Economic recovery and healthcare reform

President-elect Obama has called healthcare reform an “integral part” of economic recovery. What about Bill Clinton’s healthcare reform package in 1993? Was that also tied to the broader theme of economic recovery? In a comment on an earlier post, a reader asked this question, along with a request for information on the general positioning of the 1993 Clinton plan. Here’s what I’ve found.

To set the scene: There was a great deal of concern about the growing federal budget deficit at the time. The government had bailed out the savings and loan industry in the late 1980s (sound familiar?). There had been an unexpectedly large increase in Medicaid costs in the early 1990s. Rising health costs could endanger the new economic programs Clinton planned to propose. And so the Clinton plan was definitely tied to the broader economic situation of the early nineties.
Clinton saw healthcare costs as a “national imperative” precisely because of the economic implications.

The economic angle was not a major selling point to position healthcare to the public, however. It was part of Clinton’s strategy for overall political success. The positioning involved a great many bargaining chips aimed at every conceivable constituency.

Something for everyone, nothing for anyone

For consumers, the Clinton plan offered:

• universal health coverage
• broad-based rather than bare-bones coverage
• coverage of preexisting conditions
• a prescription drug benefit for Medicare
• substantial health insurance subsidies for early retirees
• home-based long-term care for the elderly and disabled
• standardized benefits and costs, so consumers could directly compare plans
• and consumers could choose their health plan, rather than have employers limit their selection.

Also for healthcare consumers: 80% of insurance premiums were covered, either by employers or the government. Of course employers weren’t crazy about this. And while there was a cap for small business based on payroll size, the 80% figure received wide publicity. Many small business owners either weren’t aware they’d be protected or feared the protection could be taken away.

For fiscal conservatives there was ‘managed competition’ and, if that didn’t work, caps on premium increases. Managed competition included increased compensation for health plans that insured riskier patients, standardized benefit packages, and open enrollment (time periods when consumers could change plans). Unfortunately, many people misinterpreted ‘managed competition’ to mean there would simply be competition among various managed care plans.

Many of the ideas in Clinton’s plan were too complex to be communicated efficiently and effectively. This made political positioning, always difficult, even more delicate.

Clinton was trying to win support from both liberals and conservatives. Thus the plan was full of compromises. Clinton’s strategy included presenting an initial plan to Congress that included more than he expected to get, assuming he could bargain later. Standard bargaining procedure. But it didn’t work. Paul Starr was a White House senior health policy advisor at the time:

To say these judgments about strategy were mistaken is an understatement; they proved to be a disaster. Despite the comprehensive benefit package and the extras such as prescription drug coverage for the elderly, we did not receive passionate support from the groups we were counting on. We did succeed, however, in mobilizing the opposition. The scale of the program and its regulatory features also caused sympathetic groups in the business community and opinion leaders in the media to think twice about support for reform. Because we had failed to edit the plan down to its essentials and find familiar ways to convey it, many people couldn’t understand what we were proposing. There were too many parts, too many new ideas, even for many policy experts to keep straight.

But what about the opposition of special interests, for example the millions of dollars spent on ads like the Harry and Louise commercials, plus less visible efforts such as lobbying and campaign contributions? Starr goes on to say:

No doubt these groups helped to create public anxiety and political paralysis, but their influence is easily exaggerated. Several of the key interest groups were actually less hostile to reform than in any prior battle over health insurance since the 1930s. The problem was not so much that the opponents had more resources, but that the supporters could not mobilize theirs. While the antagonists had great clarity of purpose, the groups backing reform suffered from multiple and complex fractures and were unable to unite.

Was it Hillary’s fault?

I’ve taken most of the information here from two articles by Paul Starr that appeared in The American Prospect. The first is “What Happened to Health Care Reform?“, published in December of 1994. The other is “The Hillarycare Mythology” from September 2007. This latter article corrects a widely held misunderstanding of Hillary Clinton’s role in the healthcare plan. As a presidential candidate, Hillary’s husband Bill had formulated his basic model for the plan in September 1992, just two months before his election. By the time he delegated it to Hillary in late January 1993, the plan had already taken shape. Paul Starr again:

Not only did the fiction of Hillary’s personal responsibility for the health plan fail to protect the president at the time, it has also now come back to haunt her in her own quest for the presidency. According to recurrent accounts — most recently in Carl Bernstein’s shoddily researched biography A Woman in Charge — it was supposedly Hillary’s secretiveness and rigidity that led to fatal decisions about the White House health plan and political strategy. Careful reporting after the failure of the health plan showed these charges were false, but Bernstein and other writers continue to recycle them. Misunderstanding the politics behind the plan, they give a distorted account of why it was defeated. The health-reform debacle was critical in framing Hillary’s public image, and despite her years of accomplishment in her own right, she still carries the burdens of that failure.

As it happened, the federal deficit went down even without the aid of healthcare reform, from $290 billion in 1992 to $164 billion in 1995. But President Clinton doesn’t necessarily get credit for that. According to a paper published by the United States Congress Joint Economic Committee in July 1996, the deficit went down because of an upswing in the business cycle that had already started in 1991.

Thanks again, Suneel, for asking the question. I hope this brings back pleasant memories for you!