the origins of Media and the fight over its enactment. Next. I describe the politiC! of accommodation th at governed Medicare's first 15 year of operation . Th e t hird section turns to the regulation re. elution in Medicare policy th at transformed the progran;s payment systems fo r hospitals and physicians during tre 1980s. Th e fo urt h section explores the rise of competiuon and markets as frameworks for Medicare policy dunng L1e 1990s. as well as the 2003 enactment of the Medicare P:e· scription Dru g. Improvement. and Modernization Act (a SO

known as the Medicare Modernization Act. or MMA). Fi- nally. I conclude by examining the implications of health care reform and the rise of debt and budget deficit politics for Medicare.

THE POLITICS OF ENACTMENT ---------- -- -- Medicare's story begins with the failed campaign for national health insurance during the first half of the 20th century. 2 Pro- gressives introduced a model bill for compulsory health in- surance to submit to state legislatures in 1915. but it failed due to a combination of political naivete (advocates assumed "rational argument and statistical persuasion" were suffi- cient to win legislative passage): mobilization of opposition forces (including employers. the insurance industry. labor leader Samuel Gompers and. after reversing its initial support- ive stand. the American Medical Association [AMA]. which represen ted US physicians): and bad timing and xenopho- bia (American entry into World War I enabled opponents to denounce compulsory health insurance as a "German plot." while the 1917 Russian revolution similarly led to charges that reform was "un-American").3 These same political forces proved to be enduring barriers to establishing national health insurance throughout the 20th century.

The 1935 Social Security bill originally contained a single line authorizing study of health insurance. prompting vigor- ous protests from the AMA. which believed government health insurance threatened the organizational. financial . and clini- cal autonomy of physicians. President Franklin D. Roosevelt (FDR). fearing the controversy would jeopardize enactment of his Social Security legislation. refrained from pushing health insurance and ordered the line removed from the Social Se- curity Act. His successor. Harry Truman. became the first American president to propose national health insurance but fared no better in winning its passage. Truman . like FDR. ran into the AMA's unrelenting opposition-it turned debate over national health insurance into a Cold War-era referendum on "socialized medicine"-as well as a conservative coalition of Southern Democrats and Republicans that formed a voting ma- JOnty m Congress and blocked much of his domestic agenda. Proposals for universal insurance went nowhere in Congress.

Advocates of national health insurance within the Truman administration believed it was time for a new strategy. Wilbur Cohen and I. S. Falk. advisers to Federal Security Agency administrator Oscar Ewing. developed a plan to provide federal

CHAPTER 8 • Medicare: The Great Transformation

health insurance to beneficiaries of Social Security payments for Old Age and Survivors Insurance (OASI). In June 195 I, Ewing publicly announced a proposal for 60 days of hospital insurance a year for the 7 mill ion elderly retirees receiving Social Security, saying "it is difficult for me to see how anyone with a heart can oppose this. "4

The plan reflected a political calculus of incrementalism.5

By restricting eligibility to the elderly, narrowing benefits to hospital care. and linking health coverage to Social Security, the architects of the Medicare strategy hoped to achieve a goal that had eluded the Truman administration and previous reformers: enactment of federal health insurance. In focusing on the elderly, Medicare's architects intended to take advan- tage of the political sympathy that seniors commanded as a deserving population that was both sicker and more likely to be uninsured than working-age Americans in the 1950s. By omitting benefits for physician services, reformers hoped to tamp down the AMA's opposition to a federal insurance program. And by proposing health insurance through Social Security. which provided the model for Medicare's eligibility rules. financing, and administrative arrangements. they hoped to exploit political associations with America's most popular social program and curry favor with the public.

Ultimately, of course. the Medicare strategy worked-after a half-century of failure, Medica re's enactment in 1965 repre- sented a singular triumph for reformers. But that success came on ly after a contentious. decade-long debate and an electoral landsl ide that transformed American politics. Indeed. the care- fully ca librated Medicare proposal did not succeed in calming the AMA's opposition to federal hea lth insurance: for orga- nized medicine. 60 days of hospital insurance for the elderly still constituted socialized medicine and set a da ngerous precedent for government intervention in the health care sys- tem. The AMA saw Medicare as a slippery slope to national hea lth insurance. It consequently campaigned just as hard against Medicare as it had against the Truman plan. Mean- while. though Medicare attracted substantially more support in Congress than prior national health insurance proposals had-Medicare sponsors came within one vote of winning a majority on the crucial House Ways and Means committee in 1964-it still fell short of garnering enough votes to pass Congress. The 1964 elections-Democrat Lyndon Johnson won the presidency in a landslide and Democrats gained wide majorities in both the House and Senate. thereby breaking the power of the conservative coalition-ended the impasse over Medicare. leading to its enactment in 1965.

PART Ill • The Major Programs

1965 Legacies Several key Features or Medicare as it was ~nacted. ~re worth highlighting because they created ~ndunng ~oht1ca~ l~ga· c1es and policy dilemmas. First. Medicare provided a hm~ted beneFits package focused on protecting the eld~rl~ against the acute costs or medical care rather than prov1d1 ~g com· prehensive insurance For all medica.1 co~ts or covenng care for chronic illness. The Medicare leg1slat1on enacted 1n 1965 was significantly broader than the origin.al Med!care proposal. House Ways and Means chair Wilbur Mills engineered a com· promise. with the approval oF Lyndon Johnson_. 6 ~hat added insurance for physicians' services and the Med1ca1d program for low-income Americans to the bill. But it still omitted cov- erage or cnt1cal services such as outpatient prescription drugs. long-term nursing home care, hearing aids, and denta l care. Moreover. Medicare required significant beneficiary cost shar- ing without any cap on catastrophic expenses or limit on how much enrollees could pay in a given year. These limited benefits led directly to the growth in Medigap and employer- sponsored supplemental health insurance policies that many Medicare beneficiaries carry to Fill in the program 's sizable holes and set the stage for subsequent fights over expanding Medicare benefits.

Second. Medicare at the start was divided into two pro- grams Medicare Part A. primarily covering hospitalization. and Medicare Part B. primarily covering physician services. This d1v1s1on was born oF political circumstances and diver- gent histories. Part A. Funded by payroll taxes. represented the original 195 I Medicare proposal built on principles oF social insurance. Part B, Funded by general revenues and benefi- ciary premiums. reflected the efforts oF Wilbur Mills in 1965 to sat1sFy anticipated beneficiary expectations by extending Medicare benefits without further increasing payroll taxes Medicare was thus created as a bifurcated program with two different funding mechanisms. two different cost-sharing ar- rangements. and two separate trust funds . The division. which reflected conventional insurance arrangements at the time of Medicare's enactment, contrasts with contemporary efforts to integrate and coord inate medical services across dif- Ferent settings. It has created distinctive political dynamics- Med1care politics have been driven much more by financial conditions in the Part A trust Fund than by Part B-and ar- guably led to Medicare policymaking that is fragmented by service category rather than focused on more comprehensive approaches to reform.1

Third. Medicare borrowed trust· Fund and payroll·tax financ- ing arrangements from Social Security. as well as long-term

t. r "actuanal soundness" that were credited with proiec ions o d 1 t th building that program 's public support an po it1ca s reng . However. predicting pension costs is much easier than fore- casting health care spending . so Medicares actuarial perfor-

d to be Substantially more volat1le than Social mance prove Security's. The high rate of growth in US health care costs meant that Medicare confronted inflationary pressures from the beginning that pushed program spending upward. More- over. as the antitax movement in American politics gamed strength in the 1970s and 1980s. increases in the Medicare payroll tax were increasingly d1Hicult to come by in Congress. putting the program in a Fiscal stra1ght1ac ct As a result. trust-fund and payroll -tax arrangements did not simply guar- antee Medicare's pol1t1cal and fisca l stability. instead they also generated a senes of intermittent trust-Fund crises that fed Fears Medicare was "going bankrupt " These funding short- falls have in turn catalyzed periods of pohcy act1v1sm in Medi- care. creating a cycle of crisis and reform that has long defined Medicare politics.

Fourth. Medicare was 1n key respects a liberal program. Philosophically. Medicare incorporated socia l insurance prin- ciples favored by American liberals Ehg1b1lity was established through payroll tax contributions with compulsory participa- tion for all workers so benefits were earned rather than pro- vided as welfare only to those rec1p1ents poor enough to meet a means test. Medicare provided vutually universal coverage for its intended population (the elderly). regardless of bene· ficiaries' income. in a single program. and that coverage was provided via public health insurance operated by the federal government Medicare was created . in other words. as a single- payer health insurance program s1m1lar to the Canadian system that health care reformers on the left often hold up as a model. The liberal foundations or Medicare made poht1ca sense in 1965 in the midst of the Great Society when hberals were in political ascendance: the program's structure reflected their values and political commitments. However. as American poli- tics turned rightward from the 1970s onward. Medicare's liber- alism increasingly clashed with the preferences of conservative politicians who wanted to remake Medicare into a program that reflected their own values and political commitments. That tension between Medicare's original hberal vision and a more. conservative vision that favors markets and competition remains the central cleavage in Medicare poht1cs today.

Fifth. Medicare was envisioned as a beginning. not an end.8

After Medicare demonstrated how effectively government health insurance could work. its advocates assumed oppor- tunities would soon arise to build on its success. perhaps by covering children next. Medicare would thereby pave the way for a system of universal coverage. the long-deferred dream of American health reformers: the strategy was incremental1sm. the ultimate goal universalism. But Medicare did not expand as planned. though it did add coverage for end-stage renal dis- ease patients and persons receiving Social Security disability insurance in 1972 (today 8 million Americans with perma- nent disabilities and kidney disease are enrolled in Medicare). Nearly five decades after its enactment. Medicare remains a standalone program. and though the 20 I 0 health care reform law moved the United States closer toward universal coverage, "Medicare for All" is nowhere in sight.

THE POLITICS OF AC COMMODATION Medicare was born in conflict. the debate over its passage marked by sha rp ideological and partisan divisions as well as the AMA's vocal opposition. Medicare 's programmatic ar- rangements were consequently shaped by the desire of pro- gram advocates to first win its enactment and then to secure a smooth start for the program. They hoped that a successful start would demonstrate the promise of federal health insur- ance as a prelude to expanding Medicare into a broader sys- tem of national health insurance. Medicare's political sponsors believed the program's enactment and implementation could both be facilitated by the same strategy: accommodation of the medical industry.9

The 1965 Medicare law openly announced that the federal government would take a hands-off stance toward medical providers. Section 180 I of the Medicare legislation declared that "Nothing in this title shall be construed to authorize any Federal officer or employee to exercise supervision or control over the practice of med1c1ne or the manner in which medical services are provided ... " 10 The message came through loud and clear: The federal government promised not to disturb the status quo for hospitals and physicians. Medicare would finance medical care for elderly patients. but it would not seek to alter the health care system 1n any way.

Medicare's accommodation of medical providers shaped its payment policies. Physicians and hospitals were paid

CHAPTER 8 •Medicare: The Great Transformation

generously, retrospectively, and with little oversight. Medicare initially had no predeterm ined fee schedule set by the fed- eral government. Instead. Medicare paid doctors on a fee-for- service basis according to reasonable charges. which meant that physicians could bill Medicare for amounts equivalent to what they billed other patients as well as what other doctors were charging. That formula was inherently inflationary: The more services physicians provided. the more money they received from Medicare. and paying the prevailing rate encouraged phy- sicians charging below that amou nt to ra ise their prices. leading to inexorable increases in the going rate. The fo rmula was also explicitly political. By effectively allowing physicians to charge the government whatever they wanted. program architects aimed to buy doctors' acquiescence to the Medicare legislation and their cooperation in seeing Medicare patients.

A similar story unfolded for hospital payment. Medicare paid hospitals on the basis of reasonable costs, essentially reimbursing hospitals retrospectively for whatever costs they submitted on behalf of Medicare patients. Hospital costs were liberally calculated by Medicare and even incorporated a 2% bonus payment that covered capital costs. Medicare was in part following the lead of private insurers since reasonable- cost reimbursement was the industry norm in the 1960s. Yet Medicare 's market power could have enabled Congress or pro- gram administrators to enforce tighter limits on hospital pay- ments if they had so chosen. But gaining the cooperation of hospitals in implementing Medicare became the preeminent goal, not cost containment. and once again . Medicare imple- mented an inherently inflationary payment formula. The more money hospitals spent on Medicare patients. the more money they received . That Medicare was initially administered by Social Secu rity officials who prized political conciliation as a strategy and were more accustomed to sending out checks to beneficiaries than battling medical providers to limit spending only served to reinforce Medicare's permissive posture toward medical providers.11

Medicare made one additional concession to providers: Day-to-day program administration (such as claims process- ing and reimbursement) was delegated to private insurers. largely Blue Cross and Blue Shield plans that enjoyed close relationships with hospitals and doctors and could be ex- pected to maintain the promised hands-off stance. Hospitals and physicians thus could participate in Medicare not only on favorable terms but also by working with private insurers they were comfortable with. This administrative buffer. which

P\RT Ill• The Major Programs

preserved a role for private insurers in Medicare. also served to reassure conservative opponents of federal health insurance who disliked centralized administration and to defuse any concern among the public that Medicare would lead to federal bureaucrats running the medical care system.'2

In sum. Medicare's initial payme nt and administrative ar- rangements hardly could have been more accommodating of medical providers. Doctors and hospita ls received essentia lly open-ended payments from the federal government. which foreswore cost control and ceded administrative responsi- b1ht1es to private insurers. The economic footprints of these policies were predictable. In Medicare's first years. spending. unfettered by any federal constraints. accelerated at a rapid rate. and concerns about Medicare expenditures and its finan- cial health (particularly the solvency of the hospitalization in- surance trust fund) emerged almost immediately after it began operations in 1966. By 1969 Senator Russell Long, chairman of the Senate Finance Committee, had declared Medicare a "runaway program" and opened hearings on its skyrocketing costs and alternative payment mechanisms.13

Yet 1nit1al efforts to restrain Medica re spendi ng were tepid. In 1972 . Congress enacted Professio nal Sta ndard Review Organizations (PSROs). charged with auditing the ca re received by Medicare patients to ensure the program did not pay for medically unnecessary services. But in practice PSROs had limited authority and did little to reduce unnecessary ca re or generate savings for Medicare. Even if PSROs had ferreted out fraud and abuse. they left the main sources of Medicare's spending growth untouched: inflationary reimbursement formulas for hospitals and physicians. Although Medicare costs had become a political issue. the program comprised a relatively small share of the federal budget. and the politi- cal will did not yet exist to challenge past concessions made to medical ~rov1ders Accommodation came at a high pnce to Medicares bottom line. but federal health policymakers in the 1970s were unwilling to pay the perceived higher political price of r~making Medicare's payment arrangements by taking on organized medicine.

There was another. unexpected price to be paid for the poli- tics of accommodation. As noted previously, Medicare's archi- tects env1s1oned the program as a cornerstone for a broader system of national health insurance. Clearly they d'd (and could not) anticipate the eroding fa'th .' ' not that followed the Watergate scan da l and 'v· itn government e r 1e nam war· the mergence o oil pnce shocks, stagflation (combining .high

unemployment and inflation). and sizable federal budgetary deficits: and the ensuing rightward shift in American politics during the 1970s and 1980s that halted liberals' expansion- ary social policy agenda. including plans for national health

insurance. But Medicare's advocates also did not ant1c1pate the

impact of the poli cies they had created for Medicare. Cost overruns in its early yea rs meant that Medicare was viewed more as a fi sca l burd en and less as a foundation for national health insurance. A tension ex isted between short-term goals (ensuring Medicare's successful 1mplementat1on) and long- term aspirations (expanding Medicare into national health insurance). In order to ensure Medicare's implementation. program architects unintentionally compromised their longer- term vision by loading the program with provider-friendly payment policies that inhibited Medicare's expansion. Medi- care added coverage for the disabled and end-stage renal dis- ease patients in 1972 but otherwise did not expand to new populations. Nor were Medicare's limited benefits liberalized, and over time coverage of beneficiaries ' medical expenses became increasingly inadequate. Beset by charges of prof- ligacy and inefficiency. Medicare's allure as a model for national health insuran ce dimmed.

Medicare's accommodation of medical providers also had consequences beyond the program Medicare's inflationary payment policies accelerated medical inflation in the U.S. health care system by enabling hospital charges and physician r~es to sur~e . upward for all patients. triggering the nation's ~1rst cost cns1s and renewing the debate over national health insurance in the early 1970s. All subsequent efforts to adopt universal coverage were linked to cost control. creating another hurdle for reformers to Jump over

MEDICARE'S REGULATORY REVOLUTION Medicare wrote hospital s and physic~ blank check in I ?~S that th:~ readily cashed . A program denounced as so- cial 1.zedd medicine proved to be a financial boon for the medi- ca in ustry and th · · I · · e angina Medicare bargain-the f d I government would . e era

h . 1

. pay generously for seniors medical care w 1 e leaving the t t und1'st b d . s_ a us quo in the health care system

ur e -remained inta t ' I 5 . ·r . . c ior years. Cost-containment ini 1at1 ves in Medicare we re half-hearted. and broader

reforms to restrain national health spending, such as the Carter administration's ill-fated proposal to cap hospital spending. were no more successful. But the era of the blank check in Medicare was bound to end. Once the federal government started paying for medical care through public insurance pro- grams. it could not afford to forever be a bystander to the health care system. Federal policymakers now had their own fiscal reasons to restrain medical inflation. and as the nation's budgetary circumstances changed. those incentives became an imperative.

Prospective Payment Comes to Medicare Hospitals were the first targets of policymakers' newfound willingness to take on providers. 14 The Carter administra- tion's proposals for system-wide hospital cost containment had failed to pass Congress during 1977-1979. giving way to the industry's so-called voluntary effort. Predictably, the voluntary effort failed to work-counting on hospitals to vol- untarily give up income was not much of a strategy-leaving Medicare to confront medical inflation on its own and leav- ing members of Congress convinced that federal action was necessary if hospital costs were to be slowed. Meanwhile. the Reagan administration came to power in 198 1 committed to cutting taxes. ramping up military spending. downsizing the federal welfare state. and reducing domestic spending. That policy agenda and the rate of increase in Medicare spending made the program a tempting target for budget cutters. The temptation grew stronger as the federal budget deficit in- creased from $41 billion in 1979 to $208 billion in 1983.

Burgeoning budget deficits in the 1980s transformed Medi- care politics by instilling in policymakers the political will to take on hospitals and physicians and cancel I 965's blank check policies. Coddling medical providers during periods of balanced budgets was one thing: paying them off during an era of widening budget gaps was quite another. In 1983. as part of a larger Social Security reform bill, Congress enacted the Medicare Prospective Payment System (PPS) that estab- lished predetermined payments to hospitals on the basis of patients' diagnoses. No longer would Medicare pay hospitals retrospectively on the basis of whatever costs they submitted; from here on out. federal policymakers would set Medicare payments in advance based on a federally established formula rather than reported costs. And unlike 1965 . the formula did not borrow from the hospital industry but instead grew out

CHAPTER 8 • Medicare: The Great Transformation

of state experiments in prospective payment that had been authorized by the federal government in the 1972 Social Secu- rity Amendments. Diagnostic-related groups (DRGs). which classified patients by medical diagnoses that then could be linked to a preset payment for each patient a hospital treated with that diagnosis. became the basis for Medicare prospec- tive payment after New Jersey had successfully adopted them for paying their hospitals.

The new mandate to regulate payments to hospitals had a bipartisan constituency. Democrats were comfortable us- ing federal power to limit Medicare spending since cuts in provider payments were preferable. from their perspective. to raising beneficiary costs. The Reagan administration and con- gressional Republicans preferred market-oriented approaches to cost control (such as hea lth maintenance organizations [HMOs]) but believed those approaches would not produce immediate budgetary savings. In order to reduce govern- ment's size. the Reagan administration paradoxically ended up supporting policies that expanded federal regulatory pow- ers to contain spending. Moreover. since the PPS moved away from cost reimbursement and instead rewarded hospitals that kept costs down-they could keep any profits from federal payments above what they spent. while hospitals that spent more than the government's payments had to absorb the loss-Medicare's new regulatory powers could be portrayed as promoting market forces and incentives for efficiency, making it more palatable to conservatives. 15

The Medicare Fee Schedule Medicare's PPS broke the political stranglehold of medical providers over the program. It also established the precedent of the federal government paying according to prospectively determined prices rather than on the basis of retrospectively determined costs. With Medicare hospital payments under regulatory control. it was just a ma tter of t ime before poli- cymakers went after physician payments. Indeed. whi le the rate of increase in Medicare spending on hospital services fell after the introduction of prospective payment. spending for physician services accelerated. in part because providers were moving care to outpatient settings outside of Medicare's regulatory reach. In 1984 Congress imposed a fee freeze on Medicare physician payments that lasted through 1986. How- ever. Medicare's spending on physician payments kept rising. largely due to increases in the volume of services billed to the program. an increase perceived as physicians' response

P\Rl Ill • The Major Programs

to the fee freeze. The growing bill for Medicare physician expenditures. limited success of the 1984-1986 fee freeze. and continued pressures from the budget deficit fueled con- gressional interest in creating a new Medicare physician payment system The federal government. as it had with hospitals. cancelled the original Medicare bargain that wrote

doctors a blank check. In 1989. Congress enacted the Medicare Fee Schedule for

physicians based on the resource-based re lative val ue scale (RBRVS) RBRVS created a formula for paying physicians ac- cording to the time. skill. and effort associated with different services The aim was to create a payment system that more Jccurately reflected the actua l costs of delivering services than Medicare's inflationary formula of reimbursing physi- cians for their customary. prevailing. and reasonable charges. The assumption was that once those costs were accurately measured. payments for costly specialty care would fall while payments for some primary care services would rise. By less- ening the disparity in payments for specialty and primary care services. RBRVS held out the promise of reducing Medicare spending through financial incentives that favored less expen- sive care

Under the Medicare Fee Schedule. which began in 1992. each physician service was assigned a relative value based on RBRVS. and then a conversion factor turned that relative value into a dollar amount. The federal government. in other words. would set prospective prices for what Medicare would pay physicians. Moreover. the 1989 legislation also authorized volume performance standards that empowered Medicare to adiust future physician payments downward in subsequent years if spending targets were not met. a safeguard against the kind of volume increases triggered by the 1984- 1986 fee freeze Ltke hospitals. physicians were now subiect to Medi - care cost controls that took away their ability to effectively set their own payment rates though the reforms proved less suc- cessful in reducing the gap between payments to physicians for specialty and primary care.'6

l\tlcdicare's New Regulatory Regime By the close of the 1980s. Medicare had developed a new regulatory regime for paying providers. Both the Medicare Pro- spective Payment System and the Medicare Fee Schedule were based on technical formulas that ostensib ly sought to mea- sure ph~s1cian and hospital costs on a more objective ba . But stripped of their technocratic imagery and sc ient~;~~

veneer. DRGs and RB RVS were systems of administered pnc- ing and prospective payment that enabled the federal govern- ment to impose budgetary controls over Medicare spending. Medicare had entered a new era where federal policymakers asserted power over medical providers. The politics of accom- modation. buffeted by the rise of federal budget def1c1ts. gave way to the politics of regulation

Both the PPS and Medicare Fee Schedule were enacted with scant public attention (the debate was too technical to attract a wide audience). b1part1san support (fueled by the impetus to reduce federa l deficits). and for the most part. the acquies- cence of the medical industry. which managed to win some concessions but could not stop the main thrust of reform. In contrast to Medicare 's implementation in 1966 this time Congress and program administrators (now operating from the independent Health Care Financing Adm1nistrat1on rather than from within Social Security) implemented payment for- mulas with an eye to controlling costs rather than buying cooperation.

In fact. Medicare 's new regulatory regime proved effective in slowing down the rate of growth in program spending. As budget deficits persisted throughout the 1980s and 1990s. federal policymakers aggressively used Medicare's prospective paymen t system to limit program costs in the name of fiscal discipline. A Congressional Budget Office study found that excess cost growth in Medicare (growth beyond general infla- tion and demographic changes) declined from 5.5% during 1975-1983 to 0.9% during 1992-2003 Moreover. there was no s~stematic evidence that the cost controls compromised Medicare patients' access to or quality of care.11

The new payment mechanisms did not solve Medicare's spending problems-the program was still subject to broader forces of medical 1nflat1on and lacked an overall global budget that could reliably constrain total spending and utilization- but they demonstrated that the federal government could de- velop re~ulatory strategies for cost containment that worked in practice. Indeed. private payers copied Medicare's RVS fe e sche.dule for their own payment systems. while DRGs at- ~ra cted inte.rest from health ca re systems abroad. Medicare ~ o~t~n· derided for lag~in~ behind innovations in American feat ins~rance. but in implementing these payment re - orm.s Me.d1care was an innovator.is The relative success of Med1c~re s reg~latory policies helped revive the program's

a rephueataltth1on ,and interest in using it in some political quarters as

re1orm model.

finally. just as in 1965. Medicare's payment policies had unintended effects on the health care system. By restraining Medicare spending, the federal government set in motion a chain of events ably described by Rick Mayes. 19 Hospitals ap- peared to shift costs to private insurers-who lacked Medicare's purchasing power and did not have similarly robust cost con- trol systems in place-to make up lost revenues from declining federal payments after the introduction of Medicare prospective payment in 1983. Insurers who were the targets of cost shift- ing then responded by raising their premiums for employer- sponsored insurance. resulting in a sizable increase in the ranks of uninsured Americans: employers· embrace of managed care to stem the tide of rising premiums: and finally, the return of national health insurance to the agenda in the early 1990s. Medicare's regulatory revolution unintentionally helped to create. or at least hasten. the revolution in private insurance that managed care unleashed. The cycle. though. was not yet com- plete. Managed care's spread through the private health system rn the 1990s would soon boomerang back onto Medicare.

THE RISE OF THE MARKET Medicare's trajectory throughout the 1980s and early 1990s followed the path of regulation. But Medicare politics was transformed in 1994. and program policy in the next decade moved in a new direction: toward the market. Th e market era in Medicare policy did not supp lant regulation: indeed. Medicare's regulatory scope expanded during this period. Still. there is no question that Medicare politics veered right- ward after 1994. with Medicare's policy agenda increasingly populated by proposals to promote private plans. managed care. and competition. The 2003 enactment of the M MA that created Medicare's Part D program of prescription drug coverage represented the furthest step yet in the trend toward market-driven policy.

A Political Revolution As we have seen. Medicare's enactment was highly contested. characterized by deep ideological and partisan divisions. But controversy over federal health insurance for the aged receded after Medicare was adopted rn 1965 and attracted broad pub- lic support. During the three decades that followed Medicare's enactment. program politics were remarkably stable, more technical than ideological in tone. Major. protracted public

CHAPTER 8 • Medicare: The Great Tra nsformation

debates over Medicare were rare. and policy reforms usually reinforced Medicare's existing program structure and ph i- losophy. Absent debate over ideology or programmatic first principles. Medi care pol icymaking from 1966 to 1994 was characterized by a striking degree of bipartisanship. To be sure. there were important disagreements between Democrats and Republicans on particular issues. But those differences, as the bipartisan support that emerged for prospective payment reforms demonstrated. were often less impressive than the similarities between the two parties' positions on Medicare.

Divided government made collaboration across party lines on Medicare reform a political necessity. During Medicare's first 28 years of operation. the program spent 20 years under divided government control. where the party in majority i n the House and (or) Senate differed from that of the president. Moreover. because Democrats dominated the House of Rep- resentatives. Medicare did not spend any of its first 28 years under unified Republican control of the national government. Medicare lived in a politica l world ruled by predominantly Democratic Congresses.

That world ended in 1994. and Medicare politics experienced a realignment. For the first time in 40 years. the Republican Party won majorities in the House and Senate. and Medicare's political environment radica lly changed. The new congressiona l leadership at th e vanguard of the Republican revolution-led by Speaker of the House Newt Gingrich-believed in conser- vatism. deregulation, federalism . privatization . and markets. There could hard ly have been a greater mismatch with Medi- care. w hich embodied liberalism. federal authority. social insur- ance. and regu lation. After 1994. Medicare was a Great Society progra m govern ed by a Republican Congress. It is no su rprise that, in the context of efforts to bala nce the federal budget. Republican congressional leaders sought to remake Medi - care into a program that fit more closely with their ideological vision and pol itical commitments. Put simply, Republica n lead- ers wanted a conservative Medicare program to supplant the liberal Medicare program that had been put into place by Demo- crats in 1965. The Republican revolution underscored just how important Democrats' dominance of Congw~s had been to the program's political fortunes in Medicare's first three decades.

The Rise of Managed Care The 1994 electoral triumph of the Republican Party was not the only element in the transformation of Medicare's politi- cal environment. By 1995. the US health system was in the

midst of a managed care revolution that reordered the status quo. with dramatic increases in enrollment for HMOs and other health plans that departed from the traditional American insurance model (for instance. by limiting patients' choice of doctors) . Medicare had started its own HMO program in 1985 that allowed beneficiaries to enroll in private plans in the hopes of saving the federal government money, but initia lly enrollment was slow. Meanwhile. various forms of managed care spread through the employer-sponsored insura nce mar- ket and also gained a foothold in Medicaid. The only bastion of "unmanaged" care left in the United States was Medicare. Suddenly. Medicare no longer appeared to be in the ma i n- stream of American medical care. and critics attacked the pro- gram as a "dinosaur" in dire need of modernization.

fhe rise of managed care generated pressures on Medicare to conform to the new private insurance standard. The managed care industry became an increasingly powerful stakeholder in American health politics and Medicare policy, and as other mar- kets were exhausted. they looked to the Medicare population as a growth opportunity. In addition. in the mid- I 990s managed care held down spending m the private sector. while Medicare's cost control performance. which had been strong in the prior decade. looked less stellar in comparison. Conservative reform- ers argued that Medicare was being outperformed and the pro- gram had to embrace managed care and competition for it to be sustainable Managed care consequently provided conserva- tives with an alternative model to traditional Medicare a solu- tion to Medicare's problems that offered a ready-mad~ escape from what they saw as the perils of government-run insurance.

The long-term v1s1on was that the trad1t1onal Medicare pro- gram (and federal government) would give way to private health plans such as HMOs The government's role increasingly would be to subs1.d1ze the purchase of private insurance and oversee a compet1t1ve market ~ather than operating its own insurance program through Medicare. Private sector managers would re- place government bureaucrats in making key dee . b beneficiaries' medical care. Newt Gingrich famo 1~ 1ons a ~ut that over time traditional Medicare would "wthus Y rehmar .ed becaus h' k 1 er on t e vine

ewe t in people are going to voluntarily leave it."20

A Decade of Market-driven Polle :~~:scendance of a Republican congressional maiarity and

_ged care consequently transformed M d' .. opening the door to reforms that sought . e ',care politics.

s1mu taneously to

introduce market forces into Medicare and move Medicare beneficiaries into the market Yet these proposals often did not achieve political or policy success. The 1995 Republican Medicare reform plan that would have made sizable cuts m Medicare spending and encouraged beneficiaries to move to private plans was passed by Congress but vetoed by President Clinton. The 1997 Balanced Budget Act (BBA) that created the Medicare Choice program not only failed to generate the ex· pected advance of managed care plans in Medicare but came to be widely blamed for triggering the exit of many private plans from Medicare (the BBA did produce sizable savings in Medi· care spending. but those savings were the result of extend· ing prospective payment to add1t1onal services, strengthening antifraud initiatives. and tightening existing formulas for pro· vider payments. not the consequence of the legislation's more market-oriented provisions). The 1999 Bipartisan Commission on the Future of Medicare failed to gain the supermaJority nec- essary to officially submit to Congress its recommendation to move Medicare toward managed compet1t1on. And because of favorable selection-plans attracted beneficiaries who were on average healthier than the general Medicare population-and fe?~ra! payment policies. Medicare actually lost money on ben· ef1c1anes who enrolled in private plans. spending more for their HMOs than if they had stayed in traditional Medicare.

In 2003. after nearly a decade of 1ntens1ve efforts to move ben~ficiaries out of traditional Medicare. only 5 3 million M~d1care enrollees ( 13% of all beneficiaries) were enrolled in pnva~e plans. Conservative reformers could not respond to flagging enrollment by mandating beneficiaries to JOin man· aged care plans. a strategy often employed by state Medicaid ~rograms. The Medicare population is too politically influen· t1al for that; inducement rather than coercion consequently has ?een .the policy of choice to move them from traditional Medicare into private plans.

THE MEDICARE MODERNIZATION ACT AND POLITICS OF PART D As of 2003 then k f in M d' · · n:ar et orces had made only limited gains

e 1care and private I 11 er

. . . h P an enro ment of Medicare ben· 1c1anes w ich h d

that 'c a soared before the BBA. had stalled. But year ongress enacted th MM ..

new foothold in Medic e . A. giving private plans a Med· are and taking market-based reform in

ica re to a whole new leve1.21

The resurgent momentum for market policy ironically was hnked to efforts to liberalize Medicare benefits to include prescription drug coverage. Medicare policy has historically been dominated by issues of cost control and provider pay- ment. Medicare did not expand its limited benefit package much after 1965 largely due to affordability concerns . even as it increasingly fell behind private insurance coverage carried by working-age Americans. That many Medicare beneficiaries obtained supplemental insurance coverage through former employers or by purchasing their own Medigap policies also dampened political pressures to libera li ze coverage.

Medicare's one foray into large-sca le benefit expansion- the 1988 Medicare Catastrophic Coverage Act-ended in disaster.22 That year the Reagan administration and congres- sional Democrats agreed to expand Medicare to limit the out-of-pocket costs paid by Medicare beneficiaries and add coverage of outpatient prescription drugs. However, only 16 months after its passage, Congress repealed the legislation in response to a backlash by seniors angered by the program's financing arrangements (the costs of the new benefits were to be paid entirely by the Medicare population without any subsidy from general revenues. and with income-related premiums that imposed a significant new tax on more afflu· ent beneficiaries). It was little co nsolation t hat much of the backlash was due to widespread confusion among Medicare beneficiaries (many or whom wou ld have benefited from the program) about who would have to pay the new surtax. con- fusion largely attributable to misleading mailings sent by inter- est groups opposed to the program . After the political trauma of catastrophic health insurance. little appetite remained in Congress for expanding Medicare benefits. though the Clin- ton administration proposed a new Medicare drug benefit as part of its still-born health reform plan in 1993.

Prescription drug coverage reemerged as an issue in 1999. when President Clinton called for expanding Medicare to cover outpatient medications and Democratic members of the National Bipartisan Commission on the Future of Medicare pushed for the benefit as an essential part of any program re- forms. The rising political fortunes of a Medicare drug benefit were closely linked to a critical change in fiscal conditions. In 1998, for the first time in three decades. the Congressional Budget Office announced a federal budget surplus. forecast at $131 billion by 2000 and projected to grow during the en- suing decade. The surplus heralded a new day in Medicare politics. one in which the deficit pressures of the 1980s and

CH APTER 8 • Medicare: The Great Transforma tion

1990s gave way to the politically friendlier contours of surplus politics. Meanwhile. skyrocketing drug costs led Medicare HMOs and supplemental insurance plans to limit or drop their coverage for prescription drugs or raise premiums. Medicare's omission of drug coverage seemed all the more glaring given the centrality of medications to contemporary medicine.

By 2000. prescription drug coverage fo r Medicare ben - eficiaries had become a first-order political issue and figured prom inently in that year's presidentia l campaign . The Bush ad ministration assumed office in 200 I having promised a new drug benefit and having committed to comprehensive reforms that would overhaul Medicare along more market- friendly lines. But the partisan polarization on Medicare. and the lack of large Republican majorities in Congress. made that agenda difficult to legislate. Still. the Bush administration was determined to win passage of a Medicare drug benefit. In the short term . the admin istration wanted to stave off any politi- cal repercussions of failing to deliver on Medicare prescription drugs that could damage the president's 2004 reelection bid. In the long term . the administration had a more ambitious goal: neutralize Democrats' political advantage on Medicare. move more seniors into the Republican column. and thereby trigger a political realignment that helped create an enduring Republican majority.

The deadlock over the Medicare drug benefit was finally broken at the end of 2003, but j ust barely, after a dramatic se- ries of events that included an initial bipartisan deal with Sen- ate Republicans supported by Senator Ted Kennedy. a leading liberal voice on health policy; enactment by a single vote of a more conservative House bill that would have. along with the new drug benefit. converted Medicare into a premium sup· port system (a form of managed competition that would leave beneficiaries responsible for paying the difference between a federal subsidy and the cost of the health plan they chose): difficulties in the ensuing conference committee's efforts to produce a compromise bill that reconciled the Senate and House approaches: and AARP's late endorsement of the Re- publica n drug plan, an unusual move for a political advocacy group usually aligned with the Democratic Party on Medicare issues. The final bill passed the House in November 2003 by 220-215 : Republican leaders held open the vote (the longest recorded vote in House history) long after the allotted time in order to persuade a few GOP congressmen to reverse their positions and to support the bill when it appea red it would be defeated; it later passed the Senate by 54-44. Those slim

1 1

P\R J Ill • The Major Programs

majorities (mainly on party lines) held off opposition fro~ both the right and left. as conservatives objected to the bill as an expensive entitlement that did too little to overhaul Medicare and control costs. thereby adding to growing budget def1c1ts. while liberals denounced the bill for inadequate benefits. too much privatization. and as a sellout to drug

companies and private insurers.

The drama and controversy did not end with the bill's enactment. In ensuing months. there we re allegations o f vote buying for one congressman. admissions that the Bu sh administration had concealed estimates from the Medicare actuary that projected a substantially higher cost for the pro- gram than they had given when the bill was passed. and controversy over the administration's use o f advertisements with fake news stories to promote the benefit.

When the dust cleared. the MMA had created a co mpli - cated system of drug coverage and ushered in a series of crucial program changes. Perhaps the program's most stri k- ing feature was its unusual benefit design. As a result of an agreement that the legislation could cost no more than $400 b1ll1on (over 10 years). Medicare's new drug benefit had a peculiar gap that reflected those fiscal limits. a "dough nut hole" in the middle where coverage ended before starting up again after catastrophic expenses (though lower-income pro- gram enrollees received more comprehensive coverage). In 2006. the standard Part D plan covered 75% of drug costs through $2.250. then covered nothing (the donut hole) for the next $2.850 in expenditures. before picking up coverage again to cover 95% of costs after $5.100 in total spending.

The drug benefit itself is delivered by private companies rather than through the traditional Medicare program . 23 This marks the first time in program history that a benefit is only available through private plans. Beneficiaries can select prescription drug coverage offered as standalone private poli- cies (so-called prescription drug plans or PDPs) or as part of comprehensive health insurance coverage offered through HMOs and other private plans in Medicare Advantage (the successor to Medicare Choice). There is no Medicare drug plan directly offered by the federal government· d co M d. . rug

verage in e icare has effectively been privatized.

It is ~ard to overstate the importa nce of this fundamental change in how Medicare works. To be sure. Medicare has al- ways been a mix of public insurance and private delivery and has ;lways m~intained a prominent role for private insurers in a m1nistrat1on. And since 1985 private plans have played

a growing role in delivering medical care to Medicare bene-

ficiaries. Yet what the MMA has uniquely done 1s to priva- tize insurance and cede an entire area of program benefits to private plans that operate instead of. rather than along side. traditional Medicare For proponents of market-based reform. Part D's exclusive reliance on private plans was a significant political victory. one that provided a testing ground for their belief that competition. consumer choice. and market forces ca n govern Medicare much better than the federal govern- ment. More than that . though . 1t established a precedent for wha t they would like the rest of the Medicare program to look like. Privatization gained a beachhead in Medicare that its pro- ponents would soon look to expand far beyond prescription

drug coverage.

The MMA reversed the regulatory era in Medicare poli-

t ics and the program's embrace of centralized cost control in other important ways. In a repeat of Medicares 1965 accommodation of hospitals and doctors. the MMA expanded federal insurance but prohibited the government from negotiating prices with drug companies. The prohibi· tion reflected the pharmaceutical industry's political power as we ll as the ascendance of market ideology (prices were to be controlled instead through plan compet1t1on) and marked a sharp departure from the politics of prospective payment that had asserted government power over medical providers. The MMA. which offered an array of expensive concessions to hospitals. employers. and myriad other industry groups. briefly returned interest groups to a dominant pos1t1on in Medicare policy. in the process subordinating norms of fiscal responsibility to political calculations. favoritism. and fiscal permissiveness. 24

The MMA also increased payments to private health plans contracting with Medicare. By 2006. Medicare pay- ments to private plans were. on average. 12% higher than the average costs of beneficiaries in traditional Medicare for private fee-for-service plans. which grew rapidly after

the MMA. Medicare payments were 19% higher than costs. There wa.s. t~en. no pretense of cost savings from private

f pl ans. Privatint· was the goal. even if 1t required more ederal spending.

!he strategies to enhan ce private plans· role in Medicare

p;i~ ~ff hand somely. By 20 I 0, I I. I million Medicare ben· e iciaries (24 %) were enrolled in Medicare Advantage plans com pared to 5 3 million . 2003 . . . b - in · But Medicare politics was

a out to take another turn. this time away from the market.

THE AFFORDABLE CARE ACT AND BEYOND In 2010. President Barack Obama and a Democratic Congress secured enactment of the most important health care legisla- tion since the 1965 law that created Medicare and Medicaid. The Patient Protection and Affordable Care Act (ACA) ex- tended insurance coverage to an estimated 32 million unin- sured Americans. It mandated most US residents to obtain and larger businesses to offer health insurance or pay a pen- alty. while creating new state-based insurance exchanges for the uninsured and small businesses. The ACA established subsidies for low-income persons to help them buy coverage and liberalized Medicaid eligibility. and the law regulated pri- vate insurers so they could not turn away or charge substan- tially higher premiums to people with preexisting conditions.

The ACA was notable as well for what it did not do: namely, create a so-called public insurance option mod- eled after or linked to Medicare. Advocates envisioned the new public plan as an alternative to private coverage for the uninsured and as a key element in cost containment. since private insurers would have to compete with its anticipated lower costs. The defeat of the public option. which many liberal Democrats had viewed as the cen terpiece of reform. re- affirmed that the original vision of Medicare for all remained far out of reach. Indeed . even a compromise that would have enabled Americans between ages SS and 64 without employer coverage to buy into Medicare-" Medicare for more"-failed to clear Congress.

Health care reform had other important implications for Medicare. The ACA improved Medicare benefits. gradually filling in the infamous Part D donut hole and expanding coverage of preventive services. But the law's Medicare- related provisions were mainly intended to generate funds-through both tax increases and restraints on pro- gram spending-that would help pay for the costs of cover- ing the uninsured. The ACA was explicitly redistributive. financing health care reform in part by raising Medicare payroll taxes for upper-income Americans. Furthermore . the ACA expanded the use of income-related premiums in Medicare Part B-under such arrangements. which were authorized by the 2003 MMA. higher-income enrollees pay more in premiums-and extended them to Medicare Part D. Democrats also relied on substantial savings from Medicare. including payment cuts to private Medicare

CHAPTER 8 • Medicare: The Great Transformation

Advantage plans and hospitals. The elim ination of overpay- ments to Medicare Advantage plans signaled that Medicare policy was again reversing course as Democrats sought to stem the program's drift to the market.

The ACA additionally authorized a host of experiments in delivery system and payment reform in Medicare. including bundled payment. value-based purchasing, and accountable care organizations. A new Innovation Center within the Cen- ter for Medicare and Medicaid Services-the federal agency that administers Medicare-was given authority to scale up successful experiments. The law also created the Independent Payment Advisory Board (IPAB). an expert commission that would make. beginning in 2014. cost-cutting recommenda- tions to Congress if specified spending triggers were met. Con- gress would have to consider IPAB recommendations under expedited rules. and if it did nothing. those recommendations would go into effect. Taken all together, the ACA's changes were expected to slow the average annual rate of growth in Medicare spending from 6.8 to S.5% over the ensuing decade. generating over $400 billion in savings. Moreover. the ACA's establishment of program-wide spending targets (linked to the IPAB) represented a milestone in Medicare history. even if the initial targets were not projected to have much of an impact. Indeed. the Congressional Budget Office estimated that most of th e delivery system and payment reforms would have only modest impacts on Medicare spending in the short term-projected savings came mainly from reduced payments to hospitals and Medicare Advantage plans.

During the 2009-20 IO health reform debate. Republicans denounced the proposed cuts in Medicare spending, warn- ing that "Obamacare" would create "death panels" and "pull the plug on grandma." Those charges were utterly false and based on an imaginary view of the new health reform law. But they nonetheless had a real political impact. helping to erode elderly support for reform and leaving an enduring (fa lse) impression among many that the ACA would ration care for Medicare beneficiaries. Republicans made big gains among senior voters in the 20 I 0 midterm elections. helping them regain majority control in the House of Representatives. The ACA was a legislative triumph for Democrats. but at least in the short term . it was also a political loser.

Republicans thereby repositioned themselves as the party of Medicare by leveraging (and demagoguing) health care re- form. But that new status did not last long. No sooner had the GOP make inroads with the elderly than it proceeded to pursue

controversial changes rn Medicare. In 20 I I. the Republican maionty 1n the House passed a budget resolution. that included Congressman Paul Ryan's Medicare restructunng plan. Th.e Ryan plan proposed to eliminate the traditional ~ederal M.e~t­ care program and instead. beginning in 2022. provide b~nef1c1~­ nes with subs1d1es to purchase private insurance. Medicare. rn other words. would be pnvatized. with proponents citing Part D as a model Yet the Ryan plan involved cost shifting as much as rt did competition. Because the value of the vouchers would nse more slowly than medical inflation. the Congressional Bud- get Office estimated that Medicare beneficiaries would have to pay most of the costs of medical care themselves.

fhe Ryan plan ignited a political firestorm. Democrats con- demned the proposal and the Democratic-majority Senate re- iected 1t Opinion polls showed that much of the public was cool to the idea. and seniors overwhelmingly wanted to keep the current Medicare program. The issue helped Democrats win a special election for a House seat in a conservative district in up- state New York. In town hall meetings. angry constituents won- dered why the GOP was targeting Medicare-a replay of the Tea Party furor that had bedeviled Democrats during 2009-20 I 0. Conservative activists' warning to the Obama administration that the government should "keep their hands off my Medicare " now echoed in Republican ears. The gains that the GOP had made among seniors during the health-reform fight were jeopar- dized House Republicans in vulnerable districts wondered why they had put their electoral futures at risk after the GOP leader- ship appeared to back away from the plan. Just as in 1995. a new Republican Congress had overreached in its drive to over- haul Medicare.

In the immediate aftermath of the Ryan plan's defeat. the chances for Medicare reform appeared to recede and Demo- crats seemed poised to exploit the GOP's misstep in the 2012 elections. But then program politics took another unexpected turn The 2010 elections had brought many conservative Republicans to Congress who had campaigned against soar- ing federal dericits and for balanced budgets. The new GOP maiorrty in the House refused to raise the federal debt ceiling without substantial cuts in federal spending. Meanwhile. in- ternational debt crises fueled fears in the United States about domestic debt problems. The result was a return in 20 I I to the pol1t1cs of def1c1t reduction. this time with the added spec- ter of debt fears. President Obama negotiated with Republican House Speaker John Boehner to secu re a .. grand bargain .. th t would reduce the deficit by about $4 trillion over the ne:t

decade while raising the debt ceiling. Stunningly. as part of $250 billion in estimated Medicare savings the president re- portedly agreed to a phased-in increase in the Medicare eligi- bility age-anathema to many Democrats and a concession that could undermine their polttrcal advantage on Medicare following the Ryan plan 's 1mplos1on Obama also reportedly agreed to an expansion of income-related Medicare premiums. a policy that enjoys more Democratic support.

The grand bargain eventually fell through. but the fact thata Democratic president would consider raising the Medicare eli- gibility age-a reform that shifts health care costs rather than reducing them-underscored the impact of deficit politics and debt concerns. It also signified that as long as deficit pressures loom. proposals to slow federal spending rn Medteare will fig· ure prominently in American polttrcs. In 2011 Congress and the president agreed to $917 billion of deficit reduction that initially exempts Medicare. with a b1part1san super commit· tee" charged with finding additional savings When Congress failed to adopt those savings. rt triggered automatic cuts that were scheduled to include reductions rn Medicare provider pay· ments. At the same time . Congress rs grappling with another fiscal challenge: how to find the funds necessary to offset the costs of cancelling steep cuts in physician payments scheduled under Medicare 's Sustainable Growth Rate formula (each year since 2003 Congress has ovemdden such cuts)

THE FUTURE OF MEDICARE What's next for Medicare? In the short-term. Medicare's for· tunes were linked to the fate of the ACA. The Supreme Court upheld most of the law: President Obama easily won reelec· ti on. By 2013 . the ACA prov1s1ons discussed earlier in the chapter were-at least in the short run-secure.

. ~till. the impetus to control Medicare spending remains. The rising costs of medical care. in the context of growing deficit pressures.~nd .debt fears. mean that Medicare will remain a prime target of entitlement reform " and efforts to reduce the federal budget deficit for the foreseeable future. Cutbacks rn provider payments are likely to be adopted. but so too are some benefit reductions. and perhaps fiscal pressures will generate bipartisan support for these changes. Still. a partisan d1v1de over Medicare r~form persists. with Democrats and Republicans continuing to ?isagree o:er the appropriate roles of government and private insurance rn the program. Rather than providing an impetus

for bipartisanship , budget pressures might expose and amplify partisan divisions over Medicare. The outcomes of the 2012 elec- tions have given the Democrats an opportunity to take the pro- gram in their direction-though the contest will remain intense.

Medicare's future is also linked to tax policy and ongoing economic woes. A faltering economy will erode Medicare's tax base. exacerbating financing challenges and pushing forward the date of the next trust-fund crisis. Medicare clearly will need substantially more revenues to cover its growing population. and if raising taxes remains politically infeasible. then budgetary pressures on Medicare in coming years will mount.

Yet the current focus on Medicare as a budgeting problem distracts us from tackling the broader issue of controlling spending across the entire health care system . Rising medical

CONCLUSION Medicare politics have been profoundly transformed since the program's enactment in 1965. A program that started out accepting the status quo and accommodating medi- cal providers became a source of cost control and innova- tive payment policies. and that regulatory regime was in turn followed by the rise of market-driven Medicare reform. The character of Medicare politics has also changed. The stable. quiet politics of Medicare's first three decades have given way to an intensely ideological. partisan. and polar- izing politics. Since 1995. an open political struggle over

STUDY Q~ESTIO~~ I. What are the four eras in Medicare's history?

CHAPTER 8 • Medicare: The Great Transformation

costs are not simply a problem of Medicare or government budgeting-they also impact private insure rs. employers. workers, and their families. The United States has a system- wide health care cost problem, not a Medicare cost problem. If the focus remains only on Medicare. then we are likely to adopt measures, such as raising the Medicare eligibi lity age , that do not control health care spending but rather shift costs. Medicare is also constrained i n what it can do to control spending. For example. further reducing prices below what private insurers pay could impede some beneficiaries' access to services if physicians turn away Medicare patients. Over the long run, successful cost control in Medicare depends on effective policies to control spending in the broader US health care system. 25

Medicare's core purpose and philosophy has broken out. That struggle is now taking place aga inst the backdrop of budgetary pressures and conflict. The original Medicare debate has, in effect, been reopened and program policy- making operates in a political environment highly polarized along partisan lines. Medicare politics is back to where it started in the 1950s. dominated by fundamental disputes over the role of government and markets in public policy. This debate will not be settled easily, and it wi ll not be settled any time soon.

2. What are some key features of Medicare as it was enacted that created later policy difficulties?

3. In what ways did Medicare originally try to accommodate medical providers in order to win support?

4. During the 1980s and early 1990s. what mechanisms were used to try to reign in Medicare spending? Were they successful?

S. What changes in Medicare resulted from the Republican ascendency in Congress in the 1994 elections?

6. What Medicare drug benefit championed by the Bush administration was passed in 2003?

T. What changes to Medicare result from the Affordable Care Act?

8. Overall. how does the author portray how Democrats and liberals view Medicare and how Republicans and conser- vatives view Medicare?

I I I I

EN DN OT ES I. I am drawing here on the typology of Brown. 1985 2 This section of the chapter draws in part on material from Oberlander. 2003. The best account of Medicare's

enactment. and one that I draw on heavily here. is Marmor. 1973. Other works on the origins of Medicare include

Feingold. 1966: Harris. 1966: and Jacobs. 1993. J. The "rational argument and statistical persuasion" reference is from Hoffman. 200 I. p. I 78. For an historical account

of early efforts to enact national health insurance in the United States. see Starr. 1982.

4. Marmor. 1973. pp. 14-15.

5. Ibid .

6. Blumenthal and Marone. 2009.

1 Edward S. Lawlor. 2003. pp. 30-32.

8. Ball. 1995. 9. Feder._ 1977. On the accommodating politics of Medicare's administrators and Medicare 's early years. see also

Derth1ck. 1979: Starr. 1982: and Marmor. 1973.

Io. Quoted in Oberlander. 2003. p. I 09 . I I. Feder. 1977

12 Jacobs. 1993 .

I J. Quoted in Oberlander. 2003. p 47.

14. for accounts of Medicare's shift to prospective payment. see Mayes and Berenson 2006 Sm th 1992 .. Marmor. 2000. Jost. 1999: and Brown. 1985 · ·

1

•

IS. Marone and Dunham. 1985.

16. Mayes and Berenson. 2006. p. 91-92 .

I 7 White 2006

18. This argument is made by Moon. 2006.

19. Mayes. 2004.

20. Quoted 1n Killian. 1998. pp. 169_ 170 _

21. For a comprehensive account of the MMA's o . . . Campbell, 2011 ngins. see Oliver. Lee . and Lipton. 2004. See also Morgan and

22. See H1mmelfarb. 1995.

23. This section of the chapter draws in part on Oberlander. 2007 24. On interest group poht. · M d. ics tn e icare. see Valdeck 1999 25 . See Marmor, Oberlander. and White. 2011. . .

llEF ERENCES Ball , R 1995 "What Medicare's Architects Had in M' d .. -- - Blumenthal D and J A M

2 in · Health Affairs 14(4): 62-72

. . . . . orone. 009 The Heart of p . . . University of California Press ower. Health and Politics m the Oua/ or~· B k I . 11tce. er e ey:

CH APTER 8 • Medicare: T he Great Transformation

Brown. L. D. 1985 (Fall). "Technocratic Corporatism and Administrative Reform in American Medicine." journal of Health Politics. Policy and Law 10(3): 579-99.

Derthick. M. 1979. Policymaking for Social Security. Washington . DC: Brookings Institution Press.

Feder. J. M. 1977. Medicare: The Politics of Federal Hospital Insurance. Lexington. MA: D.C. Heath. Feingold. E. 1966. Medicare: Policy and Politics. New York: Chandler.

Harris. R. 1966. A Sacred Trust. New York: New American Library. 1966.

Himmelfarb. R. 1995. Catastrophic Politics: The Rise and Fall of the Medicare Catastrophic Coverage Act of 1988. University Park: Pennsylvania State Press.

Hoffman. B. 200 I The Wages of Sickness: The Politics of Health Insurance in Progressive America. Chapel Hill: University of North Carolina Press.

Jacobs. L. R. 1993. The Health of Nations. Public Opinion and the Making of American and British Health Policy. Ithaca. NY: Cornell University Press.

Jost. T. 1999. "Governing Medicare." Administrative Law Review 51 (I): 39-116.

Killian. L. 1998. The Freshmen: What Happened to the Republican Revolution? Boulder. CO: Basic Books.

Lawlor. E. 2003. Redesigning the Medicare Contract· Politics. Markets. and Agency. Chicago: University of Chicago Press.

Marmor. T. R. 1973. The Politics of Medicare. Chicago: Aldine.

Marmor. T. R. 2000. The Politics of Medicare {2nd Ed.). New York: Aldine de Gruyter.

Marmor. T. R .. J. Oberlander. and j . White. 201 1. Fall. "Medicare and the Federal Budget: Misdiagnosed Problems. Inadequate Solutions." journal of Policy Analysis and Management 30(4): 928-34.

Mayes. R. 2004. "Causal Chains and Cost Shifting: How Medicare's Rescue Inadvertently Triggered the Managed Care Revolution." journal of Policy History 16: 144-74.

Mayes. R .. and R. A. Berenson. 2006. Medicare Prospective Payment and the Shaping of U.S. Health Care. Baltimore, MD: johns Hopkins University Press.

Moon. M. 2006. Medicare· A Policy Primer. Washington. DC: Urban Institute Press.

Morgan. K. J .. and A. L. Campbell. 20 I I. The Delegated Welfare State: Medicare. Markets. and the Governance of Social Policy. New York: Oxford University Press.

Morone. j.. and A. Dunham. 1985. "Slouching to National Health Insurance." Yale journal on Regulation 2: 263-91.

Oberlander. J. 2003. The Polit1ca/ Life of Medicare. Chicago: University of Chicago Press. Oberlander. J. 2007 "Through the Looking Glass: The Politics of the Medicare Prescription Drug. Improvement. and

Modernization Act" journal of Health Politics. Policy and Law 32: 187-219.

Oliver. T. R .. P. R. Lee. and H. L. Lipton. 2004. "A Political History of Medicare and Prescription Drug Coverage."

The Milbank Quarterly 82(2): 283-354.

Smith. D. G. 1992. Paying for Medicare: The Politics of Reform. New York: Aldine de Gruyter.

Starr. P. 1982. The Social Transformation of Amencan Medicine. New York: Basic Books.

Valdeck. B. 1999. "The Political Economy of Medicare." Health Affairs 18( I): 22-36.

White. C. 2006. The Slowdown m Medicare Spending Growth. Washington. DC: Congressional Budget Office.

When Medica id was passed in 1965, poor people were eligible for t~e program only if they met certain categorical requirements: had dependent children, or were disabled or elderly, for example. Over time, the federal government mandated expanded coverage for certain groups (e.g .. pregnant women and children in two-parent households), and provided financing to states that chose to expand coverage to certain additional groups (e.g., single childless adults). States controlled many aspects of the program. This chapter shows how, over time. Medicaid has steadily expanded and evolved from a poor people's program to more of a middle-class program. Why? Because of the way the program was organized Although no one noticed (or intended this) the program's design seems to tilt toward expansion. Medicaid seems to be designed to grow.

The Patient Protection and Affordable Care Act (ACA) intro- duced a breakthrough. It gives states the option- with very generous federal financing-to provide coverage to a// low- 1ncome Ame ri cans. Th is ha s the potential to make further strides than ever before to equalize Medicaid coverage ac ross the states. After 20 14. many more people who were co nsid - ered undeserving in the vast majority of states in the past- single adult ma les. chi ldless couples . and the homeless. for example- will receive access to public insurance.

New Medicaid enrollees w ill make up more than 25% of to- tal enrollment in many states that choose to expa nd coverage. The ACA financial offer of coverage up to a federal Medicaid el igibi lity level is hugely significant But two polar opposite views have emerged about what this historic shift means fo r the future of Medicaid and the US health care system . The fi rst sees this reform as institutionalizing Medica id as a means· tested stigmatized program that firmly entrenches unequal treatment within the American health ca re system. While

federalizing the eligibility level. it also specifies a clear cutoff where poor people are steered to a separate. and many worry unequal. system of care. Moreover. the Supreme Court ruling on the ACA forced the federal government to rescind its man· dated requirement that states expand Medicaid coverage up to 133% of the federal poverty level (FPL) and instead make the expansion optional for the states. As a result. some states will likely not take up the federal offer. and while differences in Medicaid coverage will significantly lessen . they will still persist.

The second view sees the ACA's treatment of Medicaid as consistent with Medicaid 's march for the last 45 years-as a program that now reaches significantly into the American midd le class-and did so well before the passage of the ACA. Most people are surprised to learn that Medicaid was America's largest hea lth insurance program a decade before health care reform . By 2002. the number of individuals cov- ered by Medicaid. our health care program for " the poor," surpassed Medicare-our universal program for the elderly. In 2009, Medicaid had about 62 million enrollees compared to Medicare's 45 million .'

But Medicaid does substantially more than providing health insurance to mi llions of low-income families. It plays a crucial role in providing needed long-term care (LTC) services for the elderly and disabled as well. For exa mple. it covers 70% of the elderly residing in nursi ng homes and 41 % of total nurs· ing home spend ing, helps more than eight million elderly pay their Med icare premiums and prescription drug costs. and covers nearly nine million nonelderly people with disabilities including paying for the bulk of services ( 44%) provided to AIDS patients.2 These statistics reveal that even before the passage of ACA . we could no longer easily describe Medicaid as our health care program for "the poor." Rather. it already was America's health care safety net for a wide range of peo· pie across various illnesses. age groups. and income levels.

The ACA bids to resolve a debate that has marked Medicaid since its early years. Should it be a program strictly for the poor. or is Medicaid a stepping-stone towa rd ensuring that everyone has access to some form of health care coverage in the United States? On the one hand. when Medicaid began in 1965, there is clear evidence of defining the program as wel· fare medicine. The federal government required participating states to cover certain types of poor people-namely. single· headed families and the elderly. blind. and disabled receiving cash assistance. The key point to grasp about the mandatory

CHAPTER 9 • Medicaid: Designed to Grow

populations is that they represented a very restricted group of people with very low income levels relative to families' ability to afford health insurance.

Yet. also from the start. Medicaid's institutional design al· lowed for an expansionary vision of the program to take root. In particular. an intergovernmental design with a generous federal matching rate and substantial state discretion has led to continual expansions and has pushed Medicaid in the middle-class direction. The ACA solidifies this middle-class development. In effect. it puts Medicaid politics at par with Medicare and Social Security-America's very popular middle· class entitlements-making it increasingly difficult to deny its importance to the American people.

Not surprisingly. this gradual expansion has culminated into new political conflicts: First. partisan conflicts where conservative Republicans fight to keep a popular program from developing roots as another entrenched entitlement: second . intergovernmental conflicts where the federal govern· ment has gradually increased its financial contribution along· side programmatic requirements that many states resist: and third . state-level fiscal conflicts since Medicaid draws general revenues in all 50 American states. and although it is a popu· lar program. it is at the same time a budget problem in many states. While state politicians often strive to decrease Medic· aid spending. state hea lth and budget officials are caught in between when they attempt to meet state health needs and rea lize-ironically-that expanding Medicaid (aga in) often makes the most fisca l sense because they can leverage federal funds.

At the heart of these conflicts is a fundamental question about Medicaid's goal: Whether it should be a middle-class entitlement or a welfare program. What can (and should) we expect of Medicaid in the 21st centu ry? The fight over Medicaid 's new role under the ACA is strident and dramatic but is still consistent with this longer-continuing debate about the program. While conservatives prefer Medicaid as welfare over Medicaid as middle-class entitlement. they are often thwarted by the middle-class status Medicaid already com · mands. While liberals rhetorically fight to protect America 's hea lth care program for the poor. their efforts have slowly but surely pushed the program more firmly into the middle class . And every fiscal crisis introduces the same fundamen- tal questions-should Medicaid help people when they reach rock bottom (the very poor) or help protect people before they fall (the low· and middle-income working classes)? Because

Medicaid 's institutional design created enormous ambi~ui~ around Medicaid's appropriate reach. middle-class Med1ca1d survives. expands. and flourishes despite repeated efforts to retrench 1t. and the ACA extends this development.

States continue to turn to Medicaid because of the way it is structured : Optional expansions allowing state discretion and the ability to leverage federal funds to finance expansions. These expansions. in turn. have created a political constitu- ency for Medicaid-both provider groups and enrollees- who fight against retrenchment. Yet. as program expenditures continue to increase. especially during fiscally distressed times. the partisan divide over the future direction of Medicaid becomes more stark.

l\ilEDICAID'S P OLITICAL HISTORY

l\1cdicaid's Origins Med1ca1d 's adoption 1n 1965 must be understood in the con- text or the long struggle to adopt universal health insurance in the United States. By the late 1950s. liberal proponents of health care reform were focusing their attention on sen ior c1t1 zen s. a clientele group that was viewed sympathetically and was already tied to the state through the Social Security system . In 1964. most political observers thought Congress would adopt one of three alternative approaches to improve access to health care for the elderly: (I) A universal hospital insurance program with limited benefits based on Social Se- curity (the King-Anderson bills of 1963 and 1964). (2) a vol- untary phys1c1an services program supported by beneficiary premiums. or (3) an expansion of the means-tested Kerr-Mills program , which offered a wide range of health care benefits to the low-income elderly Yet. although the popular debate suggested a choice between Medicare's limited universalism or Kerr- M1lls's comprehensive means-tested program. be- hind the scenes chairman of the powerful Ways and Means Committee. Representative Wilbur Mills. along with Wilbur Cohen . under secretary of Health. Education. and Welfare (HEW) . and President Lyndon Johnson were working out a deal to make Kerr Mills. which they called Medicaid. a sup- plement to Medicare. Obviously. their plan hatched as both Medicare and Medicaid were enacted in 1965.3

While t~e 1964 Democratic landslide provided a large enough ma1onty to pass Medicare and Med1ca1d. there was a

divide at the start over what this dual adoption meant for the future trajectory of health care reform . Representative Wilbur Mills viewed the Medicaid supplemental strategy as a way to re· duce demand for universal coverage; by providing for -worthy" groups. Mills sought to stave off claims for broader health care coverage.4 In contrast. proponents of national health insurance (NHI) continued to view Medicare as an important first step toward universal coverage and Medicaid as a mere residual pro- gram that could be swiftly eliminated when NHI was adoptecf.l

Early Years: Medicaid's Institutional Design Is Established Although Medicaid was structured as a means tested tar- geted program. three crucial components of Kerr-Mills- the concept of the .. medically indigent." comprehensive benefits. and intergovernmental financing with a generous federal matching rate-were carried over into Medicaid and are the seeds to the program's expansion over t1me.6 Almost immediately after the program was passed, some liberal states viewed Medicaid as an opportunity to expand cover- age with federal funds. New York State was a pioneer in this regard. Using the medically needy prov1s1on. which included nonpoor people with medical needs. New York passed leg- islation in 196 7 to set the Med1ca1d income eligibility re- quirements at a level high enough to encompass almost half its residents. thus including not only the poor but also work- ing- and middle-class families New York's actions called into question the fundamental purpose of the newly created Medicaid program-should 1t serve only as a safety net for the nation's neediest citizens . or as a stepping-stone toward universal health care coverage? Federal legislators responded to this question unequivocally by passing an amendment in 1968 that capped income eligibility for Medicaid at 133% of the state-mandated Assistance to Families with Dependent Children (AFDC) eligibility line 1

Meanwhile. liberal reformers at the federal level focused their efforts on expanding Medicare. While logical. their com- plac~nc.y dashed the hopes of liberal states attempting to use Med1ca1d as a stepping-stone toward NHI. And. in so doing. ~ongress ensured that states would severely limit the expan· sion of coverage to citizens with incomes above state-defined cash assistanc.e levels. Thus. early on its history. Medicaid was clearly defined as "welfare med1cine."B

~~He the 1968 amendments tightened considerably the definition of medical indigency. it nonetheless maintained

the concept. which meant the program had the potential to expand again in the future. The 1968 statute also expanded a series of well-child benefits for poor children. creating the Early and Periodic Screening. Diagnostic. and Treat- ment (EPSDT) program. The practica l effect was to make the Medicaid benefit package even more comprehensive.9

The creation of the Supplementary Security Income (SSI) program in 1972 produced an enormous (though perhaps un- intended) expansion of Medicaid. It consolidated five sepa- rate state-run cash assistance programs for the aged. blind. and disabled into a single. federal means-tested program.10 Because SSI. unlike most means-tested benefits, is run as a nationally uniform program. a clear bifurcation among Medicaid beneficiaries was established. The elderly. blind. and disabled-who tended to be viewed sympathetically-gained Medicaid eligibility based on a federal eligibility standard . In contrast. with few exceptions. poor mothers and their children gained eligibility according to a (typically much lower) state eligibility standard.11

The Middle Years: Expansionary Logic of Medicaid's Design Despite these contradictions in Medicaid's early history. which created a policy legacy of Medicaid as a residual wel - fare program. Medicaid's expansiona ry seeds began to take hold during the 1980s and 1990s. Medicaid's structure of allowing state discretion over optional coverage. combined with comprehensive benefits and intergovernmental financ- ng. prompted a series of incremental eligibility expansions for families. the elderly. and disabled. which over time led to ma1or growth

Workillg Families Among the most significant changes during this period was the elimination of AFDC receipt as an eligibility requirement for poor single-parent families. Because AFDC eligibility was pnmarily limited to single parents with children. most unin- sured two-parent families-especially those in which an adult was working- were not eligible for Medicaid. These rules began to change in the 1980s. when it became more widely recognized that most uninsured child ren resided in working families. Led by Representative Henry Waxman (D-CA). the federal government passed a series of policies-first as op- tions and later as federal requirements- to expand coverage for children regardless of parental status or attachment to the

labor force. which ultimately led to coverage of many children in low-income families above the FPL.

The federal dynamics behind these expansions were im - portant. The federal government was responding to state demand-in the 1980s the National Governors Association (NGA) lobbied for expanded coverage for children-and the federal matching rate provided the incentive states needed to take up the offer. 12 Consistent with the logic of Medic- aid's institutional policy design. most Medicaid expansions began modestly as optional provisions where states could expand coverage to designated groups and receive federal matching funds but were not required to do so. Gradually. however. as more states adopted the expansion. the federal government converted optional coverage into a mandate. For example, coverage of pregnant women and infants up to I 00% of the FPL was a state option in 1986 but became a federal mandate in 1988. Similarly, coverage of children age I to 5 up to I 00% of the FPL was a state option in 1986. but the federal government mandated coverage of children up to age 6 at an even higher eligibility level-133% of the FPL-in 1989.13

The reason it was politically feasible for the federal govern- ment to convert optional coverage to mandates was in large part due to state demand. Because the majority of states had already expanded coverage under the federal option. a federal mandate meant no additional cost to these states .14 For ex- amp le. when the 1988 mandate was passed to expand cov- era ge to 100% of the FPL for pregnant women and infants. 76% of the states were already compliant. When this man - date was expanded again the following year to 133% of the FPL. 40% of states were still compliant. By at least initially allowing flexibility for state policymakers to shape their re- spective Medicaid programs . the federal government encour- aged states through financial inducements to take the lead on transforming Medicaid eligibility and then later demanded that other states follow suit. The federal funding match meant that although states publically complained about mandates. the vast majority of states began what came to be called a .. Medicaid Maximization " effort. 15 Quite simply, it became clear to states that it was cheaper to enroll many groups in Medicaid since the state was often paying for 100% of hea lth care expenses in their safety-net institutions. whereas even relatively wealthy states would receive a 50% federal match under Medicaid. All told . the targeted Medicaid expansions adopted from 1984 to 1990 increased the number of people

PART Ill • The Major Programs

receiving Medicaid benefits to 36 million in 1996. up from an average or 20 to 23 million between 1973 and 1989.'

6

Because these rederally initiated incremental expansions in the 1980s made states the leaders or an increasingly weak- ened link between Medicaid and cash "welfare" assistance. states advocated strongly under Clinton's welfare reform (Temporary Assistance to Needy Families [TANFJ) to sever this link completely so that they could (and did) simu ltane- ously retrench cash assistance w hile calling for an expanded Medicaid. In 1997. Congress passed the State Children's Health Insurance Program (SCHIP. now ca lled CHIP) that helped make Medicaid coverage expansions-separate from cash assistance-possible. When the window or opportunity opened in 1997 for a targeted coverage expansion due to the growing economy. elected officia ls decided to focus-just as they had in the I 980s-on groups considered most deserv- ing and cost-effective. namely uninsured children in working families

fhe mechanism was similar to the 1980s' expansions: The federal government. through CH IP. gave states the option to cover uninsured children in families with incomes higher than Medicaid elig1b1hty rates and with a matching rate even more generous than Medicaid (about 15 percen tage points high er on average). Sta tes can use CHIP runds to expand coverage under Med1ca1d. a separate program. or a combination. Be- cause 1t is administratively easier. the majority or states use funds to expand Medicaid or do a combined approach. Not surprisingly. and similar to the pattern in the 1980s. many states quickly took advantage or this new opportunity to ex- pand coverage.11 In the early years or SCHIP implementation . from 1998 to 2001. Medicaid and SCHIP enrollment grew by an average or 30% across the states. Enrollment declined in only three states over this time period a By 2006. the aver- age CHIP eligibility level was 220% or the FPL. and 1 1 states set ehg1b1hty above 300%.'9 When states devoted resources to changing Medicaid's public image and ease or entry (through public relations campaigns highlighting the program's ex- panded_ scope and through administrative reforms and sim- phf1cat1ons or the enrollment process). they were ab le to increase enrollment among working. uninsured Americans by significant amounts_20 Through Medicaid and SCHIP com- bined. 47% or all children were eligible and 28 ·11 · and lo h. . m1 ion poor

w income c ildren were covered in 2005_21

As many or the legislative architects of SCHIP had ho ed Med1ca1d coverage increased sign ificantly among childr! i~

families who do not receive welfare payments. By 2000. "forty percent or all low-income children were enrolled in Medicaid and SCHIP ... and two-thirds or these children hve in families with one or two rull-t1me workers." 22 Indeed. by 2007. about one in four people in 13 states were covered under Medicaid. and in another 14 states one in five people were covered. 23

Along with the de-linking or Medicaid from welfare as part of federal welfare reform in 1996. the creation or SCHIP was the most significant programmatic shift away from welfare medi· cine since the Medicaid program was enacted in 1965.

Long-term Care f or tile Middle Class These institutional components of Med1ca1d-state discre· tion. comprehensive benefits. and federal matching rates- also work to expand the program on the LTC side as well. Similar to that for pregnant women and children. Medicaid's role in financing services for the elderly and disabled individu· als also began to grow in the late 1980s and 1990s While Medicaid acted as the "supplement" Wilbur Mills env1s1oned demand for Medicaid 's supplemental services grew way be· yond what Mills or others predicted The concepts of "medi· ca lly needy" an d "comprehensive benefits" embedded in Medicaid 's enabling legislation were sufficiently elastic that Medicaid continually filled the gaping long·term hole. as no other state or federal program covers these costs. Medicare has never covered the costs of long-term custodial nursing home care. and relatively few Americans have been able or willing to purchase private LTC insurance during their working years. 24

_As early as 1970, Medicaid had already emerged as the primary p~bhc purchaser of nursing home care. Just 10 years later. Med1ca1d spending on nursing home care reached $8.8 ?illion. equal to all other private and public sources for nurs· mg ~ome care combined. 25 By the 1980s. it was widely rec· ogrnzed that Medicaid had become America ·s "de facto LTC program."26

Senior advocacy groups believed that Medicaid's means test was stigmatizing and degrading to the elderly and therefore fought to expand Medicare- not to new groups as advocates of NHI ha_d hoped-but by expanding the benefit package and reducing the out-or-pocket burdens on seniors The old pr~blem di scussed at the ti me of Medicare·s enactment- urnversal but limited benefits-came back to rear its ugly head_. Congress responded to senior demands in 1988 by pass ing the Medicare Catastrophic Coverage Act (MCCA).

which expanded Medica re's scope of services-prescription drugs. hospice and long-term hospital care-but also required all Medicare beneficiaries to pay specia l premiums pegged to income. Medicaid was mandated to pay the premiums for beneficiaries with incomes below the FPL. 27 While the MCCA was repealed just one year after its enactment. MCCA provi- sions requiring Medicaid to pay Medicare premiums for low- income elderly remained intact.28 Pol icymakers. advocates. and interest groups learned three crucial lessons fro m the failure of MCCA: First. despite Medicare's "favorable" poli- tics. the program was extremely difficult to expand;29 second . Medicaid would remain America's de facto LTC insurance program for the foreseeable future: third. and perhaps most important. governors and state legislators understood that the federal government would continue to ask states to share in the burden of LTC coverage for the elderly and disabled .Jo Indeed. in the 1990s Medicaid expenditures for nursing home care began to rise rapidly. By 1997. Medicaid nursing home expenditures reached $39.4 billion. representing almost half of all nursing home payments.

Many seniors in nursing homes are not eligible for Medicaid at the time of their admission. At an average cost of over $72.000 per year. J1 however. nursing home ca re quickly depletes the resources of all but th e most affluent seniors. Estimates vary on the number of elderly who transition from private pay to Medicaid in nursing homes. but most recent studies suggest that between I 0 and 16 percent of elderly nursing home residents begin their stay as private payers. ex· haust their resources. and convert to Medicaid. A surprisingly large percentage of elderly-more than one in four (27%)- are eligible for Medicaid on admission and continue eligible throughout their stay. Because community-based LTC serv- ices are also quite expensive, it is likely that a sizable number of frail elderly spent down their resou rces before they even entered the home.J2

As a result. because of the high cost of LTC. a significant proportion of elderly nursing home residents on Medicaid are not poor by typical "welfare" standards. Indeed. some spent their adult lives firmly in the middle class . States cover these "nonpoor" persons under either their "medically needy" pro· grams (34 states). which allow states to cover persons who have large medical expenses relative to their incomes. or un· der a special income rule called the "300% rule." in which 38 sta tes allow persons needing nursing home care to qualify with incomes up to 300% of the federally defined SSI level

($2 .022 per month in 2010).JJ Together. these two sets of pro- grams account for 88% of Medicaid's nursing home spending and 75% of total Medicaid spending on the elderly.34

This period also saw growth in Medicaid's disabled popu- lation . The definition of disability was expanded in 1999 by the Supreme Court case Olmstead u. L.C. The Court ruled that mental illness is a form of disability and must be granted protections under the America ns with Disabilities Act (ADA). This ruling impacted Medicaid in two ways. First, Medicai d coverage was made available to indivi duals with mental ill· ness. lead ing to a significant increase in the number of indi· viduals qualifying for Medicaid due to disa bility. Second. the ruling required state Medicaid programs to assume responsi- bility for financing community-based services for clients with mental illnesses. Traditionally, states assumed almost full fi. nancial and administrative responsibility for mental health services. Yet these new rulings , combined with Medicaid's institutional structure. opened the floodgate for states to max- imize Medicaid enrollment for all sorts of behavioral health care services-previously paid for with state-only dollars to leverage federal funds. 35

Taken together. these expansions in Medicaid coverage increased the number of beneficiaries to 33 million in 2000. up from an average of 20 to 23 million during the 1970s and 1980s. Medicaid spending rose rapidly as well.

Medicaid Today Medicaid's impact on the hea lth care system in the United States is enormo us. In 2008. the program provided health insurance coverage to approximately 60 million Americans .J6

The mid-20th-century strategic notion that Medicare limita· tions were a necessary but worthwhile compromise that could eventually take us to universal coverage was virtually lost by the turn of the 2 I st century. On the verge of health care re· form. three facts were clear: Medicare had not expanded as many progressives hoped; employer-based health insurance left ma ny workers without health insurance: and Medicaid had plugged the holes-not just for the poor but for middle- class fami lies as well.

