#1921—Jnl of Health and Social Behavior—Vol. 45 Extra Issue—45X02-quadagno

Why the United States Has No National Health Insurance: Stakeholder Mobilization Against the Welfare State, 1945–1996*

JILL QUADAGNO Florida State University

Journal of Health and Social Behavior 2004, Vol 45 (Extra Issue): 25–44

The United States is the only western industrialized nation that fails to provide universal coverage and the only nation where health care for the majority of the population is financed by for-profit, minimally regulated private insurance companies. These arrangements leave one-sixth of the population uninsured at any given time, and they leave others at risk of losing insurance as a result of normal life course events. Political theorists of the welfare state usually attribute the failure of national health insurance in the United States to broad- er forces of American political development, but they ignore the distinctive character of the health care financing arrangements that do exist. Medical soci- ologists emphasize the way that physicians parlayed their professional expertise into legal, institutional, and economic power but not the way this power was asserted in the political arena. This paper proposes a theory of stakeholder mobilization as the primary obstacle to national health insurance. The evidence supports the argument that powerful stakeholder groups, first the American Medical Association, then organizations of insurance companies and employer groups, have been able to defeat every effort to enact national health insurance across an entire century because they had superior resources and an organiza- tional structure that closely mirrored the federated arrangements of the American state. The exception occurred when the AFL-CIO, with its national leadership, state federations and union locals, mobilized on behalf of Medicare. The right to health care is recognized in bility—guarantee comprehensive coverage of international law and guaranteed in the consti- primary, secondary, and tertiary services. To tutions of many nations (Jost 2003). With the the extent that care is rationed, it is done on the sole exception of the United States, all indus- basis of clinical need, not ability to pay. (Keen, trialized countries—regardless of how they Light, and May 2001; Dixon and Mossialos raise funds, organize care or determine eligi- 2002). Universal health care has proven to be a major tool for restraining cost increases. * I thank Donald Light, Debra Street, Larry Isaac, Planning avoids widespread duplication that Lawrence Jacobs, Taeku Lee, Joane Nagel, Julian underlies the high percentage of empty beds in Zelizer, Ivy Bourgeault, John Manley, and John the United States; high rates of unnecessary Myles for their helpful comments on an earlier ver- sion of the paper and I thank Michael Stewart, procedures, tests and drugs; and ineffective use Jennifer Reid Keene and Lori Parham for their assis- of some technologies. Although many nations tance in locating archival documents and historical have flirted with competition, most are wary records. This project was supported by an because the most competitive system, the Investigator Award in Health Policy Research from United States has consistently been least suc- The Robert Wood Johnson Foundation The views cessful in controlling costs (Anderson et al expressed are those of the author and do not imply endorsement by The Robert Wood Johnson 2003). Foundation. Address correspondence to: Pepper Most countries allow, and some encourage, Institute on Aging and Public Policy, Florida State private insurance as an upgrade or second tier University, Tallahassee, FL 32306 to a higher class of service and a fuller array of

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26 JOURNAL OF HEALTH AND SOCIAL BEHAVIOR services (Keen, Light, and May 2001; Ruggie other nations, the United States has been slow 1996). However, the practices of these compa- to develop national social programs and why nies are heavily regulated to prevent them from programs that were enacted have been less engaging in the more pernicious forms of risk generous. rating. That is not the case in the United States, where private insurance companies are allowed to use sophisticated forms of medical “under- Antistatist Values writing” to set premiums and skim off the more desirable employee groups and individu- According to one answer, the central imped- als (Light 1992). The United States is the only iment has been an encompassing political cul- nation that fails to guarantee coverage of med- ture based on a master assumption “that the ical services, rations extensively by ability to power of the state must be limited” (Hartz pay, and allows the private insurance industry 1955:62; Lipset 1996). Because the state is to serve as a gatekeeper to the health care sys- equated with government, and liberty with lim- tem (Light 1994; Jost 2003). This arrangement ited government, “it is easy to regard the wel- leaves approximately one-sixth of the popula- fare state as a threat to liberty” (Marmor, tion uninsured at any given time, and it leaves Mashaw, and Harvey 1990:5). The converse is others at risk of losing insurance as a result of also true: a distrust of government provision of such life course events as divorce, aging, wid- social welfare confers upon the market and owhood, or economic downturn (Harrington voluntary efforts “a central role in social pro- Meyer and Pavalko 1996). The uninsured are vision” (O’Connor, Orloff, and Shaver sicker, receive inferior care, and are more like- 1999:44). Examples of the values thesis ly to die prematurely (Institute of Medicine abound. Thus, Jacobs (1993) contends that 2004). “enduring public ambivalence toward govern- The lack of national health insurance in the ment . . . is the underlying source of America’s United States is the prime example of a larger impasse” over health care reform (p. 630). historic issue captured by the phrase Similarly, Marmor (2000) argues that, “no “American exceptionalism.” The question to be matter how large the public subsidies and how answered is not just why every proposal for substantial the public interest in the distribu- national health insurance has failed but also tion, financing, and quality of services domi- how commercial enterprise became the pre- nated by private sector actors, the American ferred alternative. Neither political sociolo- impulse is to disperse authority, finance and gists nor medical sociologists have fully control” (p. 101). explained this puzzling pattern. Political theo- Despite its prominence in political theory, rists of the welfare state usually attribute the the values argument raises some problematic failure of national health insurance in the issues. Notably, it cannot explain why some United States to broader forces of American programs that appear to contradict these pur- political development but ignore the distinctive portedly core values (i.e., Social Security and character of the health care financing arrange- Medicare) have been enacted or what mecha- ments that do exist. Medical sociologists nisms link antistatist values to policy outcomes emphasize the way that physicians parlayed (Steinmo and Watts 1995). Values are simply their professional expertise into legal, institu- presumed to have some kind of unexplained tional, and economic power but not the way effect on the policymaking process. As this power was asserted in the political arena. Skocpol (1992) notes, “Many scholars who What is required is a theory that can locate the talk about national values are vague about the political determinants of health reform within processes through which they influence poli- the changing context of the transformation of cymaking” (p. 16). American medicine.

Weak Labor/Power Resources POLITICAL THEORIES OF THE WELFARE STATE A second argument attributes the failure of national health insurance in the United States For political theorists of the welfare state, to the lack of a working class movement and the central question has been why, compared to labor-based political party (Navarro 1989). #1921—Jnl of Health and Social Behavior—Vol. 45 Extra Issue—45X02-quadagno

