Unfinished Journey — a Century of Health Care Reform in the United States Jonathan Oberlander, Ph.D

The NEW ENGLAND JOURNAL of MEDICINE

Perspective august 16, 2012

200TH ANNIVERSARY ARTICLE Unfinished Journey — A Century of Health Care Reform in the United States Jonathan Oberlander, Ph.D.

n 1915, reformers issued the first major proposal surance coverage and cost con- Ifor national health insurance in the United States tainment. (see timeline). They believed that America should Coverage follow European countries such as Germany and Political struggles over expand- ing access to insurance have long England in securing access to Germany,” “Bolshevik,” and “un- defined U.S. health policy. Al- medical care for workers and pro- American”). After an internal re- though proposals focused at first tecting them against the econom- volt, the AMA became a steadfast on industrial workers, by the ic burdens of illness. The leader- opponent of national health in- 1940s reformers were seeking a ship of the American Medical surance. The issue briefly disap- universal health insurance pro- Association (AMA) initially agreed, peared from the agenda.1 gram for all Americans. But uni- and the prospects for reform ap- Nearly 100 years after that first versal coverage remained elusive peared promising. proposal, Americans are still de- during the 20th century. The Yet by 1920, the health care bating health care reform, the same forces that initially stalled reform campaign had failed, the perils of “socialized medicine,” national health insurance — re- victim of intense opposition (from and the tensions between individ- sistance from powerful interest businesses and the insurance in- ual liberty and government aid. groups bent on preserving the dustry, among others), bad timing What have been the major devel- status quo, demagoguery, and (the American entry into World opments in U.S. health policy fear of socialized medicine — War I), demagoguery, and xeno- over the past century? And what endured to undercut subsequent phobia (charges that the health challenges lie ahead? I focus here reform efforts. A parade of presi- care proposals were “Made in on two critical issues, health in- dents — including Harry Truman,

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Richard Nixon, and Bill Clinton patchwork of public and private to build a federal health insur- — pursued universal coverage.2 coverage. Employer-sponsored pri- ance system incrementally, group They all failed. vate insurance emerged to cover by group. Government programs That failure is often attributed working Americans and their would cover politically sympathet- to a political culture suspicious families. It spread widely in the ic, deserving populations — be- of centralized power and enam- 1940s and 1950s, as unions ginning with the elderly — who ored of individual responsibility. pressed for health benefits. Link- had trouble obtaining private in- There is no question that the anti- ing insurance to employment pro- surance, as well as certain cate- government strain in U.S. poli- vided insurers with a convenient gories of low-income people who tics made the reformers’ task ex- risk pool and a reliable source of couldn’t afford it. The 1965 enact- traordinarily difficult. However, premium payments. It also gave ment of Medicare and Medicaid U.S. political institutions repre- opponents of government insur- established this pattern of demo- sented an equally important — ance a viable alternative that em- graphic incrementalism, while or perhaps even more important bodied “the American way.” Yet transforming the government role — barrier to reform. In the private insurance benefited from in U.S. medical care. Thereafter, fragmented U.S. system, health government largesse: the federal policymakers would focus on ex- care legislation died in Congress government subsidized employer- panding public insurance cover- even when it enjoyed support sponsored coverage by excluding age of pregnant women, children, from the president and the pres- from taxable income premium and persons with disabilities and ident’s party had majorities in payments made by employers on specific illnesses (such as end- the House and Senate. If we had behalf of workers. stage renal disease). a parliamentary system, the Even as it grew, employer- Despite the rise of employer- United States probably would sponsored insurance remained sponsored insurance and the ad- have adopted universal insurance beyond the reach of many Ameri- vent of Medicare and Medicaid, decades ago. cans. Having failed to secure na- the U.S. health insurance system The failure of early proposals tional health insurance, reformers has long had serious gaps and for national health insurance cru- switched strategies midcentury. inequities. Many working Ameri- cially shaped U.S. health policy. They promoted less controversial cans, particularly those at small Instead of a single insurance sys- policies, such as federal funding firms, do not have access to em- tem organized by the government, of hospital construction and med- ployer-based coverage and have the United States developed a ical research,1 and they decided found it difficult to purchase af-

