National health reform advocates retrench and prepare for Medicare.

With the failure of President Truman's efforts to pass compulsory health insurance for all, national health reform (NHR) advocates began to redirect their political attention to a politically powerful group of Americans who were simultaneously vulnerable from a health care point of view- the elderly. This effort culminated in the passage of Medicare under President Johnson. This article will focus on antecedents to passage of Medicare that can be found in the Eisenhower and Kennedy administrations. It will also discuss other facets of health reform proposals from the Eisenhower administration. While most proposals never became law, the legislative intent of many of them - outlawing cancellation of policies, a minimum standard health benefit package, establishment of regional health authorities, preference for prepayment plans, and establishment of a reinsurance pool administered by the federal government- is currently under active discussion by the Clinton health reform task forces. ith the ascent of John F. Kennedy to the presidency in 1961, the approach to health policy changed. Advocates of national health reform, licking their wounds from the FDR and Truman defeats, decided that it was preferable to pass half a loaf rather than come up empty handed. The push was on for a Medicare-type program. In many ways, the Clinton Administration has also decided for half a loaf in its espousal of free market solutions to the health care cost crisis. What remains to be seen is whether Clinton includes universal access for the uninsured in the half loaf or whether access will have to wait for cost savings to occur first. Neither Eisenhower nor Kennedy offered universal access in their legislative initiatives. In today's climate of cost control, it is unlikely that this will be recommended in the Clinton recommendations.

Health Care in the Early 1950s In 1954, a briefer version of the reports from the Committee on the Costs of Medical Care (see article x in this series) was published by the Commonwealth Foundation.[1] Koos provides us with a vivid picture of health and health services provided in a medium-sized town in middle America during the Eisenhower Administration. The concept of the family doctor was still very much in evidence. In the early '50s, the armamentarium available to physicians began to significantly increase, but many still preferred the old ways of being treated by their family physicians: "It's got so that the doctor don't even carry any medicine with him at all. When you've got five kids the way we have, you're going to need a doctor pretty often. All Doctor W did was haul out a pad and write a couple of prescriptions for you to take to the drugstore. So you had to go to town to get them filled. What's the sense? ...Now we've got Doc Z, and he just hands out a bottle of what you need and gives it to you." (2)

Medical science still had relatively little to offer compared to the advances made in the last quarter century, but the demand for medical services was present and the lack of health insurance was very much in evidence. While employer-sponsored, voluntary health insurance covered an ever-increasing percentage of Americans, fully half of the population, concentrated among the poor and elderly, was without health insurance. The humiliation of not being able to afford medical care was present then as it is today: "I suppose I could have a doctor come for my husband's sickness, but he won't have it. He gets more crippled all the time but we just get along financially now, and we haven't any money to pay him....We never took any charity, and we're too old to begin to now....I wish there was some way we could have him come, but we just can't."

Eisenhower Health Insurance Reform Proposals

It should be emphasized that the first health reform bills to be discussed not only were not sponsored by the Eisenhower Administration but in fact were opposed by the President in an effort to promote his reinsurance plan. However, it was Republicans, not Democrats, who sponsored the bills that attempted to provide rederally subsidized voluntary prepayment health programs. Many aspects of these bills bear an interesting resemblance to aspects of the Clinton approach. In some ways, parts of the proposals represent a variant on managed competition that might be termed "managed cooperation." The essential features of the program originally proposed by Republican Senators Flanders and Ives in 1949 and resubmitted several times during the Eisenhower Administration included:

* Subsidizing part of the premium costs of low-income groups and the losses incurred by a carrier from insuring above average risks.

* Subscriber premium charges to be based on the level of the individual member's income.

While a recommended level of health benefits was included, the final benefits were to be left up to a regional health authority.

