The Political Life of Medicare
By Jonathan Oberlander University of Chicago Press
Copyright © 2003 Jonathan Oberlander
All right reserved. ISBN: 0226615960
ONE - Introduction On September 14, 1995, Republican congressional leaders unveiled their plan to overhaul Medicare, the federal health insurance program for elderly and disabled Americans. Emboldened by their first congressional majority in four decades and early legislative successes, the Republican leadership proposed the most sweeping changes in the program's history. They sought to end Medicare's status as a budgetary entitlement by imposing a cap on program spending. They called for a reduction in Medicare expenditures of $270 billion over seven years, a 30% decrease that represented the largest spending cut in Medicare's history. And they proposed transforming Medicare into a competitive market by expanding beneficiaries' options to leave the traditional Medicare system for private health insurance plans.
Newt Gingrich, Speaker of the House of Representatives, promoted Medicare reform as a centerpiece of the Republican legislative agenda, "the heart of this fight" to balance the federal budget. In so doing, he ignored the advice of Republican National Committee chairman Haley Barbour. Barbour warned that Medicare was "the Achilles heel" of the Republican revolution and urged the party to leave it alone until after the 1996 national elections.Gingrich instead launched a full-scale public campaign--complete with pretested communication strategies devised by political consultants--to enact Medicare reform. Having witnessed, and indeed helped to orchestrate, the demise of the Clinton administration's health plan during 1993-94, Gingrich took care not to repeat the administration's perceived mistakes in "losing" health care reform. He moved to neutralize opposition from interests adversely affected by the Medicare changes while securing unanimity on the issue in his own party, both aims that had eluded President Clinton during his failed quest for health reform. The speaker's political acumen in organizing the Medicare campaign was widely praised. California congressman Bill Thomas, chair of the influential Subcommittee on Health of the House Ways and Means Committee, touted the Gingrich plan as "bold, innovative . . . and radical" and confidently declared that transforming Medicare was part of the Republican "mandate of the year."
No amount of legislative bravado or advice from political consultants, though, could temper the inevitable controversy that followed the proposals to change the course of one of the nation's most popular social programs. President Clinton, who had been grasping for political relevance after the humbling Democratic losses in the 1994 congressional elections, seized on the issue. The president vowed he would "not let . . . [the Republican party] destroy Medicare." Congressional Democrats similarly found a unified opposition voice in decrying the Republican Medicare proposal as turning back "30 years of trust and 30 years of hope that our parents and our grandparents will always have the health care they need." The usually gentlemanly Sam Gibbons, the ranking Democratic member of the Ways and Means Committee, personified the intensity of the Medicare reform debate. Upset with strict limits on the time Republican leaders allocated for congressional debate over their Medicare plan, Gibbons angrily confronted subcommittee chair Bill Thomas in a House hallway and grabbed him by the necktie.
Democrats charged the $270 billion cut in program spending would devastate Medicare. Such a sizable and rapid decrease in program spending, they claimed, would inevitably erode the access of the elderly to physicians and hospitals, harm the quality of medical care for Medicare beneficiaries, and ultimately drive both patients and physicians out of the traditional Medicare program and into private insurance plans. Senate minority leader Tom Daschle warned that, if implemented, the Republican proposals would trigger a "Medicare meltdown." Moreover, Democratic politicians charged, the large Medicare spending cuts were not required by the program's financial condition. Instead, the Republicans were using Medicare savings to fund tax cuts for the wealthy. Some Democrats also argued Republican proposals went too far in pushing program beneficiaries into HMOs and in opening up Medicare to private insurance companies more interested in making profits than in providing health care. Senator Edward Kennedy, a longtime Democratic leader on health issues, acerbically remarked that "the Republican Medicare plan may be heaven for the health insurance industry, but it is hell on senior citizens." One Democratic congressman explained that the Republican party's traditional label, GOP (Grand Old Party), now stood for "Get Old People."
Republicans responded that the sweeping changes were necessary to restore Medicare's financial solvency and keep pace with innovations in the private health care system. They accused Democrats of launching a "Medi-scare" campaign that stirred seniors' anxieties while ignoring the imperatives of program reform. In the absence of corrective action, they noted, federal actuaries predicted the Medicare hospitalization insurance trust fund would "be exhausted," and thus unable to cover all benefit payments, as early as 2002. Republicans argued their reforms were critical to avoid the impending trust fund "bankruptcy crisis." Congress had to "save" Medicare, Congressman Bill Thomas warned, "because if we do nothing, Medicare will go broke." The view that reform was both necessary and beneficial to Medicare was embodied in the title Republicans chose for the 1995 legislation: the Medicare Preservation Act.
