Chapter Ten

HEALTH CARE

One of the most foolhardy statements Bill Clinton made as president was widely perceived at the time as quite clever. On the evening of January 25, 1994, Clinton went to the podium of the House of Representatives to deliver his State of the Union address. As his wife gazed on from the gallery, he toured the horizon of challenges facing the country at home and abroad with force and fluency. There was one issue above all, however, that people were waiting to hear about. This was health care. In a sense, this speech marked a debut of Clinton as president on his own terms. Deficit reduction was an essential but unpleasant task, hardly the reason he ran for president. NAFTA was a cause he believed in, but he was passing a pact that had been negotiated by a predecessor. Now came the real business. The proposal that he and the first lady had crafted to overhaul the nation’s health insurance and delivery system was large and complicated. As he faced the assembled lawmakers, the president told them he was more than willing to compromise on the map by which health care reform was achieved. But, he warned, universal coverage—every American with health insurance—was his non-negotiable goal. Then, in a dramatic flourish worthy of Ronald Reagan, Clinton brandished a pen and announced: “If you send me legislation that does not guarantee every American private health insurance that can never be taken away, you will force me to take this pen, veto the legislation, and we’ll come right back here and start all over again.”

Bravo! A roar of applause went up from the chamber. The cheers came particularly from the Democratic side of the aisle. And indeed Clinton’s line had been aimed especially at the liberals who then still controlled the House. A year into the Clinton administration, many of these people were impatient with the president. They were a contentious lot, and many were frustrated that a progressive renaissance still had not materialized under this Democratic administration. Many were skeptical as to whether the new president had the stomach for a fight. So the veto threat was intended to allay Washington suspicions that Clinton was a patsy. For Americans watching on television, the waved pen was splendid political theater, sending a potent message that change was coming. Clinton’s gesture dominated coverage of the speech in newspapers and on television, exactly as the White House planned.

But the president had embarked on a historic misadventure. The veto threat was a tactical error; it limited the president’s flexibility to negotiate and compromise at the very moment he should have been expanding his room for maneuver. Much more than that, it was vividly symbolic of the debacle that unfolded in the months to come. Health care was the story of overreach. This overreach was intellectual, as both Clintons overestimated the ability of smart people to bring a hugely complicated problem to heel. It was political, as they mistakenly interpreted discontent with the status quo as a mandate for deeply intrusive remedies. And in a profound sense it was moral. Filled with confidence in their own good purposes, they raced past sensible objections as if they had been enfranchised by history itself. They saw the year ahead as filled with panoramic possibilities. In fact, 1994 would be a year of jarring limits.

How did the two most important political figures of their generation so dramatically misread the temper of their times? As a political matter, the mystery is how Clinton—a natural accommodator, and a person who instinctually gravitated to the ideological center—eventually came to be seen as occupying the left fringe of the health care debate. As a policy matter, the puzzle is how both Clintons came to embrace a proposal that was so complex. A densely complicated plan gave opponents avenues of attack on multiple fronts. It left supporters struggling to defend the plan with simple language that ordinary citizens, especially those who already had health care coverage and therefore needed to be persuaded that change was preferable to the status quo, could understand.

Part of the explanation for Clinton’s choices during the health care episode lies in his own cycles of ambition and retreat. After a year in office, this presidency remained in its romantic phase, flush with Clinton’s own lifelong dreams of standing astride great events—of earning “a little asterisk by my name in the billion pages of the book of life,” as he once put it as a young man. For a president with such ambitions, health care had an obvious allure. Over the course of several decades it had become a kind of lost arc of the liberal cause. The idea of universal coverage was some of the unfinished business of FDR’s New Deal. It had been part of Harry Truman’s Fair Deal campaign platform of 1948. Defenders of the existing order, led by the American Medical Association, had always defeated efforts to create a comprehensive right to health coverage. Instead, there were incremental reforms, such as providing coverage for the elderly and poor through Medicare and Medicaid. History would indeed have a place for a president who could enact universal health care coverage. The problem—a recurring pattern in Clinton’s life—was that his judgment was invariably clouded when he was in his romantic phase, more focused on expansive ends than on realistic means for attaining them. When the person he relied on most to provide realism and prudent judgment was herself in a vainglorious mood, it was a volatile combination—and a moment of high peril.

But excessive ambition accounts for only part of the answer. Those who would later ask why the Clintons did not pursue a centrist remedy to the nation’s health care problems miss the fact that this is precisely what they and many others believed they were doing.

