Preferred Citation: "Look Who's Talking Health Care Reform Now," New York Times Magazine, September 3, 1995. pp. 42- 43.

Look Who's Talking Health Care Reform Now

Paul Starr

This fall the country will be talking health care again--or at least should be talking about it--as Congress moves to change the principles on which Medicare and Medicaid were established thirty years ago. A writer with a taste for irony could scarcely conceive a better plot, and as one of those who wrote the Clinton plan I confess it strikes me as more than ironic.

Two years ago, Republicans were denouncing the secrecy surrounding the president's health care task force. This summer they have been meeting "behind closed doors" on a Medicare proposal scheduled to be released later this month, only a few weeks before Congress votes on it, thereby avoiding independent analysis of the costs, mobilization by opponents and other inconvenient aspects of a long national debate. Two years ago, the Republicans rang alarms about the Clinton plan's emphasis on managed care. Now the Republicans' own plans for Medicare and Medicaid emphasize managed care.

But superficial similarities are deceiving. The reform plans of 1993 generally aimed to extend rights to health coverage and health care; the Republican proposals this year will retract rights that already exist. The debate two years ago reflected a widespread belief that the health care system needed reform. The Republicans, like many in the business world, now begin with the happy thought that the system is reforming itself and that government needs to be more like the private sector.

The health care system is certainly going through profound change. Health maintenance organizations and other forms of managed care are expanding rapidly. As managed care grows, demand for hospital care shrinks. Hospitals are merging, closing beds, and cutting jobs; some new buildings stand vacant. HMOs are also limiting specialty referrals and lucrative procedures; the incomes of specialists in some areas are dropping, and primary- care practitioners are in demand. In a stunning shift, once stubbornly independent physicians are selling their practices to hospitals and insurers or taking a fixed payment per enrolled patient and accepting the discipline of the corporation.

Partly as a result of these developments, health care looks like less of a problem to employers. Companies that five years ago faced double-digit inflation in health benefits have seen costs go flat. The success of managed care in controlling costs confirms a key premise of the Clinton plan and other managed competition proposals: substantial savings are feasible. The aim of reform, however, was not merely to hold down costs, but to give people better value for their money.

Whether that is happening is hard to say; we have no national index of the quality of care. The shift to managed care has disrupted many Americans' relationships with their doctors. Many employers have also cut costs simply by requiring their employees to pay a larger share of the bill, and some have stopped covering dependents. A big part of the problem has always been lack of coverage for millions of Americans. Now, declining employer-provided coverage has left more people uninsured--nearly 41 million at any one time, up by 2 million in 1994.

Under the Clinton plan and other reform proposals, hospitals and specialists would also have borne the brunt of cost containment. For decades, hospitals had overbuilt and physicians had overspecialized; a correction, unavoidably painful, was coming. The changes taking place today, however, do not embody the values of progressive reform. The savings from rationalizing the system are not being applied to make it more inclusive. A new system of corporate health care is emerging without the new framework of rights and obligations that reform would have brought; corporate interests consequently have the field almost entirely to themselves.

Employers have no obligations to pay any share of health insurance or to offer their employees a range of choices. Insurers can still cherry-pick the healthy and shun the sick, and for the most part, they have no obligation to cover preexisting conditions. They do not have to disclose to doctors, let alone patients, their rules for denying coverage, and when they refuse to approve a service or a provider, patients find their rights are limited.

And the root problem of health coverage remains unsolved. Employment-based health insurance is now in its second decade of steady decline, reflecting a broader decline of real wages and increasing reliance on contingent workers. If not for the expansion of Medicaid during the 1980's, we would have 50 million uninsured. During the rest of the 90's, employer-provided coverage is likely to decline further, and Medicaid will contract. Americans will then have even less security than now about affording health care when illness strikes.