1986 1951 1990 Emergency Medical Treatment and Active Labor Act Truman administration Omnibus Budget Reconciliation Act (OBRA) requires state (EMTALA) requires hospitals to screen and stabilize all proposes federal health Medicaid programs to cover children 6 to 18 years of age living patients seeking emergency care, regardless of insurance insurance for elderly Social in families with incomes below the poverty level, culminating a 2003 1945 status or ability to pay Security beneficiaries series of Medicaid expansions that began in 1984 Medicare Modernization Act (MMA) adds prescription- 1915 Harry S Truman drug coverage to the program and creates tax-preferred 1977 American Association of Labor becomes first U.S. 1971 Health Savings Accounts to be paired with President Jimmy Carter Legislation proposes compulsory President to propose President Richard Nixon announces 1993 high-deductible health insurance health insurance; model bills are later national health health reform plan requiring employers to proposes a program to President Bill Clinton proposes universal 2010 introduced in several states insurance; legislation insure workers and subsidize coverage for contain hospital costs; bill health insurance, but Health Security Act fails Congress enacts Patient Protection but fail to pass fails to pass lower-income Americans; it does not pass is defeated in Congress to pass Congress and Affordable Care Act (ACA)

1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

1965 1983 1997 1943 1989 2012 Congress enacts Medicare adopts prospective Congress enacts the State Children’s Senators Robert Wagner and James Murray Medicare adopts a Supreme Court rules that ACA is constitutional Medicare and Medicaid payment for hospitals Health Insurance Program (SCHIP) and Congressman John Dingell introduce physician fee schedule but restricts federal government’s ability to take legislation to establish national health 1972 away funding from states that opt not to Medicare is expanded to include insurance through Social Security 1985 1996 expand Medicaid persons with end-stage renal disease Consolidated Omnibus Budget and permanent disabilities Health Insurance Portability and Accountability Act Reconciliation Act (COBRA) allows (HIPAA) limits employers’ ability to exclude 1946 workers who lose employer health preexisting-condition coverage for new employees Congress passes 1973 insurance owing to job loss to the Hill–Burton Act to HMO Act encourages development of continue coverage up to 18 months, fund hospital construction health maintenance organizations paying premiums themselves

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fordable, comprehensive policies U.S. insurance arrangements could the safety net of commu- in the nongroup insurance mar- are also bedeviled by complexi- nity health centers, hospitals, and ket. The revelation that private ty: Medicaid has about 50 differ- other providers who care for the insurers have targeted pregnant ent eligibility pathways, low-in- uninsured. Uninsured patients women and patients with cancer come Medicare beneficiaries are are financial losers for health for coverage rescissions3 — con- also covered by Medicaid, Medi- care institutions, and they con- triving reasons to cancel insur- care’s benefits are sufficiently sequently face serious barriers ance for persons whose medical limited that most enrollees carry to care — a reality underscored circumstances made them “bad” secondary insurance, and most by a 1986 law that sought to actuarial risks — perfectly cap- uninsured children are eligible stop hospitals from dumping tures the economic imperatives for Medicaid or the Children’s patients who lacked coverage. and moral illogic of the individ- Health Insurance Program (CHIP) Providers who do see many un- ual market. In this market, the but are not enrolled. Americans insured patients are, in effect, pun- sickest persons who most need “churn” across different insurance ished financially for their com- insurance have had the hardest programs depending on their age, passion. time obtaining it. parental status, employment, in- Despite their growing numbers, There are gaps in public insur- come, and disease. It’s no won- the uninsured often faded from ance, too. Medicare beneficiaries der that U.S. medical care is of- public view in recent decades. face substantial cost sharing, and ten characterized as a “nonsystem.” Changing political alignments, the program does not cover long- As the costs of medical care the sobering legacy of previous term nursing home stays. Medic- increased, Americans’ access to failed reform efforts, and the aid enrollees often have trouble health insurance eroded. Between limited electoral power of the finding doctors who will see them, 1987 and 2010, the uninsured uninsured pushed health care re- largely a consequence of low re- population grew from 31 mil- form down the congressional imbursement rates for a popula- lion (12.9% of the population) agenda. However, federal inaction tion that lacks the political clout to 50 million (16.3%). The incre- spurred state efforts. No state to ensure adequate payment. Cash- mental policies adopted to expand achieved universal coverage, but strapped states have at times cut access to insurance could not some made significant coverage Medicaid benefits and eliminated keep pace with the large number gains during the 1980s and coverage for optional populations of Americans who were losing 1990s. And the landmark 2006 during economic downturns. employer-based coverage. Neither Massachusetts law provided a