Whe n health care reform passed in 20 I 0 as the ACA. Medicaid became an even more significant and perma nent structure in the US health care system . For the first time since Medicaid was enacted over 45 years ago. the program started providing the option for states to cover all low-income Americans (defined as less than I 38%J7 of the FPL or $30 .843

~~~~--===========~ :J:.~ Milli P\Rl Jll •The Major Programs f f ·

201 1) 38 While main- 35% ~-------------:32::0::--~I I

annual income for a family o our in . allows states taming its means-tested structure. the program . ·1 d 30% j__,,-=-:;:-;------------ to shed its previous incremental strategy that pn~1 egeM ~~~ I ans1on to certain groups considered more deserving. e c

~are's social insurance design seems like the best strat~gy to ~ 25% advocates in favor of insurance expansions .beca use of its. fa- :; vorable constituency politics: however. ~e~1care lacks inst1tu- 1 20% 11onal incentives for expansion. Medicaid, in contrast. solves oo concrete coverage problems confronting health an? budget ~ 15% policymakers on the ground across the SO states. It is a solu- :ii tion to pressing problems. and therefore expands-:--not due ~ 1 O% to mass mobilization but rather the subtle incentives of its a.. 1nst1tut1onal design.

The ACA builds on this expansionary logic. A means test of 138% of the FPL may not seem significant until 1t is viewed alongside real income levels across the American stat~s and the continuing implications of the 2008 Great Recession. It 1s common knowledge that as the economy worsens and un- employment increases. enrollment in safety-net programs like Med1ca1d will increase commensurately. Thus. given the dra- matic increases in unemployment since 2008. it is not surpris- ing that state Medicaid enrollment has increased significantly as well. For the United States as a whole, there was a nearly 14% increase in enrollment from December 2007 to Decem- ber 2009 While considerable. it pales in comparison to the radical impact in some states: 29% 1n Florida. 30% in Colo- rado , 33% in Maryland and New Hampshire. and a whopping 42% 1n Wisconsin. Indeed. I I states experienced more than a 20% increase in enrollment.39

The downturn in the economy 1s represented in pov- erty statistics as well. In 2009 an extraordinary 28% of the US population had incomes less than 138% of the FPL (see figure 9-1) Perhaps even more striking. nearly half of all Americans live at or below 250% of the FPL. Remember. in January 2008. 45 states set their SCHIP eligibility levels at or above 200% of the FPL.

Clearly, the continuing recession combined with huge state variations in income levels means Medicaid's shift to- ward m1ddle·class incorporation will be dramatic. Here's the point: First. when the federal government offers 90% of the cost to cover 1nd1v1duals who are currently uninsured and living under 133% of the FPL. 1t will be impossible for states to find a cheaper option and the financial inducements will be very hard to turn down . Second. following this logic , when most states do adopt the expansion. by 20 19, one in

5%

Under 139- 251- 400°~+ 138% 250% 399%

Percent Federal Poverty Level

figure 9-1 Percent of US Population Li\.ing under Various Levels of Poverty, 2009. Note: Based on The Kaiser I amil) l ·ounda11on, state healthfacts.org. Data Source: L rban Institute and Kaiser Commission on Medicaid and the ninsured estimates based on the Census Bureau\ March 2009 and 20 I 0 C urrent Popu lation Survey (CP : Annua l octal and Econ omic Su pplemcn ts, accc~sed M .i rch 21, 2013}

five people will be covered by Medicaid in I 7 states. one in four people will be covered by Medicaid in 16 states. and well over a third will be covered in Washington DC (see Figure 9-2). When Medicaid coverage reaches that deep into the population. it will be extremely difficult to deny its middle-class impact. And that is exactly why its politics has become particularly fierce .

THE POLITICS OF MIDDLE-CLASS MEDICAID

Interest Group Pressure and Public Support The major drivers behind Medicaid's expansionary politics are political demand from provider groups who consistently advocate for Medicaid reimbursement and a supportive public.

r:~~~~~~~~~~~~~~~~~~~~~~~~~C~H~A~P~T~E~R::...::9_·~l'v1.:.:.:::e~d~ic~a1~·d~: ~D~e~si~g~ne~d~t~o~G:::.:.::ro~w:.Ji1 .. i~iji~.__Jw

I

~ . / '~-'

% Population

0 10-14% 815-17% 018-21% 022-29% .30-43%

Figure 9-2 Projected Percent of Total State Population on l'vtedica id , 20 19 . .\'ote: Based on Holahan and Headen (20 I 0) projections of Medicaid enro ll me n t in 2019 under assumption that a ll states adopt the federal Medicaid expansion to 138% of the FPL and population projecti o ns from the Census Bureau 's Ma rch 2009 and 20 I 0 Current Population Survey (CPS: Annual Social and Economic Supplements). Ca lculated projected Medicaid enrollment asa percent of total population by state for 2019.

The nursing home lobby has been remarkably effective across the 50 states in maintaining Medicaid payments to institu- tional care for the elderly and disabled.40 Advocates for seniors have successfully lobbied states and the national government for more Medicaid coverage of home- and community-based care.4' and those who provide the bulk of primary-care serv- ices to Medicaid enrollees. so-called safety-net providers- community hea lth centers. public hospitals. and numerous nonprofit agencies-have gradually over the years secu red expanded Medicaid benefits and payments and expansions in infrastructure.42

Because Medicaid payments go directly to these provider groups (not to reimburse enrollees) . they all have a vested interest in maintaining Medicaid payments and benefits. Although Medicaid provider payments are notoriously low relative to rates paid by private insurance companies. nurs- ing homes. home-care providers. and primary ca re safety- net providers have a cost structure where Medicaid funds are not only desirable but also create financia l sustainability for most of these businesses.43 Indeed, when Texas and a dozen other states threatened to drop out of the Medicaid program when health care reform was passed in 20 I 0, chief among

11

11

opponents' concerns (aside from potential harm done to cur- rent and future enrollees) was the crippling effect such a move would have on the state's economy. In Texas alone. a million people work in the health care industry. and this was one of the few areas of iob growth between 2005 and 2009. Accord- ing to Tom Banning. chief execu t ive of the Texas Academy of Family Phys1c1ans. "the downstream economic implications (of eliminating Medicaid) for Texas' health care infrastructure

would be decimating."44

In addition to provider group pressure. the public's sup- port for Med1ca1d has always been high . In 1972. when asked whether spending for Medicaid should be increa sed . decreased. or stay the same. 53% of Americans supported an increase in spending. less than I 0% favored a decrease. ard 35% said stay the same. 45 During the expansionary pe- riod in the 1980s. from 1981 to 1990. support for expanding Medicaid spe'1ding increased every year-by the late 1980s more tha1, t>O% r' Americans supported increasing Medicaid spending (srr 1gure 9-3).46

Interestingly. questions regarding Medicaid support in national public opinion surveys changed after 1989. reflect-

ing broader public discourse focused on federal budgetary

politics. For the years 2008 and 20 I I. the Kaiser/Harvard Poll (2008) and the CN N/Oprn1on Research Corp Poll (2011) asked, "Thinking about the federal budget. do you want to see the next presid ent and Congress increase spending on Medicaid, the program that provides health insurance and long term care to low-income families and people with d1sab1lit1es,

decrease spending . or keep it about the same?" In response

to this question in 2008. support for an increase dropped to 34% . while suppo rt for a decrease went up to 11 %. with the rema ining 54% saying spending should stay the same As the

fiscal climate continued to worsen across the American states. there w as another shift rn support in 2011 with no change n percent supporting an increase (34%) . but fewer Americans wa ntin g spendi n g to stay the same (41 %) and more sup po rting a decrease in Medicaid (24%).4' Nonetheless.

whi le more Americans support a decrease. rt 1s important to

20% -r--------------------~ _............._ ,/-- ~~~-...:::::::::::~---LL ~ 10% -·----· 0%+:-~~~~~~t:=;==:j~~-,.~--,._jl=:::;==t,__

1972 1981 1986 198 7 1989 1994 1998 2008 2011

!-;:::~=-:=-~~~~---. ---Increase --+-Decrease --.-- St S ay ame - Don't Know/No Opinion

Figure 9.3 Public Opinion o n Medica id Spend in I .'io11rn:: I or year~ 1972, 198 1 1986 1987 . g, 972 20 I l. s.1'l\:nu111g for that program sh.o uld b . . ~~89. ABC News/Washington Post Polls Q . . 101 lhc poor. I-or yea rs 1008 d e mcre.,1sed , decreased , o r le ft abou t the sa . uesll? n -. Plea e tell me\\ hether you feel ,1hout thc fcden l budg~ d an 20 11 : Ka1ser/llarva rd Po ll 2008 · CNN/O .. me.R ... Mcd1ca 1d which provide:. free health care 11

. ' e • o you want to sec the . ' pm1on esearch Corp p II ">O l I tat rro~ 1de~ health ins ura nce and

1 next president and Congress increa d ' o · - . Question: Thinking

1t ahuu1 the same'' o ng- term ca re to low-income fami lies d se s pen mg o n · · . Medicaid the program · an people w nh disabTt ' d ·

,\ 11

1< Survey question ch· r 1 1

ies.. ecreasc spend mg. or keep · anges a ter 1989.

::=:--------------------------------------------------~C~H~A~P~T~E~R:.:....:..9_·~M.:..:..::.ed~i~c~ai~d~: =D~e=si~gn~e=d~t~o~G:::.::ro~w.:....Jll .. @J~y~.__,~

realize that even in this extremely fiscally distressed period. the vast majority of Americans (75%) support either an in- crease or maintaining Medicaid funding. And. when asked pointedly whether Medicaid should be cut to reduce the fed- eral deficit. a surprisingly high number (54%) were strongly opposed to this idea.48

A significant reason behind public support for Medicaid may have more to do with middle-class self-interest than middle-class support for helping poor people. The Kaise r Monthly Health Tracking Poll focused specifically on public opinions regarding Medicaid in May 20 I I. They found that "about half of Americans (5 I%) report some level of per- sonal connection to Medicaid." Consistent with health cover- age statistics. 20% report having received Medicaid coverage themselves. while the remaining 31 % report having a friend or family member who received Medicaid at some point. Not sur- prisingly. this personal connection to Medicaid is associated with strong support for the program. Among those who have ever received Medicaid benefits. 82% say Medicaid is very or somewhat important to themselves and their family. Among those with family or friends who have relied on Medicaid. over half (55%) say the program is important. In contrast, among those who have no experience with Medicaid. only 32% say the program is important.49 Despite policymakers. pollsters. and policy experts' repeated insistence on describing Medicaid as a health care program for "the poor." these surveys suggest that at least half of the American populace recognize Medic- aid's significant role for a broad range of American families. and this recognition is strongly related to Medicaid support.

Fiscal Politics and Medicaid's Explosive Expenditures A persistent debate for Med1ca1d has been its role in financ- ing LTC services in the United States. A few facts about Med- 1ca 1d financing will quickly illustrate the challenges states face. First. the long-term medical services that the elderly and disabled need are extremely expensive: While the elderly and disabled only account for about 25% of Medicaid en- rollees. they consume over 65% of Medicaid expenditures. Second. most of the cost of these LTC expenses are not mandated by the federal government but reflect discretion- ary spending decisions by the states. In particular. 60% of all Medicaid expenditures represent optional spending (see Figure 9-4). Importantly. the bulk of discretionary spending is directed at the disabled and aged where states spend a total

Optional Services for

Optional Groups 14%

Optional Services for

Mandatory Enrollees 19%

Figure 9-4 Total Spending by Optional versus Mandatory Services and Groups, 2007. Note: Based on data from Courtot, Lawton, and Artiga (20 12). U rban Ins titute estimates based on FY 2007 from MS IS and C MS 64.

I 9

of$ I 57 billion compared to $56 billion mandated by the fed- eral government for these groups (see Figure 9-5). While the fede ral government mandates the bulk of spending for chil- dren (85%). this rela tionship is reversed for the aged where state policy decisions consu me 85% of expenditures for this group (see Figure 9-6).so

Thus. whi le states feel t he extraordinary costs of LTC services on state budgets. they also feel political pressure to maintain Medicaid coverage for these services, and this creates numerous political challenges. On the one hand. the deep reliance of the elderly on nursing home coverage en- courages politicians to offer mainstream families ever greater protections and economic security. LTC policymaking is an- other example of Medicaid bipartisanship. All states except two (Indiana and Missouri) use federal options (300% SSI or medically needy program) to expand access to LTC for the elderly. There is no correlation .51 for example, between state party control and adoption of the 300% rule. which substantially expands access to Medicaid for seniors. On the other hand. elected officials are deeply troubled by the use of Medicaid as a vehicle for protecting the assets of

r.__--i<11fl•gf .. ji.-~P~\~R~l:-::ll7l-·~T~h~c:M;a~j:o~r~Pr:o:g:ra~m:;s----------------------------~-=====================~====::== 140

(II 120 c ~ iii

100

ci 80

43.7 1---------i

subsidized by the state. Yet. 1f subsidizing familial care would ultimately help keep the elderly and disabled in their homes. this seems like a reasonable financial investment. In sum. de- spite ever-rising LTC costs. there is a persistent tension over whether to expand or restrict various aspects of Medicaid's

LTC role.53 )(

w "O

·~

~ ~

60

40 54

68.8

Consequently. state governments are constantly looking

] for creative ways to reduce LTC costs 54 State governors have been promoting alternatives to inst1tut1onalizat1on since the ! early 1970s mainly by relying on Medicaid waivers to increase

..i-_L~....L~_1..---1._--.__. __ .__,--.---'--l use of home- and community-based services (HCBS) 55 As a 20 -

0 Children Adults Disabled Aged f result. home health care use has increased dramatically since

Eligi b le Groups i the 1970s. and. not surprisingly expenditures followed suit lo optional Spending o Mandatory Spending I~· Payments increased 250% from 1975 to 2003 .5b To the great Lu' disappointment of polit1c1ans and federal and state budget

fl re 9 5 Optional versus Mandatory Spending by C'i1 oup, 2007. \otc Based on data from Courtot, Lawton, and A rtiga !20121. Urban ln\lltute e~timates based on FY 2007 from MSIS and CMS 64

Cl 100-r--r--....--..---..----,..---..---.--.--. - c 15% ~ :g 80 85% 37% 33% - - 8. 60 -o en - "O ~ 'iij 40

t ~ 20 Cl. 41

85% 67% 63%

officials. however. this increase in home care use has not resulted in significant Med1ca1d savings The hope was that home- and community-based care options would allow elderly with chronic illnesses to live in the community indefinitely and avoid institutionalization altogether Yet while there are indications of improved quality. most studies suggest that this hope for lower costs was not always realized 57 Indeed. the share of Medicaid LTC spending in home- and community- based settings more than doubled. from 19% in 1995 to 42% in 2008.58 In 2007. there were 270 federally approved HCBS

l waiver programs distributed across the United States Today. J the vast majority of persons (82%) in need of LTC services j and covered by Medicaid reside in the community. ~

Children Adults Disabled Aged ~ MED I CAID -=--=---El_ig_ib_le_G_ro_u_p s ___ ~; PARTISANSHIP A D

:i: 0 ;----..... -'----'-~.L--...1.,_~-_J,_J

D Optional Spending 0 Mandatory Spending H INTERGOVERNMENTAL ~igure_ 9· Percent Optional versus Mandatory TENSION Spending by Group. 2007.

~1111~ B,"cd on data from Courtot, Lawton , and Artiga ( ~0.1 ~.I Urban Institute estimates based on FY 2007 from ~!SIS und C.MS 64.

relatively well-off people. and rhetorically policymakers will complain about the middle class "abusing" Medicaid.52 The issue of home care and innovations has similar dilem- mas. For example. many governors oppose providing pay- ment vouchers to family caregivers because there is a stron belief that caregiving should be a familial obligation and no~

Over the past several decades. as states expanded Medicaid coverage. they have increasingly advocated for more nex1bility

to structu.re. ~he ~edica1d program to meet state preferences Such !lex1bd1ty, including greater ability to define eligibility

~enef1ts. reimbursement. service delivery. rights of appeal. financing. and administration. has been a key objective of proposals supported by the NGA Sometimes flexibility is dis-

cussed as desirable under block grants. but more often states prefer Medicaid's generous federal matching rate a1ong with federal waivers wh'ich ·d . . . . · prov1 e more d1scret1onary state-level dec1s1on making.59

The Backstage Politics of ACA Medicaid Expansion Indeed. this tension over financing and flexibility was at the heart of the state lawsuits against the ACA. After health re- form was passed in 20 I 0. the attorneys general from 20 states io1ntly filed a lawsuit in the Florida US District Court. and the Commonwealth of Virginia filed in a Virginia federal court. claiming that the ACA is unconstitutional. These lawsuits pri- marily focus on the individual mandate. which the Supreme Court ruled constitutional; however. one of the four main legal challenges concerned the federally mandated Medicaid expans1on .60 This challenge claimed that ACA was in viola- tion of states' rights (and was "coercive ") beca use the new Medicaid expansions impose massive financial burdens on the states. The federal government countered that Medicaid is an optional program. states are under no requirement to par- ticipate. and the federal government is picking up the vast ma- JOrity of the costs associated with the expansion . In response . the plaintiffs argued that states have become so dependent on Medicaid that it is no longer practical to call state participa - tion optional.61

The Supreme Court ruled in favor of the states on this ques- tion of coercion and fina ncial burden. While th e cost of the mandated expan sion itself was not large for the states. the plaintiff's claim and the Supreme Court ru ling focused on the fa ct that states would lose all of their Medicaid fu nding if they did not adhere to the expansion . It was the federal pen- alty of losi ng all Medicaid funding that was viewed by the ma- iority in the decision as coercive. Th us. the Court ruled that the federal government could only allow states the option of expanding the Medicaid program with a federal financial in- ducement but could not mandate state expansions.

At first glance. the Supreme Cou rt decision may be viewed as policy retrenchment. regardless of one 's position on its constitutionality. Yet further inspection reveals that optional coverage has been amazingly effective at expanding sta te Medicaid programs. Currently, only 40% of total Medicaid expenditures are mandated by the federal government (see Figure 9-3) . Thus. the maiority of states' financial woes are due more to state-level political pressure and discretionary decision making than to following federal requirements.

Indeed. neith er the cost of Medicaid to a state nor the proi ected financial burden of the Medicaid expansion on a state had anything to do with which states joined the

lawsuit. Few state politicians. especially conservatives against this expanding entitlement. understand the allure of generous federal financi ng-even when it is attached to optional cover- age. Thus. it is not surprising that partisa nship drove whether states joined the lawsuit; all but two lawsuit states had Re- publican governors. 62

Yet. despite th is front-stage partisan divide over the ACA Medicaid expansion . behind the scenes states continue to seek federal assistance-all bu t four states have received in- frastructure planning grants from the federal government since 20 I 0. It defies Republican Tea Party political rhetoric. but for most mainstream Republicans the funding is often too difficult to turn down .63 For example. the initial reaction to the Supreme Court decision ruling the Medicaid expansion an option for states was predictably along party lines with Re- publican governors saying they would not expand Medicaid and Democratic governors saying they would move quickly to expand coverage. Yet. less than a month later when the governors met for their annual meeting. they were much more reserved in their assessment of how best to proceed. Chairman of the Republican Governors Association. Governor Bob McDonnell of Virginia. did not rule out the possibility of expanding Medicaid: " Honestly, I don't think it's respon - sible for my state. fu lly. to make the decision now." 64 Even Republican governor Scott Walker of Wisconsin, who recently won a recall election based in part on an anti-Obamacare plat- form. was sim ilarly am biguous about the idea of expand ing Medicaid: "We're not ruli ng it one way or the other."65

Indeed. despite the front-stage anti-Obamacare rhetoric. all of the initial 2 I states that submitted ACA lawsuits were also immediately engaged in implementation.66 Texas . for example, did not just comply with federal requirements. Over a two- year period. from 2009 to 20 I 0, its cumulative grant awards from the federal government totaled nearly $5 billion-third only to California at $9 billion and New York at $ I 0 billion .

just behind Texas was Florida. another major "antigovern- ment-spend ing" state whose Republican governor proclaimed that he does not "want to waste either federal money or state money on something that's unconstitutional " and did not apply for gra nts in 201 1, but Florida quietly received nearly $4 billion under the American Recovery and Reinvestment Act (ARRA) for its Medicaid program.67 In total . the federa l government gave out $75 billion in ARRA grants to state Medicaid programs. 68 There are numerous grant programs for the states under ACA. all with the intent to improve the

states' capacity to meet ACA provisions in 2014 and beyond. For example. seven states were awarded $241 million in 20 I I to develop IT systems for coordinating their Medicaid and ex-

change infrastructure. 69

These grants. it turns out. were exactly what the states asked for In the NGA's testimony to Congress during the health reform debate in June 2009, the Executive Direc- tor Raymond Scheppach argued that if Medicaid's categori- cal elig1b11ity distinctions were going to be eliminated. then a number of supports would have to be put in place. In particu- lar. among a long list. the NGA argued for an increased federal matching rate and significant additional grants to build ca- pacity.70 Not surprisingly, then. states are actively maximizing federal funds Front-stage fighting along with backstage coop- eration has been a long-term trend in state Medicaid policy because at the end of the day it has always made fiscal sense for states to leverage federal funds. 71

Block Grant Politics Another key partisan debate at the federal level has focused on changing Med1ca1d"s financing structure from a matching rate to a federal block grant. Ever since the Reagan admin- 1strat1on first proposed block granting Medicaid in 1981. Re- publicans in Congress have advocated for this reform. with Democrats adamantly fighting against it. When Republicans have control in Congress. a Medicaid block grant proposal in- evitably becomes a priority on the policy agenda. Examples include a block grant proposal under the Gingrich Congress in I 994. the Bush adm1nistrat1on in 2005. and now again un- der Representative Ryan's plan to reduce the federal deficit. 12 Thus. the recent Medicaid block grant proposal is part of a larger and longer theme.

It ts presented at the federal level as an easy fix to the seemingly uncontrollable increase in Medicaid expenditures because under this structure the federal government would prospectively limit the amount of federal funding provided t the states From the states' perspective. however. givin u o favorable open-ended federal matching funds for a ca;pe~ amount is obviously a huge concern. Given this concern Re- publicans typically highlight the flexibility that wou ld . with block grants Of come 1

· course. states welcome flexibility as ong as they can secure an adequate amount of grant funding.

Indeed. part of the reason federal block have consistently failed-even under Re blgrant proposals becaus bl k pu ican control-is

e oc grants present tricky political dilemmas for the

states. In support of party ideology. Republican governors are typically outwardly supportive of block grant proposals. but behind the scenes. there 1s reluctance due to the fixed budget that block grants represent and concerns that state Medicaid expenditures will not be covered .73 This is what happened in 1997 under the SCHIP leg1slat1on . To understand the poli- tics of block grants. it 1s important to take a brief look at the

SCHIP experience. 74

When the federal government passed SCHIP in 1997. it was touted as enjoying broad b1part1san success At the time. however. behind the passage was a clear partisan de- bate about whether SCHIP should be structured as a block grant. Democrats opposed the block grant. fearing states would not have adequate funding to cover uninsured children and that children would not receive needed benefits offered by Medicaid. In contrast. Republicans favored the block grant approach because the flex1b11ity allowed would encourage states to innovate with private insurance approaches to cover- ing this expanded group. Ten years later when SCHIP was up for reauthorization. partisan differences were again front and center. but the party positions had flipped from enactment to reauthorization. Now. Republicans opposed state flexibility. It was no longer primari ly about block grants as a tool to provide states greater flexibility and stimulate innovation but about fundamental disagreements regarding health care reform and the role of government. In the Bush admin1strat1on's own words. opposition to the Democratic reauthorization pro· posal was "philosophical and 1deolog1cal." Foreshadowing the health care reform debate and the ACA aftermath. the admin- istration and congressional Republicans saw the plan as "big government." _an d Senator Tom Coburn (R-OK) reported that ~he Demo:rat1c plan was "part of an effort to bring everyone into a socialized health care system ."75

While these statements were 1mt1ally more focused on the ~emo~rats' attempt to expand SCHIP under the reauthoriza- tion bill. over time-during the summer and into the fall of 20~7_-Republican concerns focused on state-implementation act1v1ty. Republican proposals called for three main changes in th~ "".'ay states could run their SCHIP programs· (I) federal re- ~tnc_ti_ons so states could not extend coverage to middle-class amll 1es: (2) a recategorization of SCHIP's intended target po~ula~ion to only uninsured children. and (3) a centrali- zation in program d · that f

.t . h esign to steer states back on to a path 1 wit Republ" ·d 1 . · . ican 1 eo og1cal preferences for private

insurance Obviously II th d 1

· • a ese concerns emerged as states eve oped programs at odds with Republican beliefs. Gone

= was any rhetoric concerning block grant flexibility and states' nghts: instead the focus was on how the "proper" role of gov- ernment could be secured.

Clearly. these fundamental disagreements about the role of government in health care reform lay underneath the block grant debates in 1997. However, the willingness of block grant proponents to support restrictions on state flexibility illus- trates just how fleeting partisan commitments to block grants can be. Instead of a true commitment to particular federal- state policy arrangements. support for block grants-from either political party-stems from the degree to which block grants promote the party's image of the appropriate role of government. Although block grants are more likely to sup- port notions of limited government preferred by Republicans. the SCHIP case illustrates how Democrats are just as likely to champion state flexibility when states are moving in their pre- ferred policy direction.

Indeed. in 2007. congressiona l Democrats were quite pleased with the direction in which states had taken their SCHIP programs. Gone were their concerns about restrictive funding and state retrenchment. The expansions were con- sistent with Democratic beliefs in expanding health-insurance coverage to needy families, and their definition of needy ex- tends comfortably into the middle class. 76 Yet Democrats rarely stated their ideological preference for the expansion of public insurance to the middle-class families. Rather. they of- ten stated their position as one aligned with federalism and the granting of state flexibility. Testimony at a congressional hearing from the executive director of the National Academy for State Health Policy. Alan Weil, stated the liberal preference

CHAPTER 9 • Medicaid: Designed to Grow MU for state actions as "a good example of 'cooperative federal- ism' ... The tremendous success and bipartisan popularity of this program is directly tied to its flexible. federal structure. Efforts to remake the program with a different vision run the risk of undermining the federal-state partnership that has al- lowed it to thrive." 77

Since federal party positions depend on state actions, Dem- ocratic com mitment to states having a major role is also short lived. While Democratic preferences were consistent with the direction states were going in 2007. that was before the 2008 financial collapse. In response to the fiscal crisis. many states began to restrict Medicaid eligibility, and the Democratic Party position regarding state flexibility shifted as well. Obviously, the ACA-mandated Medicaid expansions are a far cry from state flexibility under block grants.

And . similar to Congressman Paul Ryan 's (R-WI) block grant proposal today, the Republican position in 2007 ar- gued that government-funded SCHIP should be a narrowly targeted means-tested program for poor uninsured children. whereas middle-class families should receive a tax credit to purchase private health insurance. In 2007 and again in 20 I I. Republican block gra nt proposals touted state flexibility. but written into the proposal is a clear partisan preference for how Medicaid programs should be structured. Block grants have always been political. However. under the heightened ideological politics that defines Medicaid today. block grant proposals-and the debates surrounding them -will have little to do with state flexibility and all to do with specify- ing either restricted welfare medicine or an expanded middle- class entitlement.

CONCLUSION: LESSONS FROM MEDICAID'S MIDDLE-CLASS ROOTS Understanding how Medicaid evolved over time is crucial for grasping how a program described as "only for the poor" became a middle-class entitlement. The three expansion- ary seeds embedded in Medicaid's beginnings-medical mdigency, comprehensive benefits, and intergovernmental financing-have pushed this program in ways no one quite envisioned. But it is really the larger health care system in

the United States that has always left a sizable group of un- insured Americans knocking on states' doors. elderly and disabled Americans with no other program to cover their needs, and a federal matching rate that provides significant incentives. and now responds to economic downturns. that has repeatedly pushed states toward Medicaid-even when governors really do not want to go in that direction.

Many governors argue that LTC. at least for the eld- erly. should be shifted to the federal government. They have consistently argued that LTC for the elderly is ap- propriately a federal responsibility because the federal government runs the Medicare program. Some point to the Medicare prescription drug bill. which shifted Med- icaid prescription-drug costs for the elderly to the Medi- care program. as hope that the federal government will continue to expand coverage to include all the services needed by the elderly. Yet members of Congress are complaining bitterly about the enormous costs of the Medicare prescription bill. and it is just a drop in the bucket compared to what LTC costs would be. The cost factor makes this hope seem particularly futile at least for the near future. Moreover. it is important to realize that the significant increase in LTC costs comes from the disabled population-many children of lower- and middle income families-which no one has argued is appropriately a federal responsibility. But. most impor- tant. Med1ca1d has expanded too much for even a big change like that to fundamentally change the program.

While political rhetoric about Medicaid and the ACA today touts a dramatic departure from the past-a govern- ment takeover and socialized medicine-in fact. m1ddle- class reliance was there from the beginning and has been gradually growing over several decades. It 1s not a dra mat1c departure. but these incremental expansions add up to dramatic change. The politics of Medicaid today will be difficult to unwind pre~isely because the program already touches so many Americans. At various times. Democrats have invoked Medicaid's middle-class entitlement status rn efforts to drum up support for the program and usu- ally to stave off Rep~blican efforts to retrench For exam- ple. Clinton used this fram;ng during the 1995 M d' deb t 1a H e 1grant

a es. . owever. more often than not. Democrats at- tempt to hide Med1ca1d's middle class reach cla· . stead that the program only covers low· inco~e A';;~~a'~~ who are in need. While it is true that families who Med1ca1d el1g1b1lity thresholds have low . . . meet t h h incomes. it is also

t~~e~ 1~~l~ ;~er:~~-~~ct~~~~:i~~~~e~~~r~~gu~~~~~ntly into is :~~sD~h~~~~al tpsudzzle. givenbtheir ideological preferences.

0 not mo 1lize m1ddl I en ts around the Med' 'd e-c ass const1tu-

1ca1 program. They seem afraid of

the Republican retort that this was never the intent of the Medicaid program. For example, an Associated Press story revealed that ACA provisions allow many middle-class reti· rees . who receive Social Security early at age 62. Medicaid coverage because their Social Security income would not be counted in eligibility determinations. This means that "a married couple could have an annual income or about $64.000 and sttll get Medicaid ... Republican response to the story. which was titled .. Health Care Quirk Grants Middle-Class Med1ca1d." was 1deolog1cally predictable: Former Utah governor Mike Leavitt said. "It clearly begins

to reveal that the nature of the law was to put more and more people under eligibility for government insurance"

In contrast. the Democratic response did not fit the party's ideological stance Instead of arguing that the pur- chase of affordable private health insurance IS particularly difficult for persons in this age group even among those making $64.000-Health and Human Services spokesman Richard Sorian responded. "We are concerned that. as a matter of law. some middle income Americans may be receiving coverage through Medicaid. which is meant to serve only the neediest Americans."

Dem_ocrat~ consistently attempt to hide the program's expansion with the hope that this hidden politics will allow for additional expansions That strategy worked through the

1980s and 1990s. but the strategy successfully transformed the program into a middle-class entitlement. and now that tra_nsformation demands a new poht1cs of middle-class mo·

bihz~tton. The program's reach is conspicuous to poht1c1ans and interest group stakeholders ( e g .. states. provider groups). and in this light. the Democratic strategy to hide Medicaid's expansion seems foolhardy at best and dangerous at worst For if Republican proposals to block grant Med1ca1d succeed. a large group of Amencans will lose Medicaid coverage That

~111 be ok as long as Americans prefer that option. Th~ fear. owever. is that a popular program will suffer because no one

~rd~~ political party) will make the case for it as America's e-class entitlement; that failure to defend a popular

t phrogrtahm whould be a serious crime against democracy If on

e o er and M d ·d· · · lo . r ... ~ 1ca1 s structure remains intact. then the an~~~i~g Me~ca1d ~institutional design will likely prevail-if continue. t~npantce by the ACA Health care problems will

u pressure on the state d . spond in the time-h s. an states will re·

onored way-by running to Medicaid'

STUDY QUESTIONS - --

t. What are three different views of Medicaid?

2. What are some reasons for increased Medicaid expenditures in the early years of the program?

3. What is one big reason it can truthfully be said that Medicaid is not Just a poor peoples' program?

4. Does Medicaid provide any home- or community-based long-term care outside of long-term care facilities?

S. What has been referred to as " Medicaid Maximization?"

6. How does the author think that SCHIP played a part in severing the link between Medicaid and cash assistance programs?

7. What are some mechanisms conservatives propose to use to limit Medicaid spending?

8. Why does the author think that Democrats do not highlight and in fact attempt to hide Medicaid's expansion into the middle class?

ENDN OTES I. Kaiser Family Foundation. 2012a.

2. Kaiser Family Foundation. 20 I Oa. 2011 c.

3. Blumenthal and Merone. 2009.

4. Patashnik and Zelizer. 2001: Blumenthal and Merone. 2009.

S. Stevens and Stevens. 1974.

6. Grogan and Patashnik. 2003a.

7. Ibid.

8. Stevens and Stevens. 197 4.

9. Rosenbaum and Sonosky. 1999.

Io. Quadagno. 1988. II. Watson. 1995.

12. Smith and Moore. 2008: Olson. 20 I 0.

13. CRS. 1993. p. 36; Coughlin. Ku. and Holahan. 1994. pp. 48-51.

14. Grogan. 1994 .

IS. Grogan and Smith. 2008: Allard and Smith. 2011; Buck, 2011.

16. Melnick. 1999. p. 31.

17. Kaiser Family Foundation. 201 le.

18. Mann. Rousseau. Garfield. and O'Malley. 2002.

19. Grogan and Rigby. 2009.

20. Ross and Cox. 2002.

21. Ibid.: Seiden. Hudson. and Banthin. 2004.

., ~~~~---==========::= .:..~. g P\R 1 111 • The Major Programs G f Id and O'Malley 2002. P· I.

22. Mann. Rousseau. ar ie . . , . . ·//www statehealthfacts.org/compa rebar JSp?ind=877&cat=I 23. See Henry J Kaiser Family Foundation Web site. http. .

(accessed on July 24. 20 I I).

24, Konetzka and Luo, 20 I I.

25. Olson. 2010 26. justice, Etheredge. Luehrs. and Burwell, 1988.

27. Oberlander 2003

28. Himelfarb. 1995.

29. Oberlander. 2003.

JO. Grogan and Patashnik. 2003a. JI. Actual! , this is a lower-end estimate since it is based on $198 pe~ day for a semiprivate room in a nursing home.

for a p~vate room the average cost is $219 per day. Statistics obtained from US Department of Health and Human Services Web site. on long-term care: http:l/www.longtermcare.gov/ LTC/Ma1n_S1te/Paying_LTC/Costs_or_Care/ Costs_ or_ care aspx (accessed on July 25, 20 I I).

32 Spence. 1990; Spillman. 1995 .

3 Kaiser family Foundation, 2011 c.

4 Kaiser Family Foundation. 2003

3 Coughlin and Zuckerman. 2002: Mark. Levitt. Vandivort-Warren, Buck. and Coffey. 2011.

6. Centers for Medicare and Medicaid Services (CMS). 2008.

37. The ACA establishes a new national minimum at 133% of the FPL with a standard 5% income disregard. Combined . these raise the federal l1mitto 138% of the FPL, which will be fully implemented by 2014

38. US Department of Health and Human Services. 20 I I : Kaiser Family Foundation . 20 I I c.

39. Data retrieved from Henry J. Kaiser Family Foundation Web site under heading "%Change in Enrollment. Dec 07 to Dec 09." They cite the following sources: Compiled by the Health Management Associates from state Medicaid enrollment reports for the Kaiser Commission on Medicaid and the Uninsured . 20 IO. For more details on the December 2009 enrollment data. please see Kaiser Family Foundation. 20 I Oc

40. Sparer, 1996: Olson. 20 IO.

41. Grogan. 1994: Olson. 2010.

42. Mickey, 2012. Hall and Rosenbaum. 2012

43. Swan et al .. 2000: Modern Healthcare. 2002: Fornili and Alemi. 2007. 44. Ramshaw and Serafini. 20 IO.

45 "State of the Nation 1972" survey by Potomac Associates. Methodology: Interviewing conducted by Gal up Or- ganization during May 1972 and based on 669 personal interviews. Sample: National adult. Retrieved from http: webapps.ropercenter.uconn.edu

4 6

· ior the years I 9 81

· I 986. 1987. and 1989 · ABC News/Washington Post polls. Question: Please tell me whether you eel spending for that program should be increased. decreased. or left about the same f h I h r .• Medicaid . which provides ree eat care 1or the poor. Retrieved from http:l/webapps.ropercenter.uconn.edu.

= CHAPTER 9 • Medicaid: Designed to Grow I@

41. In 2008 and 201 I. 1% said they did not know.

48. ABC News/Washington Post poll. July 2011. based on 1.01 1 telephone interviews (included landline and cell phone- only respondents).

49. Kaiser Family Foundation. 20 I I c.

SO. Courtot. Lawton. and Artiga. 2012.

SI. Pearson correlation 1s -0.07. Calculated by author.

S2. Grogan and Patashnik. 2003b; Quinn, 1993.

S3. Thompson and Diiulio. 1998: Grogan and Andrews. 2011: Olson. 20 I 0.

S4. Grogan and Smith. 2008

SS. Abdellah. 1978; Greene. Lovely. and Ondrich 1993; Thompson and Burke. 2009.

S6. Grogan and Smith. 2008

51. Abdellah. 1978: Kemper. Applebaum. and Harrigan, 1987: Kemper. 1988; Greene. Lovely, and Ondrich. 1993.

SS. Kaiser Family Foundation. 20 I I c.

S9. Thompson and Burke. 2009.

60. Cauchi. 20 I I.

61. Perkins. 20 I I; Mariner. 20 I 0.

62. Gubernatorial party control and joining the lawsuit are correlated at .8, whereas projected increase in state spending due to ACA expansions is correlated at .15. Calculated by author.

63. Jones. Bradley, and Oberlander. 2012.

64. Cooper. 2012. p. A 17.

6S . Ibid.

66. Sack. 20 IO.

61. Sack. 20 I I.

68. See Henry J. Kaiser Family Foundat1on·s www.statehealthfacts.org under Temporary Federal Medicaid Relier (accessed July 201 I).

69. USDHHS. 2010b.

70. National Governors Association. 20 I I.

71. Grogan and Patashnik. 2003a. pp. 821-58.

72. Thompson and Diiulio. 1998; Grogan and Patashnik. 2003a; Smith and Moore. 2008; Grogan and Rigby. 2009: Olson. 2010.

73. Smith and Moore. 2008; Grogan and Rigby. 2009.

14. This section draws heavily from Grogan and Rigby. 2009.

7S. Pear. 2007a.

76. Ibid.: Dingell, 2007.

77. Weil. 2007

78. Grogan and Patashnik. 2003a.

!d~I~.~ ~7~ ~:-~~ C"e Polky '".";~!,'~"'"'';"'' to lnstitotion•I C•re .. Annals of the Am.,ican Acad<m1 of Political and Social Science 4~8 Uuly).. . F d. f S c1al Service Organizations." Under revise/resubmit,

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Greene, V L . M. E. Lovely. and J I Ondrich 1993 "Do Community-Based. Long-Term Care Services Reduce Nursing Home Use? A Transition Probability Analysis,'· journal of Human Resources 28(2): 297-317.

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Grogan. C.. and E. Patashnik. 2003b (March). "Universalism within Targeting: Nursing Home Care, the Middle Class. and the Politics of the Medicaid Program." Social Service Review 77( I): 51-71.

Grogan. C.. and E. Rigby. 2009. " Federalism , Partisan Politics. and Shifting Support for State Flexibility: The Case of the U.S. State Children's Health Insurance Program" Publius: The journal of Federalism 39: 47-69.

Grogan. C., and V. Smith. 2008. "From Charity Care to Medicaid: Governors. States. and the Transformation of American Health Care." In E. Sribnick. ed. A More Perfect Union. Philadelphia: University of Pennsylvania Press.

Hall. M. A., and S. Rosenbaum. 2012. The Health Care "Safety Net" in a Post-Reform World. New Brunswick, NJ: Rutgers University Press.

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Holahan. J .. and I. Headen. 20 I 0. Medicaid Coverage and Spending in Health Reform. Washington. DC: The Henry J. Kaiser Family Foundation.

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Kaiser Family Foundation. 2003. "Medicaid: Fiscal Challenges to Coverage." Data obtained from Urban Institute estimates. 200 I.

Kaiser Family Foundation. 20 I Oa. Medicaid: A Primer. Retrieved from http://www.kff.org/medicaid/upload/7334-04.pdf on January 20. 2012.

Kaiser Family Foundation. 20 I Ob. Medicaid Financial Eligibility: Primary Pathways for the Elderly and People with Disabilities. Kaiser Commission on Medicaid and the Uninsured. Analysis of data collected by Medicare Rights Center. 2009. February 20 I 0. Retrieved from http://www.kff.org/medicaid/8048.cfm

Kaiser Family Foundation. 2010c. "Medicaid Enrollment: December 2009 Data Snapshot." Retrieved from http://assets. bizjournals.com/cms_media/southflorida/pdf/Ka1sero/o20Medicaid%20report.pdf.

Kaiser Family Foundation. 2011 a. "CHIP Enrollment: December. 20 I 0 Data Snapshot." Retrieved from www.kff.org/ medicaid/7642.cfm on January 20, 2012.

Kaiser Family Foundation. 2011 b. "CH IP Enrollment: December 20 I 0 Data Snapshot." Retrieved from statehealthfacts. org/comparemaptable.jsp?ind=217&cat=4 on January 15. 2012.

Kaiser Family Foundation. 201 lc. "Medicaid and Long-Term Care Services and Supports." Retrieved from www.kff.org/ medicaid/upload/2186-08.pdf on July 20. 20 I I.

Kaiser Family Foundation. 2011 d. "State Health Facts: Total Medicaid Spending, FY 2009." Retrieved from http://www. statehealthfacts.org/comparetable.jsp?ind= I 77&cat=4 on March 2, 2012.

Kaiser Family Foundation. 2011 e. "State Health Facts: Enhanced Federal Medical Assistance Percentage (FMAP) for the Children's Health Insurance Program (CHIP)." Retrieved from http://www.statehealthfacts.org/comparetable. jsp?cat=4&ind=239 on March 2. 2012.

I 11

""'=-'-,18 ... f•$~jl.-~P~\~R~T;:ll~l~•~T~h:e~M~~:-o:r~P~r~o~g~ra~m~s;-~~~~~~~~~==================~~~~~~~====~~=::= ~

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kff org/medicaid/upload/8046-02 .pdf on March 2. 20 I 2. . M Kemper. p 1988_ "The Evaluation of the National Long Term Care Demonstration. I 0. Overview of the Frndmgs Health

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1169- 1183 . Mann, c . D. Rousseau. R. Garfield. and M. O'Malley. 2002 Uune). Reaching Uninsured Children through Med1ca1d If

You Burld ft Right. They Will Come. Washington. DC: Kaiser Commrssron on Med1ca1d and the Uninsured .

Manner, 2010.

Mark. T. K. Levitt. R. Vandivort-Warren, J. Buck. and R. Coffey. 2011. "'Changes in US Spending on Mental Health and Substance Abuse Treatment. 1986-2005. and Implications for Policy ... Health Affairs 30. 284-92.

Marmor. T R 1973. The Politics of Medicare. New York: Aldine.

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Mickey. R. W. 2012. "Dr. StrangeRove; or. How Conservatives Learned to Stop Worrying and Love Community Health Centers:· In M. A. Hall and S. Rosenbaum. eds .. The Health Care "Safety Net" in a Post-Reform World. New Brunswick. NJ: Rutgers University Press.

Modern Healthcare. 2002 (May 22) . "States Protect Medicaid But Not Providers .. Retrieved from http·//www modern healthcare. com/a rticle/20020522/N EWS/205 220305/states-protect-med ica id. but. not. providers- report

on June 21. 2013 .

Natrona! Governors Association . 2011. Health Reform Implementation . Washington, DC: Natrona! Governors Assoc1at1on (database online). Retrieved from http://www. nga.org/cms/render/live/en/sites/NGA/home/ health-reform-implementation.html in July 20 I I.

Oberlander. J. 2003. The Political Life of Medicare Chicago: University of Chicago Press.

Olson. L K. 2010. The Politics of Medicaid. New York Columbia University Press.

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Pear R. 2007a. "A Battle over Expansion of Children's Insurance ... The New York Times. July 9

.

Perkr~a!h~~o:~:~.Ri~~~:;~~:~~~~~~~:1 So~n~~;~~~se and a Lot of Con(usion National Health Law Project. theccfblog.org/2011 /02/florida-rulrng-o; Children and Fam1hes (database onhne). Retrieved from http://

P R aca generates-some-surprise-and-a-lot-of-confusion.html rn August 2011. cw esearch Center for the People and the Press. 20 I I .. P bl' W .

Benefit· .. Retrieved from http.//www.people ress ~r /u ic ants Changes in Entitlements. Not Changes in change in-benefits/ on January 2 1, 2012 . P · g

201 I /07/o7/pubhc-wants-changes-in -ent1tlements-not-

= CHAPTER 9 • Medicaid: Designed to Grow 1§1 Quadagno. J. S. 1988. The Transformation of Old-Age Security Class and Politics in the American Welfare State.

Chicago: University of Chicago Press.

Quinn. J. B. 1993. "New Law Lets Medicaid Tap Middle-Class Seniors' Estates." The Washington Post. H3. October I 0.

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An old myth suggests that the United States has a very small welfare state and relies primarily on markets-a direct contrast to the European social democracies that rely on government to provide social services. As Campbell and Morgan explain, the pattern in the United States is more subtle: The government is very active in the provision of social services. but it acts in a distinctive way: It delegates the job to private actors-then provides a patchwork of funding. oversight. and regulation.

Health policy in the United States relies heavily on nonstate actors For instance. most Americans receive health insurance through employer·sponsored coverage that. while subs1d1zed through the federal tax code. 1s provided by private insurance companies. Moreover. even in what appear to be the most public of programs-Medicare and Medicaid-private actors play a crucial role in the administration of coverage and de- livery of care Insurance companies are responsible for much of the day·to·day administration of Medicare. the publicly funded health insurance program for senior citizens and the permanently disabled. as these firms process the vast number of claims filed by health care providers for reimbursement. The same 1s true of Medicaid. the health in surance program for the indigent. In both programs. managed care organiza-

t1ons such as health maintenance organizations have come to play a growing role in providing benefits. receiving public subsidies to provide insurance coverage and manage the care that beneficiaries receive. Moreover. the health care covered by these programs 1s offered by private providers who receive tax- payer dollars to deliver health care services. By looking closely at the governance of social policy. we can see that much au- thority for publicly funded programs has been delegated from the public sector to the private sector

We empl oy the phrase delegated governance to capture these arrangements and to highlight the ways in which public and private authority are intertwined m the American welfare state. This is particularly the case in health policy. as much responsibility for health care lies in the hands of a large array of

pnvate actors. including physicians. hospitals. insurance com- panies. pharmaceutical firms. and medical supply companies. The development of publicly funded insurance coverage in the past five to six decades has always had to come to terms with the diverse interests of these groups. and especially their resistance to government control over their activities and live- lihoods. The resulting health care system is a complex hybrid of public and private actors. one that blurs the divide between public and private and generates complex lines of authority and accountability.

In this chapter. we first develop this concept of delegated governance and discuss some of the forms it has taken. We then give a brief overview of some of the political forces re - sponsible for this mode of governance and evaluate some of its consequences for beneficiaries and the politics of the welfare state. We then discuss two examples of delegated governance in health care in greater detail-the Medicare pro- gram and the 20 I 0 health care reform.

THE NATURE OF DELEGATED GOVERNANCE "Delegated governance" refers to the delegation of responsi - bility for publicly funded social welfare programs to nonstate actors. In directly governed programs, such as Social Security or public schools. public bureaucracies populated by govern- ment employees administer benefits and services. In delegated governance. by contrast. the government uses private entities to run programs or deliver services. As noted above. much of the governance of Medicare has been delegated to private actors. Private insurance companies serve as government con- tractors to process claims and pay health care providers for the1r services. and the addition of a prescription drug benefit to Medicare in 2003 delegated much control over the benefit to insurance companies. These firms receive public subsidies to offer competing drug insurance plans in an effort to attract the business of Medicare beneficiaries.

What exactly is being "delegated" in delegated govern- ance? The act of governing involves the exertion of govern- mental power over the lives of the citizenry. In a democratic system. citizens give consent to the wielding of that power through the electoral process-principally through the election of the members of the legislature who have taxing

CHAPTER 10 • The Delegated Warfare State

and spending authority. Yet the rise of the modern state entailed the growing delegation of authority from elected officials to unelected ones-the civil servants in bureauc- racies that administer programs created by the legisla tive branch. Our notion of delegated governance concerns a further delegation of governing authority and power- away from the public sector to the private one. In such an arrangement. the chain of democratic accountability is further lengthened, as these private actors are overseen by unelected bureaucrats. who are in turn overseen by elected officials. A similar form of delegation is that which occurs when the federal government sh ifts responsibility for pro- gram administration or the provision of services to state and local governments.

We see four forms of delegated governance that have been most prevalent in the admin istration of hea lth care programs in the United States. One form gives responsibi lity for program management and service delivery to nonprofit organizations or trusted professionals such as physicians- both of which are viewed as government-like in their lack of pecuniary motives. This form was most prevalent in the immediate postwar years, when nonprofit organizations and private health care providers were entrusted with the delivery of health care services or the administration of publ ic pro- grams. In more recent decades. however. program govern- ance increasingly has been delegated to for-profit firms as part of a larger drive to introduce market competition into the management of publicly funded programs. A third. "con- sumer choice" form of de legation is to consumers who re- ceive government subsidies to purchase services from social welfare marketplaces. Finally, a fourth form of delegation is from the federal government to state and local governments who are charged with running publicly funded programs . Since 1945. the federal government has often engaged in intergovernmental burden shifting. creating new programs but requiring state and local governments to administer and partially fund them.

One difference in how delegated governance works is in who bears risk for program costs. For example. in conven- tiona I forms of contracting out to either nonprofit or for-profit entities. the risk of cost overruns lies with the federal gov- ernment. so that if. for example. beneficiaries consume more health care than expected. the federal government pays the costs. In more recent forms of delegated governance. risk is shifted to firms and to beneficiaries themselves in an effort

' -~~~===========~ ""'r--1(\f\j P\Rl 111 • The Major Programs make them reel the brunt or market forces. In t~e case of

~~1al welfare marketplaces. individuals choose the insurance plan they think best covers their needs. and ir t~e~ are wrong and need more coverage than projected. they wil_I incur t~ese costs . Similarly. private drug insurance companies that ear risk in the administration or Medicare also have to hope that beneficiaries will not use more care than projected. 1r they do. these firms will take the hit on their profits. The hop~ of po~1- cymakers has been that risk-bearing consumers and r1rms ":'ill have more "skin in the game." leading them to make wise choices about how much health care to consume and thus

reducing total costs.

Although many consider the contracting out or public programs to private actors a phenomenon or the last fe:v decades-a result or the rise or a free-market movement in American politics-delegated governance 1s an older phe- nomenon. one that characterized and enabled the growth ol federal programs over the entire postwar period. The New Deal and the World War II brought about a tremen- dous expansion or the rederal government. and conservative pol1t1c1ans hoped that in the postwar years. the size of the government would be contained. 1f not significantly reduced. Yet the onset of the Cold War and growing popular demand for government spending on education. medical ca re . and income support raised the specter of a ma1or expansion of the rederal government. To block such a development. con- gressional conservatives mobilized to impose a limit on the number or federal civil servants. 1 Federal spending could grow. but the number of civil servants could not. which meant that new or expanded public programs would have to be administered by either lower levels of government or pri- vate agents .

I hus, m the three decades following the end of the World War II , the responsibilities of the federal government grew tremendously. yet the number of employees working for the federal government remained virtually stable.2 State and lo- cal governments grew considerably, as new federal programs imposed runded. and unrunded. mandates on them. There also was a tremendous increase in private firms receiving fed- eral contracts to do government work. Since then. the con- tracting out or federal responsibilities to private actors has only intens1r1ed. with a particularly large expansion in this "shadow workforce" since the turn of the millennium. Taking into account the large number of nongovernmental workers

. h k of the rederal government. Paul Light est1· doing t e wor . h t · the mid-2000s. for every federal c1v1I servant mates t a . in ..

h addl .t1·0nal SV2 contractors or grantees rece1vmg t ere were an

federal runds. 3

THE FACTORS BEHIND DELEGATED GOVERNANCE The motivation for delegated governance has rarely been tech· nical feasibility or efficiency. even when those are the publicly stated justifications There 1s little evidence that delegated governance results in more efficiently run programs , form· stance. or that it saves much money for the federal govern· ment. Instead. three aspects of American politics explain the frequent reliance on delegated governance : public amb1va· Jenee toward the federal government. the power or interest groups to block centralized governmental authority over their activities. and the fragmented and porous policy-making proc· ess. centered around Congress. which enables these voices to weigh heavily in the policy-making process.

First. delegated governance. in all of its forms. helps policy· makers accommodate a fundamental ambiguity at the heart of American public op1n1on. that Americans dislike government but like government programs . In the abstract. majorities of Americans prefer small government and low taxes and are distrustful of government effort, particularly at the federal level. At the same time. ma1orities desire pro· tection from life's risks and are highly supportive or specific government programs. Delegating publicly runded respons1· bilit1es to nonstate actors allows policymakers to maneuver between these contradictory opinions by delivering the secu- rity the public desires without appearing to increase the size or government

Second. the prominent position or organized interests IO American politics encourages delegated governance In many areas or social policy, private interests have rought direct fed· eral administration and advocated their own role in the de- livery or publicly funded benefits and services Jn the case of Medicare. for instance. phys1c1ans. hospitals. and phar· maceutica l companies have feared that an expanded role of the government in financing health care would lead to more control over the way they treat patients or conduct their

business. Thus. these actors lobbied for the use of nonstate actors to administer Medicare in order to disperse this govern- ing power or. in the case of the insurance industry, to benefit financially from running elements of the program. However. more is going on than simple lobbying and campaign contri- butions by these groups. as private actors have been crucial allies for politicians who are facing pressure to respond to soCtal demands yet are averse to allowing too much growth in the federal government. And some advocates of delegated governance have seen it as a way to diminish the influence of organized interests in government-the hope being that rather than trying to influence elected politicians. private in- terests would instead have to fight out their battles in the marketplace. and consumers. rather than lawmakers. would be the final arbiters of quality and cost-effectiveness in pub- licly financed programs.

Third. the prominent role of Congress in shaping the policy-making process contributes to the use of delegated governance. While social policy in most advanced industrial- ized countries is crafted largely by bureaucrats sitting in ex- ecutive agencies. the legislative branch plays a distinctively powerful and independent role in the United States. This contributes to the many obstacles in the crafting of public policies. as new laws have to make their way through con- gressional subcommittees. committees. and two chambers of Congress and then receive the support of the president (and. in some instances. the Supreme Court). Given the strength of antistatist political forces in American politics and the power of organized interests in such a permeable institutional setup. legislators have often delegated authority to private actors as a way to build support for new social programs. This technique can help bring along private interests and satisfy opponents who might otherwise try to block a reform.

Delegating authority to private actors also is a way to shift the burden of tough decision making onto these nongovern- mental entities. In the field of health care. for instance. de- termining how to distribute costly and often scarce resources 1s fraught with politically difficult choices. To take the exam- ple of pharmaceuticals. individuals would like to have access to the widest array of prescription drugs at the lowest cost. and the pharmaceutical industry would like to maximize profits by selling as many of their brand-name products as possible. Yet. in publicly funded programs. government of- ficials wan t to limit costs by making sure that people use

CH APTER 10 · The Delegated Warfare State

such products only when they really need them. bargaining down the price of these drugs with manufacturers. and en- couraging the use of generic medications wherever possible. Such decisions can quickly provoke the ire of patients and drug manufacturers. putting political pressure on govern- ment officials who also face demands from taxpayers to limit government spending. In this politically difficult situation. policymakers might prefer to delegate these tough decisions to insurance companies. making them be the bearers of bad news to beneficiaries about which medications wil l be cov- ered and engage in negotiations with the drug industry over the prices they can charge.

It is worth noting that the United States is not alone in its use of delegated governance, as several other nations. including Australia. New Zealand. the Netherlands. and the United Kingdom . have enacted market-based reforms that utilize commercial firms to deliver publicly funded services. including in health care. A growing number of countries have turned to these forms of administration in the hope that they will help keep down total government costs and will provide individuals with more choice of providers.4 What is distinc- tive about the United States. however. is the often limited degree of regulation of these private actors. In addition, no country delegates as much authority to private health insur- ance companies in the hope that they can serve as agents of cost control. 5 For example. although the Netherlands uti- lizes private insurers in its health care system. they are not principally responsible for imposing austerity on health care providers or achieving cost savings.6 In the United States. pol- icymakers repeatedly have hoped that private insurers can find a way to limit total health care costs.

THE CONSEQUENCES OF DELEGATED GOVERNANCE Although delegated governance has enabled the expansion of social protections in the United States in the postwar period. it has had important consequences for government functioning. the political environment. and policy outcomes.

First. although lawmakers have often resorted to delegated governance to achieve social protections without appearing to increase the size of government. the stunted administrative

~~~~~~~----=========~ P \ R I Ill. The Major Programs ....- apparatus that typically results can create pro~lems of its own Given the hostility to government that drives the de- c1s10.n to delegate authority to private actors. policymakers who utilize this form of governance also tend n~t to dev~l?P a regulatory apparatus sufficient to ove~see the private ent1t1es now charged with administering publicly funded progr.ams. This mode of governance thus tends to empower private interests while deliberately limiting the state actors that are supposed to oversee these private agents. The r~sult ca~ be higher costs. inefficient delivery. and l~wer-qu~ l 1.ty services. rhus, while utilized to alleviate public skept1mm toward government. delegated governance can incr~ase c.onsu~er frustration. creating a self-perpetuating cycle in wh ich delib- erate administrative weakness and inadequate regu lation pro- duce poor outcomes. further fueling the public's distrust of government.

The consumer-choice variant of delegated governance that requires people to select their benefits from private markets purports to replace uncertain democratic accountability with market d1sc1pline However. market-based accountability hinges on well ·informed and active citizens making decent choices and leaving bad providers. Yet research has shown that people often make suboptimal choices and then fai l to rev1s1t them later. stul tifying the market forces that should d1sC1phne poor prov1ders.7 Moreover. there are important re- d1stribut1ve consequences. as the most vulnerable beneficiar- ies are often the least able to navigate complex social welfare marketplaces.8 Nor are private providers necessarily more effi- cient than government providers. The heavy subsidies needed to foster private actor participation in some areas drive up costs, and insufficient regulation can lead to fraud and abuse as well

The use of delegated governance to administer social pro- grams has some political consequences. One 1s to empower private interests by giving them a privileged place in the man- agement of social programs. These actors often gain consider- able knowledge about the workings of these programs-more than the bureaucrats who are supposed to oversee them. They also develop a strong stake in protecting their role in admi n- istering benefits or providing services. These stakeholders can then be a barrier to future reform. particularly to any changes that threaten their interests.

Critics of delegated governance also have worried t hat 1t might obscure the role of the federal government in

addressing social welfare needs an~ build su~port for non- state forms of social provision . For instance. 1f benef1cianes have a good experience with market-based and c~nsumer choice-style programs. this might shift t~eir loyalties from the Democratic defenders of direct prov1s1on to the R:pub· lican supporters of marketJZJng reforms . However. c1t1zens do not appear to be particularly enthusiastJC about market· based forms of soCJal prov1s1on For i nstance, even after the 2003 Medicare Modern1zat1on Act (MMA) that increased the role of market forces in the Medicare program . beneficiaries beca me no more supportive of further privatization of the program than they were before 9 Social Security. a d_1rectly governed program. remains highly popular and there 1s only limited support among beneficiaries for any privatization or

the program. 10

The real political impact of delegated governance is to pro· vide an immediate solution to social problems that preempts the drive for a bigger role for government. Windows of op· portunity for major social policy reforms generally open only with the mobilization of public opinion in favor of addressing some social issue. The precise d1rect1on of the change then becomes the subject of debate. with those on the political left often favoring government-led solutions and those on the political right advocating inaction or subsidization of market forces. Reforms that direct public funds toward private actors are a way to put an end to these debates. providing sufficient subsidies to reduce the clamor for reform without a major ex· pansion of the federal government. Giving subs1d1es to pnvate actors thus demobilizes the forces for further reform while mobilizing interest groups with a stake in the new. partially privatized status quo. This "issue preemption'' strategy has often been a deliberate strategy of conservative policymakers. and it can work to limit the growth of the directly governed welfare state.11

Finally, delegated governance is an example of the complex functioning of the American state As other scholars have pointed out. the American state resembles a Rube Goldberg machine in which aims are achieved through a web of regula· tory initiatives. legal powers. tax expenditures. and diffusion o f gove rn ing res ponsibll1t1es to nonprofit ent1t1es. 2 In the social welfa re area. there is a particularly complex set of modalities-emp loyer-provided benefits. a hidden welfare state delivered through the tax code. and even more opaque tools such as loan guarantees and tort law. 3 In many or

these arrangements. the boundaries between the public and private spheres are blurred. Employing private firms and or- ganizations to do the work of redistributive policy is an exam- ple of how. even in the seemingly most public of programs. public and private authority are often pervasively intertwined.

In sum. delegated governance is a politically expedient way to expand social programs in a nation famously hostile to large, visible government effort. However. this mode of administration can undercut the effectiveness of public pro- grams and generate a self-fulfilling prop hecy of bureaucratic incapacity and permeability to organized interests. Moreover. although delegated governance is often perceived as a way to reduce the size of government. 1t typically results in govern- ment that 1s different rather than smaller.

DELEGATED GOVERNANCE IN MEDICARE A ma1or and informative example of delegated governance is Medicare-the second-largest social program in the federal budget. The Medicare program includes three of the forms of delegated governance that have been described earlier in the chapter. When the program was cre ated in 1965, payment ad- ministration was assigned to nonprofi t Blue Cross and Blue Shield entities (and some other commercia l insure rs). with the result that just 5.000 new federal employees were brought m to run the program (compared to the 60.000 people man- aging the Social Security program). Over time, other forms of delegation were adopted as well. as for-profit private managed care firms were allowed to enroll Medicare patients starting in the 1970s. and their role in the program has further incre ased since the 1980s. In an effort to employ these private plans as agents of cost control. they began . in the mid- I 980s. to be paid fixed. capitated payments per beneficiary, thereby shift- ing some risk onto these firms for higher health care costs. The MMA then introduced the third type of delegation. the consumer-choice variant. by delivering a new prescription- drug benefit (Medica re Part D) through private. risk-bearing insurance plans from which beneficiaries must choose. The MMA also sought to increase enrollment in health plans out- side of traditional Medicare by increasing subsidies to man- aged care and other types of insurance firms. By 20 I I. 60% of Medicare beneficiaries were enrolled in private drug plans

CHAPTER JO • The Delegated Warfa re State

and 25% had left traditional fee-for-service Medicare for pri - vate plans.14

These administrative arrangements have had a variety of consequences for the Medicare program and its beneficiar- ies. As was noted above. political expediency often drives the choice to rely on private actors to administer public programs. but this may come at the cost of administrative coherence. In the case of Medicare. so much authority was delegated to private actors that policymakers initially struggled to con trol program costs or ensure sufficient scrutiny of provider claims. With debates over Medicare dominated by concern of sp i- raling costs. it was difficult to justify benefit enhancements despite the many holes in the program 's coverage. such as prescription drug or catastrophic costs. Over time. cost con- trol was improved by instituting more direct federal control of the program. but insufficient oversight generated other prob- lems. such as fraud and abuse by providers and contractors. All the while. the agency charged with overseeing this vast program-the Centers for Medicare and Medicaid Services- was kept deliberately small and underfunded. In fact. despite vast increases in program responsibilities. roughly the same number of people work at the agency as when 1t was first created in 1965.

The experience of the MMA also ha s not proven the supe- riority of market-based reforms for th is program . Although the MMA succeeded in broadening access to drug coverage for seniors, the market design has also had its costs. Beneficiar- ies have been subjected to marketing abuses and other ma- nipulative practices, and there is little evidence that consumer behavior is exerting market discipline on Part D providers.15

Surveys conducted before and after M MA implementation showed that seniors in Part D drug plans experi ence mo re problems getting their drugs than se niors with drug coverage from other sources. such as former employers or the Veterans Administration. Part D enrollees also exhibit less satisfaction with their drug coverage. And yet. very few seniors leave bad plans or use their market power to induce better performa nce by insurance plans. Instead they "satisfice." making do with the plan they originally chose ra ther than revising their de- cision, even in the face of poor performance.16 Seniors who are low income. dually eligible for Medicare and Medicaid. or sicker experience even more problems and have lower levels of satisfaction than their higher-income and healthier peers yet are no more likely to switch plans.17 The consumer-choice

I I

~ .......... --P-\_R_f_I_l~I-·=T~h-e~M~a~j~o-r:P~ro~g:r:a:m~s~----------------------------------------------------~~--=:==

variant of delegated governance is predicated on a level of in formation. cognition. and willingness to shop around that may be unrealistic for many beneficiaries.

DELEGATED GOVERNAN CE I N THE 2010 HEALTH REFORM The Patient Protection and Affordable Care Act (ACA) of 20 IO 1s another example of delegated governance. Rather than a massive federal government "takeover" of the health care sector as some alleged. the ACA relies on dispersed and diffused forms of authority. It leaves intact the existing system of employer-sponsored insurance and subsidizes coverage for the uninsured through private insurers or state Medicaid programs-and many of the latter already contract with private managed care firms to provide insu r- ance The ACA uses the consumer-choice variant of del- egated governance. with uninsured individuals outside of Medicaid and small businesses purchasing insurance from health plan exchanges. much as senior citizens who want drug coverage must purchase private Part D plans. States have the main responsibility for creating these health plan exchanges and setting up temporary high-risk pools. as well as for enforcing new federal standards for insurer policies . Direct federal government involvement is trun- cated. Federal agencies must write regulations. oversee the action s of state governments. serve as a fallback 1f states fail or refuse to perform their assigned tasks. and pay much of the bill However. the ACA 1s not national health insur- ance or Medicare for all Instead. 1t 1s a prime example of delegated governance. with responsibility for health insur- ance delegated to private insurers. states. and consumers themselves.

The three factors that have fostered delegated governance in the past shaped the design of the ACA as well. Policy- makers faced conflicting demands from the public-a de- sire for improvements in the nation's health care system yet also distrust toward the federal government. As a result. the reform sought to minimize the direct role of the fed~ eral government and relied heavily on private actors such as insurance _companies. Moreover. just as having ; rivate insurers administer Medicare he lped dampen cries tha t the

law represented socialized medicine. so too does the ACA subsidize private insurance and allow the uninsured to buy coverage on exchanges run by state governments or non- profit organizations-not a national exchange . That the ACA leaves the employer-sponsored insurance system intact but imposes new regulations on insurers enabled reform ad- vocates to argue they engaged merely in "health insurance refo rm" and not a wholesale reengineering of the health care system. This was important given that many Ameri- cans were already satisfied with their coverage. lacked trust in government. and feared that large-scale reform would in- crease insurance costs and erode the quality of the care they received. 18

A second force behind delegated governance in the ACA was the lobbying of interest groups against expansions or governmental control over their livelihoods. In the past. phar- maceutical companies. insurers . physicians. and other provid- ers opposed public health insurance of almost any kind. but they subsequently learned that subsidized insurance can be attractive as long as the federal government does not gain preeminent price-setting power. Responding to these views. the health care reform promised tens of millions of new "lives" to the insurance industry and better-subsidized users of medical care and pharmaceutical products to providers and drug makers but left the fragmented payment system in place. Such a reform design succeeded in muffling interest group opposition.

Finally. delegating the governance of social programs to lower levels of government or private actors helped the Ac.A over~ome various institutional barriers. Despite winning the ~res1_dency with a large popular margin and holding ma1ori- t1es in both chambers. Democrats lacked the supermajonty needed in the Senate to overcome a Republican filibuster. and the Democratic camps in both chambers included a consider- able subgroup of centrist Democrats who were leery of federa government gro:vth . Preserving much of the existing system of health care finance and delivery and limiting the role of the federal govern ment was a way to keep centrist Democrats on board. These centrists especially opposed the public in- surance al ternative. and they succeeded in keeping this out of the final bill. Moreover. the election of Scott Brown to r~p l ace Ted Kennedy in the Senate ensured that the Senate bill would be the dominant framework. with state-level rather

than national insurance exchanges. so that the success or the rerorm-from patient access to insurance to cost control- hinges on state action. 19

As with earlier policy i nitiatives . delegated governance made passage or the ACA possible. but the legislation's provi- sions raise the risk or administrative incoherence. Relatively little money was budgeted ror the ACA's implementation. but such a complex reform requires effective administrators who can oversee the many agents. 20 The success or the law also depends on action in the states. yet existing state capacity

CONCLUSION It is easy to forget that social policymaking involves deci- sions not just about who and what will be covered by a program and how the program will be paid for but also how it will be administered. Although this may seem a bland. technical problem . the question of who admin- isters publicly runded programs has often been a hotly contested issue at times of maJor policy reform . This is particularly true in the health care sector. which con- tains a very large number of individuals, organizations. and firms that have their own prererences as to how they should conduct their affairs. For these actors. decisions about the governance or health insurance programs can affect the practice or medicine and their own financial bottom line. Thus. when physicians rallied against Medi- care as a form of "socialized medicine" in the 1960s. they were worried that giving the government the authority to administer a health insurance program would lead it to intervene rn how they practiced medicine and what fees they charged. Pharmaceutical manufacturers long resisted the addition of a prescription-drug benefit to Medicare because of concerns that if the government were the main payer it would use its negotiating power to bargain down drug prices and thus limit profits. And insurance

CHAPTER 10 •The Delegated Warfare State

for insurance regulation is highly variable. 21 Finally, expe- rience with existing consumer-focused programs not just Part D drug plans but also others. such as health savings accounts. suggests that individuals are not always capa- ble or being the effective consumers that the insurance exchange model assumesn The ACA wi ll hopdully make insurance coverage a reality for millions or Americans. but its structure exemplifies the prob lems or administration that plague health care policy and delegated governance more generally.

companies have always resisted government encroach- ment on their terrain. whether in the repeated. and failed. drives for universal health insurance in the past or the health care reform of 20 I 0. Delegating authority to pri- vate actors or lower levels of government for the gov- ernance of publicly runded programs has been a way to appease these types of concerns.

Whether one agrees with this form of governance depends on one's beliefs about the respective roles of the federal government. state and local governments. and the private sector in meeting the demands citizens have for protection against social risks. For some , the federal government plays an important role in assuming risk for health care costs and ensuring broad access to uniform coverage. For others. the one-s1ze-rits·all na- ture of government programs can be out of step with individual needs. Allowing lower levels of government or private actors to determine the nature or the benefits offered may enable greater responsiveness to individual demands. Ultimately. these arrangements are hashed out in a political process in which competing views of gov- ernment. interest group pressures. and public sentiment all play a role.

STUDY QUESTIQ~S I. What is "delegated governance?"

2. What are four forms of delegated governance prevalent in health care program administration?

3. What are three factors motivating the delegation of governance?

4. What are some problems with delegated governance in health care?

S. Which types of delegated governance are present in the Medicare program?

6. Does the Patient Protection and Affordable Care Act incorporate delegated governance?

ENDNOTES I. Light. 1999

2. Mosher. 1980. pp. 542-43.

3. Light 2006. p. 8.

4. Gingrich. 20 11.

S. Jacobs. 1998.

6. Okma. 2008.

7. Abaluck and Gruber 2009; Iyengar and Lepper. 2000; Schwartz. 2004

8 Hibbard. Jewett. Englemann. and Tusler. 1998; Rudolph and Williams. 2007. 9. Morgan and Campbell. 201 1. pp. 172-76.

10. Campbell and King. 2010

I I Morgan and Campbell. 2011. pp. 190-98. 2 Clemens. 2006.

13. Howa rd. 2007.

14. Kaiser family foundation. 201 1 a and 2011 b.

IS. Abaluck and Gruber. 2009. Kaiser family foundation. 2006. 16. Morgan and Campbell 201 1. pp. 205- 12. I 7. Morgan and Campbell. 20 I I. P 2 15

18. Brodie. Altman. Deane. Busche. and Hamel. 20 I 0.

19. Brennan and Studdert. 20 IO; Jennings and Hayes, 20 I 0. 20. Sera fini . 2010; Nichols, 2010 21. Nichols. 2010.

22. For example. Abaluck and Gruber 2009· D G . . ixon. reene. and Hibbard , 2008.

CHAPTER 10 • The Delegated Warfare State

REFERENCES Abaluck. J. T .. and J. Gruber. 2009. February. Choice Inconsistencies among the Elderly: Evidence from Plan Choice in

the Medicare Part D Program. National Bureau of Economic Research (NBER) Working Paper No. 14759. February. Retrieved from http://www.nber.org/papers/w 14759.

Brennan , T. A .. and D. M. Studdert. 20 I 0. How Will Health Insurers Respond to New Rules under Health Reform? Health Affairs 29: I 14 7-51.

Brodie, M .. D. Altman . C. Deane. S. Buscho. and E. Hamel. 2010. "Liking the Pieces. Not the Package: Contradictions in Public Opinion dunng Health Reform ." Health Affairs 29: 1125-30.

Campbell. A. L . and R. King. 20 I 0. " Social Security: Political Resilience in the Face of Conservative Strides." In R. Hudson. ed .. The New Politics of Old-Age Policy (2nd Ed.) Baltimore. MD: Johns Hopkins University Press.

Clemens. E. S. 2006. "Lineages of the Rube Goldberg State: Building and Blurring Public Programs. 1900-1940." In I. Shapiro. S. Skowronek. and D. Galvin. eds .. Rethinking Political Institutions: The Art of the State (pp. 380-443 ). New York: New York University Press.

Dixon. A .. J. Greene. and J. Hibbard. 2008. "Do Consumer-Driven Health Plans Drive Enrollees' Health Care Behavior?" Health Affairs 27: I 120-31.

Gingrich. Jane R. 2011 . Making Markets in the Welfare State: The Politics of Varying Market Reforms. Cambridge, UK: Cambridge University Press.

Hibbard. J. H .. J. J. Jewett. S. Englema nn. and M. Tusler. 1998. "Can Medicare Beneficiaries Make Informed Choices?" Health Affairs 17( 6 ): 18 1- 93.

Howard. C. 1997. The Hidden Welfare State: Tax Expenditures and Social Policy in the United States. Princeton. NJ : Princeton University Press.

Iyengar. S. S .. and M. R. Lepper. 2000. "When Choice Is Demotivating: Can One Desire Too Much of a Good Thing?" journal of Personality and Social Psychology 79: 995-1006.

Jacobs. A. 1998 (February). "Seeing Difference: Market Health Reform in Europe." journal of Health Politics. Policy and Law23(1) : 1-33.

Jennings. C. C. . and K. J. Hayes. 20 I 0. " Health Insurance Reform and the Tensions of Federa lism." New England journal of Medicine 362: 2244-46.

Kaiser Family Foundation. 2006, Apri l. "Seniors' Early Experiences with the Medicare Prescription Drug Benefit." Retrieved from http://www.kff.org/ka1serpolls/upload/7502.pdf.

Kaiser Family Foundation. 2011 a. September. The Medicare Prescription Drug Benefit. Fact Sheet.

Kaiser Family Foundation . 2011 b. September. Medicare Advantage. Fact Sheet.

Light. P. C. 1999. The True Size of Government. Washington. DC: Brookings.

Light. P. C. 2006. The True Size of Government. Organizational Performance Initiative Research Brief No. 2. New York: New York University.

Morgan. K. J .. and A. L. Campbell. 2011. The Delegated Welfare State: Medicare. Markets. and the Governance of Social Policy. New York: Oxford University Press.

ipi P\R T Ill• The Major Programs

Mosher. f. C. 1980. November/December "The Changing Responsibilities and Tactics of the Federal Government:

Public Administration Review 40(6)· 541-48. Nichols. L. 2010. "Implementing Insurance Market Reforms under the Federal Health Reform Law." Health Affairs 29:

1152-57. Okma. K G H 2008. "Commentary on Rosenau and Lako." journal of Health Polillcs. Policy & Law 33(6) 1057-71.

Rudol ph . N V. and S.S. Williams. 2007. "Medicare Beneficiaries Knowledge of and Experience with Prescription Drug

Ca rd s. Health Care Financing Reuiew 29( I ) : 8 7- I 0 I.

Schwartz V 2004. The Paradox of Choice: Why More Is Less. New York: Harper Collins.

Serafini. M W 2010 "Writing the Rules for the Health Law." Nallonaljournal. May I. p. 6.

....

PART IV

The States CHAPTER 11

CHAPTER 12

CHAPTER 13

CHAPTER 14

EYEWITNESS 3

THE VIEW FROM THE STATES:

AN INTRODUCTION

Daniel C. Ehlke

MASSACHUSETTS

Michael Doonan

TEXAS

David Warner

OREGON

Howard M. Leichter

CONFESSIONS OF A STATE HEALTH

REGULATOR

Howard Berliner

The state governments influence almost every feature of our health care system. This chapter briefly introduces the state governments-what to look for when thinking about the similarities and differences in st~te . health policy. Each of the following three chapters continues the d1scuss1on by delving into an individual state.

Fresh on the heels of victory at Yorktown. the America n revolutionaries hammered out a document that wou ld guide governing arrangements in the new nation The Articles of Confederation was about government by the independent states It stressed difference over a commonality of purpose and decentrahzat1on over unity. The fledgling America n lead- ership conceived of a single country-but iust. The United States was to be a very loose confederation indeed. wi th states constituting the most significant unit of government by far In less than a decade. the Articles were put aside. and the early experiment in weak central government was brought to a close with the ratification of the US Constitution.

Some of the Articles· spirit lives on in the striking diversity of cond1t1on and governance seen across the SO states today. The policy landscape looks very different in Austin . Texas. t han 1t does 1n Boston. Massachusetts. In no field of policy is this truer than in health : The uninsured popul ation. for example.

ranges from a low of 5% (Massachusetts) to a high of 24% (Texas)- with the average at 16%.1 The next three chapters offer a look at the contours of health policy in three states.

DIVERSITY AMO G THE STATES Before delving into the specif1c1t1es of health politics in sev· eral states. we shou ld pause for a moment to identify some of t he varia bles t ha t together comprise the chief sources of dive rgence in heal t h system properties and. indeed health outcomes across the sta tes

Differences: From Climate to Agriculture Prior to any deliberate action on the part of policymakers broad variables like demographics and climate have a role in

CHAPTER 11 • The View from the States: An Introduction

shaping health outcomes and. indeed. health system struc- ture. Sometimes policy and population variables are decidedly difficult to disentangle. while sometimes the connection be- tween the two is crystal clear.

At one of the most fundamental levels . states vary in terms of their climate. Policymakers can do relatively little to shape the weather and its attendant health effects. State policy- makers do. however. have some latitude when it comes to monitoring and (to some extent) regu lating pollution. The presence or absence of pollutants can have a profound effect on the health of populations.

The relative agricultural fertility and geological bounty across the various states can also have effects. direct and indirect. on health profiles. Agricultural states must. in con- cert with federal authorities. ensure the safety of the food supply-a responsibility that impacts the health of citizens across the nation. growers. and consumers alike. States that contain mountainous areas . such as West Virginia and Colorado. often house a host of mining concerns. With the workings of the mining industry comes worker exposure to potential carcinogens in the form of dust and ash. Moreover. the closing of mines and the national move away from manu- facturing and into services can lead to rampant poverty. Pov- erty. in turn. can lead to poor nutrition. ailments connected to exposure to the elements. and lesser avai lability of health care services. likewise. the major tobacco states-Kentucky and West Virginia-rank number I and 2 for smokers; predictably. they also rank very high. first and third. respectively. in lung cancer rates.

Moreover. pol icymakers on the state level can help to de- termine the nature of the response to health hazards arising from cl imate characteristics. The tropica l climate of extreme south Florida. for instance. makes this area susceptible to den- gue fever-a disease often associated more with sub-Saharan Afnca. 2 State political leaders thus find themselves charged with the responsibility to take ameliorative mea sures-a responsibility that policymakers in. say. Massachusetts. would likely never face.

Demography States vary in their demographic profiles. The poorest states include Louisiana (20% below the federal poverty line [FPL]). West Virginia ( 18.6%). New Mexico ( 18%). and Mississippi (18.2%). Health problems multiply with poverty. At the other end of the spectrum are New Hampsh ire (8.5%), Maryland

(9 .1 %). and New Jersey and Connecticut (both 9.4%). Pov- erty is highly correlated with poor hea lth. The issues are even more complicated-and pressing-in the case of childhood poverty, which is three times as high in the poor states as in rich ones.3

Race and immigration complicate the job for health policy- makers. The African-America n population is more than a quar- ter of the population in states such as Mississippi. Louisiana . South Carolina. Georgia, and Maryland: in contrast. in states like North Dakota . Vermont. Montana. or Idaho. the black population is under I%. In six states. at least 18% of the population was born abroad; in eight states it is less than 3%. Scholars like Robert Putnam report the unwelcome news that more diverse states are less likely to generate "social capital"- the network of personal affiliations in the private sector that help strengthen community-wide bonds.4

National averages for any socia l issue and problem mask enor- mous variations among the states. Teen pregnancy rates are 350% higher in Mississippi than in New Hampshire. Suicide rates are stand at over 20 per 100.000 people in Alaska. Montana. and Wyoming while they are only a quarter to a third of that rate in Washington. DC. New Jersey. and Massachusetts. Every health and social problem-diabetes. obesity. suicide. and murder- varies from state to state. Each poses its own distinctive chal- lenge to state policymakers (see Figure I 1-1 ).

Political Culture Government is also shaped. from state to state. by the sub- tle factors of political cultures. Political scientist Daniel Elazar identified unique public orientations toward government found across the 50 st ates . He developed three broad groups. into which each state fit to a grea ter or lesser degree. Con- veniently. these groups tended to stretch latitudinally. east to west. This was no coincidence-the original settlers from different points along the East Coast tended to transport the political culture dominant in their source regions as they moved west (see Figure 11-2).

Across the northern tier of the United States from the Atlantic to the Pacific could be found what Elazar termed the moral political culture. In the states comprising this region. a communitarian tendency held sway-that is. com munity in- terests were often seen as taking precedence over those of the individual. As guarantor of the community interest. govern- ment was generally seen in a positive light and public service is held in particularly high esteem.

·· ···~~~--============~ w.::- 111:1 P\RJ JV· The States New England

Mid Atlantic

•Missing Data (9 States} D 7.D-8.9 (13 States} CJ <5.0 (3 States) D 9 .0-10.9 (12 States) O 5.~.9 ( 11 States) • 11.0 + (5 States)

Fl ur 11-1 New Cases of Diabetes, 2010 (Age-Adjusted) Sot1rci•: Centers for Disease Control and Preventi o n: National Dia betes Surveillance System. Rctnt.!\ed from http://\\\\\\ cdc .gov/d1abetcs/statistics on M arch 2 1, 20 13.

Texas

Georgia

Virginia

Wyoming

Missouri

Massachusetts

Moralistic

Oregon

Kansas

New Hampshire

igur 11-2 Political Cultures and Representative Stales

\otc B<1...:d on Elazar. D. 1972. American Federalism: A Viell' /mm the Statt•s (2nd Ed.). New York: Thomas C rowell. C Cengoge laaming9 All R.ghts Re:<""

Just to the south of the moral latitudes lie states character- ized by the 1nd1vidual political culture. Here self-sufficiency is oft stressed over government activism. Government is viewed as a necessary evil. and there is often greater tolerance of cor- ruption among political leaders. It is hardly coincidental that llilno1s. with its long standing reputation for dirty politics falls w1th1n this group of states. ·

Finally. the Deep South is home to the traditional political culture. Here the forces of government. when marshaled at all. are largely l1m1ted to preserving the extant social order. As in areas within the 1nd1v1dual zone. the power of government IS generally circumscribed

The three political cultures outlined here can have real policy consequences They help explain why. for instance many states in the South have higher rates of those lacking health insurance-in such areas . health coverage is not gener· ally seen to be an area in which extensive government action 1s deemed legitimate. Of course . there are exceptions-and times do change. During the 1990s. for instance. the state of Tennessee took a major leap toward ensuring the bulk of its population had health insurance with the development of the TennCare program. Its eventual failure should not obscure the significance of its being attempted in the first place

The states diverge in significant ways-along lines of geography, political structure. and culture . At the same

•

CHAPTER 11 • T he View fro m the States: An I ntroducti on

time. however. leaders in statehouses across the country are also faced with a set of common problems. Moreover. they all comprise a single national political system and, at any given time. a national political climate. The popularity of a given president's program and the perceived efficacy of Congress at a certain point of time are often reflected in state and local elections and guide the hand of policymak- ers at all levels nationwide. The singularity of circumstances raced by the leaders of individual states can thus be easily overstated. Nonetheless. differences between the policies pursued and the institutions governing political interplay across the 50 states are often substantial-and in few are- nas is this more the case than in health care . It 1s there- fore important to examine a subset of these states to gain a sense of the variety of policies and outcomes to be found from sea to shining sea.

WHY THESE STATES? In the chapters that fol low. scholars situated in Massachu- setts. Oregon. and Texas. respectively. offer their perspec- tives on the contours of health policy in those states. Out or the 50 available . why have we chosen to focus on these three? The selection of Massachusetts was an easy one. In 2006. legislators in Boston. with the support of then- governor Mitt Romney. enacted a sweeping program of health reform. The chief goal of reformers was to expand access to insurance. moving as close as possible to universal coverage. The centerpiece of the program was the Massa- chusetts Connector. a health insurance excha nge. on which residents could easily "shop" for reasonab ly priced plans. Residents " opting out" of coverage would face financial penalties-in other words. an individual insurance mandate was established. The Massachusetts plan. in turn. served as one of the inspirations for key aspects of the Affordable Care Act (ACA). Romney's role in its development. moreover. led to more than a few awkward moments when he hit the presidential campaign trail.

While Massachusetts can now boast higher rates of insur- ance coverage. Texas claims one of the lowest. This is partly due to the nature of the Lone Star state's workforce. which contains a relatively high proportion of seasonal workers. some of whom are paid in cash Employers who hire such workers rarely offer health insurance or other .. fringe benefits."

Political trends in Austin, moreover. have not been condu- cive to efforts aimed at increasing the pool of insured Texans. Texas leaders faced the passage of the ACA, and the pros- pect of a vast expansion in the state's Medicaid program. with considerable skepticism. Indeed, Governor Rick Perry. himself a one-time Republican presidential candidate. was swift in his rejection of such an expansion following the Supreme Court's decision to uphold much of the ACA. Perry also denigrated the concept of state insurance exchanges as radical overreach on the part of the federal government.

Thus despite holding the dubious distinction of leading the nation with the highest proportion of uninsured resi- dents. the Texas governor stressed his opposition to federal efforts to expand health coverage to a wider array of Ameri- cans. Perry was not alone in his condemnation of the ACA. with several other states across the South and West simi- larly contesting the role of the federal government in stretch- ing the health insurance safety net. In the case of Texas . no equivalent state initiatives offered protection from personal economic loss associated with high health care expenses. In addition to leaving a vast body of residents without even the most meager of health coverage. Perry's refusal to enter- tain the notion of federally sponsored Medicaid expansion will likely mean higher property taxes for many Texans. This is beca use the counties are responsible for funding safety net hospitals. largely out of local tax revenue. Starved of Medicaid dollars. these hospitals will be forced to turn to the largesse of county tax payers. The case of Texas exemplifies America 's ongoing fai lure to su fficiently shield its citizens from catastrophic heal th ca re costs.

Oregon has faced many of t he same (peren nial) pres- su res experienced by all the states across the Union: rising health care costs and a stagge ring proportio n of residents remaini ng uninsured. Unlike most. however. Orego n's lead- ers embarked on a program of radica l reform-daring even to opera te on the basis of a third. thoroughly toxic word beginning with "r''-ralioning. While many national lead- ers gained political traction opposing the ACA on the basis of rationing. Oregon could boast a recent history of self- conscious rationing of care.

Orego n officia ls managed to impose direct rationi ng of services by establishing a basic basket of health interventions that would be offered to all residents above the FPL that was fairly liberal. while consulting with numerous representatives

across the state before moving forward with the plan .. ~n this way. state leaders were able to overcome the brand of ?eath panel '" hysteria that came close to stifling the ACA pri~r to its pa ssage. In the end. however. even successively stricter rationing of health services were not enough to keep. the state's Medicaid budget in check. Despite the apparent failure

CONCLUSION In the chapters that follow. three scholars. from Massachu· setts. Texas, and Oregon. respectively. take us on a guided tour of the health-policy conundrums facing their home states. fhrough this tapestry are woven some particularly prominent common threads. In times of economic down· turn. such as that Americans have experienced since 2008, states face a fiscal squeeze that often forces policymak· ers to get creative. At the very moment tax revenues from residents in straitened economic circumstances are down. reliance on such safety net programs as Medicaid is at its greatest That 1s. when states can. arguably. least afford it. they are faced with the imperative of Medicaid expans1on- unless governors take steps to reduce the number of those el1g1ble to receive benefits. an escape route for cost-cutting leaders increasingly closed off by the ACA.

States have often in the past taken the lead in experi· mentrng with innovation in the finance and delivery of

S fUDY QUESTIONS

of the rationing system. the innovative spirit of the reforms remained. Faced with the desire to open the door a crack to increased Med1ca1d enrollment. state leaders opted to do so through several lottery drawings . This novel development was settled on as a fairer means of selecting new enrollees but still served to leave many without basic health coverage.

care. some of which have then made an appearance on the national stage. As noted earlier. Massachusetts 1s one of the more recent examples of this phenomenon, but it is hardly alone During the 1980s. New Jersey hosted a pilot project that had as its aim an overhaul in the way hospitals were paid for medical procedure. The end result. several years down the road . was the advent of diagnostic-related groups. or DRGs. within Medicare. The pressures faced by governors to "get creative'" can lead not simply to deep cuts in health care funding but also the development of novel ways to deliver health care to more residents with potentially greater eff1c1ency. States may not always serve as " laboratories of democracy:· but they can. at key points. contribute substantively to t he perennial search for solutions to cure what ails our American health care system-or. rather. our collection of systems.

I What variables affect health systems and outcomes variance across states?

2. What does Elazar see as three different political cultures among states?

3. What are some of the same constraints faced by all states?

ENDNOTES I. Kaiser Family Foundation. 2012.

2. See. for instance. Florida Department of Health. 20 I I.

3. Data from the US Census Bureau. 2012. 4. Putnam. 2000

S. Elazar. 1972

CHAPTER l 1 • The View fro m the States : An Int rod uction

REFERENCES Elazar. D. 1972. American Federalism: A View from the States (2nd Ed.). New York: Thomas Crowell.

Florida Department of Health. 2011. "Dengue Fever in Key West," Retrieved from http://www.doh.state.fl.us/ environment/medicine/arboviral/Dengue_FloridaKeys.html on September 14. 20 11 .

Kaiser Family Foundation. 2012. "State Health Facts." Retrieved from http://kff.org/other/state-indicator/total-population/ on June 23, 20 13.

Putnam, R. 2000. Bowling Alone. New York: Simon and Schuster.

US Census Bureau. 2012. Statistical Abstract of the United States. 2012. Retrieved from http://www.census.gov/ cornpendia/statab/2012/tables/ I 2s0709.pdf. on September 14. 20 11.

This chapter outlines the Massachusetts health-reform plan, examining the plan's details and past policies and the political coalitions that influenced its passage and implementation.

Massachusetts reform serves as a model for national re- form both in terms of politics and policy. The Massachu- setts health reform plan resulted in 98% coverage that held steady even during the economic downturn in 20 I 0. With a focus largely on coverage expansion. the plan did not ad- dress but neither did it exacerbate persistently rising health care costs. Meanwhile, reform did highlight and exacer- bate a shortage of primary-care providers and a continued overrehance on the emergency rooms The story of the re- form is not confined to the state's border Like other health care policies. this one developed amid the interaction of federal and state government officials (see Chapter 7 on federalism) .

SHARED RESPONSIBILITY Massachusetts passed comprehensive health care reform in April 2006 with the goal of moving toward universal coverage. The plan was based on the principle of shared responsibility

and asks more of government. business. and individuals. The most unique feature of the plan was a mandate that everyone who could afford 1t had to purchase health insurance Fa1 1ure to purchase insurance is subject to a fine of up to half the cost of a low-cost insurance plan S1m1lar to the national health care reform signed by President Obama in 20 I 0. the Alford· able Care Act (ACA). the Massachusetts reform builds off the base of the existing public and private health insurance sys· tern and earlier reforms. In contrast to the ACA . which passed along party lines. the Massachusetts plan was bipartisan; Re- publican governor Mitt Romney worked with an overwhelm· ingly Democratic legislature to secure the reform. Success was achieved by building and maintaining a broad-based coaht1on

as th e legislation was passed. the rules and regulations were promulgated, and the program was implemented

The state government. with significant federal financial support. expanded existing programs. created new programs. and instituted new insurance regulations. Massachusetts ex·

pan ded its Medicaid program. Mass Health. to cover children

: m families with income up to 300% of the federal poverty level (FPL). The state created the Commonwealth Health Insurance Connector Authority (Connector) to implement reform and run the new Commonwealth Care and Common- wealth Choice Programs. The goal of the Connector was to make health insurance more available and affordable. and 1t served as a model for "Health Care Exchanges" in the ACA.

Commonwealth Care provides subsidized coverage for people with family incomes up to 300% of the FPL with no other source of health insurance. No premiums are charged for people with family income up to 150% of the FPL. Eligible en- rollees with family income between 150 and 300% o· the FPL pay premiums on a sliding scale. In contrast. national reform provides Medicaid coverage with no premium for people up to 133% of the FPL (in part1c1pating states) and sliding-scale tax subsidies for people to purchase health insurance through the newly created Health Care Exchanges up to 400% of the FPL. Massachusetts subsidies are more generous than national sub- sidies. but they do not assist people over 300% of the FPL. 2

Commonwealth Choice makes a range of unsubsidized health plans available to small businesses and individuals with family incomes over 300% of the FPL. The idea. similar to the travel Web site Travelocity, is to provide information on a range of health care options through a web-based portal and allow people to make comparisons on price and select a plan that best meets their needs. Commonwealth Choice is available to individuals and small businesses wi:h 50 or fewer employees. The Massachusetts reform required insurers to combine the individual and small group markets. resu lting m 30 to 40% lower costs for individuals and a slight increase m the cost of premiums for small business. 3 The individual insurance market generally attracts people with higher health care costs and was expensive. With the infusion of younger. healthier people and small businesses required to obtain health insurance under health-reform laws. the risk :iool be- came healthier. thus reducing overall costs. However the ad- dition of the individual pool to the small group pool increased costs for small businesses.

For their part. employers with 11 or more employees who did not provide health insurance for their employees were re - quired to pay a "fair share assessment" of $295 per uninsured employee per year. This 1s a small penalty compared to the cost of insurance that can be 20 times this amount. In total. this assessment raised less than $20 million a year. a pittance

CHAPTER 12 • Massachusetts IJ:Q

compared to the $12.5 billion dollars in annual state Medicaid spending.4 However. because of the insurance mandate more employees who previously declined insurance signed up for it at work. This resulted in business contributing over $750 mil- lion in additional costs to help insure employees.5

Since the employer penalty is so low and insurance cover- age so expensive. some thought that employers would drop traditional group coverage and sh ift employees to the Connec- tor. This did not happen. In fact. Massachusetts saw a slight increase in employers offering health insurance while the number of employers offering coverage nationwide dropped.6

The reason employers provide health insurance benefits is to attract and retain good employees with the added incentive of favorable tax treatment. With reform mandating individual coverage. health insurance may have become a more valuable employee benefit. Nevertheless. it still may be advantageous for employers to drop coverage for lower-wage employees and move them into a potentially fully subsidized Connector plan. Employees who pay part of the premium at work might also benefit from this shift. However, employers are prohibited from dropping coverage for just some of their employees and must provide the same benefits to all employees. Further. in most cases, employees are prohibited from obtaining subsi- dized coverage in the Connector if employer-provided insur- ance is ava ilable.

A HISTORY OF REFORM Policy does not happen in a vacuum. and Massachusetts reform grew out of a history of health care innovation. The 2006 reforms have been referred to as the third wave of reform in Massachusetts.7 Previous efforts helped forge relationships between stakeholders and the broader health-policy network in the state. including leaders in government. the legislature. hospitals. consumer groups. health plans. business. founda- tions. and academia. Most particularly, Massachusetts reform built on the Uncompensated Care Pool started in 1985 as well as major regulatory reform and coverage expansions in 1988 and 1996.

Since the late 1970s. the Massachusetts government set hospital rates for all payers (one of six states to experiment w ith this reform). The Uncompensated Care Pool made the rates possible by assisting hospitals with high rates of un- paid bills or uncompensated care-that is, hospitals who served many poor and uninsured patients.8 The pool full y

- EJl~-1~>~\~R~l~l~\:_:_· T~h~c~S~ta~te~s~--------------------------------------------------------------~--. -

reimbursed hospitals for care provided to low·rncome u_n· insured residents below 200% the FPL and provided partial reimbursement for costs incurred by those between 200 and 400% of the FPL. It also reimbursed for emergency room bad debt. The Uncompensated Care Pool was maintai ned even after rate regulation was abolished in 1991. Just prio r to the 2006 reform. Massachusetts spent over $I billion a year through the pool to reimburse hospitals for uncompen- sated care provided to low· and moderate-income residen ts.

9

1 hese funds were collected through hospita l assessm ents. surcharges on insurers and health plans. and ma tchi ng fed· eral funds . Federal matching funds were autho rized as part of a Medicaid waiver and demonstration program. described

later rn this chapter

The structure of the Uncompensated Care Pool changed in the 1990s to provide not just hospita l services but a broader range of outpatient servrces. 10 The pool provided funds for care to the uninsured and subsidized safety-net hospitals. but rt was difficult to track spending. there were co ncerns about equity in pool payments across the state. and u ncom- pensated care needs generally exceeded pool funds. 11 Ul ti- mately, the George W. Bush administration threatened in July 2005 to end supplemental payments to safety-net hos- pitals and recommended shifting these funds to individua l coverage. The state was in jeopardy of losing $385 mill ion annually in federal funding. and this was a major impetus to the 2006 reforms. It is ironic that the conservative Bush ad- minrstratron pushed and ultimately approved Massach usetts reforms that would become the model for President Obama·s national reform.

The 2006 re~orms were also influenced by the 1988 leg· 1slat1on championed by governor and presidential candidate Michael Dukakis. The Dukakis plan mandated that employers provide health insurance coverage or pay a significant fine to the state, and rt also increased public coverage and subsid ies to low-income residents. 12 The plan would have relaxed hos- pital rate setting rn the hope that competrtron would lower costs

13 In contrast to the 2006 reforms. legislative action was

partisan. contentious. and strongly opposed by the bu · . 14 s1ness community. Shortly after Governor Dukakis left office and the state's hrgh tech economic bubb le burst. large sect ions or the law including the emp loyer mandate were repea led. Howev~r, retained elements. including Medicaid enro ll me n t expansions. coverage for certain people with disabi l it ies

mandated coverage for college students . and assistance for

the long-term unemployed. strengthened a foundation for the 2006 reforms. 15

In the early 1990s. the state was granted a comprehensive Medicaid waiver (known as a I I IS waiver) to create a dem·

o n stration program-the MassHealth Program. MassHealth included all coverage expansion under one umbrella program.

Th is plan shifted Medicaid beneficiaries into managed care hea lth plans and used cost savings to cover an additional

300.000 people in Medrcard 16 The waiver included the Un- co m pensated Care Pool and the federal matching funding t ied to t he pool. Fu r ther. in I 996 Massachusetts expanded Medicaid coverage to all children up to 200% or the FPL and created the Children's Medical Security Plan. The Children's Medical Plan was a state-funded limited benefit plan provrd· ing primary-care coverage to uninsured children. The plan

was financed by an expansion of the tobacco tax and the program served as a model for the national State Children's Hea lth Insurance Program (SCHIP) . Ultimately MassHealth wo ul d cover over I 4 mrllron of the state's 6.4 million residents. 17

Policy Environment T hese previous rounds of reform and the public and private health care system helped shape a unrque policy environment that enabled the 2006 reforms Frrst. there was a sense or urgency created by the need to renew the state's 1115 state health care waiver and prevent the loss or hundreds of millions of federal dollars. Second. earlier reform efforts created a strong safety net including high levels of Medicaid coverage and a system for paying for some care received by the uninsured. Massachusetts also has a relatively high percentage of resi- dents covered by employer-provided rnsurance.'s As a result. the state had a relatively low number of uninsured ( 10%) com- pared to the United States as a whole (whrch averages 16%' Third. t he state had resources in the Uncompensated Care Pool that could be used to help finance coverage expansion.

Furthermore. the state had progressive insurance market regulations in place prior to reform The state had instituted a system of modified community ratrng. which restncts how much prem_iums can vary based on age. region and gender It als? required that insurance offered in the state be compre· hensive and discouraged hrgh deductible and limited benefit plans. Next. the interest groups, polrtrcrans. and government

~ -

~ -

officials in the state worked on other rounds of reform and developed trust and a history of working together. Unlike the Dukakis reforms. the 2006 reforms had broad bipa rtisan sup- port without active business opposition. Finally. at the time of passage the state was experiencing strong economic growth and a budget surplus.

The absence of many of these fa ctors in other states will make implementing national reform more difficult. One could imagine that reform would be far more difficult in a state like Texas with a less generous Medicaid program. a less regu- lated insurance market. over 25% uninsured. strong political opposition. and a limited history in stakeholder interaction in this area.

Leadership Massachusetts reform was a compromise between Governor Mitt Romney's proposal and those proposed in the state Sen- ate and House of Representatives. It was made possible by leadership-from politicians. interest groups. academics. and consumer advocates-throughout the policy and implemen- tation process. The Blue Cross Blue Shield of Massachusetts Foundation held a series of three events fea turing Governor Romney, the speaker of the House. and the president of the Senate. Referred to as The Road Map to Coverage. each event included commissioned research from the Urban Institute, a nonpartisan Washington think tank specializi ng in policy re search. The first reports described in detail the number of uninsured, available resources. and the cost of various options and number of uninsured they would cover. 19 The second concluded that the plan could not get to universal coverage or close without an individual mandate. 20 The third was on implementation issues.21 These "big " events brought to- gether top health -pol icy leaders. were widely covered by the press. helped focus politicians. and helped develop consensus around policy action necessary for coverage expansion.

The state also has a strong and active advocacy organiza- tion that exerted political pressure through its own legislative plan. a ballot in1t1ative. and a comprehensive grassroots cam- paign. The advocacy organization. Health Care For All . led an advocacy coalition known as ACT! (Affordable Health Care Today) . ACT! included labor unions. community health cent- ers. public health advocates. and the Greater Boston Interfaith Organization. This was the first ti me the faith-based com- munity was directly and actively involved in Massachusetts

health care reform efforts and broadened the constituency for major reform.

Health Care For All's plan and the ballot initiative included higher subsidies for low-income residents and a stronger pen- alty for employers not providing coverage than were included in the final bill. Health Care For All's initiative did not in- clude an individual mandate. Over 2.000 volunteers collected enough signatures (I 12 .000) to put the initiative on the bal- lot.22 This provided the coalition with strength to bargain with legislators. They ultimately supported the individual mandate in exchange for higher subsidies and. claiming victory. with- drew their ballot initiative.

Despite this initial progress. Massachusetts health reform was stalled for four months in a conference committee with major differences between the House and Senate versions of the bill. The primary point of contention was employer responsibility. The House bill required a maier contribution from employers including a 5% payroll tax for small - and medium-size employers ( 11 to I 00 employees) and a 7% pay- roll tax for larger employers. The Senate bill simply required employers with over 50 employees to contribute to the extent that their emp loyees used the state's Uncompensated Care Pool. Business leaders. including health plans and health care systems . helped broker the compromise . resulting in the $295 annua l " fair share " assessment for employers with 10 or more employees not providing insurance. Later Blue Cross Blue Shield of Massachusetts and Partners Health Care System contributed substantially to a media campa ign de- fending the plan. In short. leadership was widespread and the coalition broad. This would hold during the challenges of implementation.

Implementation The Connector Board was responsible for developing the rules and regulations for implementing the Massachusetts reform . It consists of IO members selected by the governor and attorney general representing labor, business. consumers, and includ- ing top government officials. Major responsibilities include the following:

• Developing and runn ing t he Commonwealth Care Insurance Program

• Developing and running the Commonwealth Choice Program

11

• Providing a · seal of approval" for health plans offered

through the Connector • Establishing a young adult plan for people between 19

and 26 years of age • Defining the minimum health insurance coverage required

to meet the mandate. "minimum creditable coverage"

• Creating an affordability standard

• Developing rules for implementing the individual mandate

• Supporting public outreach and awareness

• Creating a business strategy to be financially self-sustaining

• Becoming a health care broker and purchasing agent

While the Connector Board faced many challenges. the locus here 1s on two stemming from the individual mandate: defining insurance and creating an affordability schedule. To implement an individual mandate requires a definition of in- surance to specify what exactly is being mandated. What type of insurance will satisfy the requirements of the man- date? Would a "bare-bones" plan that provided on ly, say, $2,000 worth of coverage qualify as insurance? In Massa- chusetts. the Connector Board decided that a comprehensive set of benefits should be required in what it called minimum creditable coverage. These include the following:

• Hospital. phys1c1an and other provider services. and diagnostics

• Mental health parity

• Prescription drug coverage

• Annual out-of-pocket cap of $5.000 for an individual. SI 0.000 for a family

• Deductibles cannot exceed $2,000 per ind1v1dual and S4.000 per family unless combined with a medical savings account

• Coverage of preventive physician visits must be provided prior to any deductible

• No limits on per year or per sickness coverage

Establishing a benefits package requires important trade- offs. The richer the benefits package, the higher the cost and the gre_ater the need for public subsidies. Further. the more expensive the plan. the more people are required by the man- date to purchase On the other hand. while a slimmer ben- efits package or a high-deductible catastrophic plan cost less

upfront. they nsk substituting uninsured patients with under- insured patients. and high out-of-pocket costs ma_y have peo- ple questioning the value of what they are required to buy . The Connector Board's choice of a more generous benefits package ensures that vital services are covered but also in- creases costs and subs1d1es and exacerbates the challenges of sustainab1hty and the need to control costs. With national reform. the secretary of Health and Human Services has faced simi lar tradeoffs in determining a national essential benefits

package.

Since the mandate applies only if insurance is ·afford- able," a definition of affordability is also required . The Massachusetts Connector Board had to determine an afford- ability schedule that they rev1s1t each year. The tradeoffs here are equally complex. Exempting a large number of people from the mandate because 1t 1s or may be unaffordable would result in fewer people with insurance. Many of these people will be younger and healthier since they are more likely to take a chance of being without insurance. Their absence from the risk pool will increase the overall per-person costs and make insurance more expensive. thereby making it unafforda- ble for more people. Conversely. requiring people to purchase insurance they cannot afford weakens the credibility of the mandate.

In the process of determining affordability the Connec- tor Board used data and analysis from a number of differ- ent consumer groups, economists. and policy analysts but ultimately made a pol1t1cal dec1s1on Consumer groups held convenience sample focus groups in churches asking people to bring in their bills to determine what they could afford.21

An economist on the board estimated disposable income at certain income levels and ran simulation models estimating what people at certain income levels were spending for health insurance. 24 Other comparisons were made with affordabil- ity standards for other social welfare benefits like the SCHIP These and other studies were used as part of a poht1cal proc- ess of bargaining and negotiating between stakeholders that ~ed to a consensus. The process itself was important to retain- ing stakeholder support and thwarting organized opposition to the mandate. The success and legitimacy of reform would have been jeopardized if. for example. consumer or business groups walked away from the bargaining table claiming that the ~~dividual mandate affordability standard was unfair and 1lleg1t1mate.

~ -

In the end, the standard was set so that the mandate appl ies to 80% of the uninsured and 99% of the public. 25 As part of this process. the Connector Board increased full subsidies in the Commonwealth Care program from I 00 to 150% of the FPL. Subsidies in this program were considered affordable. Therefore a person with income below 150% of the FPL who is not eligible

CONCLUSION The Massachusetts reform was built on a strong safety net. relatively low number of uninsured. high rates of employer- provided insurance. progressive insurance regulations. and considerable federal funding. The program succeeded be- cause of support from a broad-based coalition of consum- ers. providers. health plans. health care systems. and the business community. This coalition was maintained dur- ing the challenging implementation phase and gave reform credibility and legitimacy.

Reform, however. did not address spiraling health care costs. Moving close to universal coverage did place addi- tional pressure on the politica l syste m to control costs or risk losing coverage gains. The state is working on compre- hensive cost control legislation. but the cha llenge is great. Key supporters who gained revenue from expansion lose revenue from cost containment. The critical question is, Can the coalition that supported reform be maintained as the state moves to cost containment and the implementa- tion of national reform?

STUDY QUESTIONS

for Commonwealth Care because they have employer-provided insurance is not required to buy insurance unless the cost is zero. At the other end of the spectrum. people with family in- come over 500% of the FPL are responsible for the full premium. The Connector Board also set up a system for individual case- by-case waivers. which serves as a safety valve for the system.

Finally, the Republican George W. Bush administration proved a final impetus pushing Massachusetts toward re- form. The state faced a loss of federal funds. To go forward. it needed a federal waiver; this was approved by the Bush administration. In turn the Massachusetts reform served as a model for national reform under President Obama.

National reform will now be defined in part by how it is implemented by the states. States have considerable flexibility in how to establish health exchanges. which will be established under federal guidelines and oversight. Massachusetts will have to make modi fications to its law to come into compliance with the ACA. Other states start in far different places and wi ll have much greater politica l and policy challenges implementing the national reform. This interaction between the federal and state govern- ments creates health policy. Studying American federal- ism is central to understanding contem porary health and social policy.

I. What was the most unique feature of the Massachusetts health care reform plan of 2006?

2. What were the key features of the Massachusetts health insurance re form plan of 2006?

3. What was the political climate behind the Massachusetts health insurance reform plan of 2006?

4, What factors somewhat unique to Massachusetts made the reform plan of 2006 possible?

S . What were the two significant challenges faced by the Connector Board7

, ,

ENDNOTES h tts Taxpayers Foundation. 2009. 1. Massac use

2 . Seifert and Cohen. 2010.

J. Gruber. 2009. . & t=4&rgn-23 4. http://www.statehealthfacts.org/profileind.jsp?1nd= I 77 ca - .

S. Massachusetts Taxpayers Foundation. 2009.

6 Long and Stockley. 20 I 0.

1. McDonough. 2006, p. 421

a. McDonough 2004-2005. pp. 57-62. 9 Holahan et al .. 2005. p. 7.

1 o Seifert. 2002 . p. 5. 11 Office of the Inspector General Commonwealth of Massachusetts. 2005

12 McDonough . 2006, p. 421.

1 Sager. 1989 p. 270.

Sager. 1989. p 269.

McDonough . 2004-2005. p. 60

6 Anthony. Seifert. and Sullivan. 2009.

17 http;//www.statehealthfacts.org/profileind.Jsp7ind= I 98&cat=4&rgn=23.

1 Agency for Healthcare Research and Quality, Center for Financing, 2004.

19. Holahan. Bovbierg. and Hadley, 2004

20. Blumberg et al .. 2005.

2 1. Weil. 2005

2 2. MassAct Web site. 20 I I.

23 . Greater Boston Interfaith Organization. 2007

24. Gruber. 2007

25. Commonwealth Connector Final Regulations 5.00. 2007.

REFERENCES Agency for Healthcare Research and Quality. Center for Financing. 2004. "Access and Cost Trends: 2004." Medical

Expenditure Panel Survey Insurance Component.

Anthony, S .. R. Seifert. and J. Sullivan 2009 (February). The MassHeallh Waiver: 2009-2011 and Beyond. Boston: Massachusetts Medicaid Policy Institute and Massachusetts Hea lth Policy Forum. Retrieved from http:// masshealthpolicyforum.brande1s.edu/forums/Documents/MassHdievealth-waiver-2009-lssue%20Brief%20Final.pdf

----=-=---~~~~~~~~~~~~~-=~-=-=-~=====---·-~ _, _ CHAPTER 12 •Massachusetts 11:p

f.

Blumberg. L.. et al. 2005 Uune). ··Building the Roadmap to Coverage: Policy Choices and the Cost and Coverage Implications.·· Retrieved from http://www.roadmaptocoverage.org/pdfs/BCBSF _Roadmap2005.pdf.

Commonwealth Connector Final Regulations 5.00. 2007 Uuly I) ... Commonwealth Health Insurance Connector Authority: Minimum Creditable Coverage ... Retrieved from: http://www.mass.gov/Qhic/docs/956%20CMR%20 5.00%20Final%20060507.pdf.

Greater Boston Interfaith Organization. 2007. Mandating Health Insurance: What Is Truly Affordable for Massachusetts Families? Boston: Greater Boston Interfaith Organization.

Gruber J. 2007 (March). Evidence on Affordability from Consumer Expenditures and Employee Enrolment in Emp loyer- Sponsored Health Insurance. Boston: Massachusetts Institute of Technology. Retrieved from http://econ-www.mit. edu/files/ 128.

Gruber, J. 2009 (November 27) ... The Senate Bill Lowers Non-Group Premiums: Update for New CBO Estimates:· Washington. DC: White House. Retrieved from http://www.whitehouse.gov/files/documents/Gruber_Report_4.pdf.

Holahan J .. R. R. Bovbjerg. and J. Hadley. 2004 (November). Caring for the Uninsured in Massachusetts: What Does It Cost. Who Pays and What Would Full Coverage Add to Medical Spending. Boston: Blue Cross Blue Shield Foundation of Massachusetts. Retrieved from http://www. roadmaptocoverage.org/pdfs/roadmapReport.pdf.

Holahan J., et al. 2005 (October). Road Map to Coverage: Synthesis of Findings. Boston: Blue Cross Blue Shield of Massachusetts Foundation. Retrieved from http://www.roadmaptocoverage.org/pdfs/Roadmap_Synthesis.pdf.

Long. S. K .. K. Stockley. 2010 Uune). Health Reform in Massachusetts: An Update as of Fall 2009. Boston: Urban Institute. Blue Cross Blue Shield of Massachusetts. Retrieved from http://bluecrossmafoundation.org/sites/default/ files/MHRS%20Report%20Aug24.pdf, June 23. 2013.

Massachusetts Taxpayers Foundation. 2009. Massachusetts Health Reform: The Myth of Uncontrolled Costs. Boston: Massachusetts Taxpayers Foundation.

MassAct Web site. 2011. Retrieved from http://www.massact.org/about.asp.

McDonough, J. E. 2004-2005. "The Road to Universal Health Coverage in Massachusetts." New England journal of Public Policy 20: 57-62.

McDonough, J.E. 2006 (September 14) ... The Third Wave of Massachusetts Health Care Access Reform." Health Affairs. published on line before print. doi: I 0.13 77/hlthaff.25.w420.

Office of the Inspector General Commonwealth of Massachusetts. 2005 (November). "Ongoing Review of the Uncompensated Care Pool Pursuant to Chapter 240 of the Acts of 2004 ... Publication No. CR-1111-69-25-11 /05-IGO.

Sager. A. 1989 (Fall) ... Making Universal Health Insurance Work in Massachusetts." Law. Medicine and Health Care 17(3). 270

Seifert. R .. Cohen. A. 20 IO Uune 21 ) . Re-Forming Reform: What the Patient Protection and Affordable Care Act Means for Massachusetts. Boston: Blue Cross Blue Shield of Massachusetts Foundation.

Seifert. R. 2002 (October 23) ... The Uncompensated Care Pool: Saving the Safety Net. .. Massachusetts Health Policy Forum 16: 5.

Weil. A. 2005 (October). You Can Get There from Here: Implementing the Roadmap to Coverage. Boston: Blue Cross Blue Shield Foundation of Massachusetts. Retrieved from http://bluecrossmafoundat1on.org/sites/default/files/ download/publication/OS I 007RTCYouCanGetThereWeil.pdf on June 23, 2013.

One out of four Texans does not have health insurance coverage~the highest uninsured rate in the nation. At the same time, Texas has a formidable antitax. antigovernment culture. In this article, David Warner explores Texas politics and how the state has responded to the increased federal role in health services and to the requirements of the Affordable Care Act.

In the late 1920s. a group of Dallas-area teachers contracted with Baylor Medical Center to receive a prepaid set of defined hospital benefits . Thus was the first Blue Cross plan born. About 40 years later. in August 1969. a team of Houston phy- s1c1ans performed the first 1mplantat1on of an artificial heart. Throughout the 20th century, Texas has been a site of innova- tion in the health care sector. The state 1s home to some of the top medical institutions in the country. At the same time. however, 1t 1s also known for a far less happy superlat1ve- today a full quarter of Texans find themselves without health insurance The state leads the nation in the number of uninsured residents The proportion of uninsured Texans is around double the national rate. The state represents. in an extreme form. one of the chief conundrums facing policymak- ers nat1onw1de· How best to extend excellent health services to a larger portion of the population.

A HISTORY OF LIMITED GOVERNMENT

~~~~~~~~~~~

The state of Texas has historically been a low·tax state and whenever possible has tried to implement social policies on an experimental or pay-as-you-go approach rather than establishing entitlements to benefits or services. The con· straints on taxing and expenditure have grown stronger over the last two decades and include a constitutional restriction on a state income tax . growth limits on nonded1cated state expenditure. provisions against deficit spending. a 1m1t on state debt. and a general revenue spending limit on outlays for children and other spending on Temporary Assistance for Needy Families (TANF) to I% of the state budget In addition. the governor has a line-item veto. which is usually exercised after the legislature is adjourned for the biennium (the Texas

...

legislature meets for one session every two years). The upshot

15 significant constraints on increases in spending. In fiscal 2010-2011. the state appropriated less than one-tenth of I% of the state budget to fund TANF.1

The state has established a Rainy Day Fund. which is funded by a portion of the surpluses in the General Fund. or biennium. as well as 75% of the increase from a bench- mark of receipts from the oil and gas production tax. How- ever. it is not easy to spend the funds. The legislature can only appropriate these funds if a supermajority from both houses approves the expenditure. 2

Limits to the Rise of Health Care Programs Prior to the implementation of Medicare and Medicaid in 1965. medical care in Texas was the responsibility of the pri- vate sector. with the exception of state-run mental hospitals and state schools for the mentally impaired as well as the MD Anderson Cancer Center and the University of Texas Medical Branch in Galveston that traditionally took care of indigent patients from across the state. In addition the Texas Constitu- tion gave counties responsibility for support and medical care of the indigent. A number of counties had developed hospital districts with independent taxing authority, which cared for poor patients under variable rules.

Medicare and Medicaid. passed under President Lyndon B. Johnson of Texas . brought substantial relief to many- especially the elderly. In Texas. however. eligibility for medical indigency under Medicaid was limited to 133% of the basic welfare grant-and the cash welfare grants were extremely low. As a result . few families with low income became eligible for Medicaid. Rather. most Medicaid re- cipients in Texas fell into one of the categories that are not directly linked to income (e.g .. disabled or blind people. or pregnant women) . The federalization of Supplemen- tal Security Income (SSI) eligibility in 1972 increased the numbers of disabled and elderly poor Texans covered by Medicaid but did not significantly change coverage of poor families .

In 1985 the legislature passed the County Responsibility Act. which established counties ' responsibility for indi- gent care and required state allocation of funds to partially reimburse counties for indigent care costs that exceeded a

CHAPTER 13 • Texas 1§1

certain percentage of their general tax bill as well as estab- lish in g new programs for primary care and maternal and infant care. 3 By the end of the 1980s. the structure of gov- ernment-funded health care in Texas was well established. Due in large part to the efforts of Senator Lloyd Bentsen (D-TX). who was chairman of the US Senate Finance Com- mittee. the link between welfare and Medicaid in federal law was broken . at least for mothers and children. As a result . more than one in three children in Texas is now cov- ered by Medicaid-compared to just over I in 20 adults (see Table 13 - 1 ).

The state has become adept at drawing Medicaid funds from the federal government (using tactics discussed in Chapter 6 on federalism). Texas developed an initiative whereby hospital district tax receipts could be used to pull down federal matching funds to reimburse many hospitals for indigent care and to enhance Medicaid reimbursement at hospitals with a "disproportionate share " of low-income and uninsured patients. In fact the state was so success- ful in drawing down these funds that the federal govern- ment instituted rules in the early 1990s limiting states' disproportionate-share percentage to 6% of total Medicaid expenditure.

In addition . mandated Medicaid coverage of children un- der the federal poverty line (FPL) was being phased in by the federal government. In the 1990s. additional federal initia- tives included the Health Insurance Portability and Account- ability Act (HIPAA), which requires small group insurance to be offered , although quite a lot of discretion on rates is permitted in Texas . and the State Children's Health Insur- ance Plan (now CHIP) , which incentivized coverage of chil - dren up to 200% of the FPL. While Medicaid and CHIP have consumed increasing funds, the rate of overall health insur- ance coverage in Texas has remained fairly static since 2000 while employer-based coverage has declined from about 60% of the under-65 population to about 5 I %.4 Tab le 13-1 shows the relatively low levels of insurance in Texas as compared to the United States as a whole. This is the consequence of a variety of factors: Texas has more small employers , lower levels of unionization. a large Hispanic population, which nationally has twice the uninsured rate as whites . large numbers of low-income workers , and a state tax and expenditure system that is much more fiscally conservative than most.

TABLE 13-1 Insurance Coverage in Texas and the United States, 2009- 2010 . .

Employer-based(%) 41.4

Individual Coverage(%) 3

Medicaid (%) 37.2

Other(%) 1.5

Uninsured (%) 17

. - . 53.3

3.6

5 .9

1. 5

32 .5

. - • 49.4

4 . 1

16.4

2 . 7

27.4

US below 65 (265 million)

56.6

5.4

16.8

2.8

18.4

So111u: O:n,us Bureau March Supplement to the 20 11 Current Popu lation Survey by ana lysb of the K,11,er Comm1,,ion on \.1cdicaid ;111d the Uninsured and the Urban Institute. " Medicaid " includes CHIP a nd dual eligibilll). "emplo)cr ba,cd" i l'O\cragc ,pon,orcd by the employer that covers employees and their dependents, a nd "other" includes military and \etcran~ Admnmtration coverage as well as nonelderly who are covered by Medicare.

Policy Making in the Courts The state of Texas has often faced court cha ll enges from benef1c1anes or the federal government regarding the adequacy and appropriateness of services provided. In many ways. the courts have forced a reluctant state to expand services. Table 13·2 presents some of the major cou rt cases that have taken place over the last 40 years. Several of these cases led to the Texas mental health and state school systems being under court supervision over periods extending across 20 years. In other cases. the state has entered into agreements with the courts that are still involved in making sure the agreements continue.

On the other hand. the state of Texas 1s now using the courts to try to limit government health care. Texas JOined with 25 other states in 20 Io to sue the federal government to nullify the Affor?able Care Act (ACA). It is no surp rise that the state part1c1pated in the lawsuit. Governor Rick Perry subsequently wrote a book titled Fed Up. Our Fight to Saue America from Washington.

TllE NEW REPUBLICAN LEGISLATURE , H EALTH PROGRAMS, AN D THE ACA Arter the 2010 midterm elections, the breakdown in the Texa s House of Representatives went from 77 Republicans and 73 Democrats to I 0 I Republicans and 49 De

mocrats. Democrats

picked up just seven seats rn the 2012 election. so the newly lopsided Republican ma1orrty may be here to stay. The Texas legislature is limited by the Constitution to meet for 140 days in odd-numbered years. Srnce the session begins on the sec- ond Tuesday of January, newly elected legislators have limited time to become familiar with the issues and the strategies that they will encounter. In 20 I I the legislature was committed to not raising ta xes and also to preserving the roughly $8 billion Rainy Day Fund that had been allowed to accumulate. This was particularly difficult since rn reforming school finance. they had replaced a portion or the local property tax with a margins tax on businesses that had turned out to produce a $I 0 billion structural deficit In the end. the budget the leg- islature produced was only possible after members reduced promised elementary and secondary school funding and also developed savings and dramatic cutbacks in estimated requirements for health and human services .

Funding in the new budget was cut significantly for health and huma n service programs that relied primarily on general revenue funding. An example 1s funding for graduate medi· cal education. which had long been seen as a pnonty to keep :~xas-educated physicians 1~ Texas after medical school. It had

ten been argued that California. with fewer medical gradu- ates but many more re ·d . s1 ency programs. was more effective at attracting physic· f . . . rans or trarnrng who then remained in Cal1forn1a while Texa 1 s was on y able to retain a much smaller percentage of its grad t 8 f .d ua es. ut undrng for family practice res1 ency programs was cut almost from $15 to $5.6 million.

... -

TABLE 13-2 Key Legal Challenges in Health Services in Texas, 1971-2012 Lawsuit Date Parties Issues Resolution

Lelz u. 1971 Parents of residents Inadequacy of After two settlements where Kauanaugh of three state schools community services the state's compliance was

and inadequate care in challenged a third settlement. state schools which included closing two state

schools, led to the dismissal of the lawsuit in 1992.

RAju. MHMR 1974 Residents of state Patients' treatment 1981 settlement installed hospitals standards and poor court monitor to oversee

conditions implementation finally dismissed in 1995 after all hospitals met the care standards.

Frew u. 1993 Class action suit by Adequacy of screening After slow implementation and Hawkins parents on behalf and provision of suit, state agreed to expand

of their children on services to children on case management. dental and Medicaid Medicaid under EPSDT mental health services, as well

as enhanced pediatrician fees to encourage participation; ongoing.

DO} u. Texas 2009 Suit by Department Safety and adequacy Detailed settlement agreement

Department of Justice after three of care at Texas state entered into on the same day as

of Aging and years of inspections schools the lawsuit in June 2009. A court

Disability of Texas state monitor was appointed to assure

Seruices schools compliance with the settlement.

Florida u. US March Suit by eventually 26 States argued that the The decision of the Florida judge

Dept of HHS 23.2010 states to nullify the act is unconstitutional and of the I I circuit courts as well Affordable Care Act on a number of as other competing decisions have

fronts including the been argued before the Supreme requirement that Court, late June 2012. individuals purchase insurance or pay a fine and substantial expansion of Medicaid

Planned 2012 Suit by nine Planned State banned not only CMS told Texas that if Planned

Parenthood u. Parenthood affiliates abortion providers but Parenthood were omitted then

Suehs in Texas regarding also all entities with Texas would no longer have the

their participation in an "affiliation with an Women's Health Waiver. The ~ the Texas Women's abortion provider" from exclusion issue was argued in

Health Program participation in the court in June 2012. Texas Women's Health i Program <:!! 9

and the primary care residency program. which trained 122 residents annually. was eliminated completely. The Physician Education Loan Repayment program was reduced from $23.3 to $5 .6 m1llion .s There were additional cuts to nurse training. developmental disability funding. and trauma care. funding for family planning from the State Department of Health Services was cut from $111.5 to $37.9 million in the next biennium.6

As of early 2013. the state has not applied for federal funding or committed to developing insurance exchanges as required under the ACA. Legislation that was developed during the 20 I I session to develop an exchange was not voted out of committee. even though it was supported by the Texas Association of Business. the Texas Medical Asso- c1at1on , and a number of advocacy groups. Nonetheless. the

CONCLUSION Shortly after the ACA was (largely) upheld by the Supreme Court. Governor Perry sent a letter to Health and Human Services secretary Kathleen Sebelius expressing his inten- tion to refuse the now-voluntary Medica id expansion set out by the act In the same letter. the governor stated that he would not oversee the format ion of a state health in - surance exchange. Under the ACA. states failing to de- velop their own exchanges will witness the establishment of such an exchange under federal auspices. While some Texans will thus reap the benefits that could come with an insurance exchange. it is unclear whether they will

STUDY QUESTIONS

ACA could potentially have a greater impact on Texas than on any other state.

The Center for Public Policy Priorities estimated that of the 6.1 million uninsured in Texas I million adults would be- come eligible for Medicaid at little cost to the state (recall that the federal government will initially cover 100% or the costs of the newly eligible Medicaid recipients and 90% of their costs by 2020). Subsidized coverage on the insurance exchange would become available to 2.5 million adults and children. And the 500.000 to 700.000 children currently eligible for Medicaid or CHIP but not enrolled would continue to be eligible. but. 1n many cases. elimination of the asset test and more continuous eligibility required by the ACA would likely increase their enrollment. 7

receive the full amount of insurance subs1d1es available to those purchasing coverage on state-controlled exchanges. The impact of the ACA on Texas will. as in the case of all other states. be substantial. Nonetheless. the opposi- tion of the state government to some prov1s1ons of the act means Texans will not see the full range of benefits potentially on offer from the federal government. There is little prospect. in the short term. of Texas giving up the dubious claim of being first in the nation when 1t comes to numbers uninsured.

I. What are some of the major b d d h - 2 Wh u get an ea Ith program challenges Texas faced in 20 I I 7

• at was the overall budget situation in Texas in . . health programs? 20 I I with respect to revenues and funding for Med1ca1d and other

3. Ultimately. what was the three phase strategy Texas cam . . e up with to deal with the revenue shortfall?

-

= ENDNOTES

I. House Research Organization. 2011. pp. 7-9.

2. Ibid .. p. 9.

3. Hobby. 1995.

4. Gould. 2012.

S. Tan. 201 la.

6. Tan. 201 lb.

7. Center for Public Polley Priorities. 20 I 0.

REFERENCES

CHAPTER 13 . Texas •u

Center for Public Policy Priorities. 20 I 0 ... Health Reform Road Show: San Antonio." Retrieved from http://library.cppp. org/events/event_details.php?eid=256 on May 192012. Powerpoint slide 14.

Gould, E. 2012 (February 23 ). A Decade of Declines in Employer-Sponsored Health Insurance Coverage. Washington. DC: Economic Policy Institute.

Hobby. B. 1995 . "Health Care Reform." Austin American Statesman. December 13.

House Research Organization. 20 I I (February 3 ). "Writing the State Budget: 82nd Legislature." State Finance Report No 82-1. Texas House of Representatives.

Tan. T. 201 la. "Day 22: State Cuts Mean Fewer Residency Slots in Texas." Texas Tribune. August 22.

Tan. T. 2011 b. "Day 15: Texas Family Planning Funding Slashed." Texas Tribune. August I S.

Oregon is famous for innovation in health care policy. In this chapter. Howard Leichter describes the state's creative efforts to get health care to the entire population-a nd the enormous barriers that have stymied those efforts. He shows us the lessons from Oregon that apply to all the states.

Oregonians pride themselves on their reputation as politi- cal tra1lblazers- .. a laboratory of reform on the Pacific Rim. a maker of national trends · 1 Oregon was the first state to adopt the 1nrt1at1ve. referendum. and recall process: to intro- duce direct popular election of US senators. to use ballot by marl rn all federal. state. and local elections: to enact a .. bottle bill'; and to adopt an assisted suicide or .. death with dignity .. law But there rs perhaps no policy .. first .. better known or more widely debated than the Oregon Health Plan (O HP) and rts prov1s1on for rationing health care for the state's Medicaid population The health plan achieved almost mythic status among health policy researchers. 2

This chapter updates the story of Oregon's health reforms and casts them rn a broader li ght than merely as a bold ex- periment of one state. For although the Oregon experiment rs rn many respects. unique. it rs part of a larger sto ry of a national health care crisis that has confounded American policymakers for decades. The crisis involves two trends

that seem intractable. The first rs cost: Health care has been consuming an increasingly larger share of federal and state dollars. burdening governments and taxpayers while hm1trng their ability to address other areas of public concern such as wages. school funding. and social infrastructure Second. while health care costs have been rising. so too have the number and proportion of Americans without health rnsur· ance. The battle against these twin scourges has been fought at both the federal and state levels of government. but un· til the adoption of the Affordable Care Act (ACA) rn 20 0 much of the health care reform act1v1ty in the United States occurred in the states. 4 What follows rs the story of how Oregon ha s tried. for nearly two decades. to reach the prom· ised land of health care reform. a place where everyone has access to dependable health care at a price that rs afford· able to both the individual and the state government. The Oregon story, not unlike that of other states. 1s one of alternat· ing between .. the grand asp1rat1ons and ambitions of health

: reformers on the one hand and the state's sobering fiscal constraints and political realities on the other. " 5 Despite of· ten harsh criticisms of their efforts. Oregon policymake rs have continued in their quest to provide access to at least a basic level of affordable health care for all of the state's citizens.

I begin the chapter by setting the scene for the Oregon story with an overview of the health care crisis. Next. I examine the beginnings of Oregon's controversial policy of rationing health care to its Medicaid population. This was an exhilarat· ing time for Oregon 's health-policy reformers as pohcymak· ers in other states. and nations. closely followed the Oregon experiment. I then turn to a more sobering part of the story. when the lofty aspirations of Oregon's health-policy reformers were undermined by fiscal reality. I conclude with the lessons learned from Oregon's health-reform journey.

ALL UNHAPPY STATES ARE UNHAPPY IN THE SAME WAY State and local governments play a crucial role in protecting the health and safety of their citizens. Beginning in the mid· 19th century. state governments. and t hei r city and county partners. have monitored the hea lth status of their citizens and controlled or eradicated the microbia l and man-made hazards. Beyond their historical public-hea lth role. states per· form an enormous range of health care-related functions. For example. they license physicians. nurses. pharmacists. and other health care professionals. They set t he rules govern· ing insurance companies. nursing homes. hospitals. workers' compensation. and environmental protection.

Many of these health measures. such as mandating use of seat belts in vehicles or bicycle helmets. limiting junk food in schools. or banning smoking in public places. affect the way Americans conduct their daily lives. Others affect the bodies and lives of Americans in ways that many view as overly in· trusive. or indeed immoral. such as distributing free condoms and clean hypodermic needles. mandating fluoridation of public water supplies, or requiring immunization of children before they are allowed to attend public schools. And some. such as the death-with-dignity laws in Oregon, Washington. and Montana. affect the way Americans choose to die. All of these health measures. and many more. are often highly contentious. The Oregon Death with Dignity Act-even the

CHAPTER 14. Orgeon •a name was in dispute as opponents preferred calling it "as· sisted suicide" -was twice placed on the Oregon ballot and was challenged all the way to the US Supreme Court. Yet as important and contentious as these kinds of health policies are. none rivals the attention devoted to taming the twin beasts of the health-policy crisis: reining in costs and expand· ing access to care for the uninsured.

Between 1990 and 20 I 0. total national health expendi· tures increased from $2,853 per person to $8.086; the per· centage of the GDP devoted to health care rose from 12.S to 17.8%. What all this means is that health care has relent· lessly consumed a larger proportion of both family budgets and the nation's economic pie.6 From the states' perspective, the epicenter of the health care cost crisis has been Medicaid . Medicaid is the second-largest source of health insurance for nonelderly (i.e .. under age 65) Americans.

Medicaid enjoys a special place in the hall of horrors of state policymakers. It is second on ly to education in the percentage of the state dollars it consumes and . in the case of Oregon. claims over one-fourth of the state's budget. It has been al· ternately described as the " 900 pound gorilla" of health care and "the monster that ate the states." 7 Looking back over the last three decades. a "Medicaid crisis" has reared its ugly head with frightening, but almost predictable, regularity: The econ· omy turns bad , Medicaid enrollments soa r. and state budgets buckle under the burden of increased state health care costs. State policymakers then scu rry around trying to figure out how to reduce costs without throwing too many poor people out of the health care lifeboat. This was precisely the situation Oregon faced in the late 1980s, again during 2002-2004. and yet again during the recession that began in 2008.

"IT WAS THE BEST OF TIMES" Unfortunately as health care costs in general. and Medicaid costs in particular, were rising, so too were the number and rate of uninsured Americans. Health care trends in Oregon have mirrored those at the national level. In 1987. 18% of all Oregonians were uninsured. Following implementation of the OHP. this dropped to 11 o/o in 1995 but has subsequently increased steadily so that in 20 I 0 nearly 650.000 people. or 17% of all Oregonians. were uninsured . Health care costs were following the same trajectory as the uninsured rate. In 1987, the year the Oregon rationing tale begins. the state spent a

~~~----===========:= @m:i P\Rl IV• The States ·d· IO ars later the total was total of $234 million on Med1ca1 . ye

$1.7 brllron. and in 2009 it was $3.5 brllron.