Financing the cost of the benefits would involve funds derived from three sources--subscribers' premiums, state and local subsidies, and federal grants in aid to the states. However, actual operation and control of the programs would be under state administrative agencies.(4)

Certain aspects of the Flanders/Ives legislation merit emphasis in light of the likely Clinton legislation. First, the higher the individual's income, the more the individual would pay for health insurance. The bill would have begun to chip away at the employerbased nature of health insurance coverage. Similar to the Clinton approach, the Flanders/Ives legislation left many of the details of level of benefits and administration of the program up to the states. Of great interest is the legislation's encouragement of prepaid approaches. In addition, aspects of the regional authority concept in the Flanders/Ives legislation merits examination could be viewed as primordial examples of the Accountable Health Partnership and Health Insurance Cooperative terminology of managed competition. All in all, it is understandable why this legislation, although sponsored by congressional Republicans, was opposed by the AMA: "...[these bills would] federalize certain functions that can and should be planned for and operated on a local level. Federal subsidy of prepayment health insurance plans will involve the establishment of federal standards which will ultimately result in federal control." President Eisenhower pushed a separate agenda best summarized in his message on "Recommendations to Improve the Health of the American People," delivered to Congress on January 18, 1954. The salient features of his program were(6):

* Establishment of a new cabinet department named Department of Health, Education, and Welfare. Until this time, health care programs were dispersed throughout different government agencies, with the Public Health Service, for example, located in the Department of Treasury.

Increased funding for research, particularly for the National Institutes of Health.

Encouragement of voluntary health insurance. In particular, Eisenhower recommended the "establishment of a limited federal reinsurance service to encourage private and not-for-profit health insurance organizations to offer broader health protection to more families. This service would reinsure the special additional risks involved in such broader protection. It can be launched with a capital fund of $25 million provided by the government to be retired from reinsurance fees."

* Increased funding for vocational rehabilitation services.

* Continuation of legislation modeled after the Hill-Burton Act, which served to increase construction of medical facilities.

* Permit insurance carriers to reinsure substandard health risks.

Of significance for today's debate is Eisenhower's proposal on reinsurance. While this may appear to be an arcane and somewhat irrelevant issue in today's debate, the concept of reinsurance is important to clarify. The cost of reinsurance is much highAmericans, fully half of the population, concentrated among the poor and elderly, was without health insurance. The humiliation of not being able to afford medical care was present then as it is today: "I suppose I could have a doctor come for my husband's sickness, but he won't have it. He gets more crippled all the time but we just get along financially now, and we haven't any money to pay him....We never took any charity, and we're too old to begin to now....I wish there was some way we could have him come, but we just can't."(3)

Eisenhower Health Insurance Reform Proposals

It should be emphasized that the first health reform bills to be discussed not only were not sponsored by the Eisenhower Administration but in fact were opposed by the President in an effort to promote his reinsurance plan. However, it was Republicans, not Democrats, who sponsored the bills that attempted to provide rederally subsidized voluntary prepayment health programs. Many aspects of these bills bear an interesting resemblance to aspects of the Clinton approach. In some ways, parts of the proposals represent a variant on managed competition that might be termed "managed cooperation." The essential features of the program originally proposed by Republican Senators Flanders and Ives in 1949 and resubmitted several times during the Eisenhower Administration included:

Subsidizing part of the premium costs of low-income groups and the losses incurred by a carrier from insuring above average risks.

* Subscriber premium charges to be based on the level of the individual member's income.

While a recommended level of health benefits was included, the final benefits were to be left up to a regional health authority.

Financing the cost of the benefits would involve funds derived from three sources--subscribers' premiums, state and local subsidies, and federal grants in aid to the states. However, actual operation and control of the programs would be under state administrative agencies.(4)

Certain aspects of the Flanders/Ives legislation merit emphasis in light of the likely Clinton legislation. First, the higher the individual's income, the more the individual would pay for health insurance. The bill would have begun to chip away at the employerbased nature of health insurance coverage. Similar to the Clinton approach, the Flanders/Ives legislation left many of the details of level of benefits and administration of the program up to the states. Of great interest is the legislation's encouragement of prepaid approaches. In addition, aspects of the regional authority concept in the Flanders/Ives legislation merits examination could be viewed as primordial examples of the Accountable Health Partnership and Health Insurance Cooperative terminology of managed competition. All in all, it is understandable why this legislation, although sponsored by congressional Republicans, was opposed by the AMA: "...[these bills would] federalize certain functions that can and should be planned for and operated on a local level. Federal subsidy of prepayment health insurance plans will involve the establishment of federal standards which will ultimately result in federal control."(5) President Eisenhower pushed a separate agenda best summarized in his message on

"Recommendations to Improve the Health of the American People," delivered to Congress on January 18, 1954. The salient features of his program were(6): Estab lishment of a new cabinet department named Department of Health, Education, and Welfare. Until this time, health care programs were dispersed throughout different government agencies, with the Public Health Service, for example, located in the Department of Treasury.

