A Triumph of Misinformation

Most of what everyone "knows" about the demise of health-care reform is probably wrong—and, more important, so are the vague impressions people have of what was really in Hillary Clinton's plan
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By the time the Clinton health-care-reform plan was abandoned, in September, everyone knew how terrible it was. It had been hatched in secret by an egghead team that knew a lot about policy details but had no grasp of political reality. The Administration had wasted time and missed deadline after deadline for presenting the plan to Congress, causing the plan to miss its best opportunity for passage- during the President's brief honeymoon period, in 1993. The scheme was fatally overcomplicated. The proposed legislation, 1,342 pages long, was hard for congressmen to read and impossible for anyone except the plan's creators, Hillary Rodham Clinton and Ira C. Magaziner, to understand.

The Clinton plan would have imposed sweeping changes on one seventh of the national economy, with consequences far greater than Congress could possibly consider before casting a rushed vote. It represented a regulation-minded, top-down, centralized approach at a time when the world was moving toward decentralization and flexibility—and when the supposed health crisis was solving itself anyway. The more people learned about this plan, the less they liked it, and it finally died a natural and well-deserved death.

Or so goes the conventional wisdom, as relayed in countless newspaper and magazine postmortems of the health-care struggle. The critiques were usually accompanied by veiled jabs at Hillary Clinton—what will she do with her time now that health care's gone?—and outright ridicule of Magaziner, who was portrayed as the smartest person with the dumbest plan since Robert McNamara and the Vietnam War.

But suppose that what everyone knows is wrong. This happens all the time in politics. Barely a year ago, for example, everyone in Washington knew that Congress was absolutely certain to pass a health-care program by now. The leaders of the Administration's health-care-reform effort, Hillary Clinton and Magaziner, believe that everyone is wrong again now. I heard them elaborate this view in September and October, during a series of long background conversations. "Background" means that I agreed to check with them on any material I wanted to quote directly. The gist of their views, however, was on the record. It is no surprise that they view the reform plan as something other than an overcomplicated bureaucratic nightmare. The surprise is how much more convincing their version of reality is than the prevailing one.

These conversations began at Magaziner's suggestion. He and I were friends in graduate school, more than twenty years ago, and he was obviously betting that I'd listen to him more sympathetically than other reporters would. I am biased, in that I like and respect Magaziner. But until these meetings I had had no contact with him during his time as health czar, and I have not always agreed with his ideas. (His worst achievement: helping bring a no-requirements curriculum to Brown University, when he was the student-body president in 1969.) In this case the facts seem to be on his side.

Let's consider each count in the conventional bill of indictment against the Clinton Magaziner plan.

First count: The plan was hatched in secret. During the 1992 presidential campaign Bill Clinton talked frequently about his interest in health-care reform and gave a signal about the reform approach he preferred. In a speech in September he recommended "competition within a budget." To the health-care cognoscenti this indicated an approach different from the main Republican and Democratic proposals of the time.

The most familiar Democratic approaches were "single-payer" and "play-or-pay." Single-payer, which was endorsed during the 1992 Democratic primaries by Senator Robert Kerrey, of Nebraska, meant a Canadian-style or Medicare-style system. Private doctors and hospitals would provide care, but the government would take over all medical payments, financing them with a big new medical tax. All Americans would be covered. Play-or-pay, supported by many Democrats, required companies either to buy health insurance for their workers or to pay into a public fund, which would insure workers not covered by their companies. People who were not working would not be insured. An approach popular among Republicans relied on new tax breaks to encourage people to buy health insurance on their own. Some politicians from both parties endorsed a "managed competition" scheme, separate from all these.

Clinton's reference to "competition within a budget" fit a proposal laid out in the fall of 1992 by Paul Starr, a Princeton professor, in a short book called The Logic of Health Care Reform. This book came closer than any other document to anticipating the ultimate shape of the Clinton-Magaziner bill.