It was in the context of rising and ruinous healt~ ca~e costs rn the Medicaid program that the Oregon story begin~ rn .19~7 with the tragrc death of a seven-year-oldb b~y :~o~~~~a~~~a~h: that ear Oregon lawmakers. facing a u g state~ M.edrcaid program. decided to drop organ tr~ns~l~nt~­ tron from its covered services. As a result. the state erne he request for a bone marrow transplant to th: young boy'. w o dred in the mrddle of a highly publicized private cam~argn to raise money for a bone marrow transplant. Oregon receive~ n~; tronal medra attention as the state that let "a little boy ~re. Oregon lawmakers. and particularly its .state senate. president and emergency room physician. John Krtzhabe~. decided th.ere had to be a better way of making health care polrcy than . dealing wrth one medical tragedy at a time. Kitzhaber thought rt was a mistake to publrcally fund very expensive transplants for JUSt a few people. while so many Oregonians had no reliable access to any care at all. At the trme. 450.000 Oregonians ( 18% of the population) had no health insurance. Many workers were pay- ing taxes to fund Medicaid while they went uncovered. These included people who were "medically uninsurable" due to pre- existing medical conditions. others who fell below the federal poverty level (FPL) but by Oregon rules were not poor enough to qualify for Medicaid. and those who had no private health insurance either because their employer did not offer it or they could not afford to pay their share of the premiums.

While the state faced a large and growing uninsured popu- lation, it was also experiencing a raprd growth in health care costs. In response to the growth of Medicaid spending. the states have adopted one or more of three strategies. all of which are tantamount to rationing health services: (I) elimi- nate benefits, as Oregon did with transplants; (2) tighten up elrg1b1lrty and. thereby. throw people off the Medicaid rolls: and (3) reduce health provider reimbursements. None of these options appeared particularly attractive to Oregon lawmakers. Certainly state health reformers did not want a repea t of the transplant controversy by eliminating potentially lifesaving. but costly, medical procedures from its Medicaid program. In add1t1on, many doctors were already turning away Medicaid patients because of low reimbursement rates. Hence. Oregon was faced wrth a dilemma: How could the state expand ac- cess to health care insurance yet control the growth in health spending? The answer came in the form of a "bold experi- ment" that would become known as the OHP.

Of the plan was the Oregon Basic Health The centerpiece . . A t (hereafter referred to as the OHP). passed rn Services c d d

d . 1 mented rn 1994 The plan was es1gne to 1989 an rmp e · h t t ·s 18% uninsured rate in three ways Frrst. reduce t e s a e

the legislature created a hrgh-risk insurance pool. called the

M d. 1 Insurance Pool to provide access to pnvate Oregon e rca · . , r persons who could not get coverage due to pre-rnsurance 10 existing medical conditions. Today about 14.000 Oregonians are enrolled in this program .

Second. a "play or pay" optron. enacted in 1993. requi'.ed II mployers who did not offer insurance to erther provide

~ea~th insurance for ther r employees (i.e .. "play") or contrib- ute to a sta te insurance fund that would purchas~ covera~e for uninsured workers (r e .. "pay"). Implementation of thrs employer mandate. however. required that Congress exempt Oregon from the Employee Retirement Income Security Act (ERISA). w hich forbids the states fr~m ~egulating most large employers (who self-insure) The likelihood of an exemp- tion all but disappeared when the Republicans won control of Congress in 1994 . The employer mandate slipped.quietly into the night on December 3 I. 1995. as did Oregon s hope of achievi ng universal access to health care for all its citizens.

The third part of the law proved the most controversial. bringing the attention of the nation. and parts of the rest of the world. to Oregon. The law expanded Medicaid to all persons with incomes below the federal poverty level. At the time Oregon covered only those who fit traditional Medicaid categories of eligibility and whose incomes were 58% or fess of the FPL. In 1988 a family of four was deemed to be living m poverty if they had an annual income of $11,650 or less. Smee Oregon only provided Medicaid coverage to those with n- comes below 58% of the FPL. a family of four with an annual income above $6.75 7 was ineligible for Medicaid. To increase Medicaid enrollment by an estimated 130,000 people (1.e., those with family incomes of between $6.758 and $11.650) and not break the state's budget. policymakers proposed lim- iting (i.e .. ra tioning) the services available to the Medicaid population to what political. medical and soc1a consensus deemed a fiscally responsible and clinically acceptable pack- age of basic health services. In other words. everyone who fell below the FPL would get a basic package of health care services. To define such a package . or list of services state legislators approved an elaborate consultative process involv- ing citizens and experts through community meetings and telephone surveys.

~-

In 1991. the Health Services Commission. the body ap- pointed by the governor to create the list. presented to the legislature a list of 709 diagnosis and treatment pair- ings. In that year. the legislature approved funding a ben- efit package covering the first 587 of these li ne items. The state would reimburse physicians. managed care organi - zatio ns. and hospitals for providing treatments I to 597 but not 598 to 709 . Since then. the list has been modi- fied and revised every two years to coi ncide with Oregon 's biennial legislative session. As of 2013. the figure is 692 treatment/diagnosis pa irs. rank ordered based on the treat- ment's impact on both the individual and population health: lines I through 503 constitute the OHP or Med- 1ca1d benefit package. Priority is given to preventive care . early interventions. and primary care-the first diagnosis and treatment is pregnancy and maternity care. number 679 is gastrointestinal conditions "with no or minimally effective treatments or no treatment necessary."

Two additional points need to be made about the OHP. First. a core political and ph ilosophical principle of the plan was that when the state's fiscal circumstances worsened . the number of covered diagnoses and treatments. not Medicaid clients . would be dropped. (i.e .. they would move the line up on the priority list). All those eligible. by virtue of falling be- low the FPL would continue to get a basic. albeit reduced, benefit package. Moving the line. however. required federal approval. something that would become increasingly difficult to obtain over time.

Second. a central operational feature of the plan was that costs would be controlled through the use of man- aged care rather than fee-for-service health care delivery. Since its inception . managed care has been widely used in the state's Medicaid program . Today. for example. about 90% of all OHP clients are in managed care programs. At the time of the adoption of the OHP. national attention focu sed not on managed care as the major vehicle of cost savi ngs but on the priority list and rationing. Opponents of the plan . including national officials such as then- Sen ator Al Gore (D-TN) and Representative Henry Waxman (D -CA). accused Oregon of rationing on the backs of the poor. In later years. when it became clear that there was not really all that much rationing going on , state officials would argue that managed care. not rationing. had all along been seen as the main cost-saving mechanism in the OHP.

The early years of the OH P were heady ones for Oregon's policymakers . The plan continued to attract enormous national and international attention. Official delegations from the Netherlands, New Zealand, and France . as wel l as journalists from the United Kingdom. made the pilgrim- age to Oregon to find out about rationing. while scores of academics and journalists in this country reported on the Oregon story.9

Contrary to the critics' predictions, Medicaid recipients were not dying because of the OH P. The benefit package was quite rich . with no life-threatening conditions falling below the cutoff line. Meanwhile. the percentage of unin- sured Oregonians declined from 17% in 1993. the year be- fore the OH P went into effect. to I I% during 1997-1998. Most of the decline can be attributed to the Medicaid ex- pansion : within one year of its implementation. there were 130.000 new Medicaid enrollees. Between 1990 and 1997. the number of people on Medicaid increased nationally by 38%. while in Oregon the increase was 134%. During that same time period. the national percentage increase in pay- ments per Medicaid recipient was 39%. while in Oregon it was 22%. With more people on Medicaid. fewer uninsured people were showing up in hospital emergency rooms . and during 1994-1995 Oregon hospitals experienced a 16% drop in bad debts. Furthermore. during this period the OHP was expanding to cover new populations and new services. In 1995 the state began a gradual expansion of the OH P to cover mental health and chemical dependency. and in 1998 the basic benefit package was made available to pregnant women up to I 70% of the FPL.

Oregon was also expanding health coverage to people out- side the Medicaid population. In 1998 it created a companion program called the Family Health Insurance Assistance Pro- gram (FHIAP) to help low-income. but non-Medicaid-eligible. working Oregonians buy private health insurance. FHIAP pays from 50 to 95 % (I 00% for children under 19) of the premi- ums for uninsured Oregonians who meet the guidelines. As of April 20 I I. there were about 8,000 people enrolled in FH IAP. Fina lly. in 1998 Oregon 's State Children's Health Insurance Program (SCHIP) program began insuring children under age 19 whose family income was up to I 70% of the FPL. 10

Yet even during these "good times "-and economically these were very good times in Oregon- there were signs that the growth in the program could not be sustained. The first indication of this occurred when in 1995 and 1997

11

~

the le islature approved a reduction in covered services on the priority list 11 did so again in 1999. but the Health ~re finilncing Admm1strat1on (HCFA). the precursor to the Center for Medicare and Medicaid. which had to approve th c reductions refused thi s request. HCFA made it clear thiJt 1t would not look favorably on future requests for ben- efit r duct1ons thus potentially closing off one important route to reducing program costs

· 1 '\\' THE WORST <>I 'J I 'I E " lh OHP was implemented at a time when the state's econ- omy w. experiencing strong growth due. 1n part. to a strong national conomy and 1n part to the divers1ficat1on of its own onom1c base lleav1ly dependent on the volatile tim- b r products industry. the state set out, after the recession of th arly 1980s. to attract non -t1mber·based companies Th 1990 saw the flourishing of sports apparel (e.g .. Nike.

o umb1iJ Sportswear). high-tech (e g .. Intel). and telecom- un at1on companies (e g. lntegra Telecom).

B t by the beginning of the new century. the state's fiscal I d ape had changed. and funding to maintain. much less ex· p nd th Olf P was in Jeopardy After iust seven years. the cost

f tic program had nearly doubled from $1.33 to $2 .36 billion. 0 on Wil particularly hard hit during the recession of 200 I to 2004 wh n th state had the highest unemployment rate 1n the Un tcd States

In 2003 the state faced a $127 m1ll1on budget short· fiJll J opard1zing the OHP In order to reduce costs but still m nta1n the commitment to provide health insurance to all 0 e on1an below the FPL. the state proposed splitting the OHP population into two groups The proposal was ap - p o d by th Centers for Medicare and Medicaid Services ( MS) ther by er ating two OtlP benef1c1ary groups OHP Pu and OtlP Standard The OllP Plus plan covered the 3 0 000 ate oncally elrg1ble Med1ca1d clients (1 .e .. the blind I 1 dren in fo ter care pr gnant women. ind1v1duals with dis·

ab1l1t and the elderly) who continued to receive the full b ncfit P d .. age as defined by the prioritized list. The OHP t ndard croup about 15 000 lr1 2003. was the noncategon·

cal popul t1on with incom s between I 00 and 185% of the f Pl They would rec ive a much reduced benefit packag which eluded routine visual and hearing services. dur:~ bl m d1cal quipmcnt, dental care. and outpatient mental

health and chemical dependency services. As important as the split itself was the introduction of cost-sharing and en· rollment requirements. Standard plan members would now pay monthly premiums of $6 to $23 per month depending on their family income. $5 to $IO co-pays. and 20% of hos- pital bills. Furthermore. they would be dropped immediate~ from the plan if they failed to pay the monthly premium and could not reapply for six months.11 The results were breath- taking: Between July 2002 to July 2006. enrollment for the noncategorical population dropped by 80%. and the emer- gency department at the state's largest hospital . Oregon Health and Sciences University. experienced a 17% increase in admissions.

Although the creation of two separate plans was clearly a s1g- n ificant departure from the original format of the OHP. a case could be made that the state remained true to the spirit of its ongi· nal commitment to bring all the poor into the health care lifeboat even though provisions in the boat (i.e .. benefits) were much reduced for the noncategorical population. The next change, however. was a quantum leap from this foundational philosophi- cal and moral commitment. Remember that the mantra of the Oregon plan was that the state would ration services. not peo· pie. When hard times hit. the state would move the line up to cover fewer treatments but would not deny anyone who fell below the FPL access to a basic level of health care services through Medicaid. This core principle was about to be abandoned.

The Oregon economy went into recession beginning in the summer of 200 I and wou ld remain so through 2004. The state had the highest unemployment rate in the country, declining median family incomes. dwindling state revenues. and a steep increase tn the rate of uninsured Oregonians. from 12.8% dur- ing 2000-2001 to 16.9% during 2003-2004. the fastest growth rate of any state. Over 600.000 Oregonians were uninsured !he result was looming budget shortfalls in all policy areas. tncludin~ health care. To avoid cuts to existing programs. the state legislature passed a tax package that included a three-year personal income tax surcharge. an increase in the minimum cor- porate tax. and an extension of a cigarette tax. Antitax activists. with the ~upport of Republican legislators who opposed the Democratic-sponsored tax package. gathered enough signa- tures to get the measure on th e February 2004 ballot. The tax package was overwhelmingly defeated and the OHP Standard population became one of its casualties.

1 First. benefits under OH P Standard, which were already

ess generous than those of OHP Plus. were further cut.

--

= among which were nonemergency hospital care, acupunc· ture. chiropractic services. home health care. and occupa· tional. physical. and speech therapy. But most dramatically. the state closed new enrollments in OHP Standard begin- ning July I, 2004. and. as it turned out. would not reopen it again until 2008. Simply stated. even if you fell below the FPL but were not currently enrolled. you could not get on the OHP. The president of the Oregon Association of Hos· pitals and Health Systems. an early supporter of the OHP. declared that "We've gone from one of the best cases in the country to a disaster in the making." 12 Erin Kelly-Siel. health policy advisor to then governor Ted Kulongosk1 (D). declared that "the Oregon Health Plan as we know 1t is gone." 13

By 2008. OHP Standard was a mere shadow of its for· mer self. serving just 17.000 people. down from 132.000 at its peak in 1995. In that year. the state decided to re· open the program to a limited number of people. Although there were between 130.000 and 140.000 people eligible for the plan. due to limited funds the state could afford to add just 7.000 to 8,000 new members. The question then was. "How do you choose new enrollees from the 130.000 to 140.000 eligibles?" The answer was to hold a lottery. Ac - cording to the then-state Medicaid director. "We thought about other options. suc h as should we try to pick all of the sickest people or kids with cancer or heart disease. But the feds won't allow that. and there's no way to guaran· tee the fairness of that." 14 In February 2008. the Oregon Department of Human Services invited people who satisfied the income eligibility requirement (e.g .. $867 per month or less for a single person) to enter the lottery. Over 9 1.000 signed up for the drawing. of whom the state would ran· domly select 3.000 names. By the end of the year. an ad· ditlonal 5,000 names would be chosen. Once again Oregon was the subject of national and international attention. this time from sources as diverse as the BBC and Stephen Colbert. 15

In 2009 the state legislature passed a tax on health insur· ers and hospitals that. along with federal stimulus money. would open about 35.000 additional places in OHP Standard. These. too. would be filled. incrementally. in a series of lot· tery drawings over the next two years: There were 11 draw· mgs between February 2008 and September 20 I 0. In 20 I 0 the state had enough money to enroll an additional 35.000 peo· pie in OHP Standard. In September 20 IO. there were 164.000

CHAPTER 14 • Orgeon f{iJ@

people signed up for the reservation list. Ultimately the goal is to reach an average total monthly enrollment of 60,000 in OH P Standard. a number still well below the 130.000 average monthly enrollments in 1995.

THE MARCH CONTINUES Despite multiple setbacks and years of frustratio n. Ore· gon lawmakers have not given up their quest to reach the promised land of health care reform. In 2007 Governor Kulongoski took an important step along that road with his Healthy Kids program. the goal of which is to extend health insurance coverage to all of Oregon's children. Over the years. Oregon. through both OHP and SCHIP. had gradu· ally extended coverage to more children; by 2006. 220.000 children from families with incomes up to 185% of the FPL were covered. Yet there were still I 16.000 uninsured chil- dren in the state. and the number was growing. There were at least three reasons for this. First. as more businesses ei· ther dropped health insurance coverage or increased worker contributions. the number of working adults. and their fam- ilies. without insurance increased. Second. "Oregon's ehgi· bility rules on government-paid insurance for children are stricter than those of most other states." 16 Third. Oregon enrollment and reenrollment procedures were cumbersome . often requiring more detailed documentation than most other states.

Kulongoski . who was up for reelection in 2006. pledged to address these and other obstacles to children's coverage and proposed an 84.5 cents per package increase in the state's cig· arette tax to cover the estimated $I I 0 million to provide free or subsidized health insurance. depending on family income. to the state's uninsured kids. The program would use federal SCHIP matching funds to cover the full cost of the expansion. The problem was that revenue-raising bills require a three· fifths supermajority in the Oregon legislature. and Republi· can lawmakers refused to join their Democratic colleagues in voting for the tax increase. Although Democrats did not have enough votes to enact the cigarette tax increase. they did have enough-a simple majority-to refer the proposal. in the form of a constitutional amendment. to the voters in the November 2007 election. The measure (Measure 50) had the support of nearly 90 health. business. union. education. and children's advocacy groups. The tobacco industry spent $I 1.4 million to defeat Measure 50, a record for an Oregon ballot measure. And

,. H I I\' . I II,; St lie.!~~===~--------------------------------

they were successful The industry cast the tax as unfair t~ mokers and poorer people and as an attack on freed.om o

cho ce The measure was defeated by a 59 to 41 % margin.

Kulongosk1 and the Democrats came back in the 2009 legislative session and were successful 1n pushing through a 1 % health insurance assessment on the state's 26 largest hospitals and eight largest health insurance companies. The nsessment. which was supported by both the hospitals and tn urers was expected to raise over $400 million in the 2009- 2011 biennium . with a federal match through SCHIP of al- mo t S800 m1ll1on. The bill passed the Democratic-controlled legislature along strict party lines. Under the law. children in families with incomes of 200% or less of the FPL get health m urancc coverage free: those between 20 I and 300% pay a hd1ng scale fee, which for one child 1s about $25 per month.

In add1t1on the law provided for simplification of the applica- tion and enrollment processes and enhanced outreach to chil- dren in underserved communities. Within one year. Oregon had added about 70.000 children to the insurance rolls. In fact Oregon was so successful in expanding coverage to un- n ur d children that in both 2009 and 20 IO the state received a bonus award from the US Department of Health and Human Services for making significant progress in enrolling uninsured chi drcn in its Med1ca1d and SCHIP program. Today, nearly 95% of Oregon's children are covered by health insurance.

In 20 I 0 John K1tzhaber was elected to an unprecedented th1rd term as governor and promptly renewed his quest to reform the Oregon health care system. With the prospect of the A A extending health insurance coverage to most Orego- nian through an ind1v1dual mandate and an expansion of Med ca1d e. g1b1lity Kitzhaber focused his attention on reduc- ing insurance costs and improving the quality of health care for Oregonians The governor took up the cause of creating a

by tate run health insurance exchange. a key element required

the ACA

A early as 2006 the Oregon Health Policy Co . had recommended the creation of a state health . mm 1ss1on chanoe th t Id insurance ex-

" a wou allow individuals and small b hop for. and compare. health insurance . us1.nesses to

kctplace In 2007. the legislature create~I:~: ~a sing~ mar- Pol1cy Board (OHPB). giving it the mand regon ealth pr hens1v • plan to reform the 0 ate to create a com- lowmg the lead of the Health prelgonChealth ca~e system. Fol-

o icy omm1ss1on. the board

proposed. prior to the enactment of the ACA . the creation of a health insurance exchange that would help rat1ona 1ze tile insurance market and allow consumers to shop for t~e most affordable insurance product. The federal ACA requ1res the creation of insurance exchanges by 2014 The law allows each state to create 1ts own exchange. or the federal government will create one for the state. K1tzhaber. following the lead of the OHPB. proposed establishing the state's own exchange.

T he 201 1 legislature approved the creation of the Oregon Health Insurance Exchange Corporation with sue ng biparti- san support: 48 to I 2 in the Oregon House of Representa- tives. with 18 of the 30 Republicans voting Myes·. 24 to 5 in the Senate. with IO of the 14 Republicans supporting the bill Starting in 2014 1nd1v1dual Oregonians and businesses with 50 or fewer employees will be able to choose among vari- ous health plans with different benefits and premiums. They will be able to do this online or through a preferred insur- ance agent. Describing the Oregon Exchange law. Kitzhaber noted that "Oregon's new Health Insurance Exchange will give 350.000 Oregonians access to affordable. quality health care by providing a single marketplace where they can shop and compare quality and value of plans. For the first time, Oregon consumers will have apples·to·apples information about health insurance and will know exactly what they are buying." 17

A second major piece of legislation that came out of the 20 I I legislative session. and the one most relevant to the evolution of the OHP. was HB 3650. establishing the Oregon Integrated and Coordinated Health Care Deh ry System. The law has been described as "the most sweeping change to the OHP since its inception" and is the latest chapter in the saga of the state's effort to control the costs of the OHP and to im· prove the quality of care .18 Dubbed "the transformation· the law. which went into effect m July 2012. has consohdat~ the roughly 40 managed care organ1zat1ons that administer the OHP into regional Coordinated Care Organizations (CCOs). Although the idea of a coordinated care approach to ~ea Ith. care delivery had been bouncing around for some time :t received a political boost in the 20 I I legislative session as awt mTahkers faced an $860 m1lhon gap in the health care b~d·

ge · ey closed pa t f th tax a d

. r o e gap with increases m the hospital n cuts in Med d ' d

sta te over $200 II 1ca1 prov1 er fees, but this still left the transformation a~'b 10~ short of 1t.s goal. K1tzhaber sold the of im . h ot a cost·savmg measure and as a way

proving t e quality f h I h 0 ea t and health care in Oregon.

The bill was approved 59-1 in the Oregon House and 22-7 in the Senate. with seven of the 14 Republicans supporting the measure.

Under the law. teams of health care providers. includ- ing mental and physical health care physicians. dentists. nurses. and others. will receive global or fixed budgets to deliver care to patients. "Community health workers" will facilitate the coordination and management of care. mak- ing certain that patients take prescribed medications and show up for medical appointments. as well as encourag- ing wellness and disease prevention behaviors. Lawmakers believe that much of the cost savings will be realized with better management of the most vulnerable and costly seg- ment of the OHP population. namely. those suffering from multiple and chronic physical and mental health issues. In- cluded in this group are health plan members who receive both Medicaid and Medicare benefits. so-called dual eli- gibles. This is a particularly vulnerable group of older and poorer Americans. who consume a disproportionate share ofOHP costs.

Initially the new delivery model will apply to the nearly 600,000 OH P members. but the law directed the Oregon Health Authority to look into using CCOs to administer the health plans of both the state public employees and public school teachers. In December 20 12. Oregon received the nec- essary Medicaid waiver from the CMS. allowing the CCO pro- gram to go forward. As of this writing. the state has approved 15 CCOs for participation in OHP. These CCOs will be judged based on 33 quality and outcome measures. Oregon leaders hope this will improve the overall health of OHP members. while saving money in the process.

LESSONS FROM OREGON The American health-policy cognoscenti almost all have a strong opinion about the Oregon health-reform measures. Many academics. particularly those from outside the state. have not been kind in their assessments. 19 They see the plan's accomplishments as either minimal or nonexistent. Some have suggested that state efforts like Oregon's have been counterproductive because they diverted attention from a truly national reform. Predictably. state officials in Oregon re- ject such criticisms. Clearly. the OHP has not achieved what it set out to do: health care costs continue to outstrip increases mother goods and services. the state's budget continues to

buckle under the weight of those costs. and over 600,000 Oregonians remain uninsured.

Oregon policymakers are convinced that tens of thousands of Oregonians would be worse off had the state not made the incremental policy changes that it did. The state officials with whom I spoke agree with the conclusion by Virginia Gray (a political scientist at the University of North Carolina) and her colleagues that "i ncremental efforts promoting uni- versal access are unlikely to succeed." but they disagree with the conclusion that these discrete policies are. in effect ... in- crementing to nowhere."20 As one state legislator remarked. there is nothing wrong with having grand aspirations: "The grand aspirations [of health reformers like Kitzhaber) have helped moved the state along."21 Whatever conclusion one might reach about Oregon's efforts. the question for students of health policy is. "What can we learn from the Oregon experience?"

Timing Is Everything Timing has proved critical in enacting and sustai ning major health ca re reform in Oregon. The OHP was conceived and implemented when all the economic and political stars were in alignment. As we have seen, it was a period of strong economic growth and diversification in Oregon: there was su bstantial political agreement among health care policy players. including moderate Republican s and social reforming Democrats: the state's two US senators were moderate and influential Republicans (Mark Hatfi eld and Bob Packwood) who strongly su pported the plan and worked to get the necessary federal waivers: and the new Clinton adminis- tration took office and granted the federal waivers that the George H. W. Bus h admin istration had resisted. Democrats controlled the governorship, as wel l as both houses of the state legislature . and were led in the Oregon Senate by john Kitzhaber. a skillful and popular politician who had the added virtue of being a physician; reformers enjoyed the support of key interest groups like the medical and hospital associations. It would be over two decades before the state political environment would be as conducive to reform.

Such an environment existed in 2011 but under quite different political circumstances when the two most recent major reforms. the insurance exchange and the health delivery transformation. were enacted. The 20 I 0 elections resulted in a 30-30 partisan split in the Oregon House. Although this could have resulted in legislative deadlock. the two joint House speakers. one Democrat

PART IV • The States

and one Republican. produced the most conciliatory and produc- tive legislative session in recent memory. An editorial headline in the state's main newspaper. The Oregonian. proclaimed at the close of the 2011 session: "A House Divided Is a Better House." The editorial went on to say that "Forced to share power and ne- gotiate every major decision. the 2011 Legislature accomplished more-and did it in less time. with less acrimony-than perhaps any other Oregon assembly over the past couple of decades."22 In sum. it takes the right set of political conditions to pull off health ca re reform.

Bipartisanship The 20 I I legislative session was so successful because the two parties worked together. This was in no small part due to Governor John Kitzhaber. Kitzhaber had left office in 2003 with the unflattering pol itical sobriquet of "Dr. No." a testament to the record number of Republican-sponsored bills he had vetoed in the 200 I legislative session. At the time he declared. in frus- tration. that Oregon was ungovernable. The Kitzhaber who took the oath of office in January 2011 looked more like the moderate. skillful, and patient person who in 1989 designed and navigated the legislative journey of the OHP.

The editors of The Oregonian. who had given K1tzhaber a somewhat lukewarm endorsement in the 20 I 0 gubernatorial election. noted that .. By our count. Kitzhaber has served as governor during I I regular or special sessions of the legisla- ture. This was his best performance." They went on to applaud the governor who "helped set the bipartisan tone. rebuilt the shattered relationship between Democrats and business and supplied much of the creative thinking underlying the sweep- ing education and health care reforms that will prove to be the most important legacy of the 2011 Legislature. "23 As in the Massachusetts case. described in Chapter 12. a reform-minded governor worked with the other party to create reform.

"Show Me the Money" A third. more difficult. ingredient is also necessary for suc- cessful reform. Scott Gallant was the chief lobbyist for the Oregon Medical Association (OMA) for 28 years. He and his organization have supported the OHP fo r its entire history. When asked "what went wrong with the OHP?" he answered. without hesitation. "money."24 It is difficult to reach any other conclusion . Othe rs have identified the gap between the lofty aspirations of the state's health care reformers and the fiscal rea li ty that has dogged reforme rs throughout Oregon's recent

history. But while inadequate funding is key to understand· ing the fate of the OHP. the answer that "there just was not enough money" needs further explanation.

First. the fact that money. not ideological or partisan wra11- gling. has been the nemesis of Oregon health care reformers is an important lesson from Oregon. The OHP was enacted m 1987 with strong bipartisan support: The law was approved by a ma rgin of 19-3 in the Oregon Senate and 58-2 in the Oregon House. Since then. FHIAP. the insurance excha nge, and "the transformation .. were all approved with strong bi· partisan support. During the fisca l crisis of 2002-2004. which resulted in the split in the OHP. two Republican legislators co-chaired a committee to save the plan.

There have been. to be sure. partisan and ideological conflicts over hea lth care issues in the state. Recall that Repub licans op- posed the tax package during 2003-2004 that would have pre· vented dramatic cuts in benefits. In addition. Republicans. and their conservative constituents. successfully opposed a ballot initiative in 2002 that would have created a single-payer system in Oregon. (The measure was defeated by a 4-1 ma rgin.) They have also opposed unionization of health care workers and sided with both the tobacco lobby and the pharmaceutical industryoo severa l occasions. But. by and large. the principle of the OHP. of extending access to all poor Oregonians through a state-run program. has been embraced by both parties. No one todaygll'eS serious thought to abandoning OHP. As one Republican leader of the 20 I I legislative session put it: "The OHP is part or the oxygen of this place (i.e .. the Oregon legislature]."25

Second. while budget shortfalls destroyed the underly· ing principles and operation of the OHP. they also inspired Oregon's most innovative and ambitious health-policy expen· men ts. Remember that the OH P was conceived as a result or the state's decision to drop organ transplants as a covered Medicaid benefit because of the high cost of the procedures Similarly. it was the largest budget deficit in the state's hist()()' in 20 I I that resulted in the most productive and bipartisan legislature in recent memory. As a headline in The Oregon·an put it: "Financial Mess Brings Out Best in Legislators:

Thi rd. it is important to note that the vulnerab ility or government programs like health care to the vagaries and vicissitudes of state and national economic conditions 1s ex· acerbated at the state level where 49 of the 50 states. incud ing Oregon. have balanced budget requirements. Faced w ti hard economic times. states can not simply increase the debt

ceiling and borrow themselves out of the problem. This is par- ticularly an issue for Oregon. which is only one of five states that do not have a sales tax.

Fourth. state policymaking is particularly challenging in the 26 states with the initiative and referendum-especially when 1t comes to raising taxes. Between 1990 and 20 I 0. Orego- nians voted on over 200 ballot measures! Perhaps the most notable of these was Measure 5. approved by voters in 1990. Measure 5. sometimes referred to as "the son of Proposition 13" (limiting California's property tax) , limited property tax increases in Oregon and shifted school funding from local governments to the state government. Measure 5 effectively limited the amount of state dollars available to noneducation services. including health care.

There are two other features of Oregon tax policy that limit the flexibility of lawmakers to address health care funding is- sues. In 1980 Oregon voters overwhelmingly approved a tax rebate measure, popularly referred to as " the kicker." The law provides that when actual revenues exceed forecasted rev- enues by 2% or more. the state must return (i.e .. kick back) the surplus to taxpayers. (Until 20 I 0 Oregon had biennia l leg- islative sessions. making accurate revenue forecasts even more problematic.) There have been five kicker refunds since 1990, including over $I bill ion in 2007, the year before th e state sunk into a deep recession and experienced huge state budget deficits. In addition. in 1996 voters approved a ballot measure that requires a three-fifths supermajority in both houses of the legislature to pass revenue-raising bills. As we have seen, this provision prevented legislative passage of an increase in the to- bacco tax to make up a shortfall in OHP funding. Thus. the tax structure and policies of a state affect its ability to solve costly social problems.

Lastly, money also plays a featured role in areas over which the state has only limited. if any, control. A case in point was the ability of the tobacco industry to bring huge sums of money to defeat a ballot measure to ra ise the cigarette tax. Oregon is hardly unique in this regard. but it is important to underscore the fact that exogenous forces are at work hamper- ing the state's efforts to both expand access and control costs.

What about Rationing? With the 1mplementat1on of OHP in 1994. Oregon prom - ised to go where no other state had gone before-and. as it turned out. no other state would choose to go-by explicitly

limiting or rationing health care to its Medicaid popula- tion . Throughout the 1990s, it was impossible to write or read about Oregon without encountering some discussion or comment on rationing and the famous, or infamous. priority list. 26 Today. it is rare to hear anyone in Oregon mention the priority list and, when asked. policymakers portray it in modest, if not dismissive, terms. As the former Oregon Medicaid director puts it: "Rationing was a red her- ring [from] the beginning." 27 What. then, are students of health policy and politics to make of the Oregon experience with rationing?

First. Oregon's experiment provided an occasion for both students and practitioners of health care policy to admit the obvious: Rationing occurs all the time in the American health care system. What Oregon did was to make the implicit ex· plicit. I would argue that the OHP. even if it did not live up to the promise of its supporters. was a far more honest and responsible way of dealing with the reality that not everyone can have everything they want in terms of health care.

Second. rationing and the priority list do save money, and some denial of services. or at least payment for them, does oc- cur. Or. Bruce Goldberg, director of the Oregon Department of Health and Human Services. believes that there are many mil- lions of dollars of services that are not being delivered because of the list,28 and there is some empirical support for this asser- tion. One study of the OHP found about one-fourth of the OHP sample reported that the state had denied payment for services over the previous year. " Prescription drugs were by far the most common uncovered service. either because the drug was 'below the line' (typically allergy drugs) or because the drug was not in the [health] plan's formulary." 29 Whatever the reason. there is some money savings due to the priority list. According to Dr. Jeanene Smith. administrator of the Office of Oregon Health Policy and Research. an independent assessment of the OHP found that the state saves about $36 million per year through rationing.30 Although not an enormous sum. the savings have allowed the state to cover more people than would otherwise be the case.

Third, there are currently 176 types of health problem s that fall be low the funding line. some of which are severe and treatable although not life-threatening, and some for which there is no effective treatment. What happens . then, to Medicaid enrollees suffe rin g from these ailments? The answer is the patient often receives treatment even

PART IV • The States

when the condition is below the cutoff line. The most frequent circumvention of rationing occurs when physi- cians treat relatively minor and inexpensive unfunded con- d1t1ons. such as various skin problems or sprains Since approximately 90% of OHP patients are covered by cap1- tated managed care. individual phys1c1ans suffer no great financial sacrifice in treating these unfunded conditions As one study found. "Anecdotal evidence suggest that below-the-line services are being provided in instances of medical necessity or in the name of community relations One managed care plan. for example opted to pay for in- fant circumcision (a below-the-line service) to keep their ped1atric1ans happy."

In truth. then . there really is relatively little rationing going on now or in the past. at least not the headline-grabbing

CONCLUSION The ultimate goal of the OHP. to provide affordable health care to all Oregonians who fall below the FPL. has not been achieved Still. the Oregon experience offers students of health policy and politics a window into the barriers to health care reform in the states, the willingness of one state's policymakers to engage in policy expenmentat1on, and the persistence of those lawmakers in trying to do the right thing for the state's c1t1zens. especially those who

STUDY QUESTIONS

sort that critics were predicting The list has not become a Solomon-like instrument for denying l1fesav1ng care From the very beginning. and even after scaling back the number of treatments covered (1.e .. moving the hne up), the benefit package has been extremely generous ll

Although the rationing of health care in Oregon has turned out to be a far more modest experiment than originally adver· tised. most people involved in the process would still argue that the OHP. and the priority list. has served important politi· cal. if not necessarily medical . purposes. The hst has become. the vehicle for calculating the amount of money the state will invest in Medicaid each year. As such. 1t allows both leg1sla· tors and the public to see-with a degree or openness and specificity unknown in most areas of public pol cy-prec1sely what state dollars will buy for a ddined population