In the first years of the 1990s, the belief that the nation’s health care system faced dire problems was nearly uniform across the political spectrum. Some 20 percent of the adult population did not have health insurance; in all, some 37 million Americans lacked it. Even those who did faced rapidly rising costs. Fourteen percent of the nation’s economy was devoted to health care, as Clinton had reminded the Congress when unveiling his plan. Canada spent just 10 percent; no other nation spent more than 9. While the United States was home to the most splendid medical innovations, it also tolerated indignities—children of low-income families going without regular checkups; workers afraid to leave dead-end jobs for fear that they would lose health coverage—that most prosperous nations had vanquished. Costs rose as emergency rooms handled crisis care that could have been avoided through conscientious preventive care. Meanwhile, businesses that did offer their employees insurance were staggering under rising costs. Faced with this web of interconnected problems, every serious national politician felt obligated to offer a remedy. On the left, the remedy of choice had long been what Canada offered: a single-payer system of national health insurance. What was good for the elderly with Medicare, the thinking went, would be even better if the benefit was expanded to include everybody. The right emphatically rejected such a government takeover, but many of its solutions were also highly intrusive. Several Republicans, including Senate minority leader Dole, backed a plan sponsored by Rhode Island’s patrician John Chafee that would have established an individual mandate for health insurance—opting to save money by going uninsured would be illegal—and offered various subsidies to help people comply.

Against this backdrop, the Clintons sought a middle ground. There were several distinct ideas that animated their health plan. Among its intellectual assumptions was that private insurance, not the government, should continue to finance the health care for most Americans, albeit under vastly enhanced federal supervision. Another assumption was that employers, from whom most Americans already received their health insurance, should remain the stop of first resort. Rather than the individual mandate favored by many Republicans, the president and first lady proposed an employer mandate—refusing to provide coverage to workers would no longer be an option for most businesses.

But the Clintons also introduced two more novel concepts. One was the idea of “managed competition.” As it flowered among a group of health care intellectuals in the early 1990s, managed care came to describe a system in which insurance companies would compete for customers under rules strictly enforced by the government. The government would guarantee customers a minimum level of benefits; the insurance companies would be guaranteed a fixed amount of money for every participant in their plans. Within this system, competing companies would have incentives both to design the most attractive coverage packages, in order to attract more customers, and to force hospitals and physicians to find efficiencies, thus holding down costs and improving their own profits. The prophets of managed competition believed they could execute what to skeptics looked like an act of levitation. Market incentives would bring health care costs down for government and business alike; the savings would be captured to provide subsidies to bring down the number of uninsured to zero. Thus, the two most pressing problems in health care—rising cost and inadequate access—would be solved in one swoop. An essential pillar of managed competition, as Clinton proposed it, was a concept known to health care experts as “community rating.” What this meant was that every person would be insured at the same cost. Companies would have to cease the long-standing practice of charging people commensurate with individual risk factors like age or pre-existing conditions. Under community rating, the young and healthy would socialize the costs of society’s older and sicker population. Cumulatively, Clinton’s health care proposal reflected a generous vision of society, but one that built on the status quo rather than tried to pull it up root and branch. It was not a leftist fantasy. Such certifiably non-leftist groups as the U.S. Chamber of Commerce and the American Medical Association had, for a time, endorsed the goal of universal coverage through employer mandates. In theory, the ideas in the president’s health care plan were an effort of his lifelong penchant for finding a third way between traditional liberalism and the conservative alternative.

The problem was that these ideas, however coherent and defensible in theory, became enormously complicated once they were given programmatic expression. The health care bill Clinton presented to Congress was 1,342 pages long. To implement managed competition, he proposed creating a series of regional alliances that would be in charge of raising money from employers, negotiating benefit packages with insurers, and regulating the quality of care. In a nation with an ingrained skepticism of bureaucracies, this was for many people a frightening prospect. The opposition had a predictable field day. “We’re going to do to health care in America what Stalin did to agriculture in the Soviet Union,” brayed Congressman Chris Cox, a California Republican.

Not surprisingly, such comments took their toll on public support for the Clinton plan, which still had support of a majority, though a steadily declining one. So, too, did “Harry and Louise.” They were the television characters, a young couple at home, trying to make sense out of the Clinton health plan but growing increasingly alarmed as they pored over the details at their kitchen table. The insurance industry spent millions making Harry and Louise celebrities in an advertising campaign that began in the fall of 1993.

Given rising doubts in Congress, and the downward trajectory of public opinion, by the start of 1994 it was clearly time for Clinton to cut a deal and find his exit. He could have found large majorities, with substantial Republican support, for all manner of policies that would have made it harder for insurance companies to cancel policies when a person switched jobs, or increased subsidies for low-income workers to purchase insurance for themselves and their children. Such items, while a disappointment when measured against Clinton’s ambitions, would have been substantial achievements, and would have improved the lives of millions of people. Why not pocket an incremental victory? The question taunts the Clinton legacy.

