Sam Smith, Shadows of Hope: If Ronald Reagan had proposed [healthcare] managed competition, many of its current advocates would have been on talk shows decrying it as a fraud. In fact, it is not unlikely that Reagan might have done just that, given the provenance of the idea. It was the brainchild of Alain C. Enthoven, a former RAND Corporation think-tanker and once chief whiz kid for Robert McNamara. In 1961, he created what became known as the Office of Systems Analysis. As Rep. Peter Stark noted, systems analysis "never worked. The Pentagon has never gotten costs under control. Systems analysis gave us $600 toilet seats." In 1980, Enthoven became part of the Reagan transition team. While Enthoven was still in Washington, according to labor writer Tim Knaak, his former employer RAND did a study of health-care for New York City and concluded that the solution lay in the private sector. In 1970, Joseph Newhouse, a senior economist for RAND described medical care as a "luxury." By 1975, Knaak reported, Newhouse was recommending a 10% deductible "to introduce 'market forces' that would supposedly keep costs down by preventing 'overuse' of the system. By 1989, a major study suggested that a 50% deductible would be needed to keep costs down." But the price of the "luxury" of health kept going up.
In 1988, the Congressional Budget Office looked at Enthoven's managed competition idea and estimated that it would add another $80 billion to the deficit without slowing healthcare inflation. More recently, managed competition was massaged at meetings in Jackson Hole organized by its right-wing inventors and by corporations such as GE, Prudential, Aetna, Metropolitan Life, Cigna, the Blues, Merck and the Pharmaceutical Manufacturers Association. The corporations coughed up $33,000 to $100,000 each for the privilege. The convenor was Paul Ellwood, who had invented the term HMO in the 1970s and then sold the idea to Richard Nixon as an alternative to Ted Kennedy's universal healthcare legislation.
A leader of the Jackson Hole meetings, Thomas O. Pyle, was initially made chair of one of Clinton's task force's committees. His resume gives a good insight into the sort of people to whom the Clintons were listening. Pyle was, until 1991, the chief executive of the largest HMO in New England. He was a director the Millipore Corporation, a firm that sells a variety of products to drug and biotechnology companies, hospitals and laboratories. Equally interesting was his role as advisor to, and stockholder in, the KBI Healthcare Acquisition Corporation. KBI describes itself as a "publicly traded buy-out fund organized for the express purpose of consummating a significant acquisition in the health care field" -- the sort of practice that would likely become rampant under managed competition. Pyle's other activities include being a senior advisor for the Boston Consulting Group which has health industry clients; a director of the Chickering Group which sells student health insurance policies, and a director of another firm that sells malpractice insurance.
The media either bought heavily into managed competition or described it in antiseptic, comfortable terms. For example, the Washington Post on March 9, 1993 wrote: "Each health plan -- which could be organized and managed by insurance companies, physicians or others -- would group together doctors, hospitals, clinics, laboratories and other providers. Eventually, the marketplace -- consumers making selections through their purchasing cooperative -- would determine the price."
Skipping neatly over the fact that it was the "marketplace" that got us into this mess in the first place, the description painted a gentle image of people coming together under a fair and equal system. In fact, however, it took Prudential seven years and $2.6 billion to build its HMO network before it made a profit. Not many physicians -- even the wealthiest -- can compete in that sort of a marketplace. Those doctors who were not financial wizards were actually not likely to fare much better than consumers; many would be forced into the salaried employ of huge health corporations. Even the Post admitted that managed competition would "limit consumers' choice of physicians, make it harder than it is now to see specialists and would put an intermediary -- the 'manager' of the plan -- between the doctor and the patient. "
Once again, the administration was as interested in packaging as in its product. Recovering the semiotic advantage lost during the first months of its tenure, it thoroughly iconized its proposed health care policy, forcing anyone who wished to challenge it to deal not only with an exotically complex proposal but with the carefully massaged image of the president's wife.
Since the promoted image was that of a intelligent, charming feminist paragon, it became difficult to suggest that Mrs. Clinton might be involved in one of America's largest economic giveaways. Or that much of her defense of the program came down to uncredible versions of "trust us" or "excellent question, Senator" or "we will be sensitive to that" or "we share your concern." Or that the plan would primarily benefit a few large American corporations. Or that the administration's cost accounting assumed a level of accuracy never before seen in Washington fiscal projections, let alone in any of Clinton's number-crunching to date. Or that the plan would, to varying degrees, replace medical decisions in healthcare with fiscal ones, supplant the traditional doctor-patient relationship with a highly institutionalized system, reduce greatly a patient's choice, and generally remake medicine along corporate lines.
