Twice Bitten

From Hospitals and Health Networks, November 20, 1996.

Both parties have paid the price for their health policy mistakes. What's next--cooperation or combat? Maybe a little of both.

By Paul Starr

With the 1996 election behind them, President Clinton and congressional Republicans return to the health policy arena equally bloodied and chastened. A cycle of initiative, miscalculation, and humiliation has now played itself out twice. On the wings of their victory in 1992, Clinton and the Democrats embarked on comprehensive health care reform, only to be pummeled in 1994. After winning in 1994, House Speaker Newt Gingrich and the Republicans embarked on major changes in Medicare, only to be hammered in 1996.

The past two campaigns have left a bitter aftertaste. Democrats believe Republicans "demagogued" the Clinton health plan, while Republicans accuse the Democrats of doing the same over Medicare. Both now appreciate the negative political possibilities of health care far better than the positive ones. As a result, each looks forward to working on health policy in 1997 with all the eagerness of a suspect awaiting an interrogation: Both know that anything they say may be used to convict them in the court of public opinion.

In this unhealthy atmosphere, can any progress be made on health care? Will the parties again lock horns in budgetary and ideological combat to determine which will dominate the outcome--as they did last winter during the government shutdown? Or will they lick their wounds, forget their ambitions, and agree on scaled-back measures--as they did last summer when Congress passed and the president signed the minimalist Kassebaum-Kennedy health insurance bill?

Over the next four years, the parties may very well take one approach and then the other--perhaps this time in the opposite order, first extending each other the hand of cooperation and then resuming the battle. The public so plainly wants cooperation that neither side can afford to be seen as the first to refuse it. But the differences between the two parties are so great that expecting cooperation on some issues may be wishful thinking.

In health policy--perhaps in national policy generally--the main event will be Medicare. Just before the election, the columnist George Will wrote that when Democrats call for a bipartisan Medicare commission, "Republicans should say: 'Sorry, you have made this problem your toy, so you play with it all by yourselves.' " On the Sunday after the election, Senate majority leader Trent Lott accused Clinton of irresponsibility on Medicare and said, in effect, that the president would have to make the first offer.

But self-interest favors accommodation. After Republicans were battered on Social Security in 1982, they nonetheless agreed to a bipartisan commission the following year and accepted its recommendations. Republicans now have the same objective interest in a bipartisan settlement of Medicare: They have little incentive to carry this year's Medicare fight to the next election--having just lost Florida in the presidential race for the first time since 1976 and Arizona for the first time since 1948.

As President Clinton made clear at his postelection news conference, he wants to separate the medium-term problems of Medicare--solvency over the next decade--from the long-term problems caused by the aging of the baby boomers. It's the long-term problems that Clinton thinks a commission should address. The problems of the next decade, he believes, can be resolved through modest adjustments, which he and the Republican leadership should directly negotiate.

Yet given the ideological gap on Medicare between the two parties, the negotiations may not be so easy. During the campaign, reporters frequently cited the relatively small difference in proposed Medicare savings between Clinton and the congressional Republicans as evidence that the Democrats were exaggerating the Republican "threat" to Medicare. The budget numbers, however, were a poor measure of what divides the two parties. Republicans want to introduce medical savings accounts (MSAs) into Medicare, even though their own Congressional Budget Office estimates that they will bring a net cost, not a savings, to the trust funds. Democrats are convinced that MSAs and other private insurance plans favored by Republicans could send Medicare into a death spiral by siphoning off the healthiest elderly. If Medicare pays $5,000 per beneficiary to private plans for the healthy elderly, whose health care costs average $2,000 a year, the effect on the trust funds could be, as they say in the world of health insurance, "catastrophic."

And while Medicare today guarantees a defined set of benefits to the elderly, Republicans want it to guarantee only a defined contribution toward the purchase of health insurance. If health care costs increase above projections, the defined-contribution approach would expose beneficiaries to the entire increase. This is no little change; it is a fundamental shift in the distribution of risk. It is hard to see how the White House and the Republicans can split the difference on such "structural" issues--unless they agree to defer them to a commission.

Ultimately, big changes in Medicare are unavoidable. Today, Medicare covers 12.8 percent of the U.S. population. By 2030 it will cover nearly 20 percent. No conceivable improvement in the efficiency of the program will allow the same tax base that finances care for 12.8 percent of the population to finance care for 20 percent, especially given likely advances in technology. Taxes will be raised or the program will be cut--not necessarily in the next decade but at some turning point down the road. The rise of Republican power in Congress makes it likely that when that turn comes, the choice will be a smaller program rather than more revenue.

During the campaign, President Clinton also outlined a modest reform agenda for health care to replace his original plan. He is establishing an advisory commission on the quality of health care that will particularly address abuses in managed care. Although voters in California this fall rejected two initiatives that would have regulated managed care, this is a powerful emerging issue. Measures to protect patients' rights and the quality of care have an appeal that cuts across socioeconomic lines. Such measures also attract support from many doctors and other professionals, who, ironically, now want government to save them from private-sector controls. Ordinarily, Republicans would be unsympathetic to regulation. But as the bipartisan response to so-called drive-through deliveries has illustrated, managed care raises middle-class anxieties that Republicans cannot ignore.

President Clinton has also called for a new program of health insurance for the unemployed that would cover an estimated 3 million people, and he has talked about continuing to expand publicly financed coverage of children (already growing because of previously legislated expansions of Medicaid). The Republican Congress is unlikely to expand federally financed medical care, but the measure for the unemployed (like the recent increase in the minimum wage) may have more political potential than generally thought. Both Republicans and Democrats have described the Kassebaum-Kennedy legislation as giving Americans the right to keep their health insurance when they lose their jobs. But when the law goes into effect, it won't do anything to help the jobless pay for coverage. As this realization sinks in--perhaps in the next recession--Clinton's proposal for the unemployed may get some serious attention.

Expanding coverage for children might take two forms. The most likely is to encourage families with children who are uninsured but entitled to Medicaid to enroll them in the program. The other approach, embodied in legislation submitted by Sens. John Kerry and Ted Kennedy of Massachusetts, would subsidize the purchase of private insurance. Financing could come from funds freed up by a lower-than-expected rate of growth in Medicaid costs, down last year to just 3 percent.

Other health policy initiatives capable of winning bipartisan support may also make progress in the next Congress. One of these is the medical confidentiality legislation sponsored by Sen. Robert Bennett (R-Utah). Although the most zealous privacy advocates oppose the Bennett bill as inadequate, it has the support of prominent Democrats. In a little-noticed provision, the Kassebaum-Kennedy bill gave the secretary of Health and Human Services a year to submit "detailed recommendations" to Congress on standards for privacy. If Congress fails to act within another two years, the secretary would then have broad authority to establish privacy rules. Congress, of course, can change any deadline it sets for itself. But because of the accelerated computerization of health data there is considerable private pressure for uniform medical privacy legislation. Its time has come.

In the end, the fate of health policy will depend on how the broader political drama unfolds. Only three years ago, universal health insurance seemed inevitable; now it seems unthinkable. Two years ago, the new congressional leadership seemed intent on radically deregulating health care and pharmaceuticals, privatizing Medicare, and abolishing Medicaid. Yet the same Congress went on to raise the minimum wage. So when virtually everyone in Washington, including Sen. Al D'Amato (R-N.Y.), started talking the language of compromise immediately after the November election, I sat back expecting to watch one of the finest displays of political fireworks ever.

Copyright 1996 American Hospital Publishing Inc.