1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

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political and policy blueprint for largely catered to physicians’ and across the health care system. national health care reform. hospitals’ interests — had few However, cost control has been In 2010, President Barack restraints on costs. Medicare, too, defined largely as a budgetary Obama and Democratic majori- initially implemented generous problem, meaning that presiden- ties in Congress drew on that payment policies, partly to curry tial administrations and Congress blueprint, and lessons from pre- favor with the health care indus- often focus only on reducing fed- vious reform failures, to win pas- try and thereby ensure the pro- eral spending. Medicare savings sage of the Patient Protection gram’s successful start. have been a regular feature of and Affordable Care Act (ACA) — Investing in medical tech deficit-reduction legislation since a historic achievement. The ACA’s nologies has produced substan- the 1980s. sweeping scope — encompassing tial benefits, such as reduced Absent systemwide controls, subsidies for the uninsured, a mortality from heart disease. But it has fallen to private payers to Medicaid expansion, new insur- since 1970, excessive rates of contain spending for Americans ance exchanges, individual and health care spending have been not covered by government pro- employer mandates, insurance- viewed as a serious problem that grams. Indeed, much of U.S. market regulations, and much threatens government budgets and health policy is effectively ceded more — broke with the incre- employers’ bottom lines. In re- to private actors, who help drive mentalism of recent decades.4 sponse, U.S. policymakers have the direction of change. Employ- When the ACA is fully imple- formulated a wide array of re- ers have pursued a variety of mented, an estimated 30 million sponses.5 President Richard Nixon cost-containment strategies over people will gain insurance cover- imposed price controls on the the years, ranging from moving age, and insured Americans will health care industry and promot- workers into HMOs and relying receive important new protec- ed health maintenance organiza- on selective contracting with pro- tions, such as the prohibition of tions (HMOs). During Gerald viders to secure lower payment lifetime dollar caps on insurance Ford’s presidency, Congress ad- rates to adopting high-deductible benefits. The ACA moves the vanced health planning, includ- plans and requiring greater cost United States closer to the ideal ing health systems agencies and sharing. that all persons, regardless of certificate-of-need requirements, Increasing cost sharing and health status and income, should which aimed to rationalize re- moving from comprehensive to have access to health insurance. source use and restrain expan- catastrophic coverage rest on the Still, the ACA underscores the sion of medical facilities. Presi- dubious idea that patients can and limits of U.S. health policy. Even dent Jimmy Carter tried and should act as consumers do in if the ACA’s projected enrollment failed to win passage of a plan to other markets. In a country with targets are met, 30 million per- contain hospital costs; the hospi- a vast uninsured population, the sons will remain uninsured a tal industry instead launched a belief that Americans are over decade from now. That this land- short-lived “voluntary effort” at insured has oddly taken root. Var- mark law will leave half of the restraint. The Reagan adminis- ious cost-containment measures uninsured without coverage re- tration supported prospective pay- — including managed-care limits veals just how difficult the poli- ment of hospitals by Medicare, — have also eroded physicians’ tics of U.S. health care reform and during President George clinical autonomy. are and how far we still have to H.W. Bush’s administration, Con- U.S. health policy, in both the go to reach universalism. gress enacted a Medicare fee public and private sectors, has schedule for physicians. The been highly innovative in produc- Costs Clinton administration proposed ing new organizations and pay- During most of the 20th century, managed competition within a ment methods. Currently, employ- health care costs were not a pub- budget. The Obama administra- ers, insurers, and state and federal lic policy issue. Spending more tion has emphasized delivery- governments are embracing value- on medical care was seen as an and payment-system reform. based payment- and delivery-sys- investment in the country’s health. Some of these proposals were tem reforms, such as accountable Private insurance plans — which designed to curtail spending care organizations, that seek to