Republican lawmakers also contended that substantial reductions in program spending could be achieved without harming beneficiaries if Medicare embraced the managed care strategies of the private market. The Republican leadership portrayed Medicare as an outdated insurance model that reflected the health care system of 1965 rather than 1995, even invoking the movie
Jurassic Park to warn about the dangers of not modernizing the programmatic "dinosaur." They pointed to rates of growth in program spending exceeding those in the private sector during the mid1990s. And they asserted opening Medicare up to private insurance plans would not, as Democrats charged, destroy the program but instead improve it by increasing the range of choices available to Medicare enrollees and enhancing quality and innovation in delivery of medical services.
The flurry of charges and countercharges left the press scrambling to figure out who was right and who was guilty of demagoguery. Many journalists found both sides of the debate to be misleading. Linda Killian captured the conventional wisdom, writing that "neither the Democrats nor the Republicans were telling the whole truth. Most of what was going on was political posturing aimed at "scaring old people" and winning political points." Others simply confessed confusion about the true impact of the proposed changes. In the meantime, some health policy analysts accused both Democrats and Republicans of ignoring the real issue: how to absorb the baby boom generation retiring into Medicare beginning in 2010. For these analysts, the baby boomers were a "fiscal tsunami" threatening to overwhelm the program and the federal budget. The elderly population in the United States was projected to increase from thirty-two million in 1990 to seventy million in 2030, with an accompanying decline in the ratio of workers per retiree. A growing number of observers warned these demographic trends made Medicare "unsustainable in its current form." Reforms even more sweeping than the Republican legislative proposals--such as transforming Medicare into a full-fledged voucher system for private health insurance--were said to be required if the program was to remain viable into the twenty-first century. Without such changes, these analysts concluded, Medicare was destined to face an unappealing future of staggering increases in payroll taxes on workers or draconian cuts in benefits for retirees.
Other analysts rejected such projections as far too gloomy. The baby boomers could be absorbed into Medicare, as well as Social Security, without radical reform. They pointed out that European countries had successfully dealt with similar demographic pressures without the dire socioeconomic consequences forecast for the United States by some observers. Moreover, these nations had successfully controlled health spending for older populations without resort to market solutions such as vouchers. There was no reason, they argued, Medicare could not similarly cope with the medical care costs of the baby boom while preserving its programmatic structure.
The Medicare Consensus Lost in the political din surrounding the Republican proposals and the contested demographic assessments of policy experts was a simple, and yet stunning, historical fact. The debate over federal health insurance for the aged that had ended with Medicare's enactment in 1965 had been reopened.
During the late 1950s and early 1960s, Medicare emerged as a polarizing issue in American politics. Its legislative history bore the markings of a deeply ideological and partisan debate that reflected persistent divisions over the failed national health insurance proposals of the Truman administration. The conflict was settled only by the decisive results of the 1964 elections, which generated broad liberal Democratic majorities in both the House of Representatives and the Senate. The new majorities enabled President Lyndon Johnson to sign Medicare legislation into law after a decade of stalemate.
What made the events of 1995 so extraordinary is that in the three decades following the program's enactment, the polarizing politics of Medicare's beginnings had largely disappeared. Medicare had become a cherished institution in American political life, broadly popular with the public as one of the few acknowledged successes of the American welfare state. The popularity of Medicare was due in no small part to the substantial number of American families it helped. By 1995, the program provided health insurance to thirty-three million elderly and four million disabled Americans, as well as coverage for kidney dialysis to 230,000 patients with end-stage renal disease. The reach of Medicare, though, extended far beyond these beneficiaries, as the program touched children and grandchildren who were spared the burden of paying for much of their parents' or grandparents' medical care. Moreover, unlike other government programs serving only the poor, such as Aid for Families with Dependent Children (AFDC), Medicare's constituency had a middle-class identity, since all retirees were eligible for the program regardless of income.
As a consequence, the controversy surrounding Medicare's enactment disappeared once the program began operation. Political opponents learned if not to like the program, then at least to accommodate to its popularity. Members of Congress, as well as presidential administrations, vied to be seen as program friends and, more crucially, to avoid being seen as threatening Medicare, lest they pay a heavy price at election time. The policy world similarly accommodated to Medicare's popularity. Health care analysts focused mainly on incremental proposals to make Medicare's existing structure more efficient and equitable. Improving Medicare, rather than replacing or fundamentally restructuring it, defined the agenda for both policymakers and analysts.