are most vulnerable Perhaps the most important lesson of the Oregon experience 1s the simplest In sharp contrast to the Texas experience (see Chapter 13). Oregon policymak· ers have a long and b1part1san history of grappling with health reform They never reached the promised land of health care reform. but the JOUrney has nonetheless been an important one

~~~~~~~~~~~~~~~~~~~~~~~

I. What two trends does the author believe characterize a national health cns1s?

2. The author notes that in facing rising costs and a growing uninsured population. states commonly pursue one or more among three basic options for their Medicaid programs What are they?

J . What were the three mechanisms the 1989 and 1993 Oregon Basic Health Services Act intended to use to reduce the state's uninsured rate7

4 . What feature of the Oregon plan attracted all the attention?

S . What was the initial difference between OHP Plus and OHP Standard?

6. What are the two most recent Oregon reform in1t1atives?

1. What does the author think can be learned from the experiences of Oregon grappling with Med1ca1d?

CHAPTER 14 • Orgeon

ENDNOTES 1. Barone and Cohen. 20 IO. p 1229.

2. Oberlander, Marmor. and Jacobs. 200 I. p. 1583.

3. Kitzhaber. 20 I I, p. B8.

4. For a discussion of the pros and cons of federal versus state leadership in health care reform see Leichter. 2008. pp. 187-191.

s. Oberlander. 2006, p. wl03. 6. US Census Bureau. 20 I 0. p. 466.

7. Le1chter. 1997. pp. 3-288: Nightline. January 28. 1988.

8. Fox and Leichter, 1994. pp. 136-169.

9. See for example the several articles in the special section on Oregon's rationing plan in Health Affairs. summer 1991.

10. In 1997 Congress created another joint federal-state publicly funded insurance program called the State Health Insurance Program (SCHIP). SCHIP helps states extend health insurance protection to children under age 19 whose families earned too much to qualify for Medicaid but not enough to afford private insurance. States had the option of choosing to expand coverage through Medicaid, create a separate SCHI P program. or do a combination of both.

I I. See Steves. 2003. p. I.

12. Oregonian Editorial Board, 2005. p. E4.

13. Colburn, 2004.

14. Yardley. 2008.

IS. The Colbert Report. 2008: BBC News. 2008.

16. Colburn. 2006. BI.

17. Kitzhaber. 20 I I, B8.

18. Rosenfeld, 2011.

19. See. for example. Gray. Lowery, Monogan. and Godwin, 2009, Greer and Jacobson. 2010: and Oberlander. Marmor. and Jacobs. 200 I.

20. Gray. Lowery. Monogan. and Godwin, 2009. pp. 82- 113.

21. Greenlick. 20 I I.

22. Oregonian Editorial Board. 20 I I a. p. B8.

23. Oregonian Editorial Board. 20 11 b. p C4.

24. Gallant. 20 I I

25. Kennemer. 20 I I.

26. For the views of both opponents and proponents of the OHP during its early yea rs. see Leichter. 1999. pp. 150-152.

27. Goldberg, 20 I I.

28. Mitchell. Haber. Khatutsky. and Donoghue. 2002a. p. 22.

PART IV• The States

29. Smith. 2011

JO. Mitchell. Haber Khatutsky. and Donoghue. 2002b. p. 181 For other ways health providers circumvent the rationing limits. see Le1chter. 1999. pp. 155-156.

JI. The material for this section relied heavily on Leichter. 1999. pp. 147-160.

REFERENCES Barone. M .. and R. Cohen. 20 IO. "The Almanac of American Politics J Koszczuk. ed Washington. DC National

journal Group.

BBC News. 2008 (March 30). "Oregon Healthcare Lottery .. Retrieved from http://news.bbc.co uk/2/health insurance/7321500.stm.

Colbert. S . B. Karlin. J Stewart. and J Antonetti. Writers. and J Hoskinson. Producer. 2008 (Apri l 9) " Pick S1cks- [telev1s1on series episode]. In S Colbert. J. Stewart. and T. Purcell. The Colbert Report Los Angeles . CA. Comedy Partners.

Colburn. D. 2004. "Oregon Health Plan Faces Budget Crunch in Tenth Year " The Oregonian . February 7. Retrieved from LexisNexis Academic

---· 2006. "More Children Losing Out on Health Insurance." The Oregonian . Apnl 2.

Fox. D M . and H M. Le1chter. 1994. Rationing Care in Oregon: The New Accountability." In D M Fox and J K Iglehart. eds .. Five States That Could Not Wait (pp. 136-169}. Cambridge, MA· Blackwell Publishers.

Gallant. S. 2011 (May 6}. Author's telephone interview 6.

Goldberg. B. 2011 (April 24}. Author's interview Salem. OR.

Gray. V D Lowery. J. Monogan, and E. K Godwin. 2009. "Incrementing toward Nowhere: Universal Health Care in the States:· Publws 40: 82-113.

Greenl1ck. M 2011 (April 14). Author's interview Salem. Oregon.

Greer. S L. and P. D Jacobson. 2010. "Health Care Reform and Federalism." journal of Health Pol1t1cs. Policy and law 35(April}: 203-26.

Health Affairs. summer 1991 .

Kennemer B 2011 (April 14). Author's interview Salem. OR.

Kitzhaber. J. 20 I I. ··oregon on a Proactive Path to Progress." The Sunday Oregonian, July 3. p. B8.

Leichter. H M. 1997. "Health Care Reform in America : Back to the Laboratories." In H. M. Le1chter. eds .. Health Poltcy Reform in Amenca. Innovations from the States (2nd Ed .. pp 3-28) Armonk. NY M.E. Sharpe

---· 1999 (24 February). "Oregon·s Bold Experiment: Whatever Happened to Rationing?" journal of Health Pol1t1cs Policy and law 24( I): 155-56.

---· 2008. "State Governments. E Plunbus Multa." In j A. Morone. T. J. Ltiman. and L S Robins. eds .. Health Polttics and Policy (4th Ed .. pp. 173-195) Clifton Park. NY: Delmar (engage Learning

Rosenfeld . D. 20 11 (April 7). ··Legislators Face Timehne Crunch for OHP Transformation.'' The Lund Report Retrieved from http://wwwthelundreport.org/resource/leg1slators_face_timehne_crunch_for_ohp_transformation

_ 2002b. "'Children in the Oregon Health Plan: How Have They Fared?" Medical Care Research and Review 59: 166-83.

Ted Koppel interview with Governor John Kitzhaber Ntghtline. 1988. January 28.

Oberlander. J . T Marmor. and L. Jacobs. 200 I (May 29). "Rationing Medical Care: Rhetoric and Reality in the Oregon Health Plan .. Canadian Medical Associatwn journal 164( 11 ): 1583-1587.

--· 2006 (December 19). " Health Reform Interrupted: The Unraveling of the Oregon Health Plan." Health Affairs- Web Exclusive: W96-WIOS.

Oregonian Editorial Board 2005 "A Mad and Mindless Health Policy." The Oregonian. February 13. Retrieved from http://www.oregonlive.com/spec1al/oregonian/hospitallindex.ssr?/spec1alloregon1an/hospitallcontent/03.html.

--· 2011 a. "Not Ungovernable. After All." The Oregonian. July I. Retrieved from http:l/www.oregonlive.com/ opinion/index.ssf/20 I I /06/not_ungovemable_after_all html.

--· 2011 b. "A House Divided 1s a Better House." The Oregonian. July 7. p. BB. Retrieved from http:l/www. oregonlive.comlopinion/index.ssf/20 I I /07 /a_house_divided_is_a_better_ho. html.

Sm1th.J. 2011 Uuly 18). E-mail communication from Dr Jeanene Smith. Administrator. Office of Oregon Health Policy and Research.

Steves. D. 2003 (October 26) "40.000 Poor Lose Coverage." The Eugene-Register Guard. p. I. US Census Bureau. 2010 Statistical Abstract of the United States. Washington. DC.

Yardley, W 2008. " Drawing Lots for Health Care." The New York Times. March 13. Retrieved from http:llwww.nytimes .com/2008/03/ I 3/us/ I 3bend.html?adxnnl= I &adxnnlx= 13 73624253-90CZgRDYwgeg+LlgWpWbZw on May 4. 20 I I.

PART IV • The States

How does the health-policy landscape look from the perspective of an '"ms1der"? Here a health-policy expert describes how tough decisions are made.

New York State has a long history of regulating the expansion of its health care system. beginning with voluntary health planning in the 1930s I am a member of the Public Health and Health Planning Council (PHHPC} which has the authority to review applications in New York. The council members are institutionally employed physicians. hospital and nursing home executives. an academic (me). and representatives from insurance companies. home care. and other health agencies We meet on a bimonthly basis to re- view applications from hospitals. nursing homes. ambulatory care centers. home care agencies. and other health care ent1t1es for ex- pansion or new equipment. Our role is to determine whether the expansion is warranted and. if so. to issue a '"cert1f1cate of need'" (CON). which permits the project to go forward.

What follows gives a flavor of the kinds of dec1s1ons that get made and the reasons why they get made.

It 1s important to note that the rationale for the state"s involve- ment in health care regulation 1s to protect 1ts Med1ca1d program from excessive expense by having an efficient and effective health care system. We review projects based on three cntena that are set in the law: need for new facilities or additional beds. the financial feasibility of the proposed entity, and the character and compe- tence of the board or leadership of the organization W1th1n these three cntena are very flexible interpretations of what they might mean and how to apply them to an ind1v1dual case

Case 1: The New Ambulatory Surgery Center New technology and computers have allowed for the safe pro- vision of medical care and surgery outside acute care hospitals. This has coincided with a consumerist movement tn health care based around patients who want more choice 1n the services they receive and how and where they receive them To this end, am bu· latory surgery centers have grown quite rapidly. featuring same· day services and amenities not available in hospital settings. In many cases. physicians have created the centers and refer their own patients to them so that they make more money than by

simply operating in a hospital (In technical terms. the physician operating in a hospital gets a professional fee for the service. but 1f the phys1c1an owns the ambulatory surgery facility, he or she gets a professional lee and a facility lee as well ) Because ambu- latory surgery centers do not carry the overhead of a hospital they can produce their services at a far less expensive rate and charge less than hospitals. something that insurance compan es promote

A typical s1tua110n would be a group of surgeons creating a new ambulatory surgery center to concentrate on endoscopy (colonos- copy and related procedures) services. These services were for· merly performed m the hospital and were generally quite profitable for the hospital The ambulatory surgery center will be a prettier facility. with easier scheduling and far fewer rules and regulations than the hospital Patients enJOY the easier scheduling. the quicker turnaround. and the amenities of the facility far more than being in a hospital for these procedures for the phys1c1ans. 11 can be quite lucrative.

Ten endoscop1sts from three hospitals band together to form a new ambulatory surgery center fach of the phys1c1ans has a 10% interest m the facility. When this new proposal 1s broug"t to the PHHPC. the public 1s given a chance to speak m favor of or against the proposal. The three hospitals protest that they will lose several hundred operations, which will negatively affect their bottom Imes by several millions of dollars-so they WI be losing money Moreover. they argue. the ambulatory surgery center will not take people with Med1ca1d and will not take any uninsured-so the hospitals will be left with the more comp · cated cases. the emergency cases in the middle of the night and the uncompensated cases. The loss of revenues in already financially challenged mst1tut1ons will necessitate a reduct on in community services and layoffs of workers How should the council deal with this situat1on1

Some members of the council are fierce free-enterprise advo· cates and welcome the compet1t1on to the hospitals as a way of improving quality and lowering costs: others on the council ( ~­ eluding me) are worried about driving hospitals out of business by

lta\ing them with the more expensive cases and reducing their al- reaay limited profits. In most of these cases. the council has asked tne State Department of Health to mediate between the parties a·d to see 1f the physicians will accept the hospitals as an equity ;:artner to share in some of the profits and hence lose less money. Th s 1s not an ideal solution. and in many cases the proposal is rejected by one or both parties. If that is the case. the application 5 generally not approved . In either case. the council feels virtuous about its actions.

What would you do 1f you were on the planning board?

Case 2: Cancer Center Satellite A major cancer center wants to open a satellite clinic several coun- ~es away from its main campus to make it easier for its patients to access its services without having to travel to the central city. Sev- era hospitals in the area or the proposed clinic object strenuously to letting this new clinic be built. The Department of Health does not solicit the opinions of local oncologists who may have clinic or office-based practices and will also be affected by the proposed center. The neighboring hospitals protest that their cancer treat- ment programs are the key to their financial viability. and if they .ose patients to the new center. they may be forced to close down entirely. The hospitals enlist the support of the loca l hospital as- sociation. which argues that there is no need for the new facility. and therefore 1t should not be granted a CON. This is not a case of private doctors trying to profit at the expense of the hospital. it 1s another hospital expanding its geographic reach for the benefit of its patients. Moreover. the cancer center has the best reputation. and 1t 1s clear to all (including the competing hospitals) that if it were to open a lot of business would shift to 1t as patients sought tne higher-quality care, although there 1s only anecdotal data to support the quality argument.

from the perspective of the council this is a pretty easy s1tuat1on-there is no reason to reject the application. even if it does threaten the fiscal viability of the other hospitals. We all be- 1 eve that we should promote quality care. and maybe the new fa- c I ty will force the other hospitals to improve their quality or their C'Jstomer satisfaction so that patients will stay with them. Maybe the new facility will not have the same quality as the mothersh1p cancer center. We vote to approve the facility. and the hospital as- sociation vows to have the state legislature act (though they have no direct authority) and to challenge the dem1on through the legal system.

What does not get discussed at the hearing is that the new facil- ity would be on the border of Connecticut and near several hospi- ta ls just over the border and a large cancer center less than an hour away Because the CON law is a state law. there is no interstate compact that would ensure that actions in one state do not have a deetenous impact on another. Insurance companies are somewhat

CHAPTER 14 • Oregon

blind to this as they deal with a labor market that generally tran- scends political districts like counties or states.

Case 3: Nursing Home Ownership New York State prohibits the ownership of hospitals and nursing homes. but not home care agencies. dialysis centers. or other types of facilities. by investor-owned chains. While there are no chain nursing homes in the state. almost half the nursing homes are owned by ind1v1duals or groups of ind ividuals and run on a for- profit basis. The reimbursement methodology that is used for nurs- ing homes in New York 1s based on 1981 base year with a rate that 1s trended forward and (occasionally) adjusted for new services or new technologies. The only way for a facility to get a rebased (up- dated) rate is to have a change of ownership. This means that it 1s almost impossible for public or not-for-profit nursing homes to get a new rate (technically they would have to disband or elimi- nate their entire boards and be reconstituted as new facilities with new boards). The for-profit homes only have to have a percentage change in ownership, one that 1s usually accomplished by having the owners transfer some or all of their shares to children or other relatives .

The unfairness of this process 1s outside the scope of this vi- gnette. but the practical result is that the for-profit homes get rate increases on a fairly regular basis. The question that this case raises. though, 1s. given the fiduc iary and other responsibi lities of a board of directors. are there particular requirements that a director should have to be able to be so designated? In several council meetings. we have been presented with transfers of own- ership to minor children of the current owners (i.e .. less than 18 years old). New York State requ ires that a nursing home be run by someone with a nursing home license (while this is required for nursing homes. there is no similar license or requirement for hospital administrators). The for-profit homes argue that as long as the nursing home is run by someone who is licensed and with experience. it does not matter who 1s on the board or who are the actual owners. There is no law or regulation that requires that a new owner be over 18. even though on the face of the matter it seems a bit absurd. The council has generally not approved such transfers on grounds of character and competence. but how different is 18 from 21 or 24 in terms of knowledge of nursing homes and their operations? The state legislature. which could enact a statute that would limit the practice. has shown no inter- est tn the issue at all. perhaps a result of campaign contributions from the owners.

Case 4: Emergency Room Expansion A hospital that 1s experiencing a high and growing volume of emer- gency room (ER) cases requests approval to expand its ER through the construction of a $30 million replacement facility. The new

PART JV • The States

facility will allow for faster and more efficient triage of pat1en~s. more privacy and amenities for patients. better and more sop~1s­ ticated equipment. and easier access from the ER to the operating suite of the hospital. In the discussion. 1t turns out that the increase in v1s1ts 1s due more to a decline in primary-care practitioners than a need for emergency services. but the hospital has no interest in expanding primary-care capacity in the community 1t serves as it feels that is outside its m1ss1on. and in any event. it must deal with the consequences of more people using the ER. Members of the council are frustra ted that they will be approving $30 million in new capital spending when the real need 1s for primary care. which can be provided for substantially less money. Yet the enabling statute does not allow the council to act on this problem and their choice is limited to either approving or disapproving the new ER. In the end. the emergency room 1s approved .

A Final Comment These cases represent a sampling of the types of issues that the council is asked to deal with on a regular basis Embedded m each of these cases. and of course in the council review of all the other CON applications that come before 1t, are a large number and variety of health-policy issues that are never well articulated and always devoid of the academic discussions that could help make determinations and dec1s1ons be based on well-defined pnnc1p es. Bound by the limits that the CON law places on the council and the power and pressure of the Department of Health, policymaking becomes an ad hoc process with occasional precedents. but with enough difference between cases to make each decision un que and separate.

PARTV

Stakeholders CHAPTER 15

CHAPTER 16

CHAPTER 17

CHAPTER 18

EYEWITNESS 4

PUBLIC OPINION

Mark Schlesinger

TEN MYTHS ABOUT HEALTH LOBBYISTS

Rogan Kersh

THE BUSINESS OF HEALTH CARE: HOW

EMPLOYERS INFLUENCE POLITICS

Nicole Kazee

AGING POLICY IN THE 21ST CENTURY

William P. Brandon and Patricia Ma loney Alt

A MEDICAL STUDENT'S PERSPECTIVE

Alinea Noronha

Understanding public opinion matters because popular attitudes shape health policy. This chapter explains the essentials of public opinion and then illustrates them by exploring public attitudes toward obesity policy and national health reform .

Writing in the middle of the 20th century. George Simpson. an eminent paleontologist. described a duality recognized by biologists since Darwin: Understanding a complex nat- ural world requires those skilled at d1stingu1shing differences among seemi ngly similar organisms (aka "splitters") and those able to find commonalities among superficially dis- simi lar entities (aka "lumpers").1 Splitters recognized that lemurs were. in some biologically crucial ways. unlike mon- keys. even though they filled a similar ecological niche and looked very much alike. Lumpers discerned that elephants and hyraxes were close kin. though the former is a hundred times the size of the latter. which looks to a layman like an over- grown rodent. Each way of seeing brought its own insights about nature . uncovering uniqu e. often subtle connections among life forms.

Th e same holds true for the study of human nature and soci al institutions and gives rise to similarly va ried scholar- shi p. Some socia l sciences are predisposed toward lu mping.

favoring synthesis of general rules that apply to disparate human behaviors. Other disciplines are prone to splitting. most often those that focus on how varied social contexts can give seemingly similar actions very distinctive meanings. St I other social sciences favor an often combustible mixture of the two rnclinat1ons. 2

Making sense of public opinion regarding health policy calls for both perspectives As lumpers might anticipate atti· tudes toward health policy are shaped by many of the same factors and rn the same ways as political attitudes more gen· erally. Most pervasively. both are shaped by the challenges of bounded rationality: citizens· efforts to make some sense of a political realm about which they understand little and to "hid' they devote little attention. Under these circumstances-al too common rn contemporary democracies-most of the pub- lic does its best to formulate sensible policy attitudes but does so under conditions that fall well short of theorists aspirations for an informed electo rate. let alone effective part1c1patory

deliberation. Nonetheless. their attitudes emerge in predictable ways from personal experiences and societal events. shaped by a consistent set of emotional and cognitive heuristics.

Yet sometimes-and in some striking ways-public atti- tudes regarding health policy stand out as distinctive from those in other policy domains . The number and variety of these differences would gratify a splitter's heart. In an era in which the public has grown distrustful of govern- ment generally and government regulation in particular. large majorities still endorse government responsibility for ensuring access to care and government regulation of certain aspects of the health care system. At a time when socioeconomic cleavages deeply divide the polis. income- related differences in support for health policies-never very large-have become negligible. Under political cir- cumstances where even mentioning tax increases seems anathema to elected officials. the public remains surpris- ingly supportive of targeted taxes that earmark revenues for health-enhancing purposes.

OUR SCOPE OF INQUIRY Understanding public attitudes toward health policy thus re- quires a synthesis of lumper and splitter perspectives. The bal- ance of insights from each plays itself out differently for some health services-and some threats to public health-than for others. Tracing out these patterns both within health policy and across policy domains requires a robust compendium of research on public attitudes and abundant statistical ana lyses of their correlates.

The chapter thus covers similar ground as- and draws in- sights from-a burgeoning literature on how Americans think about health matters. But our purview here differs in two no- table respects from these earlier works. Though these previous studies also draw insights from both lumper and spli tter tradi- tJOns. for the most part they are more intent on documenting what the public thinks and focus less on why its perceptions and preferences incline in these ways . Our goal is to discern the underlying psychological processes that give rise to these patterned attitudes so that we can better understand their ori- gns and assess their potential malleability.

This chapter also differs from the existing literature in its scope. Previous reviews of public opinion on health policy focus either on government's role in improving pub lic health (typically. encouraging healthier behavior) or government

CHAPTER 15 • Public Opinion

interventions making medical care more affordable (i.e .. fi - nancially accessible). In this cha pter, we compare and con- trast the ways in which Americans think about these two distinctive roles for government. il lustrating the fi rst with public attitudes toward the so-called obesity epidemic and the second with public opinion regarding health care reform.

Health matters touch all of us in the most intimate and transformative of ways. Heroic medicine-the prospects of lifesaving treatment in the face of dread disease-remains a powerfully iconic public image. Even seemingly more mun- dane notions of health and caring can powerfully, albeit subtly, shape our aspirations for a good li fe. Conversely, un- healthy living conditions or inadequate protections against catastrophic medical expenses represent some of the most pervasive forms of insecurity and anxiety in modern society,3

and precisely because notions of health. security. and caring play such central roles in our lives. attitudes about the appro- priate balance of public and private responsibilities for these matters reveal a great deal about our shared commitments to one another.

Understanding public opinion also matters because those attitudes shape health policy. To be sure. sometimes state or federal health policymaking appears quite unresponsive to public sentiment. Nonetheless, more often than not the health policies that are adopted by state and federa l governments are broadly congruent with public preferences.4

This in fluence of public sentiment is often quite subtle. a broad acq uiescence toward particular policy approaches.5 In other cases. the influence is more directly evident. Height- ened public concerns in and of themselves can sometimes drive issues onto the politica l agenda. injecting health care re- form into the presidential race in 1992 and 2008 and catalyz - ing a vast wave of state regulation of "managed care" in the mid-1990s.

In the 23 states t hat authorize public referenda (e.g .. citi- zens voting on policy choices on the ballot) . the political impact of public attitudes can be even more direct. Over the past several decades. referenda have given rise to policies ad- dressing a variety of health-related concerns-from limits on tobacco to decriminalizing marijuana. However. as we saw in the Oregon case. referenda can also sharply limit health reforms.

Citizens· attention to and judgments about hea lth-related concerns can therefore be politically consequential in a variety

I I

PART V • Stakeholders

of ways. When they will be and how they will matter depend crucially on which factors heighten public attention to health matters and the particular ways in which citizens evaluate proposed policy options. These are the questions to which we now turn .

MEASURING AND INTERPRETING POLITICAL ATTITUDES To do so sensib ly, however. we need to first consider the ways in which public officials, media mave ns. and academ - ics discern pub lic sentiment. Although occasionally enriched by extensive personal interviews or interactive focus groups, most of what we know about the contou rs and correlates of citizens' policy-relevant attitudes is de rived from public opin- ion polling. A substantial polling enterprise developed in the United States during the latter half of the 20th century. fueled by the growing use of polls in electora l campaigns and media coverage of social issues.

Despite many changes , such as the move to cell phones. the fundamental tasks and limitations of eliciting attitudes through survey questions remain much the same today as they have been for the past hal f century. Many of the les- sons about attitude assessment that have emerged from this literature rema in timely. Three stand out as most relevant for attitudes related to health care and related social policy domains.

Attitudes Depend on Expectations Surveys elicit policy-relevant attitudes as evaluation s: Is a given social issue concerning enough to warrant public action? Is an existing program or policy falling so far short of what it should be able to achieve that a new approach is needed? Each judg- ment ca lls for comparing perceived states of the world against expectations about what is possible or desirable. To be sure. all attitudes are evaluations. So we are all well-practiced in weighi ng experiences against expectations. Whether we are entranced by the latest pop idol , prefer electri c vehicles to their older gas-powered alternatives, or are enlivened or depressed by today's weather. all these call for comparing something new to what we have come to expect as the norm.

But po licy assessments pose some distinct challenges. It is hard for anyone-expert or layman- to know exactly what to reasonably expect regarding complicated societal issues. This

is particularly true for newly identified concerns. smce their scope. harm . and potential for resolution all remain poor~ understood. Because the public is barraged with a constant litany of news stories about emerging threats to health and new promises from innovative medical technology. forming stable and coherent expectations for health policy can be par· ticularly challenging.

This is amply evident in the health concerns that make the headlines. If public officials are having trouble reversing the "obesity epidemic." have they made bad policy choices or are they simply confronting changing semi norms that are so deeply and widely engrained in American culture that no government-particularly one with limited constitutional powers and public trust-could ever hope to rectify mattersi If policymakers cannot ensure universal health insurance en· rollment even with a $900 billion budget (over 10 years) for health care reform . have they backed the wrong strategies for system change or are they simply coping with medical ser- vices that have grown so dauntingly expensive that they make additional coverage exceptionally costly?

When coherent assessments are difficult. expectations tend to be less stable , easily altered by a variety or transitory influ- ences. The sources of unstable attitudes include misinforma- tion from new sources or policy elites as well as incomplete descriptions of the nature or causes of the problems in ques- tion. Consequently, attitudes regarding the policies that address these issues can also be volatile and sometimes ill-considered

These con s1derat1ons were h1 ghl1ghted when the World Health Organization (WHO) first ranked the performance or I 76 national health system s in 2000. Skeptical public opinion researchers pointed out that the countries with the highest WHO rankings (Fran ce. Italy, and Spa in) did not get very positive survey ratings from their own cit1 zens. 6 WHO off- c1als countered that survey findings were misleading because public expectations were so unreliable. "Performance assess· ment should reflect the reality of people's experiences- 1r terms of their health . their interactions with the health care system . and the financial burden they bear to pay for that system- not simply their expectat1ons." 7 Several patterns in the survey data led the WHO to question their reliability:

• Public satisfaction ratings in Spain had vacillated from 21 to 64% and back down to 44% over a five-year period. t seemed unlikely that the system 's actual performance had changed that dramatically, meaning that the fluctuation

in expressed support had to be driven primarily by changing expectations.

• In many countries. the poor and the elderly reported higher than average satisfaction: In the United States. for example. 45% of the poor and 61 % of the elderly reported being satisfied compared to 40% for the average American. Since quality of care and financial security are demonstrably worse than average for both these groups. their higher satisfaction was argued to reflect a legacy of bad experiences that had lowered their expectations . a "fa lse consciousness" that cast doubt on the ability of the public to sensibly judge its own health care system.

Recognizing that the policy-relevant attitudes reported on surveys are influenced by expectations. of course. does not in - validate their use. It simply calls for a careful interpretation of the patterns that one observes in public opinion. These may well reflect real changes in citizens· experiences with health care or perceptions of health threats. but one must always consider whether apparent changes over time or differences among social groups might actually have been driven by ex- pectations-expectations that may have dubious origins.

Attitudes Are Not Always Expressed Not everyone responds to su rvey inquiries. To be sure. many people do-at times offering opinions on matters about which they know quite little (more on this later) . But some just refuse-in some cases. declining to participate in the survey at all. and in others responding that they "don 't know" to par- ticular questions. A common pattern emerges from both types of nonresponse: Because those who do not answer tend to be from households with lower than average socioeconomic status. there are predictable ways in which their failure to respond biases the attitudes reported from surveys compared to the true distribution of attitudes among the general public.

For government programs and policies that are redistribu- tive (that offer proportionately greater benefits to economi- cally disadvantaged households). uneven nonresponse thus causes public opinion polls to understate true public support. For other types of policies where the socioeconomic gradi- ent in support runs in the other direction-households with higher education. for example. are more supportive of some interventions to reduce unhealthy behaviors8-the bias intro- duced by nonresponse is reversed . The public legitimacy of such policies tends to be overstated by surveys that fail to cor- rect for these patterns.

CHAPTER 15 • Public Opinion

To be sure. these differences are not all that large-typically on the order of 3 to 4 percentage points of support.9 Account- ing for nonresponse bias thus has a relatively modest effect on overall support for public policies. Consider the recent debate over health care reform that led to the enactment of the Affordable Care Act (ACA). Polling data suggest that re- spondents from households with annual incomes of $30.000 or less were far more likely to report that they did not know whether the reforms would benefit them or not than were re- spondents from households with incomes of $I 00.000 and above: 21.6% compared to 5.5%. 10

Because the ACA was overtly redistributive-a nd th is was a consistent media message from the Obama administration and congressional Democrats 11 -there was more support for the reforms in the lower-income strata: 59.1% compared to 46.3%. Nonrespondents were predicted to be more sup- portive of the ACA by 2 to 4% (varying by the month of the survey) than those who did express an attitude. But even if they had all been active respondents. it would have shifted reported levels of support for the bill among the "average" American by no more than 0.5%.'2

Expressed Attitudes Are Sometimes Unstable The American Voter. published in 1960, represented one of the first careful and extended explorations of patterns in Americans' political attitudes. 13 One of its key findings left an especially lasting impression on political scientists: When asked the same questions about political matters repeatedly over time. many Americans' judgments appeared strikingly inconstant. Political scientists had previously warned that the public's judgments were often ill-considered.14 but here was abundant hard evidence that the public's expressed attitudes were in fact quite unstable.

But what causes this appa rent inconstancy? The dominant interpretation among scholars of public opinion was that instabil- ity reflected judgments that were so ill-informed or ill-considered that they were easily influenced by the wording or the ordering of the questions themselves.15 For example. the public is far more supportive of spending on "financial assistance to the poor" than on "welfare.'' though both describe the same public poli- cies. Consequently. many political scientists dismissed citizens' opinions as "nonattitudes." not worthy of serious consideration by either scholars or policymakers. This view dominated political scientists' thinking for years.16

PART V • Stakeholders

Attitudes expressed about hea Ith policies demonstrate similar inconsistency. Question wording matters. For exam- ple. more Americans favor a national health insurance pro- gram when it is described as "an expanded universal form of Medicare-for-all " (58% favor) than when characterized as a program in "which all Americans would get their insurance from a single government plan " (50% favor). 17 Question timing matters. In December 2008 . only 46% of the public supported paying part of the costs of health care reform by reducing Medicare's payments to health maintenance orga- nizations (HMOs). yet by Apri l 2009. support had grown to 66% 18 without any substantial differences in the proportion of the public enrolled in HMOs or the generosity of Medicare payments to those plans. Finally, question context matters . Survey experiments demonstrate that as many as a third of those who expressed support for national health care reforms and half of those who expressed opposition would reverse their positions if offered a single counterargument.19

This variation can be substantial and needs to be taken into account when interpreting attitudes expressed in public opin - ion polls. Yet it seems wrong to dismiss citizens' assessments of health policy on these grounds. Although attitudes toward newly proposed initiatives tend to display considerable flux . assessments of existing public programs and policies or more general allocations or responsibility between public and pri - vate sectors tend to be far more stable.20 "changing rarely and usually doing so only in response to new information or de- velopments. "21 The role of experience is crucial here.

Citizens can form more coherent and consistent judgments about programs that they have actually encountered . giving them a better understanding of how those programs operate and what attributes are most valuable. From this perspective. the higher public support for "Medicare-for-air compared to a generic national health insurance program is per{ ectly sensible-Americans know what to expect from Medicare (in all its strengths and weaknesses). but it is hard to an- ticipate what a "single-payer" program might look like. Not surprisingly. public attitudes are least stable when policies are newly proposed or health problems first emerge onto the pub- lic agenda.22 Attitudes tend to stabilize as the public learns mo re about the issues at hand. hears from opponents and proponents across the political spectrum. and better under- stands the details of proposed reforms.

Of cou rse, publ ic attitudes toward health policies are never entirely stable. This is in part because a portion of

the public manages to ignore even the highest-profile policy debates-and thus rema ins ill -i nformed about the policies under consideration-in part because health policy discourse is continually reshaped by newly emergent health threats technological promises. and published findings about factor~ influencing public health. This makes 1t essential to careful~ parse expressed public attitudes. distinguishing as best pas· sible those that are grounded and stable from those that are more ephemeral.

HOW ATTITUDES TOWARD HEALTH POLICY MIRROR THOSE IN OTHER POLICY DOMAINS Survey researchers deploy a variety of measures of public sup- port for collective action . Som e are more susceptible than others to the vagaries of attitude elicitation that we identified earlier in this chapter. They also differ in terms of the extent to which attitudes toward health policy appear distinctive from other policy domains.

More specifically, attitudes toward public spending display relatively modest differences among all domestic social poli· cies.23 At any point in time . Americans who support greater government spending in health care also tend to favor greater spending for education . welfare. the environment. and urban infrastructure. Va riations over time in support for spending on health and education also track especially closely. though they tend to diverge more for other domestic social policies The close congruence betw een health and education also holds for public attitudes in Canada and the United Kingdom. de· spite their very different (parliamentary) political institutions.

These commonalities can be traced to certain ways in which social problems are perceived and how the appropriate· ness of collective responses to those problems is assessed These can be summarized as four general propositions about the nature and origins of policy-relevant attitudes:

• Most citi zens pay scant attention to public affairs. As a result they understand relatively little about the details of particular policy initiatives and have only a va gue sense of whether those policies are likely to have efficacious impact on the problems at hand.

• Despite their limited knowledge. most citizens will endeavor to make sense of the socia l problems they

consider important and to assess whether government action is warranted in these instances. Scholars call this "bounded rationality": Citizens do not have the time or information to make well-informed judgments and so draw upon a variety of heuristics that allow them to make reasoned assessments.

• Some of these heuristics rely on political elites: elected officials. respected media sources. or other trusted opinion leaders-from President Obama to Rush Limbaugh. Mimicry is. of course. the simplest heuristic. Some portion of the public simply parrots opinions rather than forming their own. But most test elite claims based on their own experiences. a safeguard that is more reliable for policies in which people have direct experience.

• Other heuristics help c1t1zens form their own judgments. unaided by elite "assistance." These include attributions of responsibility for social problems. stereotypes about the groups expected to most benefit from government 1ntervent1on. and perceptions of the relative trustworthiness of the actors charged with implementing those policies.

In each of these four ways. the public's assessment of health policies is similar to its Judgments about other pub- lic policies. We consider each in turn. documenting their rel - evance to health policy in general as well as to the politics of obesity control and national health care reform in particular.

Inattention to Public Affairs Americans generally pay limited attention to the policy- making process or to the issues drawing the attention of public officials 2~ This limited attention is evident across all po11cy domains. Only about one in four Americans report very closely following media coverage of social policy issues. 25

Health concerns garner even less attention: only 20% of the public very closely follow media coverage of public-health is- sues. 17% follow coverage of health policymaking. and 14% follow stones related to medical care or clinical practices.

There are exceptions to this pervasive inattention. Of the 225 news stories that the Kaiser Family Foundation tracked between 1996 and 2002. 10 induced close attention from two-thirds or more of the American public. These were almost exclusively stories that warned about emergent health threats. particularly those menacing vulnerable populations.26 A total of 3 out of the IO stories involved b1oterrorism. two infectious diseases. and four other health threats affecting children.

CHAPTER 15 • Public Opinion

In a few other cases. public attention bu ilds over time in an "issue-attention " cycle. Initial media coverage of an issue captures some public attention. which encourages citizens whose lives are affected to step forward . This initial "activa- tion" of the populace in turn draws th e attention of public officials, whose pronouncements on these matters garner ad- ditional media coverage and further stoke public awareness. Tracked over time. publ ic interest in the media coverage of these aspects of health policy builds gradually over 12 to 18 months. This heightened public awareness. however. is rarely sustained for long.27

But these are the exceptions. not the rule. Most people simply have too much on their minds and too much going on in their lives to devote much sustained attention to public affairs-and when they muster some attention. it is typically focused on one or two issues at a time. leaving a myriad of other policy-relevant concerns on the proverbial back burner of their consciousness. This limited attention has conse- quences for knowledge relevant to policy discourse. Those who close ly follow health policy concerns in the media are twice as likely to correctly answer questions about those is- sues as those who have not. 28 though even the most attentive segmen ts of the public remain ed rather poorly informed about most health-policy matters.

These patterns were all evident in the year-long political debates that led up to the enactment of the ACA in 20 I 0. In ea rly 2009. roughly a fifth of all Americans repo rted very closely following media coverage of health care reform, pretty much on par for health-policy issues generally. 29 By the fall. as the political debate intensified and media coverage expanded. more than a third of the public was closely following the story. Over the latter half of the year. 85% of the public in- dicated that they were "very or somewhat" closely following media reports on health care reform. This was an extremely high level of public attention-about the same as garnered by the anthrax scare in the aftermath of 9/ I I -and for the ACA. the public remained attentive for a longer period of time.

Yet even with this sustained public attenti on and ex- tensive media coverage. Americans remained relatively il l- informed about the details of the legislation.30 Between 45 and 50% of the public reported being "confused " by the reforms ; this persisted throughout the year-long debate.31

This limited understanding persisted even after the ACA was enacted. When surveyed about the new law at the end of 20 IO. only a third of the public could correctly answer even

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PART V • Stakeholders

7 of IO questions about the reforms; 36% got less than half the answers right32-since the questions were in yes or no format, flipping a coin would have yielded more accurate responses.

Attention to media coverage enhanced public knowledge- except for those watching Fox News. It is not clear whether this finding reflects weaker informational content of Fox News coverage or the particularly partisan tenor to political debate on and media coverage of the ACA. 33 Most health policies re· ceive fa r less media coverage, and most of the public has only limited knowledge about the problems being addressed or the policies being considered.34

Bounded Rationality Abounds That said. some citizens do pay close attention to any given policy debate. often because the issues at hand matter to them. 35 For the high-profile issues with the most extensive media coverage. these informed "issue publics" can grow to a third of the electorate. though for health and social policies they are more typically on the order of I 0 to I 5%.

But the attitudes elicited on surveys about health-policy issues come from a much larger portion of the public. For example. during the debate over the ACA. Americans were re· peatedly asked whether the proposed reforms would be "good for the country." Only about 5 to I 0% (fluctuating a bit from month to month) indicated that they did not know or offered the sort of vacillating response (e.g., "it depends .. ) that is of· ten a veiled admission of ignorance.36 What then shapes the attitudes reported by the maiority of respondents who have. at best. limited understanding of the issues or policies under consideration?

Of course some people quite comfortably espouse opinions off the top of their heads. unburdened by knowledge and un· inhibited by much need for a coherent rationale Others will render judgments based solely on the fragments of knowledge that they do posses. even if these fragments are misinterpreted or outdated.37 But most who are poorly informed about policy matters recognize their limited knowledge and compensate in ways that allow them to articulate attitudes that nonetheless feel to them to be legitimate and meaningful.

Over the past 30 years. political psychologists have ex- plored how citizens formulate policy assessments under these circumstances; they do so by making use of decision heuris· tics that simplify choices so that they can be made coherently

despite limited attention and information.» These heunstics fall into three broad groups:

• Substitution · For an inattentive c1t1zenry. emotions can be a more reliable guide to public affairs than reason r.g For example. when media coverage 1s filled with so ma ny putative health threats that 1t seems 1mposs1bfe to make sense of which to take seriously, people tend to pay the most attention to risks that induce the greatest anxiety. even if they are unable to discern why those risks feel so frightening 39 Similarly. when there are too ma ny unknowns to reliably predict which policies might best address those problems. c1t1zens are typically drawn to the alternatives that feel the most comfortable. aga in without necessarily " knowing" what 1t 1s that makes those policies more comfortable prospects . .co

• Categorization: It 1s easier to express opinions if new concerns can be linked to familiar categones-hke Democratic or conservative Since the groundbreaking research in The Amertcan Voter a half century ago. pohtiG! sc1ent1sts have recognized that partisan labeling 1s among the most persistent forms of categorization used by the American public."' It is applied in two d1stmct ways.

Strong partisans (about a third of the public) are typi· cally attentive to public affairs . As a result. they can re~ on elite cues. emulating pos1t1ons adopted by opinion leaders from their own party and resisting those es· poused by the " other side.""2 By avoiding discordant evidence or discounting information that cannot be avoided. they develop a self-reinforcing partisan para- digm . one in which all the (known) evidence confi rms their partisan pred1spos1t1ons .

By contrast. those with partisan leanings but weaker identification make use of partisan cues in formulati ng their pos1t1ons in a less determinative manner. Policy op- tions that are described in terms consistent with the r party leanings induce greater support. but this can be offset by their own conflicting experience or perceptions of social issues For example. those leaning Republican will favor policies described in terms involving incen- tives and rndiuidua/ responsibility and oppose those that explicitly mention taxes or government authonty Although the evidentiary world of .. weak" partisans

is thus more complicated and potentially confusing- because they a re open to a range of evidence and

= argument-they can use these cue words to formulate a position on proposed policies without the fuss and bother of trying to discern if the policies in question are actually sensible proposals.

• Comparison: Because most Americans do not determine their policy positions solely by partisan predispositions. they will look to other heuristics to simplify policy reasoning. Comparisons play a vital role in this regard: here again. these take two primary forms. The first involves reasoning by analogy.43 Analogies are drawn from within the same policy domain. based on situations and circumstances in other times or places that seem similar to those for the issue at hand. Those relying on analogies seek lessons about what situations merit government action or what policies can be expected to best remedy the problem. When. for instance. unemployment rates fail to decline after an economic downturn in the United States. what lessons can be drawn from earlier recessions or from the recovery strategies being pursued by other countries? Copying successes and avoiding failures is far easier than actually trying to make sense of the details of the downturn itself.

A second form of comparison involves reasoning by metaphor.44 Metaphors involve comparisons across policy domains; unlike analogies. they explicitly evoke partial com- pansons and provide cues for how to think about a problem or proposed policy rather than for judging its likely efficacy. For example. when technological advances made surrogate mothers a realistic option for infertile couples. whether this development merited government intervention (and what form that intervention might take) depended in large part by whether surrogacy was likened to a labor contract (familiar and readily negotiated) or to the selling of human beings (no longer deemed acceptable in most contemporary societies). 4s Both comparisons illuminate certain aspects of the complex- ity of surrogacy: Whether and in what forms people accepted surrogacy depended in large part on which compa rison held pnmacy in their thinking. And choosing among these com- pansons was far easier than actually sorting through the de- tails of surrogacy as an issue.

The influence of all three kinds of heuristics is evident in the public attitudes toward health policy. The public supports government action more quickly when health threats induce intense fears.46 and 1t favors policies whose beneficiaries evoke warm feelings.47 Partisan predilections shape the media

CHAPTER 15 •Public Opinion IJJI sources from which Americans learn about health threats.48

how they make sense of media messages regarding the so- cial determinants of health.49 how they perceive people to be treated by the health care system.so and. of course. how they align for and against policies proposed by different politi- cal figures.s 1 Finally, comparisons exert a powerful influence over opinions. As obesity emerged as an issue on the political agenda. for example. public understanding of and support for an appropriate collective response drew on analogies to previ- ous policies shaping health behaviorss2 and to metaphorical understandings of the origins of the obesity crisis. s3

Although the influence of these heuristics can be discerned in virtually every policy context. their relative importance tends to shift as issues evolve over time. At the early stages, when the scope of the problems and their long-term trajectory remain ill- defined. emotional heuristics most often come into play because " fear cascades " feed a public panic. with little known to coun- terbalance these affective drivers.s4 As the nature and origins of issues come into sharper focus. comparative heuristics play a larger role as people look for precedents to help them make sense of the emerging evidence. For most problems. partisan heuristics are often the last to become salient. since it typically takes time for elites to define a partisan interpretation of the problem at hand and even longer for their cues to diffuse to the broader populace, even to the relatively attentive issue publics. ss

Whatever the stage of policy discourse. bounded rationality and heuristic reasoning powerfully shape public opinion. This means that. as for most policy domains, self-interest exerts a relatively weak influence over health-policy attitudes.s6 This is not because the general public is deeply se lfl ess or altruistic. But when future prospects remain uncertain, when the impact of proposed policies on any given household is difficult to reliably anticipate. self-interested stakes remain ill-defined.s7

Although heuristics can simplify complex choices to make them more coherent. they can also distort decision making by leading the public to neglect certain types of risks. to draw overly facile analogies. or to discount crucial evidence that conflicts with their preferred partisan paradigms.ss For ex- ample, the metaphor of "addictive foods" has had a power- ful influence on Americans' thinking about the obesity crisis. though there is relatively little evidence that most foods (even the tastiest) are particularly addictive.

Finally, the policy attitudes ofboundedly rational citizens may be particularly susceptible to manipulation by elite interests.

PART V • Stakeholders

Particularly when partisan cues are important in shaping policy attitudes. party leaders can make claims about policies that have little relationship to reality and are deeply resistant to being disproved because their validity is never "tested" by an inattentive public. These sorts of elite signals are where we now turn our attention.

Elite Influences on Public Opinion Each of these heuristics creates points of leverage through which political elites can influence policy attitudes. There is growing evidence that elites regularly do so. Indeed. some scholars suggest that the dramatic increase in polling in the last quarter of the 20th century reflected a growing effort by public officials to strategically manipulate opinion.59 One can identify examples where elites leveraged each of the three families of heuristics identified earlier to influence Americans' attitudes about health policy.

The impact of emotional heuristics for newly emerging issues encourages elites to lau nch " fear campaigns" that heighten public anxiety to shift their policy stances. For example. public health officials promoted the language of an "obesity epidemic" in part because its threatening overtones brought attention to a health concern that they felt was being overlooked.60 These emotional priming effects can be even more powerful when they intersect with Americans' prevailing distrust of govern- ment intervention into the content of their medical care. 61

During the debate over the ACA . Republican opponents charged that reimbursing clinicians for talking to their patients about end-of-life care represented a veiled effort to create" death panels " to limit health services for Medicare beneficiaries in their last years of life.62 Fear appeals of this sort were effective precisely because so many Americans were ill-informed about the actual details of the legislation . allowing such false claims to have persisting influence. particularly among partisans pre- disposed to trust claims made by Sarah Palin more than expla- nations from the Obama administration.63 These fear-based appeals can often have lasting impact on policy attitudes.64

Both these policy debates also created ample opportuni- ties for elites to deploy metaphorical arguments to shape at- titudes related to both obesity and health care reform . These were perhaps most evident in the framing contest over obe- sity, with advocates proffering metaphors on multiple fronts that va riously cast weight as a matter of individual choice. industry manipulation. or a dis ability meriting protection against discrimination. 65

Partisan framing was especially powerful during health de· bates. This was true for the debates over health care reform dur· ing both the Clinton and Obama adm1rnstrat1ons. even though the former occurred in an era in which politics within the Beltway evidenced less of a partisan d1v1de In both cases. the partisan split in support among the public was not that pro· nounced when reforms were first introduced.66 but within a few months partisan cleavages began to deepen, renectmg the Cntl· cisms presented by Republican elites and a greater willingness of a partisan public to pay attention to them.67

Concerted efforts by elites to influence public opinion had an impact.68 For example. almost a year after the enactment of the ACA , 40% of Americans still believed that the bill would "allow a government panel to make decisions about end-of-life care for people on Medicare."69 a falsehood entire1y manufactured as a campaign of elite d1sinformat1on.70 Part1· san cleavages in the public's support for and assessment of reforms also remain at the elevated levels that emerged after elites reframed the reform debate in partisan terms. Yet 11 is important to recognize that there are real constraints on the extent to which elites are able to shape public opm1on.

This is in part because elites on all sides strive to exert in- fluence : the competing messages tend to offset one another. Elite influence 1s also limited by the fact that elites' value judg- ments related to health policy often follow a very differe nt moral logic than those of the public. 71 so that elite appea ls may feel discordant and off-putting to many of their own con- stituents. Finally. elite efforts to manipulate policy attitudes are also constrained by the public·s ability to reality test elite claims against their own knowledge and experience.12 For ex· ample, although the Republican electorate 1n general turned against the ACA when opinion leaders 1n their party mounted a concerted critique. Republicans who felt personally at risk for large med ical expenses were far less likely to join this opposition. 73

Some Deeper Logics: Attributions of Responsibility and Morality Heuristics reduce cognitive burdens: their widespread 1n· fluence reflects a political reality in which much of the public avoids deep reasoning about policy matters. But better· informed citizens have the capacity to more thoroughly and carefully consider policy choices. Their thinking tends to be shaped by two forms of attribution that influence attitudes in both health and other policy domains.

Attributio~ of .Responsibility· When problems are thought to emerge pnmanly from ind1v1dual behaviors and choices. the public assigns respons1b1lity for their remedy largely to indi- viduals and families. Conversely. when the causes or social proble~s are seen to be more systemic. the public supports collective responses to rectify the problems or ameliorate their consequences

For much of the 20th century. health-related problems were an exception to this attributional calculus because 1t was widely presumed most ill health resulted from diseases or injunes outside ind1v1dual control 74 This began to change over the past 25 years. as an increasing number of health cond1t1ons (and associated medical spending) were linked to individual behaviors.1$ "Personal responsibility for health has become a central moral value. resonating 1n media coverage of health policy topics and reflected in policy actions. "76

Yet Americans· opinion remains divided about how much any given health problem IS a matter of individual choice. Consequently. attributions of causal responsibility have be- come a powerful-and deeply contested-determinant or public support for collective action. both for insurance expan· s1ons and interventions addressing the social determinants or health 17 Moreover. these attributions also shape the particular policies that the public views as most legitimate. even after they have acknowledged a general case for collective action.7B

Group Att11but1ons and Normattue Values: Americans' more reasoned policy Judgments also reflect a moral calculus. But these considerations typically do not derive from any or the grand theo· ries of distnbut1onal JUStice that ethicists offer as guides to poli- cymaking Instead. the public identifies the groups most likely to benefit from the policy in question. then assesses whether they mentassistance.79 for both social policy generally and health pol· 'I:'/ in particular. deservingness is assessed based on a complex combination of ment. need. equality of outcome. and equality of opportunity. Which of these moral metrics matters most de· pends on the specific health concern or seMce in question.

ATTITU DES TOWARD HEALTH POLICY ARE DIFFEREN T Popular attitudes toward health and other social policies thus share a common foundation. shaped m fundamentally similar ways by citizens' persisting inattention to public affairs. the heunst1cs on which they rely to form coherent attitudes. elite

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CHAPTER 15 • Public Opinion

influence over public sentiment. and the attributional logics deploy~d by those inclined to reason through policy issues. One m1g~t therefore expect the attitudes expressed about health policy to look much like those for other social policies. ~or some measures of policy support (e.g .. spending on exist- ing progra~s) .. th.is congruence is fairly strong. Yet in many w_ays public opinion regarding health policy looks strikingly different from other policy domains. More specifically:

• Collective Responsibility: In any given year. the public has been significantly more supportive of a collective role for "helping the sick" than for either "helping the poor" or for general involvement in American society.Bo This gap has grown over time. In the increasingly conservative era between 1975 and 2000, support for collective responsibility held in health care while it declined in the other two domains. By the end of this period. twice as many Americans supported collective responsibility for health care than for helping the poor or for government involvement in society.

• Accepting Taxes: The conservative shift in American politics after 1975 was accompanied by a dramatic rise in antitax sentiment among voters.Bl Yet the public remained far more supportive of taxes earmarked for health interventions. For example. as many as half of all Americans favored a general tax increase to support the ACA. and two-thirds consistently endorsed financing reforms using "sin taxes" on products such as cigarettes or alcohol.B2

• Embracing Regulation: Following the Reagan revolution of the 1980s. a traditional American distaste for regulation became more pronounced. Two-thirds of the public agreed that there was too much government regulation.B3 Conservative politicians routinely bemoaned the government red tape that shackles Americans' entrepreneurial spirit. Yet over this same time. polls revealed that a plurality of Americans felt that there was too little government regulation in health care; in any given year. antiregulatory sentime.nt is about half as prevalent in the health care arena as for business in general.84

In each of these ways, Americans embrace a markedly more expansive role for government in health than in other social policies. Health policy is also distinct in terms of who sup· ports activist government. For most social policies. income and race represent deep cleavages in the American electorate;

PART V • Stakeholders

lower-income and minority households are consistently more supportive of government action. Both cleavages are evident but markedly smaller in health policy.85 Indeed. income dif· ferences. but not racial differences. have virtually vanished in support for hea lth care reform. even though the ACA was ex· plicitly redistributive in both its subsidies of health insurance and its sources of financing.B6

It seems clea r that the public sees hea lth policy differently than other socia l policies . But given all the commonalities in the public's politica l reasoning that cross domains. how is it that support for government action in health care is so much broader? We address that question in two stages: First. we identify some subtle ways in which the public thinks differently about health and health care; second, we explore how these rationales might account for policy differences.

Some Ways in Which the Public Thinks Differently about Health (Care) Policy We have identified severa l primary influences that shape public attitudes-decision heuristics. elite signals. and at- tributiona l logics. Examining these influences a bit further. one can identify some subtle ways in which each plays out in distinct ways for health and health care. By doing so. we can discern how each of these factors interacts with the others.

A Shifting Balance among Decision Heuristics: Compared to most other policy domains. health policy is more pro- foundly and pervasively influenced by changing knowledge and technology.8 7 Because our "understanding" about health is in such flux-which in itself raises doubts about what we truly know-the relative importance of emotional heuristics is enhanced and partisan heuristics reduced . As new health concerns move onto the political agenda. there is typically a lag before they acquire a partisan penumbra; elites from both parties ascertain how best to frame these matters to further thei r strategic agenda. To be sure. eve n the most technical issues can eventually acquire -a strong partisan valence.BB But for t he semi nal years of policy debate. pu bl ic attitudes are less shaped by partisan frames and thus less influenced by politica l elites.

W hen knowledge is in such flux. emotional heuristics be- come more central to public reasoning. Both hope and anxi- ety loom large in political discourse; in trying to make sense

of complex and uncertain health matters. many citizens wil respond more to these emotiona l overtones than to the lim- ited information that is available.09 More specifically. wner- emotions are primed in more negative terms. latent mistrustm particular actors can become magnified. since people who are anxious tend to see the world as a more threatening place m general.90 Consequently. American s· cynical views of employ- ers. insurers. and the pharmaceutical industry can burgeon into active distrust. moving a fearful public to see government as a shield against these threats.91 For example. the threat of pernicious pricing practices by insurers may have been cru- cial to bolstering faltering public support for the ACA m earfy 20 I 0.92

Salient Risks Are More Widespread. Compared to most ad· vanced market democracies. the United States has relatively high income volatility. reflecting greater instability of earnings and less extensive public programs buffering economic nsks. 91

This instability particularly affects lower-income households that are more vulnerable to economic shocks. Hea lth-related risks. however. tend to be less economically stratified. Even the rich get sick and even well-off households can expen· ence unexpected medical expenses. This 1s far less common for other economic risks . For example. households m the lowest-income tertile have unemployment rates four times higher than those in the upper third of the income distribu· tion but are only 30% more likely to experience major medical expenses.94 To be sure. higher-income households will more easily cope with economic shocks- but unlike unemploy- ment. medical expenses remain a salient nsk for them. despite their advantaged position .

Altered Attnbutions.· Because attributions of responsibility play such a central role in political reasoning. public percep· tions about the determinants of health (and medical spend· ing) have substantial influence on support for government action . But for health care. three cons1derat1ons complicate the conventional balancing act between attributions to indi· vidual behavior (reducing support for collective action) and to systemic causes (increasing support).

First. the public recognizes that some health conditions have genetic origins. though relatively few Americans see this as a primary cause of variation in health outcomes

95

Second. the public widely sees health care as a professional· ized service. with clinicians accorded considerable discretion in deciding how best to treat a particular patient or health problem .96 Third. the impact of technology on medical care

e;p•

is also evident to the public. creating a sort of technological imperative that can drive medical spending quite apart from individual choices. 97

Each of these attributions partly offsets the growing mor- alization that would otherwise shift blame for poor health to individual choices and behaviors. However. these mitigating effects are more pronounced for health care than for health behaviors Genetic causes do surprisingly little to dispel indi- vidual stigma and blame for poor health outcomes.98 By con- trast. bad outcomes from medical encounters are more widely seen by the public to be outside the control of the 1nd1v1dual patient. a product of prejudice. economic barriers. or system malfunction. As a result, Americans consider disparities in good medical care to be unfair but not disparities 1n life expec- tancy (72% versus 3 I%) .99

However. racial disparities in health status are more widely attributed to genetics than are di sparities in income-and thus are not seen as markers of less deserving status. Ameri- cans' support for welfare (i.e. means-tested cash transfers) is significantly reduced if welfare recipients are seen to be largely from racial and ethnic minorities. Indeed. simply "priming" respondents in experiments with photos or descriptions of welfare rec1p1ents as minorities significantly reduces support for generous welfare payments. 100 By contra st. when experi- ments describe beneficia ries of health programs using photos or descriptions of minority groups. no such reductions in sup- port emerge.101

Moral Reasoning Emphasizes Different Constderallons: The public's moral calculus for assessing which rec1p1ents deserve collective assistance is generally a function of three factors· need. merit. and equality. with the third element often subd1v1ded into equality of outcome and equality of oppor- tunity. In the United States. the latter version of equality 1s perceived as paramount for all social policy domains. health care induded.102

But health care is distinctive in that Americans place a far higher emphasis on need in that domain than for other aspects of social policy. includ ing food. housing. or educa- tion IOl or course. in practice notions of what is "medically necessary" may be vague or contested Nonetheless. they do encourage the public to favor policies that delegate important aspects of resource allocation to health care professionals rather than assign them to either 1nd1v1dual patients or collec- Lve choices.104

CHAPTER 15 • Public Opinion

Policy Reasoning and Cross-Domain Differences in Support for Collective Action Building on these documented differences in the ways in which the public thinks about health care compared to other socially valued goods and services. we can now identi fy some possible reasons that Americans favor more collective respon - sibility and more extensive regulation in health care than in other arenas of social policy. These include the following:

• Because even those in better-off economic circumstances feel at risk from catastrophic medical expenses. support for government policies to expand health insurance coverage draws on a coalition of the disadvantaged and the insecure. broadening its legitimacy.

• Because large medical costs and dread diseases evoke heightened anxiety, the public may be more inclined to turn to government as a shield against potentially abusive practices by corporate actors for health care than for other services. particularly in those circumstances in which the profit motive is seen as most threatening to norms of need in medical care.105

• Because the public 's attributions about medical care reduce the perceived importance of individual choices and behavior. there will be greater support for collective responsibility than in other policy domains.

These three factors likely reinforce one another. account- ing for the large cross-domain differences in support. To date. however. there has been no research that might elucidate the relative importance of each of these considerations. Logica lly, one might expect anxieties and emotional heuristics to be particularly influential in bolstering support for regulation of the health sector. but this is speculation. since we have no research on these matters.

The origins of the public's willingness to embrace taxes when revenues are targeted to health are a bit more obscure. Sin taxes on alcohol. tobacco. and unhealthy foods likely gain their appeal because they are seen to simu ltaneously punish individuals with blameworthy behavior (the slothful. addicted. and gluttonous) and penalize industries whose mar- keting practices have encouraged that behavior.106 But these punitive motives cannot account for the greater support (per- haps more accurately. reduced opposition) to broad-based taxes when used to finance health care initiatives. Ultimately.

I I

PART V • Stakeholders

lower-income and minority households are consistently more supportive of government action. Both cleavages are evident but markedly smaller in health policy.85 Indeed. income dif- ferences. but not racial differences, have virtually vanished in support for health care reform. even though the ACA was ex- plicitly redistributive in both its subsidies of health insurance and its sources of financing.86

It seems clear that the public sees health policy differently than other social policies. But given all the commonalities in the public's political reasoning that cross domains. how is it that support for government action in health care is so much broader? We address that question in two stages: First. we identify some subtle ways in which the public thinks differently about health and health care: second. we explore how these rationales might account for pol icy differences.

Some Ways in Which the Public Thinks Differently about Health (Care) Policy We have identified several primary influences that shape public attitudes- decision heuristics. elite signals. and at- tributional logics. Examining these influences a bit further. one can identify some subtle ways in which each plays out in distinct ways for health and health care. By doing so. we can discern how each of these factors interacts with the others.

A Shifting Balance among Decision Heuristics: Compared to most other policy domains, health policy is more pro- foundly and pervasively influenced by changing knowledge and technology.87 Because our "understanding" about health is in such flux-which in itself raises doubts about what we truly know-the relative importance of emotional heuristics is enhanced and partisan heuristics reduced. As new health concerns move onto the political agenda. there is typically a lag before they acquire a partisan penumbra: elites from both parties ascertain how best to frame these matters to further their strategic agenda. To be sure, even the most technical issues can eventually acquire -a strong partisan valence.ss But for the seminal years of policy debate. public attitudes are less shaped by partisan frames and thus less influenced by poli tical elites.

When knowledge is in such flux. emotional heuristics be- ome more central to public reasoning. Both hope and anxi-

ety loom large in political discourse: in trying to make sense

of complex and uncertain health matters. many citizens will respond more to these emotional overtones than to the lim- ited information that 1s available.89 More specifically when emotions are primed rn more negative terms. latent m1strustm particular actors can become magnified. since people who are anxious tend to see the world as a more threatening place m general. 90 Consequently. Americans· cynical views of employ- ers . insurers. and the pharmaceutical industry can burgeon into active distrust. moving a fearful public to see government as a shield against these threats. 9 ' For example. the threat or pernicious pncrng practices by insurers may have been cru· cial to bolstering faltering public support for the ACA nearly 2010.92

Salient Risks Are More Widespread Compared to most ad· vanced market democracies . the United States has relat1vey high income volatility, reflecting greater instability of earnings and less extensive public programs buffering economic nsks 9J This instability particu larly affects lower-income households that are more vulnerable to economic shocks. Health-related risks. however. tend to be less economically stratified. Even the rich get sick and even well-off households can experi· ence unexpected medical expenses This 1s far less common for other economic risks For example. households in the lowest-income tertile have unemployment rates four times higher than those rn the upper third of the income distribu· tion but are only 30% more likely to experience ma1or med1ca expenses.94 To be sure. higher-income households will more easily cope with economic shocks-but unlike unemploy- ment. medical expenses remain a salient risk for them. despt:e their advantaged pos1t1on

Altered Allrrbutions. Because attributions of responsib ty play such a central role rn political reasoning. public perce:r tions about the determinants of health (and medical spend· mg) have substantial influence on support for governmem action. But for health care. three considerations complicate the conventional balancing act between attributions to ind~ vidual behavior (reducing support for collective action) and to systemic causes (increasing support).

First. the public recognizes that some health cond1:ons have genetic origins. though relatively few Americans see this as a primary cause of variation in health outcomes 11

Second. the public widely sees health care as a profess1ona · ized service. with clrn1c1ans accorded considerable discre~on in deciding how best to treat a particular patient or heath problem.96 Third. the impact of technology on medical care

1s also evident to the public. creating a sort of technological

1mperat1ve that can drive medical spending quite apart from individual choices .97

Each of these attributions partly offsets the growing mor-

alization that would otherwise shift blame for poor health to

ind1v1dual choices and behaviors. However. these mitigating

effects are more pronounced for health care than for health behaviors Genetic causes do surprisingly little to dispel indi-

VJdual stigma and blame for poor health outcomes.9s By con-

trast. bad outcomes from medical encounters are more widely

seen by the public to be outside the control of the individual

patient . a product of pre1ud1ce. economic barriers. or system

malfunction As a result. Americans consider disparities in

good med cal care to be unfair but not disparities in life expec- tancy ( 72% versus 3 I%) 99

However. racial disparities 1n health status are more widely attributed to genetics than are disparities in income-and

thus are not seen as markers of less deserving status. Ameri- cans' support for welfare (1 .e .. means-tested cash transfers) is

s1gnif1cantly reduced 1f welfare recipients are seen to be largely from racial and ethnic minorities Indeed. simply "priming"

respondents in experiments with photos or descriptions of

welfare recipients as minorities significantly reduces support

for generous welfare payments.100 By contrast. when experi-

ments describe benef1c1aries of health programs using photos

or descriptions of minority groups no such reductions in sup-

port emerge 101

Moral Reasoning Emphasizes Different Considerations: The public's moral calculus for assessing which recipients

deserve collective assistance 1s generally a function of three

factors need. merit. and equality, with the third element often

subdivided into equality of outcome and equality of oppor-

tunity In the United States. the latter version of equality 1s

perceived as paramount for all social policy domains. health

care included 102

But health care 1s distinctive in that Americans place a

far higher emphasis on need in that domain than for other

aspects of social policy. including food. housing. or educa- tion . 01 Of course. in practice notions of what is "medically

necessary· may be vague or contested. Nonetheless. they do encourage the pubhc to favor pohc1es that delegate important

aspects of resource allocation to health care professionals

rather than assign them to either individual patients or collec-

tm cho ces 104

CHAPTER 15 • Public Opinion

Policy Reasoning and Cross-Domain Dif~erences in Support for Collective Action Bui.lding on these documented differences in the ways in

wh1.ch the public thinks about health care compared to other soc1~lly valued goods and services. we can now identify some P.o~s.1ble reasons that Americans favor more collective respon s1b1hty and more extensive regulation in health care than 1n other arenas of social policy. These include the following:

• Because even those in better-off economic circumstances feel at risk from catastrophic medical expenses. support

for government policies to expand health insurance coverage draws on a coalition of the disadvantaged and the insecure. broadening its legitimacy.

• Because large medical costs and dread diseases evoke heightened anxiety, the public may be more inclined to turn to government as a shield against potentially abusive practices by corporate actors for health care than for other services. particularly in those circumstances in which the profit motive is seen as most threatening to norms of need in medical care.105

• Because the public's attributions about medical care reduce the perceived importance of individual choices and behavior. there wi ll be greater support for collective responsibility than in other policy domains.

These three factors likely reinforce one another. account· ing for the large cross-domain differences in support. To date. however. there has been no research that might elucidate the relative importance of each of these considerations. Logically one might expect anxieties and emotional heuristics to be particularly influential in bolstering support for regulation of

the health sector. but this is speculation. since we have no

research on these matters.

The origins of the public's willingness to embrace taxes

when revenues are targeted to health are a bit more obscure. Sin taxes on alcohol. tobacco. and unhealthy foods likely gain their appeal because they are seen to simultaneously punish individuals with blameworthy behavior (the slothful.

addicted. and gluttonous) and penalize industries whose mar- keting practices have encouraged that behav1or.

106 But these

punitive motives cannot account for the .greater support (per· haps more accurately. reduced oppos1t10~) .to broad·based taxes when used to finance health care in1t1at1ves. Ultimately.

of the public's greater support ~ th care taxes always being more t purpose

e c ues about the reduced so- ca th P<>hcy, though here again

c nations The reduced income u h in1t1at1ves almost certa inly

' of substantial out-o f-pocket a cd to other economic shocks)

' (I) there 1s still a modest in- c to l.irge medical expenses and

u shmg lumpers from split- na t es that connect health- op nion about all policy are

why Americans can be so .. "''""'·•"l of particular health·policy

nerally supportive of col· th and health care 101 Con- o that ma e health-policy nate ways in which greater t bolster Americans· conh-

a y and broaden their overall Put succinctly. lumpers pro· t ons but splitters the most

(2) households with more readily buffer unexpected economic resources Q row expenses through SiV!

mg, the virtual disappearance of ngs support for insurance expansions 1i:ent1~come &lid bit o. fa mystery. The smalle d.f' e ACA r

h r 1 1erences in suppon ~ ite and minority voters for health· I linked to the reduced racial stigma po icy in1llill\'tS Q t d h associated WJL~ este ealth programs compared t h r.:

th. d . . o cas ass1m nce is re uct1on in turn seems linked at I

. d east in Put to perceive role or genetics in explaining racial diflert health needs. But these linkages also need add1tJona

There are many reasons for this When countries tir.t a national health insurance program or national hea service. 1t provides a common point of experience around which to mobilize voters-and a domain 1n which tht government is unambiguously responsible for effec tive performance. By contrast. the American health art system is a fragmented morass of delivery systems a insurance provisions: government responsibility 1s a com plicated set or regulatory regimes and subsidy progra all of which makes it harder to mob1l1ze voter atten and engagement 110 And whatever enthusiasm Amena might muster for collective action in health care 1s m • gated by a long pol1t1cal history of having popular refocrn blocked by powerful economic interests

111

To be sure. there have been policies-such as Medicare that have been able to sustain a broader issue pubhc amcq beneficiaries (and their families) and a reasonably h of attention among the general pubhc 112 The fragmen structure. piecemeal implementation. and statdcvel istration of the ACA make it unlikely to generate the sa level of engagement.111 Certainly efforts could: :de more effectively encourage public attention tot implementation or health care reforms.

In the end. a more engaged and attentive citizen~ . hes to mob1hzauon

require very different approac . tieca st care differs from other social policy domains

CHAPTER 15 • PuhltL' Op11u o n

mate threat-major illness-shapes identity as well ' I eel ng well-being. Experience or illness transforms

ves of survivors and family members. That altered ~and the social networks that emerge among those ~have shared this experience-offers a different sort scaffolding for engaging public attention. To be sure. it

is one fraught with a distinctive set of concerns regarding representation and co-optation. 114 But it is one that holds the prospect for greater policy engagement and a more in formed citizenry. a potentially vital influence on public at t1tudes toward government in American li fe Whether that

potential is realized. only time will tell.

. ~ s 1. How are the public's attitudes toward health policy similar to and different from their attitudes toward other publ

policies? 2. What are two distinct roles for government in improving health?

3. Do public attitudes influence health policy?

4. How is public sentiment ascertained?

s. Do public attitudes depend on expectations? 6. Are op1n1ons always captured by surveys?

7. Are opinions of individuals consistent? a. Is there public suppor~ for government spending on health as there is for other social policies? 9. What is meant by saying c1t1zens exhibit "bounded rationality" in forming op· b

10

Doe h . 1n1ons a out social pol cies?

· 5 t e public closely follow the politics of health policy?

11. What kinds of dec1s1on heuristics are used by people to form opinions about public policy?

::· H"" do ehte poht"al mterests attempt to influence pubhc opm•on? .

I . What are two forms of attribution made by well-informed citizens?

4, How is public opinion about health policy different from public . . b IS. Why, m the author's op . d A . opinion a out other social policies?

th inion o mencans favor mo II · an in other areas of social policy? re co ect1ve responsibility and more regulation in health ca

e more involved in health care? 16. What might result m people thinking that government should b . .

EN D OTES 1. Yoon 2009.

2. Tetlock, 2005.

:· Schlesinger. 2011; Hacker, 2006.

, Political sc1ent1sts set the "o I d suooest h ver un er" at about 60% · c.c. st at the pohcymakin is re . . . -m roughly 6 of I 0 "e isod ..

i:•ncan pol•t•cal mstotut•onsgwere d'ondmJ ;o cotozen preferences This is :uite ~s h of pohcymakmg, ev•dence anny of the maionty" Volden and ~1.gne rom the outset to ensure that gover ig • given the ways tn wh ch

1seman. 2011. nment would protect against a

PART V • Stakeholders

5. Soroka and Wlezien. 2010. 6. The three countries ranked 6th. 16th. and 14th. respectively. among 25 OECD countries in terms of the proportion

of the population reporting that it was satisfied with their country's health care system. Blendon. Kim, and Benson

2001. p. 16.

7. Murray. Kawabata, and Valentine, 2001. p. 24.

8. Oliver and Lee, 2005.

9. Berinsky, 20 11.

Io. Berinsky and Margolis. 20 I I, p. 982 .

11. Oberlander. 2010.

12. Berinsky and Margolis. 2011.

13. Campbell. Converse. Miller. and Stokes. 1960.

14. Lippman, 1925.

I 5. Zaller. 1992.

16. Soroka and Wlezien. 20 I 0.

17. Kaiser Family Foundation. 2009a. p. 9.

18. Hamel, Dean , and Brodie. 2010, p. 181.

19. Kaiser Family Foundation, 2009a.

20. Schlesinger. 2004.

21. Shapiro and Jacobs, 20 I 0.

22 . Jacobs and Mettler. 20 I I: Oliver and Lee. 2005

23. Soroka and Wlezien, 2010.

24. Jamison and Hardy, 20 I I; Delli Carpirn and Keeter. 1996.

25. Brodie. Hamel. Altman. Blendon, and Benson. 2003. p. 932.

26. Brodie et al. . 2003. p. 935.

27. Brodie et al.. 2003 , p. 937.

28. Brodie et al.. 2003. p. 939.

29. Kaiser Family Foundation. 2009b. p. 3.

30. Brodie. Altman. Dean. Buscho . and Hamel. 2010.

31. Kaiser Family Foundation. 2009b.

32. Kaiser Family Foundation. 20 I I.

33. Jamison and Hardy, 20 I I ; Oberlander. 20 Io.

34. Delli Carpini and Keter. 1996.

35. Hutchings and Piston, 20 I I. Campbell. 20 11.

36. Kaiser Family Foundation. 20 IO. p. 7.

= CH APTER 15 • Public Opinion IJ&I 37. For example. early versions of the ACA incorporated a "public option" for insurance coverage. a government-run

plan that would compete with private insurers. Although that prov1s1on was dropped from the final bill , an astonish· mg 59% of the public still thought it had been included in the ACA (Kaiser Family Foundation. 20 I I).

38. McDermott. 20 I I: Lau and Redlawsk. 200 I.

39. Loewenstein. Weber. Hsee. and Welch. 200 I.

40. Slov1c, Finucane. Peters. and MacGregor. 2002.

41. Jacoby. 20 I I.

42. Taber. Cann. and Kucsova 2009.

43. Houghton. 1998

44. Lau and Schlesinger. 2005 Rein and Schon. 1994

4s. Stone. 20 I I.

46. Gray and Rope1k. 2002 .

47. Rigby. Soss. Booske. Rohan, and Robert. 2009: Corrigan, Markowitz. Watson. Rowan. and Kubiak. 2003

48. Baum. 20 I I.

49, Gollust. Lantz. and Ubel. 2009 .

so. Oakman. Blendon. Campbell. Zaslavsky. and Benson. 2010. s 1. Strickland. Taber. and Lodge. 20 I I . Henderson and H1llygus. 20 I I. s2. Oliver and Lee. 2005 SJ. Barry. Brescoll. Brownell. and Schlesinger. 2009.

S4. Sunste1n, 2002.

ss. Barry et al.. 2009. S6. Lau and Heldman . 2009.

s1. Schlesinger. 20 I I. SS. Gray and Ropeik. 2002 : Sunstein. 2002.

59. Jacobs and Shapiro. 2000.

60. Olrver. 2006. Saguy and Riley. 2005 ·

61. Buhr and Blendon. 20 I I.

62. G1tterman and Scott. 20 I 1 ·

63. Nyhan. 20 I 0 .

64. Kaiser Family Foundation. 20 I I.

6S. Saguy and Riley. 2005 . 0 20 I I. J cobs and Shapiro. 200 · 66. Henderson and Hillygus. · a

67. Nyhan. 20 I 0.

68. Jacobs and Shapiro. 2000.

PART V • Stakeholders

69 . Kaiser family Foundation. 2011, p. 2.

70 . Nyhan, 20 IO.

71 . Schlesinger, 2002a.

72 . Darmofal. 2005.

73. Henderson and Hillygus. 20 11.

74 . Stone, 1979.

75. Leichter, 2003.

76. Lynch and Gollust. 20 IO. p. 854.

77. Gol lust and Lynch. 2011; Gollust. Lantz. and Ube!, 20 I 0.

78. Barry et al., 2009.

79. Nelson. 1999; Mutz and Mondak. 1997.

80. Schlesinger, 2004.

81. Bartels. 2005.

82. Kaiser Family Foundation 2009a. pp. 15-16.

83. Blendon and Benson. 200 I.

84. Schlesinger. 2004.

85 . Hacker. Rehm, and Schlesinger. 2013; Schlesinger and Lee. 1993.

86. Henderson and Hillygus, 2011; Gollust and Lynch. 20 I I; Schlesinger. 2011.

87. Carpenter. 2012.

88. Gerber and Patashnik. 20 I 0.

89. Sunstein, 2002.

90. Fischoff. Gonzalez, Lerner. and Small. 2005.

91. Buhr and Blendon. 20 I I. p. 38.

92. Oberlander. 20 I 0.

93. Rehm. Hacker. and Schlesinger. 2012; Hacker. 2006

94. Hacker et al.. 2013.

95. Phelan. 2005; Oliver and Lee. 2005.

96. Buhr and Blendon. 2011; Schlesinger, 2002b.

97. Kim. Blendon, and Benson. 200 I.

98. Gollust. Lantz. and Ube!. 20 IO; Schnittker. 2008; Phelan. 2005.

99. Lynch and Gollust. 20 I 0. p. 862.

I 00. Gilens. 1999.

IO I. Gollust and Lynch. 20 I I ; Gollust. Lantz. and Ubel. 20 I O.

= CHAPTER 15 • Public Opinio n fj@ I 02. lynch and Gollust. 20 1 o

103. Scott and Bornstein. 2009, Schlesinger and Heldman. 200 I 104. Sch es nger and Lau. 2000

IOS . Sch es n r Mitchell. and Gray. 2004.

106. Barry et al 2009

107. Brod Atman D an. Buscho. and Hamel. 2010

108. B endon Benson. Steelfisher. and Connolly. 2010

109. 8 doo 2008

110. Campbe I 2011

111. J~cobs nd Mettler 2011 Volden and Wiseman . 2011 .

112. Campbe I 2011

113 . Skocpol 2010

114. Epst in 2011

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How do health lobbyists actually operate? Not in the ways that most people think. Rogan Kersh describes the real world of power and influence in Washington through IO popular myths. Among the surprising results: Health lobbyists influence their clients as much as they influence members of Congress; and good lobbyists do not spin-they provide accurate and timely information. Why? Read on.

A generation ago. the authors or the landmark interest-group study The Hollow Core could note that "until fairly recently ... the scope or rederal health policy was so small as to attract little attention from interest groups or anyone else." 1 Today no one would dispute the central role or lobbyists in health policymak- ing. The Clinton health-reform battle or 1993-1994 heightened awareness or groups as influential policy actors: the Health In- surance Association or America and allied interest groups are widely cited as key factors in the Cli nton plan's failure. More recently the titanic legislative struggle surrounding the AHord- able Care Act (ACA). continuing even arter its 20 IO passage, again has helped focus attention on lobbying and health poli- cymaking.2 Today a lively, wide-ranging literature on groups and hea lth politics continues to expand. within and beyond the academy.

Along with this growing attention have come enduri ng misconceptions about interest groups and lobbying. This chapter reatures 10 evergreen claims about health care

lobbying. ramd1ar from academic or journalistic accounts (or both) . each or which deserves carerul examination-or perhaps overturning. For slightly exaggerated eHect. I call them "myths."

For more than a decade starting in 1999. I followed a group or 11 Washington. DC. health care lobbyists as they earned out their proress1onal activities. During this time. I also interviewed many other interest-group representatives and their clients. as well as executive-branch officials. both career and political appointees. and members or Congress and their staffers. But direct observations were the heart or my research: I watched lobbyist discussions with their clients: meetings with congres· sional staff and executive-branch officials in the Clinton. Bush. and Obama administrations: interest-group coalition meetings to analyze policy moves at both ends or Pennsylvania Avenue; in-house lobbyist strategy meetings; and so forth.

Most or the lobbyists I followed chiefly represent private (usual ly corporate) interests. Whi le this fact may skew my

-

observations m som ways, corporate representat1ves- organized in firms trade associations. or as md1v1dual "hired guns· -are poorly und rstood polmcal actors, operating in

re ative secrecy compared to lobbyists for consumer and other pubhc·tnt groups unions. state and local governments. and large membersh p organizations >0th l'Wlse. the lobbyists make

up ad~ group with pect to type of firm. age. gender. ex penence and th-policy expertise A condition of this ethno graphic research was anonyrmty lobbyists are therefore referred to 1n this chapter by number ("lobbyist I." "lobbyist 2." etc.).

Myth I: I lea Ith arc ht Different Although the pr ence of interest group lobbyists in health policy 1s I chron cled health is often portrayed as a "d1f· feren( 1ss rtalm-attractmg mor enthus1ast1c amateur or do-gooder lobbyists than topics l1kr. tax pohcy or financial ser·

V1Ces ·Heath ca 1s not JUSt another lme of commerce." goes one typical claim Its a matter of life or death for

everyone It shou d mo r s mble a religion than a business." Retired phys c1 n and health policy commentator Theodore Dalrymple summanzes (and cr1t1c12es) the common view that "health care 1s d1ff rent rrom II other human goods and prod· ucts." as · an important pr cond1t1on ol life 1tself."<4

Yet to the clients who hire health care lobbyists. and among corporate and nonprofit lobbyists ahke. health policy is big business pl m and simple Health policy attracts more lob byist spendm than any other area This has been true for years. interest roups fforts to inlluence health policy rose sharply dunn th Clinton health plan fight of 1993-1994 and continued to mer ase through the tobacco wars of the latter 1990s th debate over a patients' bill of rights . the clash O'ler Med care p npuon drug benelits. dnd the recent ACA dtbate. Current est mates suggest that the sum of health sec· tor lobb)'ln appro ched S500 m1lhon m 2012 . s The actual total will be cons d rably higher. since estimates suggest that less than hair or lobbyist spending to influence Congress IS

reported g n amb guous legal requirements.6

"lobbyist spending as used here. excludes political action

committee (PAC) Super PAC. 527 group. or othe~ camlpa1gn efer to lobbyist sa anes

donations Monies m this category r d f th Di- h costs travel an so or .

contract payments researc • · t d lobbyist d d b the 535 members of Congress. repor e v1 e Y II d a million dollars

spending on health care m 2012 w1 excee

ptr mtmbtr

C H APTER 16 • Ten Myths ab out H ealth L o bbyists

To focus this portrait further: Of t he eight top interest- group spenders over the first half of 2012. five-the American Medical Association (AMA), the American Hospital Associa- tion. Pharmaceutical Research and Manufacturers of America. AARP. and Blue Cross and Blue Shield-lobby exclusively or primarily on health issues. The largest lobbyi ng spender. the Chamber of Commerce. devotes a significant proportion of spending to such health-policy matters as ACA repeal and medical malpractice reform. Any discussion of health care lob- bying must begin with the acknowledgement that. whatever its "special" past. today health is as normalized. professional- ized. and. yes. businesslike as any other realm of US politics and governance.

Myth 2: Here Today, Gone Tomorrm\ The classic model of Washington power brokers pictured a closed process dominated by "iron triangles"-tight, du- rable links among powerful interest groups. congressional committee chairs. and bureaucratic officials. Over the past three decades. this portrait has given way to a very different

1mage. one of loose. open " issue networks" compns1.ng experts. specialist staffers in Congress and the exec~t1ve branch. and stakeholders. Change and fluidity are now said to dominate lobbying. includ ing on hea lth issues. More t~an a decade ago. polit ical scientist Ma rk Peterson char~ed a radi- cal change" in health policymaking: The old iron tn~~gles had dissolved into a "far more diverse and open system that fea- tured "looser. less stable. less predictable. and more diverse

patterns of interactior. and decision." 7

Compared to the iron triangle model. issue networks ap- pear almost infinitely more open and penetrable-and there fore chaotic. A host of studies apply terms like bewildering and ungovernable in describing health policy. both as a gen- eral domain and with respect to particular topics. Peterson applies the issue network idea to health care as a who~e as well as to the somewhat less sprawling "health care re orm

. "8 policy community.

Despite portraits of constant change verging on chaos. olicymaking and lobbying on most health ~are is

however.r:uch more stable than many current descriptions al- sues are . the shift from triangles to networks low For accom panying is a~other. stability-inducing phenomenon. the issue regime.

. . ·s a distinctive constellation of interested An issue regi me 1 d solutions. and

stakeholders. framing arguments. propose

legislative outcomes, all oriented around a particular topic. This collection often is shaped by a policy crisis or other systemic shock: economic decline. a public-health alarm , a huge health -reform bill. As various actors react to the outside shock. their initial alliances develop into coalitions built around a set of basic ideas and policy emphases. A re- gime is born. hardening into an established set of political practices that shape and constrain future policymaking.

Most health care topics that achieve policy prominence quickly begin to display features of an issue regime. The re- sult is islands of stability within the shifting sea of the health - policy network-and a relatively stable set of legislative and administrative outcomes. year in and year out.

One overview of an issue regime may illustrate the general pattern. Medical malpractice burst onto the political agenda during the Affordable Care Act (ACA) debate of 2009-20 I 0, as opponents of "Obamacare" insisted that deep cuts in health care costs would result if malpractice insurance rates could be controlled . Health-policy veterans. as they joined the debate. dusted off familiar arguments: Malpractice also had been a hot-button issue a few years earlier-as it was a decade or so before that, in a pattern repeating back to the 1970s. During 20I0-2011 and 2001-2002 alike. congressio- nal committees organized hearings and a series of alpractice- reform bills were introduced. Media reports breathlessly chron- icled a "malpractice crisis ," warning of "physician shortages " and "a health care collapse" in the worst-affected states.9

In short. malpractice politics in recent years can seem like deja vu all over again. Over two crisis episodes during the mid- I 970s and mid- I 980s. policymakers had developed stan - dard responses. helping to establish a well-organized issue regime.10 The salient features include:

• Familiar stakeholders. For three decades. the same leading groups-physicians' representatives led by the AMA , tnal lawyers. hospital officials, and insurance executives- have been central players in malpractice policy. All tend to advance arguments first honed in the mid-I 970s: they employ consistent tactics to mobilize members: and each adapts positions in response to opponents' views. a process referred to as "issue uptake." 11

• Consistent policy options. Malpractice debates have remained stuck on the same solution: the levels of patient (and attorney) compensation. Policies taken up nationally and in most state capitals-and receiving the

bulk of media coverage-are almost all first-generation reforms. initially promoted during the 1970s.

• Consistent style of legislating. Federal officials have yet to pass a single major malpractice policy since the 1970s crisis. despite repeated efforts-which continue today. in the I 12th Congress. Instead states have been the agents of reform-and most states' malpractice policymaking styles have changed little over 30 years Some states. like New York or Texas . have passed a series of incremental pol1c1es. Others. including Pennsylvania and California. have periodically enacted broad legislation designed to redress the problem of high premiums and to cha nge perceptions of a malpractice "crisis." In Pennsylvania, major reforms passed in 1975 (Act 111 ), 1996. and 2002 (Act 13 ). In the 1970s and the current cns1s alike. laws changed. but not fears of a cns1s-consequently. there was no legislative pause despite the enactment of an amb1t1ous policy. Act I 11 . one of the nation's first comprehensive reform packages , was followed by four amendment rounds between 1976 and 1980; Act 13 was supplemented later in 2002 by two additional changes. and reformist pressure has remained a constant over the decade since Pennsylvania passed it.

Issue regimes promote stability in policymaking. Changes of course occur: new executives and legislators are elected. new rounds of reforms are proposed. But once in place. the existing regime generally absorbs short-run shifts. Despite dramatic changes in American health care since 1970s. the malpractice liability system 1s little altered The same issue network proposes (and opposes) the same solutions. Notable technological advances 1n medicine have proven a double· edged sword. once-miraculous cures are now routine. boost· mg expectations of success. but the costs of medical errors are often higher than dunng malpractice "crisis" warnings in the 1970s and 1980s. 2 Yet policy responses have remained steady over time. both at the state and national level.

New actors have entered the malpractice policy arena in re- cent years. much as the issue-network model pred icts. Political entrepreneurs, especially tort-reform advocates and patien t- safety groups. have gained increasing prominence in malprac- tice debates. Yet. in characteristic issue-regime fashion. they are swiftly absorbed into existing debates. Groups like the American Tort Reform Association became part of the long· running battle over whether noneconomic ("pain and suffer- ing") malpractice damage awards should be capped. usually

at about S250 000 And patient-safety advoca tes have been ·adopte<l9 by tnal lawy r groups seeking to frame malprac- tice as a problem or mcomperent phys1c1ans . Understa nding malpractJce-and oth r h alth topics-in terms of an issue regune helps explain the surpnsmg consistency of health poh · cymaktng lncrem ntal. predictable change generally prevails. despite (or perhaps because of 3) the forces associa ted with the modem transformation of triangles into netwo rks.

Myth 3: Ifs a 1an•s World Though no scholarly commentary has singled out heal th care as dominated by male mter t group advocates. t his general view oflobbyin hash Id ford cades Jeffrey Berry's comprehensive loo in 1996 at the American "interest-group society" termed lobbying a mans world· though h noted that " barne r[s] to equal employm nt seem to be eroding" A more recent schol· arfystudy from 2005 stat d that women are still "vastly under· represented in the nation's capital. a claim affi rmed by informal guides to lobbym pow r in Washington . The annua l "Top Lobbyists hstin 1n the Capitol Hill newspa per The Hi/I lists the 75 most prominent corporate and trade·assoc1at1on lobby· 1sts for 2011 Only eight are women 14 Similarly, six women are included among the 21 lobbyists hsted by CEO Upda te as the capital's most mflu nual m 20 I I and 20 I 2 .1 s

But in health pohcy. women lobbyists have achieved a rough numencal panty and anecdol31 evidence suggests that they are also ITlOYI up the ladder of influence in pnvate and corporate as well as publ c mt rest groups According to my count of all individuals registered to lobby on health care issues du ring 20 I 1- 2012. 47 wer women (up five percentage points over the past seven )-52% of nonprofit health lobbyists and 39% of corporate n res group representatives Although h1stoncal e..-ldence is harder to com by my analysis of 1983- 1984 health 1o1:Jt¥sts f:nds JUS1 13 worn n. and a 1990 study estimated the ~l proporuon of femal lobbyists 1n Washington at 22%.1 ~

Women 1n h alth· pollcy lobbying are not limited to m1ddle·m na er or other pos1t1ons down the co rporate ladder Leading women lobbyists include t he pres ident/ CEO of AHIP the cheer lobbying associa t ion for hea lth plans and insuranc companies . the head o f the peak trade· assoc1at on group Healthcare Leadershi p Counci l: and the lobbying shops or tWO of the nation's SIX largest pharm~ceU · tical compan es Pfizer and GlaxoSmith Kline. Of .. The Hills hst· 1ng of the cap tal s most prominent "hired gu n lo~byists '. or those who wot\: independently rather than fo r a particular fi rm

C HAPTE R 16 •Ten Myths a bo ut H ealth Lobbyists

or trade associati?n . ':"omen constitute half of the top lobby- ists who work. pnmanly on health topics.17 Evidence suggests that sta.t~ capitals featu re more women in prominent lobby· mg pos1t1ons as well . in health care and other issue domains . ~.han when the. subject was investigated in a 1998 study titled Female Lobbyists: Women in the World of 'Good 01 · Boys.'" IS

Myth 4: Lobbyists Kill Health Reform Stretching back a century. Democratic and Republican presi· dents alike-and their allies in Congres s-have sought to achieve sweep ing reforms in how health care is deliv· ered in the United States. Failure after failure dots the policy record · Since World War II. Presidents Truman . Ni xon. Johnson . Carter. and Clinton all sought to make health reform a cornerstone of thei r legacy in office. settling at best for in· cremental policies hke Medicare and Medicaid (Johnson) or the Children's Health Insurance Program (CHIP) (Cli nton ). Health-lobbying groups. especially larger ones like the AMA . have been leading figures in blocking these proposed changes. From AMA-sponsored mass-marketing attacks on Truman's and Kennedy's health-reform plans in 1945 and 196 1. through the health insurance and small-business lobby's "Harry and Louise " ads that helped sink Clinton's reform plan in 1994. in· dustry groups have been at the forefront of thwarting broad changes in the provision of health insurance and health care.

Barack Obama's decision to pursue reform early in his pres1 dency. with Congress turning its attention nearly full -time to the topic beginning in March 2009 . brought a ha il of pre· dictions that lobbyists from affected industries-insuran ce. physician s. hospitals . and so forth - would strangle reform proposals long before they reached the House or Senate floor. Health insurance companies were not just lobbying aga in st the ACA . they were "urging [their] staff to fight reform ." as a Wa shington Post report affirmed as prospects for passage looked grim in fall 2009 . Around the same time. a refrain took hold: "The lobbyists are winning." despaired Rep. J1~ 9Cooper (D·TN) . a veteran of the Clinton health-reform battle.

Yet rather than obstacles to reform. industry groups w~re among the initial linchpins moving the e~ormous 1 ~.g1slat1ve package forward. A group aptly styling itself the Strange Bedfellows Coalition" was a key behind·the-sce~es playe r. The coalition included familiar proreform public interest groups like Families USA and the giant Service Employees International Union (SEIU)-as well as dedicated foes of the Clinton reform: the Health Insurance Association of America .

the AMA. and the pharmaceutical companies' peak trade as- sociation. Pharmaceutical Research and Manufacturers of America (PhRMA). After the coalition announced plans to back reform. one of the lobbyists I follow remarked. "I always said we'd get health reform when pigs fly ... and today I saw pigs flying." Though the coalition's efforts were largely below the mainstream media's radar. as the debate heated up in 2009. economist and New York Times columnist Paul Krugman noted: "The fact that the medical-industrial com- plex is trying to shape health care reform rather than block it is a tremendously good omen ... this is some of the best policy news I've heard in a long time." 20

As Republican and ideological conservative opposition to "Obamacare" mounted. most industry groups-including those in the "Bedfellows" coalition-quieted their public support of reform. But up until the ACA's passage. none of the large health-lobbying groups issued public statements of opposition. Several. including the AMA. have subsequently criticized the reform law. some in harsh terms. The chief health-insurance trade association. it was revealed in 2011. had secretly contributed over $I 00 million to Republican efforts to block the law's passage. 21

But when it mattered most. as reform's fate hung in the legislative balance in the first months of 20 IO. health- industry groups set aside their traditional cries of "Social- ism!" in favor of public support or. at least. a neutral pos- ture. This was not an act of noble sacrifice: Groups certainly pursued and defended their specific interests in the debate. Moreover. as Jill Quadagno details. the final version of ACA produced both winners and losers among health-lobbying groups. 22 But health-reform advocates familiar with the long history of group opposition to legislative changes on the scale of the ACA may ultimately view many industry lobby- ists' actions as example of what Tocqueville termed enlight- ened self-interest.

Myth 5: "K" Is for "Republican" George Bush's presidential victory in 200 I marked a transfer of executive-branch power from Democratic to Republican. A similar partisan shift within the Washington lobbying commu- nity was soon an article of faith both inside and beyond the Beltway. as summarized by journalist Nicholas Confessore: "As Republicans control more and more K Street jobs. they will reap more and more K Street money. which will help them win larger and larger majorities on the Hill. The larger the Republican

majority. the less reason K Street has to hire Democratic lobby- ists or contribute to the campaigns of Democratic politicians. slowly starving them of the means by which to challenge GOP rule." Other accounts described a Republican "war on Demo- cratic lobbyists. "23

Several years later. Republicans regained control of the House after the 20 I 0 midterms prompting another round of predictions about Washington corporate lobbyists' whole- sale turn to Republican contributions and hires. "Many firms made big investments in House-connected Republicans"- i.e .. Congressional staffers turned lobby1sts-"after the 20 o midterms. " went one relatively sober assessment More en- thusiastic or alarmist rhetoric filled the airwaves: "Rumors are." reported an American Observer contributor shortly be- fore the election. "that K Street 1s ramping up its Republican hiring in case the Hill goes red." 24

Yet in the wake of both the 2000 and 20 IO elections. de- spite an avalanche of reports that the K Street lobbying cor- ridor was shifting solidly Republican. little change was evident in most health lobbyists' campaign contribution patterns or hiring practices. Such continuity suggests increasing stability in federal lobbying rather than "hiring by weathervane." as seasoned lobbyist Nick Allard (disdainfully) put it.2s

Two measures buttress this view of interest-group con- stancy amid partisan change If health care lobbyists shifted sharply toward Republicans in 2001 or 2011. this should show up in patterns of campaign contributt0ns. as the win- ning party received a spiraling share of donations from lob- byists and their clients. This change should also be registered in organizatwnal practices-especially new hires-within health care and other sectors of the lobbying community. On neither dimension does the case for partisan dominance. during 2001-2002 or 2011-2012. hold up fully.

The health industry slightly increased its support for Repub- lican candidates during the 2001-2002 cycle following Bush's election. compared to the 1998 and 2000 cycles. As Table 16-1 shows. health care companies contributed $96.2 million m the 2002 campaign. 65% to Republicans: in 2000. GOP candi- dates garnered 61 % of the health sector's donations. and little changed from 1998. And even this slender 2002 change. rather than reflecting even a "K Street Corridor"-influenced prefer- ence for Republicans. in fact resulted primarily from a single industry-drug companies. led by their trade association. PhRMA. PhRMA was by far the top health-sector donor during

TABLE 16-1 Health-lndu tr Contribution Pattern , t 998-i012

Election I Health $ % to Cycle (in millions) GOP -. 1998 59 5 2000 978

2002 96 2

2004 126 4

2006 IOS I

2008 176 3

2010 139 2

2012· 120 3

•Through Jul) 2012

59.5

60. 6

65. 2

61 .5

62 .0

45.4

48 .6

52 . 1

40.5

39.4

34.8

38 5

38.0

54.6

514

47.9

2001-2002 and 95% of its SJ 5 m1lhon 1n contributio ns went to Republicans Individual drug companies simila rly fa vored Republican candidates by h1stoncally large m arg ins. ow ing pnmanly to GOP I 1slators' w1lhngness to back the industry's

preferred version or prescnplton drug bene fi t leg1slat1on under cons1derat on on Capitol l hll during 2002 - 2003 M ea nw hile. most of the trad1t1onal top health contributors main tained ex· 1sting gMng pall ms in 2002 The AMA. indeed. increased its support for Democra11c candidates compared to 2000 o r 1998

After 2002 patterns remained cons i sten t in 2004 and 2006-after which a dec1s1vc shift in donation pa tterns did fina ly occur but toward Democra11c cand idates. Demo crats' advanta e has shd a bit in each successive electio n But in the wa e of the 20 I 0 result health care companies have

not notably rush d in a GOP d1r cuon

Thus reports in 200 I and 20 I I of a d ec1s 1ve move to fi -

nanc ng Republ can candidates freezing ou t Democ rats and further cement ng the -one party state" in Washingto n . ap- pear lo have been overstated-al least for t he healt h sector (Overall corporate donations moved somewha t more tow ard the GOP in 2002 and fell bac in 2004: no maio r change 1s yet evident in the 2012 cycle. compared to 20 IO or 2008 )

CHAPTER 16. ~ en M yths about H ealth L obbyists

~e:i~bgli~en6oobpby~st hi res_ far outpaced Democratic hires fol- v1ctones 1n 2000 and 20 12.

train the wake of President Bush's v ictory, one account par-

s yed meetings of Republican lobbyists and then-senator Rick

antorum (R-PA) · "th I bb · the [lobb . . e _o y1sts present pass around a list of

S ~mg] Jobs available and discuss whom to support

antorum s r ·b·1· · · b esponsi 1 1ty is to make sure each one is filled Y a loyal Republican . .. After Santorum settles on a candi-

date. t~e lobbyists present make sure it is known whom the l Republican leadership favors. " By 2003 the Washingto P t ~ concluded that " already in control of the White Haus: a~

5

d ... Congress. Republicans are tightening their grip on the largely ... ~nseen but vital world of big-time lobbying ... (and] pla nt - J mg a new crop of Republican lobbyists rich enough to give ~ back to the party in the years ahead. " Political scientists Jacob

Hacker and Paul Pierson offered a more qualified view. noting that Repubhcan " power brokers have an enhanced capacity to induce organized interests to work through them and to do so on their terms . " 26

Another round of " Republican lobbying takeover" stones circulated in the wake of GOP House control after 201 o. Some even ant1c1pated the change: " Lobbyists Rush to Hi re GO P Staff ahead of Vote." advertised the New York Times a month before the election. 21

Definitive empirical studies of Republican inroads in the lobbying community over the past decade-p lus are yet to come. But they may well show a less potent GOP effect tha n was widely asserted after 2001 o r again after 201 L Two con -

trary trends buttress that conclusion .

First. the flow of Republican poli tical talent du ri ng the early months or Bush's presidency was in pa rt away from K Street. Republicans w ith policy expertise actively sought jobs in the new administration. with nea rly 3,500 posi tlons available : conservatives called for ex panded politi ca l appointments to enable fuller Bush control over t he exec u tive branch. 28 A similar if smaller-sca le effect was appa rent after 20 I 0. when a huge incoming House GOP class d rew ex isting lobbyists. as well as potent ial new K Street recruits. to congressional offices as staff mem bers. Online services like LegiStorm . which reports details about Capitol Hill st aff ing. confirm media reports in 20 I I tha t described a " hiri ng spree " of lobbyists in Republ ican staff positions after House

What about the orgamzational fro nt: Do lo bby i st hir- ngs reflect partisan power shifts in the Whit e Ho use o r on Capitol H11f7 The conventional view. agai n . is that new

control changed hands. 29

Second. many Clinton Wh ite House veterans sought lobby ing jobs after the transfer of power in late 2000 and early 200 I

-lliiir.6iD.~P\R l \ • Stakeholders ~~---~~~~~~~~~~~---==-~

Far from forlornly seeking work. most were snapped up swiftly by lobbying firms-both public-interest and corporate-or think tanks.

30 These experienced Democrats helped public-

interest and issue groups gear up to oppose Bush policies Both after 2000 and 20 I 0. corporate and other private interests freely hired Democratic veterans of Capitol Hill and Clinton's White House. Media coverage tended to skew toward GOP hires Widespread reports followed Google's hiring the chief of staff to former Senate Minority Leader Mitch McConnell (R KY) as a senior lobbyist. for example. Less often mentioned was that a week later. Google hired former House Minority Leader Richard Gephardt (D·MO) 1n a similar position

A few related metrics underscore the point. Of the 23 for- mer members of Congress hired to lobby for the pharmaceuti- cal industry in 200 I 13 were Republicans. IO Democrats. 31

My count of the 47 highest-profile health lobbyist hires during 2002-2003 found a nearly even split: 25 Republi- cans. 22 Democrats I also tracked the most prominent lob bying hires between September 30. 20 I 0. and December 31. 2011. as chronicled by three leading sources. 32 Of 803 total hires reported over this period, Republicans were favored by a 52-47 margin (a small number did not have a clear party affil1at1on )-not much different from the S 1-49 Democratic margin during 2009. the year following Obama's election Among lobbyists 1dent1f1ed as specializing in health care. the split among 2011 hires was nearly equal (38 Republicans. 36

Democrats)

Thus in terms of both contributions and hiring patterns. most health-lobbying firms continued after 2000 and 2010 alike to boost their bona !ides with both major political par- ties This fact 1s shaped by the increasing professionaltzatwn of the national lobbying sector. with a stable set of firms and senior figures making the field less subject to swings 1n parti-

san power than 1s routinely asserted.

Dunng the 2004 election. iournalist Jeffrey Birnbaum chron .. cled two "enemies" 1n the "battlefield of national politics.

cl Democratic and Republican firm that worked ~espect1vely with the Kerry and Bush campaigns. Yet "when 1t comes to lobbying." Birnbaum notes. "both firms are freque~tly on the

e side Almost any legislation requires the backing of both sam c "33 Th's cap Republicans and Democrats to pass in ongress. I . - tures a basic feature of health lobbying today. The prominent

t g roup coalitions on most issues include lobbyists

mteres - f. h those ~ssoc1ated with both parties. as do the irms ousing eprescntat1ves.

Myth 6: Clients Are King In .most scholarly accounts of policymaking. individual lob- byists are ciphers. They appear as a means for registering the preferences of others. either as an agent for client or co . . . rpori t1on pnnc1pals. or as a member of a House or Senate ber's "lobbying enterprise" 4 The usual relation 1s spe~~: as follows:

Client Interest ~ Public-official Target ~ Policy Outcomt

Thus lobbyists are portrayed as vehicles for clients (or. some times. public officials') interests. striving to influence decis1011 makers.

Yet in practice. lobbyists do not always act in faithful obc· d1ence to the clients that hire them. Instead they sometimes advance interests of their own These include retaining clients and signing up new ones. bolstering their own reputation in t he Washington policy community for various reasons (st.1 tus. future employment. a sense of personal worth. and so forth); and promoting what they view as worthy public policy outcomes These goals are not always best pursued by faith fully striving to match client preferences to officials' pohcy positions. To understand what lobbyists do and why. it 1s not sufficient to know the interest(s) they represent or the pubhc officials' positions they are seeking to influence.

Of course interest-group representatives do not actively oppose their clients' preferences. nor do they dominate the public officials they lobby. But ample space for discretionary activity exists. enough that lobbyists must be taken serious~ as political actors in their own right. This is an accepted VltVI among Washington officials who are as likely to ask "Where does Lobbyist Smith stand on this issue?' as they are to won der "Where does Big Insurance Company stand?"

In practice. client "interests can be so vague as to amount to little of substance. Many lobbyists spend a great deal of time shaping their clients' preferences. even creating mterestS where none apparently existed before. Where strong client preferences exist. lobbyists often work as hard to alter those as they do the views of their legislative- or execut1.ve·bra~: targets. In short. lobbying works in two d1rec~1ons infl~~ ing clients as well as public officials As for policymakers char over lobbyists. this is diminished by the mutual·beneh~ acter of most lobbyist/public official exchanges and~:~~ the fact that much of what interest-group representat1 bbyiSts from officials is not terribly costly to obtain. Many lo

better described as independent trustees than as mere del- i:t tes of their sponsoring firm. trade association. individual qi f 35 ditflts. or a member o Congress

To be sure. lobbyists rarely depart radically from their cli- ents' ideological pred1spos1t1ons. But within that broad con- text (e.g .... oppose more government regulation .. ). ample ioom exists for wielding autonomy-deciding what issues to emphasize. how to do so. when to cut deals. and so forth As a former Senate committee staffer-turned lobbyist (lobby· IS! no. 8 1n my study) put it. "The alliances don't always play Olil the way you would think. I'm a lot closer to folks on the

1 than I am to my boss in [corporate headquarters]. There's th ngs they know and understand about my issues that my boss doesn't have the faintest idea about; and there's plenty of omes when I'm looking after thetr [legislators'] interests in- stead or sticking hard to the corporate line ...

This lobbyist may be articulating a skilled route to long· term lobbying success : align with public officials on some ssues. pos1t1oning oneself to push for client benefits when really necessary But the fact that even single-firm lobbyists think-and act-independently of their corporate 1mperat1ves o a regular basis is telling. Why might they opt for autonomy over faithful devotion to the client's needs?

One leading reason reflects the career path most lobbyists loi1ow years in national or state politics. usual ly starting in the legislature and. in some cases. adding executive-branch experience in a president's or governor's administration . Much is some legislators care deeply about the policy they debate Ind vote on.36 most of the lobbyists I followed or interviewed 'iad 1deolog1cal and issue preferences that grew out of the11 work in public service. The distinction between pursuing cli- ent •nterests and advocating policies distinct from (or even opposed to) these is subtle but is sometimes apparent in llractJce.

Telling examples concern the evident relish with which lob- yists work on causes about which they care a great deal I

klllow one representative (no. 4) whose background included bng service on the staff of a staunchly liberal Democratic senator; her subsequent work for the Washington office of 1 mult1nat1onal company. mostly populated by conserva- ve Republican colleagues. frequently left her discouraged.

When an appealing issue arose, she subsequently admitted ~t "I'll work on this to the exclusion of a lot of things I ould be doing instead: then I play catch-up for awhile.

CH A PTER 16 • fen M}ths about Health l.obb}ish

(a time] during which I feel like I'm going through with· drawal or something" Another lobbyist represents, for personal reasons. drug and alcohol rehabilitation interests "This causes me serious problems with my !lobbying] firm: she said . "They represent beer and wine distributors. and other clients who don't much like my advocacy of Betty Ford [Clinic] . But [the firm's director) knows that I'll leave before I give this up ...

The reasons that lobbyists seek autonomy are various Some are attentive to future employment. pos1t1oning them· selves to attract job offers from larger firms or to open their own lobbying "shop." But what Washington hands call "pnors"-the layers of leg1slat1ve- or executive-branch issue wars. professional act1v1ties. and colleagues-exert a powerful grav1tat1onal pull of their own Often that pull can be aligned differently from a chenfs primary des11es

Myth 7: Health Politics S top at Implementation Classes on public admin1strat1on no longer present the 1m plementat1on stage of national policymaking-after a bill 1s passed and signed by the president-as a technical. expert· driven realm. free of the taint of politics But there remains a clear distinction drawn between the work of 1mplementat1on, involving a complex " rulemaking" process mostly out of pub· lie view. and the circus accompanying a bill's passage through the gauntlet of House and Senate committees. pres1dent1al advisors. and hundreds of lobbyists H

If such a dividing line was once present in health policy making. the politicking continuing to surround the ACA. two plus years after passage. has largely erased 1t. Summer and fall 2009 as various versions of health reform were debated on Capitol Hill. featured new health-lobbyist registrations at a volume never before recorded-until that record was broken the following summer and fall-after the bill had become law See Table 16 2 for details

These new lobbyists. plus most of those already working in the health realm. plunged into helping shape thousands of new regulatory decisions involved in ACA 1mplementat1on. Health lobbyists also (many of them simultaneously) worked on efforts to repeal the law: others sought to defend 1t in the face of attacks by Republicans in Congress and governor's of fices nat1onw1de. along with a series of court cases that even- tually led to the Supreme Court

P\R 1 \ • <:;t.1kehol<ler-.

TABLE 16-2 Health Lobb . t A . . y1s ctiv1ty, before and after ACA Passage ... .... 'I:.~. . ,. .. .......... • Orga_nizations1h:.; ~~ Ind' 'd

-. . Registe7ect7Ac~~:,~ :t.i<li' • IVI uals · ~. • ,_. · ,.~·-~ . .,;: : Reg1stered/ACA

l. l 70 2.995

\ 1.297 3.459 otc ll.1scd on ~0111~~''1011,1l lobb:,,1st filing records. compiled by author~ -~--------..:.:::~---

6/1-12/31, 2009

6/ I -1 2/3 1. 20 IO ---- 558

613

1 he Supreme Court decision. handed down in June 2012 marked the end of political act1v1ty surrounding the ACA fo; many in the public Not so for health lobbyists. whose efforts. if anything increased: Along with ex1st1ng work on 1mple· mcntat1on they now had to explain the court's reasoning to clients and devise strategies in response ... This 1s not the pe· nod at the end of the sentence." explained lhsa Halpern Paul. an c perrenced health lobbyist. after the Court's decision I would c;ay it's an ell1ps1s. a 'to·be·continued '"38

\1~th 8: atior B ~ \otes (or l· H' \('Cl'Sloil) Wh.it 1 c;p1res PAC contributions to members of the House d d l)cn<1te 7 In the popular 1maginat1on. leg1slat1ve benefits are the bv us answer Explains one seasoned Journalist: "What obb ~t donors) do may be technically legal. but it 1s none-

th le s corrupt because it's an exchange or campaign ntr but1ons and other good es for special treatment m the

eg1s at ve process · Scholarly assessments similarly. 1f more oberly center on two explanations for donations: influencing

policy .ind aHectmg election outcomes. 39 Debates inside and o 1ts1de polrt1cal-sc1ence departments continue about whether PA funds are intended to "buy" votes (secure members' sup- port on panicular leg1slat1ve items). win access to members. or cep f rrendly legislators rn office and about the extent of po icy influence gamed through contributions

My rese.irch suggests that contributions are most o~ten a form of insurance rather than reflecting the donor's expecta- tion of political gain or even a determined effort to return a particular legislator to office. Rarely do lobbyist-donors have a clear-or even part1al-expectat1on about the return on their investment. rather. they are protecting against unforeseen fJture dargers as the policymaking process develops. In part this cla1'11 1s 1mpress1onrst1c. derived from attending numerous

fundra1sers and otherwise "fol lowing the mon .. Th . ey ~~ press1ons are augmented by observing hundreds of interactlOllS between lobbyists and the rec1p1ents of their contnbut1ons

During the 1999-2000 election cycle. 1 asked 80 lobbyrsts- the I I I followed regularly. plus 69 of the larger group that 1 interviewed to explain the motives for their campaign contn but1ons. both personal and through thei r organization's PACs In addition on the 296 occasions I witnessed or heard about a contribution decision (e.g. one of my 11 lobbyists or the11 clients giving some amount to a Congress member or poht1cal party) 41 I asked what the purpose of that contribution was for the latter queries. after a lobbyist's initial explanation I asked them to cla ssify their rationale 1n one of five categories. In 64 cases they refused or were unable to do so; thus. I coded m total One example of a coding decision· Lobbyist 10 author 1zed a $1.000 PAC contribution to a Republican House mem ber. The Member of Congress sat on a committee of interest to the lobbyist but had little seniority. "Why go to this lun- draiser?" I asked. ··well. he (the Congressman) asked me to said the lobbyist. "Sure." I ventured. "but a lot of members ask you for contributions. Why make this one?" "Ah. well. on the off chance he notices I'm not there [at the fundraiserj. best to stay on the safe side." he said "And [he named a lobbyist for a nval firm) is likely to show up. so I ought to too After prodding the lobbyist further on what .. sale side· entailed and receiving no concrete response. I coded this as "insurance·

Results appear in Table 16-3. The table·s four rows repre sent the different groupings noted earlier: First are the genera explanations of donation motives given by the 11 lobbyists I follow (the 27 responses reflect mu ltiple answers and vana nons over time. I asked them about the primary purpose of their contributions at three stages in my interactions. be!WWl earl/ 1999 and after the 2000 election). The second r(fll ag gregates lhe answers given by 69 other lobbyists in extended

p CllAPTER 16 • Ten M)ths about ll calth l.obb}ists

·TABLE 16-3 Lobbyists' Reported Reasons for PAC Contribution (as 1V<1 of Row)

1111 ------- Gen'I Resps: My 1 Reps. (n = 27)

11 15

Gen'I Resps: Other 69 Reps. (n = 92)

10 26

Specific Resps: 8 19 (n = 232)

TOTAL (n = 351) 9 21

interviews. and the third assesses the 232 specific contr1bu· 11ons made by "my" 11 lobbyists. The fourth row tota ls all these. A descriptive summary of the five categories among which I sorted answers:

• Access/policy influence: Answers here were both retrospective ("He helped us out with [a leg1slat1ve item] the last sessi on") and prospective ("We have a lot of business before his committee th is [session 08 Congress").

• ldeoiog1callpartisan: This includes answers like "We only give to Republicans,"42 "We need more [Democrats] in the Congress." and the like. Though no lobbyi st mentioned "influence voters" as a motive that would also fall into this category.

• Insurance A common formulation was one trade· assoc1at1on lobbyist's account: "I [contribute] to cover all the bases. because you never know." Also frequent in this category we re "everybody else does it'' claims . as well as variations on a familiar theme. voiced rather convolutedly here by lobbyist 4: " I doubt [that] my [contnbutions] rarely if ever help me much. but I'm never sure 1f 1t might hurt if I don't give."

• Member of Congress status: This includes answers related both to leadership position ("I always give to the Ways & Means chair it's good politics") and constituency concerns ("We have two plants 1n that district")

• Personal· Reasons ranged from "she's a personal friend" to "generally a good guy: I like him. though he's not in any pos1t1on to help me especially"

41 22 11 100

27 22 15 100

34 26 13 100

33 25 13 IOI

(rounding)

As Table 16 ·3 shows. both the general and spec1f1c re· sponses of the I I lobbyists I followed regularly, and the gen· eral answers from the 69 other group representatives . rank "insurance" highest among donors explanations of their con tributions. with "member"s status" and "1deolog1cal pos1t1on" also mentioned frequently 41 Compared to my 11 lobbyists. the 69 lobbyists I interviewed listed "1deolog1cal or partisan" reasons more often and "insurance" much less often. but oth· erw1se these differing contexts yielded fairly similar results Bringing up the rear among all three response groups are con· tributions designed to win access or influence or on the basis of a personal connection.

During this 1999 2000 campaign season as well as sub· sequently. I witnessed cases where a member of Congress's fundraising director asked a staffer to meet with a maior con· tributor who otherwise would not have merited an audience : access 1s indeed sometimes granted But such examples were surpns1ngly rare . given the "quid pro quo" tenor of most com· mentary. In a separate but related point. the lobbyists I ob· served and interviewed rank PAC and soft·money donations as considerably less important means of affecting policy de· bates than a host of other activities. such as direct lobbying. researching issues. or media interv1ews.4"4

Conventional views portray interest groups' campaign con· tnbut1ons as precisely targeted instruments designed to wield maximum poht1cal influence But 1f lobbyists' own Judgment about the purpose or benefit of their contr1but1ons 1s both highly uncertain and substantially discounted, perhaps mod· els specifying political clout as a function of campaign spend 1ng are flawed

J J ='

l J 0

~l)·.t~ 9: Citize11s U11ited Unleashed I ohttcal Spending (Including on Health Policy) The 2012 campaign ma rks the inaugural appea rance of so- called Super PACs. which by the end of July had spent an estimated $181 million on behalf of presidential and congres- sional ~and1dates. much m the form of negative "issue ad- vocacy targeting their opponents. Super PACs were in turn made possible by the Supreme Courfs decision. in the Citt· zens Unit ed u Federal Electwn Commission case. to rule out hm1ts on organizational or individual spending. The decision. wri tes election -law expert Richard Hasen. created a " Frank- enstein mon ster," 1n the form of a "flood of dollars and the negative campaign ads they buy. "45

Healt h politics 1s particularly implicated in this spending wave. give n th at many Super PAC-sponsored advertisements target the ACA- as do several of the large Republ ican- aff1liated donors who fund these outside groups. As one ex- ample a Super PAC titled "American Commitment" focused specifically on running ant1-ACA ads in Democratic Senate and House districts. as of early August. the group had spent $1.I mill on on ads targeting Sen. Bill Nelson (D-FL) on the issue.46

Interest groups are connected to Super PACs in two specific ways First. many groups- from the corporate and labor sec- tors most prominen tly- channel substantial campaign and issue ad spending into Super PACs. either directly affi liated with the r organrzat1ons or affiliated with partisan allies Sec ond. lobbyists are prominent among the political profession- als who direct Su per PAC spend ing. The anti-ACA American Commitment group 1s headed by a conservative commentator who made The Hill's most recent list of top "grassroots lobby

1sts m Washington.

So should health -reform advocates-and supporters of campaign fin ance reform - focus their ire on the Supreme Court and its Citizens United decision for unleashing this apparent tool of corporate and wealthy 1nd1v1dual influence

7

Trac1rg the various routes through which campaign and issue- ad contributions have flowed over the past two decades. the anS\\ er should be a qualified "no .. Money has poured stead- ly 1nto national politics for a quarter century. with outside cortribut1ons variously taking the form of PACs (created after 1974 became a political force 1n the 1980s). "soft-money" contributions ( 1990s). and 527 groups (2000s). Each of these innovauons 1nit1ally attracted large monetary flows-and

each was denounced by good-government · I groups in term s1m1 ar to those used to castigate Super PACs today. s

This is not to suggest that the role and fu nctioning of Su PACs should not be debated vigorously lively public dJ: erat1on shou ld address every significant source of . fl · I · in utnct m e ect1ons and issue advocacy Health politics. like those other prominent.issue areas will be affected by th · ese organi- zations and their donors-affected in complicated 1 · h Id b · ayered ways. its o~ e noticed. given that Super PAC donors and other spend mg sources are devoted to multiple topics and repres:nt different 1deolog1cal sides. The point here is more s~ec1f1 c. Tho~e who view Super PACs as a novel form of vii lain. threatening American democracy in singular ways, and the Supreme Court as abetting this change would do well to revisit the recent history of campaign finance and issue adver tising. Resources available in American public life that helped shape and constra in the influence of prior movements (527s soft money. and so forth) remain available today.

l the Spin One last article of faith in and outside Washington: lobbyists provide information that 1s subtly-or blatantly-repackaged depending on the audience. "Information is tailored narrowly to spin the target." runs one characteristic claim "Demo crat1c information for Democrats. Republican 1nformat1on for Republicans." The notion also makes sense in rational-actor terms : as "cheap speech." lobbyist information 1s presumably sculpted for maximum appeal to the recipient. 47 This may be true of rea lms outside health care. but I became dubious about the conventional view after observing lobbyists for sev eral months and reading hundreds of the information pack ets they prepare for legislators . executive-branch officials. and

reporters I conducted a two-part experiment to investigate the ex

tent to which information was altered or repackaged I se lected 15 health-policy issues high on the congressional agenda between 2000 and 2003 and did the same for the pe nod 2008- 20 I O (this covered three different pres1dencies- Clinton. Bush. and Obama-and different party control

0~ Congress) and collected all the lobbying documents I cou! for each period I was careful to draw from a total of at lust five different groups per issue. preferably on multiple sides The result yielded over 850 discrete pieces of information ranging from one -page talking points or press releases to bulky studies numbering hundreds of pages.

To my surprise. 111 both periods groups almost never al· r.ertd the information in significant ways to influence their wd ence Republican legislators received the same set of facts and figures as did Democratic staffers and their members of Congress. Frequently groups plugged in different information based on a member of Congress's district. but only in 8.7% of che matched pa irings (information provided by a lobbyist to Democratic and Republican lawmakers) did I see arguments shaded toward perceived party affiliation Rather than an ef- fort 10 match partisan pos1t1ons. the information remained constant I altended more than 90 meetings between lobby- ists and staffers or legislators on these IS issues during the first time period and another 24 meetings during the second period. differences of emphasis were certainly present in dis· cuss1on But these "leave-behind" documents-the research and analysis designed to shift arguments in the lobbyist's

CO .1USJON Myths-and theories-abound about lobbyists in US pol1cym.ik1ng One popular chestnut imagi nes lobby 1sts as channeling orders (and cash) from powerful men to pliant members of Congress. A more romantic notion imagines that health care 1s immune from such crass influence peddling-or at least that lobbying pol1t1cs stops once laws are turned over to experts for technical 1mp!ementat1on And pol1t1cal scientists generally suppose a loose n twork of political actors buzzing around the hollow core of each policy issue

As we ve een these are all myths. to varying degrees Health car 1s not different quite the contrary The pow erful men are increasingly likely to be women And most

1 l ' QUEST IO NS

Cll APl ER 16 • Ten M yths about llcalth Lobb}i,ts

preferred d1rect1on-remained the same from office to office, audience to audience.

In a longer study of information prov1s1on I e)(plore rea· sons for this constancy 48 The pnnc1pal reason was succinctly summed up to me by a senior Senate staffer The best lobby· 1sts "provide really good information. ideally very quickly, and capitalize on what you already want to do-not something that's bad for you or your [MC] If they try to spin you . as op· posed to giving good. straightforward information. that's not good .• • and their reputation will decline. fast.''

In short. here 1s a counter to the most powerful myth of all · Lobbyists are not spinners or advertisers or fast talkers Rather, their reputations depend on their delivering solid. useful. timely information that members of congress can use without fear or being embarrassed

important. lobbyists do not simply "channel" anything They are permanent. often central players 1n a Washington health regime. They have their own political views. they work closely with sympathetic members of Congress. and they are as likely to shape their clients' views as vice versa

This fits neatly into contemporary views of power Po ht1ca l observers frequently note that poht1c1ans influence interest groups as often as the interest groups influence the polit1c1ans. A close look shows that much the same 1s true or professional lobbyists and the interests that hire them. The entire Washington establishment-members of Congress. bureaucrats. and lobbyists-all regularly pres sure their constituents. the ostensible Mpressure groups

I. Why does the author think that as far as lobbying goes. health care 1s no different than other helds1

2. What does 1t mean to say that prominent health care topics are issue reg1mes1

3. Are women strongly represented among health care lobbyists?

4. Are lobbyists always against health care reform?

PART V • Stakeholders

5 · Are professional lobbyists mostly Republican? Are lobbyists hired more by Republican interests'

6. Do lobbyists perfectly represent the interests of their clients?

7. Does lobbying effectively cease after a bill is passed?

8. Do campaign contributions from lobbyists buy votes?

9. Did the Citizens United Supreme Court decision open the floodgates to poht1cal spending?

I 0. Do lobbyists provide any objective information to educate poht1cians about issues or is 1t all Just polit cal sp

ENDN OTES Heinz. Laumann. Nelson. and Sa11sbury. 1993, p. 48 .

.... On the Clinton reforms. see Blumenthal and Morone. 2009, esp pp. 371 73 Skocpol 1996 and Hacker 1997 the ACA see Starr. 20 I I

J. For details on the "lack of comprehensive, in depth studies of ind1v1dual organized interests' as a maior wca n of the [interest-group] literature:· see Cigler 1994 (quote ). Lowery and G1ay 2004 Drutman. 2009 ( scho a has largely gnored the role of trade associations")

Dyckman . 2002 Dalrymple. 2009.

S Center for Responsive Politics (opensecrets.org).

6 On lobbyists failing to register. see "So Who's a Lobbyist?· (unsigned ed1tonal). New York Times January 27 2012

.• Herrnson. Sha1ko. and Wilcox. 2005, p. 386 (on the "considerable f u1d1ty 1n the interest group universe ) Pt 1994. pp. 108. 127. Heclo. 1978. pioneered the "issue networks" view

n Kendall and Levine. 2000 ("ungovernable"): Franko, 2002 ("bewildering'). Peterson 1994 P 108

See e g .. Williams. 2012.

1 v For further details of national malpractice poht1cs. see Williams 2012. on the Pennyslvania malpractice reg me

Kersh. 2005.

11 Sulkm 2005. 2011.

2. Sage and Kinney. 2006. 13 See Peterson. 1994. on how the policy process s very complex1ty-espec1ally 1t~ multiple veto points can pa

dox1cally promote stability. 14. Berry and Wilcox. 2008: Bath. Nownes. and Gayvert Owen 2005. ·Top Lobbyists Assoc1at ons The H I Oc

ber I 2, 20 I I. Ir http: '/www.ceoupdate.com/articles/art1cleDetails.htm7artic le1d 175 I

1 o. Schlozman . 1990. 2

17 See weekly .. Lobby League ·· issues of The Hill; health insurance ran on j,rne 15. 2005· homeland security on J

2005 business on May I I, 2005 .. e adva t

d F 1998 S ee also Nownes 1999 suggesting that frmale lobbyists have an adv1c

Nownes an reeman. · · · in information provision. Compare Ogmundson. 2005. Benoit. 2007

2009 Rep Cooper quoted 1n Kirkpatrick. 2009 . . ,. [ 10• Krugman 2009

S"" 2011 pp 217 18 Frates. 2012 11 • ..

CHAPTER 16 •Ten M yths a bo ut Healt h Lobbyists

11 au dagno. 20 I I ' 2003 P 7 Dunham 2002 See generally Continetti. 2006. ll. Confessorc. · ·

14 Adley 20 I I Boehm. 20 I 0. . F I d JS: Compare to ~coplural1st accounts of interest representation and influence. See Lowery and Gray. 2004: Mc ar an . 2004 Allard quoted in Boehm. 20 IO

f 2003 P 2· Vande He1 and E1lperin 2005· Hacker and Pierson. 2005. p. 145. 16. Con essore . · · ·

27, uchtblau 20 I 0

1a. £ g Moffit. 2001 29. Quote from famam 2011 L"giStorm (a subscription site) reports available at http://www.legistorm .com/pro/

revolvmg_door htnl JO. Specifics on Chrton adm1nistrat1on eterans who sought lobbying posts is in Salant. 2003.

) I. Clemente et a . 2002 32. Natrona/ journal. Polttico and The Hill feature weekly or monthly roundups of noteworthy new hires in the

Washini:ton lobbying community. I tracked all mentions in those three sources. flagging those working on health care ISSUCS

)) , Birnbaum. 2004

34 , ll1nsworth. 1997. p 518 and passim. for a succinct statement of principal/agent theory as applied to clients and lobbyists sec Heinz et al 1993. pp. 373-74. Robert Salisbury describes the "classic model of lobbying" in similar terms "A group sends its representative to Washington to press its case for or against some policy option. or it hires one of the many would be agents already located in the nation's capital .... The presumption in this model 1s that the group knows whcit its po'1cy interest 1s.' Salisbury emphasizes, in contrast. lobbyists' "need and dependence"' on government offic1a s Sa' sbury. 1990, pp 224. 229.

l S. This claim 1s defended in greater detail l'l Kersh. 2002.

l 6. fcnno 1973. an 10terest1 1g recent comment on this theme is Miquel and Snyder. 2006.

l7. See the thoughtful ovc View in Bernier and Clavier. 20 I I. 31. Quoted m Kashrno 2017

39. Weisberg. 2006 The scholarly l1terJture on contributions is voluminous: good studies include Primo and Milyo 2006 La Raia . 2011 and Esterling. 2007. '

40. Lobbyist contributions.· as cata'ogued in this study, were of three types: donations by a lobbyist's client (corpora- ~~~rad~ assoc1at1on. or less ci:ten ind1~1dual). with the funds directed and often personally delivered by the d st onat1ons by the lobbyists firm : or aonations from the lobbyist's personal resources This chapter d

stmgu1sh between PAC and soft-money contributions, primarily for reasons of space. . oes not

41 . ~~~t~:~:e~~~1s ~~~:lo~·~yr?,~ lthl rebeblobtbyist~. wlhdosed organizations m~de multiple contributions during my ob- o y1s s are me u e m the 296 dec1s1ons.

fj!I PA RT V • Stakeholders

. October 4. 1999) : Barbour fi B rbour (personal interview. .. .d olog1cal/part

4 2. This is from former GOP party charr Ha ey a H s full explanation. coded as I e h who contribution practice is unusual. as Barbour not d i for the [issues) we're for. Rathert an give to people who need help the most and who are st:~:ns stay in the majority so we only g1 lO if we could even measure that. Our goal is to help Repu i h h t tus members of Congress

f to donate to 1g -s a

43. Esterling. 2007. discusses the propensity o groups

44. Fuller details are spelled out in Kersh , 2003

4s. Hasen. 2012. 46. Powers. 2012. 41. Powers. 2003. Lagerli:if and Frisell. 2004 See also A

48. Kersh. 2007

REFERENCES

ten Smith. 1993: Larocca. 2004: Rasmuscn 199

Ackley. K. 20 I I. "K Street Courting GOP s Senate A d Roll Call. December 5 · Ainsworth. S. H. 1997. "The Role of Legislators nth D term1nat1on of Interest Group Influence" Leg1slal

Quarterly 22: 3. Austen-Smith. D. 1993 . "Information and lnflu nee Lob y1ng for Agendas and Votes " American journal of

Science 37. 3.

Bath. M. G .. A. J. Nownes. and J G Owen 2005 Fem e lobbyists. The Gender Gap and Interest Repr Politics and Policy 33 5.

Benoit. D. 2007. Women Corporate Lobby IS Pol C>'. a University Press.

Bernier. N. F .. and C. Clavier. 2011 Publrc Heath Po Health Promotion lnternat1onal 26 I

Berry. J. M .. and C Wilcox 2008 The Interest Go Birnbaum. J. 2004 "Going Left on K Street Wa h Blumenthal. D .• and J. A Marone 2009 7i e H rl

of Calrfornta Press

Boehm. R .. 2010. "Lobbying. The Myth th Rea ty

Center for Responsive Polrt1cs 2013 Lobby n R n top.php 7showYear=2012&rndexType on Ma 2

C1gler. A. 1994 ... Research Gaps rn the Study of Int t Representing Interests & Interest Group Rep e e t

Clemente. F .. et al 2002. "The Other Drug War II Wa

Confessore. N. 2003 Uuly/August) ""' 1 h .. vve come to t e M Supreme. Washington Monthly

Continetti. M. 2006. The K Street Gang 1ih R e 1 ea d fa

Power m the United States. New Brunswick. NJ R

ly (5th Ed). New York: Longman .

Post July 2

r Health and Politics in the Oval Office Ber ry

e Impacts on Polrcy ... American Observer Nnvo•m1~.

tors Retrieved from https://www opensecret 2013 .

roup Representation." In William Crotty, et al ed

Lanham. MD: University Press of America

ngton DC: Public Citizen.

h1ne How the GOP Disciplined K St and Mad B

of lhe Republican Machine New y k D · or : oubled

=

PART V • Stakeholders

. .. journal of Health Po ---. 2011 "Health Reform : The Poht1cs of Implementation. N

t Cut Health Care Costs Kirkpatrick. D D. 2009. "Lobbyists Fight Last Big Plans

0

k .. N York Times May I 0

Krugman. P. 2009. "Harry. Louise. and Barac . ew · f p blic Funding for Congr

La RaJa. RaymondJ. 2011. "Explaining the Unpopularity o u

30: 3. r · T nsmiss1on and Uncqu Lagerlof.J. N M .. and L. Frisell 2004 "Lobbying. ln1ormat1on ra •

Working Paper. SP II 2004-02. Larocca. R 2004 "Strategic Diversion 1n Poht1cal Communication ." Journal of Politics

6 6

2

L1chtblau. Eric. 2010. "Lobbyists Rush to Hire G.O P Staff A h ead of Vote." New York Tr Lowery. D . and V Gray 2004. "A Neoplurahst Perspective on Resea rch on Organized lntc

Quarterly 5 7· I. McFarland. A S. 2004 . Neop/ura/1sm The Euolut1on of Political Process Theory Lawr n

Miquel. G .. and J. Snyder. 2006. "Legislative Elfect1veness and Legislative Careers " Legt /al

Moffit.RE. 2001 Personnel Is Pohcy Why the New President Must Take Control of th Washington DC. Heritage Foundation

Nownes. A . J. 1999 Solicited Advice and Lobbyist Power: Evidence from Three Arnc11can Quarterly 24: I.

--. 2006. Total Lobbying. What lobbyists Want (and How They Try lo Gel II) New York

Nownes. A.J., and P. D Freeman 1998 ' female Lobbyists: Women in the World of Good O Politics 60: 4.

Ogmundson. ~: 2005. "Does It Matter 1f Women Minorities and Gays Govern?. New Data r-.-··-·- Quest1on. Canadian journal of Sociology 30. 3.

Peterson. M. 1994 "Congress in the 1990s From Iron Triangles to Policy Networks In j A Mr•ttvY. eUds_.. The Pol1t1cs of Health Care Reform lessons from the Past. Prospects 'or the Fi I

nivers1ty Press. I' u ure

Powers. S .. 2012 . "Amencan Commitment Spends $1 I M 'll Sentinel. July 6. 1 ion on TV Ads to Attack N

Primo. D. M . and J M1lyo 2006 C law journal 5: I. . ampa1gn Finance Laws and Political Efficacy

Quadagno. JI. 2011. "Interest Group Influence on th P . Losers in the Health Care Reform Debate Jo e I at1ent Protection and Affordability A l

Rasmusen. E. 1993. "Lobbying When th D urna of Health Politics. Policy and law 3 e ec1s1onmaker Can A .

Sage. W M .. and E. D. Kinney 2006 M d cqu1re Independent Inform Malpracttce and the us Health c e s1care Led Malpractice Reform .. In w M s

S I . . are ystem New York· C b . . ag and R a ant. J. D. 2003. "Many Clinton Officials Sta Cl . am ndge Un1vers1ty Pr

Salisbury, R. 1990. "The Paradox of Interest G Y ose to Washington ... Washington Po t

The New American Political System (2ndr~~~s ~ Wa.sh ington-More Groups a d L ash1ngton. DC A n

. mencan Enterpri

Business plays a powerful role in American government. However. "the business community" is extremely diverse- almost no community at all. As a result. businesses pursue different interests and are affected by policy changes in very different ways. This chapter explores a powerful but highly fragmented stakeholder.

Giant Food. a large supermarket chain. holds a press conference advocating a tax on large employers in Maryland who do not spend enough on health care for their workers . The California Restaurant Assoc·ation indicates to the Schwarzenegger administration that it w· accept a small employer fee to fund health care and proposes a specific fee schedule. A group primarily run by the South Carolina Chamber of Commerce proposes a plan for expansion of Medicaid coverage in the state. financed by an increase in the state's cigarette tax.

All of these stories fit awkwa rd ly 1n the box we've created for employer behavior in social provision We generally think of business as the polit ica l fo rce that blocks policies it does not like-an obstructionist. inflexible juggernaut. But these stories illustrate the potentia l for mainstream em ployers to sit actively at the policymaking table . proposing positive action that re- quires some financial sacrifice in return fo r a larger gove rn ment role. Of course. they do not tell the full tale. Alongside these

actions are others that indicate a strong preference for sma government. less regulation. and lower taxes What resu ts IS a push and pull in the policy arena that makes for very intcttSLn.i politics-and the need for a more complete understand ng cA business influence on health policymaking

But first we must understand the influence of hea th pol icy on business. Most Amencans-56%1-reccivc hu coverage through their jobs This makes employers mmf\'t purchasers of health insurance who care a great deal aboltl available options and rising costs in the pnvate market

Despite this intimate connection between work and h~ insurance. the vast maionty of uninsured Amencans (77 n of 20 IO) are able-bodied adults 1n workmg fam1hes

1 This a

strange consequence of our patchwork system of health CO'itt age. where the better educated and skilled (and their fam receive coverage through their iobs. while another large churl of Americans. including children. the poor. the d1sab ed a

CHAPTER 17 • The Business of Hea lth Ca re: How Employers Influence Politics

tfderly. receive coverage through government programs. over. this population of working uninsured adults using as fewer Americans are being offered health

eris-in 2000. more than 65% of Americans had tr health coverage compared to 56% in 20 I I (and the

•c has accelerated).3 This means that filling in this gap :ua!ly involves employers too.

A. of this together suggests that employers are directly f,tcttd by a wide range or changes-or lack or changes- ~ment health policy. But the specifics or this impact [ll(k)'. largely because there is no true "business commu-

:t 4 The heterogeneity of employers means that the impact htl th policies on them varies a great deal. and so do their

:Mon what policy choices would be ideal and what they ;woit 1n the political arena .

Sut as central econom1L actors who are thought to be cf!lendously powerful in Washington. DC. and state capi-

'JS around the country. employers influence policy cut- es This chapter tackles the question of how they do

so 1"rough the stones or three recent reforms : Maryland's \l.M.4art bill. Massachusetts's comprehensive reform ind the national reform known as the Affordable Care Ac~ ACAJ What we rind IS that their impact on policy choices snot always what we would predict. Although they ul- ,mately have less influence than we might expect. given er privileged pos1t1on in the American system. they can

bock policies they do not like or shape successfu l policy chingcs in 1mporta nt ways .

EMPLOY E TAKEHOL

HOW HE AL' \ FFECTS T COMMUN J'

',s S:

POLICY BUS INESS

!ht 1930s a new d -.- -- nd th ' nee emerged in this country. Families

cmselves wanting t t k d !Oph sllcated . . o a ea vantage of increasingly COsU Man h ~ed1cal services but unable to pay the rising ~St\elt Y aid ~1gh hopes that President Franklin Delano Soc1~I Stcu~~uA include universal health coverage in his hod that ct .in the 1930s . His failure to do so created

over time was fill d b ready to sell I . e y private insurers who

po ic1es to willing buyers.

How did employers emerge as the primary buyers of these policies? It was actually a series of government deci - sions that led to the link between work and health insur- ance described earlier. First. during wartime wage freezes. government regulations allowed employers to offer health benefits as an alternative way to attract workers. Second. government allowed labor unions to consider health ben efits as part of the compensation packages they could ne- gotiate (a right that unions are fervently fighting to protect today). Third. health benefits were made nontaxable . es sentially creating a massive tax subsidy for employer health insurance. 5 Finally. for large employers. the Employee Re- tirement Income Security Act (ERISA) provided a frame - work that permitted them to offer insurance to workers in multiple states without being subject to a diverse set of rules from state to state. 6 In other words. 1t was not merely the failure of government to pass the one big poltcy like national health insurance that was important. It was also the smaller policy successes that shaped what came later and ultimately drove health care into the workplace and the private insurance market. 1

When Employers Provide Health Coverage To~ay, health . in.surance continues to function as a major ent1cement-:-s1milar to a higher salary or more vacation days- to prospective workers. In many industries. health benefits are an expected part of compensation. and employers that do not offer them find it difficult to compete in many labor markets.

This is not the only reason that employers offer health in- surance. They also understand that healthy workers are of ten better workers. Healthy employees-and even emplo wh f ·1· yees

ose am1 ies are heal thy-are more productive because t~ey have fe-:ver absences from work and are less likely to be diagnosed with preventable. catastrophic illnesses.a

s.ut the positive side of providing health benefits to w k ers is often subsumed by the bigger story· rising costs ~ro - ~ably, th~ conversation generally focuses on the size ~f - ~:~rease in c~sts. since so'.11e amount of increase is assum~~~

example. in 2011 . the increase in overall health around 8%. decreasing slightly to 7.5% by 2013 9 ~~sts ;as lute costs are also substantial. From 200 I to 20 e a so- health care premiums per em 1 I I. average $4.083 to $9.821 in 2011.10 p oyee more than doubled . from

Business plays a powerful role in American government. However, "the business community" is extremely diverse-almost no community at all. As a result, businesses pursue different interests and are affected by policy changes in very different ways. This chapter explores a powerful but highly fragmented stakeholder.

Giant Food. a large supermarket chain. holds a press conference advocating a tax on large employers in Maryland who do not spend enough on health care for their workers The California Restaurant Assoc ation indicates to the Schwarzenegger administration that it wil accept a small employer fee to fund health care and proposes a specific fee schedule. A group primarily run by the South Carolina Chamber of Commerce proposes a plan for expansion of Medicaid coverage 1n the state financed by an increase in the state's cigarette tax.

All of these stories fit awkwardly in the box we've created for employer behavior in social provision We generally think of business as the political force that blocks policies it does not like-an obstructionist. inflexible Juggernaut. But these stories illustrate the potential for mainstream employers to sit actively at the policymaking table. proposing positive action that re- quires some financial sacrifice in return for a larger government role Of course. they do not tell the full tale. Alongside these

actions are others that indicate a strong preference for srm government. less regulation. and lower taxes What resu!ts is' push and pull in the policy arena that makes for very intcrcstq politics-and the need for a more complete understand 11£ business influence on health policymaking

But first we must understand the influence of heath pol icy on business Most Amencans-56% 1-receive he~ coverage through their jobs. This makes employers mas purchasers of health insurance who care a great dea abollt available options and rising costs in the private market

Despite this intimate connection between work and hc4 insurance. the vast ma1011ty of uninsured Americans (7~ H of 20 IO) are able-bodied adults in working families 1lh s a strange consequence of our patchwork system of health cl7Yf1 age, where the better educated and skilled (and their fa receive coverage through their 1obs. while another large of Americans. including children. the poor. the d1sab ed '

CHAPTER 17 • The Business o f Hea lth Care: How Em ployers Influence Politics

t erly, receive coverage through government programs. ~ tover. this population of working uninsured adults

ncrusing as fewer Americans are being offered health tf11s-in 2000. more than 65% of Americans had ~r health coverage compared to 56% in 2011 (and the

"t has accelerated).3 This means that filling in this gap tia ly involves employers too.

A! of this together suggests that employers are d1rectly i!!ccttd by a wide range of changes-or lack of changes-

g111'trnment health policy. But the specifics of this impact r.r me :y, largely because there is no true "business commu·

~The heterogeneity of employers means that the impact of hulth policies on them varies a great deal. and so do their ;(IA.'S on what policy choices would be ideal and what they ;pport 1n the political arena.

But as central economic actors who are thought to be tmtndously powerful in Washington. DC. and state capi-

IJ s around the country, employers influence policy out- omes This chapter tackles the question of how they do

so through the stones of three recent reforms. Maryland's \Vi Mart bill. Massachusetts's comprehensive reform id the national reform known as the Affordable Care Ac~

(ACA) What we find is that the1r impact on policy choices

How did employers eme rge as the primary buyers of these policies? It was actually a series of government dec1- s1ons that led to the link between work and health insur- ance described earlier. First. during wartime wage freezes. governme nt regu lations allowed employers to offer health benefits as an alternative way to attract workers. Second. government allowed labor unions to consider health ben- efits as part of the compensation packages they could ne- gotiate (a right that unions are fervently fighting to protect today). Third. health benefits were made nontaxable. es- sentially creating a massive tax subsidy for employer health msurance. 5 Finally, for large employers. the Employee Re- tirement Income Security Act (ERISA) provided a frame- work that permitted them to offer insurance to workers in multiple states without being subject to a diverse set of rules from state to state. 6 In other words. it was not merely the failure of government to pass the one big policy like national health insurance that was important. It was also the smaller policy successes that shaped what came later and ultimately drove health care into the workplace and the private insurance market. 7

When Employers Provide Health Coverage

not always what we would predict Although they ul- t~-,ately have less influence than we might expect. given u eir privileged pos1t1on in the American system. they can bock pol1c1es they do not like or shape successful policy changes in important ways.

To~ay, health. imurance continues to function as a major ent1cement-:-s1m1lar to a higher salary or more vacation days- to prospective workers. In many industries. health benefits are an expected part of compensation. and employers that do not offer them fin d it difficu lt to compete in many labor markets

~

OLICY BUSINESS

• dJOs, a new need d · . fou~ the I emerge in this country. Families

mse ves wanting to t k d '°1>h1st1med medical . abe a vantage of increasingly costs Man h services ut unable to pay the rising P.oosevelt ~o~I~ h1g~ hopes that President Franklin Delano Soc,.1 Security Act'~ tuh~e,un1versal health coverage in his i vo d that 930s. His failure to do so created

over time was fill d b . "1'ady to sell I e Y private insurers who

po icies to w1l11ng buyers .

This is not the only reason tha t employers offer health in- su rance. They also understand that healthy workers are of ten better ~~rkers. Healthy employees-and even emplo ee whose famil ies are healthy-are more productive bec:us: they have fe".'1er absences from work and are less likely to be diagnosed with preventable. catastrophic illnesses s

But the positive side of providing health benefits to k ers is often subsumed b h b. . wor - tably th . Y t e igger story: rising costs No- mcre~se ~n c~o~~.r~~~1~ens;::~ally focuse.s on the size of the For example in 201 I th . mount of increase is assumed .

· · e increase in ove II h 1 h around 8% d . ra ea t costs was . ecreasing slightly to 7 5% b 9

lute costs are also substanf I F . y 20 I 3 The abso- health care premiums e ia . rom 200 I to 20 I I. average $4.083 to $9.821 in 2ciii 1~1~mployee more than doubled. from

PART V • Stakeholders

Who is actually paying these costs? If you look at simple numbers. it appears that employers are paying the bulk. In 2011. workers directly paid only 18% of the premium cost for single coverage on average. and 28% for family coverage (numbers that have risen steadily over time) .1

However. labor economists would argue that employees are actua lly paying all of the costs. This is because health benefi ts are part of a package of compensation. and when the cos t of one pa rt of the package increases. market forces are likely to bring tota l compensation back to equi- lib rium levels by decreasing other parts of the package. such as wages.

These economic assumptions are not uni versally ac- cepted.12 and most importantly do not resonate with busi- ness managers. who believe quite strongly that their labor costs will decrease if they spend less on health care. 13 In fact. their views on policies like employer mandates are based on the assumption that they, and not their employ- ees. will bear any cost increases. 14 It is safe to say that these perceptions. and not economic models. determine political behavior. Moreover. regardless of how their la- bor costs are distributed. any increases affect an employ- er's abi lity to con tinue providin g benefits. Therefore. one consequence of the rising costs of health coverage 1s that fewer and fewer employers are offering health insurance to th eir workers.

Of course. one of the them es of this chapter is that em- ployers are not monolithic. For example. the costs of pro- viding health insurance are far more formidable for small business owners. who cannot reap the economies of scale and take advantage of risk pooling in the same manner as large employers. 5 Moreover. small businesses tend to have thin ner profit margins and are less able to absorb cost in- creases. This partly explains why, in 2009. only 41 % of firms with fewer than SO employees offered health insurance to their workers. compared with over 96% of firms with SO or more employees. 16 Very sma ll fi rms (those with fewer than 2S employees) may find it most difficult. as they spend the largest percentage of payroll on health insurance. 17 Not sur- pri singly, a lot of health policy proposals focus on helping small businesses afford coverage.

Firm s with high-skilled workers . many of whom earn high sa laries. are far more likely to offer health benefits than low-wage firms that tend to have high turnover and a large

number of part-time employees. (Over 80% of uninsured workers are in blue-collar JObs.18 ) Moreover, the percentage of low-wage companies offering health care benefits rs de· clining at a steeper rate than at other firms 19

Finally. health care provision also differs between union· rzed and nonunionized employers Unionized employers are governed by binding contracts that often guarantee generous health benefits. both for current employees and those who retire. Nonunionized employers. on the other hand. choose to offer benefits on a case·by·case basis This d1v1de can sometimes affect employers in the same industry, such as the grocery business. where only some companies are unionized We will see this playing an important role in our story about Maryland

In other words. the challenges for the business commu- nity when 1t comes to prov1d1ng health care are not un1vtrsa Some employers want to continue providing health benefits. others would rather relieve themselves of the burden This variation makes it extraordinarily difficult to pin down what employers actually want when 1t comes to health pohcy

We can draw some conclusions from the many surveys avail· able For example, a large minority of employers are open to complete government control over health coverage. common~ known as single-payer health care-in one survey reported in The New England journal of Med1cm~. 39% answered ·yes· or "maybe" to the concept 20 Even the very conservative National Federation of Independent Businesses (NFIB) found that 279& of its polled members "1ust wish government would ta e Oler health care so they could get out of 1t "2

But the truth 1s that the vast ma1onty of emplo}ers favor keeping the current system and believe they bear some re· spons1bility for providing health benefits-as long as thtre are improvements.22 This appears to be true for most em· ployers across the spectrum of size and poht1cal persuas on As far as what those improvements look like. the common theme 1s that employers are looking for policies that reduce costs and that minimize regulatory burdens . In part1cu ar they tend to like market-based health reforms that help them purchase health benefits for their workers . The proposals that generally garner the most support include tax credits for small business owners: other examples include relaxed regu· lat1ons that allow small businesses to pool together and thus bring down their costs 21

--

C" ll \PTF . R l 7 • The Business of H I h

ea l Care: How Employers Influence P~llitic~

\\hen Health

°' rnmcnt Pro,·ides O\Cragc

E ploytrs a c not only concerned wnh pol1c1es that affect

&e own hca th pl ns They are also potentially affected

by t: programs This 1s because Med1ca1d and the State c rtn s Hca h lnsuranc Program (SCHIP) have continu· a expanded to cover more workers (particularly parents) and e ch dren •The 1mphcat1ons of this shift are not well

astood nd r d cussed far less than policies that have

!Ott d fKt er but th y w1ll increas1ngly need to become pan of t con er at on

doors. most of the maior state and national business groups take a more nuanced position on mandates. citing a willing· ness to accept mandates if they would not hurt smaller em players or i f they were tied to providing benefits for actual employees instead of a broader payroll tax to the oovern

t 21 v· " men . 1ews also vary depending on the type or employer For example. several surveys have shown that ma1or1t1es of small business owners support various types of mandates that require all but the tiniest employers to provide health benefits or pay a fee. 28 Employers with unionized workforces also sometimes want government policy to level the playing field by requinng that all large employers provide benefits 29 In other words. employers will often fight against health care mandates and fees. but this 1s not guaranteed

The second problem is that governments must lmd ways to finance public program expansions and often rely on tax increases to do so. In particular. both federal and ~tate governments have used cigarette and other sin taxes to fund Med1ca1d and SCHIP. and employers have mixed reel ings about these sources. Although these taxes are generally thought to be less offensive than broader sources of taxa t1on. the business community generally protests any kind or tax increase (and cigarette taxes in particular are thoup,ht to hurt retailers and small business owners). The larger point here 1s that al though pu blic programs have a number of potential benefits for employers. there are also potential costs that offer competi ng incentives when 1t comes to

policy views.

The views in the business community on public program expansion illustrate just how complex political preferences and activity can be. Surveys of individual business owners have found a clear pattern of support for public program ex pansion particularly when it applies to the working poor 3 However we find few national business groups that take pub ic osit1.ons on Medicaid and SCHIP policy Most business

1 p .

1 tay out of the debate (the reasons lor this are

groups s1mp Y s . discussed in the next section)

A key providers of health benefits. employers have a mas . stake in a wide range of health policies They have grr.at

s1ve s . . . stem that provides comprehensive financial interest i n a sy 'bl st The question is whether benefits at the lowest poss1 etcoally. translate into political

. lex preferences ac u d thei r comp ff t the policymaking process an action How do they a ec

outcomes?

IJ,i;i PART V • Stakeholders -1 ~--llilim._·-~=.=:..:..:..:..------------

EMPLOYER POLITICAL ACTION- AND INACTION: HOW THE BUSINESS COMMUNITY AFFECTS HEALTH POLICY There are two powerhouse umbrella organizations that repre- sent the business community politically. One is the US Cham- ber of Commerce, which represents all types of employers. It primarily advertises itself as a small business group, though its board-and its coffers-are dominated by major corpora- tions. J 1 The NFIB exclusively represents small employers. and although its membership is small, it is remarkably powerful. Fortune has frequently named it the most powerful business lobby in Washington, and in 2005 Republican members of Congress identified it as the most powerful congressional lobby.J2 A slew of other. largely industry-specific groups also play major political roles. including the National Retail Federa- tion, the National Restaurant Association. the National Asso- ciation of Manufacturers. and the Business Roundtable. Most of these groups also have state-based organizations peppered throughout the country. Finally, a more progressive small busi- ness organization. with far less (though growing) influence, is the Small Business Majority.

There are reasons to believe that such organized business associations may not be particularly effective at representing the interests of the business community (to the extent that such a community even exists). These umbrella organiza - tions are unlikely to take positions on contentious issues with ambiguous effects on the larger business community, such as Medicaid expansion.33 In addition. these groups and their leaders tend to be ideologically in favor of smaller govern- ment. and this political philosophy has proved to be benefi- cial in that it allows for a strong alliance with the Republican Party.J4

As a result. business associations and lobbying groups tend to represent only the conservative viewpoint. But as we have seen. individual business owners may vary a great deal in their preferences. This suggests that we should be cautious in interpreting these most visible political views as necessar- ily representative of "business" writ large. (This is not unique to business groups. of course; the same could be said for the representation of doctors by the American Medical Associa- tion. or of seniors by AARP.)

Imperfect though the process may be, the preferences of employer groups are what likely affect pohcymaking. But how7 It turns out that there is a range of ways that business asso- ciations can have a political impact

Of course. one type of influence 1s direct Business groups are highly effective at classic lobbying efforts. as well as ad· vertising. taking strong pos1t1ons. and mobilizing grassroots support. This is at least in part due to their extraordinary re· sources. Employers are thought to be particularly powerful lobbyists at the state level since state governments are more susceptible to "capture" by powerful minority factions.JS

At the federal level . the business community's lobbying efforts have largely paid off in terms of blocking unfavorable policies. since it 1s so difficult to come to clear agreement about the kinds of favorable pol1c1es to push for 6 However, employer groups can also help design policies before they come to a vote. something we will see occurring in all three of our case studies.

Employers are not just any other social actors and thus do not merely exert influence through direct efforts. Because of their key role in the economy. they are pos1t1oned to have a particularly striking indirect effect on health policymaking. Policymakers are concerned about enacting policies that might drive businesses-and with them Jobs. investments, and capital-to other places. This 1s particularly true for state lawmakers. who must take seriously the exit threat (that em· ployers will "exit " the state and move their operations else- where). This serves as a real constraint on the policy choices available to polit1c1ans.

The result 1s what 1s known as structural power. Without lobbying or even taking a position on an issue. employers can affect political choices. Policymakers anticipate the reactions of employers-that is. they make reasonable guesses-which limits the menu of viable options to programs that business would potentially support (or at least not oppose).J1 The classic example concerns taxation: To lure employers. states create favorable, low-tax business climates This has obvi· ous implications for health policymaking. where lawmakers must often choose between lower taxes or generous health programs.

We do have systematic evidence that employers have affected health policy 1n the past. For example. business influence played a substantial role in explaining state vana· ti on in health policy in the 1980s. ,s and in states where

.................................................. ----------~~~~~~~~~~-----

c

---,===~~~:;; ( 11\PI E R 17· Thc . ---.: Business of Hea lth Care· . How Employers Influence Politic-. the bus css community contributed more ca to state elections. all else being equal b~paign funds surmce pro rams wer round to hav~ ~u ic heal_th 1n- t.~rtSho ds ' ower el1g1bility

-

6;rt e truth is that 1t 1s extraordinarily difficult to . p:?CJStlywhu impact employers will have In many wa predict "ir.,ti 111 nee d"""nd h I ys, em- '""' ~~ son t po 1t1cal enV1ronment and the specif d ti s of the lcg1slat1on at hand For th 1s reason we now tum to ~ral c s of recent health reforms in an ff w dtWm bUStnc s in flu nee e ort

The first dradc of the 2000s was a time of tremendous ex- penmtn' uon 1n heal h policy Governments at both the state and fed ra evels tac I d maior h alth reforms. with varying degrttS of emp ayer influence In this section . we examine three such cases in an attempt to learn key lessons about employtr pref rences nd influence in actual s1tuat1ons. First. we considc1 two stater forms Maryland 's Wal-Mart bill (as an w c of a stat r rorm specifically targeted at employer CMra ) and -Aassachus tts s comprehensive reform (which served as a mod I both for other failed state reforms and lor the succcssf ully nacted national reform) We then look dosdy a ro: of employers in the highly contentious pas· sage of PC.A n 20 IO

Mar) land Takes on \Val-l\1art lnJanigry 2006 arter a long leg1slat1ve battle and a h1gh ·profile \!to by Govc1nor Ro rt Ehrlich . Maryland's "Wal-Mart bill" vm r na ty mad law On or 33 state governments that CO!lSldmd s nd alone fau share leg1slat1on in the 2000s. the Ma!)'Und mered national attention ror being the first (ind u wna ly only) succ ss The leg1slat1on was notable for a er reason Although 1t technically required that all employm th more than 10.000 workers in the state spend at east 8 of payro I on health benefits or pay into the state Med:ca:d rund 1 wou d have affected only a single employer: Wt. ~rt. The pa h of th Maryland leg1slat1on demon~~rates ™> rrt th n that are relevant for this chapter: the ability of wiploytrs to shape the details of health legislation and the

rema rkable heterogeneity. h comes to health pol· 41 in t e business community when it

icy.

The focus on Wal-Mart Mart recently had been was not exactly a surprise Wal- ger health benefits a ?ubhcly vil1_f1ed for providing mea- public health nd instead relying on taxpayer·funded states . insurance programs for its workers Many

comm1ss1oned studies that found that the store had more ~mployees enrolled in public health programs than a~y ot er company. At the national level. one study found t at Wal-Mart increased Medicaid expenditures by $898

l~ehr w~rker.42 The negative press made Wal·Mart a political 1g tning rod. The other re_a~on that the narrow focus ol the leg1slat1on

was_ not surprising has to do with the political role of the business community in Maryland. Over the course of sev· eral years. employers in the state had worked hard to avoid being affected by fair share legislation. and they were suc- cessful in two ways. First. the Wal-Mart bill was an out· growth of an earlier. more expansive employer mandate that had been proposed as part of comprehensive health reforms in 2003 and 2004 It was largely due to the formidable op· pos1t1on of the business community to the broad mandates that advocates, over the course of several years. narrowed their proposal from comprehensive reform to an extremely narrow mandate on only the largest employers. This was CJ type of strategic accommodation to the powerful business community.

Second. individual big businesses in the state wielded a lot of power in government. Johns Hopkins. Northrop Grumman. Giant Food. and Wal-Mart were the only employers in the state large enough to fall under the bill Giant already spent well over the threshold on health benefits (largely due to union contracts guaranteeing generous health benefits) and would not be affected. Johns Hopkins and Northrop Grumman were able to negotiate the rather arbitrary terms of the legislation to make 1t less costly for themselves . This left only Wal-Mart. which was unable to garner the same sympathy despite its use of 12 lobbyists 1n the state.

0 In

other words. the Maryland business community had elfec· tively squeezed the Maryland General Assembly into l1m1t· ing their mandates-initially conceived as a way to make all employers contribute their fair share and substantially fund public health care for uninsured adults-to one company

This 1s power indeed.

PART V • Stakeholders

The employer reaction to the legislation demonstrated the vast array of business views when it comes to health policy. Not surprisingly. Wal-Mart led the opposition and was joined by the state chapters of the Chamber of Commerce and the NFIB . These groups argued that the bill would drive employ- ers out of Maryland . and they feared that taxing one employer would lead to a slippery slope in which many more would eventually be subject to the requirement.

Many of the state's business groups faced significant in - ternal divisions between members who supported and op- posed the legislation. and took no position at all. Open support came from on ly a handful of groups. such as the American Minority Contractors and the Ba ltimore Minority Business Group. and a few individual small business owners who wrote editorials in state newspapers. 44 But probably the most visible supporter was Giant Food itself. arguing that "all companies shoul d pay thei r fair share and not subsidize . .. the major employers in the state that do not provide adequate medical care coverage for their employees and thus shift the cost toward companies such as Giant."45 Sure. their support was blatantly self-interested, but it nonetheless helped neutralize Wal-Mart's assertion that the bill was "antibusiness" -and. for that reason. was thought to be crucial to the final outcome.46

What is apparent is the difficulty of identifying one clear "business perspective" on this particular health policy. As fits the general pattern. the major business associations opposed the legislation. while smaller groups and indi- vidual business owners were divided. Even competitors in the same market (groceries) vehemently disagreed on the issue due to their specific business models. Whereas the united front in the business community helped derail ea rlier. more universal mandates. the division of opinion on the Wal-Mart bill paved the way for passage of the legislation.

Alas. our story does not end here. In 2007. before any money had been collected. the bill was overturned by a Fourth Circuit district judge. As many had feared (and as le- gal scholars had warned). the legislation was doomed by the complicated and ambiguous federal ERISA laws that govern large health plans. This perhaps suggests a third conclusion from the Maryla nd story: States are very limited in how they can act, particularly when it comes to employer health care. because they share responsibility for health policy with the federal government.

Massachusetts and the Employers Who Compromised In April 2006. Massachusetts enacted a remarkable. near. universal health care program . The reform . which included a combination of an individual mandate . a new "Connector" to help uninsured residents access pnvate health care. Medica1G expansion. and employer fees . became a model for the nationa health reform legislation enacted several years later. (See Chai>' ter 12 for a detailed description of the Massachusetts case.)

