Medicare and Medicaid: the first successful effort to increase access to health care.

As discussed in the last article in this series,[1] President Kennedy was singularly unsuccessful in his attempts to enact Medicare legislation. However, the 1962 congressional elections provided President Kennedy with the beginnings of changes in Congress that eventually led to the passage of Medicare in 1965. Several vacancies appeared on the House Rules Committee, the critical committee that pronounces a "rule" indicating whether or not a bill can be debated on the floor of the House. In addition, a key opponent of Medicare, Senator King (of the King-Anderson bill) died in late 1962.

Despite these auspicious signs, a key ingredient was still missing. President Kennedy did not put his full political weight behind the bill. Tax and civil rights legislation were higher priorities. Nevertheless, the House Ways and Means Committee took up the administration's proposal in earnest in November 1963. A key issue debated during these hearings was the relative roles of government and private health insurance. Despite the immediate opposition of the American Medical Association, work continued on possible compromises. Committee hearings came to an immediate end, however, with the assassination of President Kennedy at the end of November 1963.

Lyndon Johnson's First Year

in Office

The first year of Johnson's tenure as President represented an election year both for him and for many members of Congress. Many hoped that Johnson's ability to work the halls of congressional power would be fully applied to the upcoming battle for health care for the elderly. In particular, Wilbur Mills' arm would need to be twisted. While President Johnson supported Medicare, the Chairman of the House Ways and Means Committee supported an extension of the Kerr-Mills program.[1] with significant opposition by both elements of Congress and the AMA, the new President opted to concentrate on the campaign and use the Medicare issue in the presidential race.

Despite the fact that the conflict between President Johnson and the Republican candidate, Senator Barry Goldwater of Arizona, was, in part, over the fear of the unknown (Goldwater was thought to be in favor of a voluntary Social Security system), President Johnson did attempt to inject Medicare into the political debate. He accelerated this effort, particularly after Goldwater voted against proposed Medicare legislation in October 1964. Goldwater did vote in favor of a substitute proposal, a cash increase that was to enable needy Social Security recipients to buy health insurance from the private sector. In response, President Johnson promised to place Medicare at the top of his legislative agenda.

The Legacy of Kerr-Mills and

the Beginning of Medicaid

Despite the Clinton promise that health security will be provided to all Americans, including the poor, the history of the Medicaid program, both before and after its implementation, tells us otherwise. Prior to passage of Medicaid in 1965, an unanticipated companion to Medicare, there existed a patchwork of poorly funded programs for the poor. Unfortunately, after Medicaid was passed, virtually the same situation confronted the poor.

"Medicaid is only the most recent in a series of limited federal health insurance programs which began in 1950. That year the government initiated a program which provided states with very limited matching funds to pay for the care of welfare recipients .... Some 20 states participated. Ten years later Congress enacted the Kerr-Mills amendment to the old age assistance welfare program, increasing federal matching funds for elderly welfare recipients. Called medical assistance for the aged, it made funds available for the first time to some older people who were not eligible for welfare. But, designed by conservative legislators, it helped only 148,000 in its third year of operation. In 1965, the liberal Congress replaced the program with Medicare for the elderly and created Medicaid for low-income people. Medicaid just expanded the inadequate Kerr-Mills program to include the remaining federally funded welfare categories established by the Social Security Act of 1935; Aid to the Blind, Aid to the Permanently and Totally Disabled, and Aid to Families with Dependent Children."[3]

Championed by Wilbur Mills and Senator Robert Kerr of Oklahoma, the Kerr-Mills legislation of the late |50s represented the least politically offensive mechanism of expanding health care to the elderly. However, this legislation, which essentially extended the welfare concept,thus involving means-testing (at a state level) was offensive to the elderly and their increasingly potent allies. The key elements of Kerr-Mills are worth summarizing, as the central tenets became the foundations for the Medicaid program. The same problems afflicting Kerr-Mills almost immediately haunted Medicaid. Medical Assistance to the Aged (MAA) provided federal matching support to states providing services to elderly individuals in need but not poor enough to qualify for cash assistance. The matching program favored low-income states, thus encouraging them to participate and provide needed services. The MAA program left up to the states:

* Control of costs.

* Specification of the upper limits of the program.