WHY THE UNITED STATES HAS NO NATIONAL HEALTH INSURANCE 27 This thesis is derived from “power resource” each with its own independent authority, theory, which views the welfare state in responsibilities, and bases of support. Within Western, capitalist democracies as a product of the legislature, power is further divided trade union mobilization (Korpi 1989; Hicks between the House and the Senate as well as 1999; Esping-Andersen 1990). According to numerous committees and subcommittees “power resource” theorists, markets and poli- where legislative measures can be delayed or tics are alternative arenas for the mobilization blocked. Further, because candidates for office of resources and the distribution of rewards. In largely depend on raising campaign resources the market, “capital and economic resources personally, they are vulnerable to appeals by form the basis of power,” and private econom- interest groups and lobbying organizations ic interests dominate, while in the political (Lipset 1996). Decentralization thus impedes arena, wage earners have a numerical advan- policy innovation by increasing the number of tage, which they can use to “modify the play of “veto” points (i.e., the courts, the legislative market forces” (Korpi 1989:312–13). In the process, the states) where opponents can block ideal typical case, workers organize into trade policy reform and by allowing special interests unions, form a labor-based political party, and greater access (Maioni 1998). then use their “power resources” to expand the System-level variables such as “state struc- welfare state (Hicks 1999). tures” may appear adequate in explaining Although power resource theorists aptly cross-national variations in policy outcomes, capture the political processes involved when but they are inadequate when applied to histor- labor unions mobilize politically, engage in ical variations in policy outcome within the distributory conflicts, and establish claims for United States. A structural argument cannot processing benefits independent of market cri- explain why Congress enacted (then repealed) teria, they are less successful in theorizing the the Medicare Catastrophic Coverage Act of political processes involved when the market 1988 but rejected a national long term care remains the locus of distribution (Esping- program that same year. Although the Andersen 1990). Presumably, when unions fail American political system with its checks and to mobilize politically, then the state will balances is designed to slow down the policy- encourage the market and voluntary efforts for making process and prevent major and abrupt social provision. Left unspecified is whether shifts, that argument provides little insight into private economic interests organize as active how the existing configuration of public and agents in market preservation or merely serve private health benefits came to be. as passive observers of the status quo. The Recognizing the weakness of “state struc- uniquely American system of health care ture” arguments, a second generation of insti- financing involves social legislation that defers tutional theorists has devised an alternative to market principles and federal sponsorship of approach that emphasizes the effect of early private sector alternatives to public programs. policy choices on subsequent policy options, a This structure raises compelling theoretical process captured by the phrase “path depen- issues regarding the effect of organized labor dency.” The central premise of “path depen- on the financing arrangements that emerged in dent” theories is that policies are not only a key periods and the influence exerted by busi- product of politics but also produce their own ness groups on both public and private health politics by giving rise to widespread public insurance programs. expectations and vast networks of vested inter- ests (Pierson 1994, 2002). Early policy choic- es narrow the menu of future options by dri- Political Institutions and Policy Legacies ving policy down self-reinforcing paths that become increasingly difficult to alter. Thus, A third argument emphasizes the distinctive according to Hacker (1998, 2002), Social characteristics of American political institu- Security succeeded while national health tions. According to one variant of institutional insurance failed because of differences in tim- theory, the main impediment to health care ing and sequencing. Social Security was creat- reform in the United States is the diffusion of ed before a private pension system developed political authority (Steinmo and Watts 1995; and by implication before a network of inter- Hacker 1998). At the national level, power is ests could arise to impede its enactment. By divided among three branches of government, contrast, the private health insurance system #1921—Jnl of Health and Social Behavior—Vol. 45 Extra Issue—45X02-quadagno

28 JOURNAL OF HEALTH AND SOCIAL BEHAVIOR was solidly entrenched by the time reformers and the rejection of any policy or plan that began to press for a government solution, failed to respect their professional sovereignty “crowding out” the public alternative. (Starr 1982a). The notion of path dependent social policy Although medical sociologists have aptly is useful in that it highlights the importance of characterized the devices physicians employed tracing the configuration of interests that to construct and preserve their professional develop in response to a policy innovation and sovereignty, they do not specify how conflicts thus to account for the long term consequences over health policy were translated into actual of alternative choices. However, it does not political decisions by elected officials. Further, explain why one path was chosen over another. while they recognize that the enactment of Medicare and Medicaid in 1965 represented a turning point that unleashed these “counter- THE HEALTH CARE SYSTEM AND vailing powers,” they do not theorize the polit- POLITICAL POWER ical consequences of this transformation (Chernew 2001; Light 1995, 2000; Havighurst The Theory of Countervailing Powers 2002). Thus, for example, McAdam and Scott (2002) note that following many failed While the “American exceptionalism” theo- attempts, “legislation was successfully passed ries each capture distinctive elements of poli- in 1965 to provide governmental financing for cymaking dynamics in the United States, none health care services for the elderly and the provides a comprehensive framework for indigent” (p. 25). However, their only explana- understanding how the public/private mix of tion of how these programs succeeded in over- health care financing arrangements was creat- coming resistance from physicians is the weak ed. That has been the project of medical soci- assertion that, in addition to the election of a ologists who have addressed the issue from a more liberal Congress, “the framing of the different theoretical paradigm. In medical soci- issues was also of great importance” (p. 25). ology the key debates have focused on the way that physicians were able to parlay their pro- fessional expertise into social privilege, eco- A THEORY OF STAKEHOLDER nomic power and political influence; suppress MOBILIZATION all challenges to their authority; and prevent outsiders from dictating the conditions of med- This paper constructs an alternative model ical practice. Their ability to do so required that considers both the broader political oppor- them to gain control over the market for their tunity structure and the character of the health services and the various organizations that care system. The theory of stakeholder mobi- governed medical practice, financing, and pol- lization suggests that the health care financing icy. Physicians established professional sover- system in the United States was constructed eignty and relegated any countervailing power through contentious struggles between reform- to the margins of medical care through five ers and powerful stakeholder groups who major structural changes. The first was the mobilized politically against national health emergence of an informal system of social insurance or any government programs that control in medical practice based on physi- might compete with private sector products or cians’ needs for referrals and hospital privi- lead to government regulation of the market. leges. The second was the control of the labor Stakeholder mobilization involves the same market through various mechanisms to restrict processes that social movement theorists usu- supply, blocking the construction of new med- ally associate with the mobilization of politi- ical schools and restricting the number of stu- cally powerless groups (Jenkins and Perrow dents admitted. The third was the expulsion of 1977). To be effective in the political arena, profit-making enterprises that could extract stakeholders share with the politically power- surplus labor from physicians. The fourth was less a need for leadership, an administrative the exclusion of any organized purchasers— structure, incentives, some mechanisms for the state, corporations or voluntary associa- garnering resources and marshalling support, tions—that could offset the market power of and a setting (whether it be a workplace or a physicians. Finally, the fifth change was the neighbourhood) where grassroots activity can establishment of specific spheres of authority be organized (McAdam, McCarthy, and Zald #1921—Jnl of Health and Social Behavior—Vol. 45 Extra Issue—45X02-quadagno

WHY THE UNITED STATES HAS NO NATIONAL HEALTH INSURANCE 29 1996). Even though dominant groups may ment intervention and took the form of billion have privileged and systematic access to poli- dollar, for-profit managed care firms. tics and to elected representatives, they require Managed care helped to dismantle physicians’ these same resources to exert political influ- cultural authority by undermining their claims ence. of specialized knowledge, putting them at Stakeholder mobilization also involved the financial risk for their medical decisions, and use of cultural “schemas” to shape public per- placing decision-making power in the hands of ceptions of the issues, strategically frame non-physicians (Luft 1999). The arousal of ideas, and establish shared meanings (Sewell corporations and insurance companies also 1996; Young 2002). Implicit in this emphasis had consequences for national health insur- on symbolic politics is a rejection of the notion ance. Their political mobilization brought that political decisions are made on the basis of powerful stakeholders into debates about objective information and a recognition health care reform. While corporations were instead that political enemies, threats, crises, primarily concerned with containing costs, and problems are social constructions that cre- insurers had a vested interest in preventing the ate solidarity between groups and individuals federal government from creating competing and ultimately determine whose framing of an products and in structuring any new programs issue is authoritative (Edelman 1988; Kane in ways that would preserve the private market. 1997; Pedriana and Stryker 1997). How issues are defined can activate new groups to take an interest in the policy, fragment the existing THE DEFENSE OF PHYSICIAN configuration of support and limit potential SOVEREIGNTY options for change. As West and Loomis (1999) assert, the ability to define the alterna- The greatest challenge to physicians’ auton- tives is the supreme instrument of power. omy came from third party financiers of med- From the New Deal of the 1930s to the ical care. Should third parties assume respon- 1970s, the chief obstacle to national health sibility for financing care, they would need to insurance was organized medicine. However, establish some way to control their financial physicians succeeded because their political liability. Controlling costs would invariably objectives meshed with those of other powerful mean regulating physicians’ fees and interven- groups, notably employers, insurance compa- ing in the conditions of medical practice. nies, and trade unions. Physicians also had During the Progressive Era, physicians fought political allies in Congress among Republican against a proposal for a state health insurance opponents of the New Deal welfare state and plan (Hoffman 2001). In the 1930s physicians among southern Democrats who controlled the waged a fierce campaign to prevent federal key committees through which all social wel- officials from including national health insur- fare legislation had to pass and who refused to ance in the Social Security Act. As a result, the support any program that might allow federal largest expansion of federal authority into the authorities to intervene in the South’s racially social welfare system in American history, the segregated health care system (Quadagno Social Security Act of 1935, did not include 2004). Across two-thirds of a century, physi- national health insurance (Katz 2001). cians and their allies lobbied legislators, culti- Although physicians initially resisted any vated sympathetic candidates through large sort of third party financing at all, the Great campaign contributions, organized petition Depression had brought hospitals to the brink drives, created grassroots protests, and devel- of financial ruin. Searching for some way to oped new “products” whenever government stabilize hospital income without allowing action seemed imminent (Gordon 2003). external controls to be imposed, the American Then the excesses of the profession pro- Hospital Association (AHA) created Blue duced a counter-reaction from the government, Cross, a prepayment system of insurance corporations, and insurance companies that against the costs of a hospital stay (Law 1976). were activated to challenge the protected Under Blue Cross plans subscribers would pre- provider markets (Light 1995). Ironically, the pay a small monthly fee in exchange for free most effective challenge came from the private hospital care when needed. Hospitals would be health insurance system that physicians had paid for whatever services they provided at helped to construct as an alternative to govern- whatever price they charged. The fledgling #1921—Jnl of Health and Social Behavior—Vol. 45 Extra Issue—45X02-quadagno