For the purposes of this chapter. the legislation was most interesting for its successful enactment of the fair share em· ployer mandate. (As usual. employers paid little attention to the Medicaid expansion.) This required that all employers with more than IO workers that did not offer adequate hea tn insurance pay $295 per employee per year into a state fund Importantly, this mandate was not only openly supported !rt some of the most important business groups in the state. rt was actually written by them.

How did this come to be? The employers themselves made the strategic dec1s1on-a smart one. 1t turns out-to remain open to genuine compromise As in Maryland . we see that one of the main roles of the business community is in helping to shape health policy in ways that are most favorable to 11

But policy leaders in the state also played an importa nt role in inviting the business community to seriously engage with the policy process Their aim was to create legislation that exemplif~ shared respons1b11ity. which meant requiring sacnfice from a range of stakeholders. This pnnc1ple was crucial for securing employer support. since surveys made clear that while business owneis did recognize their own responsibility in shanng health care costs. targeting only employers would be a recipe for disaster.47

The initial proposals for the mandate resembled others that had been floating around the country (such as the Maryland legislation discussed in the previous section) and would have required that employers pay a fee equal to a certain percenragt of payroll.48 Fearing such a large requirement. business groups instead proposed the smaller. more concrete $295-per-wo~er levy. 49 This was lower than some on the left thought would be fair-unions were particularly unhappy-and was sub· stantially less than many employers actually paid to proVJde health benefits.50 Most members of the business communty seemed to agree that this was a pretty good deal. and in the end they supported the legislation almost unanimously. witi the notable exception of the NFIB. 5

C H A PTE R 17 • Th . e Business of Heal th C .

Given this chapter's prior discuss on mandates. there are some puzzl ion ~r employer views Maryland. employers were opposed itngbe emdents to this. In r d r

0 roa mandates d avore a ar narrower requirement on 0 1 th 1 an I M h n Y e argest employ

ers. n assac usetts. however man 1 - h k h I

· Y emp oyers seemed to t in t e evy was too narrow. More th h If f an a o business owners surveyed m 2007 thought the law should apply to all employers. even those with fewer than 1 o empl 52 · M h oyees. Even in assac usetts. this kind or willingness to shoulder ar the burden 1s unusual 5> P t of

So 7 why wcr employers willing to "share responsibility"

here Although we cannot say with absolute certainty ·t seems li~ely that the real difference was the inevitability. ~f comprehensive r rorm By 2006. the three most important political actors m the state-the Democratic legislative lead- ers and Republican go'< ~rnor Mitt Romney-had all proposed s1m1lar reform plans >4 Additional urgency came from the fact that advocates for reform were collecting signatures to put an even more comprehens1v • plan on the ballot. Fearing that a ballot 1ni11ative would place a far heavier burden on them. em- ployer groups chose to have a seat at the negotiating table to achieve favorab e compromises S5

There arc two main lessons here . First. business groups may have idealized preferences when 1t comes to health pol- icy. but they re also strategic pol1t1cal players. By choosing to sit at the table and negotiate an employer fee. the business community was probably able to escape far more burden- some costs

Second employers ar also c1t1zens. and their political views do not !ways stem rrom their role as business owners. Although the compromise may have been rooted in political expediency ror th business groups at the negotiating table. it seems that a slight ma1onty of ind1v1dual owners simply liked the proposal ror universal coverage In fact. more than half of employers a r ed m 2008 (after most of the plan had been implemented) that the health reform. employer fee and all. had been ·good for Massact-uc,.ttc '"Sb

EMPLOYER ON THE TAGE: THE

BLE CARE ACT In 1994. • ident Clinton's signature health reform was soundly defoated Although there were mixed views in the

d b th ol"cy preferences and business community regar ing o P 1

are. Ho\\ Employers lnflucni.:e Pohu

the appropriate pol ·r I the NFIB) won the~ ica T~rateg~es. the oppos1t1on (led by was persuaded to wi~~·d e b~siness community Writ large decision that d raw a support for the proposal downfall. 57 prove to be important to the leg1slat1on s

Fast forward 15 y h ears to t e next time Democrats found themselves with an opportunity for national reform This time. they would not risk the same outcome Their attention to the lesso_ns from the Clinton experience cannot be over ~tated: At times. their strategy appeared to be more or less do the opposite of what President Clinton did . from the

~arly days of the two Democratic presidential primary season in 2008. th~r~ were efforts to avoid another onslaught of bu ness oppos1t1on.

. In .the early months following President Obama s inaugura ~ion in 20.09, business groups quietly observed the proceed ings. stating clearly their opposition to particular ideas but remaining open to reform . 58 As in Massachusetts there was considerable momentum for reform and a sense that the new president and the large Democratic ma1onties in both hou e of Congress could actually succeed tins time Employer wanted a seat at the negotiating table.

The major business assoc1at1ons. including the US Cham ber of Commerce and the NFIB. made no secret of their line in the sand: They vehemently opposed an employer man date and the "public option." a government run health in surance plan that would compete with private plans m the marketplace. Not all business groups agreed Several smaller groups-the Main Street Business Alliance and the Small Business Majority in particular-came out in favor of em ployer mandates.59

To some degree. both sources or contention were based on ideological opposition to government control over any aspect of the health insurance marketplace. The NFIB posted on its Web site in summer 2009: "It's just too easy to imagine wed end up with a healthcare system run with the efhc1cncy of the Post Office and the compassion of the IRS. at Pentagon prices. And that's not the kind of health reform we need

But there were business·spee1fic fears as well For large employers. there was the worry that workers would flee their employer-provided health plans for a government run plan For small business. the employer mandate was the b1gge t practical concern. given the inability of small employer to provide benefits without substantial help They also won ed

about the slippery slope of opening the door to employer requirements. even if they were excluded from a mandate.

The Obama administration and Democratic congressional leaders famously spent months negotiating privately with many groups. including business associations. There were essentially two carrots thrown to the business community: The legislation would exempt small businesses (defined as those with fewer than 50 workers) from the requirement that they provide health insurance or pay fines. and the govern- ment would provide tax credits to those small businesses that wanted to provide health benefits. (The Clinton plan would have required all employers to provide coverage.) Notably, the final bills that cleared Congress had also dropped the dreaded public option.

In spite of these efforts to gain business support. it became clear that employers would not be appeased by merely ad- dressing their two main concerns. As the battle wore on , the NFIB and the Chamber of Commerce emerged as virtually the only interests that were consistently, vehemently opposed to the full legislation. 60

This time. however, business opposition was not enough to derail the legislation. Unified Democratic control; strong. pragmatic leadership in Congress; and the ability to co-opt most other major health care interests helped ensure the first successful passage of major health system reform since the I 960s.61

But the war over what is derisively called "Obamacare" con- tinued. The NFIB joined 26 states in the ultimately unsuccess- ful lawsuit arguing that the act. and particularly its individual mandate, was unconstitutional. The Chamber of Commerce. refusing to join the Republican effort to repeal the legislation. is instead "working to reduce the burden" of the new law by focusing on revision of the regulations and 1mplementat1on details as they trickle out of the agencies.62 As usual. employ- ers themselves were divided about the litigation; in a March

2012 survey, only 40% said they wanted the Supreme Court to strike down the law.63

Small battles have already been won. such as the repea of a little-noticed requirement that businesses submit tax forms (I 099s) for all contracted expenses above $600. somethmg that was deemed to place an unfair administrative burden 00 small employers. And individual employers have worked to relieve themselves of the requirement that acceptable health plans meet specified minimum standards. Arguing that the standards would prove too costly, many employers (including heavyweights like McDonald 's) received temporary waivers that exempted them from the regulation. 64

There are other troublesome signs. Employers themselves have indicated in surveys that they have substantial concerns about the lack of cost control, and a large maionty of small business owners do not think the reform will make health m- surance more affordable.65 A year after the law went into ef- fect. only 7% of small businesses reported taking advantage of the much-touted tax credits. 66

However. there is very little agreement on one of oppo- nents' key arguments: that employers will drop health cov- erage as a result of the legislation. Although one prominent study by McK1nsey and Company found that as many as 30% of companies would drop coverage. others predict little to no effect 67

What can we learn from this most recent example of busi- ness influence in health policy? Two conclusions stand out: First. major leg1slat1on can pass despite strong employer oir position. Business groups are uniquely powerful in the polib- cal system. but they are far from all powerful Second. just as we saw in the state experiences. the business communiry·s most important role may be in shaping policy design-not only during the act of creating the legislation but also in the long process of implementing reform.

-~

C HAPTER 17 • T he B · usiness of Health Ca re: How Employers lnflucnc.:c Poht

1

ION Employers are the I. epers of the institutions on wh ich most of us rely for health benefits. This means that any future po cy changes will have major ramifications for the business community

Given th r roe as health care stakeholders-as well as their gen ral import nee to the economy-it 1s somewhat surpr s ng that employers do not exert more influence than they do They t nd to g t involved on a narrow range of issues (e payer mandates first among them) and to avoid more comp p opos1tions such as Med1ca1d expansions But bu es g oups face a number of challenges when 1t

t ng poht1cally not least the vast differences

in opinion among business owners There 1s far from one uni fied business perspective on how the health car sy tern should be reform ed. and. too. business groups mu t compete with a range of other actors. many of whom can also cla im health ca re stakeholder status and come to the politica l arena armed with money, grassroots support and political savvy.

The relationship between employers and health pol cy is extraordinarily complicated and belies simple cone u sions. What we can be sure of 1s that m most hea th po battles. whether they occur on Capitol Hill or m the st t the business community 1s somewhere nearby

1. What ovemm nt dec1s1ons resulted in our current employer-based health insurance system7

2. How do mployers feel about nsmg health insurance costs?

3. Is t h n uranc offered by employers of all types?

4. wt at 1s crowd-out?

s. wtiat arc potential problems for employers of expanding Medicaid? 6 . How do employ rs g t involved in the politics of health policy?

1. Wha wa the mot1vat1on behind the "Wal-Mart bill" in Maryland?

8 . How d d employers influence " fair share" legislation in Massa~husetts?

9. How d d bu n groups involve themselves in Obama's plan.

1E son on Med1ca1d and the Uninsured. 20 1 1. P 3.

n Med1ca1d and the Uninsured , 2011. p. 6. 2 Ka Comm s on o . d h Uninsured 20 I I. p. 17. f

3. Ka Comm s1on on Med1ca1d an t e . h re not in health care industries. The issues o 4 Noe that this chapter is concerned with b~s;ne:~~:~~~ ;re oq~ite unique and would need to be considered

. pha m ceut cal companies. insurers. hosp• a s.

sepa

s. Bu nttul 2006 6. US Cha ber of Commerce. 20 I 0. p. 7.

7. See Hacker. 2002. for a far more in-depth discussion.

8 . Burton. Conti. Chen. Schultz. and Edington. 1999.

9. PwC Health Research Institute, 2013. p. 3.

IO. Hewitt Associates 20 I 0. p. I.

11. Kaiser Family Foundation and Health Research and Educational Trust. 20 I I. p. I.

12. O'Brien. 2003.

13. Pauly. 1997.

14. McArdle. 1994. p. 73.

IS. Blumberg. 2009; Feder and Whelan. 2008.

16. Agency for Healthcare Research and Quality. 2009. table II. A.2.

17. Eibner. 2008, p. xii.

18. Kaiser Commission on Medicaid and the Uninsured. 20 I I. p. 17.

19. Blumberg. 2009. p. 2.

20. Galvin, 2008. p. 1422.

21. NFIB, 2007. p. 4.

22. Gabel et al.. 2008. exhibit 3; Galvin. 2008. p. 1422; NFIB. 2007, p. 2; North Carolina Fair Share. 2011. p. S; Small Business Majority. 2009.

23. Robert Wood Johnson Foundation. 2008.

24. Mehren. 2006.

2S. Blumberg. Dubay, and Norton. 2000. p. 57; Cutler and Gruber. 1996.

26. Kazee. 2009.

27. Personal interviews with business group leaders in Maryland. South Carolina. California. and Washington . DC. m 2007 and 2008.

28. Gabel et al.. 2008. exhibit 3. Robert Wood Johnson Foundation. 2008; Stlow-Carroll. Kutyla . and Meyer. 2001, p. 59.

29. Green and Nitkin. 2005: Thomas. 2006.

30. National Association of Health Underwriters. 200 I. p 7 Silow-Carroll. Kutyla . and Meyer. 200 I. p. 56.

31. Khimm. 2011.

32. Portions of this section are drawn from Kazee. Lipsky. and Martin. 2008.

33 . Martin. 2000; Mintz. 1998. p. 222.

34. Jacobs. 1998. p. 69

JS . Gormley, 1986, p. 605: Winston. 2002. p. 8.

36. Kingdon. 1995. p. 49.

37. Arnold, 1990, p. 14; Bauer. de Sola Pool. and Dexter. 1963. p. 3 15.

CHAPTER 17 T • he Business of Health C· .

are. H ow Emplo)ers l nOucn~c l'ohu

38. Mintz and Palmer. 20oo. p. 353 .

39. Kazee 2009. p 77.

40. ·wal·Mart Tax Fizzle ... 2006.

41 . Much of this section comes f d rom personal inte · .

greater eta1I see Kazee. 2009, chapter 5. rv1ews with prominent political actors in Maryland in 2007 r 42. Hie s 2005 or

43 . Wagner 2005

44 . Derbyshire England. and Naylor. 2005: Struever and Harvey 2005 4S . Scher 2004 ·

46 . Green and N1tkm. 2005

47. HR Pol;cy Assoc1at1on. 2006. p. 3.

48. Wnght and Quach. 2008, pp. 7_8 49. leh1gh 2006

so. Dembn r 2007 SI. reudenhe1m 2007. Salganik, 2006.

S2 . D mbner 2007

S3 . In th late 1980s. universal coverage was enacted under Governor Michael Dukakis and was swiftly repealed n large part due to business oppos1t1on to its broad employer mandates (Gabel et al . 2008, p 567)

S4 . Zelman and Melamed. 2009. p. 11.

SS . Ibid

S6 . Gabel et al 2008. p 568.

57. Jacobs 1998 Quadagno. 2005: Wilson, 1980. pp . xiv-xv: Wilson. 1996. p. 122.

S8 . Dru er and Ackley. 2009.

S9 . Co don 2010. Va1da. 2009 60. Jacobs 2010 p 621 There was certainly ambivalence in other quarters, particularly among pharmaceutical corr

pan es and insurers In fact, insurers refrained from open warfare on th e leg1slat1on but funneled large cimount of

money to the Chamber of Commerce to support its opposition efforts (Stone. 20 I 0).

61 . Obe ander 2010 62 . Ad my 2010 Also see the US Chamber of Commerce Web site at www uschamber com/healthcare

63 . Gesel 2012

64. Armstrong 20 I I

6S . Oarl ng 2010

66 . Sma Business and Entrepreneurship Council. 20 I I.

67. Amb nder 2011

PART V • Stakeholders

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CHAPTER 17. The B · usiness of Health Ca re: How Employers Influence Poht

1

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K u~2009 Wal Marl Welfare. Business. Fiscal Regime and the Politics of Health Policy in the American State azee d h f lty at Yale University New Haven. CT.

D s crtat on pr nte tot e acu .. ·B. B . Who Speaks for Small Business?" The Boston Kazee N M Lip -:Y and C J Martin. 2008 Outside the ig ox.

Re ew July I . Health Reform Heretics." Mother Jones. January 25 Kh1mm S 2011 The Chamber of Commerces . p, /' . (2 d Ed) New York: Longman Press.

lln d Alternat1ues and Public o 1c1es n .. Kingdon J W 1995 ''6 n as ·

1 h .. The Boston Globe. March 10. p. A21

P t I D1rect1on on Hea t care. NJ Leh gh S 2006 A Step in a rac ica - . C 'tat Investment Policy Princeton.

nd the Politics of Human apt Martin C J 2000 Stuck m Neutral Business a Princeton Umvcrs1ty Press I r Mandate?" Health Affairs 13(2): 69-83

Id B . ess React to an Emp oye McArd e F B 1994 How Wou usm .. The Los Angeles Times. June 25.

Pl for Health Insurance. .. I C Y H Lo and Mehren E. 2006 States Make Own ans . Th Role of Big Business in Policy Formation n

of Health-Care Reform. e ford UK: Wiley-Blackwell Mintz B 1998 T~ fa~~~~af Policy and the Conseruatwe Agenda. Ox - . the 1980s: The SO States." Social

M Schmrtz s d H Ith Care Policy Reform in Mintz B and 0 Palmer 2000 "Business an ea

Prob ems 47(3) 327-59

PART V • Stakeholders

National Association of Health Underwriters. 2001. .. Employers Study." Prepared by WB&A Market Research.

National Federation of Independent Business (NFIB). 2007 ... Small-Business Owners and Health Care Policy: NFIB Health-Care Survey-Summary of Results." Retrieved from http://www.nfib com/Portals/O/PDF/AllUsers/ 5.2 I .2007ExecSumNFIBHealthCare.pdf on December 2007

North Carolina Fair Share and the Main Street Alliance. 20 I I ... Making Health Care Work for Small Businesses in North Carolina: Findings from a Fall 20 IO Small Business Health Insurance Survey." Retrieved from http:// mainstreetalliance.org/wordpress/wp-content/uploads/20 I I /02/Makmg-Hea Ith Care· Work-for· Small-Busmesses- i n-North-Carolina .pdf on June 14. 2011.

Oberlander. J. 2010. "Long Time Coming: Why Health Reform Finally Passed." Health Affairs 29(6): 1112-16.

O'Brien. E. 2003. "Employers' Benefits from Workers' Health Insurance." Mt/bank Quarterly 81 (I): 5-43.

Pauly, M. V. 1997. Health Benefits at Work: An Economic and Political Analysis of Employment-Based Health Insurance. Ann Arbor: The University of M1ch1gan Press.

PwC Health Research Institute. 2011. "Behind the Numbers: Medical Cost Trends for 2012." Retrieved from http://pwchealth.com/cgi-local/hregister.cgi?link=reg/beh1nd-the-numbers-medical·cost·trends-2012.pdf on June 14. 2011.

Quadagno, J. 2005. One Nation Uninsured. Why the U.S. Has No National Health Insurance. New York: Oxford University Press.

Robert Wood Johnson Foundation. 2008. "Study Shows Small Business Owners Support Health Reform." Retrieved from https://folio.iupui.edu/bitstream/handle/ I 0244/693/coveragesmallbizsummary2008 pdf?sequence= I on May 29. 2011.

Salganik, M. W. 2006. "Universal Health Care: Can It Work Here?" The Baltimore Sun. April 20. p. ID

Scher. B. F. 2004. " Letter to Senator Thomas Middleton." Annapolis. MD Department of Legislative Services. Bill File for HBl284.

Silow-Carroll. S .. T. Kutyla. and J. A. Meyer 200 I .. The State of Employer-Based Health Coverage and Business Attitudes about Its Future." Washington. DC: Economic and Social Research Institute.

Small Business and Entrepreneurship Council 2011. "Entrepreneur Survey Finds Subdued Outlook. Displeasure with Federal Policies." Press Release. May 3 I. Retrieved from http://www.sbecounc11.org/20 I I /05/3 I /entrepreneur- survey-finds-subdued-outlook-d1spleasure-with-federal-policiesl on June 19. 2011.

Small Business Majority. 2009. "State Surveys Highlight Small Business Support for Healthcare Reform." Retrieved from http://www.smallbusinessmajority.org/ _pdf/state_research_averages_9 I 709.pdf on June 14. 2011.

Stone. P. H. 20 I 0. "Health Insurers Funded Chamber Attack Ads." The National journal. Under the lnOuence blog. January 13.

Struever. B .. and B. Harvey. 2005 ...... But Big Companies Now Must Pay Their Share of Health Care." The Washington Post. May 8. p. B8.

Thomas. R. 2006. "Safeway Urges Quick Action on Employee Health Benefits." The Seattle Times. Feburary 14.

US Chamber of Commerce. 20 I 0. "Critical Employer Issues in the Patient Protection and Affordable Care Act .. Retrieved from http://www.uschamber.com/sites/default/files/ I 00426_cnt1cal_employer_issues_ppaca.pdf on May 23, 2011.

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CHAPTER 17 • The Business of ll ea lth Care: How Employers lntlucncc Pol111

Vaida, B 2009 "Health Care Reform Faces its 'Super Bowl Moment· .. Th N r /j I f htt II 1. · e a iona ourna. June 13 Retrieved rom P www.nationaiournal.com/magazine/health-care-reform-faces-its-super-bowl-moment 20090613 n

June 19 2011. o

Wagner J 2005 "Wal-Mart Girds for Battle on MD Bill" The Washington Post, November 17 "Wal-Mart Tax fizzle." 2006. The Wall Street journal. July 6.

Wilson G K 1996. "Interest Groups m the Health Care Debate." In H.J. Aaron . ed . The Problem that Won 1 Go Away Washington. DC: The Brookings In stitution.

Wilson J Q 1980 "The Politics of Regulation." In J. Q Wilson. ed .. The Politics of Regulation New York Basic Boos

Winston P 2002 Welfare Policymaking in the Stales. The Devil in Devolution. Washington. DC Georgetown University Pr ss

Wright A and H K Quach. 2008. "Health Reform in California and Massachusetts: Different from Start to Finish Sacram nto CA Health Access. Retrieved from http://www.health-access.org/files/advocatmg/2008CA MARdormCompanson%200I%2014%2008.pdf on June 14. 20 I I.

Zelman W and A Melamed 2009. "Politics and Policy in State Health Reform." Academy Health and the Robert Wood Johnson foundation. Retrieved from http://www.statecoverage.org/files/zleman-5%20state%20study pdf on June 14. 2011

Few groups are more important to health policy than seniors-they consume the most health care and pay the most attention to health policy. With the graying of the baby boom generation, policies catering to seniors are taking on even greater significance. As in all areas of health policy, change and fragmentation are the major constants.

Health care for the elderly resists narrow definition and differs from other areas of American health politics, which generally focus on the provision of acute medical services What we call the "aging-support" system incorporates both health care and social welfare systems and focuses on issues such as the turmoil in Medicare and Social Security. The aging-support system includes many social services that are not usually regarded as health related. The graying of the ··baby boom" generation (born from 1946 to 1964) has fueled concern not only about its implications for health policy but also more widely for its impact on income maintenance programs such as Social Security and social services programs.

The principal legislation in the field . the Older Americans Act (OAA) of 1965 , makes coordination of services a pri- mary goal. Despite many political changes in recent years. the aging-support system's emphasis on integration and co- ordination in all sectors of care. particularly at the local level.

is unlikely to change. However. it 1s a mistake to conceive of the aging-support system chiefly as a set of formal programs established by government-particularly given the increasing pressure to use nongovernmental care resources. The elderly rely on family and on the institutions with which they inter- act. Over the past decades. families have become caregivers for an ever more dependent group of older Amencans Increas- ing numbers in need are faced with more care options man aging-support system of expanding complexity.

The scope of services and other support for the elderly has evolved to reflect the heterogeneity of those who are 65 and older. Simple stereotypes regarding all of the elderly as poor or near-poor. frail. and bordering on mental incompetence are increasingly inappropriate. A growing percentage in this age group still work. full· or part-time. for wages or as volunteers Life expectancy continues to rise. 1 which increases the num· ber of frail elderly, but the average health status of every age

group 1s also improving Gerontologists ge 11 d . d nera Y eal with this new 1vers1ty by d1v1ding the elderly into th

( 5 7 ) h Id e young-old 6 - 4 . t o (75-84) . and the old-old (85 and older). and emphasize the ne d for services that recognize the d1vers1ty of the target population z The picture of elders as frail and poor may have been relatively accurate in 1935 when Social Secu- rity was enacted or in 1965 when Medicare and the OAA were passed (and th average life expectancy at birth was only 66.8 for males and 73 8 for females) .l However. today it is not accurate ov rail . although many poor. minority. and fe- male elders still face disadvantages when dealing with their health and social s rv1cc needs In the debate over increas· mg reliance on pnvat funding and prov1s1on of services. it 1s important to ma e sur that c1t1zens lacking private funds have adequate access to the publicly provided or subs1d1zed services that they need

For some 40 years. consensus on the fundamentals of pub- lic programs for older Americans-Social Security. Medicare. aspects of Medicaid. and the CAA-fostered widespread be- lief that no poht1c1an could do more than tinker at the mar gins of core pro rams for elders .. But this reluctance began to give way. first with the Balanced Budget Act of 1997. which was negouatcd bctw en President Clinton and the Republican Congress. and th n more dramatically with enactment of the Prescription Drug and Medicare Modernization Act of 2003 under President Bush Yet President Bush failed when he tried to insert p rsonal accounts into Social Security. which has always been social insurance program that did not require md1v1duals to ma e inv stment decisions. A common theme in these recent approaches is a model of government that hm1ts · its roe to something like paying a voucher on behalf of beneficaancs I umg each monitor his or her own benefits as an informed consumer an the managed care market ... The Obama adm n str t1on s health reform leg1slat1on (the Afford- able Care Act) adopted this model for its 111-fated long-term care benef1t- whach nev r made 1t through Congress.

6

Part of the planat1on for the recent willingness to re· consider est bhshed arrangements is the realization of the magnitude of t~ coming population shift. The 20 Io census shows how fast the numbers m older cohorts have risen as baby boomers replace the much smaller cohorts bornd d~~11~g the Great Depression ( 1930-1940). Between 2000 ;~5 to 64 the total popu at1on grew by 9 7%. butbth~;el ~g\he largest grew by 31 5 and those 65 and older Y · · .... ) s in the 60 to 64 range. five-year cohort increase (55 67U wa 7 followed by those 55 to 59 years old (46%).

CHAPTER 18. Aging Policy tn the 21st

d The goal of this chapter is to provide a framework ror un elrstand1ng these developments. The politics or aging in

vo ves three dim · . ens1ons. societal understanding, mst1tullona/

structu:es. and policy issues. After explarnmg what we mean by societal understanding, we outline the ch1er lns111u11ona/ structures that determine public policy related to the elderly We conclude with an overview of several key policy issues

SOCIETAL UNDERSTAND! 1G Social Security. private pensions. Medicare, nursing homes and retirement communities all emerged from our society s ways of thinking about aging; each reflects our conv1ct1on regarding appropriate activities and environments for the el derly. Over time. these structures have become givens that guide the next steps in the evolution of our societal under standings. Our emptncal arrangements. and the values em bedded in them. develop a sense of inev1tab1hty-1t becomes difficult to imagine our society without (for instance) Socia Security or nursing homes. This way of thinking about the evolution of societies over lime has recently gained in prom1 nence under the name "path dependence.''8

Several examples will help clarify the thesis that how we think of aging-and. therefore. the empirical reality that we also "objectively" experience-is a social creation 9 Perhaps the clearest example is the understanding or retirement a~ a natural life phase. The idea of reaching an age at which one stopped productive work was largely unknown in North America and England during much of the 19th century although elderly people might change what they did as their physical powers waned. ° Formal retirement depended on the availability of private pension schemes lndustrial1zat1on reduced the heterogeneity of work that had allowed respons1 bilities in agriculture or traditional hand manufacturing to be altered to accommodate failing physical strength . eyesight. or mental ability." As late as 1940. when Social Security began paying benefits. only about 40% of those 65 and older were "retired." By 1984. about 90% of the same group was retired

b the mrd· I 990s the trend toward ever earlier However. Y · r • . t 'or men had slowed and the average age o 1et11c retiremen ,, · A

f n had b egun to nse.'1 By 2008. the mcr1can

ment or wome 6S Community Survey estimated that 15.5% of those over

still in the labor force. including 23.7% of thos 65 t~ were of those 75 and older.'4 The cornbmat1011 o ;:e a;~d~·:i~ increasing age of ehg1b11ity for Soetal Security

PART V • Stakeholders

economic insecurity due to losses in stock portfolios and changes in the pension plans of many baby boomers. and the rising rate of unemployment among younger workers has created a confusing situation as far as the appropriate time to retire.

Another example of the relation between social meanings and institutional structures is the nursing home. a dwelling associated with a way of life. It is easy to forget that the Kerr- M ills Act of 1960 and Medicaid ( 1965) virtually created the nursing home industry in the United States. 15 In contrast. many European nations have long sought to keep elderly per- sons living in their own homes by providing home care and other services and by deemphasizing skilled nursing facili- ties. 16 The recent emphasis on community-based care in the United States follows a similar pattern.

In recent yea rs. advocates for the elderly and policymakers in the Un ited States have increased the scope. quality. and ac- cessibility of community-based long-term ca re services to en- hance the quality of life of the noninstitutionalized elderly and to help them continue living in the community. For example. funds were added to the OAA specifically for community- based care. including the National Family Caregiver Support Program. Medicaid waivers have also allowed states to estab- lish an array of community programs . After 25 years of suc- cessful operation. however. it was clear that those programs could not solve all the problems that families faced in dealing with caregiving. The 2010 health reform law included the first long-term insurance care program for the general public: it was designed to maintain the elderly and disabled in their homes and communities rather than to support them in nursing homes. The fact that these long-term care provisions were the first measures in the legislation to be abandoned suggests the priority on the nation's policy agenda that long-term care has

The United States began its universal social health insur- ance program. Medicare. by covering the elderly who receive Social Security. In contrast. other industrial nations began government health coverage for workers and expanded it to the rest of society. During the 15 years that it took to enact Medicare. proponents had to conceptualize retirees as a group who were uniquely needy. 17 As that image of older adults wanes. the likelihood of their being seen as "greedy geezers " benefiting from disproportionate public funding has grown . Other nations have undergone quite different evolutionary paths. For example. the Netherlands focused its public spend- ing on universal programs for adult workers and their children:

Italy has fragmented programs helping specific groups of the elderly based on their work history.18

This social plast1c1ty makes us collectively responsible for the condition of the elderly 1n our society. This considei- ation is especially important in regard to the future of aging in America. The baby boomers focused attention on. and of- ten changed. social values when they were young. Many also have a history of resisting the notion of their own aging. We should not expect them to fall passively into accepted pat- terns when they become older. There will be more elderly af- ter 2015 than at any other time in American history, and the boomers may be history's health1est 19 and wealth1estelderfy cohort. On the other hand. many lack sufficient savings for retirements that will last longer and involve more expensl\f health care than those of their parents.

INSTITUTIONAL STRUCTURES Many of the federal pol1c1es that affect the elderly ongmate in institutions that are not organized specifically to deal with aging. In these arenas . advocates of the aging clash. bargain. or cooperate with groups representing other interests. Here. for example. aging interest groups encounter the lobbying ef- forts of the American Medical Association. hospital interests. employers concerned about the cost of retirement benefits. and labor unions Over the long term. the relative power of the elderly and their advocates will depend on their ability ro mobilize. work together, and frame debates in positive (meet- ing needs) rather than negative (greedy geezers) ways.

Yet a significant policy system focuses on the elderly. The government structures established by Congress to respond to the needs of the elderly are a creation of the 1960s <'d early 1970s. The first White House Conference on Agng (WHCOA) was convened by the Kennedy adm1mstra!Jonin 1961. White House Conferences put issues relating to rhe elderly and aging in the media limelight and advance tne political agenda of the elderly. although they are held infre- quently. The first comm1ss1oner of aging was appointed n 1965. the year that both the OAA and Medicare were enactec

Interest groups representing the elderly were relatvefy weak until the late 1970s. Established interests favoring or opposing government programs for the elderly-interest group politics-could only develop fully after the pol c es had created the organizational environment for the po uca

interests By 1980. however. critics be an . that the elderly might become an g . expressing concern staggering proportions 20 Th organized political force of

e1r power was dem by the passage and then by the repeal of th onstra ted first strophic CO\ rag Act of 1988 Th e Medicare Cata-

ma1or social welfare program in A~::::~ t~~:~rrst rollback of a the startling image of angry elders attackin y and featured sentatrve Dan Rostenkowsk1 's (0-IL) I g powerful repre-

h h h imousine-protesting

t e ig premiums of the new benefit Som . ' ht e critics 1eel that

age m1g grow into a maJor d1v1s1on in US politics. and that fear continues to emerge in more recent debates Althou h the 1mt1al pressure for Medicare drug coverage g was an exam- ple of an a cent red cohort , age was not the principal factor determmm the int rest group alignment around the Medicare Prescription Drug Improvement. and Modernization Act of 2003 , and aging focused interest groups have become even less dominant in policy discussions since 2003.

Three broad categories-government. organizations fo-

cused on aging and the media-form the chief institutional structures or ging r lated policy

Go,·ernmcnt In the ex cull branch. respons1bil1ty for government pro- grams to aid the elderly 1s diffuse Using 1978 data. Carroll Estes counted at least 80 different federal programs benefiting the elderly directly through cash assistance. in kind transfers. and direct provts1on of goods and serv1ces.12 Those programs were scattered among six cabinet departments and seven in- dependent a nc1es Tax regulatory, or employment policies would add to the number of programs benefiting the elderly. These programs affect caregivers as well as beneficiaries In the past thr e decades. many governmental supports for ag- ing pohcy have been weakened. with the House Select Com- mittee on Agin gon (tt lasted from 1974 to 1993) and the assistant secretary for aging in the Department of Health and Human S MceS (OHHS) httle more than a figurehead."

23

Federal ad to the elderly 1s largely administered through agencies that serve a wide range of beneficiaries rather

than by bur aucrac1es dedicated to a single benef1c1ar~ or "clientele group Thus. the Social Security Adm1n1strat1on handles old age survivor. and d1sab1lity insurance (OASDI) and the Supp emental Security Income (SSI) program. which 1s a national means tested income-support program for low- mcome elderly bhnd. and the totally disabled . The Centers

for Medicare and Med1ca1d Serv1Ces (CMS) is responsible for

C l I AP TER 18 • A · gmg Policy in the 21st Century

Medicare and for Medica id 24 Th primarily as a program for low-in ough Med1ca1d was passed particularly important i come groups, it has become advocates because it r°r the elderly, their families. and the r i · unctions as the nation's la t or nursing home care (see Chapter 9 for details) rges payer

The Administration on A · (A the OAA or 1965 (PL gmg oA) , established under of f I 89-73). is more important as a symbol

na iona commitment than for its power as measured m mone~ or staff. It is the apex of a decentralized network of agencies. Amendments. to the OAA '° 1973 helped codify an existing informal ag1~g services delivery networ by re qumng states to establish planning and services areas to ensure that OAA funding would be funneled to strengthen local providers. 2s

. In short. a fragmented set of government mst1tut1ons pro vide symbolic benefits. programs targeted for elders broad ~rograms that include elders among other groups. and admm 1strative routines capable of reaching the elderly

Organizations Fo used on Aging The existence of a large array of groups orga111zed around some issue does not mean that they control policy relevant to the issue. Many interest groups may cancel each other out thereby leaving space for the legislator or executive policy maker to exercise some autonomy 16 There 1s also the pos sibility of a political backlash against the perceived success or interest groups in frustrating legislative reform lven AARP. the largest and most visible group during the fight over Medicare prescription drug legislation in 2003. suffered a backlash prt marily from its own members rather than from poht1c1ans or opponents. Critics attacked the AARP. which threw its sup port behind controversial leg1slat1on sponsored by the Bush administration. Critics charged AARP with putting its own business interests ahead of the needs of the elderly.

27

Today. relatively even partisan strength at the national level combined with fiscal volatility has led to serious recons1dera tion of all of the major programs for the elderly Republicans in Congress have sought. with some success. to reform na tional policy on aging to make 1t conform more closely to the budgetary and ideological priorities of the dominant con servative wing of their party. Policymakers no longer ce the problems of funding entitlement programs for the elderly as separate from such national economic issues as balancm the budget and reducing the federal def1c1t or cuttrn taxes and encouraging capital investment Traditional ag111g rclat d

PART V • Stakeholders

interest groups have played a less decisive role in policymak- ing during this time. with the striking exception of the AARP's involvement in the 2003 Medicare Modernization Act. its op- position to President Bush's effort to introduce private accounts into Social Security, and its endorsement of health reform during 2009-20 I 0.28 Thumbnail sketches of several of the lead- ing mass membership organizations, ideological groups. profes- sional societies. and a trade association will provide concrete examples of the range of organizations focused on aging.

Old-age advocacy groups have grown in number since the 1960s. The Leadership Cou ncil of Aging Organizations (LCAO). with 64 member groups, defines itself as a "coalition of national non-profit organizations concerned with the well- being or America's older population and committed to repre- senting their interests in the policy-making arena."29 However, the member groups disagree on many issues and vary widely in size and power. The largest and most powerful of these or- ganizations continues to be the AARP (formerly known as the American Association of Retired Persons) . Its over 37 million members far outnumber those of any of the other membership organizations focusing on advancing the interests of the elderly.

The AARP was founded as a retired teachers' association in 1947 and prospered from the sale of life and health insur- ance to the elderly. It only began vigorously to try to exert political influence in 1970 over the issue of control of the 1971 W HCOA.30 Because it is the largest organization and is well funded from the sale of insurance and other services and government grants, it now sponsors a great deal of policy research and employs many lobbyists and policy analysts. It tends to work with Washington insiders m support of pro- grams for the elderly. Although the membership is still slanted toward the middle and upper-middle classes, many of its pol- icy positions would benefit low-income elderly if enacted. 3

Unlike the other organizations described later, AARP 1s offi- cially nonpartisan and cannot make political contributions

Between 1994 and 2003. the AARPwas noticeably restrained in its positions. However. with the Medicare Modernization Act of 2003, it found itself in the midst of controversy. The Bush admin istra tion proposed adding a prescription-drug plan to Medicare that injected market competition into Medicare for the first time-se nio rs would shop for prescription- drug plans ra t her t han simp ly have their services paid for by Medicare (see Chapter 8 for details). The AARP aligned itself with Presiden t Bush's position and a $7 million dollars advertising bl itz to support the bill. 32 Many observers

concluded that without AARP's endorsement. the bill WOuld not have passed the Senate Smee enactment. the AARP has worked to improve the Medicare drug plan.

The AARP has staunchly opposed to the privatization of Social Security. 1~ Interestingly, while there was a strong backlash among liberals and Democrats against the AARP"s support for the Bush adm1nistrat1on Medicare drug plan n· eluding many membership cancellations. its strong oppos1· tion to the personal retirement accounts approach to Social Security has also earned 1t deep hostility from conservative groups such as USA Next.3s

The National Committee to Preserve Social Security and Medicare (NCPSSM) was founded m 1982 by James Roosevelt ( 1907-1991 ). former congressman (D-CA) and son of President Franklin Delano Roosevelt. The organization became a major irritant to AARP and the congressional elites respon- sible for passing the Medicare catastrophic leg1slat1on m 1988. when NCPSSM became the principal vehicle for mobilizing well-off seniors' discontent against the act 16 Its professional staff has become part of the issues network that determines aging policy in Washington. as shown by its adm1ss1on m 1995 to membership m the LCAO 37 The NCPSSM opposed the Medicare Modern1zat1on Act of 2003 and Republican ef- forts to reform Social Security m 2005 by providing arenas for experts to discuss the "pitfalls of privatization." an effort that has continued to be a central focus of NCPSSM.38

The Alliance of Rettred Amertcans (ARA) began as Senior Citizens for Kennedy m 1960 under union aegis With aid from the Democratic National Committee, the organization grew by developing local senior citizens clubs across the country Renamed the National Council of Senior C1t1zens m 1961. 1t focused almost entirely on Medicare unt: that leg1slat1on was enacted Subsequently. 1t concentrated on income security and health issues. In 2001. the organization's members were absorbed mto a new organization the ARA ARA proclaims its m1ss1on is to "ensure social and economic Justice and full civil rights for all citizens so that they may enjoy lives of dignity. personal and family fulfillment and security ... [aiming] to influence government through actJonon retiree legislative and political issues at the federal. state. and local levels."39 It is allied with a number of unions. including the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO}. and openly supports the Demo- cratic Party. However. it has not been very visible m recent debates over agmg policy.

United Seniors Assoc1at1on (USAIUSANext) was founded by the late Hollywood actor and former conservative senator George Murphy ( 1902-1992, R·CA) and conservati ve direct- ma1I guru Richard Viguerie Under the leadershi p of former Reagan admm1strat1on official Charles Jarvis. who took over in 2001. 1t chang d its name to USA/Next and deemphasized 1ts focus on s mors USA/ Next began operating an impressive Web site. mcludmg links to numerous conservati ve groups.4° Jarvis stat d that USA/Next had S28 million in annual rev- enues and explain d that he had dropped ind1v1dual mem - bership subscnpt1ons and aggressively sought contribution s from industry- health care companies . energy companies. the food industry. JUSt about everybody except for financial investment comp m s "41 In 2005 USA/Next ferociously at- tacked the AARP s stand against Bush's proposed personal retirement accounts Calling AARP "the boulder in the middle of the hrnhway to personal savings accounts," Jarvis promised

" h "42 H that ·we will be the dynamite that removes t em ow- ever, by 2012 USAJN ts v1s1b1hty had waned. while AARP continued to be the dominant interest group .

Communications Media and the Internet Anothc mcreasmgly mflucnt1al source of information is the Internet and the biogs and social media that it has gener- ated Each of the maior advocacy organ1zat1ons and the key overnm nt a nc1es that deal with issues of interest to .the

gld ly now has its own Web site. Facebook page. and Twitter :cc~unt Many Web sit s provide hstingseo~r~~e;h':"'~~~t;~ of interest to seniors . the sub1ects rang rn ed about

M advocates are conce senior daun s Mees any seniors especia lly Iow- a growing d g1tal d1v1de" bet~ee:unger ad.ults in the ability income and minonty seniors . a~ ~nformation on the Web.43 to access health and health ~nc\owever. have difficulty in Computer users of any age c . oht1cal biases. and nuanced recognrzmg o ni.zattonal ~ocusb~tween opinion and fact marketing and m d1st1ngurs mg

POLI I UES _ nd health policy is

Our d.~ uss1on of issues m agmgd1~gs and insti tutional grounded in the societal under~tan hapter The George W. structures d scribed earlier m the c e gen~rally regarded-

h ved w at ar . -Bush admm strat1on ac ie h most sign1f1cant struc but not universally hailed-as ~ e as enacted in 1965 . This tural chang m Med care since i w

CH A PTER 18 • Aging Policy in the 21st Century

legislation. the Medica re Prescription Drug, Improvement and Modernization Act of 2003 (PL 108 173). built on important changes in Medicare and federal program s for low-income persons in the Balanced Budget Act of 1997 (PL 105·33) These two acts of Congress are important for understanding federal health policy both in the details of how they affect the elderly and in their stakes for the underlying d1rect1on of health and aging policymaking. More recently, the pol1t1cs of the Obama administration 's ACA ha ve critical implications for the elderly.

Some key issues that this part of the chapter discusses include predicting and meeting older adults' service needs growing emphasis in the ACA and elsewhere on the prOV1s1on of long-term services and supports tn community settings rather than in nursing homes. consumer control of funds where possible. and the future of Medicare.

One broad theme is the nsmg belief. especially among con servatives. that consumer choice (especially of home and community-based supports and services) is best attained by permitting beneficiaries to use government funds to pur chase services in competitive markets. These programs appeal to conservatives for two reasons: They max1m1ze. individual choice and they permit governments to hm1t. their financial contributions by giving beneficiaries capped fina_nc1al contri butions or vouchers with which to enter the private market for services.

The fact that most older Americans clearly wish to re . . the '1 r homes and avoid skilled nursing homes fosters

main in · t. al commu f the growth of noninst1tu ion . agtyre-~::e~ !~rv~~~; across the political spectrum . Some poll rn . the quality of long term care. cymakers focus on_ increa~·~;ment budgets. Consequently. others on controlling go el vergence in regard to some

h b en an unusua con there as e . . . . while the underl ying mot1vat1ons aspects of spec1f1c policies. f I cymakers remain at logger or ends of the two groups o pho I of 20 I 0 health reform

shall see in t e case di heads. Yet. as we . t ddle - and lower-mid e legislation . the desire to protec m~f long-term care was sub class individuals from the expens~t exceed revenues raised by verted by fears that the costs m1g

vernment program. a voluntary go . h ase in long-term care

t to restrain t e mere h Everyone wan s ·ty-based services. wh1c are

h me- and communi care costs. Thus . o . d'v dual's nursing home typically less costly than an in ln~I care is unpaid. seem to especially if m~ch of the ~~r~~duce cost growth . However. provide a plausible means

PART V • Stakeholders

repeated studies have shown at best mixed results regarding the overall savings produced by an emphasis on home- and community-based services and supports. 44 Although the cost of treating a given individual may be less if that person receives care in the community that allows her to avoid the nursing home . the volume of beneficiaries who qualify for benefits and are outside of nursing homes and wish to remain there wi ll drive up total costs.

Predicting and Meeting the Service Needs of Older Adults As the census data cited earlier indicates. on average Ameri- cans are living longer. with the proportion of the population aged 65 and older projected to be about 20% by 2030.45 In 20 Io. the National Association of Area Agencies on Aging conducted a survey of local governments about the "Maturing of America " to assess communities' progress since 2005 in developing programs. policies. and services that address the needs of older adults and their caregivers. the development of "livable " communities for all ages. and the ability to use older adults' experience, talent, and wisdom to serve the com- munity at large. The survey found that due to funding short- ages. only limited progress had been made on accomplishing these goals. Most communities were on ly able to maintain services and programs that existed before 2005. a prosper- ous time. However. communities did report the availability of health care services meeting a range of needs (69%). well- ness programs for older adults (64%). preventive screenings (74%). and immunizations/flu shots (79%).46 The survey also reported the wide availability of various nutrition programs: larger communities were most likely to have both congregate meals and home-delivered meals. nutrition education. and ex- ercise possibilities for older residents.

There is also increasing recognition of the costs and contributions of family caregiving , which 1s still generally unpaid. According to the AARP Public Policy Institute . " In 2009, about 42.1 mil lion family caregivers 1n the United States provided care to an adult with limitations in daily activities at any one time. and about 61 .6 million provided care at some time during the year. The estimated economic value of their unpaid contributions was approx imately $450 bill ion in 2009. up from an estimated $3 75 bi llion in 2007. Almost two-thi rd s of family caregivers are female (65%). and more than 80% are ca ring for a relative or friend age 50 or older. "47

Consumer-Driven and Community. Based Programs By the end of the 1990s. some health-pohcy analysts and many scholarly conference panels called for "consumer-driven health care" as an alternative cost-containment strategy to managed care. This strategy for cost containment involved replacing managed care by a consumer or patient who would have incen· tives to make cost-conscious spending decisions m purchasing health care for his or her family Individuals faced with a choice of spending money for health care or keeping it for future health care consumption and short-term investment would make their own dec1s1ons about health care instead of surrendenng decision-making power to distant insurance companies.

The new solution for rising health care costs was based on the assumption that 1f individuals paid for health care with their own money. optimum levels of consumer satisfaction would be achieved and (probably) rising health care costs would be constrained. It reflects the views of economists and policy analysts who want to see health care conform as closely as possible to the economist's model of the competi· tive market. According to this model of consumer sovereignty. consumers with adequate incomes will purchase the amount of health care that yields them the optimum satisfaction rela· tive to the entire mix of goods that they wish to consume.~ This view contrasts with the more traditional view that health care should be provided to ind1v1duals on the basis of their objective need for 1t. 49 Advocates of preventive health care are usually no more effective in persuading newly empowered health care consumers to invest more heavily in preventive care than were the insurance companies and health mainte· nance organizations in covering preventive health sel'Vlces when those interests were the acknowledged decision-makers.

Meanwhile. there has been a growing emphasis on community-based care. particularly long-term care. In Olmstead u. LC (521 U.S. 581 [ 1999)) the court required that care be pro- vided to disabled individuals in the community where poSSible and that led to various waiver programs based on either disabil- ity or age. Community-based care can include a wide range of services and sites from family caregiving to paid support in the home. to community-based adult day care centers. to assisted living facilities (the last step before a medical facility).

Long-term supports and services programs that facilita_te ca re outside the nursing home may not be equally avail· able across racial and class divides While the nat1on·s tota ............ ________________________ ~~------

- '!_=

nursing home population was decreasing from 1999 through 2008. the proportion of nursing home residents wh .

o were m1- nont1es grew sharply The number of elderly wh t ·d

1 e res1 ents declined by 10 2%. while the number of elderly Hispanics and Asians went up by 54 9 and 54. I%. respectively and the number of elderly black residents increased by 1 O.S%. ~o These data might indicate a lack or minority access to the increasingly valued home- and community-based care. es- pecially when consider d in light or the conventional wis· dom that whit wcr much more likely to put elderly family members into nursm homes than were minorities.

Medicare and ... ocial Security into the l•uturc The Social Security nd D1sab11ity programs are the income streams on which almost all older and disabled Americans build their ndMdual financial plans Social Security is indexed to protect a inst inflation-making 1t almost unique among income sources S1m1larly. Medicare 1s the one universal health insurance pro ram for Americans Benef1c1aries become eligi- ble at 6S contributors who become disabled at younger ages can qualify for ~ed1car after a waiting period Financial plan- ners agree about the necessity of having add1t1onal insurance coveraEe to ma e up for the many gaps in Medicare coverage.

So 1, I Security nd Medicare. the primary foci of the at- tempt to curb spending on entitlements, are both social insur- ance programs that guarantee a benefit that 1s understood as merited beaus futur b nehc1a11es pay into trust funds dur- ing their wo in lives The 2003 Med1car~ prescri~t1on-drug benefit bro cc with the principle of solidarity in which every- one is treat d th same within the program-long consider~d a bulwa of the program s leg1t1macy We discuss the details

later m th s chap er

As they currently exist both Social Security and Medicare provide a benefit that is clearly defined by regulations estab- lished under the law for everyone who is covered . Because

Soc I c-. ty provides a cash benefit. the future costs are quite 1a .;io.u • service predictable However because Medicare promises a benefit its costs are held hostage to rising health cafre costs.

. h f t re unless o course. Both programs show deficits '" t e u u · . · ff nt

h Social Security has su ic1e taxes are ra sed to cover t em t

1 2036 . Medicare is

. d y full benef ts Un I · income an assets to pa enditure exceeds current proiected to reach th point ~he~ ~~c1al Security deficit can income and assets in 2024 T e d' trnent but the future be corrected th some reasonable a ius .

CHAPTER l8. Aging Policy in the 2bt Ccntul)

~edicare cost problem appears intractable, because for the last years health care costs have been rising faster than gross do

mestic product (the usual measure of national income)

In the face of increasing total program costs of both Socia l Security and _Medicare. Republicans have been eager to transform the defined benefit into a defined contribution In the case of Social Security. after his reelection in 2004 President Bush proposed creating personal accounts in So cial Security that would require future benef1c1anes to invest Social Security payments during their working hfe The earn mgs on that investment would determine the magnitude of the benefit when the worker retired What received almost no attention during the debate was that workers· sagacity m investing was supposed to protect them against rnflauon the federal government and its trust fund would be off the hook for the cost-of-living adjustment. which over the years adds significantly to the value of benefits as the average American lives longer than did previous generations This effort which was never popular with the general public-was beaten back by Democrats in Congress with the help of many of the advocacy groups for older Americans.

The same impulse that makes fiscally conservative poht1 c1ans attempt to insulate the federal government (and t~xpay ers) from Social Security has led them to attempt to rem rn the government's liability under Medicare. In 2011 and 2012 with great fanfare Congressman Paul D. Ryan (R WI). chair of the House Budget Committee and future vice pres1dent1al c,ind1 date, proposed .. Republican budgets .. that would have turned the Medicare current benefit guaranteeing a wide range of services into a financial subsidy to beneficiaries to help them purchase private health insurance The dollar amount of the subsidies (or vouchers) would vary according to income levels of the beneficiary. Congressman Ryan called for the reconfig ured benefit to apply only to those at least I 0 years away from Medicare eligibility.52 His proposals never had any chance of adoption tn a government sharply divided between two po htical parties and two different political philosophies Hov.'CVer for years. Social Security and Medicare were called the third rail

l"t"cs (touch and die) The very fact that such of American po I i h t ila proposals are now being treated seriously suggests t a s1m r proposals will grow more acceptable m the futu re

Republican policymakers have long desired to ach1e~e 1;~ I One involves the strategy of fostering private eda l

goa s. . miums from the CMS for prov1 mg plan~ that rece1vl e tpr(~r enhanced) coverage of 1nd1v1duals Medicare equ1va en

PART V • Stakeholders

The other. exemplified most recently in Congressman Ryan 's budgets. is to put a specified number of health care dollars under the beneficiary's personal control to make the individual responsible for using the funds to purchase health insurance at market prices or self-insure for medical bills up to a large threshold beyond which catastrophic insurance would provide coverage. (The FY 2013 budget explicitly allows beneficiaries to keep savings if they buy insurance that is cheaper than the benchmark plan.)53 Both goals actually fit well into the on- going efforts of advocates for the aging to provide more choices for long-term care by enhancing home- and community-based services and supports as an alternative to nursing homes and the increased emphasis in the Community Living Assistance Services and Supports (CLASS) Act and elsewhere on provid- ing the beneficiary (or fam ilies) with fungible supports such as cash that give recipients more discretion in deciding on how to use the resource. However, the ideological rift separating the two perspectives would undoubtedly lead advocates for more resources and enhanced individual choice for elders to deny that their goals are compatible with the policies advocated by fiscally conservative Republicans who seek to cap government expenditures and shift risk to the private sector.

Both goals were advanced by the Medicare Modernization Act of 2003. which introduced many changes in Medicare beyond providing the new coverage for prescription drugs used outside the hospital (called "outpatient prescription drugs"). Because this act is built on important changes initiated by the Balanced Bud- get Act of 1997. the discussion of contemporary fiscal and priva- tization pressures on Medicare policy must begin with that law.

The Move to Managed Care The Balanced Budget Act explicitly attempted to shift Medicare beneficiaries out of the government-run fee - for-service indemnity plan that allowed them to see any physi- cian who accepted Medicare patients. The act's proponents wanted to induce Medicare beneficiaries to enroll in managed care plans that received a set monthly amount or premium for promising to provide all care needed by the Medicare patients it enrolled but required them to use health providers with w hGm it contracted (unless they were willing to pay extra for out-of-network providers). Managed care plans claimed to provide more efficient and effective care by requiring patients to use the plan 's physicians and facilities. In return for a higher volume of patients provided by the managed care plan. health providers typically accepted lower payment than they charged patients outside of the plan.

Part of the attraction of managed care 1s the hope that it re· duces costs. Conservative policymakers also favor the growth of managed care because 1t inserts an intermediary between the government and the provider chosen by a patient. thereby shifting the responsibility for the costs of care to the man· aged care plan or health provider. In time. many conservatives would like to further emphasize ind1v1dual responsibility and choice by converting the government's promise of access to a range of medical care services-a .. defined benefit" - to a promise to provide money in a "defined contribution" to help the individual purchase whatever level or type of care he or she seeks to have. The arrangement to provide a beneficiary with money for a health insurance policy (or pension fund) instead of prom1s1ng a definite health service or retirement benefit in the future is an important concept in understanding the nature of pensions as well as health care bene fits. Sol

The effort to move senior citizens into managed care plans began during the Ronald Reagan Admin istration (1 981- 1989). During the Bill Clinton admin1strat1on ( 1993-2001). the number of elderly Americans enrolled in managed care greatly increased. By that time there were a number of checks on abuses by managed care plans. such as the requirement that plans must contain a mixture of government Medicare or Medicaid beneficiaries and ind1v1duals with insurance pro- vided by employers. (Those with commercial insurance could move to other plans 1f they perceived that quality was falling. which would force management to address problems.)

The federal government's complex payment formu la. ex· perts agreed. overpaid health care plans in areas where medical costs were high. 55 Many experts also believed that managed care plans attracted Medicare beneficiaries who were health- ier than the average Medicare patient. Better health among Medicare beneficiaries who enrolled in managed care pans would mean that that those plans had lower expenses than the government experienced from its much larger fee-for-ser· vice indemnity population 56 The cost of treating those in fee· for-service Medicare determined the premiums paid to plans High earnings-whether from healthier enrollees, greater efficiency. or reduced services- allowed plans to proV1de extra benefits that fee-for-service beneficiaries did not receive from the government-run program. However. generous extra benefits and even the existence of managed care plans open to Medicare beneficiaries were concentrated in geograph cal areas where Medicare payments were high and in urban areas In other areas. senior citizens and the disabled had no choice aside from fee-for-service indemnity Medicare

Seeking to foster managed care plans and able throughout the United States d make them avait- areas. Republ can congr ssional lead. an especially in rural

ers created a m plex reimbursement formula in the Balanced Bud ore com- 1997. with sp c1al prov1s1ons to insure that ma get Act of would de lop m rural and low-cost areas Th naged care duced the earnings of plans in the h1gh-c t. e act also re-

n os areas where they were ounsh n Pubhc information campaign k . "M d C s mar eting the

new e icare ho1c program created b th B I B d A r Y e a anced u get ct o 1997 w re developed to inform sen· f h .. h • d 1ors o t eir c o1ces amon tra it1onal fee for-service Medicare and the

several compct1n plans that were expected to emer e in m areas of the country 1 g ost

How ver ma startling lesson of the importance of "un- ant1c1pated cons qu nc s." the law's actual effect was the opposite of what was intended It seems that the managed care plans were mot1vat d to seek the enrollment of Medicare benef1c1anes btroust th business was very profitable Under the new financial structure. managed care plans began leaving many count es m th United States where they had provided health care to s mors Little expansion to new areas occurred . In 1999. 6 3 m1lhon people or 16% of all beneficiaries were enrolled m managed care plans under Medicare. but by 2003 that num~r had fall n to 4 6 million or I I% ~8

The Balanced Budget Act repea led the requirement that plans enrol n ovcrnment sponsored beneficiaries must also enroll s1gmf1cant numbers of commercially insured workers . who were presumed to have choices among plans that they would e re se by avoiding inferior plans. Moreover. to live up to its b1lhn as a balanced budget act" in its much larger indemnity pr r m the Balanced Budget Act cut reimburse· ments for a wide range of health care providers and required that many anc ary services be paid a flat fee-a "prospective payment -for dehv nng a speetf1c service or treating a spe·

c1hc krnd of patient

Medicar Prt'SCriprion D rug lmproYemcnt and :\lodcrni:rntion Act of 2003 The Medicare reform of 2003 added a Part D to Medicare that provides outpatient prescription drugs for all wh? en · roll . It also reformed Part C by changing Med1care+Choice to "Medicare Advantage. requiring managed care pl~ns to _pro·

d ber of incentives.

v1de drug cov rage and prov1 mg a num f r them to serve

including S 10 b1lhon over seven years . o II ograph1cal areas Medicare benef1c1anes. espec1a Y in ge

CHAPTER18• A · .. gmg Pohcy m the 2 bt Ccn lU I)

where they had f I d h of this policy cha~~:_:~h t ~ve in the past. A full account experience-can be founde I ~ahs. the politics. and the early the . in apter 8. Here we emphasize

most important implications for the elderly

Dfridi11g B eneficiaries

~he ~ost. unusu_a l feature of th is effort to protect Medicare ~ne ic1an.es against the high cost of drugs was the absence

~n~rotect1on b~tween $2.250 and $5.100 in an ind1v1dual's ual expenditures for outpatient prescription drugs In

this so-cal.led donut hole between $2.250 and SS.100 bene f1c1anes with the stand-alone drug plans who did not qualify as low income had to pay I 00% of all outpatient drug costs Wh1~: the actual amounts defining the edge of the donut hol: have shifted yearly. the existence of the gap has re ma1ned constant. Thus. the 2003 Medicare benefit was es pecially attractive to those who were relatively affluent and had high annual drug bills for them the 95% reimburse ment above $5 .100 beca me useful catastrophic protection Up to that level. the act was at best marginal in the help that it provided . It is these "first dollars " that proponents of consumer-driven health ca re want consumers to consider carefully before spending. Although the price of a drug 1s important. the growth in the volume of drugs consumed 1s causing much of the increase 111 drug costs . By forcing con sumers to pay a $250 deductible plu s $420 1n premiums, the drug plans and the health care system generally would be protected against the cost of drugs for self·lim1t1ng acute conditions.

These financial arrangements and the 25% co·paymenl may lead seniors with chronic conditions and modest incomes to take less than the prescribed doses of med1cat1ons One major impact of ACA on Medicare recipients is its promise to phase out the donut hole over time. In selling health reform President Obama emphasized the act's provision lo provide a $250 rebate to those who entered the Part D donut hole in the year following adoption.

An important point in the 2003 leg1slat1on worth empha sizing is that for the first time 111 its hi story both Medicare benefits and payments began to vary by income ~9 Previously. all Medicare beneficiaries were treated alike w1th1n the pro gram . Low-income Medicare beneficia ries could qualify for Medicaid . which paid Medicare Part B premiums. deduCll bles. and outpatient prescription drugs along with the other benefits of Medicaid .60 Under the Medicare Mode1111zauon Act. low-income elderly and disabled benef1c1anes who meet

PART V • Stakeholders

both income and asset (i.e .. wealth) tests do not have to pay premiums or deductibles and are covered through the donut hole. States have to pay the federal government most of what they save by not having to provide drugs for Medicare benefi- ciaries who also receive Medicaid. This income-based differ- ential marks the first example of Medicare providing more care for poor beneficiaries than for others with the same medical needs. The legislation also made the Medicare Part B premium progressive by creati ng five income levels with those in the highest level paying 3.2 times the premium or those earning no more than $85 ,000 in 20 I 1.61

Dueling Perspectives The bill to cover outpatient prescription drugs under Medi- care as finally enacted was very much a piece of Republican legislation. Democratic Senate Minority Leader Daschle and Senator Kennedy had strongly supported the original Senate bill. Coverage of outpatient prescription drugs has long been a benefit that liberal Democrats wanted to provide. After seeing

CONCLUSION We have traced the emergence of a definable aging· support system providing income. social services. and health care. In keeping with the political focus of this book. this chapter has provided considerable detail about the relevant public structures and those private interests that have developed to support and influence them. It has also illustrated the contemporary movement toward fun · damental political change. the impact of such change on an aging population. and the support system that helps the elderly and their families cope with infirmity. difficult living situations. and income insecurity.

From 198 1 to 1993, the conservative Republican ad- ministrations of Ronald Reagan and George H. W. Bush were committed to helping citizens cope with the health and social problems within a traditional framework. Their administrations stre ngthened Medicare and Med1ca1d by developing new ways to control hea lth care costs. At the same time. effo rts to encourage elders to enroll in man- aged care programs were relatively unsuccessful.

Since the Republ ican legislative resurgence in the congres· sional elections of 1994. and particularly after the election and

the version developed 1n the House. however. they disav()Wed the legislation

A key ingredient in the narrow vote in favor of the Medi- care Prescription Drug Act was almost certainly the support of AARP. AARP. reasoning that some outpatient prescription- drug benefit even 1f flawed was better than none. broke with 1ts liberal Democratic allies after canny House leaders sweetened the bill enough to get AARP to swallow it. AARP had been a major opponent of medical savings accounts and of efforts to introduce means testing into the Balanced Budget Act or 199 7. 62 The other liberal interest groups continued to vigorous~ oppose the prescription drug bill as did the liberal Democrauc senators who had supported the initial Senate bill. On the right. conservative legislators and several interest groups including the Heritage Foundation and the National Taxpayers Umon op- posed Medicare reforms as a fiscally irresponsible expansion of government programs. which in the long term threatened the existing practice or employer-sponsored insurance for retuees.63

reelection of President George W. Bush in 2000 and 2004 and the economic downturn in 2008. conservatives have pressed the notion of downsizing the federal government"s role 1n pro- tecting its citizens' health and income secunty-challenging Medicare's philosophy of solidarity. In addition. the aging advocacy groups that were so significant in the evolution of Medicare and the AoA have become less unified and focused since roughly the advent of the Bush admin1strat1on Comp!i- cated economic arguments that seem to pit benefits for elders against the future financial well-being or their children ano grandchildren proved to be more d1ff1cult to address than the old 20th-century issues surrounding "age1smM or pre1udice against the old To some extent. the very success of Medicare and Social Security in extending their lives and in reducing the level of impoverishment of older Amencans has made their need-based claims less compelling. 64 As needs become more equally distributed across age cohorts n the United States. it 1s quite possible that the 2 I st century will see a rise in intergenerational struggles for limited resources

The understandable but perhaps exaggerated concern over the solvency of Medicare and Socia Secunty as the

---

-·-

baby boomers become eligible for benefits has been used as an optn n for an 1deolog1cal effort to rethink and re- structu e the overall role of government M One of the great question o lh future is whether Democrats and propo- nents o soc a o danty will be able to reframe the politi · cal debate n a way that speaks to the contemporary global economy Th oth r poss1b1hty 1s that the United States will cont u along the alternate path , making individu- als mcru n ly respons1bl for securing and managing the necessary u d rp nnin s of a minimal livable personal life al the of th nuclear family

The new chal n to sohdanty raises two questions: Is ther a p bl1c obhgat1on to support through social insurance not by means tested and st1gmat1zed charity t o c who ar unable to reach full " md1v1dual mdepend e And d s this collective obi gat1on require prOVJs on for th elderly as an age cohort in light of the fact thal a mo t a I of them possessed this independence

ST 1. Whal thr age groups of those 65 and older?

CHAPTER 18 • Aging Policy in the 2 bt Ccntur}

when younger. but in old age a substantial number arc un able to assert that independence?

Thus. debates about Medicare and Social Security are ultimately, debates about what kind of society the United States ought to be. This conflict among specific sets of values by which to guide America m the 21st century ex emplifies "societal understandingM as we titled the general discussion of the social creation of reality that began this chapter. The debates have grown so heated because John Oberlander points out. Democrats and Republicans now stand for very different visions of the good society Ultimately the choice is about the nature of md1v1dual ism and community: Is 1t every man. woman. or child for himself or herself? Or are we all in it together?66 These and other discordant voices lead to the conclusion that the cur rent generation of Americans needs urgently to engage m an extended civil dialogue about what we owe one another and what, if anything. we owe our older c1t1zens

2 . What r om examples of how we think of aging being a "social creation?"

3. Wha r some gov rnment cnt1t1es and programs important to the elderly?

4, What a som (nongovernmental) advocacy organizations focused on aging?

s. Wh t ob~rv.iuons are possible about seniors as a political force? at home by family members a significant source of care for seniors?

ers r gJVen charge of their health care expenditures. as part of th~ consumer-driven movemert, will they re r nt1ve care than they would if it were covered by insurance. . 7

P PS are being made lo shift care from nursing homes to home- and community-based services

8 . Wha atte

rece

. ? are prob! ms and changes are under discussion. 9. Wh

Q .. I!. hort life expectancy of 20.1 more years of life and I. Ame an women turning 65 on January I. 20 I~· ::,::n c;O I I and 2039. the numbers at each age will burgeon

Am ncan men I 7 9 As the boomers surge past 6 e

(Board ofTru t cs 2010)

2. Mood 19 6

3. Boa ofTrustecs 2010

4, Obe nder 2003

IJ:ij PART V • Stakeholders

S. Stone, 2000, p. 957.

6. Binstock. 20 I 0.

7. Howden and Meyer. 20 I I.

8 . Pierson , 2000.

9. Estes. 1983.

I 0. Quadagno. 1984.

11 . Kreps. 1971; Quadagno, 1988.

12. US Bureau of the Census. 1942. 1986.

13 . Alt. 1998; Manchester. 1997; US Congressional Budget Office. 2004 .

14. Howard and Woodring. 2009.

IS . Brasfield. 1987; Chapter 9.

16. Zappolo and Sundstrom, 1989; Johnson. 1989; Jazwiecki and Schwab. 1989.

17. Marmor. 2000.

18. Lynch. 2006.

19. Fnes. 1980, 1983 ; Manton, 1982.

20. Samuelson. I 978a. I 978b; Ossofsky. 1978.

21. Brandon. 1991; Himmelfarb. 1995.

22. Estes. 1983.

23 . Stone. 2004.

24 . For details about Medicare and Medicaid . see Chapters 8 and 9. respectively.

25 . Bradley, 1994.

26. Salisbury. 1990.

27. Binstock. 2004.

28. Callahan, 2004.

29 . Schulz and Binstock. 2006: Binstock. 20 IO.

30. Pratt. 1976.

31. Day, 1990.

32. Binstock. 2004.

33. Binstock, 2004; Iglehart. 2004; Binstock. 20 Io. 34. Ba rry, 2004: Goozner. 2005.

35. Justice. 2005.

36 . Oberlander. 1995. 2003.

37. Day. 1995: Binstock. 2004.

38. National Committee to Preserve Socia l Security and Medicare . 2005.

=

CHAPTER l 8 . Ag· p 1. . mg 0 icy m Lhe 21 SL Century

39. A et for ~t red Amencans. 2013 . 40. USAF ext 2005

41. Andrews 2004

42. Just.Jee 2005

43. Ka se f m ly foundation. 2005 44. Schu and Binstoc 2006 N u g riamngton. and Kitchener 2010 4S . Schu and Binstock 2006 · ·

49. Dona~ an 1976

SI. Board o Tr st cs 2011 US Social Security Administration. 201 1.

S2. US H of Rep ntatives Budget Committee. 2012; New York Times. 2012.

SJ. US Hou of Repr mauves Budget Committee. 2012.

54. Ha 2006 SS. B fore th Balanced Budget Act of 1997 the federal government had for years set premiums for health maintenance

organ at ons t 90% of the average cost of fee-for-service Medicare patients in the same area. thereby claiming for the government some of the savings generated by managed care. If managed care plans were very profitable. earn ings beyond a threshold had to be returned to enrollees in added benefits not provided by Medicare or to the govern ment Pl ns umvusally chose to avoid sharing excess income with the government.

tand Weiss rt 2002. Congressional Quarterly Almanac. 1998.

2003

SS. Harr 2004 S9 . loco l d d Her ntials in both benefits and payment were considered as part of the Balanced Budget Act of

1997 but Democrats and I beral interest groups. especially AARP. succeeded 1n keeping them out of the final bill Many co SCMl R publicans even felt that in 1997 it was premature to push for means testing (Weissert and

Wt.t t 2002 Congressional Quarterly Almanac. 1998).

60 Med be r car es who also receive Medicaid are often referred to as "dual eligibles." A large proportion ol them

· a~ ill or disabled. many are tn nursing homes. They are. therefore. a group that consumes large amounts

of h ca resources 61. US Ct ters for Medicare and Med1ca1d Services. 20 Io. 62 . Cong ess o al Quarterly Almanac. 1998. Oliver Lee. and Lipton, 2004.

63. O iver L and Lipton 2004. Kesler. 2004.

64. B1nstoek 1997

6S . Feder 2004

PART V • Stakeholders

REFERENCES Alliance for Retired Americans. 2013. "About. .. Retrieved from http://www.retiredamencans.orgfabout on June 30,

2013.

Alt. P. 1998. "Future Directions for Public Senior Services: Meeting Diverging Needs.'' Generations 22( I)· 29-33.

Andrews. E. L. 2004. "Clamor Grows in the Privatization Debate ... New York Times. December 17. p. A26.

Barry. P. 2004 Uanuary). "The New Law and You. " AARP Bulletin 16-18. 20.

Binstock, R. H. 1997. "The Old-Age Lobby 1n a New Political Era ... In R. B Hudson. ed . The Future of Age-Based Public Policy. Ba ltimore. MD: Johns Hopkins University Press

Binstock. R. H. 2004. "Advocacy in an Era of Neoconservat1sm. Responses of National Aging Organizations " Generations 28( I ): 49-54.

Binstock. R. H. 2010. "From Compassionate Ageism to Intergenerational Conflict.'' Gerontologist 50(5) 574-85.

Board ofTrustees. 20 IO. " Federal Old -Age and Survivors Insurance and D1sab11ity Trust Fund.'' 20 I 0 Annual Report of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds. Washington. DC: Government Printing Office.

Board of Trustees. 2011. "Federal Old-Age and Survivors Insurance and Disability Trust Fund " 2011 Annual Report of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds. Washington, DC U.S. Government Printing Office.

Bradley. D. B. 1994. "Constructing State Old-Age Policy: A Pennsylvania Perspective .. Unpublished Ph.D . dissertation. Carnegie-Mellon University, Pittsburgh. PA

Brandon. W. P. 199 1. "Politics. Health and the Elderly: Inventing the Next Century- the Age of Aging." In Theodore J. Litman and Leonard S. Robins. eds. Health Politics and Policy (2nd Ed .. pp. 335-355). Albany NY: Delmar.

Brasfield. J. M. 1987. "The Management of Invisible Policies Medicaid and Long Term Care ." Paper presented at the meeting of the Southwestern Social Science Assoc1at1on Dallas. TX. March 18- 21.

Callahan . J. J. 2004. "The World of Interest-Group Advocacy: An 'Insider's' View." Generations 28( I)· 36-40.

Congressional Quarterly Almanac. 1998. "Big Medicare. Medicaid Changes Enacted in Budget Bills." Washington. DC: Congressional Quarterly News Features.

Day. C. L. 1990. What Older Americans Think: Interest Groups and Aging Policy. Pnnceton. NJ· Pnnceton University Press.

Day, C. L. 1995. "Old-Age Interest Groups in the 1990s Coalition. Compet1t1on . and Strategy." Paper presented at the annual meeting of the American Political Science Association. Chicago. IL. August 30-September 3.

Donabedian. A. 1976. Benefits in Medical Care Programs. Cambridge. MA· Harvard University Press.

Estes, C. L. 1983. The Aging Enterprise. A Critical Examination of Social Policies and Seruices for the Aged San Francisco. CA: Jossey- Bass.

Feder. J. 2004. " Crowd-Out and the Politics of Health Reform" journal of Law. Medicine and Ethics 32(3): 461-65.

Feinberg. L. . S. C. Reinhard, A. Houser. and R Choula 20 11 Uune). "Valuing the Invaluable. 2011 Update-The Growing Contributions and Costs of Family Careg1ving." Insight on the Issues. 51. AARP Public Policy Institute Retrieved from http://assets.aarp.org!rgcenterlppifltc/i5 1-careg1ving.pdf on September 30, 2011

I -·

CH APTE R 18. A . gmg Policy tn the 21st Ccntu11

Feng Z M l Fennell. D A Tyler M Cl k M nont1es in US Nursin H . . ar . and V. Moro. 2011 Uuly). "The Care . 30(7) 1358-64 g omes Driven by Demographics and Possible D ~pan. Growth of Racial and Ethn c

1spant1es in Options." Health Affairs

Fnes. J F 1980 Uuly 17) "Aging Natural 303(3) 130-35 . Death. and the Compression of Morbidity" New En 1 dj · g an ournal of Medicine

Fnes J F 1983 (Summer) "The Compression of Morbidi .. M' . Goozner M 2005 Uanuary). "Don't M h .. ty. ilbank Memorial Fund Quarterly 61 · 397-419

ess wit Success. AARP Bulletin: 12- 1 s Hacker J S 2006 The Great Risk Shift The Assault on America . . .

You Can Fight Back New York: Oxford Un1vers1ty Press. n jobs. Fam1/1es. Health Care. and Retirement and How

Harns G 2004 A Record Increase of 1 7 p . . pp A I A 13 ercent is Set for Premiums in Medicare." New York Times. September 4

H1mmelfarb R 1995 Catastrophic Politics The Rise and Fall f h . Un vers1ty Park Pennsylvania State U~1vers1ty Press. o t e Medicare Catastrophic Coverage Act of 1988

Ho~d D J and 5 B W<>_?dnng. 2009. " Labor force Participation Rate of People 65 Years and Older 2008 American

ommunity urvey Amertcan Community Survey Reports. US Department of Commerce Retrieved from htt I wwwcensus gov/prod/2009pubsfacsbr08·9.pdf on September 12. 2011. p

Howden l and J Meyer. 2011 (May). "Age and Sex Composition: 2010." 2010 Census Briefs US Department or Commerce Retrieved from http-//www census.gov/prod/cen20IO/briefs/c201 Obr-03.pdf on September 12 2011

Iglehart J K 2004 "The New Medicare Prescription-Drug-Benefit-A Pure Power Play." New England journal of Medicine 350(8) 826-33

Jazwied.1 T and T Schwab. 1989 "Conclusion." In T. Schwa b. ed .. Caring for an Aging World: International Models for Long Term Care. Fmancmg. and Delivery (pp. 366-76). New York: McGraw-Hill

Johnson M 1989 "Long-Term Care for the Elderly in England." In T Schwab. ed .. Caring for an Aging World ln1unat1onal Models for Long Term Care. Financing. and Delivery ( pp. 162-192). New York: McGraw Hill

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Kaiser family Foundation. 2005 Uanuary 12). "Online Health Information Poised to Become Important Resource for Sen ors but Not There Yet" Retrieved from http://www.kff.org/entmedia/entmedia011205nr cfm on Apnl 4. 2012

Kesler C R 2004 (December). "four More Years." Jmprimis: The National Speech Digest of Hillsdale College 13( 12)

1-3 6 7 Kreps J M 1971 L1/el1me AUocatton of Work and Income: Essays in the Economics of Agmg Durham, NC Duke

Umvers ty Press Lynch J 2006 Age m the Welfare State: Origins of Social Spending on Pensioners. Workers and Children New York

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Quarterly 60(2) 183-244. Marmor T R 2000 Politics of Medicare (2nd Ed.). New York: Aldine de Gruyter.

Moody. H. R. 1986. "The Meaning of Life and the Meaning of Old Age " In T. R. Cole and S A Gadow. eds .. What Does It Mean to Grow Old?: Reflections from the Humanities (pp. 9-40) . Durham. NC Duke University Press.

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New York Times. 2012. "The Careless House Budget." Editorial. March. p. Al8 .

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Oberlander. J. 1995. "National Committee to Preserve Social Security and Medicare (NCPSSM) ." In C Ramsay. ed .. U.S. Health Policy Groups: Institutional Profiles Westport. CT Greenwood Press .

Oberlander. J. 2003. The Political Life of Medicare. Chicago: University of Chicago Press .

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Weissert C S and W G Weissert 2002. Governing Health. The Politics of Health Policy (2nd Ed ). Baltimore. MD Johns Hop ins University Press

Zappolo A A and G Sundstrom 1989. "Long-Term Care for th_e Eld~rly in Swede_n " In T Schwab. ed Cart'lg for an Agmg world International Models for Long-Term Care. Fmancmg. and Delivery (pp. 22-57) New York McGraw Hill

l{f:i PART V • Stakeholders

Here a current medical student gives her perspective on just what the health care system looks like to one about to enter it as a provider of care.

I have fallen in love with medicine. I have grown to love the physician-patient relationship. Very few fields allow you the privilege of a person's trust with intimate details of their life. and medicine provides the knowledge and resources to help . Whenever I feel discouraged by the process. I remember the conversation I had with a teenager about sexually transmitted diseases (STDs). college. and life. Very few professions provide you with such a relationship of honesty and trust.

My interest in medicine originally arose from my grandfather's fight against diabetes. I accompanied him on his visits to the doctor and hospital. I saw how essential his phys1c1an was in managing his cond1t1on through monitoring blood sugar levels and by stressing healthy diet and exercise.

One thing I never realized before going to medical school is that the institution changes you. During the first two years of medical school. you are in the classroom. in a semi-controlled environment. You receive lectures on how to question everything that you read and provide culturally competent care Yet there are forces that con· trad1ct these basic tenets. You slowly learn that medical dem1ons are based on evidence-based research. but more strongly on experi· ence and opinions from experts. You learn to grow to love this art of medicine. as people do not fit the rules that basic science wants them to. Watching skilled phys1c1ans elicit pertinent information and build patient trust inspires you.

Yet you also learn about a hierarchy that exists and 1s often re· fleeted in seating arrangements when you enter a room . You are informally told that primary care is a "noble" field and if your board scores are high enough. you should go into something more lucra· tive. More surprisingly. you learn that phrases such as "that patient 1s medically illiterate" now make you walk into the room and treat that patient a little differently. Medical school changes you .

Perceptions of Patients My mentors tell me that the culture of medicine 1s changing. There are now policies in place to change the culture of medicine and pun- ish mistreatment. Evidence-based medicine is a hot new buzzword

that 1s constantly evoked during rounds in teaching-based hosp tals. However. one great change 1s not discussed the ways 1n whK" v.t look at our patients When some phys1c1ans encounter a paoen; who is H1span1c. 1mmed1ately "diabetes." "poor health literacy and "low English proficiency" pop up into their heads. Even 1r.ore shockingly. the treatment plan 1s a little different when the pa· ec: looks different.

Although there 1s some research that associates race with soco- econom1c class or with certain diseases. does this sudden leap aid or harm the eventual treatment process? I attended a conference. and one speaker. Dr Brian Rubineau . spoke about health dispa~­ t1es research he had conducted . He had looked at first-year medical students and analyzed how they responded to patients from m1nor- 1ty backgrounds versus nonminonty backgrounds. He did the same study on the medical students in a year or two and discovered that the minority patient group received inferior care. even by minonty medical students. At first. this was surprising to me, but then re· alized 1t makes sense. Studying for board exams. I concluded that the key to most questions lie in the age and ethnioty of the pat.em presented An Afncan·Amencan man with shortness of breatn has sarcoidos1s until proven otherwise.

It 1s true that medicine 1s mainly pattern recognition buttowrJ! extent and what do we have to sacnf1ce in the process1 Does m cal school make you a little bit more conscious of raml d fferences7

Perhaps. but to survive 1t. you have to constantly renect on the sv• of your encounters with patients. as well as those with ot'ler pro- viders. Hopefully through this process . you learn from each o:her and pick up on these biases to prevent yourself from missing so.,.i outlying diagnosis.

The best part of being a medical student 1s that you manage l few patients and can really get to know them . I remember one pa· t1ent who had a small bowel obstruction and had to undergo su• gery. She was on the floor. and we talked for a bit before her surgery about how she was a single mom who raised six children on her own and how proud she was of them. When 1t came time to go !J the operating room (OR). she was understandably nervous abooi the procedure She asked the attending if I could be there dunngllit

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•

moments of and showed humbled to being part of

I was in pcd hospital for figure out wh l

I wu a mere medical studen ~ u geon but this wo~· a.nd the attending d th s patient-phys ans faith reminded

I saw her again ~~~~/elat1onship A cou· hoot was one of the best

of her n= She immediately found me

her I le and co~~dg~~n~~anu:hhter I was very er enough for

memor.ib e experiences that I remember be· I was on ca In my obstetrics and gyne·

t w.i 2 a m and the resident on call was paged (ER) to see a patient who was six weeks

d into the room to see the patient and learn e l t c ho p ta! The patient spoke Pun1ab1 and ;a cd for her h tt1ng her thigh to wake her up.

using aggres YC body angu;age We slowly learned that she was an epileptic who h.id a c zure that morning and hit her head. She was brought tot e ER by her husband who ieported that her family did not tell h m that he had this cond1t1on before he married her. We took a fu h story and did a physical exam and then went to look at her chart once mo e The ER attending found us and asked us whether she cou d be admitted to the obstetrics and gynecology sel'Vlce since e wa six wee pregnant My resident told him that there wou d be noth n that we cou d do for her 1f she was to have

CHAPTER 18 • A . . gmg Po hey in the ., I st C - · cntury

a seizure again and that b . o stetnc1ans a · 1 seizures resulting from preecla re m~in y equipped to l>andle than epileptic seizures. mps1a. which is treated differently

The ER phy · · . s1c1an was furious and h the back room about wher th . . t ere was a small argument m stated that neurology "d1den't ~~~~1ent ~.hould go The ER phys1c1an discharge. It was frustrating to see~~:· and she was not stable to by one person to the next. first b her: young woman harded orr whose JOb relies on d1sch . y usband to the ER phys1c1an the neurology or the obstatrg1ng or admitting quickly and then to

h e TICS serv1ce-n 'th f

er The attending said that th e1 er o wh1d1 wanted that the hospital could bill for i;h;as probably because of the way neurology floor was so h" h Th service as the cost of stay on d in providing care to this ~~~an i~n~~s tru~ a failure of the system obstetrics floor but under th f e en · she was placed on th

e care o neurology n d h c1ans. This was not th f' . i. ses an p y aw~ard arrang~ment 1~ ;;ts~:; t~~:haes l:s~~~~~: ~~~ee~~en th1

It is frustrating to see patients pushed from one erv1ce to another-pushmg the patients also pushes the respon b1 t f patient care. It is not the fault of the ind1v1dual phys1c1an why or equipped to provide only a certain serv1ce-emerge'lcy c ·e obo ; ncs. or neurol.ogy. It is a fault of the fragmented system that in tt: case. at least in1t1ally. fail~d to provide the best comprehens ve c :e for t~1s p_atient. The providers in this case were all frustrated by t def1c1encies and the most important thing was lost in the proce s patient care.

The Physician's Voice We have an amazingly large health care system with many beref1t However. there is always room for improvement I am all for 1mtta t1ves that move primary care from the ER to the office t~Jt rra e transparency of the costs. and that encourage patient respons1b1lity for their own health care. I strongly support a single payer sy~tem whether or not it 1s politically feasible. because I think 1t would Ix a lot of these issues. However. 1f I had to pick one change 1t would be an increase in physician and provider involvement in policy and

management. Lila Watson. an indigenous Australian artist and act v st for

women's rights. once said. "if you have come to help me you are wasting your time. But if you have come because your ilberat1on 1s bound up with mine. then let us walk together · Thi, speaks to the intrinsic power of implementing policy and programs with the help of the people it affects the most. Health economics managcrrrnt and policy are not lead by physicians or other health care provider who would bring a unique perspective of what practically works and

what doesn't work. As a medical student. I am connected to my peers through Ii t

servs. social media. and organizations such as the American Medi cal Student Association (AMSA). Phys1c1ans for a Nattonal Health

Program (PNHP). and the Association of American Medical Col- leges (AAMC). They serve as voices to advocate change in the field Yet the voice of physicians is not so loud. despite the fact that there are more physicians than medical students. This may be 1n part be- cause their views are more diverse. or that 1t is against the culture to organize on such a grand scale. An even bigger part of it. I think. 1s that we do not think that we can make a difference. It 1s diffi- cult to constantly keep up with health policy and medical literature. The only body that seems to represent physicians 1s the American Medical Association (AMA) . yet most doctors who are part of this organization do not necessarily agree with its viewpoints-they join for the subscription to the journal of the American Medical Asso· ciation UAMA).

If physicians had a greater voice in politics. perhaps 1t wouldn't take shocking cases such as the death of Libby Zion 1n 1984 (after she was restrained and shot with sedatives that created a fatal interaction) to get tighter regulations on work hours in the hospitals. Perhaps physician involvement would affect funding and the use of health resources. Perhaps hospitals would find practical ways to reduce costs because physicians notice waste during day- to-day practice. Medical organizations like the AMA stand in the way of such changes; these organizations are large and represent the views of physicians. They cannot back maior policy changes.

However a possible solution would be to incorporate heath poficy more deeply into medical education It 1s not enough to Just spcink't 1t through the first two years in medical school; rather. we shouid teach more throughout rotations and during residency about tilt a location of resources and ways phys1c1ans can advocate for their pa- tients and change pol1c1es to provide better care. In this way. wt are inadvertently affecting the culture of medicine or the !ens throog which 1t is viewed Physicians are at the front lines along with nurses yet it is more difficult to organize and have collective voices in the political arena . Perhaps greater education early on may foster the need for such perspectives and organizations further down the pipeline.

Thanks for this opportunity to reflect on my medical educauon1

Disclosing Affi/1atrons (to shed light on some of my biases)"

• Northeast Delegate for the Committee of Community and D1vers1ty. AAMC

• Quality Improvement Intern for the Committee of Interns ar.d Residents

• Former American Medical Student Association SUNY Downstate Board member

• Former Phys1c1ans for National Health Program SUNY Downstate Board member

PART VI

Policies and Issues CHAPTER 19

CHAPTER 20

CHAPTER 21

CHAPTER 22

EYEWITNESS S

REPRODUCTIVE HEALTH

Deborah R. Mcfarlane

CHILDREN

Elizabeth Kilbreth and Erika Ziller

PRESCRIPTION DRUGS: HOW A PILL BECOMES

THE LAW

Anthony D. Dell'Aera

ENVIRONMENTAL HEALTH

Kelly Tzoumis and Susan Bennett

ADVENTURES WITH INFORMED CONSENT

Deborah Sto ne

Reproductive health issues lie at the heart of American culture wars. In this chapter. Deborah Mcfarlane explores the politics and programs that surround the three stages of reproduction: sexual intercourse. conception , and gestation.

Reproductive health issues are at the apex of the culture wars in the United States. Across the country. school boards and states figh t over which curricula guide young people in mak- ing choices about their sexual and reproductive health behav- iors. In every state. pharmacists debate the terms of practice about prescribin g and dispensing emergency contraception. Condoms are widely promoted as well as publicly v1 hfied The abortion issue literally shut down the federal government in 1996. and there is no end in sight to the abortion battles that can be fought at the state and local levels.

Indeed. abortion nearly derailed the Pa tient Protection and Affordable Care Act (ACA). signed with great fanfare on Marc h 23 , 20 I 0. As previous chapters have indicated. the pas- sage of the ACA was not easy. President Obama himself spent over two yea rs promoting health reform. In the end. the bill requ ired sol id Democratic support. so concessions were made to antiabortion Democ rats. On March 24, 20 I 0. President Obama qu ietly s igned Executive Orde r 13535. "Ensuring

Enforcement and Implementation of Abortion Restrictions n the Patient Protection and Affordable Care Act: guaranteeng that the new law would proh1b1t federa lly funded abortions

The irony 1s that while the right to hea lth care was beng extended to millions of Americans . one of the most corr.· mon surgical procedures in the United States was exphc • excluded from publ ic funding .2 Moreover. women whose e::i- ployers participate in state health exchanges will be requ1reo to write a separate check for abortion coverage.

While these developments may appear perplexing. rncon· gruities between what might be expected and what actua occurs are commonplace within reproductive health polices an d poht1cs. Most Americans are sexually active by their late teens. yet most receive no formal instruction about birth con: trol methods. American women report that more than hallo' thei r pregnancies are unintended . yet they do not use birth control as effectively as their Western European counterparts Nearly half of Americans say that they are antiabortion or

-· - --- -

pro·hfe. yet th United States has one of th h h . h d

e 1g est abortion rates m t e e-.-eloped world Effective cont . racept1ve practice has. been shown to lower abortion rates yet . · many pro-life poht1c1ans do not support public family planning programs.l

REPROD TIVE H EALTH FRA 11..\\0R K Reproductl\'C t Ith policies include those that address sexual behavior. contraception and induced abortion. Given these topics and Amcnc s Puritan heritage. 1t 1s not surprising that reproductrve h alth pol1t1cs are among the most contentious in 21st-century Am ncan society Figure 19·1 shows these policies m rclat on to the three maior steps m human repro· duct1on With r exceptions. the first requirement 1s sexual intercourse The s cond step 1s conception. and the third is gestation and ~rtur111on The interventions in relationship to the steps m r production Before Step I are the abstinence programs. intend d to discourage sexual intercourse Be· tween Steps I and 2 is contraception. designed to decrease the hkehhood that s ual intercourse will lead to conception. Between Steps 2 and 3 is induced abortion. which terminates a pregnancy 4

The steps m 1cproduct1on and the effectiveness of the inter· vent1ons arc intrinsically related When sexual abstinence is not practiced consistently. contraceptive services are needed for those who do not wish to become pregnant. Similarly. when sexually act1v women not desmng pregnancy do not use contraccp ion d mand for induced abortion increases.

The organization of this chapter follows the reproductive health interventions iust delineated. First. abstinence a_nd sexuality education are discussed. Second. contraceptive practices and family planning policies m the United State are

STEP PREVENTIVE COUNTERMEASURE

Sexual Int rcours

Conception

Abstinence

Contraception

Gestation and Partunt1on Abortion

LIVE BIRTH

FIGURE 19- 1 l'hc Rcpro<lucti\e Process and

Countcrmca urc

CHAPTER 19 •Reproductive Health

explained. Third, the delivery of abortion services and the sta· tus of abortion policies are described. Because understanding curre~t reprodu~t1ve policies and debates requires context, ~1stories of abstinence and sexuality education, contracep· t1on. and abortion are presented in the following sections This chapter concludes with likely scenarios for the future of American reproductive health policies and politics.

ABSTINENCE AND SEX UALITY EDUCAT ON Although abstinence-only education and comprehensive sex uality education are new terms. social controls for the sexual behavior of American adolescents are long-lived Until the early 20th century and the advent of the Industrial Revolu tion. parents. clergy. and Puritan communities prov1dl'd the social controls for adolescent sexuality The Puritans touted both personal virtue and community respons1b1hty Above all else. the fundamental Puritan precept for both the md1 vidual and society was "control thyself." Sexual act1v1ty had a unique capacity to counteract that prescriptive.~ As youth m1 grated to cities for educational and economic opportunities. adult concerns about their sexuality abounded. These worries were manifested initially in myriad advice manuals and later in questionable medical treatments.6

By the early 20th century. the Progressives offered a "mod em" solution for controlling adolescent sexuality Expert sex educators enlisting scientific findings would help young peo pie negotiate the dangers of youth and desire The first classes were taught in Chicago public schools 1n 1913. but even a three-lecture curriculum promoting sexual abstinence proved too controversial and lasted for only one year.

7

American sex education remained controversial throughout the 20th century. Although most sex educators sought to de

..., liver chaste students to heterosexual marriage, many people 10 continued to believe that any discussion of adolescent sex % I ty outs ide of the home and church was inappropriate or ~ ::o~se. Discussion of birth control within schools was even ~ more taboo. ~ These controversies deepened in the 1970s At the school ~ district level. growing parental approval for sex education in .§' h I . eluding birth control in struction. was pitted 9 the sc oo . in t eliminate

against religious ~onservativefs. who :i~;es~~~~fs ~y the end all sex education instruction rom pu

PART VI • Policies and Issues

of the decade. however. support for the idea had increased. and sex education courses grew throughout the nation's school districts. 8

The 1980s brought the Reagan presidency as well as the HIV/AIDS epidemic. In 1981 , Congress passed the Adolescent Family Life Act (AFLA)-dubbed the "Chastity Act" by liberal critics: it replaced a comprehensive approach to teen preg- nancy with a program that recommended abstinence as the birth control method of choice. In that same year. the HIV/ AIDS virus appeared in the United States. By the mid- I 980s. there was widespread recognition that the virus was sexually transmitted. The 1987 Select Committee on Children, Yo uth , and Families noted that without a vaccine or a cure . education was the only tool available. Sex education now had a grim mandate-to protect American youth from what was. at the time. a lethal and incurable disease. The Centers for Disease Control and Prevention (CDC) began to grant millions of dol- lars to states that mandated HIV/AIDS education.9

By 1990. all 50 states encouraged or supported HIV/AIDS education in the schools. and 41 states recommended or man- dated sex education. Religious conserva tives shifted tactics. moving from the opposition of all sex education to the encour- agement of acceptable sex education-programs that promote sexual abstinence until marriage. 10 Alternative conservative cur- ricula began to appear in the public schools. 11 These curricula often presented I 9th-century values as well as misinformation about the efficacy of birth control. particularly condoms.12

A decade later. abstinence-only curricula had become a big business with substantial political clout but no demonstrated results. While abstinence-only education advocates claimed to produce results,13 the scientific evidence that abstinence programs produced sexual abstinence among adolescents was dubious at best.'4 Nevertheless, buttressed by federal support. abstinence-only education grew dramatically.

Public Funding for Abstinence-Only Education While the Reagan-era AFLA initiated federal funding for absti- nence education. the 1996 Personal Responsibility and Work Opportunity Act (PRWORA)- widely known as "welfare reform "-increased this funding significantly. Strongly sup- ported by the Christian Right and the Heritage Foundation. an abstinence-only education provision was quietly inserted

into the final revision of the massive welfare bill and neve subjected to a separate vote or congressional debate. s Under this program. the federal government would allocate $50 IT'. lion a year to the states for abstinence education through the existing maternal and child health block grant (Title Vofthe Public Health Service Act) Abstinence education was defined as an educational or mot1vat1onal program that subscribed to eight points defined in the welfare reform act as follows:

... "abstinence education" means an educational or motivational program which-

( A) has as its exclusive purpose. teaching the social. psychological. and health gains to be realized by abstaining from sexual activity;

( B) teaches abstinence from sexual actiVJty outside marriage as the expected standard for a! school age children;

(C) teaches that abstinence from sexual activity is the only certain way to avoid out-of-wedlock pregnancy. sexually transmitted diseases. and other associated health problems:

(D) teaches that a mutually faithful monogamous relationship in the context of marriage is the expected standard of human sexual activity;

(E) teaches that sexual activity outside of the context of marriage 1s likely to have ha rmful psychological and physical effects:

(F) teaches that bearing children out-of-wedlock is likely to have harmful consequences for the child. the child's parents. and society:

(G) teaches young people how to reject sexual advances and how alcohol and drug use increases vulnerability to sexual advances. and

(H) teaches the importance of attaining self· sufficiency before engaging in sexual activity.

Individual state awards were based on their respectJve pro- portions of the country's low-income children. Like other Title V programs. individual states had to match every federal dolar with 75 cents of their own revenue.

Upon assuming office in 200 I. President George W. Bush s uccessfully advocated for a third federal abstinence pro· gram. Community-Based Abstinence Education (CBAE). This program gave the Bush administration far more discretion in

-·

promot~ng abstin nee than previous enactments had offered . Employing a categorical grant mechanism. CBAE could fund freestanding agencies w1th1n the states and bypass state health departments Many fa1th·based organizations became CBAE grantees

Until 2007, CBAE was stricter than other federal abstinence programs. requmng grantees to adhere to the eight-point defi- nition of abstinence Meanwhile. abstinence-only advocates were scrut1n1Z1ng Title V abstinence grantees for fidelity to the spirit of the idea The National Coalition for Abstinence Education 1ssu d public report cards grading states' absti- nence programs-most states fell short. In 2007. Congress responded to th abstinence lobby and reined in the Title V abstinence grant s State Title V grantees were now required to address uch of the eight points in the PWRORA absti - nence def1muon

Ironically in the same year. a congressiona lly mandated study was r leased Its findings showed that abstinence-only education had been ineffective m either delaying sexual m1- tiat1on or m r ducmg the numbers of sexual partners. This report. along with the stricter requirements for Title V absti- nence grantees. served as a catalyst for 25 states to reJect this funding by 2009 16

Despite the questions of efficacy. publ1~ funding for abstinence only education has been substantia l. Table 19- 1 shows that over $2 2 b1ll1on m public funds were spent for abstinence-only efforts between 1997 and 2009.

The 2008 election of Barack Obama was encou ragi_ng for advocates of comprehensive sexuality education . which

TABLE 19- 1 Public Funding for Ab tincncc Education, FY 1997-2009

Amount ($ Millions) Program

Adolescent Family Life Act Welfare Reform Funds

Federal

State

CBA Projects

Total

138.0

650.5

487.5

960.0

2 .236 .0

means the inclusion of birth control information As a US sena~or. Obama had supported medically accurate. compre hens1ve sex education . As president. however. Obama had to compromise. On the one hand . the ACA created the Personal Responsibility Education Program (PREP). the first time the federal government had ever funded comprehensive sexuality education . On the other. the passage of ACA reauthorized the Title V abstinence program . States now can apply for comprehensive sexuality education fund s. abstinence-only fun ds. or both.

These policy changes are encouraging for advocates of comprehensive sexuality education . but it would be easy to overstate their impact on American youth. While abstinence only education has not been shown to be effective. 1t 1s not at all clear that comprehensive sexuality education can s1g mficantly change adolescent sexual behavior or unintended pregnancy rates. Moreover. these policy changes are not being implemented on a large enough scale to affect most American youth. The United States continues to have one of the high est teen pregnancy rates among wealthy countries (67 8 per 1.000 women. ages 15-19)-more than twice as many as in Canada (27.9) or Sweden (31.4).17

CONTRACEPTION A~ FAMILY PLANN NG At the beginnin; of the 19th century. state and federal laws did not broach the subject of birth control. Puritan d1sap proval and other socia l conventions made contraception an unlikely topic fo r written records. much less for leg1slat1ve

.d t'on In 1800 native-born white women. the only cons1 era 1 . · I bo group for whom vital statistics of the period are rel1ab e, re an average of seven children .18

The Rise and Fall of Legal Prohibition h time of the Civil War. the fertility rate had dropped

By t e ·1d oman Birth control d1scuss1ons were

1 to 5 21 chi ren per w thods were

. . d nd public and more contraceptive me w1desprea a · 1 ding vagi nal sponges and d1a

~ c~:i~~n~~r~~C:l~~~s~~~~nvcu~canized rubber condoms.' 9 <i: p g . . I ed these changes The l ~ot all _ sectors of soc:~c;~~~l~sced alter the Civil War, !i social pu ri ty movement . . h d to restrict both birth control ~ included groups that w1s t II dvocated for the Act for the ~ and abortion. They success u y a

PART VI • Poljcies and Issues

Suppression of Trade in , and Circulation of Obscene Literature and Articles of Immoral Use ( 1873). Commonly known as the Comstock Law. this federal legislation forbade interstate trad - ing in any article whatsoever for the prevention of conception. During the next 15 years. 22 states passed '"little Comstock laws." many of which went further than the federal law, pro- hibiting even talking about birth control.20

Support for the Comstock laws was broader than the laws· namesake and policy entrepreneur. Anthony Comstock was not an isolated fanatic but was backed by the influential New York You ng Men 's Christian Association. particularly its Committee for the Suppression of Vice. Their collective Puritan viewpoint blended contraception . abortion. steriliza- tion. obscenity, and vice. condemning all as threats to public morality. Although not principal proponents. both Catholic and Protestant clergy tacitly supported the Comstock laws . Many feminist groups. concerned about the spread of sexually transmitted diseases from married men frequenting prostitutes back to their wives. also stood behind these laws.21

Initially, the medical profession took a reticent stance. In 187 4. before the little Comstock laws began to multiply, the president of the American Medical Association (AMA) recom- mended the establishment of a national system to regulate prostitution and control sexually transmitted diseases. How- ever. after multiple defeats in state legislatures. organized medicine abandoned this idea . along with any public recogni- tion that contraception could be divorced from licentiousness

The Comstock laws were consequential. but they did not al - ter the falling birth rate, which plummeted to 3.56 children per woman by 1900. However. these laws created serious obsta- cles. especially for poor and uneducated women . to learn about birth control. "Comstockery" also set the stage for separating reproductive health services from other medical care delivery.22

Across the United States. the statutory linkage between contraception and obscenity remained for nearly a century. Comstockery chilled public and professional attitudes toward contraception. This reticence was reflected in the policies and practices of health institutions as well as in the media . Not until 1959 . for example. did a national television program even mention birth control.23

In 1937. a federal court of appeals decision opened the mails for contraceptive materia ls intended for phys1c1ans . In t he same year. a national survey showed that 71 % of Americans we re in favo r of contraception. and the AMA

recognized birth control as an integra l part of medical prac- tice and education. Nevertheless . neither Congress nor state legislatures were willing to address such a controvtr· s1al subject. Indeed . in concurring with the One Packagt decision . Judge Learned Hand commented that leg1slat,\e action might come "long after a majority would repeal birth control restrictions . 1f a poll were taken ."24

Although One Package permitted the use of effective coo- traceptive methods by married couples. diaphragms and cervical caps. the technologies of the day, were not widely available A 1941 survey reported that most white Protestant couples used birth control. but its findings were not specific in terms of particular methods or their duration. Low- income women had limited access to effective methods of birth coo- trol and little information about them . In 1942 with the en- couragement of First Lady Eleanor Roosevelt. the US surgeoo general. Dr Thomas Parra . addressed this situation bypermt· ting the states to use federal Maternal and Child Health funds for birth control is

The post-World War II years saw a tremendous increase in fertility. which continued throughout the 1950s. But even with the baby boom in full swing. Americans were using birth control. A 1955 national survey showed that white couples of all religious persuasions reported using birth control at some point in their lives . When nonwhites were included in the sample for the first time in 1960. they reported the same pattern 26

Diaphragms. the most effective method of birth control n the 1950s. required medical prescriptions. Women who had private physicians could be fitted for diaphragms and get prescriptions . Poor women were far less likely to have access to this method. In 1958, after a six-month controve rsy. the New York Board of Hospitals permitted physicians work ng 111 the city's mun icipal hospitals to prescribe birth control ThtS change was a major turning point in public policy becaust New York set the standard for the policies of many othn t· 1es Shortly after, other localities and states also changed the pol1c1es. 27

Another boon for birth control was the publicity generated by the Draper Committee In 1959 a presidential commit· tee on foreign aid chaired by General Wilham Draper recom· mended that birth control assistance be made available to foreign governments that requested it. While Catholic bishops denounced this recommendation and President Eisenhower

initially opposed 1t (he later changed his mind . eventually becoming an honorary cocha1r of Planned Parenthood along with former president Harry Truman). the discussion of for- eign assistance for contraception inevitably brought up the is-

sue of publ c funding for family planning services within the United States

~ore ffect1ve birth control methods were also becoming available In 1960. the US Food and Drug Administration

(FDA) approved th sale o f oral steroid pills for contraception. Plastic intraut rrne d vices (IUDs) also came on the American market dunng th early 1960s Middle-class women accepted these methods rapidly In the 1960s. with the War on Pov-

erty and the civil rights movement in full swing. great interest arose in providing poor women the same contraceptive op- portumta that middle class women had.

The last vestiges of the Comstock laws were coming to an end 196S an Griswold u Connecticut (381 US 479) . the US 51 pr me Court overturned Connecticut's law prohibiting the u"e or birth control by anyone, marned or single. In 1972. in Eisenstadt u Baird (404 US 438). the Supreme Court over- turned a Massachusetts law that specifically prohibited un· married peopl from obtaining contraceptives .

Public Funding for Family Planning Sen ice" Exphc · f unding for family planning began almost 1m·

mediately after the Griswold decision. In 1965. the War on Poverty's OHace of Economic Opportunity awarded the fir~t direct grant for family planning services. $8.000 for a proJ· ect m Corpus Christi. Texas In 1967. Congress mandated the prov1s1on or family planning services under the auspices of two other fed ral programs authorized by the Social Security Act the Social Services Program for Mothers and Chddren (T1tie IV A) and the Maternal and Child Health and Crippled

Children Act (Title V)

In 1968 President Johnson appointed the Committee o~ Population and Family Planning to assess t~:t:~e~~:~:e~t the federal family planning program . A year . .

Nixon successfully advocated for ~eg1sl:~10~~~~:1~~ae::n year Comm1ss1on on Popul~t•~;e r;~:mmaendations of this Future Congress preempt~ X f the Public Health Service comm1ss1on by passing Tit e d ~ ulat1on Research Act in Act. the Family Planning an op

late 1970

Initially, Title X was authorized at a level at which it would do~inate other federal sources of family planning. which it did ~nt1I I ?SS. During the 1970s. Congress also offered add1t1onal ince~t1ves to the states to fund family planning services for low-income women. In 1972. federal reimbursement to the states for providing family planning services under l1tles XIX (Medicaid) and Title IV-A increased to 90%, the highest match rate for any service. Title IV-A was replaced by Title XX of the Social Security Act in 1975. and the favorable 90% match carried forward. Family planning was not a central issue for Nixon, Ford. or Carter administrations. but this health program enjoyed considerable congressional support.

The election of Ronald Reagan in 1980 brought s1gmf1cant changes to the family planning effort. Restructuring federc11 ism was a major priority for President Reagan. who believed that the national government had usurped too many domestic responsibilities. Reagan also owed a political debt to the con servat1ve coalition. which opposed pubhc support for farruly planning services. 29

Title X. the categorical family planning program remained intact. much to the consternation of President Reagan While a number of family planning opponents linked the provision of contraceptive services with the abortion issue many members of Congress viewed family planning as the only nationa l and logical alternative to abortion " In I 1ct more than I oo members of Congress signed a letter to the president expressing their support for family planning despite

their differing views on abortion .

The efforts of the executive branch to d1m1nish the fed eral role in family planning persisted throughout the 1980s Political appointees were selected becau se of their pro I le positions. not their knowledge of reproductive health I he "squeal rule" was issued. requinng Title X-funded clinics to notify parents when they dispensed birth control to minors The gag rule was promulgated .. which barred any mention of

abortion in Title X-funded clinics.

Ttle X funding grew modestly under both the Clinton

d 1G W Bush administrations. but the rising costs of

an eorge · d d th small increases

contrac.eptive s~i~~:~e~e~~~~~~ :xr~~~a~ger c~ntributor to the in f.und1ng. ~e I . g effort than did Title X or other public national fam1 Y P ann~n . . t nt because Title X remains

d. ces This 1s 1mpor a fun mg sour . f' d I funding available to undocumented the only source o ie era

women. 31

PART VI • Policies and Issues

The passage of the ACA has major implications for con- traceptive services. originally mandating an expansion of the Medicaid program to cover all Americans living at or below 133% of the federal poverty level (FPL). (As we have seen in earlier chapters, the Supreme Court made the Medicaid ex- pansion optional and each state is deciding for itself whether to sign on.) Reproductive-age women in this income group have higher rates of unintended pregnancy than more affluent women. and under the Medicaid program. they will not have to pay co-payments for family planning services or suppl ies. ACA also allows states to expand Medicaid coverage for family planning for women and men above the 133% cut- off. The ACA extends private insurance coverage to uninsured individuals with incomes higher than 133% of the FPL. Beginning in 2014. these individuals will purchase insur- ance through the new state health exchanges. which will be required to offer a package of core health services. While most core health services were not spelled out in the legislation. maternity care was specified. Moreover. a recent Institute of Medicine report32 recommended that all insurance plans include contraceptive coverage without co-payments.

ABORTION At the beginning of the 19th century. abortion was legal in every state. The minimal regulations that existed were in- herited from English common law. Abortions performed before fetal movements or "quickening" did not constitute homicide and were, at worst. misdemeanors . Even if the abortion occurred after quickening. the patient hersel f was immune from prosecution. Abortion itself was not consid- ered immoral , but abortion procedures of the day were risky Popular methods included administering poison to pregnant women based on the "dubious theory that a dosage suffi- cient to kill the fetus might spare the woman" and surgical techniques. which were prone to high infection rates. Never- theless. an estimated one in every 25 to 30 pregnancies from 1820 to 1830 was terminated by induced abortion.33

The Rise and Fall of Abortion Prohibitions Three waves of antiabortion legislation swept the American states during the 19th century. The first ( 1821 - 1841 ). promul- gated by physicians concerned for women's health-and their own professional standing against midwives- garnered little

popular support and even less enforcement. The second wave ( 1846-1860) disregarded the notion of quickening and spec. fied jail sentences. but 1t did not deter abortion rates. Fina~ the third wave ( 1860-1880) led by Dr Horatio Storer of the AMA . led to the passage of 40 state ant1abort1on laws. ma~­ ing pregnancy termination at any point in gestation a cnme Noteworthy was the absence of religious involvement; 19th- century clergy were reluctant to address matters related to sex

For the most part. this legal situation persisted until the 1960s. Although illegal except to save the life of the mother (i .e .. therapeutic abortion). an estimated one 1n three preg- nancies ended in abortion during the first hair of the 20th century. 34 Over time. the rationale for therapeutic abortions expanded to include poverty during the Great Depression and psychiatric reasons during the 1940s and 1950s. Most abor- tions . however, were not therapeutic but illegal and unregu- lated . resulting in especially high morbidity and mortality fOI poor. rural. and minority women .

Two events in the 1960s attracted pubhc attention to the abortion issue. One was the large number of babies born witr missing or underdeveloped limbs because the ir mothe rs had taken the sedative thalidomide during pregnancy. The best- known case related to thalidomide was that of Sherri Finkbme. an Arizona mother of four and a telev1s1on persona lity. In 1962. Finkbine was unable to obtain a legal abortion m the United States despite the fact that she had discovered early in her fifth pregnancy that the tranquilizer that she had been taking was thalidomide. The second event was the rube 1a epidemic during 1962-1965. Like thalidomide. rubellacauses severe birth defects. and this epidemic alone produced 15.0CO infants with birth defects.JS

By the 1960s. abortion had become a relatively safe proce- dure Ironically, the medical profession. which had lobbied klr making abortion a crime a century earlier. became a pnncpa advocate for changing America's abortion laws. In 1967. me AMA issued a formal statement favoring liberalization. Nne· teen states followed its lead. making abortion less restnc!M than it had been in decades .3 6

No state repealed any criminal abortion statute between 1971 and 1973. On January 22. 1973. however. theUS Supreme Court handed down the Roe u. Wade decision that effectively struck down every American abortion law. libera and restrictive. Although Roe u. Wade legalized abortion throughout the United States. it did not unify public opinion.

-·

Activity by interest groups mtens1f1ed a . one of the most content10 . nd abortion became

us issues of I t 21st-century American politics This ti a e-2~t~- and early- notably Catholics and evan ehc me. religious groups. involved g al Christians. were heavily

Abortion Policy , ince 1973 Roe u WuJe h Id that a womans was const1tutionally protected ngh~ to choose abortion This decision proh1b1ted any 1/s ta;t o her right to privacy. fering with that nght e cept t ve o . government from inter· formed by a licensed phys1c1a~ r~qu1re t~e procedure be per- the state had only the po · uring t e second trimester. . d wer to regulate abortion in ways de

s1gne to pr rve and prot t . . ec a womans health. In the third tnmester. th prot t1on of fetal hfe became a compellin rea- son to JUst1fy mttrference with the nght to choo b g sea ort1on .

I T~e abortion debat has played out in both the JUd1c1al and eg1s ative ar~s Smee 1973. there have been more than 30 US Supreme Court decisions concerning abortion. legislative re- sponses to abortion . both at the federal and state levels. have also been numerous and far-reaching. The ACA raises. once again. an evergreen controversy. the question of public funding.

In 1976. Congr sman Henry J Hyde successfully amended the appropriations act for the then Department of Health Education. and Wellare. now the Department of Health and Human Serv1c s Th Hyde Amendment prohibited federal monies from being used to fund abortions "unless the life of the mother wcr endangered 1f the fetus were earned to term ." While the Hyde Am ndment was enjoined almost immedi· ately after its ~ssag . 1t spawned a number of 1ud1c1al cases.

Two important precedents were set m 1980 for low-income women see mg abortions In Harris u McRae. in a 5-4 rul- ing. the Court upheld the Hyde Amendment Although this amendment applied to all federal funding. its major effect was to cumul federal Med1ca1d funding for abortions for poor women . In W111tams u Zbaraz. the court decreed that a state did not have to provide reimbursement for medically neces· sary abortions even when federal funds were unavailable.

In June 1992. the Supreme Court handed down Planned Parenthood of Soulheastern Pennsyluania u. Casey. reaffirming 5-4 the fundamental holding of Roe u. Wade: that a woman has a const1tut1onal nght to obtain an abortion 1f the proce· dure 1s performed before fetal viability. However. the majority modified the nght to privacy. The original Roe decision had

CHAPTER1 9•R . eproducll\C I lc,1hh

~ropounded a hard-and-fast . interfere in the first tr· JUd1c1al rule: The states may not

. 1mester Now c 1 ;:v1th a more lenient standard·· Th . asey rep aced the rule undue burden" on . estate could not impose an

women seeking an abortion.

Abortion and the Passage of Health Reform 20lO Given the prolong d · d" . . ing abortion .t . e JU icial _an d legislative conflict surround

tant dunng ~~e i~O~;_s~~~~s~~~l~~a~atr~1~~~~t: b~~ae~~~~Ppoorl supporters and oppo ts f b . · iar The A . nen . o a ort1on restrictions was lam1I t . mencan Council of Catholic Bishops declared that axpar~rs3;hould not have to subsidize the destruction or hu

man I e. Planned Parenthood and other pro choice groups responded t~at employer-based insurance already covered abortion services so that not including abortion would repre sent a step backward for women_ la

In the e~d. only one Republican in Congress supported the leg1slat1on. To pass the ACA. the Democratic congres s~onal leadership and the president had to make conces s1ons to pro-life Democrats. Congressman Bart Stupak and a dozen Democratic holdouts simply refused to commit their votes until there was a pledge to not use tax dollars to lund abortions.

Abortion Provisions of 2010 Health Reform In order to understand how abortion 1s treated 1n the ACA 1t is necessary to review key prov1s1ons of the leg1slat1on These are summarized in Table 19-2. Many of the ACA's prov1s1ons go into effect in 2014 and beyond. However. a temporary, national high-risk pool to provide health care coverage to in dividuals with preexisting cond1t1ons had to be estabh~hed within 90 days of enactment. In July 20 I 0. the Obama admin istration banned most abortion procedures from being cov ered by this pool after a handful of states indicated that they would allow abortion coverage.

By 20 14. citizens and legal residents. with some excep tions. will be required to have qualifying health care coverage or pay a penalty. Similarly. employers with 50 or more rm ployees will have to offer health care coverage. or a tax will be levied. Employers with 200 or more workers must enroll their employees in health insurance plans that they ofler, although employees may opt out of this coverage.

PART Vl • Po licies and Issues

TABLE 19-2 Abortion Provisions in 2010 Health Reform Law Provision Year to Be

Implemented

Abortion not covered in temporary high-risk pools.

Abortion prohibited from being considered an essential medical service.

2010

2014

2010-2014 No federal funding to purchase coverage for abortion beyond condition s specified by the Hyde Amendment.

With state health insurance exchanges, payments for abortion coverage must be segregated from other funds .

2014

For insurance plans offering abortion coverage, the actuarial value must be calculated without including the savings in the calculation .

20 14

Insurance plans that offer abortion coverage cannot discriminate against providers who do not provide abortions.

2014

Under the ACA. public programs will also be expanded. By 2014. states may expand Medicaid to include all eligible individuals with incomes up to 133% of the FPL. Because employers and individuals may pursue coverage through dif- ferent plans and the fact that state Medicaid plans differ. the new law recognizes that covered services may vary. However. plans must offer an essential health package. The ACA specif- ically prohibits abortion from being considered as part of the essential health benefits package, but it does not stop there. The new law requires that no federal funds can be used to purchase coverage for abortion services beyond limited condi- tions specified by the Hyde Amendment (necessary to save the life of the woman , rape. or incest).39

The ACA also creates state-based health benefit exchanges where individuals and small businesses with up to I 00 em- ployees can purchase qualified coverage. By 20 I 7. states may allow businesses with more than 100 employees to participate in these exchanges. Not surprisingly. the health exchanges also have abortion restrictions.

Individual states are permitted to prohibit insurance plans that participate in their health exchanges from providing any coverage for abortions. If states do allow abortion coverage beyond the conditions permitted by the Hyde Amendment. then each insura nce pla n that offers abortion must create accounts that separate premium payments for abortion from premium payments for coverage of all other health services. Women who opt for abortion insurance will have to write

a separate check for that coverage. Insurance plans that do cover abortion must also estimate the actuarial value of cover· mg abortions by taking into account the cost of the abortion benefit (valued at no less than $1 per enrollee per month) and cannot take into account any savings that might be reaped as a result of the abortions (e.g., savings from not re1mburs· ing for prenatal services and childbirth). Moreover. insurance plans that participate 1n the exchanges are proh1b1ted from discriminating against any provider unwilling "to proVlde. pay for. or refer for abortions."-40

AMERICA HEALTH I CENTU RY

REPRODUCTIVE THE 21ST

American reproductive health politics in the early 21st centcy are contentious and partisan. Consequently, policies m tns arena are often volatile and controversial.

Reproductive health has become increasingly politicized over the last four decades. The abortion debate overwhMJS all reproductive health politics. For example. Congress has not managed to reauthorize Title X the categorical fam ily plan· n ing legislation. since 1985. although this leg1slatJon express~ forbids the inclusion of abortion . Gender politics are ever pres· ent; current contraceptive technology is women-<:entered.and women have a singular capacity to become pregnant.

These policies and politics a re se . of contrad1ct1ons The vast t against a backdrop

maiority of A sexually active by their late te mericans are marriage is 26 y ars Neverthee~:· yet ~her average age of ment and many local school d1stri::; :o~ti~~=rt~ govern- abstinence unt1l· mamage curricula that excl d promote cept1ve mformat1on Most Americans hav u e cfontra- f I

e a pre erence or on y two ch1ldr n. yet the average Ame

f I f rican woman

is ert1 e or more than three decades A · mericans practice contraception I ss successfully than thei r Western Euro- pean count rparts . r porting that nearly half of their pre - nanc1es ar unintended 41 Fully half of Americans identJy themselves s pro hfe or antiabortion. yet if current rates

C c .. ;ly se ducat1on. contraceptive practice . and the demand for abortion arc integrally related Each . however. 1s addressed by s parate public policies. thus promot- ing fragmentation at the service level There 1s no clear national policy to reduce unintended pregnancy. This chapter h s explained how thi s policy fragmentation occurr d h1stoncally and how 1t continues today. Even the recent In t1tut of M d1c1ne report recommendations for womens hu th calling for full funding of contraceptive seMces under ACA neglected to mention linkages to sex educat on nd abortion 4

The pol es that emanate from reproductive health poli- tics aff ct low incom women relatively than more afflu- ent worn n Low income women are disproportionately H1span c nd nonwhite They are more likely to rely on publicly financed family planning clinics. so they are subiect to pohcy restr1ct1ons and funding cutbacks. Pubhc funding for family planning services lags far be- hind th documented need for contraceptive services. a fact reflected 1n the higher rates of unintended pregnancy for low income and minority women. These trends are

exacerbat d by economic downturns. Not surprisingly. low-income and minority women

have far higher abortion rates than do more affluent

CH APTER 19 • Rcproducti\c I h:ahh

persist. one in three American least one induced abort· b women will experience at

. . ion y age 45 The historical unf Id . r

the United Stat h o ing o reproductive health policy in are ofte es as meant that reproductive health services th n segregated from other health services Indeed more ~n a quarter of the 20 million American women who ob

tain contraceptive services from a medical provider receive care from a pu.blicly funded family planning clinic. not from a gen.era! me?ical practice.42 Specialized clinics that deliver abortion services find it difficult to be reimbursed for offering contraceptive services. Because they are controversial sexual ity and abstinence education are seldom integrated with other types of health education.

women in spite of the fact that public abortion fund ing has been curtailed. Women living at or be ow the FPL are four times as likely to experience abort1or as women living at or above 300% of the FPL fhe abor tion rate for Hispanic women 1s twice as high as that for non-Hispanic white women. and the rate for African American women is three times as high as the rate for white women. Over time. overall abortion rates have been dropping while racial and 1rcome disparities in abortion rates have been increasing.44

The passage of the ACA means that more women tha'l ever before will be affected by public policy either through the Medicaid program or through mandated statr. hcdltt> insurance exchanges. Given the stringent requirements for insurance companies. 1t is unlikely that abortion coverage will even be offered for women whose employers part1c1 pate in the state health insurance exchanges. the Medic aid abortion restrictions will continue unabated On the contraceptive front more women th an ever should have access to these services It 1s likely that they will not fdce co-payments fo r family planning services and birth control supplies. at least in the immediate future Nevertheless we should not expect the controversies roiling Americar reproductive health politics to subside

PART VI • Policies and Issues

STUDY QUESTIONS I. How are sex education. family planning. and abortion related?

2 . Why did President Obama sign a new law prohibiting ACA funding for abortions. one of the most common surgica procedures in the United States?

3. Explain the passage of the Comstock laws. their legacy. and their legal demise.

4. During the 19th century, all states except Kentucky criminalized abortion. yet abortion rates increased. What imp i· cations did this have for public policy?

5. How does ACA affect sex education. contraception. and abortion services in the United States?

6. How much money has the federal government invested in abstinence·only education? Has 1t been a good use of public funds?

7. What programmatic and political results can be expected from the federal government's dec1s1on to fund both abstinence-only education and comprehensive sexuality education under ACA?

8 . What federal program provides the most money for family planning services for low· income women? Why 1s Title X the only source of public family planning funding for undocumented women in the United States?

9. How common is induced abortion in the United States? Why do you think American rates are higher than Western European rates?

I 0. What predictions do you have for reproductive health politics and policies in the future?

ENDNOTES I. Jost. 20 IO.

2 . Guttmacher Institute. 2009.

3. Meier and Mcfarlane. 1994

4. Mcfarlane and Meier. 200 I

5 . Morone. 2003.

6. Moran. 2002: Reed. 1978

7. Moran. 2002.

8. Irvine. 2002 (56% of adults supported sex education in 1970); Moran. 2002. p. 208 (82% supported 1t in 1980). 9. Donovan. 1998; Moran. 2002

10. Donovan. 1998.

11 . Darroch. Landry. and Singh, 2000.

12. US House of Representatives. 2004; Moran. 2002

13. Rector. 2002.

14. Trenholm et al.. 2007.

15. Doan and Williams. 2008.

16. SIECUS 2009 o I . oan and McFarlane. 2012 1. McKay and Barrett 2010 K .

18. Brod e 1994 Re d. . ost and Henshaw. 2012 e . 1978. ·

19. Brode 1994

20. lb d

21 . R d 1978 Morone. 2003.

22. Jaffe 1973

23. lbd

24 . US u One Package (86 F 2d 73 7). 2S . Mcrartane and Meier. 200 I.

26 . lbd

27. JaHe 1973

28 . JaHe 1973 Reed 1978

29 . Mcfarlane and Meier 1993. M K · · c eegan, 1992. 30. Mc 'eegan 1992

31. Mcfarlane 2006

32. Institute of Medicine, 20 I I.

33. Mohr. 1978. Tribe, 1992. p. 29: Sheeran. 1987

34. Lu' r 1985

JS. Tnbe 1992

36. Sh ran 1987. I nbe. 1992.

37. US Confer nee of Catholic Bishops. 2009

38. Planned Parenthood Federation of America. 2009.

39. Kaser Family Foundation. 2010. p. 2.

40. Ka!Ser Family Foundation, 2010. p. 6.

41 . Finer and Henshaw. 2006

42. Guttm cher Institute. 20 Io. 43. Institute of Medicine. 20 I I.

44. Guttmacher Institute. 2009

• Reproducti\ c I lcalth ,. =

---Brodie J F 1994 Contracept on and Abortion in Nineteenth Century America. Ithaca. NY: Cornell University Press Darroch J E D J Landry, a· d S Singh. 2000. "Changing Emphases in Sexuality Education in US Secondary School

1988-1999 Family Pia· nmg Perspectives 32(5) 204-11. 265.

Doan. A. E .. and D. R. Mcfarlane. 2012. "Saying No to Abstinence Education: An Analysis of State Dec1s1on·Making • Publius: The journal of Federalism 42(4): 613.

Doan. A. E .. and J. C. Williams. 2008. The Politics of Virginity: Abstinence in Sex Educatton Santa Barbara. CA: Praeger Press.

Donovan. P. 1998. "School-Based Sexuality Education: The Issues and Challenges." Famtly Planning Perspectives 30(4) 188-93.

Finer. L.B .. and S. K. Henshaw. 2006. "Disparities in Rates of Unintended Pregnancy in the United States. 1994 and 200 I." Perspectives on Sexual and Reproductive Health 38: 2. 90-96 .

Guttmacher Institute. 2009. "An Overview of Abortion in the United States." Retrieved from http·//wwwguttmacher org/.

Guttmacher Institute. 20 IO (May). "Facts on Publicly Funded Contraceptive Services 1n the United States." Retr eved from http://www.guttmacher.org/.

Institute of Medicine. 2011. Clinical Preventive Services for Women . Closing the Gap Washington. DC National Academies Press.

Irvine. J. M. 2002. Talk about Sex: The Battles over Sex Education in the United States Berkeley: University of Cahfom a Press.

Jaffe, F. S. 1973. "Public Policy on Fertility Control .. Scientific American 229 : I, 17-23 .

Jost. K. 2010. "Abortion Debates: Should the States Enact New Restrictions? " CQ Researcher 20 31. 1-34.

Kaiser Family Foundation. 20 IO Uune 18) "Focus on Health Reform. Summary of New Health Reform Law "

Kost. K .. and S. Henshaw. 2012. U.S. Teen Pregnancies. Btrths and Abortion. National Trends by Age, Race and Ethnicity. New York: Guttmacher Institute. Retrieved from http://www.guttmacher.org/pubs/USTPtrends08 pdf

Luker. K. 1985. Abortion and the Politics of Motherhood. Berkeley: University of California Press

Mcfarlane. D. R. 2006 (December) "Reproductive Health Policies in President Bush's Second Term Old Battles and New Fronts in the United States and Internationally." journal of Public Health Policy 27 4

Mcfarlane. D R .. and K. J. Meier. 1993. "Restructuring Federalism : The Impact of Reagan Pol1c1es on the Family Plann r.g Program." journal of Health Politics. Policy. and Law 18(4) 821-50.

Mcfarlane. D. R .. and K. J. Meier. 200 I The Politics of Fertility Control Family Planning and Abortion Pol1c es m tne American States. Washington. DC Congressional Quarterly.

McKay A .. and M. Barrett 20 I 0. "Trends m Teen Pregnancy Rates from 1996-2006 A Comparison of Canada Sweden USA. and England/Wales.' Canadian journal of Human Sexuality. 19( 1-2) 43-52

McKeegan. M. 1992. Abortion Politics.· Mutiny in the Ranks of the Right. New York Free Press

Meier. K. J .. and D. R. Mcfarlane. 1994 "State Family Planning and Abortion Expenditures Their Effect on Public Health." American journal of Public Health 84(9): 1468-72.

Mohr. J.C. 1978. Abortion in America. The Origins and Evaluation of Nattonal Policy. 1800-1900. New York Oxford University Press.

Moran. J. P. 2002. Teaching Sex· The Shaping of Adolescence in the 20th Century. Cambridge. MA Harvard Unl\ers ty Press.

Marone J A 2003 Hellftre Na11on New Haven. CT: Yale University Press.

Plann~d ~ren~hood F deration of America. 2009 Uuly 27). "Abortion Care Coverage and Health Care Relorm Getting t e acts tra ght Retneved from http://www.plannedparenthood.org/stlouis/images/st-louis-reg1on/myth vs fact pdf -

Rector R 2002 The E//ec11ueness of Abstinence Education Programs in Reducing Sexual Actiuity Among Youth Wash gton DC Th Heritage Foundation (April 8). http://www.heritage.org/research/reports/2002/04/the- effectro n of abstinence education-programs

Reed J 197 from Public Vice lo Prruate Virtue. New York: Basic Books. Sheeran P J 19 7 Women Soc1ely, lhe State. and Abortion: A Structuralist Approach. New York: Praeger SIECUS 2009 St l Profiles A Portrait of Sexuality Education and Abstmence-Only-until-Marnage Programs m the

States F cal ar 2009 ed1t1on Retrieved from http://wwwsiecus org/index.cfm?fuseaction=Page v1ewPage& pa Id 7&parentlD--478

Trenholm C ct al 2007 Impacts of Four Tiiie V. Section 510 Abstinence Education Programs · final Reporl Mathcmat ca Policy Research , Inc .. MPR Reference No. 8549-110. Retrieved from http://www.mathemat1ca mpr com pub t ons/PDFs/1mpactabstmence.pdf.

Tnbe l H 1992 Abortion The Clash of Absolutes. New York: Norton.

us Hous of Representatives 2004 The Content of Federally Funded Abstinence-Only Programs Committee on Government Reform - Minority Staff. December. Prepared for Representative Henry Waxman.

US Conf r nee of Catholic Bishops. 2009 (December 22). Letter to U.S. Senate. Retrieved from http ://old usccb org/ comm archivcs/2009/09 267.shtml.

Despite children's unique vulnerabilities, children's health programs are patchy and offer incomplete protection. This chapter outlines th e programs that collectively, and imperfectly, address the health concerns of this popu- lation, and it explores the advocates, interests. stakeholders. and values that combine to create both innovation and stalemate in child policy.

Child health policymakers contend with a paradox. On the one hand. in the eyes of the public. children have an uncon- tested cla im to protection from harm and to public generos- ity in the face of calamity. The charity world is replete with organizations like the March of Dimes. which helped fund the development of the polio vaccine. and the Make-A-Wish Foundation. which provides opportunities for terminally ill chil- dren to experience an adventure of their dreams. Children have been a priority in the development of government-sponsored social safety net programs starting with the creation of a fed - eral Children's Bu reau in 19 12. The Sheppard-Towner Act, a short- lived federal program that dispersed funds to the states to reduce infant mortality and improve child health. was en - acted in 192 1-long before any other programs to improve access to health care. 1 The current array of health coverage programs available to low-income chi ldren-the Medicaid and

CHIP programs-has ensured that proportionately more ch dren than work mg-age adults have public health coverage. As a consequence. fewer children than adults will be affected by the 1mplementat1on of expansions in the Obama adm1nistratJ011s Affordable Care Act (ACA).

On the other hand. the well-being of ch ldren. as measurea by critical yardsticks. remains abysmally low both 1n compar.- son to groups within the United States. such as the elderly. a'Xl in international comparisons. Smee 1974. children have been the poorest demographic group in the United States. 2 In 2ff!J 18.6% of US children under the age of 19 lived 1n poverty. com- pared to 9 8% of seniors age 65 and over. The US infant mor· tality rate was 7 per 1.000 births compared to 5 per UXXlfol Cuba. 3 per 1.000 for France. and 2 per I 000 for Singapore!I" one study of 26 wealthy nations the United States ranked 2001 in death rates for children between I and 14 years old.s

Unlike the elderly where the Socia Security system has pro- vided basic mcom security for many who would otherwise live in poverty. children in the United States have no guaran- teed source or income support Other than public education. programs that targ t resources to children are not universal but rather a patchwork with access limited to children who meet specified ehg1b hty criteria The programs do damage control for those hvmg m pov rty or teetering on the brink but do not attack the und rlytng problem of poverty itself. Children do not vote and cannot advocate for themselves. They are often the 1nvis1ble and collat r I damage in policy debates that are fought out over resources that would go to their parents. As one child advocat put 1t. "Our legislators. even the best of them. addr ss ch ldren's issues 1n terms of the adult stand- ing next to the duld. not tn terms of the need of the child."6 Children come s a package deal-with their parents-and that increases ambivalence toward pohcy proposals not Just among legislators but also with the public at large. This chap- ter creates a framework for understanding debates in the child health-policy arena first . we start with the social context for political contests over child health resource needs and fam- ily rights and r spons1b1l1t1es Second. we describe the basic architecture of the maior public programs serving the health needs of children 1 h1rd. the chapter reviews the key stake· holders in child h alth · pohcy debates. Finally. we set fo:th some of the debates likely to command policymaker attention at the state and fed ral I vels for the foreseeable future.

THE H LLENGES OF CHILD HEALTH POLICY

-. - .we the health of children must be effected Strategies tu '" .,, d t nlist the part1cipa- through family support systems a~ mus e:s to basic medical tion of parents or guardians Prov1 '"~~~~ample requires par- care through th Med1ca1d program .d through the process ents to complet an apphcat~on an11r::nt. Seven to eight mil- of elig1b1hty determination ~n b~n~out not enrolled m Medicaid hon children ar currently e ig1 e treach efforts-a testa- or CHIP despite aggressive state ou r

t to the challenges of reaching children . men ene on behalf of children can

In add1t1on . efforts to interv d . acy rights of families . . . st1ons aroun priv . d

raise serious que have the right to take risks an Adults in most s1tuat1ons f olhardy choices. The safety make what others may see as o d d on the one side by of children is a contested area guar e

parents who believe they know what 1s best for their children and challenged by state authority when a child 1s perceived to be in peril. When a family's child-rearing philosophy runs counter to current public health or mental health norms or standards, at what point is 1t appropriate for the state to m tervene? We allow families to refuse otherwise requ11ed 1m munizations for their children for rel1g1ous reasons . but 11 a child's life is endangered through a parent's refusal to allow medical treatment. doctors can seek a court order to override the family's wishes. We tolerate spanking as a form of paren- tal discipline although we require. by law. ped1atric1ans and other health professionals to report to authorities bruises on a child that raise a suspicion of child abuse . The Imes between parental authority. the state's interests. and the child's well being are often difficult to negotiate.

Child health policies are also complicated by the frequent participation of multiple professionals and agencies It can be difficult to treat health problems in 1solat1on when they are a part of a complex array of problems associated with poverty. It is difficult to treat a child for lead poisoning for example. if the child's family cannot afford to move from an apartment with peeling lead paint and the landlord has made no remediation efforts. A child with disab1ht1es may need on going treatment from a therapist as well as routine medical care: the family may need assistance paying for specialized medical equipment or in finding an appropriate day care set ting. Schools have. of necessity. become involved m ensur ing the health and safety of students. The array ol programs and services targeted to children has become so complex and involves so many departments and agencies that at least 16 states have established Children's Cabinets made up of ex ecut1ves across state agencies to better coordinate resource~ and ensure that services targeting the most needf~ and at ns children are being delivered in an effective and e ic1ent man

Typical'y these cabinets include executives from depart ner. f h .alth mental health . education. child care. income ments o ~ . . services youth development. labor. support. chil~ an~ fam1I~ Ma~y Children's Cabinets also and iuvenile JUst1ce serv1~es. f k community based stake· have seats for representatives o ey

8

holder groups. . . . d 's health policy is the A final cha_llenge spec1:1~h~~d c~~lal~~ -preteen and adoles

extent to which is~ues o ht up m the American cul cent health in part1cular-ar~~au~enters for Disease Control ture wars (see Chapter 19). h et 70% of adolescent mortality and Prevention (CDC) states t a

Despite children's unique vulnerabilities. children's health programs are patchy and offer incomplete protection. This chapter outlines the programs that collectively, and imperfectly, address the health con cerns of this popu- lation . and it explores the advocates. interests, stakeholders. and values that combine to create both innovation and stalemate in child policy.

Child health policymakers contend with a paradox. On the one hand. in the eyes of the public. children have an uncon- tested claim to protection from harm and to public generos- ity in the face of calamity. The charity world is replete with organizations like the March of Dimes. which helped fund the development of the polio vaccine. and the Make-A-Wish Foundation. which provides opportunities for terminally ill chil- dren to experience an adventure of their dreams. Child ren have been a priority in the deve lopmen t of governmen t-sponsored social safety net programs starting with the creation of a fed- eral Children's Bu reau in 1912. The Sheppard-Towner Act. a short-lived federal program that dispersed funds to the states to reduce infant mortality and improve child health. was en acted in 1921-long before any other programs to improve access to health care. 1 The curren t array of hea lth coverage programs available to low-income child ren- the Medicaid and

CHIP programs-has ensured that proportionately more chd dren than working-age adults have public health coverage AH consequence. fewer children than adults will be aHected by lhc implementation of expansions in the Obama adm1mstrat1011 S Affordable Care Act (ACA).

On the other hand. the well-being of children. as musurtd by cnt1cal yardsticks. remains abysmally low both in compi son to groups within the United States. such as the eld~ a in international comparisons. Since 197 4. children have b the poorest demographic group in the United States.

1 In 2009

18.6% of US children under the age of 19 lived 1n poverty c pared to 9.8% of seniors age 65 and over.3 The US infant mot tality rate was 7 per 1.000 births compared to 5 per I CXXJ}OI Cuba. 3 per 1.000 for France. and 2 per 1,000 for S1ngapolt one study of 26 wealthy nations. the United States ranked 2fth in death rates for children between I and 14 years old i

Unhke the elderly, where the Social Security system has pro- vided basic income security for many who would otherwise hve m poverty, children in the United States have no guaran- teed source or income support. Other than public education. programs that target resources to children are not universal but rather a patchwork with access limited to children who meet spec1r1ed elig1b1lity criteria. The programs do damage control ror those hving in poverty or teetering on the brink but do not attack the underlying problem or poverty itself. Children do not vote and cannot advocate for themselves. They are orten the mv1s1ble and collateral damage in policy debates that are fought out over resources that would go to their parents. As one child advocate put it "Our legislators. even the best of them . address children's issues in terms of the adult stand- ing next to the child . not in terms or the need of the child."6

Children come as a package deal-with their parents-and that increases ambivalence toward policy proposals not 1ust among legislators but also with the public at large. This chap- ter creates a framework ror understanding debates in the child health·policy arena First. we start with the social context for political contests over child health resource needs and fam- ily rights and responsibilities Second. we describe the basic architecture or the major public programs serving the health needs of children . Third. the chapter reviews the key stake- holders in child health policy debates. Finally. we set fo~th some of the debates likely to command policymaker attention at the state and rederal levels for the foreseeable future.

TH E CHALLENGES OF CHILD HEALTH POLIC_Y_ S .ateg1es to improve the health ;["children must be eff~cted through family support systems and must enlist the_ part1c1?a- t1on or parents or guardians. Providing access to basic _med1c~I care through the Med1ca1d program. for example. requires pa - ents to complete an application and go through the. p~ocesls or ehg1b1hty determination and enrollment. Se~~~ t_o ~e;i::~ hon children are currently. eligible but not e~roff~rt~-a testa- or CHIP despite aggressive state ou~reac ,e ment to the challenges of reaching children.

behalf of children can In add1t1on. efforts to intervene ~n · hts of families.

t s around privacy ng raise serious ques 10~ he ri ht to take risks and Adults in most s1tuat1ons havfe \hardg choices. The safety make what others may see as

00 d ~ on the one side by

or children 1s a contested area guar e

CH APTER 20 · Children

parents who believe they know what is best for their children and challenged by state authority when a child 1s perceived to be in peril. When a family's child-rearing philosophy runs counter to current public health or mental health norms or standards, at what point is 1t appropriate for the state to in· tervene? We allow families to refuse otherwise required 1rn munizations for their children for religious reasons. but 1f a child's life is endangered through a parent's refusal to allow medical treatment. doctors can seek a court order to overnde the family's wishes. We tolerate spanking as a form of paren· tal discipline although we require. by law, ped1atric1ans and other health professionals to report to authorities bruises on a child that raise a suspicion of child abuse . The Imes between parental authority. the state's interests. and the child 's well being are often difficult to negotiate.

Child health policies are also complicated by the frequent part1c1pation of multiple professionals and agencies It can be difficult to treat health problems in 1solat1on when they are a part of a complex array of problems associated with poverty. It is difficult to treat a child for lead poisoning, for example, if the child's family cannot afford to move from an apartment with peeling lead paint and the landlord has made no remediation efforts. A child with disabil1t1es may need on going treatment from a therapist as well as routine medical care: the family may need assistance paying for specialized medical equipment or in finding an appropriate day care set ting. Schools have. of necessity, become involved in ensur ing the health and safety or students. The array of programs and services targeted to children has become so complex and involves so many departments and agencies that at least 16 states have established Children's Cabinets made up of ex ecutives across state agencies to better coordinate resources and ensure that services targeting the most needy and at risk children are being delivered in an effective a~d efl1c1ent man ner Typical!y these cabinets include executives from depart me~ts of health. mental health. education. child care. income

Port child and family services. youth development, labor. sup · Ch.Id n's Cabinets also and juvenile justice services. Many I re b d stake· have seats for representatives of key community· ase

8 holder groups. h A final challenge specific to children's health pold1cyd1s It e

. . f child health-preteen an a 0 es extent to which is~ues 0 in the American cul · cent health in part1cular-ar~~au~:~~!s for Disease Control ture wars (see Chapter 19). th et 70% of adolescent mortality and Prevention (CDC) states a

PART VI • Policies and I ssues

and morbidity 1s linked to six factors: unintentional and in- tentional injury. drug and alcohol abuse. sexually transmitted diseases and unintended pregnancies. tobacco use. illnesses resulting from inadequate physical activity. and inadequate dietary patterns.9 All six of these categories are related to behavioral factors. Two-underage drinking and drug use- cross over into illegal activity. Some-sex outside of mar- riage. drinking. and drug use-defy religious or ethical values held by many in society. As a society. we are divided about whether to treat illegal drinking and drug use by youth as a public health problem or a crime. and we are ve ry divided on what message to give young people when providing sex education. Heated debates surround sex education. abortion rights . parental notification rules. mandatory sentencing for drug possession. and. more recently. the availability of soft drinks and "junk food" in schools.

To counter some of these spec ial cha ll enges. th e cu lture of the child health community offers some strengths that policymakers can build on. The child health delivery sys- tem and policy arena have always integrated public health and prevention strategies with acute medical care more successfully than other areas of medicine. Abraham Jacobi , considered the founding father of the field of pediatrics. had a substantial impact on infant mortality by teaching parents (and other physicians) to boil milk used for feed- ing infants-a practice thought to save countless numbers of infants' hves. 10 The federal Children's Bureau. founded in 1912 worked with national women's organizations around the United States to improve the accuracy of vital statistics, recording births and infant deaths. in order that health and health education resources might be targeted to high infant death areas. Prenatal and infancy clinics funded under the Sheppard-Towner Act of 1921 were staffed by physicians a~~ public health.nurses who provided preventive screening v1s1ts and taught illness prevention and infant care long be- fore t~ese preve~tive strategies had been incorporated into the private practice of medicine."

The alliance between pediatric providers and government public health agencies has frequently come under attack by forces hostile to government intervention i n the health care system. When the Sheppard-Towner Act was under consid- eration for reappropriation in 1926 the most vo 'f r lobby· h · c1 erous 1orce . ing against t e act was the American Medic I A .

t1on (AMA). which attacked the program w·1th a f ~soch1a­ a re rain t at

wi ll sound familiar to modern ears. The program was "an im· ported socialist scheme" of "state medicine .. 2 In the original debate in Congress. the bill was characterized as "govern- ment superv1s1on of mothers. (and] Government care and maintenance of infants."

13

In the face of strong AMA opposition. the Sheppard- Towner Act was repealed in 1929 Nevertheless. prevention- and population-based public health measures have remained a strong feature of government-funded children's health pro- grams. ranging from the Early Periodic Screening. Diagnosis. and Treatment Program (EPSDT) within Med1ca1d. to infant screening programs funded through the federal Maternal and Child Health block grant program Cutting-edge strategies such as the patient-centered medical home model. forged as a strategy to improve care for children with complex medical needs. have caught the attention of policymakers and prov1d· ers and are being tested as models to improve primary care services across all populations.

CHILD HEALTH SAFETY NET INFRASTRUCTURE Child health policy stands on three pillars the Medicaid pro· gram. CHIP. and the Title V Maternal and Child Health (MCH) block grant program. These monumental achievements en· acted by Congress serve as the legislative and ins!ltullonal framework for a complex array of children's programs and services. All three programs function as a sometimes uneasy partnership between the federal and state governments

Medicaid 1s an entitlement program. meaning that all 1nd1· viduals who meet eligibility criteria must be enrolled if they apply, and consequently. budgetary demands on states and the federal government vary with the ups and downs or the economy and the changes in the number of children aid families facing economic hardship. CHIP 1s a bled gra"t program. meaning that while the federa government shares a percentage of each child's enrollment costs. the total fed· eral contribution 1s capped. in contrast to Medicaid stateS may limit enrollment in the CHIP program. The MCH is a so a block grant although, in this case. each state's allocation formula is based on the state's share of children 1ving in pov· erty. Th.e sta~es administer each of these programs and ha1e some d1scret1on in the allocation of funds The dollars from Washington give the federal government ~versight authont',I

~=========--~~= CHAPTER 20 • ( htldren In@ and considerable leverage with the states t1ons pl'OVlde details on these programs The following sec-

Medicaid Since its inception m 1965. Medicaid has beco . ingly important source of health insuranc me an increas- mcome children (see Chapter 9 for mo e dcoverlage for low-

) re eta1 s about the

program Med1ca1d was originally intended t h . I d I

o meet t e medi- ca nee so children and parents receivi·ng If b .

dd we are enef1ts

in a iuon to a small number of other sel t I . . ec popu at1ons In the 1980s and 1990s. ehg1b1hty was expanded to include l~w- 1~come pregnant women and children who were not in fami lies receiving welfare benefits In addition. a small number of states had sought Medicaid waivers to expand health insur- ance to children l1vmg above the federal poverty level (FPL). with six states granting coverage to children up to twice th FPL.1c As a result of these expansions. by the m1d- I 990s th: number ol poor children who were uninsured had declined substantially is Between 1987 and 1996. the proportion of children under 18 covered by Med1ca1d increased from 1 s to 22%.16

Expanding Medicaid ehgibihty during this period had a sub- stantial impact on health care access for low-i ncome children. Compared to low·mcome uninsured children . children with Medicaid w •re substan tially more likely to have a usual source of care. ol seeing a physician over the course of a year. and of having no unmet health care needs 11 While performance on these measures was somewhat poorer compa red to low- income children with private insurance. the differences were small However. Medicaid has historically faced some signifi- cant challenges in enrolling and ensuring access to ca re for children Due to low Medicaid reimbursement rates. some ar- eas of the United States suffer from insufficient numbers of prOVtders to meet the needs of Medicaid patients. The program has been st1gmat1zed as ··welfare" care. adding to recruitment and enrollment d1fhcult1es.18 Medicaid also faces challenges due to its overall costs States struggle to meet the financial obhgatJons that Med1ca1d . as an entitlement program. places on them-escalating Medicaid costs are constantly referred to

as the program that ate the budget When Republicans won control of Congress in 1995. they

promptly voted to repeal the original Medicaid legislation and replace 1t with a block grant program that would have lim- ited federal contnbuuons-but the legislation was vetoed by

President Clinton 19 Inst d . . and gave rise to the I t e: . Med1ca1d expansions continued specifically to ch.Id a es federal insurance initiative targeted ance Program . or i(S;~~IP.the (State) Children's Health Insur

The (State) Children's Health Insurance Program (S)CHIP In 1997 . th ... Just two years after Republicans had tried to repeal

e ?ngina l Medicaid statute. Congress enacted SCH1p10 as T1tle.XXI of the Social Security Act Authorizing close to $40 b1ll1on t? be spent over a period of I 0 years. CHIP repre· sented the. single largest expansion of public health insurance coverage since Medicaid was created in 1965

Passage: Bipartisan a11d Co11te11tiou.\ CHIP was designed to extend public coverage to children whose families earned too much money to qualify for Medicaid yet lacked access to employer·sponsored health 1n· surance. 21 In general. this meant children in families earning between 100 and 200% of the FPL. although states that had already undertaken Medicaid expansions for ch ildren had the authority to increase eligibility even higher 72 Like Med1ca1d costs for the program were to be sh ared by the federal and state governments. although the federal government contrib utes a larger share of the costs than for traditional Med1ca1d .

The program's passage was contentious. While support for the bill was bipartisan. Democrats wanted an expansion of Medica id : Republicans. who had tried to repeal Medicaid. just wanted a block grant. Lawmakers clashed over funding the program through a cigarette tax-leading the Children s Defense Fund (CDF) to run a series of advertisements asking politicians to choose between "joey ... a cherubic lour·year·old boy. and "Joe Camel." the historic icon of Camel cigarettes.n Finally. many Republicans feared that a generous public pro gram would "crowd out" private insurance coverage (meaning that government funding would repla ce employer coverage) The final bill reflected a bipartisan compromise between Re· publicans. who controlled both chambers of Congress. and Democrats. who controlled the White House.

Although administered by the sa me federal agency as Medicaid (the Health Care Finance Administration. renamed the Centers for Medicare & Medicaid Services in 200 I}. CHIP differed in some fundamental ways from Med1ca1d. Unhke

" r J i '

PART VI • Policies and Issues

Medicaid. CHIP is not an entitlement program that requires states to provide coverage to any child meeting federally es· tablished eligibility criteria. Instead. states were given fixed grant funding and a great deal of flexibility in whether and how they chose to implement CHIP. They could create a new. stand-alone program. use funds to expand their cur· rent Medicaid program. or implement some combination of the two. States choosing to establish new programs had some flexibility with respect to benefit design and could impose enrollee cost-sharing requi rements through prem1 · urns and co-payments. although these areas were subject to much stricter federal regulation than other implementation options.24

C H/P's Impact 011 H ealth /11sura11ce Coi•erage States began implementing their CHIP programs in late 1997. and by 2000 every state had an approved plan. 25 While states had taken full advantage of the flexibility they were provided under CHIP. all but a dozen had used their CH IP funds to increase eligibility for coverage to children in families with incomes up to twice the FPL. 26 As a result. the number of uninsured children in the country began to show a steady de· cline. As Figure 20· I demonstrates. the proportion of children that are uninsured has decreased from about 15% in 1997 to

20%

18%

16% 15.0 15.4

14%

around 10% in the late 2000s dcsp1t two recesSIOOS d that time span This represents a drop of one third m the pm. portion of children lac mg covera since CHIP was ,. authorized. while dunng the same time period e i:td rate for adults increased The b1 est am in CO\'tnge oc curred among low-income children partlCU~rty those income group CHIP was intend d to target-en u income between I 00 and 2~ of the f Pl 1

Although the uninsur d rate for children is approximc• 10% nationally, there 1s substantial variation by state (Figure 20. 2 ). Som of this vanauon 1s c early due to eco- nomic and demographic differ nc betwttn sutts mcb:L":g the ava1lab1hty of mployer sponsored hca th benef ts H ~ ever. some of the variation Is du to d ff renccs e for CHIP. and in enrollment and r ntton of e :?!' States had flex1b1hty m how th y prOVld d outreach and m- rollment to eligible families and then CHIP rants coou ~ money for these admm1strat1v act1v1t Some SU!eS used these funds for innovative str t to reach cl e b with information and to r due app cu on barr: rs by nating face · to-race interviews for chg b I ty d twnw• or guaranteeing 12 months continuous covcra e for ad: c regardless or changes m ehg1b1hty dunn that ytar E suggests that these efforts ha paid off Partic pa

12% 11.3 11.2 11.0 10.5

10% 100

8%

6%

4%

2%

0%-t-~~r-~-r~~-y-~--,r--~"-T~~~~ 1997 1998 1999 2000 2001

2002 2003 2004 2005 2006 2007 2008 2009

I -+- % of Children Uninsured I Figure 20-1 Cha nge in US Child Uninsured Rate. 1997 2009 Source: US Census Bureau Current Po I Retrieved from http://www.~cnsus g /~hu·~llon Sun.c>- Annual '>o.. 11 nnd I· onom upplcmcn

. ov c www/hlthms/datalhMo cal/indc~ html

~ ... •.$:>

HI()

US Average 10.4%

CHAPTER 20 • Children

0 < 9% (25 states and DC) D 9-12% (17 states) • > 12% (8 states)

Fip re 20· 2 Unm,un.:ll Rates for Children under 19, by State, 2008- 2009

i\ou t:haldrcn m ludcs .11l 111J1\1Juals under age 19. ul"('(' Kaiser< omm1s ion on Mcd1ca1d and the Uninsured/Urban lnstitue analysis of 2009 and 20 10 ASEC Supplements

10

the I'S 1wo-ycar prn>I J c,tml.ltcs for state~ and the United States (2008-2009).

ra ge rrom a low or half to two· thirds of eligible children m and Manufacturing Association (PhRMA) sponsored televi· evada and Utah to over 95% part1c1pation in Massachusetts sion commercials in support of CHIP. with children on a play·

and the D stnct of Columbia 21 ground singing " If you're healthy and you know it. clap your hands."30

Strucu:h• fm Cl/ IP Reauthorization The onginal lcg1slat1on authorizing CHIP was set to expire in

2007 though reauthorization was generally presumed to be a certa nty The Democrats had regained a congressional major-

r!y and renewing. and expanding CHIP had been identified as one of their lcg1slat1ve pnonties.29 The program had popular support from states not only for reauthorization but also for expansion Support ranged from grassroots organizations to the pharmaceutical industry-the Pharmaceutical Research

Despite widespread and bipartisan support President Bush vetoed two congressional bills reauthorizing CH IP According to the President's speeches. CHIP represented a step toward universal. single-payer health care As President Bush put it ... Democratic leaders in Congress want to put more power in the hands of government by expanding federal health care programs Their SCHIP is an incremen· tal step toward the goal of government run health care for

every American. " 31

PART VJ • Policies and Issues

Congress ultimately voted to temporarily extend the origi- nal CHIP legislation as reauthorization was clearly unachiev- able during President Bush 's tenure . The vetoes became Democratic campaign fodder during the 2008 election . and the Children's Health Insurance Program Reauthori za t io n Act (CHIPRA) was one of the first laws passed and signed (in February 2009) after the Democrats won the White House in 2009. In addition to extending the original law. CHI PRA provides financial incentives to states that achieve certain enroll ment benchmarks and enact policies to sim- plify enrollment for low-income families. such as en suring 12-month continuou s eligibility. having single application s for Medicaid and CHIP. and doing away with asset tests or requirements for in-person interviews for el1gib1lity. among

others.

Impact of the Affordable Care Act Because of the protections already afforded many by Med1ca 1d and CHIP. the Obama administration 's ACA will affect ch1l· dren less than working-age adults. Nevertheless. the law in- cludes provisions that will significantly reduce barriers to care for some children.

Expa11di11g Insurance for Cflildre11 In the first place. many children who are currently el igible for Medicaid or CH IP remain uninsured. One estimate in 2008 placed the number of eligible but not enrolled children at 7 to 8 ·11· 32 m1 ion. Most of these children have parents or guardians who . to date. have not been eligible for Medicaid or CHIP In 2014 . the ACA sets minimum eligibility for Medicaid cov· erage for all persons . regardless of age or family status, at 138% of the FPL, greatly expanding the availability of pubhc coverage for adults. As we have seen. the impact-while still sub~tantial-will be diminished by the Supreme Court's dec1s1on to permit states to refuse Med1ca1d expansion The. ~xpanded Medicaid and CHIP eligibility for parents. m add1t1on to the ACA's insurance mandate. is likely to result m the enrollment of many eligible uninsured children Nat o . ally. 84% of children have the same insurance statu~ as t

1 h n

~ar.ents. whether their parents have private insurance pu~~ lie in surance. or are uninsured.33 Prior experience has ; hown that expanding pa rent coverage increases Med1ca1d pa t t1on among chi ldren .34 r 1c1pa·

of ~~~o~~j Pdespite the h igher income eligib1l1ty thresholds program, there remain children whose families

fa ce significant f1nanc1al barriers to hea th covera·e both parents and children Moderate ncome \l/O •-ttS do not have access to mployer heal h bend ts a g that includes many small business employees pa 1 t ime workers. contract wor rs and the se f Cl!'? cannot afford coverage 1n the ind1v dual ns a cc

market or can afford only policies w th ma or gaps coverage Parents in th ind1v1dual insurance a ltt be able to purchase insur nc th t tends coverage lo their children through a stat e chan e nd those • incomes below 400% of th FPL will be el be f Ur credits applied toward the cost of cov ra e Pa so , through the exchang s will b r quu d to cove ba pc d1atnc services mclud1n oral and v on ca ea d c

= change will last . particularly 1f states con t·

ud inue to struggl

aga nst b g t deficits in coming years. e

Gettint.: ThaL' fro m I/ere Wh e federal health reform originally held out th .. promise of near univ rsal coverage among ch1"ldr e exciting

en-one es- timate put the number covered after full implementation at 9 -the tmpl mentauon challenges are formidable Th "formed health coverage system will remain a complex ~om~ b nat on of public options available only to those who meet specified cl g1b1I ty criteria and a compet1t1ve private insurance

~t d vided betwe n employment-based benefit plans and ndivldually purchased insurance

A I states are required to create or ioin a regional insur- ance e change which will oversee the individual private

ar et and serv as a portal for 1nd1v1duals and families see mg to purchase or enroll in an insurance plan . The ACA rtQU res that states create a single point of entry for fa mi- es who want to apply for public coverage or tax c redits .

Spec1f1cally stat s must develop a single application form that applies to all program options and must create an eli- g b1I ty revcew process that evaluates applican ts and places them m the appropriate program. lnd1v1duals must be af- forded opportunities to app ly in person. online. by mail. or by telephone 39 Developing these systems will require c ose coordination between each state"s already established Medicaid and CHIP admin1strat1ve agency and the new in· surance exchanges It will require substantial ly expanded capac ty for ehg1b1hty review and new capacity to coordi- nate federal tax er d1t payments and individual premium ~ents to private insurers

Th effort to er ate a seamless system of coverage 1s going to be part cularly challenging for children who live in com· p ex fam ly situations For example. some children are (and wi conbnue to b ) eligible for Medicaid or CHIP when their parents are not Conversely. some parents have employer· sponsored coverage that does not cover their children. Chil- dren might be ehg1ble for coverage through a parent who _lives apart Finally. some children of noncitizen parents-e1t_her "' documented or legal residents who have not met mini· mum residency requirements-may be eligible for ~overage when their parents are not One analysis of these s_ituat~ons est mates that about 20 million children li ve in s1tuat1ons that create some of these complex1t1es of coverage.4 In these s.1uat1ons parents and children may have to be enrolled in

CH APTER 20 • C h1klren ilQ

dif~erent heal~h plans. complicating the selection of doctors an the coordination of family health care State insurance ex· changes may need to arrange for insurers to offer child only coverage plans. and families will need assistance in negotiat- ing pl~~ selection and enrollment in situations where children are eligible for Medicaid or CHIP while parents are selecting coverage from among private plans in the exchange.42

T itle V-The Maternal and Child Health Block Grant The MCH services program is an outgrowth of the early grassroots political activism around the social well -being of mothers and children . The program was the only component of the Social Security Act passed in 1935 that directly ad dressed the health needs of particular Americans . Structured as a federal-state partnership . Title V funds and oversees state administration of a variety of categorical child health programs. many targeted to children with special needs. Under the Omnibus Budget Reconciliation Act (OBRA) of 1981. the Title V MCH program was converted to a block grant program . consolidating seven categorica l programs.•> Then. in 1989. Congress again amended the law to constrain state discretion in the use of the block grant fu nds and to introduce stricter planning and reporting requirements States are now required to conduct needs assessments of their child population every five years. develop plans for use of block grant funds to address identified needs. and submit annual progress reports to the federa l government.

Despite the conversion to a block grant. the MCH services program continues as a close federa l-state partnership. Fed eral funding amounted to $705 million in 2000. and states are required to match federal allocations at a 0. 75 rate. That

1s. for every $4 provided by the federal government. the state allocates $3. Federal allocations to states are determined by a formula that adjusts a state's baseline funding according to a state's proportionate share of children living 1n poverty. The MCH block grant has two funding categories in add1t1on to the formula grants to states.

While bound by the overall purpose of the block grant. states have some discretion in the use of their formula grants The range of programs under the rubric of Title V exemplifies the more successful integration of public health and med1· cal care strategies found 1n pediatric care compared to adult medicine. A major focus area 1s prevention including support

" ~ , : ~1 j

PART VJ • Policies and Issues

of immunization programs. newborn screening. and Healthy Start-a project that targets high-risk pregnant. postpartu_m. and interconceptional women with services to reduce in- fant mortality and low-birth-weight babies and to ensure a healthy infancy. 44

A full description of the array of funded act1v1ties under the MCH block grant is beyond the scope of this chapter. Described next are two Title V programs that have generated suffi cient congressional interest that dedicated funds were in- cluded in the ACA for their support.

School-Based Health Ce11ters School-based health centers (SBHCs) are facilities located in schools or on school grounds that provide a broad range of primary-care services and. frequently, mental health care ser· vices as well. Some centers have the capacity to provide pre- ventive denta l care. The first SBHCs were established through local initiative in the 1970s, and . for a long time . the idea was picked up and spread from district to district and state to state in a haphazard fashion through word of mouth . By 1990. there were just 150 centers nationwide.45 Then. in part through a Robert Wood Johnson Foundation-backed effort, the idea took hold with state health departments . and now SBHCs number over 1,900 and can be found in 44 states and the District of Columbia.

SBHCs are usually staffed with m1dlevel pract1t1oners with physician backup. Many SBHCs are affiliated with an exter· nal health care provider such as a city health department or a hospital. Schools at all levels from elementary through high school have adopted SBHCs. Generally, parental perm1s- s1on is required for children to be able to use the centers. for the large majority or students where permission is granted . walk-in care is available as needed. SBHCs cover many basic ~ealth services such as physical exams for sports partic1pa· lion. t_hroat cultures for sore throats. medication management for children with chronic conditions. evaluation and referral for chi ldren with more serious complaints. counseling on sub· stance abuse, and basic health education on nutrition and other healthy living issues.

Although SB HCs are not a federally sponsored program, state health departments have relied heavily on Title v block grant funds and. in some cases. Medicaid reimbursement for funding. Where state Medicaid programs and private insur- ers ha d established managed care programs. SBHCs were

frequently denied reimbursement as be n ou of nttvo because the service was not preauthor zed or beaUSt ~ mid level practitioners were not rec n zed as havmg pendent billing authority Tod Y of SSHCs bill health insurance However. of those that bdl onl) hi to bill pnvate insurance. whil 72 b cd and 4S CHIP. 011erall. 65% of SBHCs still rece SU e (MOi) ing and 28% get some fed ral fund n

SBHCs are a case study m some of the co pm es i~ challenges of child health policy As h alth care c the centers need health department (o a pr Vi'C r.,r cal institution's) oversight and sponsorsh p Bu loa• in schools requires authonzauon from school ~rds a sometimes. par nt·teacher assoc1at ons o SBHCs an advisory board cons1stm of commun ty rep cse !J t1ves . parents , stud nts and family or an ut o s T :c work necessary to build bnd es across bu u ratJC is illustrated by an incident report in one sme In a ti meeting betw en health d partm nt and edua dqwi ment officials. 1t too the two sides a cons den e ~ figure out that when the health d p rtmcn rcp~r.u·:ttS referred to "primary care - th educat on dcpartr:: • rtp- resentat1ves assum d they meant cared ivtred n pn: ry school grades. while the health profess ona s wm rct enc1ng routine and prevenu health s r ccs de Mrcd ped1at11c1ans and ram1ly providers

--

--

~===========-----~~-----~~ CHAPTER 20 • Childri:n llQ Home Visiting Program Maternal. inrant. and early childhood home .. t. h

. d h v1s1 ing as newly acquire t e status or a national program under th ACA This program runds nurses social workers. and othereprofes~ s1onals to meet w1t.h at-nsk families in their homes to evalu- ate the home s1tuat1on. develop a plan or appropriate services, and help connect family members to the appropriate services. The scope or services provided includes health care. devel- opmental services for children. early education services such as Head Start. parenting skills classes. child abuse prevention. and nutrition education or assistance.49 The ACA authorized Sl.S billion ror this program over five years.

Home V1S1ting has a long history. has been extensively stud- ied. and generally shows positive outcomes ror both mothers and children. Among the outcomes measured are reductions 1n postpartum depression. spacing between pregnancies. and cognitive and emotional development of the babies.5o Nev- ertheless. the program concept provokes a firestorm among ant1government policy watchdogs. When then-Senator Hillary Rodham Clinton praised a local prenatal and early in- fancy proiect in New York State. her support generated the following comments you II discover Hillary's 'vision· for American family lire in the 21st century ... a 'brave new world ' in which mothers and fathers take a backsea t to an army or teachers. pediatricians and social workers who will take over the main task of child rearing. In Hillary's America. social workers will even be allowed to make 'preemptive v1s1ts'-l1ke Gestapo agents 1n Nazi Germany .... "51 That perspective. while extreme. illustrates one of the minefields of child health policy. Programs viewed as "lifelines" by some loo like looming government takeovers to others.

STAKEHOLDERS IN CHILD HEALTH POLICY

