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Health Has No Fury

By 11.1.13

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Five days after his inauguration, Bill Clinton named his wife Hillary to head a taskforce charged with drafting a bill within a hundred days to reform the health care system. In the first flush of the hundred-day effort, Hillary framed the outline of the Clinton plan and talked to members of Congress, lobbyists, interest groups, and the public, in an effort to create momentum and rally support.

She made dozens of courtesy calls on Capitol Hill, testified before committees in both houses of Congress, and went on a nationwide speaking tour. As part of a massive public relations blitz, Hillary went to Capitol Hill to introduce her plan to Congress that fall: "I'm here as a mother, a wife, a daughter, a sister and a woman," she began. In marathon sessions before five key House and Senate committees, the first lady demonstrated her command of the subject. "No previous first lady occupied center stage so aggressively or disarmed her critics more effectively," the New York Times said. "I think in the very near future," Ways and Means Chairman Dan Rostenkowski said, "the president will be known as your husband. 'Who's that fellow? That's Hillary's husband.'"

"It's hard to follow that answer, that was so brilliant a response," said Christopher Dodd, the Connecticut Democrat, before asking a question at one hearing. "As a nation, and as a people, we're blessed to have you leading this effort," said Rep. John Lewis, a Georgia Democrat. Rep. John La Falce of New York said, "I probably shouldn't say it, but she is so smart and I like her so much that I feel like squeezing her." 

After meeting with individual legislators, Hillary always sent a letter the next day--and often an autographed photo--thanking them for their input. At hearings, she would ask them about family members by name and never missed an opportunity to compliment a specific piece of legislation they had worked on. One of Hillary's first private meetings was with Senator Dave Durenberger of Minnesota, a moderate Republican who had spent years developing expertise on the health care system. His vote would be crucial for the Clinton plan in the Senate. Durenberger was impressed by Hillary's preparation, which included a knowing reference to his home state. "When I called Mrs. Clinton at the end of February, she said she'd love to get together," Durenberger recalled. Displaying her intelligence, wit, and even a touch of flirtatiousness, "She said, 'Your place or mine?'” When I went down to the White House, she mentioned an author from Minnesota she'd read [John Hassler]. She had picked up one of his books at the airport in Cincinnati and started reading them all."

Hillary's successful performances turned on political savvy and carefully planned attention to detail. But while Hillary's poise and charm worked wonders on congressional egos, her calculated efforts also raised some suspicions. "She impressed the finance committee, it was such a new event and glamorous in those circumstances," said former GOP Senator Malcolm Wallop of Wyoming. "But it was very unserious--it was all for the cameras. I suddenly realized I didn't have my make-up on. No one asked tough questions at all."

It would soon be clear that no amount of skilled politicking could paper over the deep divisions over the product Hillary was trying to sell and the way she was selling it. The public and many Republicans were ready to address serious problems in the health care system, from rising costs to the portability of benefits. But rather than talking about how the Clinton plan would make health care more affordable and reliable for the middle class, or help the elderly afford prescription drugs, Hillary presented the plan in the language of a welfare advocate. The hard truth was that extending full and free benefits to the uninsured and unemployed struck many as another budget-draining government giveaway.

In its design, the Clinton plan reflected who Hillary was and where she had come from. Hillary Rodham had gone into politics to improve people's lives by extending what she saw as the beneficent potential of government. She made no bones about her distrust of the free market system, or her lack of confidence in the prudent rationality of average Americans. She simply did not believe that a largely unfettered private sector could provide adequate health care at affordable prices. 

To Hillary and her allies, central planning meant eliminating inequalities in the system, providing for the disadvantaged, and sharing the costs of health care equally among all Americans. But to critics, the plan's state-run "alliances," mandatory membership in health maintenance organizations, caps on insurance premiums, and annual limits on overall health care spending meant more government, fewer services, and less choice. The plan was loaded with politically appointed government boards and over-sight agencies, designed to enforce corporate and individual compliance with federal standards, which specified in intricate detail the kind of health care services that could be provided, to whom, under what circumstances, and at what prices. Employers would pay for the bulk of the coverage, establishing a new middle-class entitlement, while government covered the uninsured. Most everyone would be required to join state-run or regional health "alliances," government-controlled middlemen who would contract with various health plans, collect and negotiate insurance premiums, and oversee the allocation of benefits. A National Drug Price Advisory Board would decide whether drug prices were "fair." Confidential medical records would be centralized and accessed through special identification numbers placed on government-issued health security cards.