In Starr's plan, which was a variation on a managed-competition scheme, all Americans would be covered—even if they were out of work, even if they had "pre existing conditions." The cost of coverage would be paid mainly by companies, which would contribute to the insurance premiums for each of their workers. The government would subsidize coverage for those who were unemployed or worked for small firms. Private insurance companies would offer coverage, as they do now, but the government would "manage" the way they competed for business. Each company would come up with a list of standard benefits, which it would have to offer at the same price to all customers. That is, the insurers could not turn down people who were already sick, or charge fifty-five-year-old applicants more than thirty-year-olds. Each year people could compare the offers and choose the plan they liked best—including a fee-for-service plan that let them go to their family doctor. From the customer's point of view, the system would work like the "open enrollment" policy at many corporations, in which employees can choose a new health plan each year. The government would set an overall limit on the amount of money that could be spent on medical care each year, while giving insurance companies and health plans latitude to spend the money as they thought best. This limit was the "budget" in Clinton's reference to "competition within a budget."

With numerous changes of detail and emphasis, the plan that Starr explained in his book and that Clinton alluded to in his campaign became the plan the Clinton Magaziner task force unveiled in 1993. The most important difference lay in what was meant by "within a budget": the bill that Clinton presented would have limited total spending not directly, by fiat, but indirectly, by limiting the amount that insurance premiums could rise each year. The process of working out these details and emphases kept Magaziner and some 500 task-force members busy round the clock during the Administration's first few months.

According to today's conventional wisdom, these meetings doomed the reform effort before it really began, for it was here that Magaziner and his fellow nerds cooked up their unrealistic schemes. But did the process seem weird, secretive, and isolated at the time? Yes, but in only one limited and revealing way.

On matters of substance, the task force went out of its way to hear a variety of views. Most members of the task force were policy or budget officials borrowed from other parts of the government, but the group also included outside scholars and experts, plus several doctors and nurses. There were no representatives of organized outside interests—no delegate from the American Medical Association, no one from the Pharmaceutical Manufacturers of America—but the task force met frequently with outside groups and above all with senators, representatives, and their staffs. By early May, Congressional Quarterly reported, the task force had met with 572 separate organizations. "We had a couple of hundred meetings with the congressional leadership and individual members," Magaziner says now. "People were saying that it was the biggest outreach effort ever in laying the groundwork for a bill."

Indeed they were saying so. A Congressional Quarterly headline on May 22 read, "Clinton Task Force All Ears on the Subject of Overhaul." The article said, "Most members of Congress give the president high marks for laying the political groundwork necessary for his proposal to get the careful consideration of both parties. . . . Clinton has been playing the health-care issue with an eye to keeping everyone at the table, at least at the outset."

In late September of 1993, when Hillary Clinton appeared before five congressional committees in three days to explain the rationale behind the bill, not a single legislator complained about "closed" or "secretive" deliberations: not Robert Dole, not Robert Packwood, not John Danforth—Republican senators who all later came out against the bill. Senator John Breaux, of Louisiana, a conservative Democrat who supported a competing reform plan, praised Hillary Clinton for the "truly remarkable" consultations the task force had carried out.

So when did the task force become "secretive"? Complaints inevitably arose when Magaziner and his assistants stopped soliciting outside advice and started announcing decisions. Those who disagreed felt that they hadn't been listened to. "Some people say they were excluded because in this case we didn't agree with them," Hillary Clinton told me. "But I think that a fair assessment is that we listened to everybody—and then made recommendations based on what we thought made the most sense."

The larger problem was with the one group that truly was excluded from the deliberations—the Washington press and, by extension, the public in whose interest it is supposed to act. During the brusque early weeks of the Clinton Administration, when George Stephanopoulos was walling reporters out of the White House press office and the Administration thought it could use talk shows to take its message directly to the public, over the heads of the daily press, Magaziner was told by the White House communications office that he and his associates should not talk to reporters about what ideas they were considering for the new bill. Instead they were supposed to refer all queries to the communications office. This didn't stop leaks, of course, but it gave Magaziner a lasting reputation among reporters as a man who liked to operate in the dark. Hillary Clinton is known within the Administration for a combative attitude toward the press. But she now says that the news blackout on emerging details of the health bill was a major mistake.

"Even though we had a process unlike any other that has drafted a bill," she told me, "—more open, more inclusive—we got labeled as being secretive because of . . . our failure to understand that we should be more available to the press along the way. That was something we didn't do well. . . . We were not aware of how significant it is to [shape] the inside story in Washington, in order to make the case . . . for whatever your policy is."

Secrecy toward reporters was stupid. But reporters are now acting as if it were something worse: closed-mindedness about ideas.