~~~~~~~~

Parents a;e the most obvious advocates with a vested in- terest when policy changes will affect children. In additi~n. there are not· for-profit advocacy organizations whose m1s- s1on 1s the betterment of children or needy families. Next on the list are organizations with a genuine interest in t he welfare of children. but whose professional role in the health care system or policy world also creates a selr-int~re~t in the outcome of policy debates These include organizations that are funded to provide services to children. parts of the

medical _establishment like children's hospitals and medical assoc1at1ons and go . . . vernment agencies These part1c1pants and the. unique fact~rs they bnng to the policy table are de- scnbed in the following sections.

Parents as Advocates Th~ ~ransformation of ind1v1duals into mobilized political act1v1sts does not happen spontaneously. lnd1v1duals need to feel that their demands and concerns are part of a larger ca_use. They need to develop a collective identity with a group w1t_h recognized and shared gnevances. 52 Unlike public edu· cation. where a community shares a resource and a critical mass of children face the same circumstances . communities do not share health care systems or resources m a recogniz able manner. As a consequence. parents are not easily mob1 lized to demand changes to the health care system on behalf of children-except. as we have seen. where health services become a part of school services.

The lack of grassroots mobilization also reflects a dra mat1c decline in membership-based organizations that pre viously played a large role m advocating for policy change (e.g .. protective child labor laws).53 Analysts of the decline in membership organizations suggest that the change- particularly with regard to the involvement of women and mothers-may be due in part to the movement of women into the workforce in the 1970s and 1980s . ~ Regardless of the cause. the absence of a mobilized and vocal community or parents has resulted in a heightened v1s1bility and role for professional advocacy groups dedicated to promoting child well-being.

Professional Advocacy O rganizations and Foundations The professional advocacy organizations championing chil· dren·s causes. whether located at the national or state level. are typically proressionally staffed. not-for-profit organ1za · tions that rely on grant funding and a donor base to fmance operations. Many devote significant resources to education functions targeted either to the public at large or more nar rowly to the stakeholder community engaged directly 1n policy debates. Some. but not all. engage directly 1n mflu· encing legislation by lobbying members of Congress (or state legislators) or negotiating with congressional staff during the legislative drarting process . All these functions require a

PART VI• Policies and Issues

of immunization programs. newborn screening. and Healthy Start-a project that targets high-risk pregnant. postpartum. and interconceptional women with services to reduce in- fant mortality and low-birth-weight babies and to ensure a healthy infancy.44

A full description of the array of funded activities under the MCH block grant is beyond the scope of this chapter. Described next are two Title V programs that have generated sufficient congressional interest that dedicated funds were in- cluded in the ACA for their support.

School-Based Health Ce11ters School-based health centers (SBHCs) are facilities located in schools or on school grounds that provide a broad range of primary-care services and. frequently. mental health care ser- vices as well. Some centers have the capacity to provide pre- ventive dental care. The first SBHCs were established through local initiative in the 1970s, and. for a long time. the idea was picked up and spread from district to district and state to state in a haphazard fashion through word of mouth. By 1990, there were just I SO centers nationwide.45 Then. in part through a Robert Wood John son Foundation-backed effort. the idea took hold with state health departments. and now SBHCs number over 1,900 and can be found in 44 states and the District of Columbia.

SB HCs are usually staffed with midlevel practitioners with physician backup. Many SBHCs are affiliated with an exter- nal health care provider such as a city health department or a hospital. Schools at all levels from elementary through high school have adopted SBHCs. Generally. parental permis- sion is required for children to be able to use the centers. For the large majority of students where permission is granted. walk-in care is available as needed. SBHCs cover many basic health services such as physical exams for sports participa- tion. throat cultures for sore throats. medication management for children with chronic conditions. evaluation and referral for children with more serious complaints. counseling on sub- stance abuse, and basic health education on nutrition and other healthy living issues.

Although SBHCs are not a federally spo nsored program. state health departments have relied heavily on Title V block grant funds and. in some cases. Medicaid reimbursement for funding. Where state Medicaid programs and private insur- ers had established managed care programs. SBHCs were

frequently denied reimbursement as being "out of network," because the service was not preauthorized or because the midlevel practitioners were not recognized as having inde- pendent billing authority. Today. 80% of SBHCs bill students' health insurance. However. of those that bill. only half are able to bill private insurance. while 72% bill Medicaid and 45% b 1 CHIP. Overall. 65% of SBHCs still receive state (MCH) fund- ing. and 28% get some federal funding.46

SBHCs are a case study in some of the complexities and challenges of child health policy. As health care clinics. the centers need health department (or a private med1· cal institution's) oversight and sponsorship. But location in schools requires authorization from school boards and. sometimes. parent-teacher associations. Most SBHCs have an advisory board consisting of community representa· tives . parents. students. and family organizations. The work necessary to build bridges across bureaucratic silos is illustrated by an incident report in one state. In an early meeting between health department and education depart· ment officials. it took the two sides a considerable time to figure out that when the health department representatives referred to .. primary care." the education department rep· resentatives assumed they meant care delivered in primary school grades. while the health professionals were refer· encing routine and preventive health services delivered by pediatricians and family providers.

Because schools are frequently at the epicenter of com· munity culture wars. SBHCs can get caught up in commu· nity conflicts. Particularly in high schools and middle schools. parents can hold emotionally charged views on the appropn· ate way to prevent and deal with high-risk student behaviors including sexual activity and substance abuse. Whether an SBHC provides reproductive health services. including screen· ing. counseling. pregnancy testing. and the provision of bird1 control. is a school- and community-determined decision or. in some cases. a decision determined by state law. Once the scope of services for an SBHC is established and parentsun· derstand the availability of an opt-out for their child. the cQ1'1· munity uproar usually dies down.47

The ACA provides $50 million a year for four years in one· time funding grants for construction. renovation. and equ P' ment for SBHCs.48 The model has gained bipartisan support in Congress and is recognized as an important link in the health system safety net.

~=========-----~~------' CHAPTE R 20 • Children ilg Home Visiting Program Maternal. infant, and early childhood home .t. h

. d h v1s1 ing as newly acq. u1re t e status of a national program d h un er t e ACA This program funds nurses. social workers and th f · · I · o er pro es-

s1ona s to meet with at-nsk families in their horn t 1 es o eva u- ate the home situation. develop a plan of appropriate services and help connect family members to the appropriate services. The scope of services provided includes health care. devel ~ opmental services for children. early education services such as Head Start. parenting skills classes. child abuse prevention. and nutrition education or assistance 49 The ACA authorized $1.5 billion for this program over five years

Home v1s1ting has a long history, has been extensively stud- ied. and generally shows positive outcomes for both mothers and children . Among the outcomes measured are reductions in postpartum d press1on. spacing between pregnancies. and cognitive and emotional development of the babies.so Nev- ertheless. the program concept provokes a firestorm among antigovernment policy watchdogs. When then-Senator Hillary Rodham Clinton praised a local prenatal and early in- fancy project tn New York State her support generated the following comments . " you' ll discover Hillary's 'vision· for American fami ly life 1n the 21st century ... a 'brave new world' in which mothers and fathers take a backseat to an army of teachers. pediatricians and soc ial workers who wi ll take over the main task of child rearing. In Hillary's America. social workers will even be allowed to make 'preempt ive v1sits'-like Gestapo agents in Nazi Germany ... " 51 That perspective. while extreme, illustrates one of the minefields of child health poltcy Programs viewed as "lifelines" by some look like looming government takeovers to others.

STAKEHOLDERS IN CHIL D HEALTH POLICY ---- Parents are tne most obvious advocates with a vested in- terest when policy changes will affect children In add1tio.n. there are not-for profit advocacy organizations ~~ose mis- sion is the betterment of children or needy families. Next on the hst are organ1zat1ons with a genuine in.terest in the welfare of children . but whose professional role in the health care system or policy world also creates a self-int~re~t in the outcome of policy debates. These include organizations that are funded to provide services to children. parts of the

medi~al estab lishment like children's hospitals and medical assoc1at1ons and go . · vernment agencies These part1c1pants an~ the unique factors they bring to the policy table are de· scribed in the following sections.

Parents as Advocates Th~ ~ransformation of individuals into mobilized pol1t1cal act1v1sts does not happen spontaneously. lnd1v1duals need to feel that their demands and concerns are part of a larger cause. They need to develop a collective 1dent1ty with a group with recognized and shared grievances .52 Unlike public edu· cation. where a community shares a resource and a critical mass of children face the same circumstances . communities do not share health care systems or resources in a recogniz· able manner. As a consequence. parents are not easily mob1 lized to demand changes to the health care system on behalf of children-except. as we have seen. where health services become a part of school services.

The lack of grassroots mobilization also reflects a dra· mat1c decline in membership-based organizations that pre v1ously played a large role in advocating for policy change (e.g .. protective child labor laws).53 Analysts of the decline i n membership organizations suggest that the change- particularly wi th regard to the involvement of women and mothers-may be due in part to the movement of women into th e workforce in the 1970s and 1980s 54 Regardle ss of the ca use. the absence of a mobilized and vocal community of parents has resul ted in a heightened v1s1b11ity and role for professio nal advocacy groups dedicated to promoting child well-being.

Professional Advocacy Organizations and Foundations The professiona l advocacy organizations championing ch1I · dren's causes. whether located at the national or state level. are typically professionally staffed. not-for-profit organ1za· tions that rely on grant funding and a donor base to finance operations. Many devote significant resources to education functions ta rgeted eithe r to the public at large or more nar rawly to the stakeholder community engaged directly 1n policy debates. Some. but not all. engage directly in influ encing legislation by lobbying members of Congress (or state legislators) or negotiating with congressional staff during the legislative drafting process All these functions require a

IHI PA RT VI • Policies and Jssues -----t.- l!JliM~~~=-:=::~~~~~~~~----{_

highly sophisticated staff. knowledgeable not only about the intricacies of relevant laws and programs but also about the legislative process.

These organizations form strategic alliances with similar organizations when policy objectives overlap. For example. the CDF. the American Academy of Pediatrics . the National Association of Children's Hospitals. the Center on Budget and Policy Priorities. and Families USA. were all engaged in the policy debate over the passage of the CHIP program. 55

The expertise and pol itical savvy that these organizations have brought to the policy process has been instrumental in shaping children's health policy over the years. However. their structure limits their effectiveness. The children's health- focused advocacy organizations are not membership-based with local chapters around the country or actively engaged citizen volunteers. While the membership-based organiza- tions can mobilize their constituency to put grassroots pres- sure on legislators. professionally-based advocacy groups are limited to using the media-press conferences. letters to the editors of newspapers. and the like. In addition. the not-for- profit organizations are usually overwhelmingly outspent by corporate-backed organizations representing opposing views.

The professionally based structure of child advocacy orga- nizations has an additional handicap. The orientation toward insider stakeholder debates and lack of ties to community- based parents may limit the capacity of these organizations to read public sentiment and link advocacy campaigns to strategies with enthusiastic public backing.56 Conversely. the advocates are poorly positioned to get their message out to communities nationwide and to counter campaigns based on scare tactics. such as the effort to liken a home visiting pro- gram endorsed by Hilary Clinton with an authoritarian state takeover of child rearing.57

Aware of some of these limitations. some organizations- the CDF in particular-have launched new efforts to build a grassroots constituency. CDF has been instrumental in launching a new organization. Stand for Children. which is cosponsored by more than 3 ,500 organizations and has an explicit mission of mobilizing grassroots constituents to pro- vide visible and public support to children's causes.58

Service Providers The growth of the Medicaid program over the past 45 years has been paral leled by growth in socia l service organizations that provide health care. training, case management. day care.

transportation. and other services. At the local and state lev- els. these organizations frequently are engaged in policy de- bates and serve as advocates for their constituency. Medica d and CHIP recipients and their families. Because the service providers have in-the-trenches knowledge of the daily ives and struggles of their clients. they can provide effective tes- timony on the need for services and the likely impact of pro- posed policy changes.

There are two factors that temper their impact. First. be- cause government programs are a significant revenue stream for these organizations. many observers view their advocacy on behalf of clients as self-interested. Second. and ironicaly. that very dependence on government contracts can make ser- vice organizations unwilling to take a position that runs coun- ter to current government policy.59

The Government As Medicaid and its costs have grown. governors have be- come actively engaged in national policy debates about the Medicaid program and other proposed health reforms. Under the Clinton administration. governors fought for and won the right to make major changes to the administration of Medicaid through a waiver application and review process. Under the Bush administration. objections from governors helped derail an administration proposa l to transform Med icaid into a block grant program that would have capped federal spending and placed states at risk for future cost increases. While the col· lective actions of state governors have been oriented pnmari~ toward preventing further "unfunded federal mandates" that add to state budgetary woes. there are individual governors who have provided leadership in efforts to expand coverage to children beyond the parameters of current federal policy.

POLICY ISSUES The child health-policy environment. like the rest of the Amer· ican health care system. is caught in a vise. squeezed on tilt one side by the need to extend access to appropriate heath care to all children and on the other side by the need to con- strain health care spending. The passage of the ACA ho lds some promise for relief on the access side. but all those who pay health care bills. from state governments to employers. are very concerned with the continued threat of health cost inflation . Many officials have turned to health care prevention and disease management for their cost savings as well as thei·

-....,,

~==========--~--rn.~=-~ C HAPTER 20 • Children ''" health effects. This section turns to two 1. . . . . dd

po icy in1t1at1ves that a. ress prevention and chronic illness· ob .ty d

h I · es1 an reproduc

t1ve ea th These policies offer promises f b h . - I . d o ot improved

qua ity an lower d cost, but they face the fa ·1· b . th f

m1 1ar arners at con ront other 1mt1at1ves in children's health policy.

Obesity Obe~1ty among children is fast becoming a top co n cern of public health professionals and pediatricians W h en con-

trasted with the prevalence of other diseases that curre ntly threaten during childhood years. both the scope and rate

of increase m obesity 1s shocking . Research demonstrates a powerful hnk betw n obesity rn adults and increased risk

of heart disease diabetes. gall bladder disease. some can- cers. and mortality It also shows that obese children are more likely than oth rs to become obese adults, thus putting

them at early ns for chronic and serious health problems in adulthood.60 In add1t1on . there 1s a growing body of research

showing the damag caused by obesity during childhood it- self. The ep1dem1c 1s associated with increases in diabetes. hypertension . and hyperlip1dem1a (high cholesterol) among

children. with sleep disorders. orthopedic problems. poor immune function. low self esteem. and increased risk of

depression e

Further. the rapid nse 1n obesity and overweight in American society is associated with the troublesome rate of in crea se in health care spending An analysis that measured obesity-

related health care spending as a component of overall spend- ing growth betwe n 1987 and 200 I found that spen ding on obesity-related cond1t1ons accounted for 27% of t he rise in per capita spending During this period. expenditures for the treatment of diabetes rose 38%. for hyperhp1dem1a 22%. and for heart disease 41% 62 With both child well·being and bud- getary control at sta e. this issue has grabbed the attention of the medical community and policymakers as a problem crying

out for interventions both in prevention and treatment.

The need to address the problem of obesity enjoys bipar-

tisan support However. legislating or funding programmatic solutions has not been easy or dramatically success ful. .To begin with there is far less scientific evidence on effective

strategies for prevention and treatment of obesity than on .'ts causes and health effects. Results both from clinical trials "".'1th

enrolled children (and. frequently. parents) and commun.i ty- or school-based public health interventions have had equivo-

cal results.63

Further. the politics around obesity prevention and treat· ment is a case study in the difficulties that plague children's health policy. Since children spend much of their time in school . eat their lunches (and sometimes breakfasts) there and are strongly influenced both by formal teaching and peer norms . school is a logica l location for obesity inter· ven t1on s. But school po licies are governed by local school boards and budgets. comp licating the implementation of federal- or state-sponsored initiatives. Nationally, the school lunch program is run by the Department of Agriculture . Thus. any proposed change in the conte nt or quantity of food in the school lunch pipeline is likely to run afoul of powerful agricultural interests. Many schools have come to rely on contracts with the distributors of soft drinks and snacks sold through vending machines in schools . Although these snacks are recognized as a source of empty calories and a culprit in the increa se in chi ldhood obesity. ban · nmg the machines or substituting alternative healthy snack foods is no easy matter for managers of school budgets or boards. or even for Congress . A bill introduced in Congress in 1994 would have "encouraged" schools to restrict or ban the sale of soft drinks and other foods with "minimal nutn· tional value." The Coca-Cola Company enlisted support from school principals and superintendents and waged an intense lobbying effort against the bill. which soon died.64

A second challenge is the need to enlist parents as allies for any successful policy intervention. As with many issues. parents do not always see eye to eye with policymakers on what is best for their children. Effective strategies at reduc- ing or preventing obesity in children may require significant lifestyle changes for the parents as wel l. Meals with a heavy emphasis on fresh fru its and vegetables can be considerably more expensive than meals relying on processed foods and may be financially difficu lt or out of reach for low-income parents. Efforts at circumventing parents and intervening di· rectly with children inevitably ra ise emotionally charged issues of parental autonomy and state interference with pnvacy.

6 s

This dynamic is well illustrated by a recent proposal from a Harvard-affiliated obesity specialist. published in the journal of the American Medical Association UAMA). in which he called for placing extremely obese child ren in foster care'. ra1s· ing a storm of protest from bioethicists and the public al1ke.

66

The hobbling effect of the various hurdles to obesity inter· vention policies can be seen in the record of legislative action to date. Efforts to address the problem are widespread In 2009.

21 states passed laws aimed at reducing childhood obesity, and in 2010 another 17 state laws were enacted.67 These laws ran the gamut of school-based efforts to improve healthy eating and physical activity to community-based strategies to encourage farmers' markets and safe bicycling routes. A close look at the specific laws. however. shows an almost universal orientation toward gentle encouragement. studies. and incentives rather than mandated changes or direct program implementation. For example. of the 12 laws addressing school nutrition in 20 IO. only I-targeted to day care centers. not schools-sets man- datory nutrition standards. 68 One requires that safe drinking water and fresh fruit be available to students in areas wherever food is being sold on school property. Two establish farm-to- school programs. The other laws create committees or man- date existing agencies or departments to establish nutritional standards. establish databases to facilitate the purchase of fresh produce or document best practices, or create task forces to develop farm-to-school programs.

Reproductive Health There is no child health-policy issue more emotionally charged and more divisive than reproductive health. The medical and public health communities see adolescent sexual activity as a health hazard-placing young people at risk of unwanted pregnancy and sexually transmitted diseases (STDs). Social conservatives see the issue in moral terms-part of a constel- lation of behaviors arising from ··a lack of moral restraint [that] typically follows from the absence of nurturing parents and their constant discipline. "69

In the policy arena. the debate is fought out over what 1s the appropriate role of government in regulating or influencing pnvate behavior. On the topic of sex education. there is rare unanim - ity between conservatives and liberals that there is an important role for government. The Christian Coalition's Contract with the American Family states. "When families fail . government must be ready to deliver a firm message."70 The Democratic Party plat- form includes the language, "The Democratic Party also strongly supports access to comprehensive affordable family planning ser- vices and age appropriate sex education which empower people to make informed choices and live healthy lives." 71 Philosophies diverge sharply, however, on the content of the message we give to youths regarding sexual behavior.

In 1996, as part of a larger welfare reform initiative. Con- gress approved a provision appropriating $250 million over five years for state initiatives promoting sexual abstinence outside

of marriage as the only acceptable standard of behavior for young people. The program was incorporated into the Title v MCH block grant as Section 510. Every state but Ca1 1forn a participated in the program 2 In 2000 a Congressional ear· mark added funds to the Special Pro1ects of Regional and National Significance (SPRANS) program of Title V for com- munity-based abstinence education proiects. The SPRANS program bypasses state approval and control processes and allocates funds directly to community-based orgamzations. including faith-based organizations. Smee the onset of the program. the government has spent almost $1 .5 billion on abstinence-only programs (see Chapter 19)

Congress 1s very explicit with regard to the content of the pro- grams it has approved for funding . An eligible program is defined in the law as one that "has as its exclusive purpose. teaching Jhe social. psychological. and health gains to be realized by abstain- ing from sexual activity." Programs that include content covenng birth control methods and strategies for protection against STDs other than abstinence are barred from funding.

In the 15 years since the enactment of Section 510. evidence from rigorous studies overwhelmingly concludes that the pro- grams do not reduce the proportion of adolescents who be- come sexually active and do not reduce the frequency of sexual encounters among adolescents who are already sexually active. Some postintervention surveys indicate that because course content emphasizes the unreliability of birth control. youths who receive this training show a decreased likelihood of using birth control when engaging in sexual intercourse compared to controls. By contrast. a number of studies have found that comprehensive sex education. promoting abstinence as we1 as other protective behaviors. has shown some effect in delaying the onset of sex. 73 Perhaps most importantly from a policy per- spective. Congress's own contracted evaluators released a fina report in 2007 that concluded that abstinence-only educaoon does not keep teenagers from having sex nor does 1t change the likelihood of condom use among sexually active teensu

However. repealing abstinence-only programs. much less authorizing the full scope of reproductive health care services runs into deep moral divides . The tensions run espec1al~deep on the issues surrounding minors and abortion. Twenty-three states have laws that require consent of at least one parent for a minor to have an abortion. although most of these have judicial bypass prov1s1ons. Another 11 states have laws requr- ing that parents be notified in the event of a minor seeking an abortion. but do not require consent.75

~=========-~~=---~· CHAPTER 20 • Children "Pl In Congress. the most recent battle affecti

reproductive health services has be f ng adolescent for Planned Parenthood . Planned ~n overh ederal funding . . I arent ood is the

t1on s argest reproductive health care d na- Planned Parenthood provided serv·1ce ptrov1 er. In 2009. . s o over 5 mill. ind1v1duals Its clinics provide contrac t ion

d ep ion. pregnancy

tests an counseling. cancer screening f b I

or re a st and cer- v1ca cancer. tubal ligations emergenc . · Y contraception vasectomies . STD testing and treatment 1 • . prenata care treatment for menopause . and abortion Ab t . · or ion services constitute 3% ors rv1ces provided . 16 Planned Parenthood clinics are a maJor source of health care services for teen· agers and young adults. many of whom are uninsured or

Overt m th r has been a consistent pattern to the polit- ical struggles to create a health care safety net for children in the United Stat s From the creation of the Children's Bureau in 1912 to the 1mplementat1on of the CH IP pro- gram m 1997. attention to children's needs has preceded policies attendant to similar needs among adults. But despite the recurring cycles of poltcy innovation. Ameri· can children continue to lag behind the children of other nations on many measures of health and well-being and behind the rest or the US population in economic well-be- ing These frusuating outcomes can be attributed in large measure to two aspects of US poltcy. First, while every other developed democracy in the world offers universal ent t ment to health coverage for children (and adults). the Un t d States maintains a patchwork safety net system extended only to those hv1ng in or near poverty Second. pol cy entrepren ursh1p on behalf of children 1s undercut and compromised by the same forces that weaken do· mest c soc al pohcy 1n all spheres-unfettered access to pohcyma ers by special interests and the strong current of publ c d strust or government services.

Un versa! coverage would have sweeping benefits for ch ldren (as 1t does for seniors) . Children would no lon.ger ~fall through the cracks" because of family income being

feel they can n t h . . for c f"d . o. go to t e1r family doctor due to concerns

on 1 ent1ality.

19~~nned Parenthood has received federal funding since . and federal dollars currently constitute about a third of ~:~ organiz~t1on's revenues. The organizatmn is prohibited by . from using any federal dollars for abortions. Recently pro·

life proponents in Congress. arguing that allocating federal ?ollars for ~ther medical care JUSt frees up "fungible. mon· ies for abortions. have tried to eliminate federal financial sup· port for Planned Parenthood. Efforts to remove funding from the 20 I I federal budget failed. 77 However. Indiana eliminated state fun.ding in 20 I I. perhaps foreshadowing a new trend in state pohcy activity.

marginally higher than eligibility standards. In add1t1on. a uniform system of coverage would go a long way to re· ducing fragmentation in the health care delivery system Children whose parents change JObs and either lose cover age or change private insurance earners would no longer experience gaps in coverage or have to leave a "medical home" to move to an "'in-network" provider Finally, a uni versal coverage system could eliminate the two·t1ered med· ical system that results from different reimbursement rates available to providers from public and private insurers A seamless. guaranteed system of coverage can go a long way toward ensuring the prevention ·oriented coordinated care system that is the goal of the current patient-centered medical home demonstrations. That such a system results in better outcomes is demonstrated by the enviable hea lth statistics of other countries in comparison to the United States.

The ACA . while making important strides in extending health coverage to new populations. builds on our frag mented health care system rather than moving toward a more universal and integrated model Adding a tax credit system for private insurance plans on top of means-tested programs increases complexity rather than reducing 1t In addition because new Medicaid benefits and the tax

PART Vl • Policies and Issues

credits are extended to only part of the population. they are vulnerable to future budgetary cuts as both the federal and state governments continue to struggle to stretch limited tax dollars. Means-tested programs are. of course. counter- cyclical. Need and demand for their services is highest at precisely the point when federal and state revenues are at their lowest. As welcome as the ACA is. in terms of the im- portant strides Congress has made in extending coverage to vulnerable populations. we are likely to continue to see the familiar pattern associated with child heal th policy- for every two steps forward. one step back.

Policymakers' deference to special interests is well illus· trated in the current efforts to address childhood obesity- where a campaign by the Coca-Cola Company was able to derail efforts to limit sugar-laden soft drinks in schools. While it is never politically wise to profess that one's in· terests are served by harming children. interest groups can usually make a claim that their preferred policy approach is better for children- as when the AMA helped defeat the Towner- Sheppard children's health clinics with the claims that private medicine is superior to "state-run" medicine. The health policy arena is crowded with powerful vested in· terests from PhRMA to the health insurance industries. For· tunately, children have powerful allies among these groups. including ped iatric associations and associations of chil· dren's hospitals. However. policy proposals that run counter to the interests of any major stakeholder have little chance of success. The substantial power to block legislation wielded by special interests limits poltcy options to ones that, at worst. are neutral to special interests and. at best. benefit special interests. The impact of CHIP on expanding the pool of children purchasing medications and receiving

~TUDY_ QUESTIONS

immunizations. for example. helps explain PhRMA's inter- est in actively supporting the program's reauthonzatton.

Distrust of government is a deep current in American politics that at the present time threatens to erode the so- cial safety net for children. lrontcally. 1t 1s tn times of eco- nomic hardship. when the need for safety net programs is the greatest. that the view of government as a taker of resources rather than a provider of resources seems stron- gest. Programs targeting children are. of necessity. a part- nership with those who have primary responsibility for the well-being of chtldren. parents. and local communities. Under the best of wcumstances. designing programs sen- sitive to family and community concerns is a challengmg undertaking. When the most benign efforts are misinter- preted as the arbitrary imposition of state power the task becomes next to impossible.

These challenges to policymaking on behalf of child ren have been with us throughout the 20th century and likely will move forward with us well into the 21st. What al- lows us to move forward is a fundamental shared value in ensuring the well-being of children. Policymakers and the public disagree on the best means to achieve that well-being but not on the need to protect children. The near future appears to promise even greater polarization m American politics and greater budgetary woes as the de- mographic bulge of baby boomers move into retirement and the Medicare program. In this environment. we are challenged to use our shared interest in the well-being of children to build greater poltt1cal comity that will support a noncontroversial and highly needed social safety net for the next generation.

I. What is the paradox the authors observe about child health policy 1n the United States?

2. What are some challenges to child health policy?

3. What are the three pillars of child health policy?

4. What are some challenges faced by Medicaid in providing health care for children?

S. What population segment was CHIPS intended to target?

6. What are some prominent programs of the Title V MCH block grant funding?

CHAPTE R 20 • Children

7. Who are some maJor stakehold . h ers in c lid health policy? 8. What are some major child disease prevention or mana . . . .

gement in1t1at1ves and associated controversial policy issues'

I. The St. ppard Towner Act-An Act for th p lasted only until 1929 when it was repealede ~omot1on of the Welfare and Hygiene of Maternity and Infancy- postnatal are clinics. public health nurses . h ur~ng its short life. it allocated money to the states for prenatal and children rrom disease. and broad health ed w to e uf;ated mothers on breast-feeding and proper hygiene to protect

uca ion e iorts. See Skocpol. 1992 chapter 9 2. Imig. 2001 . .

3. US Census Bureau 2005- 2009

4. World H a th Organization. 2011

5. Starf eld 2004 pp 165- 70

6. State Leg1slat1v Leaders Foundation. 1995, quoted in Reid. 200 1.

7. Kenney Coo and Dubay. 2009

8. National Governors Assoc1at1on, 2004.

9. Allensworth Lawson. Nicholson . and Wyche. 1997.

IO. Hagr.erty 1997

11. Skocpol. 1992 pp 512-18

12. Skocpol, 1992 p 513 13. Lest we thin political debate 1s nastier today than in the pa st. consider the following comments by a US senator

regarding the women agency directors of the Children·s Bureau "It 1s now proposed to turn the control of the moth- ers or th land OV r to a rew single ladies holding government ]Obs at Washington .... We would better reverse the propos1t1on and provide ror a committee of mothers to take charge of the old maids and teach them how to acquire a husband nd hav babies or their own ." Skocpol. 1992. p. SO I, quoted from the Congressional Record. 67th Con

gress. I st scss 1921 vol 61, pt. 8. pp 76945-46.

14. Kenney and Chang. 2004

IS . Banth1n and Selden 2003 16. Analysis or Current Population Survey Data. US Census Bureau. as reported by Child Trends Databank. Retrieved

from wwwch1ldtrendsdatabank org

17. Newachcd: Pearl Hughes. and Halfor. 1998.

18. Hill. 1992

19. Weil, 2003 k b the acronyms S-CHIP and SCHIP to emphasize the role of "state"' in the pro 20. CHIP has been alternauvelyh ~own Ythe program's name was officially changed to the Children's Health Insurance

gram With the 2009 reaut onzat1on. Program and CHIP 1s the official acronym .

21 . Sec. 21o1. (42 LJ.S.C. I 397aa] of the Social Security Act: Purpose. State Child Health Plans. Retrieved horn http}/ www.ssa.gov/OP _Home/ssactltitle2I/2I01.htm.

22. Sec. 21 1 o. [42 U.S.C. I 397jj] (a) Child Health Assistance: Definitions . Retrieved from http://www.ssa gov/OP_

Home/ssactltitle2 I /211 O.htm.

23 . Gray, 1997.

24. Lambrew. 2007.

25. Kenney and Chang, 2004.

26. Ibid.

27. Kenney, Haley. and Tebay, 2003.

28. Kenney. Lynch. Cook. and Phong. 20 I 0.

29. Iglehart. 2007a.

30. Pear. 2007.

31. Press Conference by President George W. Bush. Retrieved from http //georgewbush ·wh1tehouse.arch1ves.gov/newsl releases/2007/09/20070920-2.html.

32. Kenney et al.. 2009.

33. GA0-11-264. 2011.

34. Dubay and Kenney, 2003.

JS . Kenney and Pelletier. 20 I 0.

36. Galewitz. 20 I I.

37. Holahan and Dorn. 20 10.

38. Dubay. Cook, and Garrett. 2009. Note that this opt1m1st1c prediction came before the Supreme Court decision that made the ACA's Medicaid expansion optional for states.

39. Guyer. 20 I 0.

40. The ACA extends. for the first time. eligibility to all adults with incomes below 138% of the federal poverty !eve. In addition. some states. prior to the passage of the ACA. had added some parents as an eligible population to the r CHIP programs. However. in many cases income eligibility for children 1s set at a higher level than the threshold for parents. meaning that children in the household are eligible for CHIP coverage when parents are not.

41. McMorrow. Kenney. and Coyer. 2011.

42 . For a detailed analysis of complex eligibility scenarios. see McMorrow et al.. 20 I I

43. The seven consolidated programs include maternal and child health programs for children with special health needs supplemental security income for children with disabilities. lead-based paint poisoning prevention programs. genebc disease programs. sudden infant death syndrome programs. hemophilia treatment centers, and adolescent preg· nancy prevention programs. Maternal and Child Health Bureau. 20 IO.

44. Maternal and Child Health Bureau Fact Sheet. DHHS. Retrieved from http://www mchb.hrsa gov

45. Kilbreth and Morone. 2005.

46. National Assembly of School-Based Health Care. 20 I I.

~===========-~~=-~J CHAPTER 20 • Children ifd 47. K1 breth and Marone. 2005. 48. lbd

49. DHHS Heath Resources and Services Ad . . SO min1strat1on. 20 1 1

• Amlstrong Fraser Dadds. and Morns. 1999· Olds R b. SI. Grgg 1999 . . o inson.etal..2002;01ds.Kitzman.etal .. 2004.

S2. Im g 2001 p 193

S3. S oc,pol and D1d:ert 2001 .

S4 . lbd

SS . Rosenbaum and Sonosky. 200 1. pp 81 _ 104.

S6. S ocpol and Die ert 2001. pp 149-50

S7. Gr 1999

SB. S ocpol and Die ert 2001. pp 153-56.

S9 . for Full discussion of constraints on advocacy for the poor. see Grogan and Cusmano. 2007.

60. Wh ta r Wright Pepe. Seidel. and Dietz. 2003.

61. Goodman Slap nd Huang, 2003: Riley, Santiago. and Edelman. 1976: Sinha et al.. 2002; Wab1tsh, 2000.

62. Thorpe Florence Howard . and josk1. 2004 .

63. Epst n Myers Raynor. and Saelens. 1998: Epstein. Paluch. Gordy. Saelens. and Ernst. 2000.

64. Pear 1994 6S. For a full discussion of the politics of obesity contrasting the personal respoosibility view with the call for regulatory

control of Cood industry marketing and packagi ng practices. see Kersh and Moro ne. 2005.

66. Tanner 2011

67. Wnt rf d Shin le and Morandi. 2011. 68. Th s Ca forn1a law requires licensed day care facilities to serve only low-fat or nonfat milk and to limit juice to not

more th n on serving per day. It bans beverages with added sweeteners except for infant formula and requires cen- ters to h ve saf drinking water available (Winterfeld et al.. 20 I I).

69. Ch st an Coalit1on. Conlracl wllh lhe American Family as quoted in Morone. 2003.

70. lbd

71. Democrat c Party Platform. 2008 72. u fomia had pr viously tested and evaluated an abstinence-only education program and determined that the strat

egy was ineH ct1v (Hauser. 2004 ). 73. rby 2001 Manlove. Romano-Papillo. and lkramullah, 2004: Hauser. 2004: Santelli et al.. 2006.

74 . Trenho m Devaney Fortson . and Quay. 2007. 7S. Information retrieved from http://www.pos1tive.org/Resources/consent.html.

76 . Planned Parenthood. 2011.

77. Espo 20 I I

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Thorpe. K. E .. C. S. Florence. D. H. Howard. and P. Joski. 2004. "The Impact of Obesity on Rising Medical Spending.· Health Affairs Web Exclusive 20: W4-480.

Trenholm. C.. B. Devaney. K. Fortson. and L. Quay. 2007. Impact of Four Title V Section 510 Abstinence Education Programs: Final Report. Princeton. NJ: Mathematica Policy Research.

US Census Bureau. 2005-2009. "American Community Survey." Retrieved from http://www.factfinder.census.gov.

Wab

Weil

Win'

Wori

Wab tsh M 2000 Overweight and Obesity tn European Children: Definition and Diagnostic Procedures . Risk Factors and Consequences for Later Health Outcomes." European journal of Pediatrics 159: S8-S 13

Weil A 2003 There·s Something about Medicaid." Health Affairs 22( I): 13-30.

Wh ta e R C J A Wnght. M S Pepe. K. D. Seidel. and W. H Dietz. 2003. "Predicting Obesity in Young Adulthood from Ch dhood and Parental Obesity." The New England journal of Medicine. 337(13): 869-73.

Winterr d A D Shin le. and L. Morandi. 20 I I. Revers mg the Trend in Childhood Obesity: Policies to Promote Healthy Kids and Commun111es Washington. DC: National Conference of State Legislatures.

World Hea h Organization 2011. World Health Statistics. 2011. Geneva. Switzerland: WHO Press. Retrieved from http /www who tntlwhosrs/whostat/2011 /en/.

This chapter examines the federal government regulations on prescription drugs in the United States. We begin with an overview of the regulatory process. We then examine how the regulatory regime arose across time. What we see is a great deal of attention to keeping unsafe drugs off the market (what might be called front -end regulations) and far less attention to making prescription drugs affordable and available (back-end regula- tions). The roots of th is asymmetry explain the regulatory path for prescrip- tion drugs and reveal why some problems have been resolved while others continue to be politically elusive.

The story of prescription drug regulation in America 1s a tale that spans nearly a century. with roots that go back even fur- ther. It is a tale whose plot includes quackery. magic elixirs. muckraki ng, conspiracy theories. public-health disasters. inter- est group mobi lization. legal wrangling. media maneuvering. international controversy. ideological bicke ring. philosophical proselytizing, and pol itical profiteering. But it is also a story of political deve lopment through gove rn men t intervention spurred by t he evolution of the pharmaceutical industry and the needs of public health. As the science of pharmaceuticals

has progressed through the years. so too has the expanslOfl i government regulation to which new prescription drugs must be subjected both before winning approval and after entenng the marketplace.

Prescription drugs are expensive. Americans spent $307 b illion on prescription drugs in 2010. and that amount is expected to grow to nearly $500 billion in 2019. Althougr. prescription drugs account for about I 0% of overall heath care spending in the United States. for many segments of the population . particularly senior c1t1zens and those with chrome

C HAPTER 21 • Prescript" o ion rugs: How a Pill Become~ the L ""

cond1t1ons, the figure is much higher: prescription drugs have

become perhaps the single most utilized instrument of hea lth care treatment. with approximately 4 billion prescriptions dis-

pensed to Americans in 20 I 0.2 '.he pharmaceutical industry has been among the most consistently profitable sectors in the United States, with profit margins approaching 20% and

net profits in the billions. yet in the last two decades increases in prescription drug prices have generally far exceeded in- creases in the Consumer Price Index. l

The result of this overall trend in utilization and price infla- tion ts that prescription drugs have been one of the fastest

growing portions of the nation's rising health care costs over

the last several years. its rate of increase coming out at the top or near the top in most years .4 In short prescription drugs

have become more central to Americans· health care treat-

ment and . at the same time . have become increasingly unaf- fordable Approximately 43% of the population has difficulty

paying for prescription drugs , causing many people to stretch

their supply by skipping doses, cutting pills in half. or neglect- ing certain med1cat1ons entirely. Drugs are often too costly,

even for people who have health insurance coverage. s

Although cost may be the most common concern over prescription drugs. 1t 1s not the only concern. While some

patients may lack access to certain prescription drugs because

they are unaffordable. others lack access to particular prescrip- tion drug treatments because they are simply unavailable in

the marketplace as a result of the lengthy and complex federal

drug approval process-a concern affecting both patients. who want to use the medications. and the pharmaceutical

industry. which wants to sell the medications. On the other

hand , there have been several instances where prescription drugs. such as the arthritis medicine Vioxx. have success-

fully emerged from the byzantine drug approval process and

reached the marketplace to great commercial success. only to get withdrawn (either voluntarily by the manufacturer or

forcibly by federal regulators) after the drugs' dangerous a.nd

potentially deadly side effects became widely known. leading to questions about drug safety. the rigor and sufficiency of the drug approval process. and the role played by special interest

groups

Concerns such as high costs. needed drugs being withheld.

and dangerous drugs being approved are at the cent~r of the contemporary debate over prescription drug regu.lat1on and

are intncately related to the exigent issue of prescription drug

pricing. Ancilla ry issues such as pharmaceutical advertising research c t ff . ·

. os s. e icacy, patent protection. generic substitutes a.nd interest group lobbying all figure into the regulatory equa.

~ion as well. To grasp ~~e significance of prescription drugs in the larger health politics discourse. it is necessary to have a nuanced understanding of the prescription drug regulatory state to locat~. comprehend. and analyze policy conflicts as they anse. This chapter traces the political history of the pre scnpt1on drug regulatory state. studying the factors and issues leading ~o its formation and subsequent changes and creating a portrait of the government's role in the regulatory process and the reasons why this issue has remained on the public agenda.

THE PRESCRIPTIO N DR UG APPROVA L PROCESS For most Americans. the drug approval process 1s inv1s1ble- we do not see it. and we are hardly aware of 1t. Today there is a general confidence in the labeling. safety. and effrcacy or prescription drugs that reach the marketplace after they have successfully passed what is known as the drug approval pro cess.6 In its present form. this process 1s the product or over a century of lawmaking. which established , revised. relined, and expanded regulations to which prescription drugs must be subjected before they can be allowed onto the market by the Food and Drug Administration (FDA) which 1s the pn mary government institution that oversees drug regulations and acts as the gatekeeper for all medications for which ap

proval is sought. 7

The drug approval process itself appears fairly simple and can be broken down into three stages The first. known as the preclinical stage, is essentially the exploratory stage as 11 involves the most rudimentary research into the development of the chemical that will serve as the active ingredient m an eventual new drug. This stage is conducted in the laboratory and on animals to assess the basic safety and functions or the newly developed chemical This stage generally lasts from one to two years. If the results of the preclinical stage hold promise. then the research firm will move onto the second stage the clinical trials stage. which consists of a number of st~ps and in itiates the involvement of the FDA spec1h cally a team of doctors. sc1ent1sts. and other specialists lrom the FDA's Center for Drug Evaluation and Research (CDER)

PART VI • Policies and I ssues

Before conducting clinical trials, the drug developer must file an investigational new drug application (IND) documenting its preliminary findings and outlining its plans to proceed, which the FDA will then evaluate. If the IND is approved. the drug developer is then allowed to begin conducting clinical trials on human subjects. the progress of which FDA investi- gators will then begin to monitor.

Clinical trials for drug approval occur in three phases. each progressively more challenging. Phase I, which takes approxi- mately one year to complete. tests the drug on between 20 and I 00 healthy volunteers to determine drug safety and po- tential dosage levels. Approximately 70% of all drugs tested in Phase I are found safe enough to proceed to Phase 2. which takes approximately one to two years to complete. Phase 2 testing takes place on approximately I 00 to 300 volunteers who present w ith the condition that the experimental drug proposes to treat. The goa l of Phase 2 is to eva luate the drug's effectiveness. further examine its dosing. confirm anew its safety. and study its side effects. Only about 33% of drugs entering clinical trials emerge successfully from Phase 2 test- ing. which often reveals that the drugs do not work. are too dangerous. or have intolerable side effects.

Drugs that proceed to Phase 3 will be tested on between 1,000 and 3,000 volunteers who present w ith the condition the drug purports to treat. Phase 3 trials can last anywhere from 2 to I 0 years and offer investigators the opportunity to monitor long-term safety. effectiveness. potential side effects. and other adverse reactions across a much larger and more diverse sample size. Approximately I 0% of drugs wash out of Phase 3 clinical testing. but for those whose safety. effective- ness. and proper dosages have been established successfully, the drug makers then proceed to file a new drug application (NOA) with the FDA. seeking official approval for the drug to be marketed and sold in the United States. The NOA is accompanied by all of the data and analysis obtained from the preclinical and clin ica l trials. data about the medication collected outside the United States. and any other supporting information.

The official evalua tion process. known as FDA Review. takes up to 12 months for a standard review. which appl ies to medications that are therapeutically similar to those already on the market. or up to 6 months for a priority review. wh ich applies to drugs that offer substantial advances over existing therapies. However. actual review times are contingent on FDA staffing and caseload. so the complete review can take

considerably longer. The FDA investigators will then complete their own independent review. sometimes consulting wth the applicant to clarify findings. and eventually issue a deci- sion to accept the application. deny the application (typically because of inadequate or unsubstantiated clinical tnal data whereby the FDA cannot verify a drug's safety or efficacy), or conditionally accept the application (provided that additJona studies. also known as postmarket or Phase 4 clinical tnals. are successfully performed within a certain time period after a drug is allowed to reach the market to further verify clinical findings or allay potential concerns).

Once a drug is approved by the FDA. its manufacturer is granted a 20-year period of market exclusivity during which no other entity can use or duplicate the active ingredient that serves as the basis of the new drug. thereby granting the drug's developer a temporary monopoly through which the company can recover its development costs and profit from its innovation. However. this period of exclusivity begins not on the date when the new drug was approved by the FDA but. rather. on the original date the active ingredient was fifit patented by its parent firm . long before the end of clinical trials. Therefore. the effective patent life (EPL) of this period of ma rket exclusivity is typically several years less than the officia l 20-year grant (though there are various ways-some controversial-for a pharmaceutical firm to extend this period by months or even years). This exclusivity period is impor· tant because a successful new drug can earn a pharma ceub· cal company billions of dollars in annual sales. so there 1s a strong financial incentive to bring a drug to market as quic~y as possible to maximize the EPL. Once a drug's exclusivity period approaches an end. pharmaceutical companies w sometimes work out new formulations of the same drug (e.g. altering its delivery mechanism into a time-released formua or utilizing an isomer of the active ingredient that 1s simpfya mirror image of the molecule), differentiating it just enough to qualify as a new drug even though chemically and thera· peutically it is virtually identical to the original drug. Such de- rivative copies are known as me-too drugs. and though the practice is controversial. it is also highly profitable.

But all good things must come to an end , and eventualfya drug's market exclusivity will expire. meaning that other firms in the generic drug industry may utilize the active ingredient to manufacture their own version of the drug, usually at a sig· nificantly discounted price. However, while generic manufac· tu re rs need not engage in the same long and expensive drug

C H APTER 2 1 • Prescription Drugs: How a Pill Becomes the Law

approval process that the original brand name developers were required to pass, there is nevertheless a regulatory process that they must follow. A generic manufacturer must submit an abbreviated new drug application (ANDA) to the FDA . demonstrating that the generic version is bioequiualent to the originally approved brand name drug, that the quality of the drug meets pharmacopeia standards. that the manufacturing facility meets FDA standards. and that the drug will be ac- curately labeled. To demonstrate bioequivalence. the generic ftrm must provide data on test subjects verifying that the drug functions identically to the brand name version. a far simpler process than the traditional clinical trials that new drugs are requi red to pass. The first generic manufacturer to success- fully get its ANDA approved by the FDA is granted a 180- day period of exclusive generic rights. during which the brand name firm may negotiate with the generic maker to withhold its product from the market in exchange for a fee. However after that 180-day period expires. regardless of what actions the initial generic applicant takes . other manufacturers whose ANDAs are approved may enter the marketplace as well.

Although the drug approval process appears simple and logical. it includes conflicts that were never ful ly resolved and poses a number of problems for the public health. By looking more closely at th is regulatory state and how it developed, we can better understand the regulatory ends as well as the polit- ical means that exist within the system; we ca n also discover why certain problems persist and how they may be solved.

BUILDING THE FRONT END OF THE PRESCRIPTION DRUG REGULATORY STATE: THE FIRST EFFORTS Three major laws constructed the American way of prescrip- tion drug regulation: the 1906 Pu re Food and Drug Act: the 1938 Food . Drug, and Cosmetic Act; and the 1962 Kefauver- Harris Drug Amendment. However. the awareness of the need to regulate the drug market can be traced back all the way to colonial America when Nicholas Knopp. an entrepreneur in the Massachusetts Bay Colony. began to ma rket a very expen- sive cure for scurvy.8 After about a year. the quackery of this enterprise became apparent. for it was determined that the alleged cure was merely " a water with no worth nor value." and so Knopp was put on trial. found guilty. and ordered to

pay a fine of five pounds or else be whipped and imprisoned. This was hardly an isolated incident in American history. as this example symbolizes the early struggles within the Ameri- can drug trade that would ultimately lead to the first major attempt at federal regulation.

Medical Democracy and the Rise of the Drug Industry The 19th century was an exciting, pioneering era of science and innovation. and nowhere was this more evident than in the realm of medicine and pharmacology. But like all new frontiers . there were perils to match the promises of pharma- ceutical development. As rudimentary science found its way into the consciousness of the masses. people began to know trivial facts about what might ail them. born from ideas such as the "germ theory of disease ."9 without actually under- standing the root causes or the real effects of their treatments. and herein lay the problem and danger to the public health. Like the great western frontier. turn-of-the-century pharmacol- ogy was virgin. unregulated territory.

There were no laws on this land. and no sheriff to keep or- der. As a result. a mass of nefarious characters from the shady world of proprietary medicine emerged from the cracks of the scientific establishment. peddling allegedly wondrous-but in rea lity worthless-treat ments for a variety of ailments. These individuals were both products and perpetrators of the times that produced medica l miracles. As the miracles increased. so did people's expectations. After all. if one can be inoculated against a virus through the use of a vacc ine hatched from chicken eggs, which was indeed true . then it may not have been beyond the realm of possibility that a dubious propri - etary medicine allegedly produced from something like snake oil could be an effective treatment in its own right as well. Once medical science raised the therapeutic bar with remedies for conditions long thought untreatable. expectations were also raised. providing opportunities for the predatory peddlers to crawl into the marketplace with nostrums and elixirs.

As purveyors of adulterated food and drugs joined the pro- prietary medicine makers in preying on a sometimes ignorant public . President Abraham Lincoln founded the US Depart- ment of Agriculture (USDA) out of the agricu ltural wing of the US Patent Office. Contained within this new depart- ment was the first Bureau of Chemistry. which would later develop into the FDA. Although the early investigations by

PART VI • Policies and Issues

the Division of Chemistry looked mostly into matters of food and drink. many of the subjects under scrutiny very much resembled those contents of the reigning proprietary medi- cines. For example. the suspect wines being studied prob- ably differed little from the infamous proprietary medicine "Hostetter's Stomach Bitters." a best-selling but useless concoction (consisting of up to 47% alcohol). which was originally marketed to soldiers during the Civil War as a means to fight off swamp-borne diseases. 10

Substances like alcohol and othe r additives commonly found as the main ingredients in these medicines would soon find themselves placed on the table for study. As the weak- ness of existing rules became obvious and the scope of the problem became clearer. a cast of reformers would begin to call for aggressive government action. The National Board of Trade reso lved that " it is ... important th at wise laws (if possible national in character) shou ld be enacted wh ich wi ll afford adeq uate protection both to consumers and honest producers." 11 Congress responded in 1879 with the introduc- tion of the first antiadulteration bill, but it did not pass. as the industry that Congress proposed to regulate wielded consid- erable influence. Arguments for regulation were branded as "sensational and unreliable ... calculated to create needless alarm." 12 Yet the issues would not go away. and in the ensu- ing 27 years another 190 bills in the same vein were proposed. though to no avail. 13 Although futile. this development was significant in that it heralded the beginning of national regula- tion of the domestic drug industry as a legitimate issue for the federal government to consider. even if most lawmakers were not yet ready to make the leap.

Welcome to the Jungle: America's First Foray into Drug Regulation The origins of the political impetus to successfully pass the 1906 Pure Food and Drug Act are commonly traced back to the publication of Upton Sinclair's novel. The jungle. which shocked readers with its portrayal of the grossly unsan itary conditions of the meatpacking industry. The resulting outcry of both the public and the press did i ndeed spu r Co ngress and the president to finally take action to help ensure the safety of food and drugs through the enactment of broad na- tional regulations . but the plot to this development is fa r more complex than the tale that is often told, and it reveals much about American politics and health care policy.

Upton Sinc lair's work was actually part of a larger brand of muckrak ing journalism that marked the Progressive era (roughly 1900- 1915 ). Enlightened publishers sought to mo- bilize their middle-class audiences about pressing issues so as to spur government action. The muckrakers spec1a 1zed n predatory industries-and proprietary medicine fit the b I Among the muckraking outlets that had taken an interest in the proprietary drug issue was Collier's. which enlisted a muckraking reporter named Samuel Hopkins Adams to wnte a series of articles on this subject. The publisher built up an· ticipation and intrigue for this series in its editorials and car· toons. Adams· exhaustive research resulted in a series ca ed "The Great American Fraud" whose first chapter was adorned by an illustration featuring a dark-hooded skull surrounded by snakes. proprietary medicine bottles. and a fog of seeming~ noxious vapors. This series would run through February 1906 and fea ture a devastating attack on the proprietary medicine trade.

Unlike previous efforts to raise awareness about the dangers of proprietary medicines and the need for federal safety regula· tions. the muckrakers. led by Collier's. appeared to create s1g· nificant traction . The American Medical Association (AMA) collected Adam s's Collier's articles and published a bound volume as The Great American Fraud . selling 500,000 cop· ies. The outcry-from consumer groups. trade associations, women's clubs. and Progressive reforms in Congress-moved President Theodore Roosevelt to recommend to Congress "that a law be enacted to regulate inter-state commerce in misbranded and adulterated foods. drinks. and drugs."

The proprietary drug makers shifted their strategy: After op- posing legislation for decades. they now worked to weaken the proposed law. At a specia I meeting of the Proprietary As· sociation in December 1905. opposition to regulation was reiterated. but the membership adopted resolutions that concurred with minor portions of the congressional bill op- posing the excessive use of alcohol in proprietary medic nes discouraging exaggerated curative claims. and regulatng medicines containing narcotics and poisons.14 The largerard more reputable proprietary drug manufacturers perhaps S4W an opportun ity to consolidate t heir place in the market by subj ecting their weaker competitors to regulations that they could not easily afford to obey. 15 The proprietary medic ne makers were determ ined to exert as much of their influence as possible-to derail regulations if possible. to dampen regulations if necessary.

CHAPTER 21 •Prescriptio n D rugs: H ow a Pill Becomes the Law

Aside from the sporadic charges from proprietary allies. op- ponents were primarily southern states rights advocates op- posed to federal regulation of almost any kind. arguing that 'the Federal Government was not created for the pu rpose of

cutting your toe nail or corns" : otherwise the ensuing delib- erations in Congress concluded that " the general purpose of this bill is to protect the public health. and to secure honesty in trade and to enable people to know just exactly what they get." affirming the progressive notion that consume rs could make wise and informed decisions for themselves if given ac- cura te information.16

In February 1906. in the midst of these deliberations. Upton Sinclair's novel. The jungle. was published and became an in- stant best seller that struck a nerve with the public. Although ts subiect matter was con fined to a portrayal of pra ctices and conditions in the meatpacking industry, it fostered the idea that government regulation was necessary to protect the public health from unscrupulous captains of commerce . thereby increasing pressure on Congress to approve what had already been brought onto their agenda . By now. it was al- most a fail accompli that the bill would pass. 17 and indeed . in June 1906. the Pure Food and Drug Act passed overwhelm- ingly in Congress and was signed into law by President Theodore Roosevelt.

The new drug regula tions requ i red th at any la bels th at manufacturers applied to t heir products must tel l the t ruth . prohibiting " any statement. design. or device" that was "fa lse or misleading" and requiring that the presence and amount of certain dangerous contents . such as alcohol or opiates. be labeled. Any statement made about a d rug's contents was required to be accurate . and if a drug's " strength or purity fall below the professed standard unde r which it is sold ," it would be deemed adulterated. The Bureau of Chemistry was charged with the task of admin istering these regulations and conducting in spections. with violators potentially subject to a cessation order. confiscation . destruction of stocks. and a fine. 18 "Guaranteed."' hailed the New York Times in an edito- nal praising the newly passed law. for now the "purity and honesty of the food and medicines of the people are guaran- teed." making the long struggle an "effort well spent." 19 Other reports were equally effusive. However, a closer look at the regulations reveals that they were far from being comprehen- sive safeguards for the public health .

In most cases. the regulations did not require drug label- ing at all : only that if the manu facturers chose to provide a

label . then they must tell the truth on that label. This provi- sion would later be tightened up by Congress . w hich passed the Sherley Amendment in 1912. expanding the prohi bition against listing fraudulent contents to apply to fra udulen t t herapeutic claims as well. An organization of proprietary drug makers claimed credit for rendering the law "in its pres- ent rather innocuous form ." suggesting that these regula- tions are "not such a terrible th ing after all " because "people generally will reason . and reason correctly, that preparations which come up to the requirements of a congressional en- actme nt must be all right . or. certain ly that they are not harmful or dangerous." 20 a sentiment that cou ld enhance their business by providing an air of legitimacy not previ- ously available while possibly reducing competition from smaller rivals.

The new responsibility doubled the size of the Bureau of Chemistry. setting in motion the development of a growing regulatory institution that would eventually evolve into the modern FDA. 2 1 The emergence of the regulatory state would also help to build the private institutions of the drug market. as competitors banded together into trade associations. such as the American Pharmaceutical Manufacturers· Association (la ter PhRMA). for mutual benefit in tasks such as lobby- ing, ma rket research. and government rela tions. which can be pe rformed more effectively and efficiently through collective efforts and resources. The intervention of government in the drug market was not the destructive force some had feared . nor was it the consu mmate guard ian for which some had hoped. but it did demonstrate that broad nationa l regulation of the drug industry was possible and productive.

THE NEW DEAL ERA: NEW REGULATIONS, OLD PATTERNS The proponents of progressive reform succeeded in their long struggle to erect a drug regulatory state to fight market- place fraud and protect the public health. but they were also aware of the new law's shortcom ings. which would become mani fest not long after it was enacted. "The bill is not as good as we should like it. " concluded USDA chief chemist. Ha rvey Wiley. "but it is a splendid founda tion on which to erect a more perfect structure in the future." 22 The need for that " more perfect structure" grew parallel to the growth of the

drug industry and its skill at exploitation of loopholes and eva- sion of existing regulations.

Reformers Seek a "More Perfect Structure" By 1933. regulators in the FDA. which was organized out of the Division of Chemistry in 1927. lamented that many prod- ucts they encountered did not even exist in 1906. including chemicals in pesticides and cosmetics that were becoming more widely used. and that they had little authority to regulate many others beyond alerting companies of their violations or hazards and negotiating with them to stop.23 When the law was. in fact. invoked and offenders prosecuted. the average fine paid under the Pure Food and Drug Act was $67. 24

Reformers sought prohibition against false advertising. the requirement of informative labeling, adherence to a list of dis- eases for which no drug could claim it was a cure. broader definitions of adulteration and misbranding. more severe pen- alties for violations. and most significantly. the requirement that companies prove to the government that their drugs were safe before being allowed onto the market. Once the conflict began. there was a certain familiar pattern to the way the sides lined up and engaged each other. Just as in the struggle for the 1906 Pure Food and Drug Act. the drug trade was the principal opponent. It used its significa nt resources to pres- sure members of Congress.25 Its arguments against the new proposed regulations were variations on a familiar theme. Op- ponents insisted that the existing law was sufficient so that there was no need for a new law. that the proposed regula- tions were "un-American" attempts to destroy "sacred rights" of the individual and "Sovietize" the drug market in America by creating "a virtual dictatorship over the trade ."26

Proponents of reform came together as a coalition similar to that which fought for the Pure Food and Drug Act. Women's groups, health officials, scientists. public health groups. con- sumer advocates. and select drug firms made their case about the need to further protect the public health.

Unlike the previous campaign. the parameters of mobiliza- tion in this battle had changed-and tilted against reform. Activists energized by the Progressive movement would not find the same motivation in the Great Depression. Whereas President Theodore Roosevelt had given drug regulation a loud public pronouncement. President Franklin Roosevelt gave it but a hushed private whisper. The re would be no

multitude of muckrakers in the popular press to educate a mass audience. no Samuel Hopkins Adams or Upton Sinclair to stir up passions among the masses. no AMA m1ss1ves. and no reformers to coordinate the efforts. The proposed reforms sta lled in Congress-until a public health tragedy altered the course of drug policy and served as a model study of politica action.

The Unexpected Triumph of Scientific Testing In the 1930s. the Massengill pharmaceutical company had developed the drug sulfanilamide. a potent ant1b1otic that was considered a breakthrough medicine. effectively treating infections such as strep throat. venereal disease. and several other kinds of infections that did not respond well to exist· ing medicines .27 Since many people (particularly children) could not tolerate the pill version. one of Massengill's chem ists experimented with several different solvents to mix with sulfanilamide until finally he created a liquid form using dieth· ylene glycol . which acted as a sweetener. After being tested for appearance. flavor. and fragrance (but not safety or toxic· ity). the concoction was bottled as Elixir Sulfanilamide and shipped out in September 1937. The following month. reports began to surface about patients who had died after taking Elixir Sulfanilamide. The AMA obtained a sample of the elixir. and its tests revealed that while the antibiotic sulfanilam1de itself was safe. the solvent diethylene glycol. a chemical com· monly found in automobile antifreeze. was highly toxic. a fact of which the Massengill chemist was not aware. According to the law. there was little the FDA could do unless there was a problem with the product's labeling. Otherwise. the existing law spoke nothing of drug safety. Although the FDA was able to seize on a technicality to withdraw nearly all of the extant Elixir Sulfanilamide in the United States. the damage had al· ready been done. At least I 07 people (mostly children) died a slow and painful death.