Increased funding for research, particularly for the National Institutes of Health.

Encouragement of voluntary health insurance. In particular, Eisenhower recommended the "establishment of a limited federal reinsurance service to encourage private and not-for-profit health insurance organizations to offer broader health protection to more families. This service would reinsure the special additional risks involved in such broader protection. It can be launched with a capital fund of $25 million provided by the government to be retired from reinsurance fees."

Increased funding for vocational rehabilitation services.

Continuation of legislation modeled after the Hill-Burton Act, which served to increase construction of medical facilities.

Permit insurance carriers to reinsure substandard health risks.

Of significance for today's debate is Eisenhower's proposal on reinsurance. While this may appear to be an arcane and somewhat irrelevant issue in today's debate, the concept of reinsurance is important to clarify. The cost of reinsurance is much higher than popularly known. Re-insurance, also known as stop-loss, can be defined as the financial protection of excess costs incurred by a health care provider and/or insurer. The lower the level at which reinsurance is used, the higher the cost of purchasing it. All health care entities, whether they are prepaid or traditional indemnity, use other insurance companies, many of which specialize in reinsurance activities. In the United States, estimates for the cost of providing reinsurance are in the billions of dollars. For this reason alone, a government-sponsored reinsurance program that has elements of the Eisenhower proposal may receive attention from the Clinton task force teams. The salient aspects of the two Eisenhower submissions on reinsurance were: Establishment of a reinsurance fund that would pay 75 percent of a plan's losses on reinsured contracts that exceeded the premium income of the contracts, less 87.5 percent of the administrative expenses predetermined for the contract.(7)

Four funds were directed toward plans for all income levels and types of health insurance plans.

The foregoing summary of the Eisenhower health reform program indicates that, within the context of insisting on a voluntary rather than compulsory philosophy, the Republicans pursued an activist approach to health insurance reform. It indicates why the President of the AMA warned in his annual address to the House of Delegates that "our economic problems are not solved....As a matter of fact, these problems have increased. The socialistic trend and government intrusion into the business and affairs of the people have shown little evidence of change. The greatest battle for the preservation of democracy is yet to come.(8)

The reimbursement program, along with many of the other major initiatives proposed during the Eisenhower administration, were not passed into law. The reinsurance proposal passed the House of Representatives in 1954 but was not considered by the Senate, thus killing the measure. Eisenhower reintroduced the measure in subsequent sessions of Congress without success.

One other proposal from the fifties merits brief mention in light of current proposals encouraging managed care organizations. Senator Hubert Humphrey of Minnesota unsuccessfully proposed the Health Services Facilities Act, which would have provided loans for the development of group practices operating on a prepaid basis if "a group of people in a community where health facilities are inadequate will form a voluntary health plan organization and be prepared to assume the financial responsibility for working out their own problems."(9) The loans would have been supervised by the Surgeon General in conjunction with a National Health Services Facilities Council, a very primitive example of what the Clinton Administration is considering in the development of a National Health Board.

Health Care Politics and the 1960 Presidential Campaign

By the late 1950s, the elderly had begun to mobilize in favor of government-sponsored health insurance. Demonstrations in favor of a variety of legislative proposals increased in frequency. Early in 1960, at the start of the presidential campaign, Vice President Nixon, the likely Republican candidate, pushed President Eisenhower to propose a program providing health care coverage for the elderly. However, Eisenhower remained opposed to any compulsory program operated at the federal level along the lines of the Forand bill, one of the many laws proposed in the late '50s (figure 1, above). The President was also initially opposed to a federally controlled "subsidized system of voluntary health insurance for the aged."(10)