Only by ignoring these realities is it possible to say that the private health system is reforming itself. The emerging health care marketplace, in fact, is likely to reduce access to care for the uninsured. Hospitals and clinics have traditionally shifted the cost of charity care to insured patients, who have consequently paid a hidden "tax" in their bills. Managed-care plans, however, refuse to pay that tax; they demand discounts, and if one hospital refuses, the plans contract with another. The hospital and clinic that provides charity care now commits an economic sin: it risks making itself uncompetitive. During the national debate, opponents of reform often said lack of insurance didn't matter much because doctors and hospitals still took care of the uninsured. This was never entirely true--the uninsured get less care--but the emerging market makes our old Robin Hood system impossible to maintain.

The emerging market also isn't going to satisfy concerns about individual choice. About half of the workers who receive coverage (including most insured employees in small businesses) have no choice among alternative health plans. In the old days, it hardly mattered that the employer picked the insurer since the plans pretty much covered all providers. But when employers now adopt managed care, they effectively choose doctors and hospitals for their workers and families. This is an anomaly in our society. My employer doesn't determine where I shop, live or send my children to school. Why should my employer pick my health plan and my doctor? But, increasingly, that's how Americans get their health care--and not through a system of unlimited free choice, which critics of reform often conjure up as if it described the present.

Unfortunately, the old system of unconstrained health insurance that covered almost all costs is gone. The Clinton plan would have shifted the choice of health plan from employers to families and required plans and providers to disclose information that would help people choose sensibly. The Clinton plan also sought to open up a wide menu of options at different prices, including fee-for-service plans. The irony is overwhelming. Many people who opposed reform because they believed it would restrict their choices now face a system that is becoming far more restrictive.

Perhaps nowhere is the irony greater than for Medicare. Many of the elderly also opposed reform for fear they would lose benefits and freedom of choice: "Don't let the government get hold of my Medicare" was one beneficiary's much-reported plea to a Congressman. In fact, while adding prescription drug benefits, the Clinton plan did not fundamentally change the structure of Medicare.

Such a change is exactly the aim, however, of a Republican Congress now committed to cutting $270 billion out of the program over seven years. A draft Republican proposal would encourage the elderly to join HMOs by charging them more both for Medicare and for the supplementary (Medigap) plans they buy to cover out-of- pocket costs. Many Republicans want to cap Medicare expenditures but to uncap provider charges. Those policies alone will make it impossible to assure that elderly continue to receive Medicare's package of benefits. Instead of defined benefits, the elderly would get a fixed amount of money--often described as a voucher-- which over time might not buy the insurance they now receive as an entitlement. Ending Medicare as we know it was not, as I recall, a campaign slogan, but it is plainly where this policy is headed.

Ending Medicaid as we know it is an immediate prospect. Republicans want to replace Medicaid with block grants that would give the states an average of 30 percent less money in the year 2002 than Medicaid would. Welfare is currently the basis on which many of the poor now qualify for Medicaid. The clear prospect is that many of the poor who lose eligibility for welfare would also lose eligibility for medical coverage.

The big losers include would also include teaching hospitals and medical schools. They are being hit by what is technically known as a double whammy. First, the rise of managed care threatens their clinical revenues; managed care plans not only use hospitals less but also shift patients to lower-cost institutions. Second, Republican budget plans would end subsidies for medical education that have come with Medicare hospital payment. During the debate over the Clinton plan, the medical schools and teaching hospitals clamored that they weren't being treated well enough. Actually, they did quite well, especially compared to the massive retrenchment they now face.

Budget plans come and go. The historic importance of what is happening is the shift in legal rights. Health care reform would have given Americans a right to coverage and a variety of other rights in relation to employers, insurers, and health care providers. Converting Medicare into a voucher and Medicaid into block grants eliminates the legal rights to medical benefits that the elderly and some of the poor now have.

This movement to eliminate rights is not a cautious version of reform; it is its opposite, reverse reform, a radical version of that. During the debate over the Clinton plan, many of its critics said first we should first control costs and only then extend coverage to the uninsured. The thrust of policy now, however, is to cut costs by retracting rights to coverage.

There is still talk of legislation that would set some minimal federal standards for health insurance, which might benefit people with preexisting conditions. But there is no money, at least not in the current Congress, for extending coverage to the uninsured. In opinion polls, Americans keep saying that health care reform is a high priority. I cannot believe that reverse reform is what they have in mind.