Some people who spent time in the Clinton orbit found an explanation in balance-of-power politics between husband and wife. At the president’s moments of greatest vulnerability, Hillary Clinton achieved her moments of greatest influence. Among those who believed this was David Gergen. The White House counselor had joined such diverse advisers as Rahm Emanuel and John Podesta in suggesting that Clinton begin looking for a compromise on health care, and in particular in warning against the ostentatious veto threat in January. Presidents use their veto power to stop bad things in bills, he urged, not to support laudable things that are not in them. But Hillary Clinton thought the veto threat was a good idea, and Gergen was struck that Bill Clinton seemed entirely deferential to her on this and seemingly every question. This was just weeks after the American Spectator’s embarrassing sexual exposé, and just days after Clinton had acquiesced to demands for a special counsel on Whitewater. “Watching him in that time,” Gergen recalled, “it was very much like watching a golden retriever that has pooped on the rug and just curls up and keeps his head down. . . . I think it put him in a situation where on health care he never challenged it in a way he ordinarily would have, had he been under a different psychological situation.”

Fear was one part of the equation. But raw admiration was another. The president was dazzled by his wife. And, indeed, when she was performing at her peak she was dazzling even to her critics. Months earlier, appearing before Congress, the first lady had dispatched House minority leader Dick Armey of Texas, one of her husband’s most vitriolic opponents, with a few swift strokes. Before her appearance, Armey had told reporters that the Clinton plan looked like something that might have been designed by Dr. Jack Kevorkian, the so-called suicide doctor, who put terminally ill patients to death.

When Armey greeted her by promising to make the debate “as exciting as possible,” she noted with a cool edge, “I’m sure you will do that, Mr. Armey.”

“We’ll do the best we can,” said Armey.

“You and Dr. Kevorkian,” she shot back without delay, as the room dissolved in laughter and applause.

Armey sputtered, “I have been told about your charm and wit, and let me say the reports on your charm are overstated, and the reports on your wit are understated.”

But that intelligence and confidence could curdle into self-righteousness when Hillary Clinton felt her high aims were being frustrated. Ralph Larsen, the chief executive of Johnson & Johnson and a member of the powerful Business Roundtable lobbying group, once observed calmly in a meeting with the first lady that the regional alliances in the Clinton plan sounded more like serious regulatory bodies and not merely benign “purchasing cooperatives” to negotiate better insurance rates, as the administration had claimed. She slammed the table and flared, “I said they were purchasing cooperatives and that’s what they’re going to be.” Another time, in a speech before the American Academy of Pediatrics, she became so angry about the Harry and Louise ads that she threw out prepared remarks and showered vitriol on the insurance industry. Insurance companies “like being able to exclude people from coverage, because the more they can exclude, the more money they can make,” she said, adding, “They have the gall to run TV ads that there is a better way, the very industry that has brought us to the brink of bankruptcy because of the way they have financed health care.”

It was not merely conservative Republicans and the insurance industry that had doubts about the Clinton health plan. From the outset, it prompted deep and sullen divisions within the administration. The economic team, led by Bentsen at Treasury and Robert Rubin, then heading the National Economic Council at the White House, raised questions but soon learned to muzzle them. It was clear, they decided, that Hillary Clinton had her own mandate from the president, and her own channels for advice. She seemed uninterested in, or even hostile to, their advice, so they soon learned to stop giving it. At the Department of Health and Human Services, Secretary Donna Shalala likewise warned that the administration was on a wrong course with a plan that created an unwieldy bureaucracy. Her objections were dismissed as jealousy that she was not the one put in charge of the reform effort.

Much of the rising discontent within Clinton’s own team was focused on Ira Magaziner, Hillary Clinton’s deputy and chief staff member in the health care project. A former student protestor, he had spent a successful career as a business consultant, studying ways to reform large and complex organizations. He had known the president casually for twenty years, since his own days as a Rhodes scholar at Oxford.

And like Clinton, he would hold meetings at his warren in the Old Executive Office Building until well after midnight. Quite often, he spent the entire night there. His personal loyalty to the Clintons often translated as a brusque dismissal of any question or doubt about the course the Clintons were traveling.

Donna Shalala, who with mounting frustration was watching the debacle unfold, did not like Magaziner—“Ira was arrogant, rude, dismissive”—but she said he became the heavy when people should have been assigning responsibility further up the ladder. “Bill and Hillary came from Arkansas where they were always used to being the smartest people in the room,” she said. “So they just naturally assumed they were the smartest people in the room in Washington, too. Anyone who had any different idea than they had was dismissed as part of the system, and part of the problem.”