The numerous demonstrations by the elderly increased the pressure on presidential candidates to come up with concrete proposals. The Administration came up with its proposal in May 1960 in testimony by the Secretary of Health, Education, and Welfare, Arthur Fleming, to the House Ways and Means Committee. The plan consisted of grants in aid to the states and had the following features: "An enrollment fee of $24 would enable the recipient to be paid 80% of health insurance costs after the individual paid a deductible of $250 for the following services: hospital care up to 180 days, skilled nursing home care or home care services for up to 365 days a year, surgical procedures, physician's services, dental services, prescribed drugs up to $350 in cost, private duty nursing and physical restoration services.(11)

While this plan may sound attractive, it must be emphasized that participation in the program was to be left up to the states. In addition, the scope of the program was to be left up to the states. In many ways, the program resembles the current Medicaid program. Providing patchwork coverage has historically been politically acceptable for health services to the poor. The Medicaid program, passed in 1965 along with Medicare, represents a version of the Eisenhower proposal. The recently approved Oregon proposal that rations care only for the poor represents another example of what Americans are willing to do for the poor but not for the middle class.

During the 1960 campaign, three distinct groups proposed differing legislative approaches to ensuring access for the elderly: the traditional majority of southern Democrats allied with conservative Republicans who were opposed to any initiative; liberal Republicans in favor of a voluntary program; and liberal Democrats in favor of a compulsory program. During the firties and early sixties, all powerful committee chairmen (they were only men at the time) also had to be reckoned with. In health care, this individual was Wilbur Mills, chairman of the House Ways and Means Committee. Representative Mills held the key to eventual passage of Medicare. During the 1960 Presidential campaign, he sent his committee a proposal, H.R. 12580, providing federal grants to states to pay for medical insurance for the needy aged. This entirely voluntary program passed the House on June 22 by a vote of 381-23. Liberals in the Senate hoped for compulsory, social security legislation, along the model of the Forand bill. However, forces in the Senate, in combination with Eisenhower's opposition, defeated the Forand approach and other similar compromise measures. Instead, Representative Mills' perspective, embodied in the Kerr-Mills legislation, became law on August 29. By 1962, less than half of the states had opted for this voluntary program.

Kennedy's Push for Medicare

By the time of Kennedy's election, a patchwork of health coverage began to appear for the elderly, making it more difficult to pass comprehensive health reform. According to the National Health Survey: "When the total family income of the person 65 or over (including both his own income and that of all other family members) was under $2,000, only 33% of the aged had hospitalization insurance. When the family income was $4,000 or more, 59% had hospitalization insurance .... Where insurance paid part of the bill, it covered less than half the total in 18% of those cases, between one-half and three-quarters of the bill in 23% and three-fourths or more in 59% of those cases.(12)

On February 9, 1961, President Kennedy sent a message to Congress, advocating "enactment of a health insurance program under the social security system [that will] meet the needs of those millions...."(13) Embodied in the King-Anderson bill, this expansion of the social security system promised coverage of both inpatient and outpatient services. Copayments and deductibles were present. In addition to the AMA, the American Hospital Association was sharply critical of the legislation. Because of the opposition of outside interest groups and the implacable opposition of Wilbur Mills, the House Ways and Means Committee did not even allow the bill to come before the House for debate in the first session of Kennedy's Presidency. While Kennedy was clearly in favor of compulsory health insurance for the elderly, it must be recalled that he was

preoccupied with other matters. The Bay of Pigs invasion, the Cuban missile crisis, and the Berlin Wall crisis were only a few of the foreign issues that Kennedy had to direct his attention to. On the domestic scene, civil rights took precedence over health policy. While President Clinton has vowed to maintain a laser beam on domestic issues, foreign crises may still take a toll on both his time and his political capital.

Rebuffed in his first effort to have Congress enact health legislation, Kennedy gave a speech to Congress, on February 27, 1962, outlining his health reform agenda. While Kennedy expressed an interest in a variety of health issues (for example, the Community Health Act and legislation enhancing services to the mentally retarded), his prime focus was on the elderly.