30 JOURNAL OF HEALTH AND SOCIAL BEHAVIOR commercial insurance industry, too, provided teamed up with some powerful employer and hospital benefits on an “indemnity” basis insurer groups: Blue Cross, the American (meaning that patients were reimbursed for Hospital Association, the Insurance Economic some of the costs after the fact), imposing no Society (an organization representing over controls whatsoever on doctors or hospitals. 2,000 insurance companies), pharmaceutical Thus, the insurance industry became the ser- and drug manufacturers, and the Chamber of vant of the providers of health care, a passive Commerce all took a public position opposing vehicle for the transmission of funds from national health insurance and endorsing pri- patients to providers but exerting no oversight vate health insurance.5 The AMA also actively (Light 1997). entered electoral politics, organizing against National health insurance was revived in Democratic candidates who supported nation- 1945 under President Harry Truman (Poen al health insurance. In Pennsylvania, just three 1979). As the Truman administration geared weeks before the 1950 election, physicians up to promote national health insurance, the created a “Healing Arts” committee composed American Medical Association (AMA) of doctors, nurses, dentists, and office assis- launched a “National Education Campaign” to tants who mailed over 190,000 letters, ran prevent its passage and to promote private newspaper ads, hung more than 500 posters in health insurance. The AMA was perfectly doctors’ offices, and posted notices in waiting organized to conduct an opposition campaign. rooms. Physicians also sent personal letters to The basic unit of the AMA was the county their patients, explaining that there were “evil medical society. Without membership in the forces creeping into this country” county society, a doctor could not be a member (Cunningham 1951:53–54) and asking them to of a state medical society or be granted staff vote for Republican candidates. On election privileges at most hospitals. At the next level day, spot radio announcements were made was the state medical society, which sent dele- every hour on the hour. gates to the AMA’s National House of In 1950 Wisconsin doctors started a Delegates, its conservative governing body. “Physicians for Freedom” campaign to defeat With its hierarchical organizational structure, Representative Andrew Biemiller (D-WI), a the AMA had the capacity to set an agenda, House sponsor of a national health insurance generate resources, and mobilize a grassroots bill, and Utah doctors mustered forces against campaign in nearly every state, city, and small Biemiller’s Senate co-sponsor, Elbert Thomas town in America. (D-UT). Florida physicians also worked to AMA national headquarters levied a $25 fee defeat Senator Claude Pepper (D-FL), another on all members and told state societies to adopt co-sponsor. A prominent Florida urologist a resolution against “socialized medicine.” wrote his colleagues asking for money and Every county society was organized “into a endorsing Pepper’s opponent, George hard-driving campaign organization” with bat- Smathers: tle orders going out by “letter, telegraph and We physicians in Florida have a terrific telephone.” Each state organization received fight on our hands to defeat Senator Claude form speeches from headquarters to “get lay- Pepper, the outstanding advocate of ‘social- men for medicine in this fight” and were ized medicine’ and the ‘welfare state’ in instructed to approach local newspapers to get America. In eliminating Pepper from the “real facts” before the editors.1 Posters, Congress, the first great battle against pamphlets, leaflets, form resolutions, speech- Socialism in American will have been 6 es, cartoons, and publicity materials that could won. be adopted for state use all had a single goal: Physicians also ran half page ads of a photo “to keep public opinion hostile to national showing Senator Pepper with the African health insurance.”2 The message to be promot- American singer, Paul Robeson, who was a ed in every venue evoked the same antistatist member of the Communist party.7 theme—that national health insurance was Racism and the Red Scare provided a potent socialized medicine, part of a Communist plot framework for defaming national health insur- to destroy freedom.3 Patients would surrender ance and demonizing its proponents. In 1945, liberty and receive in return “low-grade assem- 75 percent of Americans supported national bly line medicine.”4 health insurance; by 1949 that figure had To achieve its political objective, the AMA declined to only 21 percent.8 In the 1950 elec- #1921—Jnl of Health and Social Behavior—Vol. 45 Extra Issue—45X02-quadagno

WHY THE UNITED STATES HAS NO NATIONAL HEALTH INSURANCE 31 tions six Democratic Senators who had sup- lion were privately insured (U.S. Senate ported national health insurance were defeat- 1951:2). The increase in private coverage was ed. a product of wartime wage and price controls According to some interpretations, the and tax policies that encouraged the prolifera- AMA campaign against national health insur- tion of fringe benefits and became organized ance was ineffectual. Thus, Morone (1990) labor’s primary strategy for recruiting and claims that the AMA “tirelessly evoked the retaining members in a hostile political cli- twin specters of galloping socialism . . . and mate. Kafkaesque bureaucracies (but) . . . the rhetor- ical pyrotechnics did not matter” (p. 262). In his view, reform depended on “political will in PRIVATIZING ORGANIZED LABOR’S Congress and the Presidency” (p. 262). AGENDA However, the evidence indicates that “political will” is not determined independent of these The activities of trade unions in other indus- campaigns. During the 1940s the AMA shaped trial democracies suggests that organized labor the “political will” in several ways. First, it is the prime political constituency with the mobilized economic resources and drew upon motivation and capacity to promote a national its organizational capacity to arouse members, health insurance program. Consequently, one stimulate grassroots activities and reach deep would not expect the trade unions to be advo- into communities to foment opposition to cates of a private insurance system. Yet in the national health insurance. Second, the AMA United States, for the most part the trade succeeded in framing national health insurance unions made no effort to win national health as a Communist plot and its supporters as com- insurance through political means but instead munists. Third, the AMA organized other anti- focused on obtaining collectively bargained welfare state groups into a coalition to spread fringe benefits for their members in employ- its oppositional message across a range of ment contracts (Derickson 1994). As Stevens venues. (1988) notes, “the political pressure exerted by How did physicians, merely a professional the American labor movement was . . . a group, defeat the will of social reformers, pow- demand for a private alternative to state-run erful politicians, and even presidents for more welfare programs” (p. 125). than half a century? Starr (1982) argues that The reason why the trade unions chose to the key to physicians’ political influence was bargain for fringe benefits must be understood “the absence of [any] countervailing power” as a response to an assault by business and (p. 231), but the historical evidence suggests conservative forces that sought to sharply curb that the opposite is the case. It was not the organized labor’s ambitions in the postwar era absence of a countervailing power that allowed and reduce its economic program to a militant physicians to assert their parochial concerns interest-group politics. The clash between into the policy making process, but rather the business and labor culminated in 1947 with fact that their objectives coincided with those passage of the Taft-Hartley Act, which rescind- of employer groups, insurance companies, and ed many of the rights unions had won during trade unions (Quadagno 2004). Once these the 1930s (Lichtenstein 1989). In the wake of interests diverged, the fragility of physicians’ Taft-Hartley, the Congress of Industrial power base was revealed. Organizations (CIO) expelled 11 communist- Truman did not run for re-election in 1952 controlled unions, triggering internecine war- and the Republican candidate, Dwight fare among several large unions. Union feuds Eisenhower, campaigned against national also helped defeat Operation Dixie, the CIO’s health insurance. Under eight subsequent years organizing drive in the South (Griffith 1988). of Republican rule, national health insurance The purge of communist unions from the CIO disappeared from the political agenda. The dramatically narrowed the scope of political policy vacuum gave the private health insur- debate within the labor movement (Stepan- ance industry the opportunity to establish a Norris and Zeitlin 1995; Stepan-Norris and preeminent position as the financier of health Zeitlin 2002). care. In 1940 fewer than six million people had To surmount new obstacles to recruitment any kind of insurance against the costs of med- invoked under Taft-Hartley, the trade unions ical care. Just ten years later more than 75 mil- made bargaining for fringe benefits a top pri- #1921—Jnl of Health and Social Behavior—Vol. 45 Extra Issue—45X02-quadagno