The first lady’s certitudes, and the president’s bravura performance at the State of the Union, did nothing to halt the deterioration in the health care initiative’s political condition over the next several months. By June, Daniel Patrick Moynihan once again chimed in with a discordant note. There was no chance of enacting Clinton’s goal of universal coverage this year, he announced on NBC’s Meet the Press. Universal coverage might take a decade to achieve. Why not, he urged, immediately pass some more modest reforms? His favored alternative of insurance reforms and subsidies would not lead to universal coverage, but experts estimated it would leave 91 percent of the population covered, a considerable improvement over the current 85 percent. Why not at least move closer to the goal? “We can do better than 91 percent, but 91 percent is not a failure. It’s progress,” Moynihan said. “And government is about the increments by which you move toward goals you desire.”

The irony is that Moynihan had described an approach to governance that was entirely consistent with the president’s own philosophy. No matter. The next day, Hillary Clinton warned publicly that the president was still ready to veto anything that fell short of universal coverage. Her refusal to acknowledge political realities was only partly bullheadedness. One signature of the Clinton plan—a defect, as it happened—was that its parts were interlocking. Its features designed to increase access to health insurance worked only if the features for controlling costs also worked, and so on. The belief among the plan’s creators was that it could not be modified and scaled back without becoming incoherent.

“The argument we kept hearing was that . . . no part of the plan could work unless all of the plan was passed,” said Harold Ickes, who was helping promote it from his new post as deputy chief of staff in the White House. “Maybe that was true substantively, but it was an impossible order politically.”

By the summer, the Clintons’ instincts—his, urgently craving a compromise; hers, grimly resolved to keep fighting—were in desperate conflict. This private tension slipped briefly into public in July, when Clinton traveled to Boston to speak to the National Governors Association. Before his old colleagues, Clinton could not help speaking what was really on his mind: finding some way to extricate himself from what was by now shaping up as a political and substantive debacle. In his remarks, he backed off from his pledge to accept nothing short of universal coverage, saying “somewhere in the ballpark of 95 percent” coverage would be all right with him. He even said he was flexible on the idea of employee mandates, a key pillar of his plan.

Clinton knew as soon as he stepped away from the podium that he was in trouble. The anxious looks on the staff aides rushing to him confirmed it. Minutes later, the White House operator was calling, with Hillary Clinton on hold. She was in a rage, according to a White House aide who listened to the call. “What the fuck are you doing up there?!” she thundered. Clinton tried to explain that what he had said was not quite the way it was being reported. She cut him off. “You get back here right away.” When he returned to the White House, Clinton immediately walked to the residence, a look of dread on his face. The next day, he issued a humiliating retraction of his remarks to the governors, professing that he was still committed to universal coverage.

Within a few weeks, however, even the first lady bowed to the inevitable, when the Clintons gave George Mitchell, perhaps their best friend in Congress, the green light to try to negotiate a more modest compromise. This was a desultory effort that dragged on through August and September, and then died. By this late date, Republicans had long since made a judgment that they were not helping Clinton find a health care compromise, and even many Democrats had abandoned the president. The Clintons were repudiated, and just five weeks before the 1994 mid-term election. Health care reform had failed.

The post-mortems on one of the great liberal defeats of the twentieth century would last for years to come. In retrospect, the Washington consensus was that the Clintons had erred by putting forward a specific health care proposal, though they had been urged to do precisely this by the Democratic leadership in Congress. The wiser strategy would have had the president lay down general principles and let lawmakers of both parties fashion the precise bill. “By putting his personal signature on health care reform,” wrote Paul Starr, an academic who was part of the White House health care team, “Clinton gave the Republicans an incentive to defeat it and humiliate him.” There were other misjudgments, including the belief that public opinion would gradually push Republicans toward the Clinton plan, and that a compromise could be struck at the end of the legislative process without a bipartisan foundation at the beginning. “The support they imagined was never there,” said Shalala. “They mistook polls saying that a majority of people were concerned about health care as though there was a majority for any particular plan of what to do about health care.”

Clinton, too, reached this judgment. There were many moves he wished he could take back, both tactical and strategic. He wished he had sent Congress a set of principles rather than a specific plan, and let lawmakers work out the details. He wished he had moved first with an idea like welfare reform, on which it would have been easier to fashion a bipartisan consensus. “I set the Congress up for failure,” he concluded in 1995. By then, he would be living with the painful consequences of that failure.