"I therefore recommend again the enactment of a health insurance program for the elderly under the social security system .... this program, of course, would not interfere in any way with the freedom of choice of doctor, hospital, or nurse. It would not specify in any way the kind of medical or health care or treatment to be provided. But it would establish a means to provide for the following minimum levels of protection: ...inpatient hospital expenses for up to 90 days, cost of nursing home services up to 180 days immediately after discharge from a hospital...the cost of hospital outpatient clinic diagnostic services in excess of $20...the cost of community visiting nurse services, and related home health services for a limited number of visits."(14)

Thus, the focus of coverage enhancements was hospital insurance. Most of the relatively minimal outpatient coverage was to encourage substitution for expensive hospitalization services.

On the surface, the contrast between the Kennedy and the Clinton approaches to national health reform could not be more striking. However, this is more a reflection of changing times than a drastic difference in philosophy. Both the Kennedy and, in all likelihood, the Clinton proposals reflect a pragmatic approach to health reform (figure 2, below). What is still unclear, and will be answered by the time this article is published, is whether Clinton's pragmatic approach will include universal coverage for health services. Judging from Clinton's acute political antennas, it is possible that universal coverage will not be recommended, at least not in the short term.

However, Kennedys Medicare proposal failed. As in the other health reform campaigns, the Medicare proposal received significant popular support from ordinary Americans,(15) but this proved insufficient to combat traditional enemies to health reform. According to syndicated columnist James Marlow, many of the forces from past defeats were present: the American Medical Association and conservative Democrats and Republicans. One factor may represent a significant difference from the current administration: "He [Kennedy] made no real fight for it, at least publicly. But he didn't make much of a fight for it

publicly last year, either."(16) Kennedy and other supporters of Medicare hoped for a better result in 1964, an election year. This was one month before the Kennedy assassination.

Concluding Remarks

One must ask how a historically updated version of the Eisenhower proposals, many of which were voluntary and private sector in nature, may become part of Clinton's private sector health reform agenda. Why isn't Clinton heeding the advice of Robert Reichauer, Director of the Congressional Budget Office, who indicates that, unless the federal government legislates some form of government regulation, it is unlikely that savings will occur to pay for expanded health care coverage? There are two possible answers: the charitable and the politically savvy perspectives.

On the charitable side, it is certainly possible that Clinton truly believes in managed competition and its potential for long-term savings. The view that Clinton truly believes in managed competition is buttressed by the almost manna-like manner in which managed competition is portrayed by administration officials, by Clinton's rejection of transition team documents that were equivocal on support of managed competition, and by the support that managed competition has engendered at the National Governors' Association- a constituency of particular importance to Clinton. Supporting this perspective is the fact that HHS Secretary Donna Shalala and OMB Chief Alice Rivlin did approach Clinton espousing a more active government approach, and were rebuffed.(17)

It is likely that a calculation has already been made as to which broad policies are politically possible and what legislation will pass congressional muster. Just as Kennedy in the '60s, Clinton in the '90s cannot afford to appear to be adopting too liberal an approach if he expects legislation to be enacted. Just as President Kennedy tailored his Medicare proposal to what was politically feasible, managed competition is favored by Clinton over either extending prospective payment to all payers or a single-payer approach. While the AMA was politically powerful during the Kennedy Administration, it is the large insurance companies that Clinton is apparently unwilling or unable to offend.

With respect to access, President Kennedy proposed expanding particularly expensive services (i.e., hospitals) to a politically important group--the elderly. Kennedy never promised access to all health services, particularly for long-term care, for the elderly. Clinton will likely analyze the situation politically and decide that, at a minimum, access will be increased for the un- or underinsured middle class, a critical voting block for the President. Provisions will be recommended in the upcoming legislative initiative for laid-off workers to continue their health insurance at reduced rates. This critical block of Democratic voters (Reagan Democrats) will receive preference over general relief recipients and workers in fast food establishments who do not receive health insurance in many states and often do not vote.

Even taking Clinton's well-known political astuteness into account, legislative success is not ensured. The President will have to devote his entire political energy to passing any significant health reform (the type requiring increased federal outlays).