Dennis Hastert, a Republican from Illinois who chaired the GOP's House task force on health care, began meeting in February with Clinton administration officials as part of an effort to craft a bipartisan approach to reform. One evening in June 1993, a group of Republican congressmen, including Hastert, met with Hillary at the Alexandria home of Republican Rep. John Kasich of Ohio. One of Hastert's ideas under discussion that night would have allowed employers the option of establishing medical savings accounts for their employees as an alternative to a government-managed system. 

Under Hastert's plan, employers would put the money they were willing to spend subsidizing employees' health care into tax-deferred accounts. Employees would be encouraged to buy high-deductible catastrophic care policies and pay for rudimentary services with the remainder of the money. At the end of the year, the unused funds could be rolled over tax-free into the next year and, like an IRA, be withdrawn at retirement. Hastert and other advocates believed that as people shopped around for insurance and spent their own money to purchase care, costs would be controlled and competition enhanced. But critics said the accounts would benefit healthier people, who would spend less than what employers contributed, and hurt the poor, who might pay higher premiums as healthier and wealthier people formed their own insurance purchasing pools.

Hastert soon concluded that there was little common ground on which to negotiate with the administration. "I guess the straw on the camel's back was a meeting that I had one evening with Mrs. Clinton," Hastert recalled:

I mentioned...to the first lady about medical savings accounts and just right away she said, "We can't do that." And I said, "Well, why?" And she said, "Well there's two reasons." And I said, "Well, what are they?" [And she said,] "The first reason is with the medical savings account, people have to act on their own and make their own decisions about health care. And they have to make sure that they get the inoculations and the preventative care that they need, and we just think that people will skip too much because in a medical savings account if you don't spend it, you get to keep it or you can…accumulate it in a health care account. We just think people will be too focused on saving money and they won't get the care for their children and themselves that they need. We think the government, by saying 'You have to make this schedule. You have to have your kids in for inoculations here, you have to do a pre-screening here, you have to do this'--the government will make better decisions than the people will make, and people will be healthier because of it." I said, "Well, part of that's an education process. People have to understand that [if] they behave a certain way, they're going to save money, [with the] preventive medicine issue--you get the prescreenings, if you can inoculate your kids you save money on it. I mean, they're not sick. You save money." She said, "No. We just can't trust the American people to make those type of choices…Government has to make those choices for people."

I said, "Okay, we just disagree there. But what's the second reason?" And she said, "Well, the second reason is, with a medical savings account, savings are [like] an IRA. They go in as actually money saved and all that money will go into IRAs which goes to the private sector." And she said, "We can't afford to have that money go to the private sector. The money has to go to the federal government because the federal government will spend that money better than the private sector will spend it." And so [I thought] holy mackerel. I can't argue these issues, these are philosophical issues.

Hillary's pro forma outreach to the Republicans was short-lived. The opportunity for a truly bipartisan approach to health care reform was squandered early on at a time when many moderate Republicans, including senators John Danforth of Missouri, John Chafee of Rhode Island, and even minority leader Bob Dole had signaled a commitment to universal coverage and a readiness to work with the White House. "We're going to start down the road together," Dole had said. Had Hillary not been so dismissive or mistrustful of the Republicans, many would have supported a middle-ground bill giving her most of what she wanted. "Dole had formed a task force under [John] Chafee before the Clinton bill got started," said Senator Paul Coverdell, Republican of Georgia. "They were Washington-wonking it. [Senator Phil] Gramm came out of one of their meetings and turned to me and said, 'Good grief. We've got to do something."'

It should be no surprise that Hillary's visits to Capitol Hill left Republicans feeling perplexed. She seemed interested neither in their votes, nor in their input. Rather than reflecting her political clumsiness, however, what the Hastert incident seems to illustrate is Hillary's extraordinary confidence in her mandate. She and her staff had already counted the votes, and they apparently believed with Republicans in the minority they simply were not needed to win. Such tough political calculations are made all the time in the legislative process. Hillary, however, did not seem to appreciate the dangers of tearing down an entire healthcare system--something that affects every American--without some degree of consensus and bipartisanship.