* Definition of poverty, the level deserving of cash assistance.

According to Senator Kerr, the program would "provide a program, in every state in the Union in which the individual state has or wants a medical care program for its aged, whereby every aged person in each individual state can, under the provision of a medical care program approved by each state, have an adequate medical care program."[2]

This same approach was adopted in legislating Medicaid. That is, despite the fact that President Johnson promised that, with the adoption of Medicaid, the poor would be able to enter mainstream medicine, the federal government was unwilling to pay the piper. For example, while, at least initially, physicians could charge the patient extra in the Medicare program, the Medicaid program forbade such practices. From a care perspective, low-income patients were seen in hospital clinics before the passage of Medicaid. Except for a brief period immediately after passage of Medicaid, the situation has remained the same, with low-income populations still in treatment in hospital clinics.

The Passage of Medicare

Not only did President Johnson win in 1964; he won by a landslide. Important changes occurred in the makeup of Congress. Anti-Medicare votes were often replaced by pro-Medicare representatives and senators. While initially it appeared that Wilbur Mills might continue his recalcitrant approach to Medicare legislation, insisting on the Kerr-Mills approach, a week after his election he announced his willingness to consider Medicare legislation. Congressman Mills shortly spelled out his precondition for support: a separate tax and trust fund. He insisted on these preconditions because of a fear that, in the event of rapid rises in costs, Medicare might eat into the Social Security program. President Johnson was obliging to the Congressman's concern and early in 1965 sent HR1 and S1 to Congress, fulfilling a campaign promise to place Medicare at the top of his legislative agenda.

The House Ways and Means Committee began its examination of HR1 at the end of January. While Congressman Mills was aware of the strong Democratic majority, he was mindful of the Republican minority, a lesson that President Clinton and his congressional liaison are just beginning to learn. During the Johnson Administration, the Republicans proposed a voluntary program, largely paid for by government money. The amount of support provided to an individual recipient was means tested on the amount of social security he or she was receiving at that time. There was a life-long benefit of $40,000 (medical care was truly cheap back then). Mills liked aspects of the Republican proposal and attempted to co-opt them by including voluntary benefits pertaining to physician services when the Medicare bill was reported out of the House Ways and Means Committee.

With the imprimatur of Congressman Mills' committee, there was no question that the bill would easily pass the House. On April 7, 313 Congressman voted in favor, with only 115 opposed. (In this respect, there are significant similarities between the situation facing the Clinton proposal in the House of Representatives and that facing President Johnson in 1965. If President Clinton can maintain the support of Congressman Rostenkowski, it is likely he will be able to push his proposal through Congress despite the relative lack of enthusiasm in Congress for managed competition.)

The Senate took up Johnson's Medicare proposal in April. Two significant amendments were proposed to the legislation. Anthony Celebrezze, Secretary of Health, Education, and Welfare, recommended what might today appear to be an arcane suggestion but what, in fact, created a huge furor at the time: payment for hospital-based staff physicians (for example, anesthesiologists and pathologists) would be included in hospital Medicare payments. While joint ventures between physicians and hospitals are now commonplace, such a suggestion during the sixties was tantamount to communism. According to the American Hospital Association, it was not a matter of lay control of physicians but rather of the hospital taking responsibility for the services offered to patients on its premises by physicians whom patients had not chosen.[4] The Senate did not accept this amendment.

The second amendment was offered by Senator Long of Louisiana, an early opponent of Medicare who would now switch his vote if an amendment were passed that would extend the hospital and nursing home benefit in return for increased patient copayment. The Senate compromised on the Long amendment and voted on June 23 to increase hospital care benefits by 60 days together with increased patient copayments. Medicare passed in the Senate on July 9, a mere three days after the beginning of debate, by a vote of 68-21. The House and Senate bills went to conference committee and the House approved the final bill by a vote of 307-116 on July 27 and the Senate followed suit by a vote of 70-24 on the next day. These lopsided majorities have hardly ever been seen for any major legislation, let alone controversial health reform legislation of the type President Clinton is sure to recommend.