With considerable assistance from the media, the canonization of Mrs. Clinton began in earnest late in the spring of 1993 as the healthcare task force was trying to complete its work. Reported the New York Times on May 7:
Suddenly Hillary Rodham Clinton is back dominating the newsstands, from Family Circle to the cover of People, from Time to the Washington Post. Her aides insist that the timing is all coincidental, but some political professionals see it as a useful exercise in image-burnishing for the release of the Administration's long-awaited proposal for health-care reform.Typical of the fawning coverage was a Washington Post article headlined: Hillary Clinton's inner politics: As the first lady grows comfortable in her roles, she is looking beyond policy to a moral agenda.
The Times quoted Democratic poll taker Geoffrey Garin, who said: "This is going to be a very complicated plan, and in those circumstances people's faith in the author will be pretty important. If you don't know exactly know what a `health alliance' is all about, at least you know whether you trust Hillary Clinton."
It worked. A study of the first six months of the Clinton administration found that 79 percent of Mrs. Clinton's network TV coverage was favorable as opposed to only a third of her husband's.
The Hillary hype escalated as Mrs. Clinton spent several days on Capitol Hill the end of September fielding softball questions from members of Congress. Gone was all memory of an attorney who had once represented a failing S&L before an agency of her husband's government. Absent was any sense of the irony over a lawyer for corporate interests being used as a national role model. Even conservatives were cowed and feminist leaders, who had long demanded control of their own bodies, smiled or applauded as Mrs. Clinton proposed turning the bodies of all Americans over to the care of a handful of huge corporations.
It would be one thing if managed competition's advocates could cite some empirical basis for their arguments, but managed competition had been promoted largely by conservative theorists. As the Left Business Observer put it, "managed competition comes from an economist's mind, not human experience." Meanwhile, single-payer advocates argued that:
The private insurance industry now spends between 33 and 73 cents in order to provide $1 worth of health care. Comparable costs for Medicare are 2.5 cents and for the Canadian single-payer system only 2 cents.
It takes 6,682 workers to administer 2.7 million Blue Cross policies in Massachusetts, more than the total number of employees needed in the Canadian system, which serves 25 million.
The private insurance companies have left some 81 million Americans with medical problems facing either higher premiums, excluded coverage or denial of all coverage.
Between 1980 and 1989 the average per-employee cost of a typical group Blue Cross/Blue Shield major medical plan quadrupled.Part of Clinton's original cost-accounting assumed an incredible fifty percent decline in the annual increase of funds spent on health care between 1996 and 1997. The plan also assumed a $239 billion cost savings in Medicare and Medicaid between 1996 and 2000. How would these savings be achieved? Most likely by cutbacks in service. Further, Medicaid has a current overhead of 3-4%. Under the Clinton plan it would be run through the private insurance system with an overhead of 13%, an increase in costs that will have to come from somewhere, presumably from the Medicaid program itself.
Despite the administration’s reliance on competition to keep costs down, medical costs were 26% higher for hospitals in highly competitive areas than they were in non-competitive communities, according to a study by University of California researchers James Robison and Harold Luft.
Nonetheless, during the long months of Mrs. Clinton's task force, there was little talk in Washington of the single-payer, Canadian-type system that a majority of the American public had said in polls that it would like. As with the budget, the media gave short shrift to some very basic facts. Thus the Washington Post played down on page 10 a study by the Congressional Budget Office reporting that a single-payer system could save the country $114 billion on its present annual health care costs.
When the issue was raised, opponents argued -- borrowing from the propaganda of the health industry -- that Canada's system would mean long waits for surgery and other horrors. In fact, Canadians -- like other citizens in countries with real national health insurance -- are decidedly more satisfied with their health care than are Americans. Asked if they would prefer the American system, only 3% of Canadians said yes.
In one of the best summaries of the health care situation, the September 1992 Consumer Reports concluded:
A single-payer system that draws its inspiration from Canada's is not the best solution for those doctors who are mainly concerned about their own pockets, or for hospitals with ambitions to become major medical centers. It certainly isn't a good solution for health insurance companies; many of them would go out of business. But it is the best solution for the growing number of consumers shut out of the private-insurance market and the even larger number who have reason to fear their coverage might disappear at any time.As for managed competition, Rep. Stark said, "When you get it down to sea level, it doesn't do anything, which is why everybody likes it. There's no new taxes needed, it provides universal access, and if you believe all that, that's somewhere between the tooth fairy and the chuckling oyster." At the end of Clinton’s first year, Stark (whose subcommittee would review the legislation) said the measure was still at ground zero: “We’re going to have to negotiate a sentence at a time.”