Surprisingly, even some top officials in the Clinton White House appeared to believe that Hillary's "outreach" was merely tactical. In early 1993, Hillary made an overture to one senior Democratic senator, David Boren, a moderate from Oklahoma, in an effort to gain not only his support but also his help in bringing others aboard, including moderate Republicans like Chafee. "Before the meeting, I was warned by senior people in the White House that she didn't really want a centrist approach and not to allow myself to get used by her," Boren said. "'Don't get yourself used,' I was told. I had explicit warnings not to front for her."

Hillary's confidence also illuminates another unexplained feature of her approach: her mystifying reliance on a circle of advisers whose ideas were far out of the mainstream. Curiously, the ideology of Hillary's top advisers was not a subject of interest to the press: CNN's health correspondent, Jeff Levine, for example, referred to central-planning advocate Ira Magaziner as a "free marketeer," and most other reporters hewed to the administration's spin that the Clinton plan was a moderate market-based approach to reform. On closer examination, however, it is clear that the press missed the story. 

Like Hillary, Ira Magaziner, a senior White House adviser overseeing the health care task force, had an appetite for the big and bold. Magaziner first met Bill Clinton at Oxford, where he led antiwar demonstrations along with actress Vanessa Redgrave at nearby U.S. military bases. But it was Hillary and Magaziner who were the true kindred spirits. In high school, the young student activist led a boycott against saluting the flag, and at Brown University he spearheaded efforts to eliminate required courses and grades. Hillary knew Magaziner through Renaissance Weekend circles and also through her work in the early 1990's with the National Center on Education and the Economy, a nonprofit, state-subsidized policy foundation in New York. In 1990, the center released a report entitled "America's Choice: High Skills or Low Wages," prepared under the direction of Magaziner. The report advocated state-funded education for all Americans for four years beyond high school, and the establishment of a nationwide network of federal and state employment and training boards to "organize and oversee the new school-to-work transition programs and training systems" for those who sought an alternative to college education. It also sought to introduce nationalized health care through the nation's schools. The Rose Law Firm was paid more than $100,000 for Hillary's work to promote the new programs and work on their implementation.

Another influential adviser of Hillary's was Vicente Navarro, who openly espouses Marxist views and is an advocate of socialized medicine. A health policy professor at Johns Hopkins University, Navarro has devoted his career to promoting government-controlled medicine. "The private sector is dangerous to our health," Navarro once wrote. In a 1992 article "Has Socialism Failed?" Navarro contended, "Contrary to what is widely claimed today, the socialist experience (in both its Leninist and its social democratic traditions) has been, more frequently than not, more efficient in responding to human needs than the capitalist experience." In 1988, Navarro joined Harold Ickes in the Reverend Jesse Jackson's presidential campaign as an adviser to help craft a comprehensive national health insurance scheme.

Navarro was a leading advocate of a "single-payer" health care model, such as the one in place in Canada, where the government is the sole provider of medical services. This approach, which relies on taxes to pay for "free" medical care for all, was backed by key Democratic constituencies such as labor unions, and was championed in Congress by Senators Jay Rockefeller, Bob Kerrey, and Paul Wellstone, and Congressman Pete Stark.

According to internal White House memos, Navarro co-chaired a health care group exploring a single-payer plan, which gave him significant access to Hillary. (The documents were later released in a bitterly contested lawsuit over the legality of the health care task force operations.) Navarro told Hillary that without a liberal base, her plan would be a flop. In the September 6, 1993 issue of the Nation, Navarro opined, "The Clinton administration is well aware that health care reform cannot occur without the support of the single-payer constituencies, which include some of the key grass-roots sectors of the Democratic Party. Hillary Clinton has repeatedly said as much."

Navarro appeared to confirm Hillary's belief that proposals to rely on the market to achieve reform should be rejected not only in principle but also as bad politics. "It will be assembly-line capitalism for the masses and their health care givers, with the elites continuing to enjoy free choice and fee-per-service medicine," he wrote in the Nation in late 1993. "I told Mrs. Clinton that if she and the president went ahead with that [managed competition] plan that it would be defeated, and that her husband would lose his re-election," Navarro told the Capitol Times newspaper in December 1994.