Even though it was probably not necessary, President Johnson extended himself politically and met on July 29 with leaders of the AMA. By then, the winds of war in Vietnam were beginning to appear. The President used his arm-twisting skills to focus the attention of the meeting primarily on physician support for the small contingent of American troops in Vietnam. After he draped himself with the American flag, the President muttered something about supporting the Medicare proposals and meeting with HEW officials to work out the details of Medicare. As conservative Americans, the AMA leaders agreed on both accounts with the Commander in Chief. On the day after the meeting, President Johnson flew to Independence, Mo., to sign the legislation at the side of former President Harry Truman.

The Role of the Presidency

Richard Neustadt, the renown scholar of the U.S. Presidency, traced presidential influence to three sources:

Formal powers, often termed authority, vested by the Constitution, law, or customs in the Presidency, along with the status they confer on a President.

Professional reputation, amounting to impressions in the Washington community about the skill and will with which the President puts those things to use.

Prestige, the President's public standing, amounting to impressions in the country generally about how well or how badly its President is doing.[5]

At the beginning of his term, when Medicare and Medicaid were passed, President Johnson enjoyed significant presidential influence in all three areas. Johnson's professional reputation in Washington was legendary from his congressional days, and, coming after his landslide win over Goldwater, his public prestige was very high.

The situation may change by the time this article comes out, but current predictions on the fate of President Clinton's health reform package very much depend on the state of Clinton's second and third sources of power - reputation in Washington and public standing. Currently, Clinton's reputation and public standing are relatively weak. His legislative success, particularly on his economic package, will likely demonstrate the possibility of success for his health reform package. That is, if Congress passes his economic package relatively untouched, the health reform proposal may be passed; if numerous changes are made to Clinton's economic proposal, health reform, particularly the portion pertaining to access, almost certainly will not come to pass. In this case, the following situation afflicting the last Democratic President will almost certainly occur: "Carter suffered from the very scale, diversity, complexity of his initial legislative program. He began as a legislative activist in what had been since FDR the Democratic President's tradition. A large share of what Carter sought, all of it controversial, much of it redistributive, was within the jurisdiction of the Senate Finance Committee: energy policy, tax reform, welfare reform, health insurance, social security financing. With unexpected vigor, the committee chairman, Senator Long, proceeded to stalemate the President on every score."[6]

As of this writing, the chairman of the Senate Finance Committee has proposed significant changes to President Clinton's economic proposal. The changes recommended include discarding the energy tax in favor of caps on entitlement programs. In light of this opposition to entitlement programs, it is difficult to see how the Senate will pass a significant enhancement of health insurance coverage for low-income Americans. One concern is that the Congress will agree on passing Clinton's approach to the delivery of health services - managed competition - but fail to deliver access to care for the uninsured.

Lessons for the Current

Health Reform Effort

Successful implementation of a policy initiative depends on three ingredients:

* A purpose that moves with the grain of history, a direction consonant with coming needs.

* An operation that proves manageable to the people who must administer it, acceptable to those who must support it, and tolerable to those who put up with it, in Washington and out.

* Timing, which can be crucial for support and acquiescence.[7]

The cartoons on pages 7, 8, and 9 illustrate some lessons that the Clinton Administration needs to be aware of. The first cartoon demonstrates that, despite the current popularity of extending health care benefits to the uninsured, the actual dollar amount required may "sticker shock" the American public back to their traditional posture of resistance to expanded entitlements. It is very likely that the extent (not the presence) of this resistance will depend on how the total bill is presented and how it is to be paid for. The cartoon on page 8 is especially apt at this point in the Clinton Administration. Many health care experts, known these days as "policy wonks," are riding hard on the health reform issue, with very little understanding of the political aspects of the process.

This series of articles has emphasized the importance of foreign affairs in stymieing health care reform. World War I drained any possible attention away from President Wilson. The aftermath of World War II and the Korean War diverted President Truman's gaze. There are several possible foreign crises that are potential powder kegs and that may detonate into oblivion President Clinton's health reform proposal - at least that portion pertaining to increased health access.

The role of the states was a major issue in the debate leading up to the passage of Medicare. This is particularly interesting in light of today's debate. One segment of the single-payer approach appears to favor the provision of strong leeway to the states, in the hope that several will adopt a regulatory, single-payer approach. Advocates of managed competition, with President Clinton firmly in their political camp, are strongly opposed to any significant opt-out feature for state governments.