Second count: The plan was politically naive. Everyone now knows that the health care reformers drew up their master plan without taking the slightest interest in what most Americans thought or felt. In reality, though, the plan suffered because the Administration was too attentive to shifting political moods.

Even before Inauguration Day, Magaziner was churning out memos about the right way to pitch the plan to editorialists and interest groups, about the likely Republican arguments and how to rebut them, about the connection between a health-care bill and a re-election campaign in 1996. Week in and week out his memos to Bill and Hillary Clinton contained head counts of likely Senate and House votes—who was leaning, who could be pressured and pushed. In his conversations with me Magaziner seemed to spend half his time sizing up the legislators he had had to deal with: Senator X was in thrall to Bob Dole because of personal problems, Congressman Y had to start out opposing the bill because of donations from Interest Group Z.

Two fundamental decisions about the plan had much less to do with policy than with judgments of political reality. One involved handling the single-payer challenge. A Canadian-style single-payer system has two big virtues. It is simple to administer, since doctors, hospitals, and patients no longer have to worry about dozens of insurance companies with scores of different payment plans. The single payer approach also guarantees that everyone in the country has medical coverage. But Clinton was dead set against a single-payer plan, arguing that it would require sweeping new taxes and would, in effect, abolish the entire medical-insurance industry. This left the political problem of how to deal with the hundred or so members of the House who supported some kind of single-payer plan. Without them, no health bill of Clinton's could possibly pass.

Congress also contained a large number of supporters of market-reform and managed-competition plans. The main advantage of such plans is that they change the incentives of medical practice so that doctors, patients, and hospitals are more conscious of costs when making medical decisions. To get a plan passed, Clinton had to show that it would reform the medical market.

"We had to try to bridge the chasm" between these groups in drawing up the plan, Magaziner told me. "If we were serious about universal coverage, we felt, then the single-payer people would buy off even if they didn't like managed competition. We felt we were doing enough of the market reforms that the reform people would buy off too. And, by the way, we also thought that that was the best policy."

But by June of 1993 one of the main market-reform legislators, Representative Jim Cooper, of Tennessee, made clear that he wouldn't buy off. He recommended seeing to insurance reforms first and getting around to universal coverage in a few years. The single-payer group, of course, was not going to agree to that. "At that point," Magaziner said, "we knew that the only way we could try to bridge the chasm was to start a little bit left of center and try to negotiate toward the center."

"Left of center" meant proposing a benefits package a little more generous than what the Administration really wanted, setting the employer's share of total costs a little bit higher, making the limits on insurance premiums a little bit tighter. When the Republican Party lost interest in negotiating, this strategy became a liability, because it made the Clinton plan look more extreme than it was meant to be.

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James Fallows is a national correspondent for The Atlantic and has written for the magazine since the late 1970s. He has reported extensively from outside the United States and once worked as President Carter's chief speechwriter. His latest book is China Airborne. More

James Fallows is based in Washington as a national correspondent for The Atlantic. He has worked for the magazine for nearly 30 years and in that time has also lived in Seattle, Berkeley, Austin, Tokyo, Kuala Lumpur, Shanghai, and Beijing. He was raised in Redlands, California, received his undergraduate degree in American history and literature from Harvard, and received a graduate degree in economics from Oxford as a Rhodes scholar. In addition to working for The Atlantic, he has spent two years as chief White House speechwriter for Jimmy Carter, two years as the editor of US News & World Report, and six months as a program designer at Microsoft. He is an instrument-rated private pilot. He is also now the chair in U.S. media at the U.S. Studies Centre at the University of Sydney, in Australia.

Fallows has been a finalist for the National Magazine Award five times and has won once; he has also won the American Book Award for nonfiction and a N.Y. Emmy award for the documentary series Doing Business in China. He was the founding chairman of the New America Foundation. His recent books Blind Into Baghdad (2006) and Postcards From Tomorrow Square (2009) are based on his writings for The Atlantic. His latest book is China Airborne. He is married to Deborah Fallows, author of the recent book Dreaming in Chinese. They have two married sons.

Fallows welcomes and frequently quotes from reader mail sent via the "Email" button below. Unless you specify otherwise, we consider any incoming mail available for possible quotation -- but not with the sender's real name unless you explicitly state that it may be used. If you are wondering why Fallows does not use a "Comments" field below his posts, please see previous explanations here and here.
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