Feature

Not waving but drowning

The prospects for health reform in the US have plummeted along with the political fortunes of President Clinton. Geof Rayner explains how it all went wrong for Bill’s bill

Nobody could accuse President Clinton of not investing thought in his plans for health care reform. He had co-opted his wife Hillary, his friend Ira Magaziner, and 450 health policy consultants to bring it all together.

But the bill which emerged from his laboratory in September 1993 — the Health Security Act — was a 1,350 page Frankenstein’s monster, not only badly assembled but also constructed from the wrong parts. Despite widespread public demand for health care reform, the ideas in Bill’s bill could not be translated into popular support. With pieces grafted on from the existing system, the plan was just too unattractive to inspire those who should have been the natural supporters of reform — the unions, the elderly, and the left. But the forces ranged against it were legion.

After a debilitating journey through multiple Congressional committees, by the middle of summer 1994 the bill was already a shadow of its former self, losing its moral claim to offer universal coverage and, in the form proposed by the Democratic leadership, devoid of the financial obligations on employers which had originally made the plan viable. By August, as mid-term elections approached, Congressional time ran out for Bill’s monster.

A full examination of its remains would show that its demise had involved a whole cast of villains — right wing Republicans, wavering Democrats, corrupt insurance companies, short-sighted employers and the thousand and one special interest groups who have been doing very well from America’s trillion dollar health care gravy train.

It might have been different. The Democratic Party’s purpose was to provide universal health insurance for Americans, a noble and historic aim. The US is the only country in the OECD without comprehensive health care arrangements despite a history of reform efforts stretching back before the first world war. But instead of adopting what would probably have been the simplest and most acceptable option (with some modifications) — that found just across the border in Canada — the Clintons tried to establish a wholly new approach based on a plan originally drawn up by Professor Alain Enthoven, the guru who inspired Thatcher’s reforms of the NHS.

In Britain, Enthoven has always tried to present himself as a socially-conscious liberal, but his track record at home is somewhat different. A former under-secretary of defence turned health economist, during the Reagan era Enthoven had argued that a key reason for holding down health care costs was to release money for the military build-up.

The centrepiece of Enthoven’s ideas was that American health care should be reformed by encouraging groups of employers to form purchasing consortia. Health care providers and insurance companies would compete in creating ‘plans’ to offer a comprehensive — but minimum — package of health care. Health care providers would then be forced to operate like real businesses, offering standard, comparable packages which could be negotiated by price. The approach was termed ‘managed competition’, a phrase with little actual meaning but one guaranteed to press all the right buttons with corporate America.

Clinton adopted the term too, but added a large regulatory apparatus to make it work. Enthoven had said that the managed care market place would bring prices down. Other economists didn’t agree, and so Clinton’s plan also contained price controls to be set centrally by a new National Health Board. The health care industry didn’t like this idea (and neither did Enthoven) and employers didn’t like the fact that 80 per cent of the costs would be paid by them. What they had previously seen as a freely negotiated employment benefit was beginning to look like another corporate tax. Even ‘enlightened’ employers like IBM, who had been involved in detailed discussions with the Clinton administration and already paid $1bn a year in employee health benefits, advised their employees to oppose it.

If large employers were unhappy, small employers were apoplectic. For many small employers the 80 per cent requirement was a new cost since they didn’t provide occupational benefits already. Despite the offer of subsidies many claimed that these new costs would drive them out of business.

As well as the employers, the Clintons faced another powerful group, the insurance industry. The US health insurance industry is composed of some 1,500 different companies, including so-called non-profit schemes like Blue Cross, which faintly resemble companies like BUPA in the UK. It is a ramshackle and inefficient industry which makes money by denying coverage to the poor and sick, and writing policies of such complexity with so many get-out clauses that even the wealthy can be bankrupted by long-term sickness. Clinton’s plan envisaged a slimmed down industry composed of only the larger players, who gave the plan tacit support and promptly left the existing industry-wide trade association to form their own. The remainder spent millions of dollars on misleading television advertising which gave the impression that future health care would be administered by people in jackboots.

Of course, the declining political fortunes of the Clintons didn’t help. From the start, the cause of health care reform had been championed by Hillary Clinton who imbued the reform programme with energy and moral purpose. Unfortunately the Whitewater crisis and other alleged misdemeanours soon marred the virtuous image. Initially the Republicans, always the poodles of industry lobbyists, were on the defensive, unwilling to be seen as an obstacle to popular reform. But by the summer of 1994 they were up to their usual trick of denouncing health care reform as ‘socialised medicine’.

Alas, it was hardly that. The Democrats, divided into supporters of Canadian-style social insurance on the left and advocates of Enthoven-style ‘managed competition’ on the right, simply could not agree on a common direction. In a political system which lacks party discipline, the inevitable outcome was a stalemate.

When they came to office the Clinton administration had thought the time was ripe for reform. But the events of 1994 suggest that US health care may have become too big and politically powerful for government-inspired reform. It may take a major catastrophe — or the perception of one, which amounts to the same thing — to give members of Congress sufficient determination to ignore the blandishments of the lobbyists, which have become an important source of campaign contributions.

There is already a consensus around insurance market reform, and legislation may be introduced to stop insurance companies denying coverage because of prior medical conditions, or loading premiums for illness or other factors. At best, this would take the market back to the less vicious insurance practices of the 1950s, in which case things may have to get even worse before fundamental reform moves up the political agenda once more. But while most Americans share a sense of health insecurity, the worst problems are faced by the weakest groups in society, 35 million of whom have no access to health insurance. Such people can little afford to wait yet again for reform.

The US health care system is consolidating fast. Large insurance companies are buying hospitals and independent practice and fee-for-service medicine is being transformed by managed care and health maintenance organisations. In the wake of failed reform measures on Capitol Hill, the emphasis is now likely to switch to individual state legislatures.

In the face of the expensive and inequitable mess US health care administration is in, a mess which was so fully exposed during the reform debate, it is ironic to note how many US-inspired ideas have now infected the NHS. The gurus of the health economics establishment continue to insist that the British are ‘parochial’ in not studying what the Americans have to offer, particularly in mechanisms for controlling costs and quality. But should we really take seriously ideas which have failed at home and are now looking for successful application abroad?