32 JOURNAL OF HEALTH AND SOCIAL BEHAVIOR ority. Collectively-bargained benefits obtained from one visit to the doctor to the next.”10 on union terms were viewed as the “virtual Rather the vast majority were in good health. equivalent of a closed shop,” that is, a union- Only 4 percent of people 65 or older were con- ized workplace (Brown 1997–1998:653). fined because of chronic illness. Nor were the Although pensions involved more money, aged especially needy. When tax obligations health insurance was the benefit for which and family size were taken into account, aged unions bargained most actively. As a result, families had only slightly less income than between 1946 and 1957 the number of workers younger families. Moreover, they had fewer covered by collectively bargained health insur- financial obligations. Despite employing ance agreements rose from one million to 12 “every propaganda tactic it had learned from million, plus an additional 20 million depen- the bitter battles of the Truman era,” AMA dents (Klein 2003). Thus, during a time when efforts were neutralized by the AFL-CIO trade unions in other nations were working for (Marmor 2000:38). national health insurance, American trade Notably, the AFL-CIO not only had an orga- unions faced an effective employer assault and nizational structure that matched that of the a hostile political environment. The conflict AMA, with its national headquarters, state fed- removed the organized working class from the erations, and union locals, but it also employed struggle over a universal health care program, a similar repertoire of tactics, strategies, and diverting its resources and political energy grassroots mobilization. This similarity is toward the pursuit of private health benefits for striking given that the AFL-CIO represented union members (Gottschalk 2000). the working class as a whole, both skilled and Collectively bargained health insurance unskilled workers, while the AMA was a nar- plans had one significant gap: They generally rowly-focused organization with its primary excluded retirees. Whenever a union attempted goal protecting the professional prerogatives of to include health insurance for retirees in a col- physicians. The comparison of the activities of lective bargaining agreement, that drove up the AMA and the AFL-CIO suggests a more costs and resulted in concessions on wages and general principle of policymaking processes in other issues.9 Thus, organized labor had an the United States—that the structure of the incentive to support a public health insurance state channels political activity in certain program for the aged. Health insurance for old directions, regardless of what type of group, people appeared to be an achievable political challenger or stakeholder, organizes that objective, one that could resolve the problem activity. of negotiating retiree health benefits and prove When it appeared that a government solu- what a recently united labor movement could tion was gaining political support, commercial achieve (Berkowitz 1986). insurers, who had previously been uninterested Beginning in 1956 the AFL-CIO wrote in insuring the elderly, began offering policies model bills and drummed up legislative spon- tailored to older people. In 1957 Continental sors, held annual conferences to educate union Casualty created Golden 65, the first hospital members about the issues, and worked to insurance program for the aged. The following develop a broad base of political support. To year, in 1958, Mutual of Omaha developed a win over the public, the AFL-CIO created a Senior Security program. Most commercial separate “grassroots” organization of retired policies were woefully inadequate, however, trade unionists, the National Council of Senior leaving the elderly with many health needs Citizens (NCSC). The NCSC staged demon- uncovered and many expenses to absorb. Fewer strations, organized mass protests and rallies, than half of people over 65 purchased health prepared flyers and newsletters, and bombard- insurance, and many who did either dropped ed elected officials with letters and phone their policies when rates rose or were dropped calls. The AFL-CIO also seized the initiative in by the insurer when claims were made (U.S. defining Medicare, using publicity materials to Senate 1964). As it became apparent that characterize the aged as a deserving group insuring the aged would never be profitable, (Quadagno forthcoming). insurance companies stopped actively oppos- Hoping to regain control of the national ing Medicare and instead lobbied behind the debate, the AMA released its own statistics, scenes to carve out a role they could play contending that the aged were not “universally (Corning 1969). frail and feeble, constantly ill, and doddering At the 1964 Democratic national convention #1921—Jnl of Health and Social Behavior—Vol. 45 Extra Issue—45X02-quadagno

WHY THE UNITED STATES HAS NO NATIONAL HEALTH INSURANCE 33 in Atlantic City, NCSC members arrived by the The fight to resurrect national health insur- busload. Fourteen thousand senior citizens ance began in 1968 when Walter Reuther, pres- marched for 10 blocks down the boardwalk to ident of the United Auto Workers (UAW), the convention hotel. Then during the months made a fiery speech before the American leading up to the election, the NCSC worked to Public Health Association. Reuther charged ensure that no Medicare supporters were that the only way to remove economic barriers defeated at the polls. The Democrats won the to care and contain health care costs was Senate and the House by a wide margin, and through a single federal program (Reuther no incumbent, Republican or Democrat, who 1969). What triggered the apparent about-face supported Medicare lost (Zelizer 1998). of organized labor was the dilemma of rising Medicare was signed into law by President health insurance premiums, which were taking Lyndon Johnson on July 30, 1965. The a larger share of the total wage package with Medicare bill included “Part A,” which provid- each new contract.11 Reuther organized the ed insurance for hospital care, “Part B,” an Committee of 100 for National Health optional voluntary plan of health insurance for Insurance (CNHI), a top-notch team of trade physicians’ services. Also included was unionists and social activists, including Medicaid, a new joint federal-state program of Senator Ted Kennedy, the heir apparent of the health insurance for the poor. Democratic party, who introduced the CNHI plan, dubbed Health Security, in 1971. Modeled after Medicare, Health Security ORGANIZED LABOR’S REVERSAL would make the federal government the “sin- gle payer” for all health services. Not to be Medicare was a victory for reformers but outdone, President Richard Nixon announced also a victory for providers and insurers. The his own National Health Insurance Partnership American Medical Association and the Act a few months later. A regulatory approach American Hospital Association won conces- that encouraged the private insurance market, sions guaranteeing that the government would Nixon’s plan included an employer mandate, a not control doctors’ fees or hospital charges concept that had gained favor with some large and that federal authorities would not adminis- employers, and health maintenance organiza- ter Medicare directly. Rather, private insurance tions, now known widely as simply HMOs agencies would handle claims, review billed (Starr 1982b). costs and reimburse providers (Jacobs 1993; After its bitter defeat over Medicare, the Fein 1985). Medicare also left a considerable AMA had decided that it was better to help number of health care needs uncovered, ensur- craft a bill friendly to the profession than to ing that private insurers retained a share of the scuttle reform. Instead of launching a cam- market for “Medigap” policies while shifting paign against Health Security, the AMA the riskier, less predictable costs to the govern- unveiled Medicredit, an alternative based on ment. vouchers and tax credits. However, the AHA With the federal government pouring virtu- refused to endorse Medicredit, preferring to ally unlimited public resources into financing expand Medicare into a national program, and care for the aged and the poor, health care the insurance industry opposed Medicredit, became a profitable enterprise for physicians, fearing that any infusion of federal funds into hospitals, and insurance companies. In 1965 the industry, even in the form of a subsidy, alone hospital daily charges jumped 16.5 per- would invite federal regulation.12 cent, average fees for office visits to general By July of 1971, 22 different bills were on practitioners jumped 25 percent, and fees for the table. At one end of the continuum was the internists jumped 40 percent (Marmor 2000). AMA’s Medicredit; at the other was Kennedy’s Spiralling costs provided fuel for reformers single payer plan. However, national health who argued that the problem could only be insurance failed to win congressional support solved by entirely revamping the health care in 1972, because of the Vietnam war, the system and placing responsibility in the hands OPEC oil crisis and the absence of a grassroots of one purchaser, the federal government. movement supporting the legislation. Although However, cost increases also made the reform- the AFL-CIO endorsed Health Security, the ers’ task more complex by diminishing the endorsement was qualified by an emphasis on clarity of the message. costs.13 Even the UAW, in disarray since #1921—Jnl of Health and Social Behavior—Vol. 45 Extra Issue—45X02-quadagno