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reverse the traditional financial has not adopted the cost-contain- cans cannot obtain decent, afford- incentives to provide more ser- ment policies that work in other able insurance because they have vices. These reforms are central countries: global budgeting, sys- preexisting conditions, lack the to the ACA’s vision of cost con- temwide fee schedules and pay- financial resources, or work for a tainment. ment rules, monopsony purchas- small business. Too many Ameri- Americans used to reassure ing, and supply-side controls on cans with permanent disabilities themselves that although the expensive technologies. Instead, must wait too long before Medi- United States failed to provide universal coverage and affordable U.S. health policy is a story of care, at least the quality of our health care system was superb. progress — but also abject failure, Since the 1970s, research has in- having produced an inequitable, creasingly challenged that as- sumption, showing that the qual- inefficient system that is the most ity of care in the United States is inconsistent, often inadequate, expensive in the world and that and varies by geographic location leaves 20% of the nonelderly — problems that other countries struggle with as well. By high- population uninsured. lighting the potential for saving money by cutting down on waste- America continues to abide high care covers them. Too many ful services, these discoveries prices and the staggering admin- Americans who are eligible for have strengthened policymakers’ istrative costs imposed by our Medicaid and CHIP fall between interest in containing health care byzantine insurance system. the cracks. Too many insured costs. Enthusiasm for delivery- Americans are only one illness and payment-system reform em- The Failures of U.S. Health Policy away from discovering they have bodies the politically appealing U.S. health policy is a story of inadequate coverage that leaves aspiration that the United States progress, with substantial gains them with overwhelming bills. can moderate spending by im- in health insurance coverage over Too many Americans have to fight proving quality. the past century, culminating in their insurance companies to ob- Yet for all the innovation, the ACA’s enactment. But U.S. tain covered benefits. Americans have been singularly health policy has also been an That these and other indigni- unsuccessful in restraining health abject failure, having produced ties have persisted so long is an care spending. The United States an inequitable, inefficient system indictment of U.S. health policy has moved through fads at a diz- that is the most expensive in the and its moral quality. If there is zying pace in recent decades — world and that leaves 20% of the one thing we should learn from from managed to consumer-driven nonelderly population uninsured. the experiences of other countries to accountable care — but they Health insurance should be a that have universal coverage, it is have thus far failed to produce source of security and reassur- that it doesn’t have to be this reliable cost control.6 Rising health ance. The U.S. insurance system way. None of these problems are care costs are an issue through- is too often a source of suffering, natural or inevitable — they are out the industrialized world, anxiety, economic insecurity, and all the result of policy choices though other countries manage frustration. that the United States has made. to spend much less while insur- Too many Americans who fall ing their entire populations. Still, ill are forced to worry about how Future Challenges lessons from international expe- to pay their medical bills and the In coming years, U.S. health pol- rience are largely ignored by U.S. threat of medical bankruptcy, icy will be shaped and perhaps policymakers and analysts intent rather than focusing on getting transformed by fiscal pressures on fashioning a “uniquely Ameri- well or coping with maladies that and deficit politics. The size of can solution.” The United States won’t improve. Too many Ameri- Medicare and Medicaid and their

