Health Care Reform: Clinton's failure, Obama's success

On the day after the passage of historic health care policy in the US House, let me try to wrap up this discussion of recent health care reform in the US.

So, why did Clinton’s health care reform fail in 1994? Throughout most of the 1990s – even in the fall of 1993 – public opinion polls showed that the majority of Americans favored some kind of significant government role in health care. Leading up to the 1992 presidential election, even Republican candidates expressed support of health care reform that included an increased government role (though a smaller role than envisioned by most Democrats).

And, as we have seen, a cross-class coalition that included workers, unions, and many businesses and trade organizations supported an expansion of government activity in health care. Again, large businesses who had long offered their employees health insurance saw their costs (i.e., premiums) rise alarmingly during the 1980s. They turned to the federal government to regulate health insurance, create cost controls, and spread the costs of providing health care.

Remember, the U.S. Chamber of Commerce supported government-mandated employer health benefits, as did many large corporations, including Bethlehem Steel, Lockheed, Chrysler, Xerox, and Westinghouse. Not only did these businesses want to control premiums, but many of them also wanted to correct what they saw as an unfair situation: most small businesses did not provide health insurance for employees; these employees were often married (or otherwise related) to someone who worked for a medium- or large-business that provided health insurance for that employee’s family. Many medium- and large-businesses saw this as a subsidy that reduced the labor costs of small businesses (and put some large businesses at a competitive disadvantage in the global market).

So we return to the question at hand: Why did the Clinton health care proposal fail? There were obviously many immediate political factors: intense partisan opposition, a strong effort by the insurance lobby, and a “combative and secretive strategy” by the Clinton administration, among others. Such factors, no doubt, contributed to problems.

But these answers overlook a key factor: the expansion of HMOs began to effectively rein in rising health care costs. The annual growth in private health insurance premiums (i.e., the cost to employers) fell from 17% in 1990 to 10% in 1992, 8% in 1993, and -1% in 1994. This sent a signal to many businesses that had favored – and even advocated for – health care reform that the insurance industry was reforming itself and controlling costs through managed care.

Consequently, these businesses backed off from their previous advocacy for reform. This loss of strong support was very significant and affected the political debate, resources behind the political battle, and ultimately affected public opinion because some of the voices in favor of an expanded government role (including an employer mandate to provide employees with health insurance) weakened or disappeared.

What does all of this mean for the passage of health care reform under Obama? Obviously, there were notable partisan battles, parliamentary strategies, resistance from the insurance lobby, questions about the administration’s strategy, and so forth. There are always these kinds of issues.

But beneath this level of partisan politics are more fundamental dynamics. I have not researched the recent battle over health care reform and therefore can’t point to the underlying coalitions. Nevertheless, they are there.

For example, here is one telling link between Clinton’s failed attempt and Obama’s success. HMOs controlled health costs from the 1994 thru 1997, when the cost of insurance premiums did not rise more than 2.5% in any year. A few years later, however, health care costs were rising rapidly once again. In 2000, the growth in health insurance premiums was at 10%. The ability of HMOs to contain costs began to falter. In that context, what groups had been hit hardest by rising premiums? Maybe some businesses once again had an interest in containing health care costs.

One thing is for sure: The Obama health care reform is not about socialism. But it is very likely about capitalism. And in capitalism – in a market economy – based as it is on competition and the drive for profit, some segments of capital will seek national policies that protect them from competition or even from the market, itself, in an effort to secure “adequate” profits (which is always relative, of course).

This can be seen in Clinton’s effort at health care reform, in the history of US agricultural policy, as well as in labor policy, social security, and many other policy arenas.

A full understanding of recent efforts at health care reform requires us to move beyond much of the current political debate.