Like Magaziner and Navarro, Hillary's third recruit, Luanne Nyberg, leaned toward technocratic socialism. Nyberg was a career left-wing activist in Minnesota, where she staged protest drives on behalf of various causes, including expanded state health care benefits. After being fired from a job at a Minneapolis print shop for trying to form a union, she founded a group to demand "rights" for people on Minnesota's welfare rolls. She successfully spearheaded a bill requiring the state to provide basic health care for uninsured pregnant workers and for children under eight. She then joined a state representative in expanding the program to the rest of Minnesota's uninsured. The program's costs reached nearly $1 billion a year, bankrolled by state residents paying higher insurance premiums. Nyberg's main connection with Hillary came as founder of the Minnesota chapter of the Children's Defense Fund in 1985. As a friend of Hillary's Chief of Staff Maggie Williams, Nyberg had a temporary assignment in Hillary's office in the summer of 1994, when crucial decisions on healthcare strategy were being made.

Associates said that while Hillary and Magaziner privately favored the single-payer plan, they understood that it would be politically impossible to pass a Canadian-style plan under that name in the United States. The strategy they therefore chose was a classic exercise in co-optation. Early in the year, Hillary and Magaziner met with representatives from the Jackson Hole Group--academics and industry professionals who had coined the phrase "managed competition," which was used to distinguish the original Clinton plan from the single-payer version advocated by Bob Kerrey. But if the architects of managed competition thought that their ideas would be adopted by the task force, they were soon disappointed. Alain Enthoven, a Stanford University economics professor and board member of the group, said, "I resent the fact that they dressed up the single-payer plan in the language of 'managed competition' a la the Jackson Hole group. It discredited us. They were borrowing our rhetoric. It was really deceptive and misleading." 

In their meeting, Enthoven and his associates laid out their idea: health maintenance organizations (HMOs) would compete for patients, and large insurance purchasers would then bargain with the HMOs for reasonable prices. "I made the point that the market was working, and that it was not necessary to have price controls," said Dr. Paul Ellwood, president of the Jackson Hole Group. "And I can remember very distinctly Mrs. Clinton saying to me, 'You're wrong about that.'  There was that kind of up-front assumption, at least on her part, that the market wasn't working...They flat out denied what I had said, and not 'they'—her—she.”

Hillary and Magaziner originally considered slapping across-the-board price controls on virtually every sector of the healthcare industry. She saw this as both ideologically sound and pragmatic: She believed that government control over the marketplace was the only way to achieve results before Clinton ran for reelection in 1996. In her meeting with the Jackson Hole Group, Hillary said little during the presentation, but when she finally spoke up, Enthoven recalled her saying: "Yeah, that's all very well, but my husband wants to get re-elected...so we'll have to put the whole thing under price controls."

Enthoven conceded that Hillary was correct that market reforms were harder to predict than government mandates, but he believed her bias toward the single-payer plan was a sign that she simply did not comprehend the recent lessons of history. "Let's take some steps backwards. Take the blinders off," he said. "We've had a century-long struggle between socialism and capitalism and guess what? Capitalism won."

Members of the Jackson Hole Group were soon banished from the inner councils and left to "hang around the halls" of the Old Executive Office Building during working group meetings, according to one group member. "Mrs. Clinton thought they owned the Democratic Party and to get their plan through they thought they had to purge all the dissidents, but what they did was end up taking shots at the moderates-their crucial mistake," Enthoven said.

The blackballing of the Jackson Hole Group also showed that Hillary needed firm control over the advisory process itself if the final plan was to follow her preconceived one. Like the use of "managed competition," a figleaf for a highly centralized approach, hundreds of advisers were brought in to create the appearance that contrasting views were being solicited and the best minds in America were being consulted. This was primarily intended to cloak the plan in the armor of intellectual respectability. The participating organizations were also given the illusion that they were actually being consulted, thereby neutralizing their potential opposition.

In an effort that ended up costing more than $13 million, Magaziner set up a 500-member working group comprising hundreds of federal workers, Capitol Hill staffers, academics, and private sector consultants. He then constructed an elaborate "tollgate" process to monitor the fifteen "cluster groups" and forty smaller committees which were conducting in-depth studies of virtually every issue associated with health care, ranging from cost control and long-term care and mental health issues to medical ethics and antitrust regulations. As one working group member put it, "he wanted to invite the world in"--everybody, that is, but Republicans and certain business and doctors' groups, all of whom were pointedly excluded. 