This means that the President cannot be distracted by foreign crises, as occurred with President Kennedy. In his effort to lead, not just sell, the country and the Congress on health reform, President Clinton will have to take a page from the one successful effort to enact significant health reform in the United States-- Medicare, the focus of the next article in this series. President Clinton will not have many of the luxuries enjoyed by Lyndon Johnson, particularly a massive Democratic majority in Congress. The need for Clinton to negotiate with many constituencies in Congress will lead to compromises. Passage of health reform under Clinton will truly prove the political maxim that successful legislation represents the art of the possible.

References

1. Goldberg, N. "The AMA Faces Down FDR and Wins." Physician Executive 19(1):3-8, Jan.-Feb. 1993.

2. Koos, E. The Health of Regionville: What the People Thought and Did about It. New York, N.Y.: HarperCollins Publishing, 1967, p. 62.

3. Ibid., p. 65.

4. Glasgow, J. "The Compulsory Health Insurance Movement in the United States," PhD dissertation, University of Colorado, 1965, p. 235.

5. President's Address. JAMA 153(17):1529, Dec. 26, 1953.

6. Message from the President of the United Sates, transmitting "Recommendations to Improve the Health of the American People," Committee on Interstate and Foreign Commerce, Document #298, p. 4.

7. Brewster, A. Health Insurance and Related Proposals for Financing Personal Health Services: A Digest of Major Legislation and Proposals for Federal Action, 1935-1937. U.S. Department of Health, Education, and Welfare, Social Security Administration, Division of Program Research, 1957, p. 4.

8. JAMA 151(9):745, Feb. 28, 1953.

9. Congressional Record Vol. 99, part 1, 83rd Congress, 1st Session, p. 1297.

10. Feingold, E, Medicare: Policy and Politics. San Francisco, Calif.: Chandler Publishing, 1966, p. 106.

11. Glasgow, J., op. cit. pp. 270-1.

12. "Health Insurance for Aged Persons." Report submitted to the Committee on Ways and Means, House of Representatives by the Secretary of Health, Education, and Welfare, July 24, 1961, pp. 28,33.

13. Health and Hospital Care, "Message from the President of the United States (H. Doc. No. 85). Printed in the Congressional Record, 87th Congress, 1st Session, Vol. 107, part 2, pp. 2000-2.

14. Message from the President of the United States, Feb. 27, 1962, Referred to the Committee of the Whole House on the State of the Union, Document #347, p. 3.

15. John F. Kennedy Library, Boston, Mass., President's Central White House Files, Box 484.

16. Marlow, J. "McCormack Issues Death Notice on Medicare Bill." Peoria Star Journal Oct. 24, 1963, p. A-4.

17. Personal conversations with members of the transition team and task forces.

18. U.S. Congress House Committee on Ways and Means. Social Security legislation heatings, 85th Congress, 2nd Session, 1958, pp. 868-86.

Eligibility: Included all persons 65 years or over who were eligible for OASI benefits, even if employed and therefore not receiving these benefits; excluded persons receiving old-age assistance.

Benefits:

Hospitalization-60 days per year.

Nursing home-120 days per year or 2 days for each unused hospital day;

available only upon transfer from hospital.

Home health services-none.

Surgeon's fees-full payment

Laboratory and x-ray services-full payment for hospital inpatients; no coverage for outpatients.

Method of Financing: Additional social security tax of 1/4 of 1 percent of first $4,800 of wages to be paid by employees and equal amount by employer; selfemployed persons were to pay 3/8 of 1 percent of first $4,800 of earnings.(18)

Similarities

Both houses of Congress controlled by Democrats.

Democratic President.

Health care relatively important to Americans.

House Ways and Means Chairman opposed to President's proposal (Mills absolutely against King-Anderson, Stark verbally opposed to managed competition.)

Significant presence of conservative Democrats (against Medicare under Kennedy and in favor of managed competition under Clinton).

Significant foreign policy crises.

Budgetary limitations to increasing access.

Most significant interest groups in favor of free market solutions.

Large insurance companies politically powerful.

Ambivalence/disagreement on the part of labor unions.

Differences

Primary interest in Kennedy era was access; currently, cost appears to be holding sway.

Stronger Presidential involvement under Clinton.

Significant for-profit health sector under Clinton.

AMA much weaker.

Federal deficit limits initiatives to immediately expand access under Clinton.