34 JOURNAL OF HEALTH AND SOCIAL BEHAVIOR Reuther had withdrawn the union from the cial interests. AMA lobbyists sat in on the AFL-CIO in an internecine struggle in 1967, Committee’s final meeting and mustered 12 failed to provide a firm base of support votes for an alternative plan, similar to (Goldfield 2000). In 1973, a weakened version Medicredit (Wainess 1999). Insurance industry of Nixon’s HMO proposal was enacted instead lobbyist also opposed several aspects of the (Hacker 2002; Gordon 2003). measure, while labor leaders refused to sup- In his 1974 State of the Union address, port any compromise plan (Wolinsky and Nixon announced a new national health insur- Brune 1994). With few politicians receiving ance program, a two part plan which would mail on the issue from constituents, Mills give the private insurance industry a central announced that national health insurance role, as a way to distract attention from the would be tabled and that the Committee would escalating Watergate scandal and head off a not resume consideration in the fall (Quadagno more ambitious Kennedy proposal.14 On April 2005). 2, 1974, with much fanfare, Kennedy As health insurance costs continued to rise announced his own plan that he devised with inexorably during the 1980s, large corpora- Ways and Means Committee Chair Wilbur tions began seeking other cost containment Mills (D-AK) without consultation with the measures. One strategy was to bypass insur- trade unions. Like the earlier Health Security ance companies completely and self-insure plan, the Kennedy-Mills legislation would (Gabel et al. 1987). Self-insurance was a strat- replace the current system with a single egy that allowed corporations to reduce the national health insurance program but would administrative costs of insurance companies, otherwise preserve most aspects of the tradi- negotiate better rates with hospitals and physi- tional health economy. It would include co- cians, and use surplus funds in health benefit payments and deductibles, allow private insur- accounts as a source of investment capital. In ers to serve as fiscal intermediaries, and leave 1975 only 5 percent of employees were cov- room for lucrative supplementary benefits. ered by self-insured plans; by 1985 that figure Not unexpectedly, the AMA decried the had increased to 42 percent (Weiss 1993). The “socialist” measure (Dranove 2000: 30). The trend toward self-insurance eroded the eco- National Federation of Independent Business nomic base of private insurance plans and left called it “nothing more than a first step them with the less profitable business of pro- towards socialized medicine” (Martin cessing claims and benefits management 1993:369). (Goldsmith 1984). To compensate for these The AFL-CIO, furious at being excluded losses, insurance companies began aggressive- from the process, deserted Kennedy, denounc- ly seeking new markets (Bodenheimer 1990). ing Kennedy-Mills as a surrender of organized They began marketing managed care plans to labor’s fundamental principles. The unions employers that entangled them in complex objected to the major role allotted to the health negotiations with providers through preferred insurance industry and to the co-payments and provider networks, health maintenance organi- deductibles, which were anathema to orga- zations, and prepaid products. They also began nized labor because of the heavy burden they exploring the untapped, potentially lucrative would place on low-income and middle- long-term care market, which had, as income families (Quadagno forthcoming). Kitchener and Harrington (2004) show in this AFL-CIO leaders told their members to press volume, concentrated on nursing home care their elected representatives to delay voting on rather than alternative arrangements because national health insurance until the following of medical and business opposition. Long-term year, when it was presumed a veto-proof care was an attractive product line for insurers, Congress would be in office and a more labor- because profits in the commercial insurance friendly plan could be enacted. industry are generated almost entirely from When Nixon was forced to resign on August investment income. Policies that incur benefit 9, 1974, his successor, Vice President Gerald expenses monthly, such as health insurance, Ford, singled out national health insurance as are less profitable than policies that likely the major piece of domestic legislation won’t pay out benefits for years, such as life Congress should pass that year. The House insurance or long-term care insurance (Gabel Ways and Means Committee became an instant and Monheit 1983; Schwartz 1999). The target for lobbyists and contributions from spe- longer the duration of the policy, the greater #1921—Jnl of Health and Social Behavior—Vol. 45 Extra Issue—45X02-quadagno

WHY THE UNITED STATES HAS NO NATIONAL HEALTH INSURANCE 35 the profits. Yet it appeared that the government active employees and 54,000 retired employ- might absorb this promising market as a com- ees; by 1987 it had only 37,000 active employ- promise with legislation intended to expand ees and 70,000 retirees (Gottschalk 2000). Medicare to cover “catastrophic” expenses. Expanding Medicare to cover catastrophic health care costs could ease these pressures on corporations and reduce employer’s liability to THE TRIUMPH OF THE INSURANCE current retirees by an estimated 30 percent INDUSTRY (U.S. Senate 1989). The one influential organization opposed to The Long-term Care Defeat Medicare expansion was the Pharmaceutical Manufacturer’s Association (PMA). The PMA In 1986 President Ronald Reagan proposed was an active participant in a conservative expanding Medicare to include the cost of movement to halt the growth of federal entitle- “catastrophic illness,” purportedly to cultivate ment expenditures and immobilize the old age the support of the elderly whose health care lobby, which appeared to be a growing politi- costs in the form of deductibles, co-pays and cal force capable of swinging elections and medigap insurance now consumed a higher then demanding ever greater benefits (Pratt proportion of their income than before 1993; Powell, Williamson, and Branco 1996). Medicare was enacted (Moon 1993). He insist- The PMA opposed a provision in the cata- ed, however, that any proposal be voluntary, strophic care bill that would permit Medicare self-supporting, revenue neutral, and that it not to set drug prices or stop paying for entire encroach on the private market (Thompson classes of drugs entirely if costs rose too 1990). A catastrophic care plan was sent to quickly. To prevent the inclusion of price con- Congress in February of 1987 with the trols, the PMA spent several million dollars endorsement of the major provider groups. The lobbying against the legislation. The PMA also American Hospital Association supported the mobilized a grassroots movement among more measure as long as reimbursement to hospitals than 12,000 pharmacists, who wrote letters was sufficient. The American Medical urging their representatives to support a Association supported it as long as fee-for-ser- watered-down version of the drug benefit vice was not challenged (Street 1993). The (Quadagno 2005). insurance industry did not oppose the cata- On July 1, 1988 Congress enacted the strophic care proposal because it would still Medicare Catastrophic Coverage Act with leave numerous gaps in coverage, including huge bipartisan majorities in both the House $2,000 a year for deductibles and co-payments and Senate. The PMA endorsed the final com- and treatment for Alzheimer’s disease, which promise bill, which made no reference to cost was an emerging market for the private indus- controls on drugs. The Medicare Catastrophic try (Himelfarb 1995). Further, according to Coverage Act capped the amount beneficiaries conservative columnist Peter Ferrara, “insur- would have to pay for hospital and physician ance companies weren’t interested in fighting care, provided a prescription drug benefit, .. . Medigap just isn’t that profitable” mammography screening, hospice care, and (Thompson 1990:199). caregiver support but did not provide any help Expanding Medicare to cover catastrophic for the most pressing expense of the elderly, expenses would be a boon to large firms, long-term care (Street 1993). The new benefits which had become increasingly concerned would be financed by an increase in Part B about the costs of retiree health benefits for premiums, which would rise from $122 a year former employees. Over 70 percent of people to $511. In addition, Medicare beneficiaries 65 and older had some supplemental medigap who paid at least $150 a year in income taxes insurance, and half of these policies were paid would have to pay a surcharge up to a maxi- for by their former employers. By the 1980s mum of $800 for a single person and $1,600 health care inflation coupled with increasing for a couple (Pratt 1993). Although approxi- life expectancy and early retirement had made mately 60 percent of older people would be retiree health benefits a significant drain on exempt from the surcharge because their profit margins (Neilsen 1987). The more incomes were too low, those who would have mature the firm, the higher the costs. For to pay were the group most likely to already example, in 1982 Bethlehem Steel had 70,000 have catastrophic coverage from medigap #1921—Jnl of Health and Social Behavior—Vol. 45 Extra Issue—45X02-quadagno

