The role of the New Democrats in the explosion of managed care

Remapping Debate pointed out to Marshall that most people in the United States receive health insurance through their employers, whose incentive is to control their own costs. How were those employees supposed to “exit?” “That constrains choice,” he said. “We’re not dealing with a perfect marketplace here. It’s got all kinds of peculiarities. And most people can’t afford to forgo the group purchasing functions of their employers.”

Where then, were they supposed to go? At that point in the interview, Marshall acknowledged that choice and exit alone were not powerful enough to prevent managed care from denying necessary services to patients. “That’s why you have to have legal protections. Aligning the incentives of health care providers with the interest[s] of patients cannot be left to the market alone.” For that reason, he said, having regulated “purchasing alliances” that would increase the negotiating leverage of health insurance “consumers” was an important part of the managed competition theory — but one that was not realized in the 1990s.

Cost, cost, cost

Managed competition was at the heart of President Clinton’s health care reform proposal, the Health Security Act (HSA), which was formulated by a group of health insurance insiders known as the Jackson Hole Group. The HSA died in 1994 of what Ida Hellander, the director of policy and programs at PNHP, called “political asphyxiation.” Neoconservative political commentator William Kristol, through his organization called Project for the Republican Future, spearheaded the opposition.

But records of the public debate around the HSA provide a window into how health care was discussed in the New Democrat era. Upon examining a range of speeches and testimony given during this period by politicians, health insurance lobbyists, and think tank representatives, and comparing those with the rhetoric of the last major health care debate in the 1970s, it is clear quality concerns took a back seat to a focus on controlling cost in the 1990s. As Will Marshall acknowledged, “The assumption [in the 1990s] was that quality wasn’t a huge problem…The assumption was that cost inflation was the problem.”

The text of President Clinton’s 1993 speech on health care encapsulates the general trend of the 1990s. Its underlying assumption was that the quality of American health care was already excellent and needed little improvement: public policy should focus on quality health care only insofar as it does not harm quality; the priority was controlling cost, not improving quality. “We’re blessed with the best health care professionals on earth, the finest health care institutions, the best medical research, the most sophisticated technology,” Clinton said.  However, “medical bills are growing at over twice the rate of inflation, and the United States spends over a third more of its income on health care than any other nation on earth, and the gap is growing, causing many of our companies in global competition severe disadvantage.”

President Clinton’s speech was just the vanguard of what became a stampede of calls for controlling the cost of health care, with quality as an afterthought. For example, on November 8, 1993, Kenneth Thorpe, deputy assistant secretary for health policy at the Department of Health and Human Services, in testimony at a hearing on health care reform held by the Housing Energy and Commerce Committee, said, “Why must we remain committed to a strong cost containment strategy? Because the total costs of health care are high and rising…The rising costs of the current system harm businesses, government, and households.” The only mention of quality was as a factor for health insurance plans to compete over as part of a market-oriented bid at controlling cost.

And on March 10, 1994, Joan Simmons, the vice president of the Healthcare Leadership Council, an association of CEOs from several health insurers, pharmaceutical companies, hospitals, and other corporations in the health care field, testified to the House Education and Labor Committee, “People from across the globe come to the United States to receive the highest quality care. In this respect, our health care system is the envy of the world. It is proof that our system does more for its patients…Our delivery is undoubtedly the best in the world…Yet the financing system does require swift legislative reform…Congress must pass and the President must sign a bill that contains health care costs and makes coverage affordable and accessible to all.”

There were a number of key reasons that might have caused lawmakers and policy advocates to appreciate some cost increases as appropriate. These included the increased availability of demonstrably improved and necessary medical technology, the  population growth, and the beginning of the aging of the population. But, in general, this view was not expressed or explored, with the rising cost of health care seen as exclusively a negative that needed to be thwarted.

And quality?

There were, of course, some voices calling for quality as well, but even those often explicitly acknowledged they were swimming against the tide. For example, in testimony to the House Education and Labor Committee on November 8, 1993, Samuel Havens, board chairman of the Group Health Association of America, said, “We want to emphasize that while much of the impetus for reform comes from the need to reduce the inordinately high rate of increase in the overall health care costs, an even greater emphasis on assuring appropriate care and on maintaining and continuously improving the quality of care will be necessary if reform efforts are to succeed.” A call for “continuously improving the quality of care” was rare indeed, the record shows.

In testimony that pointed directly to the risk posed to quality of care by a strategy that focused entirely on cost control, given before the House Committee on Ways and Means on March 21, 1995, Robert Brook, a professor of medicine and health services at the UCLA Center for the Health Sciences, said, “If we are going to contain the growth of health care costs in the United States, as most people insist we must, mechanisms that rely solely on economic and administrative principles will result in the indiscriminate elimination of care that is both beneficial and not beneficial to the patient…We must work toward ensuring that quality, not just cost and access, is considered when the structure of the health system is altered by forces such as managed care and competition.”

Consequences of cost control fever

Near-relentless focus on cost and access, said Theodore Marmor, a professor emeritus of both political science and public policy and management at the Yale School of Management, will generally “put pressure on quality.” Marmor believes a basic health care policy dictum: “If you push for any two of the following three aspirations, you put pressure on the third. That is, if you put pressure on access and on cost, you’re going to do something to quality. If you put pressure to expand quality and to increase access, you’re going to put pressure on cost. If you put pressure to get cost under control and to maintain quality, you’re going to have real pressure on access.” This rule, he said, generally holds true “for anything other than vaccinations.” According to Marmor’s rule, then, by focusing the debate of the 1990s so strongly on cost and access, the New Democrats guided the way toward pressure on quality.

The health care debate in the 1970s was different. There, Marmor said, “the scope of reform was much broader.” Democrats, led by Senator Ted Kennedy, pushed for a national health program as a means of improving cost and quality, with both factors seen as equally in need of improvement. In a speech on health care at the 1978 Democratic National Convention, Kennedy said, “One of the most shameful things about modern America is that in our unbelievably rich land, the quality of health care available to many of our people is unbelievably poor, and the cost is unbelievably high.”