This is just the opposite of what was hoped for by proponents of a strong state role during the debate over Medicare. The AMA wanted to have the entire program administered by the states, in the hope that Medicare could, in essence, be watered down. Thus, the issue of the role of the states becomes important, particularly if there is significant disagreement inside Washington over the role of the federal government. President Johnson's landslide victory enabled him to insist on a preeminent federal role in the administration of the Medicare program. In addition to the fact that he has promised a strong role for state government, President Clinton does not have such a powerful coalition espousing a single approach, particularly on the organizational (managed competition versus single payer/rate regulation) side of the health policy debate.

The AMA was the principal opponent of Medicare. President Johnson essentially bought the support of the insurance companies by enabling them to enter a new line of business with the assignment to the private sector of the sale of Medigap policies. The following interaction between First Lady Hillary Clinton (HC) and supporters of the single-payer (SPS) or Canadian approach was reported to have transpired in early January:

SPS: Why do you not support the Canadian model?

HC: Even if I did, the insurance companies are opposed, and they have a significant war chest available for the defeat of any proposal they do not approve of. What do supporters of the single-payer approach have to bring to the table?

SPS: Seventy percent of Americans support the Canadian model, and we believe that, if the President led the country, such an approach would be politically viable.

HC: Tell me something interesting.[8]

It is evident that President Clinton has made the same political calculation as President Johnson did in 1964: You can alienate the medical profession but not the insurance industry. President Clinton has devised the managed competition plan such that it will ensure a continued role for, at a minimum, the large insurance companies.

Supporters of President Clinton may respond that they have, in fact, tried to reach out to the medical profession. However, the physician panel in the Health Care Reform Task Force is composed virtually only of physicians who actively campaigned on the President's behalf. Because President Clinton is much weaker politically than was President Johnson, and the latter extended himself to AMA leadership in a manner not even yet contemplated by President Clinton, it would seem that Clinton should attempt to engage the official leadership of the medical profession in a much more serious manner than he has to date.

To reemphasize, President Clinton is attempting to accomplish what has never before been feasible in the history of the United States: the simultaneous passage of legislation that increases access for a segment of the population, many of whom do not vote, and to reorganize the health care system. In fact, the latter has not even been attempted before. President Johnson did not consider reorganizing the American health care system. He knew he would be lucky to enact increased access for the elderly.

With significant foreign crises and difficult economic times pressuring him, President Clinton has a difficult balancing act to conduct in passing health reform. "The job of being President is tougher when incumbents have to struggle for effective influence in foreign and domestic spheres at once, with their command of nuclear forces losing immediate relevance, and the American economy shorn of its former clout."[9] Medicare was passed at a time of domestic economic plenty. The Vietnam War had not yet intruded its ugly face. The lessons of the enactment of Medicare do not appear to have yet made it to the current White House.

Comparisons of Conditions under Johnson and Clinton Administrations

Similarities

Democratic President

Both houses of Congress controlled by Democrats

Strong national interest in the health care issue

Large insurance companies favor or are neutral

Smaller insurance companies will likely oppose Clinton plan

The AMA in opposition

Differences

Huge election majority for Johnson

Economic prosperity under Johnson; minimal budget deficit

Significant foreign policy dilemmas facing the Clinton Administration

Significant for-profit health sector under Clinton

Labor unions in favor of Johnson plan, ambivalent toward Clinton plan

References

[1.] Goldfield, N. "National Health Reform Advocates Retrench and Prepare for Medicare." Physician Executive 19(3):7-13, May-June 1993.

[2.] Stevens, R. American Medicine and the Public Interest.

[3.] Feingold, E. Medicare: Policy and Politics, A Case Study and Policy Analysis. San Francisco, Calif.: Chandler, 1966, p. 144.

[4.] Ibid., p. 138.

[5.] Neustadt, R. Presidential Power and the Modern Presidents. New York, N.Y.: Free Press, 1990, p. 185.

[6.] Ibid., p. 238.

[7.] Ibid., p. 155.

[8.] The Nation, April 1993, p. 1.

[9.] Neustadt, R. Op. cit., p. 189.

Norbert Goldfield, MD, is Medical Director, 3M/Health Information System, Wallingford, Conn.