36 JOURNAL OF HEALTH AND SOCIAL BEHAVIOR insurance policies. Thus, they would be paying sion. Many insurance companies paid agents a twice for the same coverage. commission of as much as 60 percent of first The Medicare Catastrophic Coverage Act year premiums, giving them an incentive to triggered an explosive reaction among the “churn” clients. Some elderly people owned as elderly. Angry senior citizens descended on many as 11 different policies that paid dupli- Congress, demanding that the new program be cate benefits (U.S. House of Representatives changed or repealed outright (Himelfarb 1989). 1995). On October 4, 1989 the House voted to Politically, insurers are consummate insid- repeal the program it had approved just 16 ers. State insurance commissioners and their months earlier. Two days later the Senate voted staff are often former insurance executives, to repeal the surtax, retaining only the long- and the federal and state committees that han- term hospital benefits, which subsequently dle insurance matters are dominated by legisla- were also eliminated (Crystal 1990; Day tors with ties to the industry (Bodenheimer 1993). 1990). With assets greater than the largest During the battle over catastrophic care, a industrial corporations and insurance lobbyists long-term care measure was introduced by foremost in nearly every state, the insurance Representative Claude Pepper (D-FL). Pepper industry proved to be a formidable foe proposed expanding Medicare to pay for home (Renzulli 2000). To fend off the threat of a fed- care services, a popular proposal among the eral home care program, the Health Insurance elderly whose only option when they needed Association of America (HIAA) bankrolled a long-term care was to become sufficiently lobbying blitz. HIAA lobbyists wrote every impoverished to qualify for Medicaid (Grogan member of Congress proclaiming that “this and Patashnik 2003). According to a poll con- bill is the wrong medicine for our country, ducted by the American Association of Retired another example of an expensive government Persons, 85 percent of the public supported solution . . . that would lead to exploding pub- home care for the disabled.15 In exchange for a lic sector costs.”16 The HIAA also created an promised vote on his home care bill in the umbrella organization, the Coordinating House, Pepper agreed he would not bottle up Committee for Long-Term Care, to arouse the catastrophic care bill, which he viewed as other stakeholder organizations. Blue inadequate, in the Rules Committee. Cross/Blue Shield, the Chamber of Commerce, The insurance industry was willing to allow National Small Business United, the American the federal government to absorb the cost of Association of Homes for the Aged, the catastrophic care, because the medigap market National Association of Manufacturers, and was saturated and never that profitable to begin several other insurer groups worked together to with. In fact, as soon as the Medicare defeat the Pepper bill.17 The Chamber of Catastrophic Coverage Act was signed, insur- Commerce, whose own governing committees ers began offering new policies to cover the co- were stacked with insurers, warned that the payments and deductibles that beneficiaries proposed payroll tax increase would hurt small would still have to pay. Insurers opposed the businesses and set a “dangerous precedent” home care bill, however, because it threatened that could lead to the “application of the entire to absorb the market for their newest product. Social Security tax to all wages.”18 The In 1985 no insurance company offered a long- National Federation of Independent Business term care policy. By 1987, 72 insurance com- (NFIB), an organization that represented small panies had developed some type of long-term businesses, sent members of Congress a list of care product. However, these policies provided businesses in their districts that opposed the inadequate protection and were often fraudu- measure and warned ominously that it would lently administered. An analysis by the House “consider the vote on H.R. 3436 a Key Small Select Committee on Aging of 33 long-term Business Vote for the 100th Congress.”19 care insurance policies offered by 25 insurers Home care opponents also waged a public found that most provided little protection relations campaign, demonizing the aged, who against the cost of nursing home care, few were perceived as an omnivorous political were indexed to inflation, many would only force with the potential to overcome business pay for skilled nursing but not custodial care, opposition. The Wall Street Journal described and more than half excluded Alzheimer’s dis- the home care bill as “the welfare state on ease, the main cause of nursing home admis- cocaine,” supported by “the King Kong known #1921—Jnl of Health and Social Behavior—Vol. 45 Extra Issue—45X02-quadagno

WHY THE UNITED STATES HAS NO NATIONAL HEALTH INSURANCE 37 as the senior citizen lobby. There is something secondary consequence of depriving the both disingenuous and surreal about today’s Clinton administration of a key ally. Before the elderly lobby . . . They always want more- election, the president of the AFL-CIO had preferably in a federal program others will promised Clinton that the labor movement have to pay for.”20 When the home care bill would be the “storm troopers” for national came to a vote in the House, 99 Democrats and health insurance. However, labor leaders 144 Republicans voted against it. Following viewed NAFTA as an effort to shift production the defeat, the HIAA sent members of to low-wage countries with more lax environ- Congress who voted for the bill a letter warn- mental and labor standards, so instead of work- ing, “we want to take special notice of your ing for health care reform, the AFL-CIO vote last week on Rep. Pepper’s home care became involved in fighting NAFTA (Skocpol bill.”21 As an alternative, the HIAA lobbied for 1996). and won federal tax incentives to stimulate the The president’s Health Security plan was private long-term care insurance market. finally released in October of 1993. The most The battle over home care proved to be a comprehensive domestic policy proposal since useful learning experience for the insurance 1965, it would guarantee universal coverage industry. Insurers formed a viable coalition through an employer mandate and contain with other organizations dedicated to defeating inflation through purchasing alliances and a federal health care proposals and devised tac- national health budget. The purchasing tics and strategies that allowed them to crush a alliances would be similar to the the corporate measure that had broad public support. That purchasing coalitions of the 1980s and domi- battle prepared the insurance industry for a nated by the five largest health insurers: Aetna, fiercer struggle that would be waged in the Prudential, MetLife, Cigna, and Travelers. 1990s over national health insurance. However, smaller specialty firms stood to lose 30 to 60 percent of their business, and insur- ance agents would be put out of business National Health Insurance Revisited entirely. The plan also called for repeal of the health insurance industry’s antitrust exemption In 1991 national health insurance moved to under the McCarren-Ferguson Act and made the forefront of political debates when Senator insurers subject to federal anti-trust provisions John Heinz (D-Pa.) died in a plane crash and and consumer protection mandates (Johnson the governor of Pennsylvania appointed Harris and Broder 1996; Skocpol 1996). Wofford, the sixty-five-year-old former presi- The lengthy planning period provided stake- dent of Bryn Mawr College, to replace him. holder groups the opportunity to develop a Wofford was only supposed to serve until a strategy and plan an attack. The most vehe- special election could be held, but he decided ment opponent of Health Security was the to run for the regular Senate seat. The little- Health Insurance Association of America, known Wofford was trailing far behind his which spent more than $15 million in a multi- opponent, Richard Thornburgh, the twice faceted advertising campaign. In the summer elected, popular former governor and U.S. of 1993, the HIAA created the Coalition for attorney general until Wofford raised the topic Health Insurance Choices, involving many of of health insurance. Wofford crushed the same organizations that had fought the Thornburgh in the election, and polls subse- home care bill. Initially, the Coalition spon- quently showed that voters identified health sored vague commercials about health care care as a key factor (Johnson and Broder reform. One ad said the purchasing alliances 1996). might be “the first step to socialized medicine” Other candidates seized the issue, and the (Skocpol 1996:137). Another series of ads fea- Democratic party candidate, Bill Clinton, tured a white, middle-class couple confronting made it a feature of his campaign (Hacker the worrisome possibility of government 1997). After Clinton won the election, he bureaucrats choosing their health plan. As promised to have a health reform bill for Health Security won public support, the ads Congress within his first 100 days. Instead a zeroed in on fears people had about how their crisis in Somalia and a battle over the North current insurance coverage would be affected American Free Trade Agreement absorbed the (Jacobs and Shapiro 1995). All the ads invoked president’s attention. The NAFTA battle had a an antistatist theme, that Health Security #1921—Jnl of Health and Social Behavior—Vol. 45 Extra Issue—45X02-quadagno