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projected spending growth make visions of the law could be over- From the University of North Carolina at them likely targets for plans to turned. Chapel Hill. reduce the federal deficit. The The ACA will not remedy all 1. Starr P. The social transformation of Amer- question is whether health care that ails U.S. medical care. Much ican medicine. New York: Basic Books, 1982. 2. Blumenthal D, Morone JA. The heart of providers or Medicare and Med- can be done to strengthen its cov- power: health and politics in the Oval Of- icaid beneficiaries will bear the erage and cost-containment foun- fice. Berkeley: University of California Press, brunt of spending cuts. Tax policy dations. But the ACA will dramat- 2009. 3. Committee on Energy and Commerce, will also have a vital impact, ically improve the health care Subcommittee on Oversights and Investiga- since both programs will require circumstances of tens of millions tions, U.S. House of Representatives. Termi- additional revenues to absorb of Americans, making coverage nations of individual health insurance policies by insurance companies. June 16, 2009 growing populations and finance more accessible and affordable for (http://democrats.energycommerce.house rising medical costs. Meanwhile, uninsured Americans and more .gov/index.php?q=hearing/terminations-of- the search for stronger cost con- secure for those who are insured. individual-health-policies-by-insurance- companies). trol and improved quality will After a century of struggle, the 4. McDonough JE. Inside national health re- continue. ACA’s enactment provides strong form. Berkeley: University of California Press, The most crucial issue, though, grounds for optimism about the 2011. 5. Altman S, Shactman D. Power, politics, is what happens to the ACA after future of the American health and universal health care: the inside story of the 2012 elections. Barack Obama’s care system. Yet with implemen- a century-long battle. Amherst, NY: Pro- reelection would ensure that the tation of the ACA uncertain, U.S. metheus Books, 2011. 6. Marmor T, Oberlander J. From HMOs to ACA moves forward, albeit with health policy stands at a cross- ACOs: the quest for the holy grail in U.S. continued conflicts over its imple- roads: will we continue down health policy. J Gen Intern Med 2012 March 13 mentation at both the state and the path of reform or move (Epub ahead of print). federal levels. If Mitt Romney backward? DOI: 10.1056/NEJMp1202111 wins the presidency, however, and Disclosure forms provided by the author Copyright © 2012 Massachusetts Medical Society. Republicans secure majorities in are available with the full text of this arti- the House and Senate, major pro- cle at NEJM.org.

When the Cost Curve Bent — Pre-Recession Moderation in Health Care Spending Charles Roehrig, Ph.D., Ani Turner, B.A., Paul Hughes-Cromwick, M.A., and George Miller, Ph.D.

ommentators have noted re- Our analysis of monthly data cording to the historical relation- Ccent moderation in the rate on health care spending shows ship between BEA and NHEA of growth of U.S. health care that the moderation in growth be- figures.2 spending — a bend in the cost gan well before the recession and Economists and policymakers curve.1 A critical question is has continued through May 2012. often compare the growth of whether the low growth rate is Spending estimates are based on health care spending to that of likely to continue — an issue monthly data from the Bureau of the overall economy, as measured with enormous implications for Economic Analysis (BEA), trans- by the gross domestic product the country’s fiscal future. If the formed for consistency with the (GDP). However, this comparison slowdown resulted from the re- official annual figures from the can give a false sense of “excess” cession, the rate is likely to in- National Health Expenditure Ac- health care spending growth crease as we return to full em- counts (NHEA). Since the NHEA during economic recessions and ployment; if not, it may provide a runs through 2010, our monthly recoveries. Although this growth- respite from the problems creat- estimates for 2011 and 2012 are rate differential surges during ed by spending inflation. based on BEA data, adjusted ac- recessions, the surge signals ab-

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