Once the truth about Elixir Sulfanilamide had been revealed newspapers began to report updated statistics on fatalities each week. and they struck a nerve. This tragedy served as a trigger event that awakened the public. who had been un- moved and apathetic toward the crusade to strengthen drug regulations. Such sentiments were exacerbated by the lega prosecution of the head of Massengill. who lamented the tragedy but accepted no responsibility. claiming he had vio- lated no law because the Pure Food and Drug Act provided no

CHAPTER 21 • Prescription Drugs: How a Pill Becomes the Law

prohibition or penalty for distributing dangerous drugs-and indeed. the extent or the punishment was merely a fine for mislabeling this product as an elixir. as it contained no alco- hol.28 Now legislators were inundated with letters demanding a new law with tougher safety regulations. Even the majority of those in the drug trade believed new regulations were nec- essary to restore public confidence in the industry and protect themselves and the public from a recurrence. 29

Congress took up the matter almost immediately. dump- ing the watered-down versions of the new regulations they had previously considered and replacing them with a bill that addressed the rears. problems. and regulatory shortcomings exposed by the Elixir Sulfanilamide tragedy. As it pertained to drugs. the new measure. passed by Congress as the Fed- eral Food. Drug, and Cosmetic Act and signed into law by President Roosevelt in June 1938. significantly strengthened the regulatory state by instituting premarket requirements for manufacturers to test all new drugs for safety and report their findings to the FDA.30 Additionally, the law required that all drugs be labeled with complete information about their con- tents. side effects. and dosages. The law no longer required the FDA to prove the difficult case or fraudulent intent in its prosecutions against false therapeutic claims. and 1t also stiff- ened penalties.

THE REGULATORY CHALLENGES OF PHARMACEUTICAL PROGRESS With the new Food. Drug. and Cosmetic Act's emphasis on drug safety and accuracy in labeling or contents. quantity. and usage. drug makers were put in a position that required the ex- tensive use or scientific resources not iust in the development of drugs but also in the production and usage or drugs such that. to comply with the new regulations. they acquire a fuller understanding or what these products contained. the effects they had on the patient. and the maladies they were designed to treat. To accomplish this required a significant investment in scientific research. both financially and mentally. It is esti- mated that in the 1920s. the top 200 drug companies in the United States had "a few thousand " scientists on staff. most working on the chemical production end. but by the 1940s, there were 58.000 SC1entists on staff engaged specifically in

research. 31 The result or compliance with the new regulations was the restructuring or the drug industry that equipped it to seek more ambitious therapeutic goals. The proprietary drug makers declined under the pressure or the new regulations and the competition from robust new therapies born from the renewed commitment to research.32

The new legislation helped transform the industry. By the early 1950s. some 90% or the drugs being used had been de- veloped since passage or the 1938 Food , Drug, and Cosmetic Act. In 1950 Congress solidified the place of the industry by passing the Durham-Humphrey Amendment. which created a new class or drugs that would be available " by prescription only."33

The changes in the drug industry brought about by the augmented regulatory state were not confined to the scien- tific realm. The business end of the drug trade also evolved in its practices. Unli ke the previous era . when drugs were mar- keted primarily to consumers via advertisements in newspa- pers and magazines, companies now began to energetically market their products directly to doctors via medical journals and th rough professional office visits. leaving behind free drug samples. literature. and trinkets with logos.34 Similarly. the drug industry began seeking to patent not only the chemicals they developed but also the processes they used on naturally occurring chemicals, allowing the patent holder to license the means or production for a fee. Th is approach to patenting also had the effect or encouraging drug firms to explore alterna- tive chemical modifications and processes whose products would have similar therapeutic effects to those already on the market. offering the innovating firm a means or extending the patent life or its own product through modification while en- titling the competitors who make similar versions to a patent of their own and. thus. creating a category of virtual copycat "me-too" drugs.35

An expose by Saturday Review. science editor John Lear revealed that many doctors were quite confused by a plethora of similar medications between which they had trouble dis- tinguishing. and many of these drugs were becoming increas- ingly pricey.36 In fact. some drugs in the same therapeutic class were identical in price-down to the penny-prompting suspicions about pharmaceutical pricing practices.37 These issues would catch the attention of policymakers and make their way to the Senate Subcommittee on Antitrust and Mo- nopoly. led by Estes Kefauver. Aided by staff research . govern- ment reports. constituents' complaints. and his own personal

j

litjj PART V I • Policies and I ssues

encounter with the need to buy an unexpectedly high-priced medication. Senator Kefauver asked. '"How in the world can poor people afford to stay alive these days?" He announced that hearings on the drug industry would commence in De- cember 1959. hoping to better understand that very question.

Drug pricing was an issue that had not been previously investigated or considered in the debates leading up to the existing drug regulations. and the FDA had no authority to consider pricing or economic issues of any kind in its opera- tions . However. after the explosive innovation following the enactment of the 1938 Food. Drug. and Cosmetics Act. the pharmaceutica l industry had risen to become the nation's most profitable enterprise. 38 Kefauver would seek out the wiz- ard behind the curtain. lining up top executives from lead- ing pharmaceutical companies to provide some insights into their businesses and the pricing methodology. Kefauver com- menced the hearings by reading a letter from an elderly citizen who lamented that the "cost of medicine is so great that I can barely make ends meet. Sometimes I think I must stop taking the medicine and just die."39 Testimony from the president of Schering and other companies revealed the significant price markups taking place beyond what drugs cost to produce. In the case of the drug prednisone. testimony and data re- vealed that the drugmaker spent 1.6 cents to make a tablet that it would sell to druggists for 17.9 cents. and who. in turn. would sell it to the public for 29.8 cents-an initial markup of 1.1 18%-while another drug, estradiol. which the same firm simply bought from an overseas company and repackaged. was marked up 7.079%.40 The common industry reply was that these high profit margins were required to offset the high research costs of developing successful products and making up for the research costs of product failures (a claim that has been often repeated. including as recently as February 2012 by former senator Rick Santorum during his campaign for the Republican nomination for president). However. pricing was but one issue to be exposed.

Some of the more precarious revelations of the Kefauver hear- ings were concerned with advertising practices. In 1958. the average outlay in advertising and promotion for the 22 largest manufacturers was 24% of their gross income-a cost. drug company officials insisted. that was necessary to educate and inform physicians about their latest products.41 These ads and promotions were hardly revelatory. however. The educational literature lacked content. exaggerated the drugs' usefulness. and

understated side effects.42 Although the 1938 Food . Drug. and Cosmetic Act had given the FDA considerable authority. 1t re- mained ill-equipped to address these issues. Kefauver cast him- self as an heir to the act1v1sts of old. seeking to further protect consumers and patients from drug companies that colluded to maintain high prices and used predatory promotional practices to exact maximum profit.

In the fall of 1961 . Kefauver introduced a sweeping bil to shore up premarket regulations by empowering the FDA to re· quire manufacturers to demonstrate the safety and efficacy of all new drugs before they would be allowed on the market. The bill also proposed granting the FDA authority to inspect and license all manufacturers and subject them to review or revo- cation. and it would require all drug advertisements to contain clear warnings about adverse side effects from data provided not only by the manufacturers themselves but also from the FDA as an impartial source. While these proposals were. in many ways. an extension of the existing regulatory state that operated in the premarket to protect the public health by en· suring safety and preventing fraud. Kefauve r also sought to address what he saw as a postmarket problem of drug pricing and access by reforming the patent system through compul- sory licensing whereby drug patent holders would retain only three years of exclusivity. after which they would be required to license their drug to other interested firms who could then produce and sell it on their own. for which the patent holder would receive a royalty of no more than 8% of total sales Once again. facing the prospect of expanding the prescription drug regulatory state. affected parties mobilized in predictable ways and made the now-familiar arguments.

Most of the medical journals and trade associations were staunch ly opposed to the Kefauver bill. The AMA protested the new authority that would be given to the FDA to require proof of efficacy as an intrusion on doctors' ability to use their own independent medical judgment about drugs. though t 1s likely that they. like the medical journals. also feared a re· duction in advertising and marketing revenue from the drug companies.44 Conservative politicians such as Richard Nixon decried the growth of a national bureaucracy and feared the new bill would trample on individual liberties.41 The drug trade found the general call for more complete informat10" a worthy goal and agreed in principle with creating the ef· ficacy requirement and granting the FDA authority to remove su bstandard drugs from the market. but the idea of affecting

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CHAPTER 21 •Prescription Drugs: How a Pill Becomes the Law

pricing through patent reform and compulsory licensing ren- dered the Kefauver bill a nonstarter. 46

As Kefauver's bill was being picked apart by various inter- ests. President John F. Kennedy made drug regulation part of his agenda for the nation. In his 1962 State of the Union ad- dress. Kennedy recommended new drug regulations affecting premarket safety and advertising issues but was silent on the issue of pricing.47 On the surface this might have appeared to boost Kefauver's efforts. but instead it was the death knell for his ambitious vision. as the president's vague and selec- llve support emboldened those in Congress who favored more modest measures. In April 1962. members of Congress. along with the White House and representatives from the drug trade. drafted an alternative. watered-down drug bill that they hoped would pass quickly. with patent reform and other means to control pricing stripped out of the bill.48 This weak compromise bill was essentially a token designed to give the impression that the call to reform was being answered. It did not address advertising. its efficacy requirement was eas- ily satisfied. and it permitted an approved drug to be labeled ror other uses without additional testing. Despite its tooth less design as an innocuous piece of legislation. it did not receive much support.

Once again. the publ ic did not mobilize over the issue. However. once again a tragic public-health trigger would break the stalemate. mobi lizing the public and recalibrating the interests of the affected parties. Starting in 1959. doctors in Germany and England began observing an unusual form of birth defect called phocomelia in infants. causing arms. legs. hands. feet. and sometimes other organs to form into seal-like flippers. No cause was found until 1961. when it was deter- mined that the drug thalidomide. a sedative taken by preg- nant women to help with morning sickness. was responsible for the deformities. Infants in the United States were generally spared because. as a result of the Food. Drug, and Cosmetic Act. thalidomide generally was not available domestically be- cause its application for approval failed to ascertain the drug's safety. Although regulations prevented a drug from being sold on the market. under the law the pharmaceutical company was allowed to distribute unapproved drugs to practicing phy- sicians to be administered to patients of their choosing as part of its investigation into the drug's safety. In the United States. Merrell. the manufacturer of thalidomide. had provided over 2 million tablets to nearly 1.200 physicians for distribution

without supervision. recordkeeping. or scientific guidelines.49

Once news of this broke. the FDA dispatched investigators to collect all of the thalidomide pills that been distributed in the United States. However. since recordkeeping had been poor, it was nearly impossible to trace every bit of the thalidomide that had been distributed. Although there would be on ly iso- lated cases of thalidomide babies in the United States. mostly from women who had used the drug overseas. there was a collective sense of outrage to accompany the relief tha t a di- saster had only been narrowly averted.

In the aftermath of this story. "the headlines screamed. the public was aroused. the drug manufacturers ran scared. and the opponents of a tough bill jumped for cover. "50 With the public now an attentive spectator. President Kennedy called for a press conference to push for quick action on a strong bill . and Congress took up the issue once again. looking for guid- ance from portions of Kefauver's original bill that was now m part resurrected and supported by those who had previously conspired to kill it. Although Kefauver failed to reinstate the postmarket revisions to patent law that would affect pricing. the premarket safety and advertising regulations that Kefauver had originally proposed would form the basis of this new bill. now called the Kefauver-Harris Amendment (or Drug Efficacy Amendment). to the 1938 Food. Drug, and Cosmetic Act. It passed Congress by a unani mous vote in October 1962. Bui ld- ing on existing regulatio ns. the new law required proof of ef- ficacy for all new drugs and old drugs already on the market. complete disclosure of warnings on the drug labels. mandatory disclosure to test subjects that experimental drugs lack FDA approval and may carry risk. and complete recordkeeping by drug companies on all side effects; it authorized the FDA to withdraw approval of drugs if they are later proven to be un- safe or ineffective: and it transferred ultimate jurisdiction over drug advertising from the Federal Trade Commission (FTC) to the FDA. 51 In essence. the FDA now had oversight over all stages of drug development. a fully armed gatekeeper of the free market.

Passage of the Kefauver-Harris Drug Amendment brought to a fundamental conclusion the gradual but consistent construction of the prescription drug regulatory state in the United States. As the third head of the triumvirate of major federal acts to build up institutions charged with protecting the public health. it resulted in the most sweeping authority to intervene in the prescription drug marketplace.

AFFECTING ACCESS THROUGH EXPEDITED DELIVERY: THE LESSONS OF FDA REVIEW While the safety and efficacy standards enforced by the FDA were hailed for their rigor. some scientists argued that the figurative price Americans paid for this safety was a drug lag whereby the citizens of other nations had access to new drugs before Americans because the FDA's approval process was long and tedious compared to that of other countries.s2

The statistics on this claim were inconclusive.s3 but the issue was a valid one. Although drug lag was commonly framed as a public health concern. another important factor was that the rigorous approval process kept new drugs off the market longer during the testing phase while the time left on their patent clock was t icking away, costing the industry potential profits to be reaped during their window of market exclusiv- ity. The cause was obvious and unassailable: The FDA drug review division was simply understaffed and underfunded.

Speeding the Process This broader issue occupied an unusual space on the regula- tory continuum. On one hand. it was an effect of the buildup of premarket regulations to ensure drug safety and efficacy. and on the other hand. it was a bottleneck to the postmar- ket period affecting issues of drug access to the marketplace and patient access to drugs. While there was some validity to claims that patients were being denied access to new drugs as a result of the slow FDA approval process. this complaint was only meaningful in cases where the drugs in question had no alternative on the market and where the fatally ill patients had precious little time to wait. By 1988 this consideration led to some subtle shifts in FDA policy regarding treatments for "life-threatening" illness. allowing such drugs already in the advanced clinical testing phase to proceed along an acceler- ated path to approva1.s4 This modest change was a prelude to what would become a significant reform to help bring drugs to market more expeditiously through the institution of drug industry user fees.

The purpose behind the concept of charging a user fee accompanying a new drug was to contribute additional rev- enue to the FDA so that the agency could acquire and fund the additional resources and personnel to expedite the drug

review process. In 1992. a bipartisan consensus yielded the Prescription Drug User Fee Act (PDUFA). With the intention of funding an additional 600 scientists to expedite the drug review process. the PDUFA required the FDA to charge a user fee of approximately $200.000 to each new drug applicant. set performance benchmarks for the FDA that would impact future funding, and included a five-year sunset provision. meaning that it would automatically expire unless renewed by Congress.ss By the time the PDUFA was due for renewal by Congress in 1996. it appeared to have been a success. Though still short of the ideal. as a result of the additional FDA staff funded by the user fees. average drug review times were reduced by approximately 50%. to 18 months for stan- dard drugs and only 6 months for priority-designated drugs. bringing new drugs to the market much sooner than before and preserving valuable months of patent exclusivity for the pioneer drug makers. 56

Yet. despite these successes. some members of Congress rebelled. After the defeat of the Clinton health reform plan in 1994. Republicans seized control of both chambers of Congress for the first time in 40 years. They opposed PDUFA renewal and framed it as part of a proposal for a broader dis· mantling of government health care regulations. particularly the FDA. This ambitious attempt by conservatives failed. and Congress would in stead pass the 1997 FDA Modernization Act. whose primary provisions were the reauthorization of the PDUFA for another five years and the modification of drug patent law to grant an additional six months of exclus1v1ty to drug makers for products whose usage can be extended to children. The PDUFA would be renewed by Congress once again in 2002 and again in September 2007 as part of a larger set of reforms.

Another reform to emerge from the FDA in 1997 would address pharmaceutical advertising. which had succumbed to progressively tighter controls over time. Although advertising targeted at physicians remained commonplace. advert1s11g targeted directly at consumers was a more precanous enter· prise strictly guarded by the FDA as a result of the Kefauver- Harris Amendments. The industry strategy in resurrecting direct-to-consumer advertising (OTC) as a marketing tool was to stress its educational purpose. The FDA slowly relaxed its position to allow some "help-seeking" ads that informed consumers about ailments for which potential treatments ex· isted. but the companies were not allowed to advertise their products. though some "reminder" ads would sneak through.

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CHAPTER 21 • Prescription Drugs: How a Pill Becomes the Law

which mentioned the name of the product without mention- ing its function. Even with these controls. annual DTC spend- ing rose from $12 million in 1989 to $595 million in 1996.57

With the growth of DTC. the industry (and some media) began to complain about the FDA's violation of free speech rights. In 1997. the FDA issued a " draft guidance." which would be finalized in 1999 as the Industry Guidance on Con- sumer Directed Broadcast Advertisements. whose purpose was to relax the restrictions on DTC advertising. Rather than require comprehensive disclosure of risks. side effects. and drug interactions, which effectively kept such ads off the air. the new guidelines required broadcast ads to simply provide a '"brief summary" of risks ; announce major risk factors: provide a toll-free telephone number. web address. and other contact information where customers could obtain additional details; and direct consumers to get in touch with their physicians to learn more about the advertised product. 58 The intended ef- fect of this change was to put an end to the reminder-style ads that lacked substance and allow for more useful ads following guidelines with which the industry could more easily comply. Oversight would take place through the FDA's Division of Drug Advertising, Marketing. and Commerce (DDMAC). which would preview new drug ads and issue warning letters to vio- lators. with particular attention to false or misleading claims. As annual DTC spending continued to soar-from $595 mil- lion in 1996 to $5.6 billion in 2005. so too did the enormity of the FDA task to conduct oversight an d enforcement- in an agency that was already struggling for resources.

Although the drug companies would spend a significant amount of money on DTC advertising, it was a good invest- ment. A Harvard School of Public Health study determined that. on average. a I 0% increase in DTC advertising of drugs within a therapeutic class yields a I% increase in sales of drugs in that class . so that every $I spent on DTC advertising yiel ds an additional $4.20 in drug sales. 59 Thus, DTC advertis- ing has proven instrumental to consumer awareness of avail- able pharmaceutical treatments on the market and to industry profitability. At the same time . the ads generally promote the newest drugs still under patent. which are often considerably more expensive than older alternatives and almost always re- quire higher co-payments. even though they may not work any better than older. cheaper alternatives.

One of the drugs that benefitted greatly from DTC advertis- ing was Merck's arthritis medication Vioxx. which was part of a new class of COX-2 anti-inflammatories that were much

gentler on the stomach than the older class of medicines like aspirin or naproxen , which were harsh on the stomach and could cause gastrointestinal bleeding. Merck had a block- buster on its hands. as Vioxx had $2 billion in sales in its first year alone. However. in tracking studies. Merck would learn Vioxx was associated with an increased risk of serious heart con dition s and stroke, but the company downplayed the causal link and published its data in the New England j our- nal of Medicine in November 2000. However. it would later be revealed through leaked documents and internal memos from Merck dating as early as 1996 that the company knew about the cardiovascular risks caused by Vioxx and took steps to contain the problem. minimize the potentia l commercial damage, and clear its path to speedy FDA approval by altering its clinical trial to exclude test subjects at a high risk to experi- ence these side effects and underreporting cardiac events in its published results, in effect falsifying its data. 60 Vioxx and similar drugs wou ld be pulled from the market. and lawsuits against their producers would ensue.

Government was slow to respond. as the Vioxx case was multilayered and exposed the industry's quest for new path- breaking drugs. the pressure to avoid drug lag and get a prod- uct to the market as soon as possible. the ease with which data from premarket clinical trials cou ld be misrepresented. the utility of industry user fees to reduce FDA review time. the power of DTC advertising that is difficult to oversee. the lack of adequate postmarket product surveillance. and indecisive FDA postmarket authority. After Democrats won back control of Congress. they would pass the Food and Drug Adminis- tration Amendments Act (FDAAA) of 2007. which makes a number of subtle adju stments to the existing regu lations along with some broad outlines for new endeavors to address lingering problems.

The FDAAA renewed the PDUFA and rai sed its fees to gen- erate more operating revenue for the FDA. required all nonpre- liminary clinical trial data for new drugs be made publ ic within a year as part of a searchable database. required drug compa- nies to follow through on conducting postmarket surveillance on approved drugs the FDA believes require further monitor- ing, created voluntary DTC advertising user fee s to fund vol- untary FDA review of industry ads; extended the award of additional patent exclusivity time granted by the Best Phar- maceuticals for Children Act, which applies to drugs later ap- proved for use by children ; enhanced the authority of the FDA to recommend and eventually require drug labeling changes

Mui PART VI · Policies and Issues j --~~__:.::=~~~~~~~~~~~-----~~

in response to new safety information: gradually reduced the number of conflict-of-interest waivers that may be granted by the FDA chief to individuals serving on advisory panels: and perhaps most innovatively. created the Reagan-Udall Founda- tion as a public-private partnership to further the FDA Critical Path Initiative. which sought to overcome the perceived lull in breakthrough drug developments.61 None of these develop- ments were substantial advances of the regulatory state, but they were useful refinements that restored some of its rigor while creating an outline to address back-end issues of access in innovative ways.

BUILDING THE BACK END OF THE PRESCRIPTION DRUG REGULATORY STATE: POSTMARKET PRICING AND ACCESS What we have observed thus far has been the systematic buildup of premarket regulations existing on the front end of the utilization cycle, regulations affecting the conception . creation , processing. testing . and marketing of a drug to the consumer. However. the politics of reducing the barriers for patients goes all the way back to the 1960s when Senator Kefauver raised the issue of drug pricing and access as an equally important consideration for regulation to promote the public health. Regulating the back end of the market met with considerable resistance-even the thalidomide scandal did not resurrect that part of Kefauver"s plan. However. 1t 1s these back-end regulatory considerations affecting pricing and access that would prove to be the center of the ensuing policy debate. which continues to the present day. These re- forms break down into two basic types: price (to reduce costs through controls and promoting competition) and coverage (to increase consumer access to drugs through public and pri- vate insurance).

Price The perception of a drug lag in the United States was not solely attributable to the extensive premarket approval pro- cess but also to the extensive amount of underutilized government-owned research and patents-estimated at ap- proximately 95%-which were never commercialized because companies with whom the government worked would have

no incentive to license the work for which they assumed a financial risk. To change this policy. in 1980 Congress passed the University and Small Business Patent Procedures Act (commonly called the Bayh- Dole Act). which allowed uni- versities and small businesses (and. later. large industries as well) to take ownership of patents to discoveries benefitting from government funding. provided that licensing and royalty revenue from commercialization of the resulting product be shared with the inventor and that the university (if applicable) allocate its share to research and education.62 However. there were also sweeping protections afforded to public interests as well. If a patent holder contracted under this act fails to commercialize an invention that government determines 1s "necessary to alleviate health or safety needs which are not reasonably satisfied " or if the contracted patent holder fails to "provide the invention to the public at a reasonable price." then the federal government may exercise its .. march-in" au- thority to seize the patent and issue a compulsory license to other manufacturers who can live up to these terms.63

As much as this act was designed to spur innovation and bring products to market. the legislative discourse reveals that product pricing was an essential consideration as well. A simi- lar reasonable price clause was adopted by the National Insti- tute of Health in 1989 for drug products developed through its Cooperative Research and Development Agreement (CRADA) program. While the pricing and distribution authority reta ined by government appeared substantial in statute. it would prove hollow in practice. Throughout the entire lifespan of govern- ment march-in authority. it has never been invoked against the drug industry despite conditions that would seem to war- rant it. and the National Institutes of Health (NIH) reasona ble price clause would be abandoned in 1995 due to "consider- able pressure from the industry."·64

These unutilized government fair pricing mechanisms would seem to hold significant potential. as it has been es- timated by the National Science Foundation that since 1987. approximately half of all new drugs derived from new molecu- lar entities (and thus truly new rather than recombinations or me-too derivatives) have benefitted from public funding. and that an even greater percentage of "important new drugs· or so-called blockbuster drugs owe their development in part to public funding. thus making them eligible under Bayh-Dole Act for federal march-in provisions to facilitate more afford- able prices and greater access.65 Yet the pharmaceutical mdus· try has succeeded in advancing the argument that high drug

C HAPTER 21 • Prescr ipt io n Drugs: H ow a Pill Becomes the Law

prices are necessary to fund its research endeavors and cover the losses of its failures . and that any external price interfer- ence by government would endanger new research and . thus. the public health.

The common industry refrain is that it costs approximately $802 million to bring a new drug to the market. 66 However. deeper analysis reveals that this statistic is subjective. a product of creative accounting. Studies performed by the Tufts Center for the Study of Drug Development (a nonprofit research insti- tution partly funded by the pharmaceutical industry)67 and the federal government's Office of Technology Assessment allow us to break down that figure further and calculate that 65% of the reported $802 million actually represents "opportu nity cost of capita l." wh ich refers to profits the industry believes it could have earned by spending its investments and resources on other projects. while I 0% is attributed to " out-of-pocket expenditures " covering early research . testing, and FDA fil- ings. and the remaining 25% is attributed to "risk."68 So not only is the actual cost much lower. but the government fund- ing related to such re search endeavors is also expended in the earliest and riskiest phases of the development process . which somewhat undercuts industry claims that high drug prices are necessary to underwrite the extreme fi nancial risks they ta ke. when it is. in fact. federal dollars and. thus. the taxpayers who are assuming a large portion of that risk as well. Indeed . the tools to influence pricing and improve consumer access are ex- tant in law, but there has been little w ill to wield them.

Coverage Medicare. passed in 1965, offered quite limited prescription drug coverage. Even so. rising costs soon posed a problem , and placed pressure on the federal government budget. In 1973. the Nixon admin1strat1on proposed "maximum allowable cost" regulations that limited drug cost reimbursements under fed- eral programs " to the lowest cost at which the drug is gener- ally and consistently available unless a difference in therapeutic effect can be demonstrated"-essentially limiting government reimbursements to generic substitutions over expensive brand name equivalents even if the physician prescribed a brand name version.69 This "bombshell" was vigorously denounced by the drug industry. recycling familiar warnings that this policy was "a disservice to the public " and would "cripple American drug research." 70 Lawsuits and procedura l arguments would delay full implementation of this policy. and the industry wou ld even- tually succeed 1n tempering its effects. but once more the issue

of drug costs had been raised and the back end of the regula- tory continuum had been breached .

Prescript ion drug coverage under Medicare would be rev1s1ted again as part of a larger package of proposed re- forms in the ill -fated 1993 Health Secu rity Act attempted by President Clinton . Unlike previous proposals for federal drug coverage . this plan was undergirded by a concerted attempt to contain costs by using Medicare's " negotiating power " as the world's largest purchaser of drugs "to get discounts from the pha rmaceutical companies ."71 Despite cries of so- cialism . the plan relied on common market mechanisms like bulk purchases . product negotiations. leveraged formu laries . and competition between providers to arrive at the optimum and most efficient price for the buyer. in this case the federal government.

The issue of prescription drug access. especially for seniors. remained on the agenda after the Clinton plan collapsed . In December 2003 , Medicare Part D added a prescription drug benefit to Medicare (see Chapter 8). The legislation took on a shape that appeared to address the factors contributing to the failures of its predecessors.

In its design , the Medicare Part D drug benefit reflected considerable atten t ion to the industry 's desires. Whereas previous proposals ca lled for government to confront pric- ing issues directly through controls or indirectly th rough the utilization of common patent reform and other marketplace mechanisms . the Medicare Part D program restricts govern- ment from the Medicare drug marketplace altogether. To the frustra tion of many liberals and consumer activists. it pre- vented the federal government from directly negotiating with pharmaceutical companies for cheaper prices for Medicare beneficiaries. maintained a ba n on reimporting domestically produced prescription drugs from foreign countries where prices were often significa ntly below those of the domestic market. and avoided estab lishing price competition between managed care and fee-for-service plans.72 Many liberal re - formers faced a conundrum: They derided the esoteric cost sharing in the plan . the bizarre "donut-hole " benefits (now being min imized by the Obama administration). the injection of market forces into Medicare. and the complexities of the different plans that left many seniors bewi ldered . But here, finally, was a reform - however flawed-that advocates had been fighting for since 1965 when Senate liberals tried unsuc- cessfully to add it to the original Medicare bill. In addition. de- spite its rocky start. the plan has proved popular with seniors.

l:fj PART VJ • Policies and Issues l ~-~-~-~~~~~~~~~~~~~-----+-

CONCLUSION: "PROTECTING THE PUBLIC HEALTH" 73

AND ADVANCING

The history of the drug regulatory state teaches us many things. It reveals how a political culture generally suspi- cious of government would not only accept the estab- lishment of new institutions overseeing public health but would also promote its expansion on a massive scale over time. It reveals how the interests of the public and the interests of the affected industry. apparently at cross- purposes. could converge on a policy of expanded regula- tions that were beneficial to both. It reveals how a free market could survive and thrive not in spite of but because of watchful drug safety regulations that located public health as a commodity in which everyone shared a stake. In this tale. the notion of health care as a public good that government had an obligation to protect became a legitimate subject of regulation. However. as the shape of the problem evolved. so too did the private calculations of the actors. and this would color the debate then as it does today.

In recent times. as safety concerns generally dissipated and the issues of drug pricing and access took hold of the agenda. attempts at reform were varied. unpredictable. and only moderately successful. Attempts to build up the back end of the regulatory state to address access by affecting prices in the name of distributive justice failed. and at- tempts to tear down the front end of the regulatory state in the name of market efficiency also failed. Among recent efforts. the passage of the prescription drug benefit under Medicare appears to be a successful reform affecting access. for two very instructive reasons. First. it steered clear of the controversial act of intervening in the drug marketplace to affect prices directly, and second. it had a large public fol- lowing that kept it hoisted long atop the agenda. In essence it reflected the political reality of the times. Like the drug regulations of old. this one followed a particular recipe for success. even if its taste was not to everyone's liking.

When examined en masse. the attempts to reform the prescription drug regulatory state with respect to

prices are often blistered by arguments that object to government interference in the marketplace. However. the irony is that the prescription drug trade 1s very much defined by government part1c1pation in the mar- ketplace and owes much of its existence to the policies that have expanded this role over time. Many of the attempted reforms we have observed were actually at- tempts to work within the marketplace and utilize mar- ket mechanisms to promote such capitalistic creatures as competition. negotiation. efficiency, and contracts. But when the regulatory proiectile followed its histon- ca I trajectory over the postmarket terrain where drug access is the principal target. private self-interest pre- vailed and solutions floundered.

It has been suggested that when Hillary Clinton led the effort to reform health care during President Bill Clinton's administration. she believed that they would succeed because they were doing the right thing. and that part of its fa ilure resulted from her own failure to re- alize "that government doesn't work that way"-that to get anything done legislatively in American government requires a large consensus. 74 Reforms attempted in the absence of a consensus are likely to be less robust and far more d1ff1cult to achieve and then sustain. particu- larly in the contemporary partisan political climate-as illustrated by the endless fight over the Obama adminis- tration's health reform (in Congress. in the courts. dur- ing the 20 I 0 and 2012 elections. and now in the states during the 1mplementat1on process)

Like many great movements in American history, suc- cessful drug reforms to address issues of pricing and ac- cess will depend on a level of participation and investment by the body politic. moved by a commitment to the public good. that was so instrumental to the political develop- ment of drug regulations and the subsequent strengthen- ing of both the pharmaceutical industry and the public health.

CHAPTER 21 • Prescription Drugs: How a Pill Becomes the Law

STUDY QUESTIONS I. What is the purpose and method of clinical trials in the drug approval process?

2. How can pharmaceutical companies extend the effective patent life of their products? Why would they desire to do this?

3. Why did the US government take steps to allow for the expedited review of generic drugs. and what is necessary for a generic drug to receive approval?

4. Why was the early proprietary medicine trade a threat to the public health?

S. What are the three major federal acts that constitute the basis for the prescription drug regulatory state in the United States, and what does each of their respective legislative histories have in common?

6. What is the main criticism of Medicare Part D?

7. What effect has direct-to-consumer advertising had on the prescription drug market in the United States? Has th is advertising had an effect on the drug approval process?

8. As seen in the Vioxx case. how can we explain recent lapses in the drug approval process7

9. What are some ways that the US government supports the pharmaceutical industry's research and development of prescription drugs?

10. If the US government (i.e., the taxpayer) contributes financial and scientific assistance to a pharmaceutical firm in its research and development of a prescription drug, do you believe the US government should be able to require that the price of any resulting drug must be affordable?

ENDNOTES I. IMS Institute for Healthcare Informatics, 20 I I ; Truffer et al.. 20 I 0.

2. Kaiser Family Foundation, 2010; IMS Institute for Healthcare Informatics. 201 1.

3. Kaiser Family Foundation. 20 I 0.

4. Ibid. S. Kaiser Public Opinion Poll. 2011; Consumer Reports also conducted a study in February 20 I 0 that detailed the steps

patients took to ration their medications.

6. In the midst of the COX-2 inhibitors (e.g .. Vioxx) safety warning. which elevated postmarket drug sa fety on the public agenda. a November 2004 Harris poll found that 70% of those polled had strong-to-moderate faith in the safety of prescription drugs on the market. versus the 67% who responded similarly in a September 200 I Harris poll.

See Rubin . 2004.

7. Details about the drug approval process can be found in numerous sources. The FDA's own Web site provides comprehensive details: http://www.fda.gov/drugs/developmentapprovalprocess. Several articles also provide useful information for this section. See Randall. 200 I ; Lipsky and Sharp. 200 I.

8. For a fuller account of this incident. see Young, 1961.

9. Louis Pasteur and Robert Koch are generally credited with first espousing this theory. which claims that a specific disease is caused by a specific microorganism. However. it should be noted that the credit for this theory is in ques- tion . as 1s its viability.

10. Dr. Hostetter's Stomach Bitters. a best-selling nostrum consisting of up to 47% alcohol . was originally marketed to soldiers during the American Civi l War as a means to fight off diseases born from Southern swamps and bayous. See US Department of Interior. http://www.cr.nps.gov/mwac/bottle_glass/hostetter.html. Dr. Rudolph Kampmeier. a clinical professor and noted author of medical textbooks, recalls that in his younger years. "I didn't know the alcohol content [of Dr. Hostetter's Bitters]. but I knew why all the young bucks in town were buying it." See Wood. 1997.

I I. New York Times. 18 79.

12. Francis Thurber was particularly critical of Angell in articles appearing in his publication. American Grocer See Okun. 1986.

13. See Bailey. 1930.

14. Anderson. 1958.

IS . Leimone. 1996.

16. Anderson . 2004.

17. Anderson. 1958.

18. Liebenau, 1987. p. 92.

19. New York Times. 1906.

20. Frank Cheney, quoted in Young. 1961.

21. Harding, 1947.

22. Harvey Wiley, letter to Horace Ankeny (30 June 1906). quoted in Young. 1989.

23. Hilts. 2003.

24. Abraham. 1995.

25. Ibid

26. Quoted in Hilts. 2003. p. 81 These views were echoed by several witnesses before the Senate Commerce Subcom- mittee Hearings of 7-8 December 1933

27. US Food and Drug Administration. 1981

28. Ibid.

29. Jackson. 1970.

30. Specifically. manufacturers were required to file a New Drug Application with the FDA. including information about its contents. manufacturing processes. and proof of safety. and the application would be automatically approved after 60 days if the FDA took no action. See http://FDAreview.org.

31. Hilts.2003.

32. Sobel. 2002. Many of the proprietary drug makers began to focus their efforts on consumer goods such as shampoo. soap, and mouthwash.

- C H APTER 21 • Prescription Drugs: How a Pill Becomes the Law

JJ. Hilts. 2003.

34. Goozner. 2004.

JS . Abraham. 1995. For example. Astra-Zeneca is credited with creating the first 1n a new class of acid reflux medica- tions. This drug. called Prilosec. inspired many other me-too drugs by other firms that had a similar therapeutic function. However. as the highly profitable patent life for Prilosec was about to expire. Astra-Zeneca created its own me-too version of Pnlosec called Nex1um. which was simply an isomer-or a mirror image-of the Prilosec mol- ecule. Nex1um would go on to ach ieve a blockbuster market status similar to Prilosec.

36. See Lear. 1959.

37. Harris. 1964.

38. Hilts. 2003 .

39. Quoted in Daemmrich. 2004.

40. Cited in Hilts. 2003 .

41. Cited in Abraham, 1995.

42. Harris. 1964.

43. Temin. 1980.

44. Dowling. 1970.

4S. Hilts. 2003.

46. Dowling. 1970.

47. Kennedy, 1962.

48. Abraham. 1995.

49. Daemmrich, 2004.

SO. Dowling. 1970.

SI. Abraham. 1995.

S2 . Wardell. 1973. S3. A study by Dr. William Wardell found that between 1962 and 197 1. out of the 180 new drugs to appear in the

United States and the United Kingdom. 43 were introduced in the United Ki ngdom first. and 39 were introduced in the United States first or simultaneously in the United Kingdom. Wardell's fo llow-up study wou ld reveal a similar

pattern for the years 1972-1976. See Wardell. 1978.

s4. Ceccoli. 2003.

SS . Ibid

S6. US Government Accounting Office. 2002.

S7. Palumbo and Mullin s. 2002.

S8 . Ibid

S9. Rosenthal. Berndt. Donohue. Epstein. and Frank. 2003 .

60. Matthews and Martinez. 2004.

Mfl PA RT VI• Policies and Issues

61. US Congress . House of Representatives. 2007.

62. Henderson and Smith . 2002

63 . Terms of the Bayh-Dole Act. cited in Arno and Davis. 2000.

64. US National Institute of Health . .. Response to the Conference Report Request for a Plan to Ensure Taxpayers· Inter- ests Are Protected." July 200 I. cited in Angell. 2004.

6S . National Science Foundation data and statistics. cited in Arno and Davis. 2000.

66. Goozner. 2004.

67. Although the Tufts Center for the Study of Drug Development considers itself an independent. nonprofit research or- ganization, it must also be noted that the pharmaceutical industry is a major source of its funding. that the Center's findings often featu re prom inently in the pharmaceutical industry's lobbying efforts. and that the Center's leading investigators are Joseph Di Masi and Henry Grabowski. who are noted for their advocacy of the pha rmaceutical in- dustry's core arguments against government regu lation. The research performed by the Center appears academically sound and unbiased on its face. but its perspective is focused through a narrow lens that blinds it to industry short- comings and the beneficial role of government in the market.

68. Cited in Michaelson. 2002.

69. Silverman and Lee. 1974.

70. PMA President C. Joseph Stetler. cited 1n Silverman and Lee. 1974.

71 . "' Health Security: The President's Report. "' quoted in Oliver. Lee. and Lipton. 2004.

72. Oliver. Lee. and Lipton . 2004.

73. FDA Mission Statement. http://www.fda.gov.

74. Clift. 2007.

REFERENCES Abraham . J. 1995. Science. Politics. and the Pharmaceutical Industry. New York. St. Martin's.

Anderson . A. 2004. Snake Oil. Hustlers. and Hambones. Jefferson . NC: Mcfarland.

Anderson. 0 E .. Jr. 1958. The Health of a Nation Chicago: University of Chicago Press.

Angell . M. 2004. The Truth about the Drug Companies. New York: Random House.

Arno. P .. and M. Davis. 2000. "Why Don't We Enforce Existing Drug Price Controls?"' Tulane Law Review 75(2000): 63 1-93.

Bailey, T. A. 1930 Uuly). "Congressional Oppos1t1on to Pure Food Legislation. 1879- 1906. " American journal of Sociology 6( I ): 52-64.

Ceccol i. S. J. 2003. "'Policy Punctuations and Regulatory Drug Review." journal of Policy History I 5(2): 170.

Clift. E. 2007 (October 5). "formidable. but Not Inevitable." Newsweek. Retrieved from http://www.newsweek.com/ id/4241 5.

Daemm rich. A . 2004. Pharmacopolillcs. Chapel Hill: University of North Carolina Press

=

CHAPTER 21 •Prescription Drugs: How a Pill Becomes the Law

Dowling, H. 1970. Medicines for Man. New York: Knopf.

Goozner. M. 2004. The $800 Million Pill. Berkeley: University of California Press.

Harding, T S. 1947. Two Blades of Grass: A History of Scientific Development in the U.S. Department of Agriculture. Norman: University of Oklahoma Press.

Harris. R. 1964. The Real Voice. New York: Macmillan.

Henderson. J. A .. and J. J. Smith. 2002 (October). "Academia . Industry, and the Bayh-Dole Act: An Implied Duty to Commercialize." Center for Integration of Medicine and Innovative Technology. p. 2.

Hilts. P. 2003. Protecting Amenca's Health. New York: Knopf.

IMS Institute for Healthcare Informatics. 2011 (April). "The Use of Medicines in the United States: Review of 2010."

Jackson. C. 1970. Food and Drug Legislation in the New Deal. Princeton. NJ: Princeton University Press.

Kaiser Family Foundation. 20 I 0 (May). Prescription Drug Trends.

Kaiser Public Opinion Poll. 2011 (April). "Health Security Watch."

Kennedy, J. F. 1962 Uanuary 11 ). "State of the Union Address." Retrieved from http://www.presidency.ucsb.edu/ws/ index.php?pid=9082.

Lear. J 1959. "Taking the Miracle out of the Miracle Drugs." Saturday Review. 23 January.

Leimone. M.A. 1996. "Furthering the Cause of Self-Medication through Food and Drug Administration Regulation." Harvard Law School.

L1ebenau. J. 1987. Medical Science and Medical Industry. London: Macmillan.

Lipsky, M .. and L. Sharp. 200 I. "from Idea to Market: The Drug Approval Process." The journal of the American Board

of Family Practitioners 14: 362-6 7.

Matthews. A. W.. and B. Martinez. 2004. "E-Mails Suggest Merck Knew Vioxx's Dangers at Early Stage." Wall Street journal. November I. p. A I.

Michaelson. A. 2002. "The Law of the Lab: Using Zerit to Inform Technology Transfer." Harvard Law School LEDA. Retrieved from http://leda.law.harvard.edu/leda/data/5 I 2/michaelson.pdf.

New York Times. 1879. "The Problems of Trade." December 13, p. 2.

---. 1906. "Guaranteed." July 2. p. 8.

Okun. M. 1986. Fair Play in the Marketplace: The First Battle for Pure Food and Drugs. DeKalb: Northern Illinois

University Press.

Oliver. T. R .. P. R. Lee. and H L. Lipton. 2004. "A Political History of Medicare and Prescription Drug Coverage." Milbank Quarterly 82(2)· 298-99

Palumbo. F. B .. and C. D. Mullins. 2002. "The Development of Direct-to-Consumer Prescription Drug Advertising Regulation." Food and Drug Law journal 57(3). 424.

Randall. 8., IV. 200 I Uune I). "The US Drug Approval Process: A Primer." Congressional Research Service.

Rosenthal. M. E. R. Berndt. J. M. Donohue. A. M. Epstein, and R. G. Frank. 2003 Uune). "Demand Effects of Recent Changes m Prescription Drug Promotion" Kaiser Family Foundation. Retrieved from http://kff org/health-costs/

report/demand-effects-of-recent-changes-in-prescnption/.

PART VI • Policies and I ssues

Rubin. R. 2004. "Can Americans Trust Their Medicine?" USA Today, December 20. p. Al.

Silverman. M .. and P. Lee. 1974. Pills. Profits. and Politics. Berkeley: University of California Press.

Sobel. R. 2002 (Winter). "Public Health and the Placebo: The Legacy of the 1906 Pure Food and Drugs Act." Cato journal 21 (3): 470.

Temin. P. 1980. Taking Your Medicine. Cambridge, MA. Harvard University Press.

Truffer, C. J .. et al. 20 Io (March). " Health Spending Projections through 2019: The Recession's Impact Continues." Health Affairs 29(3). 522-29.

US Congress. House of Representatives. 2007. Congressional Record. I I 0th Cong .. I st sess .. vol. I 53. no. 139.

---. 1981 Uune) . 'Taste of Raspberries. Taste of Death: The 193 7 Elixir Sulfanilamide Incident." FDA Consumer

US Government Accounting Office. 2002 (September). "Food and Drug Administration: Effect of User Fees on Drug Approval Times. Withdrawals. and Other Activities."

Wardell. W. 1973. "Introduction of New Therapeutic Drugs in the United States and Great Britain: An International Comparison." Clinical Pharmacology and Therapeutics 14: 773-90.

---. 1978. "The Drug Lag Revisited." Clinical Pharmacology and Therapeutics 24: 499-524.

Wood. W. 1997. "The Great American Fraud. " Vanderbilt University Medical Center. Retrieved from http:l/www. mc.vanderbilt.edu/biolib/hc/nostrums/nostrums.html.

Young. J. H. 1961. The Toadstool Millionaires: A Social History of Patent Medicines in America before Federal Regulation. Princeton. NJ: Princeton University Press.

---. 1989. Pure Food. Princeton. NJ: Princeton University Press.

This chapter explains that a traditional focus on public health has slipped out of environmental decision making. The authors examine the policy response to three problems-natural disasters, accidents and terrorism, and climate change-and show how a public-health focus would improve policymaking and increase the chances of political success. They call on public-health spe- cialists to galvanize a new and more effective environmental movement.

In this chapter. we examine how decision making on environ- mental health issues has gravitated from health to environ- mental agencies While the change may have been inevitable. it has had negative consequences. The environmental move- ment. like all movements. deploys the rhetoric and sym- bols that can help win policies.' However. this change may have neglected the health aspect relevant to people "on the ground" at the local level. For example. many Hispanic groups. African-American communities. and low-income pop- ulations view the modern environmental movement as being unresponsive to their health needs.2

We illustrate the problem of losing the health dimension by focusing on three major environmental challenges: natural disasters. accidents and terrorism . and climate change. These are not the only issues of environmental importance the world will be facing in the immediate future. but they are likely to be at the top of the hst of environmental issues that our political

leaders will be grappling with in the foreseeable future. Each has an important-often overlooked-health dimension.

The chapter concludes with recommendations for improv- ing environmental policies by bringing health issues. and health professionals. back into the decision-making process. We wish to emphasize. however, that there are no "magic bullet" solutions for any of the issues we raise.

FROM ENVIRONMENTAL HEALTH TO ENVIRONMENT Environmental health issues have been a major problem since early cities polluted the lakes and rivers. which supplied their drinking water. One of the most famous environmental health insights followed the outbreak of cholera in England in 1831 .

l@1i PART VI • Po licies and Issues

Dr. John Snow plotted the incidents on a map and made the connection between a water pump and the incidence of the disease.3 Up until then cholera had been considered a poor person's disease. something from contaminated air or perhaps divine punishment. Medical science and simple statistical ob- servation contributed to major scientific advances in environ- mental health as people moved into more urban environments.

American cities experienced similar problems with con- tamination of drinking water as the country grew. For ex- ample, Chicago experienced very high rates of cholera and typhoid fever in the mid- I 800s. State and local governments responded by creating water sanitation districts to manage the supply of drinking water. Several major engineering ap- proaches and technologies were also implemented. Officials ra ised street levels several inches to literally pull buildings out of the contaminated soil and water. 4 They also reversed the flow of the Chicago River in 1900, moving the polluted water downstream toward the Mississippi River (and St. Louis) and away from the growing metropolis.5 These examples illustrate how state and local agencies originally defined the issue of environmental health as more of a health issue than an envi- ronmental one. Moreover. specific problems were defined and primarily solved by public-health officials and engineers rather than environmental scientists per se.

Indeed. rarely were health problems considered "environ - mental" until the rise of the modern environmental movement in the 1970s. No specialized "environmental protection agen- cies" dealing with drinking water polluted from urbanization were formed prior to that decade. Public-hea lth agencies or public works departments that handled infrastructure dealt with the issues. Policy was rarely made in a larger context of ecosystems or environmental protection. All this changed with the environmental movement in the late 1960s and 1970s.

When policies implemented by public-health agencies pri- marily at the state and local levels moved to the state and national level. the old problems were defined in a new way. Major pieces of legislation such as the Clean Air Act. Clean Water Act. Safe Drinking Water Act. Endangered Species Act. Resource Conservation and Recovery Act. and Toxic Substance Control Act enacted in the 1970s were viewed primarily as environmental protection policies designed to protect resources such as air, land, water. or species. The provisions, the language. and the ti tles in this legis lation were constructed with the environment- and not public health-as their central focus. They all granted government

clear leadership in protecting environmental health. empha· sized the environment. and largely overlooked ind1v1dual and population health .

New federal organizations were created in the 1970s. such as the Council on Environmental Quality. the US Environ· mental Protection Agency (EPA). and many parallel state environmental protection agencies. to address env1ronmen· tal problems. Natural catastrophes. accidents and terrorism. and climate change issues have large human health impacts and public-health concerns that are addressed by a multi· tude of government agencies. However. these organizations are regarded primarily as environmental organizations mak· ing environmental policies. Thus most of the employees of the Council on Environmental Quality and the EPA (as well as state-level counterparts) have environmental rather than health expertise. even though their missions include an em- phasis on interactions between human hea lth and the en· viron ment. The creation of new environmentally oriented agencies fostered the development of academic disciplines like environmental science and ecology. This redefinition or refram ing over time has had a tremendous impact on environ· mental health policy.

CAUSES AND CONSEQUENCES OF THE CHANGING STRUCTURE AND EMPHASIS OF ENVIRONMENTALISM What prompted the redefinition and reframing of environ· mental policy to emphasize environmentalism at the expense of health -related concerns? The answer is grounded in the profession of public health and the state and local organiza· tional operation and definition of public health. Policymakers reassigned environmental health concerns from state and lo· cal health departments to federal environmental agencies be· cause they thought the health departments were weak. The causes of this perceived weakness are debatable, but the con· sequences are not.

Troubles in Public Health Theoretically, the mission of public health can be expanded to encompass a vast range of concerns. From the professions perspective. almost any aspect of living can be related to the

---

--

heal_th of s~ciety and thus appropriately be considered a po- tential pubhc health matter. For example. decent jobs and ad- equate housing contribute to people's good health. In actual practice. however. the responsibilities of state and local health departments are in tension with the profession's self-image. There is great heterogeneity of duties and functions among the various state and local entities responsible for public health. As a result. there appears to be no clear relationship between the public health profession's claim to authority and the problems. tasks. and skills on the ground in public-health departments. To make matters worse. many if not most of the people actually doing the work of public health in agencies are not public-health professionals by training-further subvert- ing the classic claim of every profession-outsiders are not qualified to do its work.

An Institute of Medicine (IOM) study6 concluded that the diversity of organizational arrangements and responsibili- ties reflected in state and local health agencies suggests that there is no clear organizational focus for state and local pub- lic health in the United States and little agreement among its units of government about what "public health" means op- erationally. The study uncovered numerous examples of gaps and confusions in the public health system that reflects this lack of focus.

The difficulty of arriving at an operational definition of public health is further complicated by the nature of the discipl ine. The public health profession itself frankly ac- knowledges . even prides itself on . its multidisciplinary na - ture. including within the fold not only physicians. nurses. and sanitarians but industrial hygienists. statisticians. com- munity health educators. and others as well. The tie that binds these different perspectives together is training in a distinctive body of knowledge centering on the " mother sci- ence" of ep1dem1ology. But training in epidemiology is not widespread among existing state and local agency staff. For example . only about one-third of local health department directors have a master's degree in public health. and most public-health nurses have little formal public-health train- ing beyond what they may have received in nursing school. Despite obvious expertise. dedication. hard work. and some success on the part of many professionals. on the whole public -health agencies are ill-equipped to cope with the functions they perform . let alone fulfill the broader vision of the profession. The IOM study traced the current difficulties of public health to fragmented authority. antiquated laws .

C HAPTER 22 • Environmenta l Health @I

frequently inadequate fiscal resources. and lack of public un- derstanding and support.

Problems with Contemporary Public Health Practice In the 1960s, growing concern over pollution and environ- mental hazards made the traditional health department model for handling environmental problems appear outdated. The departments appeared incapable of solving complex problems-a conventional wisdom that has grown over time. Perhaps the most striking of all the difficulties facing public health today is a lack of public knowledge and support. State and local health departments not on ly have no apparent constituency. a serious handicap in a pol itical system where organized interest groups play a key role in policy decisions. but in addition the general public has little knowledge of what health departments actually do.

Leadership for protecting the environment was removed from public health departments and lodged in newly cre- ated departments of environmental science or ecology. Public health professionals feared that the result would be neglect- due to lack of knowledge-of the health dimensions of issues removed from their control.

While environmenta l func tions are unlikely to be returned to state and local health departments . it is vital that those dedicated to the environment begin to reemphasize the health aspect of the field. Otherwise. the current political weakness of the environmental movement is likely to continue.

Environmental policies must be demonstrably beneficial to humans over time if they are to be enacted and sustained. This means the rhetoric and policy focus must include issues of intrinsic value along with concerns of sustainability to bal- ance the importance for improving human health. welfare. and well-being for current and future generations.7 Intrinsic value arguments cannot be presented as having the same im- portance as those for improving human health and well-being. The environmental health challenges of recent years present an opportunity for the reintegration of the health professional into the implementation of environmental policies. These are also challenges that are likely to continue to pose the need for health professionals into the future.

The neglected health issues may pose one answer to the challenge facing environmental action today. Many conserva- tives oppose environmental regulation for economic reasons.

j

claiming high costs and potential 1ob losses as the cost of environmental protection. Proponents of environmental policy address this lingering debate by focusing on estab- lishing greener employment and production of green goods. The future development of postindustrial economies is said by ecological modernists to depend on an ability to produce high-value. high-quality products with stringent environmen- tal enforcement standards. In this framing of environmental issues. environmental health becomes a superior good. and envi ron mental protection not an economic burden but an opportunity for enhanced growth and job creation. 8 Further- more. many of the myths associated with the loss of jobs due to environmenta l regulations are not substan tiated by the data on a national sca le9 or an industry scale. 10

A NEW ROLE FOR ENVIRONMENTAL HEALTH: NATURAL CATASTROPHES, TERRORISM, AND ACCIDENTS Three major challenges requiring the attention of environ- mental health professionals are natural catastrophes. acts of terrorism. and accidents. These types of events are similar in that they have limited or no warning for environmental health responders. The lead time for response varies from limited and uncertain (for natural events like hurricanes. tornadoes. and even volcanic eruptions) to none (accidents or terrorist acts). In the case of accidents. such as spills or leaks into the environment. the initial response time is critical to stopping continued damage. However. the impact from these events can be somewhat mitigated by preparation. training. and planning-particularly by environmental health responders. It requires environmental health professionals to predict what the probable health risks will be for various populations caused by these disastrous events and to inform emergency responders as well as the general public as to potential exposures.

Hurricane Katrina One stark example of the importance of environmental health issues and the need for public-health professionals fol lowing a natural catastrophe was Hurricane Katrina. which hi t Gulf Coast states on Monday. August 29. 2005. as a category 3

hurricane. The Federal Emergency Management Agency (FEMA) estimated that the storm killed over 1.300 rndividu· als and disrupted the lives of 650,000 more. 11 The range ol environmental health problems caused by the hurncane was extensive: .. drinking water. wastewater. solid waste/debris. sediments/soil contamination (toxic chemicals). power. natu· ral gas. housing. unwatenng/flood water. occupational safety and health/public security. vector/rodent/animal control. road conditions. underground storage tanks (e.g .. gasoline). and food safety." 12 The joint task force of the Centers for Disease Control and Prevention (CDC) and the EPA noted these con· ditions would change as recovery efforts were undertaken. For example. a large amount of debris had to be removed during demolition and reconstruction: some would be hazardous. crea ting a need to identify it. separate it from other debris and determine the best means of disposal. The changing na· ture of potential dangers also meant decisions regarding Ire· quency and standards of monitoring needed to be made.

In the aftermath of the hurricane. then. there were several pressing public health issues: organizing medical care lor sur· vivors. identifying and monitoring environmental hazards. tra ining workers for emergency response and hazardous waste cleanup. ensuring the safety of drinking water supplies. and considerating long-term public-health effects. Though many governmental and nongovernmen tal agencies were involved in the recovery. the need for better coordination was demon· strated when the mayor of New Orleans prematurely invited people to return to the city. Despite this. the record of recovery efforts demonstrates the significance of collaboration across governmental levels. and between government and nongov· ernmental actors within both formal and informal networks.

A major contribution of federal agencies was the monitor· ing of potential threats to human health. including volatile organic compounds. arsenic and lead in sediment or soil. and airborne molds. A pressing reason for the monitoring was the potential hazards facing cleanup and recovery workers rn the immediate aftermath.13 though many forms of pollution also posed long-term threats.

The approximately 3 million cubic yards of sediment left behind after the flooding and the large number of flooded buildings in New Orleans also ra ised environmental health concerns. The EPA found significantly higher concentrations of arsenic throughout the city following the hurricane: 93% ol samples had concentrations higher than the EPA cancer soil screening level (measures showed no posthurricane increase

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in concentrations of lead). Samples taken 18 months later showed significantly lower levels. closer to pre-Katrina leve ls. Unfortunately. some areas continued to show elevated lev- els of arsenic: the more disadvantaged neighborhoods (e.g .. Lower 9th Ward and Faubourg Marigny/Bywater/St. Claude). a third of the schools that opened 18 months after the start of the recovery. and slightly more than one-tenth of playgrounds.

Floodwaters also raised concerns about airborne mold. which can affect respiratory and neurological health. 14 Mea- sures taken by the Natural Resources Defense Counci l (NRDC) throughout New Orleans found mold spore counts in outdoor areas exceeded the "very high" threshold established by the National Allergy Bureau of the American Academy of Allergy and Immunology: indoor levels were significantly worse. 15

Nor was th is problem confined to New Orleans: The CDC reported about 46% of homes inspected in the Gulf Coast re- gion had mold growth.16

Federal agencies and supportive networks were also central in providing medical care to survivors. given the hurricane's catastrophic effect on hospital infrastructure in Louisiana and Mississippi. Supplies shipped by the CDCs Strategic National Stockpile provided pharmaceuticals. technica l assistance teams. and treatment capacity. Within days after landfall. medical authorities establ ished contingency treatment facili- ties for over 10.000 people. and they ultimately treated many thousands more. Alongside strong responses from state and local medical teams. CDC support remained crucial until nor- mal infrastructure support began to return a week and a half later. Partnerships with commercia l medical suppliers. shi p- ping companies. and support services companies ensu red that evolving medical needs could be met within days or even hours. Post-Katrina recovery efforts benefited from both infor- mal and formal networks that fostered collaborative efforts in organizing medical care.

An immediate problem was the damage to over 4.000 drink- ing water systems serving more than 15 million residents. The EPA provided significant support in these efforts but lacked the fam iliarity necessary to develop a comprehensive effort for the large rural areas affected. In both Louisiana and Mississippi . state and local rural water technicians we re essential in handling the emergency. They relied heavily on local informal networks as well as regional networks of pro- fes sional colleagues and were able to restore water access to many communities within days. As a result, both states considered forming Water/Wastewater Agency Response

Networks (WARNs) such as those in California, Florida. and Texas. The National Rural Water Association also acted on this experience. releasing guidel ines for esta blishing such networks and mutual-aid agreements to facilitate disaster relief efforts. 17

In reviewing disaster recovery efforts. Abramson and col- leagues noted that " LJS policy has focused principally on the recovery of place rather than the recovery of person. " Assis- tance for victims is generally limited to "an economic model of redress (housing resettlement. short-term aid) and clinical ... efforts to address short-term health effects." 18

Some post-Katrina research efforts may begin to provide us a fuller understanding of the longer-term public-health issues associated with natural disasters. For example. a Tulane Uni- versity study found that in the two years following Hurricane Katrina. New Orleans residents experienced a three-fold in- crease in heart attacks and 120% increase in coronary inter- ventions. Dr. Anand lrimpen. the lead researcher. attributed the increase to posthurricane chronic stress due to unemploy- ment. loss of health insurance. and housing difficulties as well as reduced access to preventive health care services. 19

A particularly significant long-term effect is the well-being of children. A study of Baton Rouge chi ld ren living in federally funded trailer parks until their closure found this particularly vulnerable population had significant hea lth problems. A re- view of their medical charts found that "(n]ot only has the health of these ch ildren not improved since the storm. over time it has decl ined to an alarming level ... [as] reflected in their multip le medical and mental health needs. developmen- tal and school problems, and an unusually high rate of nutri- tion problems."20

In sum. one major message from the hurricane disaster was the need to coordinate environmental and health profession- als. For all the lessons that were learned in New Orleans. this would be experienced once again in the aftermath of super- storm Sandy's devastation of the New York and New j ersey coasts.

Terrorism Environmental health professionals have recently had to face a relatively new threat: terrorism. The unpredictability ofter- rorism and the vulnerability of facilities such as drinking wa- ter plants and nuclear power plants to terrorist attack means planning for terrorist attacks is a significant new challenge to the field of environmental health.

When the World Trade Center and sections of the Pentagon came crashing down on September I I. 200 I. the rubble left for rescuers and cleanup crews was laced with asbestos. heavy metals. diesel fuel. polychlorinated biphenyls (PCBs). and dozens of other toxins. New York City was enveloped in a cloud of smoke. soot. and toxic ash. The pivotal role of en- vironmental health in terrorism preparedness became clear for the first time. Environmental health providers are now on the frontlines in defending public safety in this age of terrorism. 21

At the World Trade Center. 450 emergency responders- ful ly one-sixth of the victims of that attack-perished while doing their jobs. while environmental and medical officials. as well as volunteers. stood helpless to save them . In addi- tion. many workers who cleaned debris from the site in the aftermath were harmed because they did not understand the environmental health risks. On the eve of the two-year anni- versary of the terror attacks. the EPA released an evaluation of its response to the incidents that gave credence to critics who said the government downplayed risks and returned people to their homes and offices prematurely.22

As a result of the terrorist attacks. Congress passed the Pub- lic Health Security and Bio-terrorism Response Act (in 2002). which provided money through the CDC for counterterrorism planning and funding to states for counterterrorism planning. Although much of the funding focused on local police and fire responders rather than environmental health responders .23 the act raised federal spending on public health infrastructure from $67 million in fiscal year 2001 to $940 million in fiscal year 2002. The money generally is being dispensed through CDC in the form of cooperative agreements with the states. Within certain guidelines. each state decides how to spend the money. For environmental health agencies. this trickle-down system has worked unevenly. In some localities. environmental health has received significant new funding. In others. little money has made it from the state level down to local health departments or. within health departments. down to environmental health. and at about the same time this money was appearing. many states were experiencing budget crises that resulted in cuts to funding for public health. Thus. many environmental health budgets are declining despite the infusion of federal money.24

Accidents and Spills Environmental accidents and spills can have devastat- ing impacts on human health. Oil sp ills have traditionally been viewed as environmental disasters. affecting mainly

ecosystems rather than humans. The Oil Pollution Act (OPA) of 1990. one of the major policies that address oil spills in the United States. offers little help for assessing the consequences to humans.

On April 20. 20 IO. the largest marine oil spill to date oc- curred in the Gulf of New Mexico at BP's Macondo Prospect well at the Deepwater Horizon Oil Rig. A blast killed 11 work- ers. injured another 17. and resulted in a gush of oil (known as the BP oil spill) that lasted for three months before 1t was contained. Unlike terrorism and natural catastrophes. acci- dents like this can last a long time before the contamination 1s con tai ned. Because of the scale of this oil spill. which affected the ecosystem and economy of a multistate area. assessments of impacts had to include effects on human physical and mental health. OPA created a process for assessing the dam- ages by a spill as a guide for the amount of expenditures to be collected. It designates natural resource trustees as a neutral party to assess the damages.

The world watched daily for three months as the oil leaked into the Gulf and then followed as the oil plume migrated be- fore anything like tar balls and wildlife washed up on shore. This accident leaked 4.9 million barrels (approximately 189 mi lli on gallons) of crude oil into the Gulf. in the same re- gion that Hurricane Katrina. fo llowed by several other hurri· canes. had struck only five years earlier. This was about allow rate of 52. 700 to 62.200 barrels a day before containment. To compare this to another high-profile marine oil spill. on March 24. 1989. the supertanker Exxon Valdez grounded on Bligh Reef off the Alaskan coast. fracturing its hull and spilling 53 million gallons of crude oil into Prince William Sound. The Exxon Mobil Corporation spent around $2.1 billion in cleanup efforts and settled state and federal claims for environmental damage. with payments exceeding$ I billion.25

The oil spill put into risk two large economic niches in the Gulf region. tourism and fishing. BP agreed to place in escrow a $20 billion fund to compensate for financial losses. In the first weeks of operation . by November 23. 20 IO. more than $2 billion was paid to approximately 127.000 claimants. The Food and Drug Administration. the National Oceanic and Atmospheric Administration's (NOAA) National Marine Fisheries Service. the EPA. the US Coast Guard. and the Gulf Coast states took unprecedented steps to ensure that the sea- food harvested from the Gulf was safe-first by closing areas exposed to the oil and then by establishing a reopening proto- col designed to ensure that seafood from any given area was

safe from harmful oil and dispersant residues before the area reopened to harvest. 26

At the height of the oil spill. more than one-third of the federal waters in the Gulf and much of the state waters were closed to harvesting. At the most extensive point. 88.522 square miles of the Gulf coast were closed to fishing. After the oil began to dissipate. the states and federal government conducted extensive sampling and testing of fish, shrimp. crabs. and oysters. Only after all samples collected from an area passed both sensory and chemical testing was a harvest area allowed to reopen. All of the federal waters and all but a few state harvest waters have reopened. and the tests have shown that the seafood from these reopened areas is as safe to eat as it was before the oil spill.

In response to this unprecedented disaster. President Obama formed a bipartisan commission-the National Com- mission on the Deepwater Horizon Oil Spill and Offshore Drilling-and tasked it with investigating the facts and cir- cumstances concerning the cause of the accident. One con- clusion in the president's report criticizes the technology, laws. regulations. and practices for containing. responding to. and cleaning up oil spills. The report frames the oil spill in terms of tensions between human safety. the environment. and economic pressures for energy. It recommends that EPA amend its policies on accidents like the oil spill to add distinct procedures to address human health impacts from these types of accidents. Th is recommendation included the health risks for responders as well as the affected community. According to Oliver Houck. a law professor at Tulane University who studied the disaster. the United States has laws and policies that could have prevented this type of major oil spill that were not followed.27 Instead. the author argues. this is an example of "risk creep" where more risky technology was employed without the proper vetting through assessments in existing laws and policies like the environmental assessment process. This aggressive behavior was fueled by the demand for more energy.

Today, the information about the response effort in the Gulf is astounding. The Department of the lnterior28 estimates that 47.829 responders with 7.000 active and reserve personnel were deployed as well as 6.500 government and commercial vessels and 22 aircraft. Because the oil moved across several state boundaries. there were command posts in four states. The government used a variety of response approaches in- cluding dispersants. booms. and 4 I I in situ burns conducted

on 265.450 barrels of oil. About 1.4 million barrels of liquid waste and 92 tons of so lid waste were collected. Th is was clearly one of the largest challenges for health professiona ls in recent history.

As of April 2012, a proposed settlement establishes a pro- gram to monitor claimants' health for a period of 21 years. People whose physical symptoms have not yet developed will also be able to pursue claims. BP has also promised to pay $I 05 million to improve health care around the Gulf region. 29

The Lessons All three events. Hurricane Katrina. the September 11 terrorist attacks. and the BP oil spill, present a consistent and clear message. Environmental health providers need to be more central to the team of emergency response providers both in providing protection immediately after the event as well as preparing for the possible event. Natural catastrophes. terror- ist attacks. and accidents will continue to occur in the United States. The challenge is to implement the lessons we learned through the large and cumbersome complex of organizations that deal with environmental health policy.

CHALLENGES FOR THE FUTURE: CLIMATE CHANGE AND ENVIRONMENTAL HEALTH POLICY Climate change poses the most fundamental environmental challenge to both the United States and the world. Unlike ter- rorism or natural catastrophes. climate change is gradual and predictable.

Generally, American policyma kers have been slow to join international policymakers and organizations tha t see climate change as a serious. major environmenta l health threat; the international consensus calls for immediate reductions in the gases that contribute to warming. Part of the explanation for the American reluctance stems from the perceived economic cost to limiting the emissions associated with climate change. Additionally. some Americans continue to challenge the sci- entific evidence. suggesting the evidence of human-made climate change is weak. This is a unique situation for environ- mental health officials because science has generally identi- fied such problems and suggested solutions; however. in the

lrtl PART VI • Policies and Issues Ii ~----~~~~~~~~~~~~---f

United States. by far the largest emitter of global gases. weak scientific arguments have been used to delay working with the international community to address climate change.

This section gives a brief overview of the subiect of cli- mate change and then focuses on political actors' use of the rhetoric of science to argue for delay when issues of eco- nomic cost are key. Effective participation in the climate change debate in the United States is. in our judgment. the most serious task of environmental health professionals in the foreseeable future. They must become expert in its sub- stance and politics.

Background on Climate Change30 Levels of carbon dioxide and other "greenhouse gases" in the atmosphere have risen steep ly during the industrial era as eco- nomic and population growth has spurred activities like de- forestation and heavy fossil fuel use. Like a blanket around the planet. greenhouse gases trap heat energy in the earth's lower atmosphere. If levels rise too high. the resulting overall rise in air temperatures-global wa rm ing-is liable to disrupt natural climate patterns. which will result in major ecosystem changes.

Carbon dioxide produced by human activity enters the natural carbon cycle. Many billions of tons of carbon are exchanged naturally each year between the atmosphere. the oceans. and land vegetation. The exchanges in this massive and complex natural system are precisely balanced. carbon di- oxide levels appear to have varied by less than I 0% during the I 0,000 years before industrialization. In the 200 years since 1800. however. thei r levels have risen by over 30%. Even with half of humanity's carbon dioxide emissions being absorbed by the oceans and land vegetation. atmospheric levels con- tinue to rise by over I 0% every 20 years.

The Intergovernmental Panel on Climate Change (IPCC) concluded that "new and stronger evidence [demonstrates] that most of the warming observed over the last SO years is attributable to human activities." Uncertainties in the pro- cess of projecting future trends lead to a wide range of esti- mates. but the IPCC predicted a rise of 1.4-5.8 C in global mean surface temperatures over the next I 00 years. Even at the lower end of th is range, the impact of warming is likely to be dramatic. These impacts on human lives will be un- avo idabl e. Peop le in some areas may bene fi t from clima te change. but most will suffer-in many places they will suf- fer a great deal.

Developing countries will suffer more than others. both be· cause their lack of resources makes them especially vulnerable to adversity or emergencies on any major scale and because most are near the equator and other areas likely to receive the most negative consequences of climate change. Yet people in developing countries have created only a small proportion of greenhouse gas emissions.

The stakes are huge on all sides: The economic impact of either action or inaction on climate change will be high. How· ever. taking measures to reduce emissions will be essential to maintaining high levels of health and quality of life on this planet.

The US Delay: Uncertain Science as the Reason? In the United States. where the best science on climate change has been conducted. the scientific evidence compiled to date on the observed ecological effects of climate change in the United States and their consequences. and on the re· lationships between observed biological changes and human activities. is strong. according to a review of the scholarly literature contained in a recent Pew Center report on global climate change. 31

That report reviews more than 40 studies that associate ch· mate change with observed eco logical impacts in the United States. Using objective evaluation criteria. it found that more than half the studies provide strong evidence of a direct hnk. These studies span a broad range of plant and animal species from various regions of the United States.

Despite the diversity among studies. the observed ecologi· cal responses are consistent with one another. as well as with the changes that one would expect based on the nature of cli mate change in the United States observed to date Although many species and ecological systems have yet to be studied (often due to inherent limitations of available data) and 1t is difficult to attribute ecological changes to a particular cause number of robust findings emerge from this report. Sufficient studies now exist to conclude that the consequences of di· mate change are detectable within ecosystems in the United States.

The key issue is simple: Inevitable scientific uncertainty is used to delay action because of the perceived economic costs. The environmental health community has struggled to respond. It is hard to refute the claim that the planet has

undergone many natural . large-scale lifecycle changes over time. The earth 's climate has always varied-from ice ages, volcanic activities . or even the reversal of the poles . Nonethe- less. the EPA states there is compelling evidence from around the world demonstrating that a new kind of climate change is now under way. foreshadowing drastic impacts on people, economies. and ecosystems. 32 According to the EPA. the heat-trapping property of gases released by human activity is undisputed-although uncertainties exist about exactly how the Earth's climate responds to them . The EPA further states that it is not easy to calculate the extent to which human- induced accumulation of greenhouse gases since preindus- trial times is responsible for the climate change trend. This is because other factors . both natural and human. affect our planet's temperature. Furthermore. the EPA claims that scien- tific understanding of these other factors-most notably nat- ural climatic variations. changes in the sun's energy, and the cooling effects of pollutant aerosols-remains incomplete. In short. scientists think rising levels of greenhouse gases in the atmosphere are contributing to climate change. but to what extent is difficult to determine.

We are certain that human activities are rapidly adding greenhouse gases to the atmosphere. and that these gases tend to warm our planet. This is the basis for concern about climate change. According to those who want to delay action.

CONCLUSION We have outlined some current and future challenges for environmental health providers. Events like Hurricane Katrina. terrorist acts like those of September I I, 200 I, and accidents like the April 20 I 0 oil spill in the Gulf are likely to occur again in different forms that will demand policy responses from environmental health professionals. It is not clear that the environmental health movement is moving ef- fectively toward implementing the hard lessons we learned from these events. Nor has the movement met the chal- lenge posed by the even larger dangers of climate change.

What is to be done? A first "process " proposal we would like to present is that a national summit on environ- mental health be convened that encompasses both public health and environmental protection experts as well as

CHAPTER 22 • Environmental Health Ml the fundamental scientific uncertainties are these: How much more warming will occur? How fa st w ill thi s warm ing oc- cur? How much is caused directly by human action and how much by natural causes? And what are the potential adverse and beneficial effects? These uncertainties will be with us for some time. perhaps for decades.

In sum . the inevitable uncertainty of science has been uti- lized as a rationale by some interests in the United States to ignore and even criticize the climate change prevention ef- forts by the rest of the international community. The scientific community has not adequately responded to this strategy by demonstrating the problems with this delay-including the obvious points that uncertainty also means the problem could be much more than assumed and that delay can have the same negative results as a delay in treating serious disease- nor has the scientific community successfully demonstrated what we already know with certa inty.

Most of the protest against the United St ates' delay has come from environmental protection interest groups, not from environmental health agencies and experts at the local or national levels. This reflects badly on those in envi ron - mental health. More importantly, it hurts the effort to com- bat climate change . for it is concerns with environm ental health and quality of life that most move the publ ic.

grassroots communities. This recommendation may seem platitudinous but was demonstrably effective at the inter- national level during the Earth Summit conducted by the United Nations in 1992 where major work resulted in de- veloping climate change policies.

Out of such a summit, we hope a better alignment of the organizational components of environmental health policymaking would emerge. particularly at the national level. This does not necessarily mean creating duplicative agencies to deal with environmental health. but better organization of the agencies already in existence. This is actually a much smaller task than the recent bureaucratic redesign for homeland security. but one of equal or even greater importance.

A second recommendation concerns the education and training of environmental health experts More emphasis should be placed from early education all the way to upper levels of university studies on a multidisciplinary approach to environmental health fields. Again . this may seem like stating the obvious. but it speaks to a serious gap in train- ing. The IOM 's analysis of public health (discussed ear- lier in the chapter) emphasized improved training in the politics of the policymaking process; political intelligence is essential to the increased effectiveness of public-health agencies and professionals.

The essential precondition for improving the effective- ness of the environmen tal health field. however. 1s to increase the visibility and importance of environmental health concerns within the environmental movement. This would be of benefit to both environmental health specifically and the environmental movement generally. but achieving it will be difficult.

Today. the environmental movement is undergoing a searching and sometimes searing self-evaluation . Set off by a provocative paper by Michael Shellenberger and Ted Nordhause titled "The Death of Environmentalism.'' its purpose is to develop a strategy for repairing a per- ceived loss of influence in the political arena. Many en - vironmental activists believe that this has sadly resulted in both effective resistance to new recommendations

STUDY QUESTIONS

from environmentalists and selectively repealing envi- ronmental regulations put in place dunng the 1960s and I 970s-"the Golden Age of Environmentalism .··

We believe that we need a " New Politics of Environ- mentalism. " 33 The environmental movement will need more than a message "reframing" 1f 1t 1s to obtain and retain a long-term increase in influence. Instead. it will have to emphasize the value of its recommendations for the betterment of human health and an improved qual- ity of life rather than subtly and sometimes not so sub- tly implying that we must all sacrifice for the good of the environment.

In conclusion. we turn the argument around and end by urging environmental health specialists to work harder at integrating themselves and their concerns into the overall environmental movement. They can and will be the most effective advocates for an emphasized role of environmen- tal health in environmentalism.

just as increased emphasis on the health dimension would work to the advantage of the environmental move- ment. so a rigorous and popular environmenta l movement would be the essential driving force behind the enactment and successful implementation of effective environmental health policies. In the eloquent wo rds used by Benjamin Franklin during the founding of our Republic. "United we stand. divided we fall."

I. What do the authors claim has happened to decision making on environmental health issues?

2. In previous centuries. how was environmental health considered . and what changed matters?

3. How did public health play a part in losing 1unsd1ct1on over environmental health issues?

4. Why do conservatives sometimes oppose pro-environment policies?

S. What are some public-health issues raised by Hurncane Katrina?

6. What are some health challenges of terrorism?

1. What are the health consequences of environmental accidents and spills?

8 . How do the authors believe we should be responding to the threat of climate change?

9. What recommendations do the authors make to refocus attention on the importance of health issues in environ- mental policy?

= CHAPTER 22 • Environmental Health pi

ENDNOTES I. Baumgartner and Jones. 1993.

2. See Novotny. 2000.

3. Vinten-Johansen. Brody, Rachman. and Rip. 2003.

4. Hill. 2000.

S. Theriot and Tzoumis. 2005.

6. Institute of Medicine. 1998.

7. Kuhlman and Farrington. 20 I 0.

8. Crowley. 1999.

9. Goodstein. 1999.

10. Morgenstern. Pizer, and Shih. 2002.

11. Pezzoli et al .. 2007.

12. joint Task Force. 2005.

13. Professor Henry Glindmeyer of Tulane University is directing a study on the possible respiratory problems among workers in post-Katrina New Orleans; no results are yet available.

14. Pezzoli et al .. 2007.

IS. Meffert. Thomas. and Wallace. 2007.

16. Pezzoli et al .. 2007.

17. Warboys and Applegarth. 2006.

18. Abramson. Stehling-Ariza. Garfield, and Redlener. 2008. p. 85.

19. Tulane University, 2009.

20. Children's Health Fund and National Center for Disaster Preparedness. 2009.

21. Lyman. 2003.

22. Berg. 2004.

23. Ibid.

24. Ibid. 25. Exxon Valdex Shipping Company et al u. Grant Bakker et al .. 128 S.Ct. 2605 {2008) No. 07-2 19.

26. Food and Drug Administration. 2011.

27. Houck. 20 I 0.

28. Department of Interior Fact Kit. 2010.

29. Burdeau. 2012.

30. United Nations. 2005.

31. Parmesan and Galbraith. 2004.

32. EPA. 2005.

33. Tzoumis and Robins. 2005.

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REFERENCES Abramson. D .. T. Stehling-Ariza. R Garfield. and I. Redlener. 2008 ... Prevalence and Predictors of Mental Health Distress

post-Katrina: Findings from the Gu lf Coast Child and Family Health Study." Disaster Medicine and Public Health Preparedness 2(2): 77-86.

Baumgartner. R .. and B. Jones. 1993. Agendas and Instability in American Politics. Chicago: The University of Chicago

Press.

Berg. R. 2004 ... Terrorism Response and the Environmental Health Role." journal of Environmental Health 67(2): 29.

Burdeau. C. 201 2 (April 12). "Gulf Oil Spill Health Claims: BP Settlement Includes New Process." Huff Post Green. Retrieved from http://www.huffingtonpost.com/20 I 2/03/04/gulf-oil-spill-health-cla1ms-bp-settlement_n_ I 3 I 9848 html.

Children's Health Fund and National Center for Disease Preparedness. Columbia University Mailman School of Public Health. 2009. Legacy of Shame: The Ongoing Public Health Disaster of Children Struggling in Post-Katrina Louisiana. Retrieved from http://www.childrenshealthfund.org/sites/default/files/BR-White-Paper_Final_REV I- I 2- 09F.pdf.

Crowley. K. 1999 ... j obs and Environment: The 'Double Dividend' of Ecological Modernization?" lnternatwnal journal of Social Economics 26(7/8/9): 1013-27.

Restorethegulf.gov. 2011 (April I 0). ··one Year Later Press Pack." Retrieved from http://www.restorethegulf.gov/ release/20 l I /04/ IO/one-year-later-press-pack.

Environmental Protection Agency (EPA). 2005 ... Uncertainties ... Retrieved from http://cfpub.epa.gov/ncer_abstracts/ index. cf m/f useaction/ display. a bstractdeta i I/ abstract/ 6238/report/2005.

Food and Drug Administration. 20 11 (September 2) ... Gulf of Mexico Oi l Spi ll". Retrieved from http://www.fda.gov/ Food/ucm2 I 0970.htm#Government.

Goodstein. E. 1999. The Trade-Off Myth· Fact and Fiction about jobs and the Environment. Washington. DC: Island Press.

Hill. l. 2000. The Chicago River: A Natural and Unnatural History. Chicago: Lake Clarmont Press.

Houck. 0. 20 I 0. "Worst Case and the Deepwater Horizon Blowout: There Ought to Be a Law ... Tulane Environmental Law journal 40( I I): I I 033-40.

Institute of Medicine. 1988. The Future of Public Health Committee of Public Health: Division of Health Care Services Washington, DC: National Academy Press

Joint Task Force of Centers for Disease Control and Prevention and the US Environmental Protection Agency. 2005 (September 17). Hurricane Katrina Response-Initial Assessment.

Kuhlman. T. , and J. Farrington. 2010 ... What Is Sustainability?" Sustainability 2: 3436-48.

Lyman. F. 2003 (September). Messages in the Dust: What Are the Lessons of the Environmental Health Response to the Terrorist Attack on September 11th. Nationa l Environmental Heal th Association.

Meffert. D. J .. J. J. Thomas. and R. Wa llace. 2007. "Public and Environmental Health Concerns ... In C. J. DeVita. ed .. After Katrina: Shared Challenges for Rebuilding Communities. Wash ington. DC: The Urban Institute and Louisiana Association for Nonprofit Organiza tions. Retrieved from http://urban.org/publtcations/3 I 1440.html on May 10. 20 11 .

CHAPTER 22 • Environmental Health

Morgenstern. R .. W. Pizer. and J. Shih. 2002. "jobs versus the Environment: An Industry Level Perspective." journal of Environmental Economics and Management 43(3 ): 412-36.

Novotny. P. 2000. Where We Live. Work. and Play. Westport. CT: Praeger Press.

Parmesan. C.. and H. Galbraith. 2004 (November). Observed Impacts of Global Climate Change in the U.S. Pew Center for Global Climate Change.

Pezzoli. K .. et al. 2007. '"The NIEHS Environmental Health Sciences Data Resources Portal: Placing Advanced Technologies in Service to Vulnerable Communities." Environmental Health Perspectives 115(4). 564-71.

Theriot. C.. and K. Tzoumis. 2005 (April). "The Chicago River: An Experiment in Innovative and Technological Approaches." Golden Gate University Law Review 35: 377-90.

Tulane University. 2009. Post-Katrina Stress. Heart Problems Linked. Retrieved from http://tulane.edu/research/discover/ story-katrina-heart-attacks-cfm on May 10. 2011.

Tzoumis. K .. and L. S. Robins. 2005. The New Politics of Environmentalism. Unpublished manuscript. available on request. June 28.

United Nations. UNFCC. 2005. Caring for Climate: A Guide to the Climate Change Convention and the Kyoto Protocol. Bonn. Germany: Climate Change Secretariat.

Vinten-Johansen. P .• H. Brody. N Paneth. S. Rachman. and M. Rip. 2003. Cholera. Chloroform. and the Science of Medicine: A Life of john Snow. Oxford. UK: Oxford University Press.

Worboys. K. J.. and C. Applegarth. 2006. "Recent Research from Lessons Learned Information Sharing: The Importance of Partnerships in the Rural Water Response to Hurricane Katrina." journal of Environmental Health 69(2): 31-33.

Jn a report from the real world of patients and medicine, Deborah Stone shows us how impenetrable bureaucracy, overworked staff members, and defensive legalism wipe out our privacy and bury the patient's right to know.

A few years ago, I had a mole removed from my forehead. I'd had a preliminary consultation with the dermatologist-even such simple things are never done on the spot. On the day I returned for the ac- tual excision. the receptionist gave me a form to sign. saying. "We need this form in order to biopsy it."

Of course. I thought to myself. they have to get my consent. if only so my insurer will pay. Nevertheless. I always read forms before signing. The part she was asking me to sign read: "I under- stand that Medicare will not pay for a pap smear test for one of the following reasons (there were four boxes that could be checked, but none of them was). I agree to be personally responsible for all the charges ...

"I don't understand." I said. ''I'm not on Medicare and I'm not having a Pap smear. ..

"You're reading too much into it." the receptionist snapped. "It has nothing to do with Medicare. We need your signature in order to biopsy it." and then, after a pause meant to suggest my impending stupidity. she drawled. "unless you don't want it biopsied.''

"Well then." I asked. "1s this saying that I wtll have to pay for the biopsy?"

"No:· she said, still exasperated "Your insurance will cover it."

Well-informed patients and strictly regulated consent procedures are the foundations of the medical marketplace and the supposed guarantees that medicine will treat patients right. In practice. in- formed consent is a sham. Medical staff administer these forms as 1f they are a royal nuisance. and by and large. they brook no questions from patients. "Shut up and sign" is the prevailing attitude.

Most people don't even read medical consent forms before sign- ing. and the clinica l staff don't expect patients to read them. When someone like me comes along, someone who actually reads forms and asks questions. the staff get flummoxed. annoyed. or both.

Once. on admission to a hospital for a breast lump biopsy (1t was benign). the admitting clerk handed me a consent form

saying. "This j ust allows us to bill your insurance company.· I read it over. Billing my insurer was only one of about six or seven things for which the form asked my perm1ss1on. Most notable to me was authorization for the hospital and its physicians to do anything to me they deemed necessary while I was in their custody.

Given that I was going in for a breast biopsy and given the his- tory of breast cancer trea tment-namely. radical mastectomies per- form ed at the surgeon's discretion without consultation with the woman-I found this consent form horrifying. no matter that I had discussed th is very issue with my surgeon and that she had assured me she never did surgical treatment or even lymph node dissections at the same time as the 1nit1al biopsy.

I poin ted out to the admitting clerk that the form was about more than permission to bill my insurer. "Oh. real ly?" She professed surprise.

Each time I have v1s1ted that same hospital for mammograms and follow-up care. the admitting clerk has handed me a consent form with the same cheery line, as if she's offering me a special deal. "This Just allows us to btll your insurance company." I practically know the form by heart. It's a HIPAA (Health Insurance Portability and Ac· countability Act) form. now ubiquitous in the medical world. You can't walk into a clinic or office anymore without being asked to sign that you've received a notice of the institution's "privacy practices.· This particular form does indeed say that I authorize the hospital to disclose my health information to my insurer. It also says I've seen the hospital's "notice of pnvacy practices." which 1s a separate form-six pages. single spaced-listing myriad ways "we may use or disclose your protected health information."

The form tells me that the hospital may share my health informa- tion both inside and outside the conglomerate Boston health system of which it is a part. It may use my information for medical research and for training new health care workers. The health system may use my health information to contact me not only about "patient care is· sues. treatment choices. and follow-up instructions." but also ·with other health related benefits and services that may be of interest to you"-in other words. marketing. And also. "for fundra1s1ngto

support [the system] and its mission of excellence. provided. how- ever. that such information is limited to demographic information only." Bill my insurance company. indeed.

By signing the HIPAA form. I'm authorizing a mega-hospital sys tern to include me 1n its research. business operations. and marketing and fundra1sing databases. not to mention that I'm giving 1t perm1s· s1on to turn over my "protected health information" to law enforce- ment. public health. and other government authorities. These HIPAA ·notices of privacy" are grossly misnamed. They're notices of pub- licity. All the paperwork in the name of privacy masks how patient privacy has been gutted. and it's all carried out through the rituals of informed consent-we give you a notice; you read it. understand 1t. agree to its prov1s1ons. and pen your signature to signify your consent.

As if to underline how vacuous and absurd the HIPAA pro- cess has become. one d1agnost1c imaging center I've used keeps a wastebasket by the door with a prominent sign ... Please Discard Unwanted Privacy Notices Here." Both times I've been there. the basket was full. In another physician's office where I have an annual checkup. the receptionist greets me with something like. "You prob- ably don't want a copy of our privacy notice. but I need you to sign this paper saying you've received 1t."

Most medical visits now begin with this parody of consent: The patient 1s asked to sign one piece of paper saying they've received another piece of paper. No one cares whether they've read or un- derstood the paper that provides the important information. This inane ritual inures people to the very idea of consent as a useful and informative procedure.

With the advent of electronic medical records, the ritual has become even more of a shell game. When my denta l clinic went electronic. the receptionist informed me I had to sign all my various forms again using the new electronic signature pad. much like the credit card pads in stores The forms. she reminded me. included the notice of privacy. the nght to bill my insurer. the consent to treatment. and the "no guarantee of success" disclaimer I stood at a counter looking at the back of her computer monitor.

Receptionist: "This 1s the such-and-such form. Now sign on the line."

Me: "But I can't see what I'm signing."

Her; "That's because it's on my screen"

Me: "I want to see what I'm signing.'

Her: "There's a copy on the counter right in front of you. I told you those are the forms you will be signing. That's why they're there. Right now you're signing the one marked 'A'."

Me. thinking to myself: I could be signing a $500.000 mortgage.

Me to her "Can I look at the screen?'"

Her: ''I'm sorry. 1t doesn't turn around."

Defeated, I signed four times. The bank hasn 't yet come after me for a mortgage payment. but by now I've had the same experience in several medical establishments: I'm asked to sign my name on an electronic pad with absolutely no idea what I might be signing. So much for "informed."

Okay. maybe privacy and billing notices aren't so important. but surely good information about potential risks and benefits of any medical treatment is essential for wise decision making. For another surgery I needed. the consent form warned me of many potential. if unlikely, risks of this procedure. including death. My surgeon had discussed the "I% .. chance of cutting the nerves to my vocal cords. leaving me unable to speak. but he hadn't men- tioned death. I raised my eyebrows and uttered some sort of startled exclamation about not expecting to meet my maker quite so soon. "Oh. we have to say that for everything." the admitting clerk assured me. "If I were you. I'd iust sign 1t. because you have to in order to have the surgery.''

There's something cynical and duplicitous about making pa- tients sign off on every risk. including death. no matter how remote the possibility. Another form I had to sign to have my mole excised. a procedure for which I would be having Novo- cain, warned me that "all forms of anesthesia involve risk and the possibility of complications, injury. and sometimes death." Crying wolf undermines the credibility of all warnings. including the most serious ones. to the point that even the people admin- istering informed consent forms tell patients not to believe the information.

When the oncologists informed my cousin about a rigorous (their word) and brutal (his wife's word) lymphoma treatment protocol, they softened the terrifying potential consequences by saying. "Le- gally we have to mention anything that has ever happened 1n any of the patients who have undergone this protocol. even if the prob- lems were unrelated to the cancer treatment. .. With their verbal as- surances of how unlikely the worst consequences were. they all but contradicted the written forms. What's a patient to believe when informed consent gives such mixed messages?

A key principle of the law of contract. the pnnc1ple that un- derlies informed consent in medicine, 1s the idea that parties to a contract must give their consent voluntarily. Coerced consent. consent obtained under duress. is not consent and cannot make a valid contract. In practice. there's coercion 1n every act of med- ical informed consent. There's subtle coercion in the staff's per· functory presentation of consent documents. in their impatience with people who actually read them . and in their outright misrep· resentation of what these documents say. And there's brute co· erc1on in the situation: As the admitting clerk said to me. unless you sign. we won't treat you.

PART VII

The United States in International Context

CHAPTER 23

CHAPTER 24

CHAPTER 25

AMERICAN HEALTH CARE IN

INTERNATIONAL PERSPECTIVE

Joseph White

ENGLAND

Daniel C. Ehlke

CANADA

Antonia Maioni

EYEWITNESS 6 HOW TO LEARN FROM OTHER COUNTRIES

Ted Marmor, Richard Freeman, and

Kieke Okma

This chapter places American health care politics and policy in an inter- national perspective-highlighting how our own system is unusual. The chapter describes the "international standard" for organizing and financ- ing care by showing what most other health systems have in common. The international perspective illuminates the underlying causes of our problems (like high costs) ; it highlights the kind of health policies that often succeed-and those that are more likely to fail.

Artists know that the appearance of a figure depends in part on the painting's background. or setting. Within this book's analysis of American health policies. the purpose of this chapter is to provide some background , or contrast. that can highlight important aspects of the subject.

The proper background for this picture consists of other "rich democracies": countries that have large enough per cap- ita incomes and responsive enough political arrangements so that underlying economics and sociology enable similar poli- cies. if the political systems so choose. 1

While I will fi ll in some details later in this chapter. the ba- sic outline of the international backdrop to America n medi- cal care is clear enough. Other countries have national health

care or insurance systems that provide much more equitable access at lower cost than in the United States. Hence the in- ternational background highlights how differently the United States collects the money for health care (finance) and pays the providers of care (payment). To a lesser extent. the back· ground provides some contrasts to how Americans organize care (delivery) . Last. the background highlights aspects of US health politics.

These international comparisons were evident to some or the supporters of the 20 IO health care reform legislation. and one way to understand that legislation is by looking at to what extent it would. if implemented. make the American health care system like those in other countries.

CHAPTER 23 • American Health Care in International Perspective

WHAT CAN WE LEARN FROM COMPARISON? From a social scientific perspective. comparing countries is a way to increase the number of cases for analysis. Just as we can learn more about welfare-to-work policies by looking at actions and results in 50 states than in one. we can learn more about health policies by adding to American experience the experience of the countries at comparable levels of eco- nomic development. 2 We need to be careful because nations may vary from each other in ways that states do not. Yet that should not scare us away. After all. Texas 1s very different from Massachusetts.

International comparisons offer three kinds of information: about possibilities . about cause-and-effect relationships. and about preferences.

Possibilities The more cases we look at. the more phenomena we might see. so the more alternatives we might consider for chang- ing our own system. For example. national health coverage can be achieved in very different ways. Canada has govern- ment-sponsored insurance. but it is managed by the provinces within broad national guidelines. France has a dominant na- tional insurer that covers most people but a series of smaller funds for other occupational groups. Japan has thousands of insurers. with membership determined by employment and location. In the Netherlands. people are required to have in- surance but can choose among funds. In Germany, about 80% of the population is required to join "sickness funds." but there too people choose their funds. In England. instead of having insurance. citizens are given the right to use a state bureaucracy. the National Health Service. Sweden also pro- vides coverage through health services. but they are organized and mainly funded at the county level. Australia has a version of Medicare nationwide for ambulatory care. but hospital care is provided by state public hospitals. National Health Insur- ance (NHI) turns out to include a very wide range of possible arrangements.3

Looking abroad can expand our sense of possibilities in other health policy areas as well. In 1990. for example. one could see that in the United States care within hospitals was basically supervised by admitting physicians. who prac- ticed outside of the hospital as well. The full-time hospital staff consisted mostly of trainees. interns. and residents. In

Germany. physicians with ambulatory care practices generally did not have hospital privileges: Once a patient was admit- ted. their care was and is managed by full-time. fully trained. hospital physicians. Each system has its own strengths and weaknesses . but. since that time. the US system has moved toward greater use of full-time "hospitalist"' physicians.4 There are many different ways to pay hospitals; in recent years. pol i- cymakers in other countries have to some extent adapted the American Medicare method of payment by diagnosis. but in a variety of forms and for a variety of purposes. Britain's cre- ation of a National Institute for Health and Clinical Excellence (NICE) has inspired all sorts of proposals in other countries.

Thus looking at other countries can increase the menu of possible "solutions" to policy problems. Yet studying other countries should also. sometimes. provide caution against believing problems could be easily solved . If an undesirable condition has never been solved in other countries . maybe American failures are not due to American institutions. As my mentor. Aaron Wildavsky, commented to me in 1993. " Even Stalin and Beria couldn't get doctors to move to the country- side." In 20 I I it was impossible to find countries that had found ways to "pay for performance." Comparison might give us a more realistic sense of what is possible. not just a wider range of options to consider.

Cause and Effect Analysis of how systems work in other countries can also pro- vide evidence about cause-and-effect relationships. For exam- ple. observation of the same rela tionship in multiple settings may make it more credible. American evidence suggests that an aging population per se is not nearly the most important cause of increases in health care spending. The fact that evi- dence from other countri es supports exactly the same conclu- sion should make this finding more convincing.5

Yet it is more difficult to use comparison to analyze causa- tion than to survey possibilities. for a series of reasons. To begin. it can be very hard to measure some effects. The con- troversies over assessing any new technology or drug make that clear enough. as do the controversies over rating the per- formance of individual hospitals or health plans. The problem is particularly severe if t he goal is to compare the quality of national health care systems.6 Measurement of the dependent variable is less of a problem if the variable is health care costs or the extent of insurance coverage. There can be some dis- agreement about what costs count or what benefits matter.

PART Vn • The United States in International Context

but there is very little doubt that costs are much higher, and a larger part of the population has no coverage. in the United States than in other countries.

Even when outputs can be measured and causes identified. doubts can be raised about the implication of that finding for American policy choices. For example, there 1s no doubt that when Canada moved to a system of NHI with stronger capacity and payment regulations, the trend of spending in- creases. which had been quite similar to the United States until then. substantially diminished. Yet critics could argue the association between seeming cause and effect is spurious because the better performance is due to some other. unmea- sured cause. Lower health care costs in Canada could not be due to superior cost-control methods but due to Canadians being healthier because of lower levels of poverty. crime. and other problems. Or perhaps changing the policy (cause) will have negative effects on some other valued output. Hence the policies that lower Canadian costs may be claimed to have unacceptable effects on quality. Also. perhaps intervening fac- tors mean a policy would work differently in the United States than in Canada. A friend of mine. for example. suggests that the payment restrictions that work in Canada will not work as well in the United States because Canadians are more law abiding and Americans more likely to look for ways to cheat the system. None of these objections are in fact compelling, but an analyst who argues that the United States would ben- efit from adopting Canadian-style insurance has to be able to address them all.

Preferences Each nation has not only health care policies but health care politics as well. Within that politics. groups define and fight for their interests. Analysts identify "problems." To most peo- ple. each of these processes may seem natural. but for politi- cal scientists they require explanation.

Why are some conditions put onto the political agenda as problems and others not?7 For example. how did "quality" be- come an issue in the United States in the late I 990s?8

Why do some groups take sta nds that would seem con - trary to their economic interests? For example, why do busi- nesses that pay lots of money for health insurance not turn to the government, which seems to have more power to control costs, and ask it to take over?

Do we decide which problems are most pressing based on some objective measurement of their level? Or do problems

get prioritized based on the sel f-interested perspectives of groups that try to sell those definitions to win changes that serve their own purposes? Here an instance would be the fre- quent claim in the United States that there should be a greater emphasis on " primary care" and less on "specialty care.· 9

Is this claim clearly iust1fiable from data? Or is 1t predomi- nantly a result of the soml position of its advocates?

Comparison to other countries can give us a sense of the answers to such questions. For example. 1f we find people with the same backgrounds promoting the same problem definitions in different countries. in spite of quite different cir- cumstances, we may conclude that the preferences of these groups (say. public-health professionals or physicians) are de- termined by socioeconomic aspects of health care. If a group in one country takes different positions than similar groups in other countries (such as American businessmen on the sub- ject of compulsory hea lth insurance). we might look for spe- cific causes in that country.

In the rest of this chapter. I will identify some conclusions about possibi lities. cause and effect. and preferences that I have drawn from my comparative studies of hea lth policy

POSSIBILITIES The most obvious possibility, as mentioned previously. is to provide a health insurance and health care system to all c1ti· zens. The fact that all other rich democracies do it strongly suggests it is possible!

The secon d and equally obvious background fact is that other countries spend much less money on health care than the United States does. Figure 23-1 reports that in 2008. the United States spent 16% of its gross domestic product (GDP) on health care. The second highest spender as a share of its economy was France. at 11.2%; most countries clustered in a range from 9 to I I%. Thus. the United States spent at least a 40% larger share of its economy than other countries. The first column in the table provides another comparison: spend· ing in terms of purchasing power (national currency adjusted for national prices). By this standard. the Un ited States spent half again more ($7.538) than the next most expensive coun· try. Norway ($5.003).

If we look behind the statistics. we can see nearly as stark differences in policies between the United States and other nch democracies. Although their policies differ in many ways. they share aspects that can be called an international standard

CHAPTER 23 • American Health Care in International Perspective

16-y-~~~~~~~~~~~~~~~~~~~~,........,r---,

14 -t-~~~~~~~~~~~~~~~~~~~~~I

1 2 -;-~~~~~~~~~~~~~~~~~~~~--l

1 0 -t--~~~~~~~~

8

6

4

2

0 Australia United Canada

Kingdom Israel Germany France United

States

I D 2008 • 1998 1 Figure 23·1 Hea lth Care Spending as Share of GDP, 1998 and 2008 Note: Based on OECD 20 I 0, countries with national per capita incomes over $25,000 per year in 2009.

GDP is a standard measure of the size of an econo my. The ratio of health spending to GDP depends not just on the trend in healt h spending but on th e trend of GDP. Thus, some o f the changes over time in this data are partly due to differen t levels of economic growth, with slow increases in the ratio tendin g to occur in coun tries with high growth rates.

All other rich democracies provi de vi rtually uni versal coverage-about 99% or more of the legal population. But they do not provide comp lete equity of access. nor do they all cover the same set of services.

Governments create universal coverage by compelling people to contribute to the system. Germany is the exception: About 20% of the population. those with higher incomes or particular jobs. are not compelled to participate in the sickness fund sys- tem. But some of those people (such as civil servants) have other automatic coverage: all have high enough incomes to afford in- surance: and all are given strong financial incentives to buy it.

Each country cove rs its own definition of all "medically necessary" hospital and physician services. Each provides pharmaceutical benefits for the poor and elderly, and some make that coverage universal. In all cases. the definition of medically necessary excludes extras such as cosmetic sur- gery and private rooms. which are more available to people with more resources. There are other inequalities. partly due to factors such as geography and patients' knowledge. Rural areas can never have the same access to services as urban ar- eas. and immigrants who do not speak the national language will always be at some disadvantage. In all systems. some

portion of more privileged people can buy extra access or bet- ter amenities.

The difference between the United States and other coun- tries therefore is not the existence of inequality per se. The difference is that in other countries everyone is guaranteed decent standard coverage, and some have more. In the United States. hardly anyone under age 65 is guaranteed anything : most people have decent coverage. but a large segment has much less. In other countries. there are "escape va lves" for the well-to-do. In the United States. there is a ra gged "safety net" for the poor.

With limited exceptions (Switzerland . Holland to some ex- tent. and Germany for some people). the main coverage in other countries is not a good that people purchase on a mar- ket. Instead . people contribute to a system. Whether people pay a payroll contribution (a proportion of wages. like Social Security) or spending is fina nced from government general revenues. payments are in rough proportion to ability to pay. They are not related to need for care. The basic princi ple is that contributions should be a fairly steady share of income through your life. regardless of how much health care you or those on whose behalf you contribute need.

PART VIl •The United States in International Context

In the United States. private insurers charge according to the perceived risks of individuals or groups, so they charge more to those who need more. regardless of their income. Insurance companies and purchasers . which normally means employers . negotiate over the terms of insurance. so that cov- erage differs according to the price that the purchaser feels able to pay. Therefore. there are thousands of different combi- nations of benefit terms and provider networks. In most other countries . coverage is much more standard. even if (as in the Netherlands) insurers can compete for customers. Variation occurs mainly due to markets for additional gap or parallel insurance.10

As mentioned earl ier in the chapter. compulsory coverage can be organized and fina nced in many ways. Inequalities based on the fi nancing system (rather than on. say, geogra- phy or social connections) then can take a variety of forms. In England, a person might "jump the queue" with private care financed by private. parallel insurance. In France. some people have a wider choice of physicians because they pay extra for "Sector 2" doctors. In Germany. people with private insurance may have quicker or at least more personal service. In Canada. some people have better gap insurance (e.g .. for pharmaceuti- cal or dental benefits) than other people. Yet the basic guaran- tee in all these cases remains solid and relatively equitable. at least. compared to the United States.

Managers of insurance companies or hospita ls in other countries may have entrepreneurial instincts. but the scope for entrepreneursh ip is limited. Other countries· experiences show that universal insurance can include private insurers. Their experience suggests it is not possible. if you want to cover everybody, to allow insurers to pursue profit without being very heavily regulated as to their rates and marketing practices. At least. that possibility has not been observed in practice.

Cost control also is different in other countries. While most hospitals and physicians in the United States collect revenues from many payers on many different terms, in all other coun- tries the terms and sources of income are more limited. They have versions of a/I-payer systems: Even if there are multiple payers . the terms of payment from each payer are much the same.11 There are also limits on capital investment, so pro- viders of care cannot ju st go out and buy new equipment or expand their facilities in ways that increase costs. For ex- ample. access to capital is restricted. or services cannot be reimbursed unless the new capacity was formally approved.

Conversely. cost control in other countries generally does not rely on each payer trying to negotiate better prices by threat- ening to take its business to other providers. In short. other countries rely much more on coordinated payment and much less on selective contracting.12 Hence they illustrate a very dif- ferent approach from the cost-control methods of the Amen- can private market.

American advocates may argue that some benefit or other is absolutely crucial to the decency of any universal system. This is. ultimately. a personal judgment. But by looking at other countries. one can see that there are many possible ben· efit structures. Canada does not directly guarantee pharma- ceutical benefits to all. Germany and Japan. in contrast. do. France does. adds substantial cost sharing. and then reduces the effect of cost sharing with low prices and a series of ex- clusions. Some countries cover abortion and some do not. In Japan. normal pregnancy is not covered by sickness insurance because it is not considered an illness (it is financed by other arrangements).

The international standard includes compulsory contn· butions related much more to income than to projected ex· penses. coverage of medically necessary physician expenses. cost controls based on some coordina tion of pa yers that maximizes their power vis-a-vis providers. and much greater limitations on entrepreneurship by either insurers or provid· ers than in the United States. Within th is common pattern of financing. there is variation between having health services and insurance. in the coverage of benefits beyond hospital and physician services. in the levels of cost sharing. in the pattern of additional coverage (strongly related to cost shanng and missing benefits) . and in the details of the cost controls

There is no international standard for delivery systems. Ex· perience in other countries is less useful for discovering new alternatives because the United States has such a wide range of systems internally. The role of general practitioners (GP) as gatekeepers in the British NHS or in the Netherlands 1s m1r· rared in some American health maintenance organizations (HMOs) . Similarly. some American HMOs resemble some British and other country primary care practices in heavy rel1· ance on .. physician extenders" of various sorts. The United States has begun to see the use of hospitalists in a way s1m1lar to that found in Germany. Other countries do. however. show different mixes of specialists and generalists (basically. fewer specialists). There are especially interesting variations in the bal· ance between physicians and other providers of medical care.