38 JOURNAL OF HEALTH AND SOCIAL BEHAVIOR would create a vast, inefficient, and unrespon- favored it. By June of 1994 public support had sive government bureaucracy and thousands of declined to only 44 percent (West and Loomis new bureaucrats (Goldsteen et al. 2001; Jacobs 1999). and Shapiro 2000). Interestingly, unlike the 1940s, when the The Coalition for Health Insurance Choices AMA had been the most vocal political oppo- set up an 800 number to enlist grassroots sup- nent of the Truman plan, in the 1990s physi- porters. The Coalition also formed “swat cians were nearly invisible in the fracas over teams” of supporters to write letters and lobby Health Security. The AMA initially endorsed lawmakers (Center for Public Integrity 1995). the concept of universal coverage but opposed Concerned employers received a thick manual any stringent cost controls or regulations that spelling out ways to get employees, vendors, would give managed care an advantage. Some and other sympathizers involved in the battle organizations of specialists endorsed the basic against the Clinton plan. The effort produced features of the Clinton plan; other physician more than 450,000 contacts with members of organizations opposed the same features Congress, almost a thousand for each senator (Tuohy 1999). These disagreements made it and congress person (Johnson and Broder impossible for physicians to convey a clear 1996). message about health care reform. Tellingly, Insurance companies and insurance agents’ the various accounts of Clinton’s failed effort organizations increased their campaign contri- scarcely mention the AMA or the physicians it butions substantially, with the largest sums represented (Johnson and Broder 1996; going to members of the House Ways and Skocpol 1996; Hacker 1997). Means Committee and the Senate Finance After the demise of Health Security, health Committee, both of which had jurisdiction policy making moved toward shoring up the over health reform. Members of two House private health insurance system by tightening committees that debated health care bills regulations to make private insurance less inse- received contributions averaging four times cure. The Health Insurance Portability and that of members not on these committees Accountability Act of 1996 (HIPAA) narrowed (Center for Public Integrity 1995). Insurance the conditions under which companies could agents also organized their own grassroots refuse coverage, allowed people who itemized effort (Johnson and Broder 1996). A political deductions on their income taxes to deduct a force in their own right, they were located in portion of long-term care insurance premiums, every congressional district, active in their and made employer contributions toward the communities, and involved in state and local cost of group long-term care insurance a tax politics (Quadagno 2005). deductible business expense. After HIPPA The HIAA had an ally among small busi- long-term care insurance sales increased an ness owners who opposed an employer man- average of 21 percent a year, with the biggest date and any tax increase. The NFIB mobilized increase occurring in group insurance plans its own grassroots effort against Health offered by employers (Quadagno forth- Security, dispatching streams of faxes and coming). action alerts from its Washington office to tens The most recent health policy event was of thousands of small business owners. Every enactment of the 2003 Medicare prescription week the NFIB polled 600,000 members on drug benefit. Hailed by the Bush administra- their attitudes toward the Clinton plan and sent tion as the biggest overhaul of Medicare since their responses to their congressional represen- its inception, the new program would pick up tatives. The NFIB also organized groups of 75 percent of a beneficiary’s drug costs up to activists who attended local meetings whenev- $2,250 a year (Hacker and Marmor 2003). er their congressional representatives visited Then, in a confusing twist, coverage would their home districts, and it also conducted sem- stop until a beneficiary had spent another inars in states that had members on key con- $3,600, creating a so-called “doughnut hole” gressional committees. The NFIB also worked (Oberlander 2003). After that, Medicare would through the press, using the influential radio pay 95 percent of any additional drug costs. talk shows to kindle public opposition Also included were tax incentives to encourage (Johnson and Broder 1996). When the first higher income elderly to purchase private poll was taken on the Clinton plan in health insurance policies as a substitute for September of 1993, 59 percent of the public Medicare, $12 billion in subsidies to private #1921—Jnl of Health and Social Behavior—Vol. 45 Extra Issue—45X02-quadagno

WHY THE UNITED STATES HAS NO NATIONAL HEALTH INSURANCE 39 insurance companies to encourage them to ing their sovereign rule, as the abuses of pro- offer seniors’ policies that compete with fessional authority following the enactment of Medicare and $70 billion in subsidies to Medicare and Medicaid roused large firms and employers so they wouldn’t drop prescription the insurance industry to seek redress in the drugs from their retiree health plans (although form of managed care. The outcome demon- many analysts doubt that the incentives are strates the fragility of physicians’ power base. sufficient to have that effect). The final caveat As physicians’ antipathy to national health was that the federal government was prohibit- insurance dwindled—tempered by the benefits ed from negotiating drug prices. of guaranteed payment, splits among various The no-price-negotiation feature came from specialty groups, and the loss of allies among the Pharmaceutical Research and Manu- other health professionals and employer facturers of America (PhRMA), with its 620 groups—health insurers moved to the forefront lobbyists. In the first six months of 2003, the of public debates, determined to prevent pas- PhRMA pumped $8 million into a lobbying sage of national health insurance and defeat campaign against price controls. The “dough- any program that might compete with their nut hole” was a concession to the American products. In some cases, traditional lobbying Association of Health Plans which represents tactics were sufficient to ward off government managed care firms. The main incentive for intervention; in other instances, they formed the elderly to choose an HMO over the tradi- political coalitions with like-minded organiza- tional Medicare program was prescription tions—whether they be small business owners, drugs. If Medicare assumed all drug costs, pharmacists, or insurance agents—to create then HMOs would be a less attractive alterna- “grassroots” social movement activities and tive. Increases in physicians’ payments sealed fund public information campaigns designed the deal. The result was a benefit that paid to convince politicians that the public opposed some of the costs for low spenders and most of health care reform. The changing composition the costs for people with catastrophic drug of the anti-reform coalition, dominated first by expenditures but preserved the free market for physicians, then by insurers, has obscured the the middle class (Weissert 2003). persistence of stakeholder mobilization as the primary impediment to national health insur- ance. CONCLUSION The ironic outcome of each failed attempt to enact national health insurance was federal Medical sociologists have aptly described action that stimulated the growth of commer- the shifting configuration of power within the cial insurance and entrenched a market-based health care system from providers to pur- alternative to a public program. In the 1940s chasers but have failed to specify the way that the failure of national health insurance provid- the rise of these “countervailing powers” trans- ed a stimulus to the private health insurance formed the political terrain. From the New industry. The enactment of Medicare in 1965 Deal to the 1970s, the most vehement oppo- removed a key constituency, the aged, from the nents of national health insurance were physi- political debate while preserving a profitable cians. Fearful that government financing of segment of the market for private insurers. The health services would lead to government con- compromises involved in Medicare also led to trol of medical practice, they mobilized against health care inflation, creating a dilemma that this perceived threat to professional sovereign- would jinx all subsequent efforts to enact ty. Physicians were able to realize their politi- national health insurance. Health care reform- cal objectives through the American Medical ers could never again define the problem sole- Association, which then had the organizational ly in terms of improving access to health care capacity to marshal resources, command a for worthy and deserving groups. They now response from members, achieve deep penetra- also had to promise to control costs and reform tion into local community politics, shape pub- the system. A national health insurance plan lic opinion through antistatist campaigns, and proposed in the 1970s was redirected and led subsequently influence electoral outcomes. instead to federal support for private HMOs. The historical irony is that the private health The defeat of home care legislation in the insurance system that physicians helped to 1980s provided a stimulus to the long-term construct became a mechanism for undermin- care insurance market. #1921—Jnl of Health and Social Behavior—Vol. 45 Extra Issue—45X02-quadagno