But it soon became clear even to those who were included that their participation was largely illusory. Just as she had done with education reform in Arkansas, Hillary made up the plan before the health advisers ever met. "One of the popular games we played was to sit around and try to figure out why we were there," said Tom Pyle, a highly regarded health care expert who originally led one of the important working groups. Hillary appeared to mistrust even members of her own team who might raise questions about the approach to reform. One government employee who was assigned to the working group said, "I don't know how the decisions were being made. I can tell you flat out I was told, 'We want to talk about this, but we don't want to hear from you feds about it."' 

“Ira Magaziner approached this like he was Zeus preparing to give birth to Athena out of the side of his head," said another working group member. "He used these 500 people as his personal tutorial to make him an expert in health care policy, which he'd had little involvement with before. At the end of the tutorial, he would, as the genius that he holds himself out to be, conceive a grand interrelated, internally consistent health care reform policy that he would give birth to, and all of Washington would just accept it." 

While plausible enough from the perspective of a bewildered participant, this seems not to have been Magaziner's intention at all. Rather than synthesizing the great outpouring of material generated by the process, the broad outline of Magaziner's plan were already written. Some participants sensed as much. "It was very difficult to know if their interest in our feedback was real. I had a nagging sense that they had written the whole thing before we got there," one health care working group member said. A higher-ranking member confirmed these suspicions: "There was no even-handed review of alternative policy options. Ira Magaziner drafted a work plan which I read the day before I started work, which laid out, chapter by chapter, exactly what was going to be done…" 

In conducting his tutorials, Magaziner insisted on a captive audience. In a comic effort to meet the hundred-day deadline imposed by President Clinton, he made the group members sit in discussion groups literally around the clock. "Ira Magaziner would wear the same clothes the whole session," Andrea Bempong, a working group member, recalled. "Every day he had the same outfit on. And we thought unless he had two or three of the same shirts--we didn't know what he was doing. We guessed he was staying up all day and all night." Ultimately, the person most in need of health care seemed to be Magaziner himself. "He was constantly getting sick," said another member of the working group. "He was going around the clock. The two months I was working on it he must have had three separate colds or flus. He was sick almost the entire time. Coughing in front of everyone."

As Magaziner pushed toward a deadline he would never meet, it became clear that the plan was sealed off from any and all internal criticism. The view among many even in the Clinton administration who were serving on the working groups was that the plan was simply too ambitious and expensive. Not even the White House's own economists believed the resources matched the goals. "None of the [administration] economists supported the Clinton health care plan," said one senior Treasury Department official. Yet nobody appears to have told Hillary--who may have seemed omnipotent by virtue of her marriage to the president--that she was on a collision course with fiscal reality. "I was in some meeting with Rubin [Robert Rubin, chairman of the National Economic Council] and he didn't speak up. He never really weighed in," said a health care lobbyist who had substantial access to the White House. "I think he was afraid of her. All those guys were afraid. It was fairly obvious that a lot of those guys there were intimidated by her--the top ten to twenty people in the White House. A lot of them knew it [the plan] was ridiculous."

Originally, the goal had been universal care with modest benefits. But Hillary wanted a more generous plan: The government simply had to take a more aggressive role in ensuring proper care. By including more benefits, the administration was hoping to satisfy the multitude of interest groups scrambling to be included in the plan as well. Strategically, the White House knew that a big benefits package would give them bargaining chips in dealing with Congress. The catch was that the larger the benefits package became, the more regulations were needed to control how they would be administered, and the more costly still the plan would become. Said the Treasury official: "She [Hillary] went around the country finding out what people's gripes were, and each time she came back with one more load of what needed to be included. Things like long-term care, mental health, dental care, and substance abuse. She just came back and kept saying, 'We have to include this, we have to include that…' She would end up listening to people's problems all over the country and, being the sympathetic person she is, she said, 'These are their problems and they need to be addressed.' By the end it was full-scale cradle-to-grave medical services for everyone. There had to be some cost consideration. Those were the things giving people over here in Treasury severe gas pains. We saw the price would be so high it was not economically viable."

Finally, it was left to Laura Tyson, chairman of the Council of Economic Advisors and one of the few senior women working in the area, to raise critical questions about the plan's financing. In a memo summarizing an April 1, 1993 meeting where Tyson and administration aides struggled to figure out how to pay for all the benefits Hillary wanted in the package, a Treasury Department economist wrote, "We sat around the table making guesstimates of the savings to be realized. It was an appropriate exercise for April Fool's Day." 

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