The central thesis of this book is that from 1966 to 1994 Medicare was governed by the politics of consensus. Medicare politics in this period was consensual in three key respects. First, policymaking took on a predominantly bipartisan character, with Democrats and Republicans generally agreeing on the direction of program reform even as that direction changed substantially over time. Second, bipartisanship produced a quiescent politics, in which Medicare policymaking rarely triggered large-scale public debates. Third, and most critically, with no debate over ideology or programmatic first principles, from 1966 to 1994 a de facto consensus prevailed in favor of maintaining Medicare as a universal, federally operated government health insurance program. That consensus was liberal at its core. Consequently, programmatic stability meant that, over time, the Medicare consensus continued to embody a liberal vision of the program's structure, philosophy, and goals.
I argue that the Medicare consensus fractured in 1995, in the midst of a radically altered political environment and a changing health system, leading to the rise of a new politics of Medicare. The difference was not merely substantive, though the consensus that Medicare should operate as a universal public program eroded substantially. In 1995, Medicare entered (or more precisely, reentered) a different type of politics. Bipartisanship gave way to sharp partisan differences, quiescence was replaced by controversy, and political conflicts were played out against the backdrop of a public debate as Medicare moved from the margins to the center of American politics. The scope of conflict in Medicare after 1995 thus differed fundamentally from the politics of 1966-1994. It was wider, with an engaged public, and the very nature of the program was at stake, echoing in important ways the political contest over Medicare's enactment. As consensus fractured, then, Medicare moved in 1995 from a politics of program management (low-visibility, low-conflict, low-ideology politics that focuses on program administration and efficiency with limited public involvement) to a politics of program transformation (high-visibility, high-conflict, ideological politics that centers around efforts to change--or enact--a program's basic structure and philosophy with a greater role for the public).
How Medicare politics operated during the era of relative consensus and stability, as well as the fracturing of that consensus in 1995 and its aftermath, is the subject of this book. To be sure, the politics of consensus in Medicare was far from absolute. There have always been opponents of Medicare in Congress. During the era of consensus (1966-94) there were important disagreements between Democrats and Republicans on particular issues--for instance, in deciding who should bear the financial burden of rising Medicare costs. Republicans generally were more willing to impose higher costs on elderly beneficiaries, while Democrats looked first to physicians and hospitals as targets of spending cuts. There were also some instances where Medicare politics sparked public controversy, such as the repeal of catastrophic health insurance in 1989 and, despite strong protests from the medical profession, the introduction of professional standard review organizations in 1972 to monitor the medical care delivered to Medicare beneficiaries. And during the program's first three decades, there were substantial changes in program policy, including the transformation of Medicare's regulation of health care providers.
Yet Medicare's congressional enemies were few in number and their political impact negligible. And differences between Democrats and Republicans were tightly contained within the bipartisan consensus that favored maintaining Medicare as a federally operated health insurance program. Medicare's popularity created a political boundary few politicians were willing to cross to challenge its fundamental purposes or organization. In the end, the common ground between Republicans and Democrats on Medicare policy during 1966-1994 was far more impressive and consequential than their differences. The policy changes adopted in Medicare reform were generally supported by both parties. And public controversy over Medicare was an exception to a norm of quiet politics and policy-making that operated far from the public eye. In a political environment bounded by consensus, policy reforms of tremendous importance, such as the introduction of hospital and physician payment reforms during the 1980s, were enacted with little controversy and scant public notice.
It is also crucial to recognize that in key respects the Medicare consensus, throughout both periods of maintenance and fracturing, was an elite rather than public phenomenon. As I will show, the public did not support critical elements of the consensus that federal policymakers held strongly, such as the limits on Medicare benefits. And the unraveling of consensus in 1995 with the rise of the market as a model for Medicare reform occurred as a result of changes among policymakers and politicians, not the mass public. Chapter 6 examines the significance of this split between the public and political elites for democratic accountability in Medicare politics.
Medicare: The Three Tensions My intent is not to write a comprehensive history of Medicare. There are many subjects and events of significance not treated here. Rather, the aim is to analyze Medicare's political development from 1965 to 2002. I therefore selectively highlight patterns and episodes representing central themes in Medicare politics. It is my hope that these themes will provide a useful framework for the reader to consider the politics of Medicare.
Despite its prominence in American politics and health care policy, there has been relatively limited scholarly attention to the politics of Medicare after 1965. A substantial literature on Medicare policy has developed, produced predominantly by economists, but it has little to say about program politics. Political scientists have conducted important research on particular periods and issues in Medicare politics. Yet there is currently no work that comprehensively investigates Medicare politics across all three decades of its operation and the different dimensions of program policy. This book is intended to redress that void. I weave together existing studies of Medicare with my own research in a new synthesis in order to tell the story of the program's political development. I also seek to illuminate areas of Medicare politics remarked upon only rarely--in particular, the dynamics surrounding program financing and benefits (previous studies of Medicare have by and large focused on the politics of cost control). My analysis therefore relies extensively on primary sources, including government documents, congressional hearings, and interviews.
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