C H APTER 23 • American Health Care in International Perspective

The Netherlands and New Zea land reveal extensive roles for midwives. The French have separated almost all medical test- ing from physician offices. a system that might have advan- tages by reducing incentives to "overprescribe." 13 The French have a special medical service to provide house calls at higher. but affordable. fees. In some cases. other countries may seem to be "behind " the United States. with delivery systems that resemble the US past more than the present. French physician offices and hospitals have fewer layers between the patient and the doctor than in the United States.14

Health policies in other countries can provide ideas for read- ers about what goals are reasonable (insuring virtually every- body is; total equality is not). They also can expand notions of the possible solutions to problems. In Judging possibilities. however. people are likely to look for evidence of causes and effects. That will always be more controversial.

CAUSES AND EFFECTS Assessments of cause and effect are difficult for all the rea- sons stated earlier. Yet I have already slipped in some judg- ments as statements about what seems not to be possible. For example. the fact that no system has ever achieved univer- sal coverage without compulsion suggests that compulsion is a necessary cause for universal coverage.

For an analyst. some of the most interesting evidence from a country other than one's own may involve unusual policies. Such extreme cases may raise doubt about common theories of cause and effect. For example. Japanese experience shows that regulation of fee s can be used to manage medical care systems quite thoroughly. Campbell and l kegami recount how high fees were used to encourage adoption of imaging technology and then. when the Japanese imaging industry had been developed and costs for the health care system seemed too high . fees were lowered. 15 This Japanese policy flexibility depended on some unique political conditions. but 1t still should give pause to economists and health services researc hers who believe price regulation is a blunt instrument. Analysts m other countries could also learn a great deal from lookmg at American experience. which provides unmatched evidence of how market forces . given free rein. work in health care. 16

As background for understanding American health policy conundrums. the following statements of cause and effect seem particularly relevant. I will put them in order from what

shou ld be least controversial to most-though all are. in my judgment. reasonable conclusions.

First. it does not appear possible to have universal hea lth insurance without both making health insurance compulsory for the lower-income two-thirds or more of the population and making payments proportional to income.

Second. aging per se does not appear to be nearly as im- portant a cause of increased health care costs as are policies about payment for care. Payment here includes both what is paid for and how payment is made. 17 Cross-nationa l evi- dence helps to make this clear. There is hardly any correlation between the age distribution in countries and their levels of health care spendi ng. and a wide range of evidence shows that aging per se is not a key driver of much anywhere.18

Third, the major explanation of America's high spending is the prices we pay for services. Comparisons to other countries show that prices are much higher in the United States and that differences in the volume of services are much smaller than the differences in prices. 19 Nor are high American costs explained by the availability of fancy technology. When re- gression lines are calculated to relate availability of cardiac care facilities. ca rd iac catheterization labs. radiotherapy ma- chines. and other equipment to per capita health care costs. the United States is a consistent outlier. with far higher costs than the supply of faci lities would project.20

This is an important finding since so much of American policy debate claims that cost control req uires restricting utili- zation, even to the point of making ethically tough choices. 21

Ma ny American health-policy experts either do not know or choose for political reasons to ignore the fact that prices are a major cause of high costs. 22 From an international perspec- tive. the key question is why American prices are so high and how to reduce them. That directs attention to factors such as the costs of the admi nistrative overhead associated with the insurance system. pay levels for caregivers and for the busi- ness side of the health care enterprise. and more subtle as- pects of system organ ization.

Fourth. the degree of inequality created by cost sharing depends on the price of care. Many analysts believe that cost sharing can create an unacceptable two-tiered system. in which richer people go to the "better" doctors who can charge extra for their services. while poorer people are stuck with lower-quality providers. Indeed. sick people may go without care because. even though they have insurance. they

PART VII• The United States in International Context

cannot pay the co-payment or coinsurance. This is a serious concern, but it needs to be modified. Whether I 0 or 20 or 35% cost sharing is a major barrier depends on what it 1s a percentage of. It is less of a barrier at the prices in Australia or France or Japan than in the United States. 23

Fifth. it appears that coordinated payment (fees set by gov- ernment or a cartel of payers negotiating with all providers) normal ly results in better cost control than does selective contracting (letting many different payers negotiate with dif- ferent groups of providers). This is harder to judge because other countries use selective contracting so sparingly. More- over. there could be times-the mid- I 990s in the United States are the example-during which selective contracting controls prices as well as most coordinated payment systems. Nevertheless. that example was both quite exceptional and quite short. 24 Moreover. in systems where insurers are encou r- aged to selectively contract to pay less than the standard fees. hardly anything of the sort has occurred .25 American costs are higher than those in countries with coordinated payment by a nearly ridiculous margin. This difference supports what would be expected from the logic of market power (as pursued by all monopolists): that coordinated payment. if seriously pursued. is a more reliable cost-control method.

The conclusions here reflect my basic earlier point that it is easier to judge cause and effect when the effect-in these cases. level of insurance or spending-is easier to measure. Nevertheless, it seems fair to make one last background judg- ment. on a less easily measured topic: The much higher costs in the United States do not appear to be justified by higher quality of care.

The United States probably buys some extra amenities for its patients. such as more privacy in hospital rooms and nicer hospital lobb ies. It does not buy better overall health results . Table 23-1 provides the most basic statistic: life expectancy. The United States has the lowest life expec- tancy at birth among the 23 countries. This figure partially reflects the higher infant mortality levels in the United States. which are more closely related to social ills than to qual- ity of medical care (save for the uninsured!). We can con- trol for infant mortality and some other social ills (such as homicide against black males) by looking at life expectancy at older ages. Yet even at age 65. the figures in Table 23- 1 are not much better.26

An alternative way to look at overall performance 1s to study deaths from "causes that should not occur in the presence or timely and effective health care." Some examples include dia- betes. bacterial in fections. and treatable cancers. This elimi- nates causes such as automobile accidents and homicides. A leading study looked at such deaths before age 75 or. for certain conditions. earlier ages . Across 19 countries. the con- ditions studied accounted for 23% of deaths of males under age 75 and 32% of deaths of fema les. Du ring 2002- 2003. the United States had the highest level of deaths from conditions tha t could be successfully treated .27 This is also not a perrect measure . but it is hardly com patible with the idea that the United States buys high quality for its money.

There is some reason to believe the US level of spending buys, for people with good insurance. some higher quality of life. Americans are getting something for their money 1n cases where patients would wait longer for elective surgery

TABLE 23-1 Life Expectancy at Birth and Age 65, 2008 Estimates

Country At Birth-Males At Birth-Females At Age 65-Males At Age 65-Females Australia

Ireland

Switzerland

Japan

Germany

Spain

United States

79.2

77.5

79.8

79.3

77.6

78

75.3

83 .7

82 .3

84.6

86.1

82 .7

84.3

80.3

18.6 21.6

17.2 20.4

18.9 22.3

18.6 23.6

17.6 20.7

18 21.9

17.1 19.8

Source: U.S. Census Bureau, Statistical Abstract of the United States: 2012. Retrieved from http://www.census.gmlcompendia/ statab/20 12/tables/ I 2s 1340.pdf.

CHAPTER 23 • American Health Care in International Perspective

in some other countries (e.g .. for hip replacements) or where less surgery is done and the lower level may result in greater discomfort. Yet many countries do not have noticeable wait- ing list problems. Moreover. '" the amount of US health spend- ing accounted for by the fifteen procedures that amount for most of the waiting lists in Australia. Canada . and the United Kingdom ." three countries where waiting lists are an issue. would be only 3% of total US health care costs. 28 Hence it is highly unlikely that the much higher American spending is justified by convenience of access to surgery.

The best one can say for the US health care system . in terms of value, is that Americans might buy a small amount of extra value for a portion of the population. for a huge amount of extra money-meanwhile providing worse value to the uninsured. Anyone who says the United States has the " best health care system in the world " has not looked at the rest of the world .

PREFERENCES, OR THE PECULIAR POLITICS OF HEALTH CARE Health care is a politica l world unto itself. It shares w ith some policies . such as pensions. controversies about who will pay for whom . It shares with other policies. such as administra- tion of the law. a need to rely on professiona ls (such as at- torneys. accountants. or physicians) to implement policies. It is nearly unique in the range of professions and perspectives it involves: not just physicians but other caregiver types. plus the managers of a wide range of institutions. plus the public- health side of health policy. plus all the institutionalized com- mentators such as economists and health service researchers. The combination of redistribution . professionals. and overall complexity makes health care a peculiar subsystem in any country's politics and sociology. The fact that it is largely paid for with public or publicly mandated funds . and that it is extremely expensive. makes it a prominent part of political conflict everywhere. with a close connection to the realms of budgetary and economic policy.

A comparative perspective provides insight on what aspects of health politics are due to common factors in the sociol - ogy and economics of medical care. In many situations. the saying goes. '"where you stand depends on where you sit." This is often true because people in different jobs have differ- ent material interests and because different jobs are roles with

processes of socialization that shape individuals' ideals about policy.

It is hard to develop statistical data about such questions. so I can write mainly from anecdotal observation (mine and others'). We can begin with a simple example. In a number of different countries. I have heard orthoped ic surgeons de- scribed as very different from pediatricians . The former are described as jocks. super confident. super aggressive. and not very cooperative. The latter are supposed ly much more coop- erative. communicative. and gentle. These are stereotypes and do not predict any individual's behavior. Yet they are common enough that one cannot help figuring that some self-selection and some of the basic nature of the work shape the personali- ties involved.29

The medical world has villages and tribes and maybe rival nations. Consider cost-control politics and policy. Any system has cost controllers . To the budget office, or the corporate VP for human resources. spending on health care 1s a cost to be limited . It is usually growing quickly and always a large cost. Therefore. control of health care spending is a big issue almost without regard to nations' relative success at the task. When they search for policy options. both cost controllers and other participants in the system tend to think the same way. and come up with the same ideas. across nations.

In virtually all countries, budgeters think something like this: "We have to control spending; we should focus on the largest parts of spending; the largest portion is on hospitals; so we should try to get people out of hospitals. which are expensive places." In addition. new technology has made it easier to do procedures without an inpatient stay. For both these reasons. levels of hospitalization have declined virtually everywhere. Unfortunately, as Uwe Reinhardt has shown. this pol icy may not reduce costs. 30 Yet it is so entrenched in the worldviews of budgeters and managers that we can expect it to remain a common policy regardless of its merits.

In a similar fashion. economists are trained to assume that efficiency is created by either markets (most of them) or plan- ning (a dwindling remnant). so they seek cost control from creati ng markets or plans. Public-health professionals believe health can be improved by nonmedical means; they conclude that healthier people would have fewer expenses . so the so- lution is to have more public-health interventions. Health service researchers believe man~' people recei ve the wrong treatments; some of those treatments therefore must be un- necessary and money could be saved by not doing them :

PART VU• The United States in International Context

therefore. the solution is to do more health services research and ensure doctors follow the research.31 Because of such dis- ciplinary biases . the menu of cost-control ideas is pretty simi- lar around the world.32

There are also fairly standard worldviews and conflicts among the providers of medical care. Nurses and physicians have versions of the same conflicts-over status. control of the hospital. pay, and so on-virtually everywhere. Physi- cians' attitudes about practice can be shaped by the condi- tions of practice and attributes of national culture. In Great Britain. the constraints on supply may have been so severe for so long, and the national emphasis on keeping a stiff upper lip provide a convenient enough justification. that British phy· sicians could rationali ze less-aggressive practice more easily than their counterparts in the United States.33 Nevertheless. the profession as a whole tends to share a set of values and desires across countri es. Giorgio Freddi gives a nice su mmary:

I. The remuneration of physicians according to the fee· for-service formula . whereby fees are paid directly by pa- tients to doctors and are freely determined by the latter.

2 . The right to independent practice. that is clinical autonomy, connoted by the sanctity of a highly individualized doctor- patient relationship, which ensures that diagnostic and therapeutic decisions are subject to no external controls.

J. The responsibility to lead and coordinate other health professionals.

4. The processing of professional issues according to a social consensus model of behavior that excludes the conflict-based processes inherent in unionization.

Recognizing that a behavior is common in many different countries should inform us that it has very deep roots. Inas- much as such attitudes derive from the fundamental training and work orientation of physicians. they should be very dif- ficult to change. In essence. multiplying the cases can give us more confidence in conclusions-when the cases display the same patterns. Thus one can feel fairly confident that paying physicians more money per service will induce them to do more screening tests. while physicians anywhere. not just in the United States. will resist health care reforms that call for them to move into large. "integrated" group practices.34 At the same time. we should be aware that change in physician attitudes is likely to require profound social trends. such as the feminization of professions and the pressure for more predict- able working hours to balance work and family obligations.

None of this makes all countries' health politics the same- far from it. Attitudes depend in part on what people think they can get: German physicians surely would like the incomes earned by their US counterparts. but years of income sup· pression have forced them to have more modest ambitions. Participants in systems become accustomed to how they are or- ganized. Politics is path dependent: Past decisions profound~ shape future poss1bilit1es. Moreover. the politics of health de- pends not only on what is unique to health but also on broader political factors. such as the institutions for political dec1s1on making and the cleavages in the national party system.

Comparison of the pol itical backgrounds thus highlights signi ficant and relatively unique obstacles to the creation of some sort of national health care or insu rance system in the United States. The private health insurance industry be- came much larger in the United States than in other countries and thus has much mo re pol itical power. Compa ring coun· tries shows that the conservative party in the United States is much more opposed to measures of any sort that social· ize risk than the conservative parties in much of Europe have been. 35 The United States up to 2009 had also seen much more mobilization of interest groups to oppose redistribu· ti on (especially the small business lobbies against President Clinton's heal th care reform). and in 2009. even more than before. costs in the United States had become so high that the redistribution to cover our uninsured had to be much larger than the redistribution in countries where income s more equal (most) and health care costs a lot less (all).

Hence similarities in the sociology of the health care arena are better predictors of the politics of noni nsurance issues. Controversies over how to improve quality, or the balance of medical professions. or methods of cost control . or relative emphasis on prevention and cure. create similar cleavages across nations. "Experts" such as economists and health ser· vices researchers have predictable interests and biases.

THE 2010 REFORM IN COMPARATIVE PERSPECTIVE The international backdrop is one reason why reformers have argued. for many years. that the United States should be abe to offer benefits to all citizens and improve control of costs. It seems reasonable to view the reforms enacted in March of 20 IO within the same frame. 36

C H APTER 23 • A merican Heal th Care in I nternati onal Perspective

Policies One obvious difference is that the reforms are not expected to cover all Americans. Yet they are projected to expand coverage by about 29 million people. We might ask. then. whether in- ternational comparison can help us understand both the pro- jected success and insufficiency of the legislation.37

Let us begin with the money: the level of effort to subsi- dize or redistribute funds. About two-thirds of Americans would be eligible for direct government subsidies. either through Medicare or because their incomes are below 400% of the federal poverty level (FPL) so they could receive insur- ance through either Medicaid or the new exchanges.38 This is comparable to the proportion of the population in the Dutch sickness fund system in the 1990s. The transfers involved are also quite redistributive. Medicaid pays nearly all costs for the poor. The subsidies in the exchanges would reduce premiums to a percentage of income. and to lower percentages for lower incomes. so they are at least as redistributive downward as the norm 1n other systems.

The amount of social sharing is also in line with interna- tional norms. The United States in 2008 already exceeded the Organization for Economic Cooperation and Development (OECD) average share of GDP devoted to public or quasi- public (e.g .. sickness fund) spending on health care. Public spending in absolute terms per capita was lower on ly tha n Norway's.39 Those figures can only rise as a result of t he re- form. Thus the system of health care fi nance created by the reform does not look especially ungenerous compared to other countries. If it is relatively inadequate. that is because the costs of health care are much higher in the United States. so the same funding effort is less sufficient.

The structure of the coverage created by the reform is very different from a model like Canada's. Yet it can be described as. roughly. Japanese pooling with choice among plans within each pool. and the Germans. Dutch. and Swiss all offer sub- stantial choice of plans.

In Japan. large employers offer insurance directly to their employees. taking the illness risk on their own books. This insurance has somewhat better benefits than the national norm and quite limited government subsidies. This is essen- tially the same as for large employer-sponsored insurance in the United States. although for a more limited sha re of Japa- nese coverage. Japanese "government-managed insurance" pools private employees across employers. somewhat like

in the US exchanges. with larger government subsidies than for large employers. also like the exchange coverage: recently management of this system was devolved to the prefectural level. much as excha nges will be managed by states. NHI cov- ers the self-employed. agricultural workers . and unemployed. It mainly consists of local government plans (so at smaller re- gional divisions than Medicaid) but. like Medicaid. has poorer members than average. and it receives half of its funding from the national government. Finally. coverage for the elderly is merged into other plans but has special benefits and financ- ing. similar to Medicare.40

Unlike in Japan. individuals in the US exchanges are expected to choose among many insurers, and Medicare also offers choices. Yet insurance choices do exist in other systems. Nei- ther the pooling nor having choices is so distinctive. But the nature of the choices in the new US design is much different from other countries. The benefit packages would be much more varied and so will do little to change the factors that make US coverage both less certain and a cause of higher costs.

To begin. the legislation does hardly anything to standard- ize benefits sponsored by employers. The costs of marketing and underwriting for insurance for more than half of Ameri- cans therefore should change little. Health care providers will still deal with a huge num ber of plans. with varied coverage terms and provider networks. and so face all the extra costs assoc iated with the varied eli gibility and bi lling. Coverage through the exchanges will also be quite varied. The legis- lation requires that the plans meet one of five standards for value. but w it hin those standards. they might have qu ite dif- ferent terms and networks. The exchange system will reduce marketing and underwriting costs for a small percentage of the market but do little to reduce administrative costs and confusion for providers and patients.

Not only will benefits remain con fusing, but the standard for subsidy in the exchanges provides a definition of appropri- ate benefits that is relatively meager. It is based on the .. sil- ver plan" that is supposed to cover. on average, 70% of the costs of an "essential" benefit package. The current norm for employer-sponsored insu rance in the United States is about 84%. and even countries that ostensibly have high cost shar- ing have more extensive coverage.4 1

The design in t he 20 I 0 legislation has been further weak- ened by the Supreme Court. which in June of 2012. in NFIB u. Sebelius. ruled that states are not required to implement the expansions of Medicaid.42 In the short run at least. that will

PART Vil• The United States in Internationa l Context

allow two inequalities that will be quite unusual compared to other countries. A fairly large number of states. such as Texas. will not implement the Medicaid coverage. So insurance guar- antees will be quite different depending on where you live. Moreover, in the states that do not expand Medicaid. house- holds with incomes above the FPL may still get insurance through the exchanges. while some households with income below that level will not. The effect will be to have. in those states, a system that gua rantees coverage to all but some of th e very poorest citizens.43 That has no parallel among ad- vanced industria l cou ntries.

In the long ru n. in spite of the fact that the political balance in sign ificant states for the moment opposes the Medicaid ex- pansion. there is reason to believe that politica l pressures will cause almost all states to adopt it. Otherwise. states will be foregoing hundreds of mi llions or billions of dollars in federal money. Their inhabitants will be paying taxes that. at least in theory. are paying for benefits in other states ra ther than their own states. Representatives of major interests, such as hospitals. will want their states to take the federal money. The financial logic for taking the money is very strong. Therefore . if the legislation is funded and not repealed. it will likely lead to the level of transfers and social sharing expected from its design. In the short run. however. the transition wi ll involve unique inequities.

Thus. although the United States would have a standard level of transfers and would somewhat resemble a few other nations' systems to pool risk. it would remain extremely com- plex. hard to navigate. and a generator of extra costs. From a comparative perspective. the reform does much less to reduce the difference between the United States and other countries on spending than on coverage.""

The cost-control nonprovisions of the leg1slat1on also main- tain what is most unique about insurance provided through employment in the United States. In the U nited States. each employer is left alone to battle the insurers and medical pro- viders over costs. Individual employers have little leverage to get better deals. so their major spending control tool in the current market is to adjust the benefit packages they sponsor. In all oth er systems, even if there are mul tiple insurers. the power of payers is concentrated to somewhat constrain costs through either government rate setting or all-payer bargai ning. This in turn all ows them to have more standard benefits and so greater clarity and lower administrative costs than in the United States.

As described earlier. the international standard includes concentration of payer power. coordinated payment rules. lim- its on capital investment. and relative administrative simplic- ity. The reform does hardly anything to increase use of these tools. though it does tighten payment restrictions within Medicare. An indirect version of the international standard was proposed and seriously debated. This was Jacob Hacker·s idea that the exchanges would give customers the option of buying public insurance based on Medicare.4s Yet this ap- proach was rejected. and there was hardly any advocacy for extending regulatory cost controls beyond the public plan.46

T he reform design encourages somewhat more cost shanng than is normal in other countries. in two ways. The first 1s set· ting the silver benefit level as the standard for subsidies in the exchanges. This will make it difficult for most people to pur- chase more extensive benefits. while also setting an informal standard that may encourage employers to reduce the value of the plans they sponsor. The second is a provision that will force employers with particularly expensive groups of employ- ees to reduce the coverage they sponsor.

This "Cadillac tax." as its proponen ts called it. will charge insurers (wh ich really mea ns employers) 40% of the value of any coverage above a fixed dollar amount. Its advocates viewed it as a way to keep employers from offering luxury benefits that raise costs. Ma ny American health economists. including prominent advisers to the Democrats. believe that excess insurance is a major cause of costs. and that the tax preference for health insurance is distributionally inequita· ble.47 In fact. however. the most common reason for plans being unusually expensive is that they insure groups that have high health expenses. So the Cadillac tax is more of an "ambulance tax." Therefore. the major effect of the excise tax would be a sort of reverse nsk adjustment: raising the costs of insuring the riskiest groups.48 It will force higher cost shanng for sicker groups of people. This is a truly unique approach to cost sharing by international standards. Its effect would be delayed and somewhat diminished. however. by both not be· ing applied until 2018 and some adjustments for more visible risk factors such as the age distribution in a group.49

Most of the cost-control language in the reform follows a th ird approach. w hich emphasizes reorganizi ng medical care delivery. I call this the aspirational agenda because it is broad~ promoted and endorsed in the international health-policy com· munity but barely exists in practice. The US version of reform in 20 IO included increasing the use of (or at least spending

CHAPTER 23 • American Health Care in International Perspective

more on) health information technology (HIT): finding ways to "pay for performance" rather than for health services (known as P4P) ; increasing spending on preventive care in hopes that would reduce spending on curative care: reorganizing health care delivery to create something called accountable care or- ganizations (ACOs); doing much more cost-effectiveness analysis (CEA) to have more evidence-based medicine (EBM): creating " medical homes." somehow replacing fee-for-service payment of physicians with something else: and various other measures (hundreds of pages of legislative text).

This 1s not the place to explain either why these measures were included or why they are highly unlikely to have any sig- nificant effects on costs. Suffice it to say that there is little evidence that these measures would work or even. in some cases. about how they would be implemented. 50 The aspi- rational agenda measures adopted in the legislation consist largely of pilots and experiments focused on the Medicare program. They could not have a substantial effect even on Medicare. even if they worked. for many years and so could not have effects on the rest of the system until even later.51 In- terest in the aspirational agenda is common around the world. Actually relying on it for cost control. however. is uniquely American.

Preferences The 20 IO reform. if fully implemented. will substantially ex - pand health insurance in the United States. In terms of social sharing, it moves the United States closer to the international

CONCLUSION Comparison to other countries does not tell anyone what health policies they should desire

However. it provides evidence about both what is pos- sible and how specific policies will work. The review in this chapter suggests some core conclusions:

The United States could have lower costs and better cov- erage if its policies were different.

The reforms legislated in 2010 would. if fully implemented. improve coverage. They would not do so as efficiently or

standard. In terms of cost control. it does not. What prefer- ences or politics explain this resu lt?

That is a huge question, but if we compare US politics to the politics of reform in other countries. certain developments appear most significant.

The reform was enacted because partisanship has become a much more decisive factor in congressional decision mak- ing over the past few decades. The Democrats had substan- tial majorities and were more united (though sti ll significantly divided) than in previous legislative battles over health care. The majority of the party was desperate not to fail again. so compromised with the minority by supporting legislation that would not cover everybody and abandoned measures such as the public plan.52

On balance. the ways in which the legislation was passed do not suggest that the politics of health in the United States has become markedly less distinctive. It is still characterized by weaker support for social solidarity. and particularly vocifer- ous opposition. The legislation was passed without majority public support. in a purely partisan manner. by a partisan ma- jority that lost power nearly immediately. It has already been weakened by the Supreme Court. and it could certainly be reversed if the Republicans gain full power in the future and could well be chipped away even if that does not occur. In contrast. in spite of criticisms. the national health care or in- surance systems in other countries are much more established and stable.

effectively as some alternatives. but that 1s mostly because of the high costs of care in the United States.

The sociology of health care is fairly standard around the world. The fact that the aspirational agenda is an aspiration rather than practice everywhere 1s a result of this kind of factor. It also suggests that it is not likely to succeed in the United States.

Americans have chosen. to the extent their political system represents them. not to follow the cost-control evidence

PART VIl ·The United States in International Context

from the rest of the world. The politics of the 20 I 0 reform gives little reason to believe that will change. However. the fact that legislation to substantially expand coverage was

STUDY QUESTIONS

adopted at all means that one should not be too sure of political predictions.

1. According to this chapter. what three kinds of information can be learned from international comparisons of health care systems?

2. What are examples of health care system possibilities we might learn from looking at other countries?

J . What are some cautions about and examples of inferring cause-and-effect relationships from international comparisons?

4 . What sorts of questions might arise about health care politics being common or different among countries?

s. In the author's opinion. will recent health care reform in the United States move us much closer to a European or international model of health care coverage and access?

ENDNOTES I. For explanation of why similar levels of economic development tend to be accompanied by some convergence in

sociology and politics. see Wilensky. 2002 . which 1s also the source of the term rich democracies.

2. The set of countries for reference begins with the members of the OECD, which constitutes kind of a developed countries "club." There are some countries that are rich because of oil resources. but that is not the same kind of economic development. In 2009. 23 of the OECD member nations had per capita national incomes above $25.000 per year. with national currency translated mto US dollars according to purchasing power parity (World Bank. 2011 ). Those are the countries used in Tables 25-1 and 25-2. Some other countries that approach this income level have versions of NHI as well. My own research has focused on Australia. Canada. France. Germany. Japan. the Netherlands. and the United Kingdom.

J . White. 200 I.

4. White. 1995; Luft. 2011.

S. White. 2004; Gray. 2005. Of course. having better evidence does not mean people will recognize it. and in this case. the conventional wisdom is so conventional. though wrong. that I do not expect the average American policymaker or editorial writer to notice the error.

6. A large part of the difficulty 1s how to distinguish between the quality of care and other factors. such as access to care or factors that affect underlying health risks separate from medical care. Yet even measuring the quality of spe· cific types of treatment is very challenging. One of the few examples of thorough analysis of quality of care is OECD 2003; for a good example of the measurement difficulties. see chapter 3 on stroke treatment and care.

7. The classic analysis of this question is Kingdon. 2003. but there 1s much more to be said.

8. For a discussion see Leape. 2005. but a political scientist might have a somewhat more skeptical view.

9. Stevens. 2005.

I 0. White. 2009a.

CHAPTER 23 • American Health Care in International Perspective

11. For a much more extensive discussion of all-payer systems see White. 2009b.

12. White. 1999.

13. Rodwin. 2011.

14. My source for this is personal experience. but everyone else with whom I talk and who has experience in both coun- tries agrees!

IS. Campbell and lkegami. 1998. Lower fees then also encouraged the Japanese industry to develop products that would have price advantages in some markets.

16. Light. 1998; Robinson. 2005; White, 2007.

17. Many health-policy analysts believe technology 1s the major cause of growth in health care spending. If this is true. 1t is only true in an uninteresting way. particularly for Americans. The wide variations in spending between systems cannot be explained by technology. which is universal. Whether a technology is implemented and how much is paid for it depends on policies. Moreover, too often invention and promotion of new services is defined as technology when it might better be called "marketing."

18. Gray, 2005 ; OECD. 2003; White. 2004.

19. Anderson . Reinhardt. Hussey, and Petrosyan, 2003; Anderson. Hussey, Frogner. and Waters. 2005; Angrisano. Farrell . Kocher. Laboissiere. and Parker. 2007: Ginsburg. 2008.

20. OECD. 2003. pp. 201-4.

21. For a typical example see Daniels. 2005; for a critique see Oberlander and White. 2009.

22. For some good examples. see Oberlander. 2011.

23. On average. while I lived in France in 20 I0-2011, the full prices for my prescriptions were only slightly more than my co-pay for the same drugs in the United States.

24. For a full discussion see White. 2007.

25. Jost. 2009.

26. US relative performance on such measures has tended to get worse. not better, over the two decades that I have been looking at this data. The data available from White , 1995. for example. showed the United States with much better relative performance at age 65 . In essence . other countries' performance appears to be improving more quickly than US performance. on average. This is understandable for poorer countries that are catching up economically, so have been improving social conditions and availability of medical care; it is surprising that the pattern should be so

general.

27. Nolte and McKee. 2008. quote on p. 58.

28. Anderson et al. . 2005.

29. Orthopedic surgeons may have developed interest in the work from experience with sports. the realm in which broken bones are most common for young people. It at least used to help if one was large and strong enough to manipulate bodies and bones. They hope not to have long-term relationsh ips with patients. When bones are already broken . there is a limit on the opportunities to be gentle. Pediatricians are dealing with frightened children. often in the presence of a parent who would expect gentleness. expect long-term relationships. and so on. It would be inter- esting to observe how this informal sociology holds true as a larger part of orthopedic surgeons' practice consists of frail and elderly people getting hips and knees replaced.

PART VII •The United States in International Context

30. Reinhardt. 1996.

31. Readers may consult http://academyhealth.org for examples of this advocacy; for a more international example see OECD. 2003.

32. White 1998. 20 I 0.

33. Payer. 1996.

34. Glaser. 1994.

35. This is a major theme in the comparative public policy literature; for just one example see Wilensky, 2002 The first major step toward national health insurance was taken by Germany in 1881 . led by the distinctly nonsocialist1c chancellor Otto von Bismarck.

36. This account was written to put the enacted reforms into perspective . For that purpose. the question of whether they wi ll be implemented can be ignored. If this is read while the battle over implementation continues. perhaps it will inform some readers' understandings of the stakes.

37. As must be reported elsewhere in this volume, the reform required two laws. the Patient Protection and Affordable Care Act and amendments in a reconciliation law. Therefore. I will refer to it not as the PPACA but as "the legisla- tion " or "the reform." For good summaries of the combined terms, see Commonwealth Fund. 2010. and Kaiser Fam ily Foundation, 20 10.

38. The population figures are my calculations from US Census Bureau . 20 I 0. Estimates presume that many people with incomes that qualify for subsidies will . instead. receive their insurance through their employers. But that too has indirect support, through the tax code: and in any case the potential commitment is the best measure of the legislation.

39. Author's calculation from data in OECD. 20 I 0.

40. Fukuwa . 2002; Matsuda, 2009.

41. The definition of essential benefits was left to the secretary of health and human services to develop. Leaving aside the question of why one would cover less than the essential. the Commonwealth Fund estimated a plausible pack· age to come up with the 84% figure (Davis, 20 I 0). The French system has high cost sharing for many services (e.g. 35% for most drugs). but 1t excludes over 30 expensive conditions from cost sharing and as a result covers far more than 70% of costs. even before one accounts for the fact that over 90% of the population has voluntary supplemen- tary insurance.

42. Rosenbaum. 20 12.

43. Children and their mothers with the lowest incomes were in all states previously eligible for Medicaid. but single persons or couples without children generally were not.

44. Oberlander. 20 I I.

45. Advocates for this "public plan" wanted 1t to pay providers at Medicare rates (or slightly higher) and to strongly encourage providers to contract with the public plan by requiring them to do so 1f they wanted to serve Medicare patients. Thus it would further concentrate the payer power that already 1s greater for Medicare than for private insurers. Private insurers would have had to find better ways to control costs . since they would now be competing not only with each other but with the public plan as well. They would either succeed or lose more market share- strengthening the public plan further. See Hacker, 2009; Holahan. 2009.

46 . A not at all prominent exception is White. 2009b.

CHAPTER 23 • American Health Care in International Perspective

41. For strong statements of these beliefs see Rampell. 2009: and Gruber, 2009.

48. Jost and White, 20 IO.

49. See Van de Water. 20 I 0. One should expect. however. that employers who expect their coverage to be subject to the tax would begin scaling down before 2018 rather than making the change in one big chunk that year.

SO. For critiques see Alliance for Health Reform. 2008: Marmor. Oberlander. and White. 2009; Pauly, 2008: and. most importantly and thoroughly. Congressional Budget Office, 2008.

SI. See the estimates for Medicare Title Ill. Subtitle A. in CBO, 2010.

52. See Brown. 20 I I: Cohn. 20 IO: Hacker. 20 IO: for a summary of the reasons conflicted Democrats supported any bill at all. see White. 2011.

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---. 2010. Health Data/Eco-Sante (database).

Pauly. M. V. 2008 (September 16). "Blending Better Ingredients for Health Care Reform." Health Affairs 27(6): W482-91.

Payer. L. 1996. Medicine & Culture: Varieties of Treatments in the United States. England. West Germany. and France. New York: Henry Holt and Company.

Rampell. C. 2009. " Economists' Letter to Obama on Health Care Reform." New York Times. November 17. Economix [Blog]. Retrieved from http://economix.blogs.nytimes.com/2009/ I I/ I 7 /economists-letter-to-obama-on-health-care- reform .

Reinhardt. U. 1996. " Perspective: Our Obsessive Quest to Gut the Hospital." Health Affairs 15(2): 145-54.

Robinson. J. C. 2005. "Entrepreneurial Challenges to Integrated Care." In D. Mechanic. L. B. Rogut, and D. C. Colby. eds .. Policy Challenges in Modern Health Care (pp. 53-68). New Brunswick, NJ: Rutgers University Press.

Rodwin. M.A. 20 I I. Conflicts of Interest and the Future of Medicine· The United States. France and japan. New York: Oxford University Press.

Rosenbaum. S. 2012 Uune 28). "The Supreme Court's Medicaid Ruling: A Shift in Kind. Not Merely Degree." Health Affairs Blog. Retrieved from http://healthaffairs.org/blog/2012/06/28/the-supreme-courts-medicaid-ruling-a-shift-in-

kind-not-merely-degree/ on July 2. 2013.

Stevens, R. 2005. "Specialization. Specialty Organizations. and the Quality of Health Care." In D. Mechanic. L. B. Rogut. and D. C. Colby. eds .. Policy Challenges in Modern Health Care (pp. 206- 20). New Brunswick. NJ: Rutgers University Press.

U.S Census Bureau. 20 I 0. " Income, Poverty and Health Insurance in the United States 2010." Retrieved from http:// www.census.gov/hhes/www/poverty/data/incpovhlth/20 I a/index.html on July I I. 2013.

Van de Water. P. 20 IO Uanuary 26) . " Changes to Excise Tax on High-Cost Health Plans Address Criticisms. Retain Long- Term Benefits." Center on Budget and Policy Priorities. Retrieved from http://www.cbpp.org/cms/?fa=view&id=3060.

White.J. 1995. Competing Solutions: American Health Care Proposals and International Experience. Washington. DC:

The Brookings Institution.

---. 1998. " Health Care Reform : What Is the Problem?" In T. R. Marmor and P.R. Dejong. eds .. Ageing. Social Security and Affordability (pp. 246-70). Aldershot. UK: Ashgate.

---. 1999. "Ta rgets and Systems of Health Care Cost Control." journal of Health Politics. Policy and Law 24(4):

653-96. ---. 200 I. " National Health Care/Insurance Systems." In N. J. Smelser. and P. B. Baltes. eds .. International

Encyclopedia of the Social and Behavioral Sciences (pp. 10301-05). New York: Elsevier.

---. 2004. "(How) Is Aging a Health Policy Problem?" Yale journal of Health Policy. Law and Ethics. 4( I): 47-68.

---. 2007. " Markets and Medical Care: The United States, 1993-2005." The Milbank Quarterly 85(3): 395-448.

---. 2009a . "Gap and Parallel Insurance in Health Care Systems with Mandatory Contributions to a Single Funding Pool for Core Medical and Hospital Benefits for All Citizens in Any Given Geographic Area." journal of Health

Politics. Policy and Law 34(4): 543-83.

PART VU• The United States in International Context

---. 2009b (May). "Cost Control and Health Care Reform: The Case for All-Payer Regulation " Health care reform discussion paper. posted to the Campaign for America's Future Web site. Retrieved from http://www.ourfuture.org/ fi les/JWh iteAll PayerCostControl. pd f.

---. 20 I 0. "Cost of Healthcare in Western Countries." In D A. Warrell. T M. Cox. and J D Firth. eds . Oxford Textbook of Medicine (5th Ed . Vol. I. pp. I 12-16) Oxford Oxford University Press.

---. 2011. "Muddling Through the Muddled Middle" journal of Health Politics. Policy. and Law. 36(3): 443-48.

Wilensky, H. 2002. Rich Democracies: Political Economy. Public Policy. and Performance. Berkeley. University of California Press.

World Bank. 20 11. "Gross National Income Per Capi ta 2009. Atlas Method and PPP." Table from World Development Indicators Database. Retrieved from http://siteresources.worldbank.org/DATASTATISTICS/ Resources/GNI PC.pdf.

This chapter examines the rise of the British National Health Service. It explains how British health reformers turned to market competition and placed it in the middle of a government-run system. Finally. the chapter compares the idea of market competition in health care as it has played out in Britain and in the United States.

Health care challenges every effort to introduce free ma rket forces, but as costs keep rising. policymakers around the world keep trying. This chapter looks at British efforts to in- iect market forces into their national health service. Americans might feel a bit dizzy when they firs t encounter the British experience. After all, we often imagine that markets are the opposite of government: while many chapters in this book challenge that idea, the English case completely exp lodes it. In Britain. market reforms operate entirely within the central- ized.government-run . British National Health Service (NHS). Indeed the reforms are known as "internal markets"-internal to a vast. bureaucratic. public-hea lth service.

While injecting markets into a governmental program may sound unusual to American ears. in many ways. the British results parallel our own reform experience: The British inter- nal market was intended to alter the power relations within the medical profession. transform the relations between payer and provider. and empower consumers. while del1verrng

greater "value for money." As in the American case . results have been mixed-the on ly constant in recent years has been change.

BRITISH HEALTH CARE BEFORE 1948: ANTECEDENTS OF THE NHS By the end of the 19th century, two kinds of hospitals had developed in Britain. Wealthier people received care at the so-called voluntary hospitals.' These were private institutions financed by members of the nobility and others who could af- ford to cover the costs of such institutions. 2 Municipal hospi- tals treated the poor and. to some extent. the midd le classes. Overseen and funded by local governments. municipal hospi- tals varied widely in quality, reflecting the uneven distnbut1on

PART Vll • The United States in International Context

of wealth among the different communities. Care of any qual- ity was often hard to come by in rural areas. which suffered from a shortage of medical professionals and facilities.3

Physician services were also divided into two categories . As in many nations. the British drew a sharp distinction between office-based general practitioners (GPs) and hos- pital-based specialists. A rivalry soon developed between the GPs and the hospital specialists. For the most part. the latter enjoyed greater prestige, viewing GPs and their pa- tients as being beholden to them. 4 Government programs would perpetuate this bifurcation among British medical professionals.

The state established a role in medicine by 191 I with the passage of national health insurance for workers. The Lib- eral Party under the leadership of Prime Minister David Lloyd George championed the legislation. Lloyd George. who be- came best known for guiding the nation through World War I. was a legendary political survivor. changing positions fre- quently across a range of issues to preserve his position at or near the apex of the national power structure.5 Though a decidedly dynamic figure himself. he led a Liberal Party that was even then heading into a state of long-term decline. Al- ready competing with a fledgling Labour Party for votes. Lloyd George hit upon the construction of a limited welfare state as a means of improving the fortunes of the laboring class and, with it. those of his own party.6

The national health insurance established by the Liberal government in 191 I was quite narrow. Under the plan . the government financed a portion of basic health care costs with employers and. to a far lesser extent. the workers themselves paying the rest. Dependents of workers were not covered . Nor were hospital costs. 7 The legislation was partly inspired by the German health care system. in which the provision and finance of health care was (and is) closely related to em- ployment sectors; the Germans also limited coverage to the "workingmen" within society.

This early experiment with national health insurance estab- lished a working relationship between the GPs and the state. Initially the GPs feared state intervention in the affairs of the profession. and physicians represented by the British Medical Association (B MA) opposed the plan.8 After threatening to refuse to provide care under national health insurance. most physicians chose to participate in the new scheme and quickly grew fond of the steady flow of income it provided. Hospital- based physicians remained excluded from the national health

insurance system and would continue to operate independ- ent of significant government intervention for nearly another three decades.

The interwar period would feature a lengthy debate con- cerning ways to improve British health care generally, and the proper role of the government in health care. By the 1920s and 1930s. the British hea lth care system was in a state of crisis. During the Great Depression. many hospitals. municipal and voluntary alike. were underfunded, with some forced to close. Voluntary hospitals increasingly found themselves in the un- familiar position of actually lagging in quality beh ind many municipal hospitals.9 This trend accelerated once legislation allowed local authorities to take over the ancient poor-law medical institutions. thereby encouraging local government to construct a more unified system of health ca re provision. Voluntary hospitals soon followed suit. banding together to centralize care under their collective auspices. By the 1930s. the hospital sector was marked by ever-greater centralization of operations.10

The partial and haphazard centralization did not solve the problems of the health care system. Inequities developed. par- ticularly between rural and urban areas. Poor conditions and low quality of care marked hospitals serving every class. By the late 1930s. there was a growing consensus that some- thing had to be done to improve the state of British health care. There was little agreement, however. as to just what might constitute the proper prescription .

As World War II descended on continental Europe and threatened the British Isles. government officials prepared for the possibil ity of massive military and civilian casualties by enlisting a large proportion of the medical community in the service of the state. The GPs extended their tradition of ccr operation with the state. and now that tradition expanded as hospital-based specia lists were enlisted into this Emergency Medical Service. 11 This system had its share of weaknesses and hiccups . particularly in its early phases. Many physi- cians were forced to abandon lucrative practices to provide care where the state-expected need could be greatest. with significant reductions in revenue the result. These kinks were. in good measure. ironed out once government and medical personnel agreed on a fair (and. in some cases. generous) ra te of compensation.

Like GPs befo re them. many hospital-based physicians learned to work with public officials. Ironically. the Emergen cy Medical Service would prove largely unnecessary. Though a

fair swath of England. and London particularly, suffered un- der the depredations of Hitler's Luftwaffe. resultant casual- ties were far lower than the government had predicted in the immediate run-up to war. The episode was nonetheless sig- nificant within the context of the state's role in the national health care system. Along with the National Health Insurance Act of 1911. the Emergency Medical Service of the late 1930s and early 1940s set a precedent of substantial government in- tervention in British health care. Indeed. the effectiveness of the service led to calls for a postwar National Health Service. one which the government swiftly promised its citizenry.12

In addition to providing hospital-based physicians with ex- perience in working with government. World War II also had broader significance for the development of the British health care system. England had been a heavily stratified society. Now. groups who had been thoroughly segregated from one another found themselves thrown together under consider- able adversity. The same fears of widespread (mainly urban) casualties that led the government to establish the Emergency Medical Service also led to mass evacuations of women and children from London and other urban centers. into (an often more genteel) countryside. Well-off rural residents were. for the first time. brought into contact with some of the poorest within society.'3

For the most part. this experience and the shared common peril of daily (and nightly) bombing raids had the effect of blur- ring class boundaries. The national solidarity contributed to postwar acceptance of measures aimed at the further leveling of British society. This spirit found voice in the work of social reformer and sometime government advisor William Beveridge.

At the request of Labour leaders in the wartime coalition government. Beveridge prepared a report in which he outlined measures for improving the well-being of the British populace after the war. Unveiled at the height of World War II in No- vember 1942. his report was a tour de force. enlisting govern- ment to put its authority to bear in slaying what he called the "five giants": illness. ignorance. disease. squalor. and want.14

The report created national excitement. A Gallup poll car- ried out in 1943 discovered that 95% of the public had heard about the report and overwhelmingly supported its three ma- 1or goals: a health service, a children's program . and a full- employment plan. 15

In the area of health care. many (though certainly not all) of Beveridge's recommendations would be swept into law by a very rare political event: "a landslide upset." Winston

CHAPTER 24 • England 11$#

Churchill's conservatives. anxious about "the follies of so- cialism." called for "pragmatic reform." Labour. which more enthusiastically embraced the popular Beveridge report. won its first majority in the House of Commons by a stunning 146 seat margin. Labour's Minister of Health. Aneurin Bevan. touted Beveridge's vision. beginning with the establishment in 1948 of the NHS. 16

THE NHS SUCCESS STORY As we have seen. the period from approximately 1911 to 1941 had witnessed two trends in the field of British medical organ- ization: An ever-increasing proportion of the medical commu- nity was brought into contact with the state. and the hospital sector underwent considerable centralization. with many previously stand-alone facilities combining with other facili- ties. Though the system remained rather haphazard. power increasingly resided in three sectors: medical professionals. local authorities. and the national government. By 1945. many could agree on the need for a unified health service. What remained open to (fierce) debate was just how such a system would look and-more specifically-who would hold the reins of power.

Local authorities initial ly appeared the best candidates to lead the health service. Their role in the hospital sector had. after all. been steadily increasing prior to the war. and such an approach would be a good bit less politically ambitious than outright nationalization of health care. 17 In the end. however. Aneurin Bevan settled on nationalization. Under Bevan's NHS. all hospitals would be state run.

Bevan divided England and Wales into a total of 14 health service regions. each focused around a prominent teaching hospital. To avoid a London-centered region from lording over (and draining resources from) outlying districts. Bevan drew regional boundaries that met in a point within the city. This way the various neighborhoods of the capital would be di- vided into four regions. preventing the rise of a preponder- antly powerful London-based bloc.

Operations within health regions were to be overseen by a new administrative construct: the Regional Health Board (RHB). RHB members were appointed by Bevan him- self though. insofar as possible, the government worked to keep leaders within health care's ancien regime in positions of power. Their responsibilities were broad and included capital planning and the formation of hospital maintenance

PA RT VII • The United States in International Context

committees (HMCs). These latter committees would form a unified control structure of the diverse hospital facilities to be found within the various regions-effectively turning a number of different institutions into a single organism. 18

At least that was how it was to work in theory-in practice. there was a large loophole in the form of teaching hospitals. Though the health regions had been partly determined on the basis of their geographical distribution across the coun- try, teaching hospitals were only brought into the fledgling NHS on the condition that they would retain a considerable degree of independence. Though a representative from their respective RHBs was added to the governing boards of these institutions. they largely retai ned freedom of action under the new system. 19

Anticipating and . indeed . encou nteri ng resistance from organized medicine, Beva n ensured that the system incorpo- rated key compromises to the important groups comprisi ng the medical community. When it came to physician compen- sation, for instance. GPs were to receive capitation (i .e .. set fees per patient examined) rather than an outright state sal- ary. thus preserving their nominal independence from state control. Similarly, specialists were granted the privilege of re- taining private practices and seeing (private) patients in NHS facilities. Ironically, specialists accepted the very state salary scheme opposed by GPs.

Even after these significant compromises were struck, pro- fessional opposition remained and the BMA threatened a strike.20 At the very last minute. however. the BMA leader- ship recommended its members accept and serve the new regime. Parliament passed the law in November 1946. a little more than a year after the unexpected nse to power of Attlee's Labour government. The NHS went into effect on July 5. 1948.

Beveridge and his allies had. from the start. envisioned an NHS that would improve the well-being of society, while actu- ally lowering health care costs. In the event (a nd perhaps un- surprisingly), this did not occur. Indeed. NHS resource needs were consistently underestimated by Attlee's government.21

While absolute costs rose considerab ly. much of these early increases could be chalked up to inflation: as a proportion of gross domestic product (GDP) . health care spending remained stable. and at a decidedly low level-rising from roughly 3 to 4% of GDP over the next 15 years. 22

Despite the relatively low investment required to maintain the NHS. the service would continue to face cost-cutting pressures from the Treasury ministry, or Exchequer. The initial

cost overruns shifted the power over the NHS from the Health Ministry (the pol1t1cal guardian of the NHS) to the budget hawks at the chancellor of the Exchequer. From very early on. Treasury officials dominated the NHS. constantly laboring to control health spending. at one point establishing a maxi- mum level of government investment. 23 For this and numer- ous other reasons. health expenditure would remain very low throughout the postwar penod. particularly relative to that or the United States (see Figure 24-1 ).

The NHS was. from the start, a hugely popular program. Large proportions of the British populace have expressed and. continue to express support for the NHS. Indeed. a 2002 poll showed a full 80% of citizens surveyed to believe the NHS was critical to British society. 24

Ironically. the very popularity of the NHS leads politicians to po rtray the NHS as being endangered and vulnerable to the w him s of the government of the day. The party in opposi- tion. Co nservative and Labour alike. often finds health policy a conve nient means by which to focus criticism on the gov- ern me nt. That this has proven a consisten t theme in British politics is. in turn . the result of health care having been thor- oughly politicized. This is not to say that health care some- how falls outside the realm of po litics in the United States However. t he British system is very much a command-and- control entity-the government is responsible for the smooth operation of the health care system-and the opposition al- ways seeks to score political points by blasting the steward- ship of the party in power.

10 -t-~~~~~-=-~~~~~~~-:::::oe-~

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1960 1970 1980 1990 2000 2005 2009

I --- United States ---+-- Britain I Figure 24-1 N at iona l Health Expenditures, 1960- 2009, U nited States a nd Un ited Ki ngdom Source: Centers for Disease Control and Prevention, '·Health. United States, 20 11 ." Re1rie1·ed from htt p://www.cdc.gov/ nc h s/h us/hca lthexpenditures. htm.

The historical circumstances surrounding the establishment of the NHS also ensure that it remains central to British politi- cal conflict. Having served generations of citizens over nearly six decades. the NHS stands as one of the crown jewels of Labour's postwar political legacy. Since it had been skepti- cal about the organization up to the moment of its passage. the Conservative Party has spent decades proving its worth as a custodian-even enhancer-of the service. In more recent years. the Conservatives (or Tories) have presented themselves as a big-tent party. genuinely concerned with the well-being of all citizens. particularly the most vulnerable. In Britain. health policy has been central to this effort at party transformation .

Today. both parties joust over how to reform the NHS. Un- leashed in the early 1970s. the forces of change have been going strong for the last 25 years.

THE NHS IN FLUX: 1974-PRESENT The NHS forged an alliance among three groups: the GPs. spe- cialists in the hospitals. and local government. The three acted with considerable independence within the NHS structure. By the late 1960s. policymakers. academics. and some (though by no means all) elements within the medical profession were pushing for management and structural reform aimed at unify- ing the three components of health care delivery.25

The first important reforms. passed in 1974. did not engage the general public. perhaps because of their highly technical nature. The new program established local health authorities (LHAs) under the supervision of slightly reconstituted RHBs. now dubbed RHAs (authorities). Reformers aimed to bet- ter delineate the roles of managers-and generally improve management-within the system. The changes had few prac- tical consequences for patients and were most significant for presaging more radical efforts to alter the structure and management of the NHS under future governments.

The press for change came partially from the shortcomings of the NHS. By 1970. Britain was spending less on health care (as a proportion of the economy) than France (which spent 20% more). Germany (37% more). and the United States (53% more). The strains were beginning to show. However. the trouble in the NHS reflected a larger crisis that seemed to enmesh the entire British political economy in the mid- I 970s. Just when Watergate and the Vietnam War shook Americans'

CHAPTER 24 • England it!pj

fa ith in the efficacy (and, indeed. good intentions) of politi- cal leaders and governing institutions. the British underwent a period when their nation also seemed ungovernable.

The roots of this political crisis lay in an economic malaise that spread across much of the world (with the possible excep- tion of the major oil-producing countries) during the 1970s. Pervasive and prolonged economic torpor called into ques- tion basic assumptions that had driven domestic and. indeed. global policy for the past three decades. At the international level. the establishment of a fixed exchange rate mechanism under the postwar Bretton Woods regime protected nations from the treacherous currency markets. ensured financial sta- bility. and, for many. facilitated rapid economic improvement. In the British case. stability was further enhanced by succes- sive governments' close control of the economy and. more specifically, their policy of preserving something approaching full employment.26 Demand was largely regulated through cyclical injections of money in the form of government spend- ing, which would. in turn. be followed by periods of spending restraint. Also concerned about the problem of inflation. gov- ernments from the 1940s through the 1970s chose to respond by attempting to cooperate with trade unions to control in- come across the economy during particularly inflationary peri- ods. 27 By the mid- I 970s. the effects of oil and energy shocks were creating the phenomenon of stagflation on both sides of the Atlantic-that is. economic stagnation paired with high inflation.

British attempts to rein in industrial income in this environ- ment were met with mass strikes across the economy. This came to a fearful head during the so-cal led Winter of Dis- content of 1978-1979 when even the dead went unburied in parts of the country on account of striki ng gravediggers.28 The Labour government seemed powerl ess in th e face of political chaos. Armed with the convincing slogan "Labour Isn't Work- ing" and buoyed by promises to regain control over events. the Conservative Party under Margaret Thatcher coasted to election victory in 1979.29

Thatcher prescribed the bracing discipline of economic markets for the ills of the British economy. But how to ap- ply that idea to the troubled. underfunded, yet ever popular NHS? The government called on Sir Roy Griffiths, a super- market executive. Initially charged with examining staffing issues within the NHS. Griffiths went beyond his remit (or charge) by evaluating the entire operational structure of the organization. Griffiths found a glaring lack of accountability

PART VU • The United States in International Context

across the NHS and called for the increased use (imposition really) of nonmedical general managers who could call phy- sicians to account and push efficiencies on the system; the Griffiths Report also called for tighter national government budget controls. The idea was to inject private managerial practices in the NHS.30 Griffiths's suggestions were . for the most part. implemented in the mid- I 980s. By strengthening management and accountability. his reforms would make it easier for Thatcher to enact more radical changes in the years to come.

The conservatives did not take more forceful action until they had won a third successive election in 1987. Then. after considerable study. the government enacted the Na- tional Health Service and Community Health Act of 1990. which revolutionized the way the NHS did business. In the past those.who provided care and those who financed it were . if not the same people. at least a part of the same entity-the state. Now the reformers split these functions into the purchaser and the provider. District Health Author- ities and a new breed of GP. the GP "fundholder." would be entrusted with a limited budget; they were charged with negotiating favorable deals with health care provid- ers (hospitals. for the most part) on behalf of their patient clients.3 1

This purchaser-provider split. it was thought. would in- crease efficiency by forcing the providers to compete for business from the purchasers. Competing hospitals would contract with as many purchasers (the District Health Au- thorities or the GP fundholders) as they could manage. Three assumptions guided the reforms : First. since the hospital 's income would be based on how many blocks of patients they could win contracts for. hospitals would streamli ne their operations and build up reputations for good-quality patient care. Second. the contracts between purchasers and providers would effectively "lock in" higher standards of care. Finally, the reformers thought that the scheme would ensure the empowerment of GPs at the cost of specialists (since GPs would guide their patients into the hospital system). thus establishing a better balance be- tween the two key sectors of the medica l profession and righting imbalances that had stretched all the way back to the 19th century. 32

While the internal market was designed to break the mo- nopoly of the providers and inject market forces into the

NHS. the entire construct played out within the state (and thus remained " internal"). Public health authorities would . under the Thatcher reforms . remain the driving force among the " purchasing " class of actors. The state would have to authorize the formation of trusts and. indeed. the assignation of GP fundholding privileges. The postreform NHS was a quasi- market. representing a halfway point between public enterprise and private corporation.33

Where did the 1990 reforms come from? As we have seen. there was a clear political trajectory that seemed to point toward fundamental change of the NHS. beginning in the 1970s. The election and reelection of the Conservatives under Thatcher accelerated reform efforts that had been percolating for a considerable period. Perceived "crisis" within the system (and the British state as a whole) seemed to justify a veritable revolution in the way the NHS functioned.

At the same time. however. the 1990 reforms drew their in- spiration from more distant. or external. sources. While it was a British executive who got the ball rolling when it came to management reforms of the NHS. it was an American scholar and sometime government official. Alain Enthoven. who pro- vided much of the theoretical backing and practical advice on just what form any reforms should take .34 Enthoven was the chief originator of the concept of the internal market. even though such an idea had little relevance . on the face of it. for an American health care system that looked very different (and was substantially already a creature of "the market"). His consultation with the Thatcher government was crucial in the formulation of the 1990 package of reforms.

The Thatcher reforms worked their way through the NHS between 1990 and 1997. John Major. Thatcher's successor as Tory leader. continued the cha nges she introduced. At the end of this seven-year period, reviews of the new system were mixed. This was inevitable, as it has long proven difficult to measure outcomes of any sort associated with a given health care system. Bound up. as it is. in political conflict. health care systems are altered more as a result of perception and political imperative than objective measurement of system outcomes. Market reforms often generate charges of ineq· uity. and Conservatives had always been politically vulner- able to charges of not enthusiastically supporting the NHS Predictably. the Labour Party-moving steadily back toward the center under the leadership of Tony Blair-opposed every Conservative change.

Blair entered office in 1997 seemingly dedicated to the eradication of the internal market. His stated goal was more than a bit vaguely expressed as the substitution of competi- tive principles with those of "collaboration."35

Such broad goals could have been put into practice

through a variety of further reforms. and this is. in fact. just what occurred. Whereas the Thatcher reform package re-

mained operative for a span of seven yea rs. the chapters in Blair's health care reform agenda would each last a few years

before being succeeded by the next change. These chap- ters roughly corresponded with the various health secretar-

ies who held the post following the 1997 election.36 Frank Dobson (1997-1999) was followed by Alan Milburn. who

served until 2003. Milburn. in turn. was replaced by John Reid (2003-2005). who was. in turn. displaced by Patricia Hewitt during a cabinet reshuffle in 2005.

The late 1990s and the first several years of the 2 I st cen- tury were thus turbulent times for an NHS in a continuous state of flux. Blair's .. New Labour" team was first intent on formally abolishing the internal market. though it was still un- clear what they would replace it with. Indeed . the government left little mark of its own on the N HS during its first two years in office.37 The momentum of market reform appeared to have ebbed. Surveying the w reckage of the internal market experi- ment. the normally optim istic Alain Enthoven remarked that

"The government couldn't shake its identity as a provider and make the transition to becoming primari ly the purchaser of

health services."38

Appearances aside. however. further change was afoot. During 1998 and into 1999. the Health Ministry developed plans to establish a National Institute of Clin ical Excellence (NICE). This body was charged w ith establishing the suitabil- ity and effectiveness of various drugs and treatments. 39 Along with a host of other such regulatory bodies. it was designed to improve the quality of care within the NHS. Though new

within the context of the United Kingdom. the new policies received some inspiration from American private insurers that often set down just which course of treatments they would

authorize and finance. 40

A more (outwardly) energetic approach to reform com- menced shortly after Alan Milburn took the he lm at the Department of Health in 1999. The winter of 1999-2000 witnessed a flu epidemic that appeared to swam p NHS

CHAPTER 24 • England @pl@

resources and furthered an impress ion of crisis within the in - stitution. The government set forth a new package of reforms the following year. These echoed the 1990 re form s. with the reorganization of NHS hospitals (into [more] autonomous foundation trusts chief among them). 41 Quietly, the Blair gov- ernment began to refine pro-market reforms that had been conceived during the Thatcher era.

At the same time that he was injecting market thinking. Tony Blai r pledged to break the long fiscal austerity that had marked the NHS since its inception . By 1997. the United Kingdom's health spending as percentage of GDP stood at 6.7%-far behind France (9.4%). Germany ( 10.7%). the United States ( 13%). and even Portugal (8.5%) or Greece (9.4%). Blair promised increases in health spend- ing through 2008. a pledge designed to place British health care spending in line with the expenditure rates found in other EU na t ions. 42 Critics questioned whether the rapid increases would be accompanied by greater complacency and inefficiency within the NHS. A l l the same. from an American perspective this was. in itself, an enviable po- sition in which to find oneself-seeking to increase the size of the health sector. After all (and as previous chapters have demonstrated). detractors of the American system constantly pointed to t he proportion of GDP dedicated to health ca re-al rea dy past 16%-on t he other side of

the Atlantic .

Toward the end of Alan Milburn's tenure as health minis- ter and the start of John Reid 's, the NHS continued to un- dergo radical transformation. In particular. the private sector was invited to take a far more active role in the provision of hea lth ca re. Private corporations. for instance. were allowed to present bids for primary care under NHS auspices. This had the practical effect of changing th e role of the organization from a direct provider of care to a purchaser of care on behalf of the British citizenry.43 Labour was thus the party to achieve the veritable apotheosis of the internal market envisioned by

Thatcher and her team.

Recent developments have perpetuated the pro-ma rket changes. The role of the private sector within the NHS contin- ues to increase. In January 2006. the local authorities in York- shire. England . made headlines by "hiring" a subsidiary of US health firm UnitedHealth Group to run several GP practices in the region .44 By incorporating more "alternative provid- ers" into the system at the community level. the government

J

PART VII• T he United States in lnte rna tional Context

hopes to counteract the traditional bras patients have shown toward seeking hospital care.

Reform of the NHS promised to continue apace when the Conservative Party swept back to power under David Cameron in 20 I 0. Coming on the heels of the (relatively) short-lived government of Labour prime minister Gordon Brown that had largely held the line on health care. the new Tory government sought to place its stamp on the con- ti nu ing saga of flux within the NHS. In Jan uary 20 I I. the government prese nted for pa rliamen tary consideration the Health and Social Ca re Bill. The legis la tion in many ways con ta ined echoes of past reforms by easing the way for fur- ther participation in the provision of NHS services by private bodies. whi le also continuin g efforts to decentralize the health service. Under the bill . primary care trusts and stra- tegic health authorities were to be abolished. with many of their responsibilities taken up by a myriad of cl inical com- missioning groups.45

The government faced vehement pushback from the BMA and other actors and opted to embark on a national "listen- ing tour." After several months of listening. the government introduced modifications to the legislation. which included strengthening the governance and ove rsight of commission- ing groups. The amended bill worked its way through Parlia- ment during the balance of 2011. rece iv in g the necessary royal assent on March 27. 20 12. The full impl ications of the resultant Health and Social Care Act are still being absorbed by health service employees and the British populace gener- ally. Nonetheless. it appears safe to say that the next sev- eral years-if not decades-will witness more of the sort of dramatic change that has characterized much of the past 40 years.

Whi le citizens have . in the marn . taken the reforms rn stride. the same cannot be said for some members of the medical profession. Polling shows that members of the pubhc were generally indifferent when it came to whether it was the private or public sector that provided care-as long as they received the ca re they required.46 Ahead of a recent meeting of the BMA. however. some doctors appeared fearful that the NHS would effectively cease to be public . Indeed. the gath- ering debated whether members shou ld join a campaign to ensure that the NHS did not fall into the private sector.47 Sixty yea rs after mem bers of the profession voiced opposition to

the idea of an NHS. doctors have now become among its most ardent defenders.

AMERICAN MEDICAL MARKETIZATION Around the time the NHS internal market was established ( 1990). one of its creators. Alain Enthoven . convened a meeting in the reso rt town of Ja ckson. Wyoming. Hrs Jac kson Hole Group drew on business leaders and policy- makers and wo rked to bring managed competition to the American health ca re system. 48 Managing competition with in the context of the NHS involved injecting market prin cip les into an overwhelmingly public. tax-supported enterprise (through the operation of an internal market) . Th is process needed to be reversed in the American system si nce much of American hea lth care was. after all . already provided by way of a market (of sorts). with direct state in- volvemen t being limi ted largely to Medicare and Medicaid. Whereas the emphasis would thus be on "competition" in the United Kingdom. "manageme nt " was stressed in the United States. For all the problems of the British system. re - formers began with more or less universal access to health ca re ; American reformers faced the du al problems of rising costs and shrinki ng coverage.

Of course. there are multiple ways in which attempts might be made to "manage" the health care marketplace. Members of the Jackson Hole Group decided to push the formation of insurer networks. which would then bargain for the best care at the lowest pnce.49 They also promoted health main- tenance organizations (HMOs) that (theoretically. at least) unified care of individual patients. Such organizations had grown popular with health-polrcy analysts in the 1970s. but the organizations themselves had failed to capture large seg- ments of the health care market.50 This was. however. about to change.

Reformers had been pressing pro-competition reforms since the Nixon administration had promoted HMOs rn February 1971 : "A n HMO cannot afford to waste resources that costs more money in the sho rt run," enthused Nixon " But neither can it afford to economize in ways which hurt patients fo r that increases long-run expense." As- sistant sec retary of health Lewis Butler had expressed the

hope that 90% of all Americans would be covered through HMOsby 1980.5 1

Each generation of pro-competition reformers i n the United States offered the same diagnosi s of the Ameri ca n system as the Tories had offered of the British : not enough accountability to the patient. Though nonmarket tenden- cies in the American system could be traced to private actors rather public enterprise , they existed nonetheless. In the United States. it was (medical) professional preroga- tive, insurance coverage , employer lassitude. government tax expenditures. government regulations. and government programs that all conspired to block a genuine market in American health care .52

Reformers on both sides of the Atlantic. however. saw pro- viders as the greatest obstacle to achieving efficiency in health care . This was particularly the case in the United Sta tes. in which mo ney largely went wherever physicians decided it should go.53 Even in the tightly budgeted NHS. however. would-be reformers starting with Griffiths pointed to ineffi- ciency and a lack of accountability arising from provider au- tonomy-in the NHS case. the panacea was first thought to be the insertion of professional managers. and then the estab- lishment of an internal market. Each attempted to " discipline " the medical profession .

The American health care system. by contrast. appeared to require the construction of a true market. in effect an ex- ternal market. But the upshot was almost exactly t he same. Market forces would break the tra di tiona l prerogat ives of the medical profession and bend providers to the consum - ers' desires.

Among the converts to the market model of health re form were Bill and Hillary Clinton. Early in his first term , President Clinton entrusted the task of health care reform to hi s wife and several close advisors. The package they produced was heavily influenced by Enthoven and other reformers seeking to meld market discipline to universal coverage. In the Clinton plan, insurance networks or alliances (recall the British District Health Authorities and GP fundholders) would be empowered to bargain for the best price of services among health care providers. The reforms also sought to expand and formalize the responsibility of businesses to collectively finance health care for their respective employees.

CHAPTER 24 • England ••

Of course. the Cl inton health reform plan went down to defeat. As it turned out. a version of managed com peti - tion eme rge d independent of comprehensive government action. Faced with continuing increases in health expendi- ture, business corporatio ns took direc t action . Many re- quired their workers to enroll in HMOs or othe r forms of managed ca re. The managed care organizations competed for contracts by promising to cut health ca re premiums. They wou ld do this , i n turn, by forci ng efficiencies on medical providers.

For a brief time. they appeared to succeed. National health spending flattened out-and even dipped-between 1995 and 1999. Then the bottom fell out-or more accurately, the top blew off. Managed ca re organizations had held prices untenably low to attract enrollees. Now. they began to make up the lost ground and raise prices. More importantly. health care consumers (and their physicians) rebelled at the limits imposed on providers. Horror stories of managed care compa- nies denying needed care turned into a major political story- the Democrats touted "a patient's bill of rights " and took to the floor of Congress to read the names of constituents who had been cruelly (sometimes fatally) denied insurance cover- age for needed care.

President Barack Obama came into office promising to cor- rect some of the flaws and inefficiencies plaguing the Ameri - ca n health care marketplace. Obama was not a "socialist" on this front as his opponents liked to portray. His Affordable Care Act left many of the actors comprising the market in health care playi ng their tra ditional roles. The legislation did break new ground , however, by introducing an individual health insuran ce mandate and setting up insurance exchanges to facilitate citizens' navigation across the ind ividual insurance market. Other elements. like the much-touted Accountable Care Organi zation. merely followed the gra in of preexisting trends. Despite the moderate nature of the reforms. politica l acrimony was intense.

Am id the political furor. health ca re costs resumed their inexorable march-from 13.1 % of GDP in 200 I to 16% by 2005-and. as other chapters in this volume document. with rising costs comes shrinking coverage. The great difference to- day is that the market solution-an American reformer's holy grail for 35 years-no longer holds the same allure thanks to the consumer uprising against managed care.

PART Vil • The United States in International Context

CONCLUSION What lessons are to be learned by the divergent yet eerily similar experiences with markets in health care on both sides of the Atlantic? Certainly they reveal the extent to which changes in one system can be. and sometimes are. trans- ferred to one that is very different. This story echoes a famil- iar generalization repeated in every chapter of this part on international systems: It may be impossible to limit health care expenditure without direct government control of the system as a whole-in fact. the monopsonistic NHS proved too austere at cost control while the pluralistic American health care has. of course. had the opposite problem.

The experience of both countries also yields a more sub- tle lesson: It takes time. patience. and political commitment to introduce large-scale change into any health care system. Moreover, big changes generally flow out of past experi- ence. The British medical system. for example. slowly came under state control-from Lloyd George's workers' program in 1911 to the medical emergency measures during World War II-long before anyone proposed an NHS.

Many of the themes that run through contemporary conceptions of health reform can appeal to elements

STUDY_9UESTIONS

on both the political right and left. Whtie Margaret Thatcher. a Conservative. first championed market re- forms. Labour's Tony Blair pushed the idea further and more successfully (though with many fits and starts). Likewise. in the United States. Republican Richard Nixon first championed prepaid group practice. but it was the Clinton administration that gave managed care its great push forward. Despite the political overlaps. however. the practical dynamics of the reform proc- ess-and of markets themselves-are every bit as likely to sow (i ndeed. exacerbate) political divisions as they are to bri ng disparate forces together.

Where will the NHS go next-further into markets or back away from them? How will health reform in the United States progress as the Affordable Care Act contin- ues to face challenges? Will 1t swing back toward "purer" markets or rebel against them? Only time will provide the answers to these questions. A veritable certainty. however. is that health care will continue to surprise and. at times. confou nd policymakers. providers. and patients on both sides of the Atlantic.

I. What political developments led to the establishment of the NHS?

2 . How was World War II a catalyst for increased state intervention in British health care7

J. What are some of the ways in which the British health care system differs from the American system?

4. What led the Thatcher government to fundamentally change an ever-popular NHS?

S . How does managed competition. as conceived in the United States. differ from that applied in the United Kingdom7

6 . How has the application of market-based principles to health care fared on both sides of the Atlantic?

ENDNOTES I. Parry and Parry, 1976. p. 204.

2 . Rivett. n.d .. "NHS Inheritance."

J. Ibid.

4. Mays. 2005, persona l interview.

CHAP TER 24 • England ea

5. Fromkin.1989. p. 124.

6. Sykes. 1997. pp. 156-57.

7. Rivett. n.d.

8. Eckstein. 1960. p. 94.

9 . Rivett. n.d.

10. Ibid.

11. Parry and Parry. 1976. pp. 200-1.

12. Webster, 2002. p. 7.

13 . Timmins. 1995, pp. 31-23.

14. Ibid .. p. 42.

15. Jacobs. 1993. p. 113.

16. Jacobs. 1993. p. 117 [socialism). p. 168 [most unusual).

17. See Rivett. 2006.

18. Ibid.

19. Rivett. n.d.: Parry and Parry. 1976. pp. 209-10.

20. Parry and Parry. 1976. pp. 205-7.

21. Webster. 2002. p. 30.

22. Rivett. n.d.

23. Webster. 2002. pp . 3 1-2.

24 . Lowe. 2002.

25. Rivett. n.d .. chapter 3.

26 . Hall, 1986. p. 76.

27. Ibid .. pp. 80-3.

28. Timmins. 1995. p. 352.

29. Ibid .. p. 351.

30. Ibid .. pp. 406-8.

31. See, for instance. Le Grand, 1999.

32 . Baggott. 1997. pp. 283-306

33 . Enthoven. 1999. p. 14.

34. Timmins. 1995. pp. 455-6. 460.

35 . Webster. 1998. p. 5.

36. Rivett. n.d . "Introduction."

37. Glennerster. 2001. pp. 399-400

38. Enthoven. 1999. p. 39.

PART VII• The United States in International Context

39. Warden. 1999. p. 962.

40. Timmins. 1995. p. 577.

41. Guardian, 2003.

42. Sussex and Towse. 2000.

43. Rivett. 2006. "Introduction."

44. BBC News. 2006.

45. Campbell. 20 10.

46 . 83% answered thus. in a poll cited in Dreaper. 2006.

47. Ibid.

48. Quadagno, 2005, pp. 187-88.

49. Ibid .. p. 188.

SO . Hollingsworth. 1986. p. 159.

5 I . See Chapter 4.

52 . Enthoven. 1993. pp. 26-7.

5 3. Mahar. 2006.

REFERENCES Baggott. R. 1997 (Summer). "Evaluating Health Care Reform: The Case of the NHS Internal Market." Public

Administration 75(2): 283-306.

BBC News. 2006 Uanuary 13). "U.S. Giant Takes Over GP Practices." Retrieved from http://news.bbc.co.uk/2/h1/ health/4608782.stm on July 24. 2006.

Campbell. D. 20 I 0. "Speed of NHS Reform Means Andrew Lansley Has Faced a Bumpy Ride." The Guardian. December 30.

Dreaper. J. 2006 Uune 26 ). "NHS Reforms Split Medical Opinion." BBC News. Retrieved from http://news.bbc.co.uk/2/ hi/health/51 I 0478.stm on July 23. 2006.

Eckstein. H. 1960. Pressure Group Politics: The Case of the British Medical Association. Palo Alto. CA· Stanford University Press.

Enthoven. A. C. 1993. "The History and Principles of Managed Compet1t1on." Health Affairs Supplement. pp. 26-7. Retrieved from http://content.healthaffairs.org/cgi/repnnt/ 12/suppl_ 1 /24.pdf on July 23. 2006.

- --. 1999. In Pursuit of an Improving National Health Service. London. The Nurfield Trust.

Fromkin, D. 1989. A Peace to End All Peace. New York: Henry Holt.

Glennerster. H. 200 1. "Social Policy." In Anthony Seldon. ed. The Blair Effect: The Blair Government 1997- 2001. London: Little, Brown and Company.

Guardian . 2003 (May 7). .. NHS Reforms: The Issue Explained." Retrieved from http://soc1ety.guardian.co.uklnhsplan/ story/0..4593 10.00.html on Ju ly 24. 2006.

CHAPTER 24 • England i@i

Hall. P. 1986. Governing the Economy: The Politics of State Intervention in Britain and France. New York: Oxford University Press.

Hollingsworth. J. R. 1986. A Political Economy of Medicine: Great Britain and the United States. Baltimore: johns Hopkins University Press

Jacobs. L. 1993. The Health of Nations.· Public Opinion and the Making of American and British Health Policy. Ithaca. NY: Cornell University Press.

Lowe. R. 2002 (May). "financing Health Care in Britain since 1939." History & Policy. Retrieved from http: //www .historya nd pol icy. org/ arch 1ve/pol icy-paper-08. htm I.

Le Grand. J. 1999. "Competition. Cooperation. or Control?Tales from the British National Health Service." Health Affairs 18(3). 27-39.

Mahar. M. 2006. Money-Driven Medicine: The Real Reason Health Care Costs So Much. New York: Harper Collins.

Mays. N. 2005 (September 25). London School of Hygiene and Tropical Medicine Research Unit. Personal interview conducted by the author.

Parry. J .. and N. Parry. 1976. The Rise of the Medical Profession: A Study of Collective Social Mobility. London: Croom

Helm.

Quadagno. J. 2005. One Nation Uninsured: Why the U.S. has No National Health Insurance. Oxford: Oxford

University Press.

Rivett. G. n.d. A Short History of the NHS. Retrieved from http://www.nhshistory.com/cvrivett.htm on July 14. 2006.

Sussex. J .. and A. Towse. 2000 (March 4). '"Getting UK Health Care Expenditure up to the European Union Mean·- What Does That Mean?" British Medical journal 320: 640. Retrieved from http://www.ncbi.nlm.nih.gov/pmc/

articles/PM( I I 17660/ July 24. 2005.

Sykes. A. 1997. A History of the Liberal Party. London: Longman.

Timmins. N. 1995. The Five Giants. London : Harper Collins.

Warden. J. 1999 (April IO). "NICE Opens for Business." British Medical journal 318: 962.

Webster. C. 1998 (Spring). "Blair and Bevan: More than Fifty Years Apart." Healthmatters 33.

Webster. C.. 2002. Natrona/ Health Service: A Political History. Oxford. UK: Oxford University Press.

Health care looks much different just to our north. There "Medicare" refers to a province-based universal health care system that was enacted some 40 years ago. This article examines some of the most important features of the Canadian system.

Although Canada and the United States share many social and economic traits. health insurance persists as one of the most distinctive policy differences between the two countries. There are important similarities in the delivery of health care services in a North American environment. but the two coun- tries have diverged considerably in the ways in which health care systems are financed and organized.1

One might be tempted to conclude. in hearing about Canada. that health care is either an egalitarian utopia or a socialist night- mare. Neither is obviously the case. The basic facts of health care organization and financing in Canada are quite simple: Health care is, for the most part. delivered by voluntary. not- for-profit hospitals and private practice physicians, and health care is paid for. in large pa rt. through provincial general rev- enues. supplemented by federal transfers. In other words, it is a Canada-wide system of provincial health care plans paid for through tax dollars and an enduring compromise between "pub- lic payment" and "private practice."2 The key elements of these public plans are that they are universal and comprehensive. and are based on the principle of access to care on a needs-first basis.

As might be surmised. this kind of arrangement is very pop- ular with Canadians, many of whom consider health care a de· fining feature of the country's identity. or at least an important marker of Canadian values .3 And yet. at the same time that Canadians support the principles of public health care. they still seem anxious about access to care. and while gove rn· ments and stakeholders tend to tread warily in reform debates. they are feel ing the squeeze of cost concerns.4

HISTORICAL BACKGROUND Until at least the middle of the 20th century. little pointed to the eventual divergences in health care between Canada and the United States. If anything. the development of the practice of med ic ine-the impact of the Flexner Report or the pioneer· ing efforts of William Osler. for example-was hardly affected by the border in between. Still. the effects of political differ· ences were already being felt. While the Great Depression led the federal government in the United States to an act1V1st

social policy-making role-one that did not include heal th care in the 1930s and could not by the I 940s-in Canada. the relative absence of federal engagement. combined w ith the understanding that "social " matters were the responsibil- ity of the provinces. left the policy playing field open to other types of initiatives.

Along with this dynamic of federalism. what set Canada on a very different path from the United States would be the policy innovation that emerged from a specific po- litical source : the social-democratic government of one of Canada's most rural and hardest-hit economies . the west- ern province of Saskatchewan. Founded in the 1930s as a protest party of the left. the Co-operative Commonwealth Foundation (CCF) came to power in the province in 1944 and by 1946 was implementing North America's first pub- licly funded. universal hospital insurance program . Unlike the US reforms that would follow later, a crucial decision was made to begin with hospital care , which was more financially crippli ng for in dividuals but also less of a target for stakeholder hostility.

A decade later. with the positive results of the Saskatchewan experiment leading to pressure on other governments to act. the federa l government designed a cost-sharing program in 1957 for all of the provi nces to establish their own hospital in- sura nce plans. In 1962. the Saskatchewan government inno- vated again with medical insurance legislation. although thi s time medical lobbi es balked. leading to a bitterly contested physicians' strike.

The Saskatchewan experience proved convincing enough to compel the Liberal government. now in a minority situation in the House of Commons and dependent on the CCF's succes- sor. the New Democratic Party. for support, to design another cost-sharing agreement. this time for medical insurance in 1966. By 1972, all of the provinces would have hospital and medical insurance plans in place.

The key element of these public plans were that the prov- inces now became the single payers of hospitals and of physicians. although both would continue to enjoy relative autonomy. that is. not be subject to state ownership or con- trol. As the years progressed. this turned out to be a workable. but sometimes tense. arrangement between the provinces and stakeholders. Tension also mounted between the federal gov- ernment and the provinces over both the financing and the rules of the game of health care.

CHAPTER 25 • Canada

As early as 1977, the federal government changed its fund- ing arrangements from shared cost to block grants. leaving provinces with a larger share of the financial bu rden-a dy- namic famil iar to stude nts of health care federalism in the United States. In 1984. the Canada Health Act was passed, a federal statute that attached fiscal transfers to a set of five "pri ncip les" for health plans: Canadian health care would provide universality (it must be provided to all Canadians) , comprehensiveness. portability, accessibility, and public ad- ministration (the program must be ru n by public authorities). And again, in 1995 , the federal government redesigned its fiscal rela tionship with the provinces, amalgamating all of its social transfers into the Canada Health and Social Transfer. By 2000. electoral concerns led the federal government to re- invest in health care. and in 2004. a I 0-year " health accord " was hammered out with the provinces. essentially committing the federal government to a sizeable increase in the Canada Health Transfer. In return. the provi nces agreed to shore up their primary-care sectors and to try to reduce wait times (for nonurgent services).

A 2005 Supreme Court decision known as Chaoul/i v. Quebec reinforced this attention to wait times. The court ruled that in the face of long wait times for public services . Quebec could not prohibit private insurance companies from offering the same services. But since health care is an enor- mously sensitive political issue. most provincial governments are treading carefully where change is concerned . Quebec's resp onse to the Supreme Court, for example. offered a narrow applicati on of the court ruling by allowing for pri vate health insurance only in limited. nonurgent surgical care (e.g., knee. hip, and cataract surgery) and opening the publi c system to private clinics only as a last resort to meet access time guaran- tees for these services. (The Quebec government also noted that privatizing health care wou ld not address overall health cost issues.)

THE DELIVERY OF HEALTH CARE IN CANADA Every Canadian citizen and legal immigrant is insured through a provincial government health plan. There is no formal mandate i n place. simp ly the obligation to enroll in the provincial plan to access public services. Visitors

PART Vil • The U nited States in Inte rnatio na l Context

and nonresidents usually pay for these services on their own account. while care for refugee cla i mants 1s paid for by the federal government. The federal government is also constitutionally responsible for the health needs of abo- riginal peoples. military and veterans. and federal inmates. although in most cases this care is devolved to provincial plans.

It should be remembered that pub lic spending accounts for only 70% of this total in Ca nada. This is because pro- vincial hea lth p lans normally cover "med ically necessa ry" services. which has come to be defined as diagnostic test- ing. medical care. and hospita l care. These services are allocated on t he basis of medical need and through fi rst- do llar coverage. In ot her words. no money changes hands between patien t and provider; co-payments. user fees. and extra billing are effectively not allowed for publicly insured services. Private insurers do have a market for "supplemen- tary'' services. but these are limited to t hin gs not covered by provincial p lans. wh ich may include optometry. den- tistry. physiotherapy. and increasingly expensive outpatient prescription drugs.

Opting Out Canadian physicians walk a fine line in this kind of arrange- ment. Most physicians are paid on a fee-for-service basis, with fees negotiated between provincia l medical associa- tions and provincial public agencies. This allows physi- cians some measure of financial autonomy and a good deal of income secu rity. Billing in a single-payer system rather than dealing with multiple health plans also has its ad- vantages: US physicians spend nearly four times as much as do Canadians in this regard. 5 Since most physicians in Canada have been trained in publicly funded universi ties. are covered by not-for-profit malpractice insurance. and operate in a legal system much less forthcoming to civil injury awards. t hey enjoy considerable adva ntages com- pared to their American cou nterparts. Th e caveat is that they must either work within the public system or opt out entirely. including hospit al privileges: Once a phys1c1an ac- cepts public-pay pa tients. he or she may not receive oth er payment (i.e .. t hrough private pay). Very few physicians opt out. however. given the scarcity of private insurance an d the fact tha t they need access to hospitals to provide comp rehensive ca re.

During the 1980s and 1990s. some provinces experi- mented with "caps" on total billing for ind1v1dual phy· sicians. a none-too-popular measure. especially among specialists. Other provinces also used their power of the purse to put incentives into place that encouraged physi- cians to practice in less densely populated or more remote areas. Despite these efforts. many stakeholders claim that there is an evident shortage of physicians in Canada The tendency for medical students to opt for spec1alt1es over primary care is also on the upswing. Unlike in the United Kingdom. primary phys1c1ans have no "mandated" role in the Canadian health system. although patients are normally required to consult a family physician-if they have one- before being referred to a hospital or specialist.

As in the United States. hospitals in Canada developed ove r time as voluntary institutions with independent boards and distinct identities. 6 Initially, hospital insurance did little to change the ir mode of operation. but as reimbursement gave way to global budgets. hospitals have come to play a much different role in the health care system. as opposed to the United States. While hospitals rema in independent. that is. not government-owned. they are expected to operate on a not-for-profit basis. And while a yearly global budget provides a stable and reliable funding source. not to mention signih· cantly lower administrative costs. this also presents a consid· erable challenge for hospital administrators to live with a fixed income. determined on a retrospective and prospective basis. that may not account for spikes in demand. When need 1s the all ocative principle at work. the pressure to ration non- urgent care. particularly surgical interventions. becomes more intense.

Money, Money, Money Although the individual components of health care spending (e.g .. shares allocated to physician services. hospital care. and prescription drugs) are comparable between Canada and the United States. the dollar figures spent on health care are very different. Canada is a big spender among the Organ ization for Economic Cooperation and Develop· ment (OECD) countries. with total spending on health care accounting for I I% of gross domestic product (GDP). s1g· nificantly lower than the United States7; per capita health spe nd ing. estimated at about $4.300, is just under half

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10

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6

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Series 1

South Korea

United Canada Germany Kingdom

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Figure 25-1 Health Expend itures as Propo rti o n of GDP for Selected Countries Source: The World Bank. " H ealth Expenditure, Total (% GDP)." Retrieved from http://data.worldbank.org/ indicator/SH .XPD.TOTL.ZS, Ju ly 18, 2013.

that of the United States. After severe cuts in spend ing in Canada through the 1990s. growth in health care costs has been comparable across the two countries in recent years (about 4 to 5%). although the reinvestment in publ ic health care has led to slightly higher growth in Canadian spending since 2004.

There are several reasons for these discrepancies in costs . including some of the features mentioned in the fo rgoing description: global budgets for hospitals. negotiated fees for physicians. relatively lower prescription -drug costs . and sig- nificantly lower administrative cost. 8 Despite some of the rhetoric and media coverage. there is little evidence to suggest that the difference in cost is attributable to signi ficant gaps in quality of care. however. nor are Canadia ns flocking to the United States for unmet needs.

80

70

60

50

40

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United States

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CHAPTER 25 • Canada Im@

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Canada France Germany

I --- % Public Spending --+-- % GDP I Figure 25-2 National Health Expenditure (NHE) as Percentage of GDP and Share of Public Spending as Percentage of NHE, 2009 Source: OECD, Health Data, June 201 1.

That being said, Canada faces many kinds of cost pressures that contribute to the political volatility of health care issues. A major one is the pressure on the public purse to fund health care in relative terms (vis-a-vis other social programs) : another is the pressure on the public purse in absolute terms (health care expe nditures as part of provincial budgets and federal spending). Because of the attention focused on respondi ng to consumer demand and reinvestments in the health care sec- tor, less atten tion has been paid in recent yea rs to a poten- tially more important issue: cost contain ment in the medium to long term. both in terms of public and private spending. These include cost increases across all sectors. and in particu- lar the sectors that fall outside the public system , especially pharmaceuticals.9

There are also cost pressures that wil l be familiar to an American audience. For example. the demographic pressures associated with aging are perhaps even more evident in the Canadian population. and although the actual impact of aging on health care costs is still hotly debated in the scientific liter- ature.10 politicians. economists. and the media tend to frame

PART VII • The United States in International Context

the problem in terms of a "silver tsunami" with dire implica- tions fo r the health care system.

Canada also faces sim ilar challenges in terms of environ- mental and lifestyle factors associated with health risks. Al- though obesity in Canada is less prevalent than in the United States 11 , the impact of this trend over time is being felt. es- pecially with regard to children . Tobacco control is another factor of interest-Canada was an early trendsetter in terms of advertising and packaging regulation.'2

The impact of new technologies in Canada is a matter of concern not only in terms of cost but also in terms of access. Although regulation of drugs is a federal responsi- bility, assessme nts of new technologies. including pharma-

CONCLUSION While Canadians still have generally positive attitudes toward public health care and with respect to the services they receive. in recent years there has been a considerable increase in concern about the future sus- tainability of the system. 14 There has also been a nota- ble shift in the tone and tenor of health reform debates . where demands for fundamental cha nge are more fre- quent and where the boundaries of political discourse about change have widened considerably. 15

Despite these trends and much ado about hea lth care in the past decade (provincial inquiries. federal commissions). there has been comparatively little legrslattve change or ma- JOr policy initiatives. Some reform has moved through pro- vincial initiatives. in particular with regard to primary care. In addition. there has been substantial movement in public health. including the creation of the Public Health Agency in the wake of the SARS epidemic tn 2005.

The federal government has instead used its spending power as an effective political and policy lever. attempt- ing to encourage primary care reform. wait-time guaran - tees. and reinvestment in medical technology and medical training in the provinces. The publication of a royal com- mission report. known as the Romanow Report. in 2002 indicated the existence of a "gap" tn funding. which the Liberal government undertook to attenuate after 2004.

ceuticals. are undertaken at the provincial level. allowing for potential va riance in services from one province to another

The cost pressures of health human resources are also dawning on Canadian policymakers. This is an issue related to both numbers and distrrbutton. and one that is hotly debated by stakeholders and politicians alike. With the publication of the Barer-Stoddart report in 1991 . most provincial health care system s attempted to reduce physician supply with cuts in medical school enrollment and postgraduate training. 3 Today. concerns are being raised about the reduction in physic1an- patient ratio. but also about the global compet1t1on for phys1- c1ans and nurses and the need to plan for more skilled workers in long-term care.

As that funding agreement winds down by 2014 . all eyes are on how the current Conservative government will frame the health -reform debate. There are already indi- cations that this frame will be one that emphasizes the mechanics of federal transfers rather than the content of provincial health plans. with an emphasis on prov1nc1al innovation and an openness to "alternative mechanisms" for delivery and funding of health care. Nevertheless, this relatively new rrght-wing party is loathe to make a political issue of health care especially as it trres to consolidate its support toward the center of the poli tical spectrum and in voter-rrch central Canada . in the House of Commons. it faces an official opposition under the left-wing New Dem- ocratic Party banner for the first time in Canadian history

The direction of health reform in Canada will un- doubtedly be affected by the same forces that led to its emergen ce: federalism and partisan politics. This will be marked by a continued debate over the sustainabil- ity of public health care funding and the best ways of gua ranteeing access to care. To different degrees . but in noti cea ble tandem. right-wing messages about the benefits of private market solutions and decentralization toward subna tional 1n1t1at1ves are gaining prominence tn Canada. although in Canada thi s 1s so far limited to dis- cussing private markets within the public system.

CHAPTER 25 • Canada lnil

SIUDY_ QUESTIONS I. How did the activity of one Canadian province start the country on the way to its current health care system? -

2 . What are the basics of the Canadian system?

3 . Why does Canada spend less than the United States on health care as a percentage of GDP?

4. What are significant political issues concerning health care in Canada?

ENDNOTES I. Tuohy. 1999: Maioni . 1998.

2. Naylor. 1986.

3. Mendelsohn. 2002 .

4. Soroka. 2007.

s. See Morra et al .. 20 I I. 6 . Boychuk. 1999.

7. OECD. 20 I I.

8 . Woolhandler. Campbel l, and Himmelstein. 2003.

9. CI HI. 2011.

I 0 . See. for example. Lefebvre and Soderstrom, 2000.

11. Au ld and Powell. 2006.

12. See Manfredi and Maioni. 2004.

13. Barer and Stoddart, 1991.

14. Soroka. Maioni. and Martin, 20 11.

IS . Maioni and Martin, 2004.

REFERENCES Auld. M. and L. Powell. 2006. The Economics of Obesity: Research and Policy Implications from a Canada-US

Comparison. Health Services Restructuring: New Evidence and New Directions. John Deutsch Institute. Queen's

University at Kingston · 305 - 32.

Barer, M .. and G. Stoddart. 1991. Toward Integrated Medical Resource Policies for Canada. Centre for Health Economics

and Policy Analysis Working Paper Series.

Boychuk. T 1999. The Making and Meaning of Hospital Policy in the United States and Canada. Ann Arbor: University

of Michigan Press.

Canadian Institute of Health Information (Cl HI). 20 I I. Drivers of Prescription Drug Spending in Canada.

PART VII• The United States in International Context

Lefebvre. B. A .. and L. Soderstrom. 2000. Le vie1/ltssement de la population quebecoise consequences sur le financemenl des depenses publiques de sante. Report presented to the Conseil de la Sante et du 81en-etre. Department of Econom ics. McGill University. November.

Ma1oni. A. 1998. Parting at the Crossroads: The Emergence of Health Insurance in the United States and Canada. Princeton, NJ: Princeton University Press.

Ma1oni. A .. and P. Martin. 2004. Public Opinion and Health Care Reform in Canada· Exploring the Sources of Discontent. Paper presented at the Annual Meeting of the American Political Science Association. Chicago, Illinois. 2004.

Manfredi. C .. and A. Maioni. 2004. "Tobacco Control in Canada." In Unfiltered: Conflicts over Tobacco Control and Public Health. Cambridge, MA: Harvard University Press.

Mendelsohn. M. 2002. "Canadians' Thoughts their Health Care System: Preserving the Canadian Model through Innovation." Commission on the Future of Health Care in Canada.

Morra, D .. et al. 20 11. (August) . "U.S. Physician Practices Spend Nearly Four Times as Much Money Interacting with Health Plans an d Payers than Do Their Canadian Counterparts." Health Affairs Blog 30. http://www. commonwea I th fund. org/Publ ications/1 n-the-Li terature/20 I I/ Aug/US-Practices-Spend-Four-Times-as-Much-as- Ca nadia n .aspx.

Naylor. D. 1986. Private Practice. Public Payment: Canadian Medicine and the Politics of Health Insurance 1911-1966. Kingston and Montreal. Canada: McGill-Queen's University Press.

OECD. 2011. " Hea lth at a Glance 201 1: OECD Indicators."

Soroka. S. 2007. "Canadian Perceptions of the Healthcare System." Health Council of Canada Report.

Soroka. S .. A. Maioni. and P. Martin. 20 11. "What Moves Public Opinion on Health Care in Canada? Individual Experiences. System Performance. and Media Framing." Paper presented at the Annual Meeting of the American Political Science Association. Seattle. Washington. 2011.

Tuohy. C. 1999. Accidental Logics· The Dynamics of Change m the Health Care Arena in the United States. Britam. and Canada. New York: Oxford University Press.

Woolhandler, C .. T. Campbell. and D U. H1mmelstein. 2003. 'Costs of Health Care Administration in the United States and Ca nada. New England journal of Medicine: 768-75.

CHAPTER 25 • Canada i(i~j

Th is eyewitness concludes the section on international politics by explaining how to compare systems and how to learn about health care from other nations. Looking at

other nations can be a marvelous way to stretch the mind and to expand our knowledge of what is possible. On the other hand. the authors wam against treating comparative studies like a sports tournament (which system wins?) or a shopping trip (can we pick

up these policy items and use them back home?).

We are constantly bombarded by health care information from other countries. 1 Yet. despite the volume and velocity of the information flows. it is not easy to learn useful lessons from foreign experience. A large gap falls between promise and perfor- mance in comparative health-policy studies. 2 Misdescription and superficiality are common.

Unwarranted inferences. rhetorical distortion. and caricatures all regularly show up in both scholarship and policy debates. In this essay. we suggest how to avoid the common pitfalls and learn useful lessons from other nations.

The Political Context: Welfare State Debates and Health Reforms 1970--2000 Health policy 1s prominently on the public agenda of most. if not all. of the industrial democracies Canada's universal health insurance 1s a model of achievement for many observers. the subject of consider- able intellectual scrutiny. and the destination of ma ny policy trav- elers searching for illumination. Yet both the national government and a majority of its provinces have felt sufficiently concerned about the condition of Canadian Medicare to set up advisory commissions

and chart ad1ustments. The United States has been even more obvious about its medi-

cal care worries. with crisis commentary a fixture for decades on the national agenda. Fretting about medical care costs. quality. and access is not limited to North America Disputes about reforming Dutch medical care have been going on for decades. Any review of the European experience would discover persistent policy controver- sies in Germany (burdened by the fiscal pressures of unification). in Great Britain (with recurrent debates about the National Health Service), and in Italy and Sweden (both facing fiscal and unemploy-

ment pressures) .

The puzzle is not why there 1s such widespread interest in health policy, but why now. Why does international evidence (arguments. claims. and caricatures) seem so much more prominent during the 21st century than. say. during the fiscal strains of the mid-I 970s or early 1980s? What can be usefully said not only about the sub- stance of the expenence of different nations but about the politi- cal processes of introducing and acting upon policy change in a national context?

There is a simple answer to these questions. Medical care policy came to the forefront of public agendas for the following reasons. First. the fin ancing of personal medical care everywhere became a major financia l component of the budgets of mature welfare states. When fiscal strain arises. policy scrutiny 1s the predictable result. Second. mature welfare states have less capacity for bold fiscal ex- pansion in new areas. This means that managing existing programs assumes a more prominent place on the public agenda. 3 Third. the postwar consensus about the welfare state is wearing thin (perhaps wearing down). We see the effects of more than two decades of fretfulness about the affordability, desirability. and governability of

the welfare state. The reexaminations of health care arrangements began in ear-

nest when the 1973-197 4 oil shock exacerbated high levels of unemployment and persistent stagflation Critics became bolder. bolstered by the electoral victories of conservative parties opposed to welfare state expansion. Mass publics increasingly heard chal- lenges to programs that had for decades seemed sacrosanct. From Mulroney (Canada) to Thatcher (Britain). from New Zealand to the Netherlands. the message of serious problems requ iring ma1or change gained support. Accordingly, when economic strain reap- pears. the inner rim of programmatic protection-not just interest group commitment but social faith-weakens. and the incentives to explore transformat1ve but not fiscally burdensome options be- come relatively stronger. Those factors help to explain the pattern of

PART VII • T he United States in International Context

welfare state review-including health policy-over the past three decades across the industrialized world . But there still remains the question of why these pressures gave nse to increased attention to other national experiences.

Pressures for policy change increase the demand for new ideas-or at least new means to old ends. Rudolf Klein once argued. "no one wants to be caught wearing yesterday's 1deas 04

Everywhere. policy makers and analysts looked across the border to search for the latest policy fashion. just as American reform ers turned to Canada . many Canadian. German. Dutch . and other intellectual entrepren eurs reviewed recen t American. Swiss. and Swedish experience. In the 1990s, many conferences followed this pattern . International conferees were interested 1n getting better policy answers to the problems they faced at home. Many were explicit about cross-bord er learning: How to find a balance between "solidarity and subsidiary?" How to maintain a "high- quality health system in times of economic stress?" and even the optimistic search for "optimum relations between patients. insur- ers. providers. and the government."

Understood as simply wanting to stretch one's mind-to explore what is possible conceptually. or what others have managed to achieve-these questions are useful. This is the kind of learning an- thropologists have long extolled-understanding the range of pos- sible options and seeing one's own circumstances more clearly by contrast. But as a simple search for the best model-like shopping abroad for the best answer to problems back home-this is wishful thinking.

What about drawing policy lessons from international expe- rience? What are the rules of cross-national learning? The truth is that. whatever the appearances. most policy debates rn most countries are (and will remain) parochial affairs. They address na- tional problems. emphasize national developments in particular domains (pensions. medical finance. and transportation). and embody conflicting visions of what policies the particular coun try should adopt. Only occasionally are the experiences of other nations-and the lessons they embody-seriously examined When cross-national experiences are employed in such paro - chial struggles. their use 1s typically that of policy warfare. not policy understanding and careful lesson -drawing, and. one must add. there are few knowledgeable critics at home of ideas about "solutions" abroad.

In the world of American medical debate. the misuse of British and Canadian experience surely illustrates this point. The National Health Service was from the late 1940s the specter of what "gov· ernment medicine" or "socialized medicine" and "rationing" could mean. In recent years. mythmaking about Canada has dominated the distortion league in North America. The reason s are obvious. Policymakers are busy with day-to-day pressures. Practical concerns incline them. if they take the time for comparative inquiry. to pay more attention to what appears to work. not academic reasons for

what is and is not transferable and why. Policy debaters-whether polit1c1ans. policy analysts. or interest group figures-are engaged in struggles. not seminars. Like lawyers. they seek victory. not illumination For that purpose. compelling stories . whether well- substantiated or not. are more useful than careful conclusions. Interest groups. as the label suggests. have material and symbolic stakes in policy outcomes. not reputations for intellectual precision to protect

Once generated and communicated. however. health-policy ideas are adopted more readily in some contexts than in others. These pat- terns of adoption and adaptation have to do with the machinery of government. as well as with local cultural understandings. The auton· omy and authority of government in parliament in the United King· dom. for example. as well as its position at the apex of a nationalized health service. means that "ideas can make a difference more quickly 1n Britain than in America "1 It may be. too. that policy ideas trans· fer more easily between similar types of health systems. Institutional similarity facilitated the spread of managed competition among the national health services of Northern and Southern Europe.6

However. lessons from abroad often meet strong local cultural re· sistance. Globalization may be putting economic pressure on social programs. as Giaimo and Manow observe. but even a quick look at the political response makes it clear that " the national markets for ideas have yet to be fully liberalized." 7 Morone similarly remarks of Canada's experience with universal health insurance:

It 1s difficult to imagine a lesson that 1s more foreign to the American experience. Instead of hard conscious choices. we have sought painless automatic solutions. Rather than explicit programmatic decisions Americans prefer hidden. implicit policies Rather than centralize control in governmental hands. we would scatter 1t across many players. In short the Canadian lessons ... are not iust different-they challenge the central features of American political culture. at least as they have manifested themselves in health care policy.8

It is not clear. then. whether what matters most 1s administra· tive infrastructure or national values and assumptions. Different systems operate with different organizational rules. and perhaps more important. different national policy communities-however weli· networked internationally-simply see problems differently.9

Purpose, Promise, and Perils of Comparative Inquiry in Health Policy Comparative analysis 1n health policy can serve various purposes. learning about national health arrangements and how they operate learning why they take the forms they do. and learning policy Jes· sons from those analyses. Much of the comparative commentary on health care neither clari fies the different modes of comparison nor

addresses the difficulties of drawing policy lessons from the experi- ence of other countries.

First. there is the goal of learning about health policy abroad. Comparative work of this sort can illuminate and clarify national ar- rangements without addressing causal explanation or seeking policy transplantation. Its comparative element remains for the most part implicit: In reading (or writing) about them. we make sense of other systems by contrasting them with our own . The process of learning entails a deeper appreciation of something familiar by contrasting it what 1t 1s like or unlike. This 1s the gift of perspective.

The second purpose served by comparison 1s to generate causal explanations without necessarily seeking policy transplantation: that is. learning why policies develop as they do. Many of the his· torical and developmental studies of health care fall into this cat· egory. This approach uses cross-national inquiry to check on the adequacy of nat1on-spec1f1c accounts. Let us call that a defense against explanatory provincialism. Many different things may seem decisive in explaining why country A adopted a policy. How do we know 1f a feature is truly decisive as opposed to simply present? One answer is to look for similar outcomes elsewhere. Do the same factors seem to drive country B to the same policy? Or are those apparently .. decisive .. factors in country A missing or configured dif- ferently in country B?

An example from North American health pohcy provides a good illustration of how and how not to proceed Some policymakers and academics in North America regard universal health insurance as incompatible with American values. They rest their case 1n part on the belief that Canada enacted health insurance and the United States has not because North American values are sharply different. In short. they attribute a different outcome to a different political culture in the United States In fact. the values of Canada and the United States. while not identical. are actually quite similar. 10 Like siblings. differences are there. sure. but Canada's distribution of val- ues 1s closer to that of the United States than any other modern . rich democracy. In fact. the value similarities between western re- gions like British Columbia and Washington State are greater than those between either of those jurisdictions and. say. New Brunswick

The last decades have seen a growing body of comparative study in health policy. but this growth was not matched by a growing under- standing of the processes of policy learning from the experience of other countries. There 1s. in fact. little attention to methodological

questions about this learning process. The confluence of economic. demographic. and ideological fac-

tors that led to extensive debate about the future of the welfare state also created pressure to reform health care systems. Fiscal strains and declining political support for an active role of the state undermined

CHAPTER 25 • Canada i(!i#

or New Hampshire along the East Coast. Similar values are compat· ible with different outcomes. which in turn draw one's attention to other institutional and strategic factors that distinguish Canadian from American experience with financing health care. 11 The imper· tant point 1s simply that comparing the United States and Canada gives us explanatory checks that are unavailable by simply looking at one nat1on·s history alone. Why does the United States have no national health insurance (NHI)? The comparison with Canada 1s what tells us that culture alone is inadequate-we have to find other explanations.

The third category of work explicitly draws lessons from the policy experience of other nations. The international organizations that support policy work have this as part of their rationale The World Health Organization (WHO). for example. is firmly in the business of selling .. best practices.· The Organization for Eco- nomic Cooperation and Development (OECD) regularly produces extensive. expensive. hard-to-gather stat1st1cal portraits of pro· grams as diverse as disability and pensions. trade flows. and the movement of professionals, education. and health care. No one can avoid using these studies. if only because the task of collect· ing data and discovering "the facts .. in a number of countries 1s so daunting. But the portrait that emerges requires its own very care- ful review. Even data as simple as health spending is full of hidden questions. What Germany spends on spas may count as public health expenditure: in the United States. it would. of course . fall under an entirely different category Often the same words do not mean the same things. and different words may denote similar phenomena.

For now. it is enough to restate that looking carefully at the ex· perience of other nations is a precondition for understanding why change takes place in one's own country. International experience can stretch the mind and offer us perspective on our own experi· ence. It can help identify (or refute) causal explanations and gener· ate policy lessons. This last category, however. must be approached carefully. with close attention to the many factors that shape the politics. the institutions. the culture. and eve n the definitions in

another nation.

------- support for welfare state expansion. and that strain also affected health policy. There was. indeed. growing pressure to seek out new policy solutions abroad. That pressure also gave nse to a new body of research within national communities as well as international agen· cies like the World Bank, the OECD. the WHO. and the European Union. However. to date most of that research consists of merely de- scriptive studies of health care systems and policy measures within national boundaries. The studies pay little attention to the question of what experience can be applied in another country and under what