40 JOURNAL OF HEALTH AND SOCIAL BEHAVIOR The centuries-long struggle for national there must be a national leadership responsible health insurance illuminates fundamental fea- for mapping out a grand plan to disseminate tures of American political development. First, ideas, recruit members nationwide, and culti- it suggests that while anti-statism is not a vate political insiders (influential congression- causal force in and of itself it does provide a al committee chairs and civil servants) who powerful weapon that can be deployed in polit- can introduce bills and devise ways to attach ical struggles over the welfare state. Second, it health care initiatives to less visible budget suggests that labor movements can use their measures. At the middle level, a reform move- “power resources” in ways that reinforce rather ment needs intermediate institutions, such as than transform the play of market forces, but state labor federations whose leaders can coor- also that the trade union movement has the dinate activities, tap into indigenous social net- capacity to transform the welfare state without works, and disseminate the organizations’ forming a political party. Because the models and ideas (Nathanson 2003). Finally, a American trade unions viewed national health reform movement needs local chapters to fun- insurance as an unachievable political goal in nel money to the higher levels of the federation the postwar era, they instead concentrated on and provide grassroots activists who can winning benefits through collective bargain- engage in social action to influence politics at ing. Once won, these private health benefits the local level. This structure ties leaders to created a conundrum in the form of costly one another, links local groups to larger issues, retiree health benefits that encouraged the and affords opportunities for political leverage AFL-CIO to lead a successful campaign for at the local, state, and national levels. Thus, health insurance for the aged. The Medicare social movement theorists’ focus on informal, victory resulted from a confluence of historical emergent social and political processes needs conditions and favorable political opportunity to be coupled with an analysis of the way the structures that included an internally unified structure of the state systematically organizes labor movement, Democratic party control of political activity (McAdam and Su 2002). Congress and the Presidency, and a national climate that was sympathetic to initiatives to aid the less privileged. Third, it is apparent that NOTES the institutional structure of the state in the United States channels political activities in 1. A Simplified Blueprint of the Campaign ways that blur the distinction between the tac- Against Compulsory Health Insurance, tics and strategies of less privileged groups and National Education Campaign, American normal political processes. Just as challengers Medical Association, Whitaker and Baxter, not only engage in grassroots activities but p. 4–12. Library of Congress, Washington, also attempt to gain privileged access to main- DC., Robert A. Taft papers, Box 643, stream politics, so, too, do powerful stakehold- Legislative Files, File: National Program ers with privileged access also manufacture for Medical Care (S. 1679-S. 1581) 1949. grassroots protests to convince political lead- 2. Address of President R.L. Sensenich, ers that their interests represent the public will. American Medical Association, Atlantic The similarities in tactics and strategies used City, June 6–10, 1949, Journal of the by opponents and successful reformers suggest American Medical Association, June 18, that the structure of the state organizes politi- 1949, p. 613. cal activity in systematic ways. This insight 3. Statement on Truman Health Plan, Journal provides a framework for identifying what of the American Medical Association, May might be required to transcend the network of 7, 1949, Vol. 146, No. 1, p. 114. Taft papers, powerful, vested interests to achieve universal Box 640, Legislative Files, File: Health coverage. Specifically, it suggests that Legislation, 1945. prospects for reform are enhanced when a 4. Freedom of choice under the Wagner- coalition is organized in ways that closely mir- Murray-Dingell bill S. 1050 by Marjorie ror the representative arrangements of the Shearon, Nov. 18, 1945, p. 7. Taft Papers. American state (Skocpol, Ganz and Munson Box 640, Legislative Files, File: Health 2000). In keeping with this argument, any Legislation, 1945. reform movement needs an organizational 5. “You and Socialized Medicine,” pamphlet structure with a federal framework. At the top by the Chamber of Commerce, p. 3. Box #1921—Jnl of Health and Social Behavior—Vol. 45 Extra Issue—45X02-quadagno

WHY THE UNITED STATES HAS NO NATIONAL HEALTH INSURANCE 41 640, Legislative Files, File: Health 2, 1988. Pepper Library, Series 302A, File Legislation, 1945. 42, Box 7. 06. Letter from Louis Orr, M.D. to Dr. Arthur 20. “Elderly Lobby Peppers the House on Schwartz, April 10, 1950. Claude Pepper Health Bill,” Wall Street Journal, May 6, Library, Florida State University Libraries, 1988. Series 302A, File 42, Box 7. Pepper Tallahassee, FL., Series S201, Box 93, File Library. 1. 21. Letter from Linda Kenckes, Vice 07. Claude Pepper Oral History, Columbia President, Federal Affairs, HIAA. Pepper University Oral History Collection, p. 28. Library, Series 302A, File 42, Box 7. 08. Gallup Polls Public Opinion, 1935–1971, 2:801. 09. Nelson Cruikshank Oral History, REFERENCES Columbia University Oral History Collection, p. 75. Anderson, G.F., U.W. Reinhardt, P.S. Hussey, and V. 10. Washington News, Nov. 30, 1963, Journal Petrosyan. 2003. “It’s the Prices, Stupid: Why the United States is So Different from Other of the American Medicare Association, Countries.” Health Affairs 22(3):89–105. Vol. 186, No. 9, p. 16–17. Berkowitz, Edward. 1986. “Disability Insurance and 11. Katherine Ellickson Oral History, the Limits of American History.” The Public Columbia Oral History Collection, p. 135. Historian 8(2):65–82. 12. Income Tax Credits to Assist in the Bodenheimer, Thomas. 1990. “Should We Abolish Purchase of Voluntary Health Insurance.” the Private Health Insurance Industry?” Files of Rashi Fein, Department of Social International Journal of Health Services Medicine, Harvard Medical School, 20(2):199–220. Boston, MA.. File: Tax Credit for Brown, Michael. 1997–1998. “Bargaining for Social Rights: Unions and the Reemergence of Health Insurance (Nixon Task Force). Welfare Capitalism.” Political Science Quarterly 13. Letter from David S. Turner to Members of 112(4):648–72. the U.S. Congress, October 5, 1970, Series Center for Public Integrity. 1995. “Well-heeled: 3098, Box 52, File 1, Pepper Library; AFL- Inside Lobbying for Health Care Reform: Part CIO Executive Council Statement, II.” International Journal of Health Services February 17, 1970, p. 1. 25:593–632. 14. Memo for the President from Caspar Chernew, Michael. 2001. “General Equilibrium and Weinberger, November 2, 1973, National Marketability in the Health Care Industry.” Journal of Health Politics, Policy and Law Archives, College Park, MD, Nixon mate- 26(5):885–97. rials. White House Central Files, Subject Corning, Peter. 1969. The Evolution of Medicare. Files, HE (Health) Box 2, File: EX HE Social Security Administration, Office of 8/1/73. Research and Statistics, Research Report No. 29. 15. “Polls show public supports Pepper home Washington, DC: U.S. Department of Health, care bill.” AARP news release. Pepper Education and Welfare. Library, Series 302A, File 42, Box 7. Crystal, Stephen. 1990. “Health Economics, Old- 16. HIAA Comments on H.R. 3436, p. 1. April age Policies and the Catastrophic Medicare 26, 1988. Pepper Library, Series 302A, Debate.” Journal of Gerontological Social Work 15:21–31. File 42, Box 7. Cunningham, R.M., Jr. 1951. “Can Political Means 17. Letter to Claude Pepper from Coordinating Gain Professional Ends?” The Modern Hospital Committee for Long-term care, April 22, 77(December):53–54. 1988. Pepper Library, Series 302A, File Day, Christine. 1993. “Older American Attitudes 42, Box 7. toward the Medicare Catastrophic Coverage Act 18. Letter from Albert Bourland, Vice of 1988.” Journal of Politics 55:167–77. President for Congressional Relations, Derickson, Alan. 1994. “Health Security For All?” Chamber of Commerce, May 23, 1988. Journal of American History 80:1333–56. Pepper Library, Series 302A, File 42, Box Dixon, Anna and Elias Mossialos. 2002. Health Care Systems in Eight Countries. London, 7. England: European Observatory on Health Care 19. Letter from John Motley, Director, Federal Systems. Government Relations, National Dranove, David. 2000. The Economic Evolution of Federation of Independent Business, June American Health Care: From Marcus Welby to #1921—Jnl of Health and Social Behavior—Vol. 45 Extra Issue—45X02-quadagno

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Jill Quadagno is Professor of Sociology at Florida State University, where she holds the Mildred and Claude Pepper Eminent Scholar Chair in Social Gerontology. She has been a recipient of a National Science Foundation Visiting Professorship for Women, the Distinguished Scholar Award of the American Sociological Association Section on aging, a John Simon Guggenheim Fellowship, and an American Council of Learned Societies Fellowship. She is past-president of the American Sociological Association (1997–98). She is the author of 12 books and more than 50 articles on aging and social policy issues. Her book The Color Welfare was a finalist for the C. Wright Mills Award and won the award for the Outstanding Book on the Subject of Human Rights from the Gustavos Meyers Center for the Study of Human Rights. An Investigator Award in Health Policy Research from the Robert Wood Johnson Foundation provided the funding for her to conduct the historical research for her book, One Nation, Uninsured: Why the U.S. Has No National Health Insurance, which will be published by Oxford University Press in February 2005.