802 Bookshelf: The Politics Of Medicare, Second Edition

by Theodore R. Marmor, Aldine de Gruyter, New York, 2000, 205 pp., paper, $16.95

Volume C, No. 5May, 2000

Americans like Social Security and Medicare. Everyone hopes to become a beneficiary some day. Even before enjoying our own benefits, few of us want the financial burden of caring for aging parents and grandparents. That’s why conservatives’ “greedy geezers” propaganda has failed to undermine popular support for these programs.

Just five years ago, in 1995, Medicare’s trustees predicted the plan would be insolvent by 2002. Yale political science professor Theodore Marmor, in “The Politics of Medicare,” explains why such forecasts are not to be believed. Other government programs aren’t threatened with financial ruin. The Pentagon doesn’t go broke. Neither does the IRS. The FCC, FAA and most other government boards and agencies don’t run out of money. But the fact that Social Security and Medicare are financed through “trust funds” makes it possible to raise the specter of bankruptcy.

Professor Marmor explains that this governmental accounting device isn’t like a private trust fund, which disappears when its money runs out. Congress can and does bail out these popular programs with additional funding whenever their trust funds start to run low. Almost as an afterthought, he reminds us that the pessimistic 1995 forecast has already been revised. Medicare’s costs have risen more slowly, and its income faster, than predicted.

It’s all politics, Marmor says: an endless ideological dispute between those who can afford to take “personal responsibility” for retirement, medical emergencies and just plain hard luck and those who feel that government insurance plans are a good and necessary part of modern society.

The partisan squabbling that shaped Medicare over the years is dissected throughout this perceptive work. The first of its two sections, a virtually unchanged reprint of the study’s first (1973) edition, describes the seemingly endless political battles leading to Medicare’s passage in 1965. It traces the history of the fight for government health insurance from the 1930s, when advocates hoped it would become part of the Social Security system but backed down when it threatened prospects for passing the old-age pension program.

Several national health insurance proposals were introduced during the Truman administration (1947-52). Despite enthusiastic presidential support, none had a chance of passage by a hostile Congress. Not until 1964 did a Democratic landslide create a congressional majority in favor of government social programs. For the first time in decades, health insurance legislation was possible.

However, even with a sympathetic President and a friendly Congress, proponents remained cautious. Instead of advocating a universal system like those in most other industrialized democracies, they sought to deliver limited hospitalization coverage only to older Americans.

To differentiate the program from “the demeaning world of public assistance,” Medicare’s advocates restricted benefits to those who had earned eligibility by paying into Social Security. To assuage opponents’ fears of overuse of the program, they mandated co-payments and deductibles. Ironically, the trust fund gimmick now invoked to frighten voters was designed as a symbolic commitment to fiscal stability to make the program palatable to cost-conscious legislators.

Amazingly, the 1965 legislation went far beyond the expectations of many of its proponents. As it progressed through committee hearings, covered hospital stays were lengthened, the “Part B” doctor-payment program was added and the plan was extended to all oldsters, not just Social Security recipients.

Bringing Medicare’s history up to date in Part II of the book, the author notes that the program’s later development disappointed its sponsors, who had hoped that it would be just the first step to a universal, comprehensive program. Unfortunately, a growing mistrust of government, combined with “the American impulse…to disperse authority, finance and control,” stymied progress toward this goal. Later expansion added only kidney dialysis and coverage of the disabled.

The program’s designers had intentionally omitted cost controls “for fear of enraging Medicare providers.” As a result, expenditures grew rapidly, along with the health budget of the whole country. By 1970, attempts to restrain costs focused on reforming the American health care system overall. But neither President Nixon’s Comprehensive Health Insurance Plan nor several other far-reaching bills could pass Congress. Without system-wide change, Medicare outlays – like all health care costs – increased faster than inflation.

During the Carter, Reagan and Bush administrations (1977-92), Medicare “reform” efforts shifted to cost control. Financing was moved from the Social Security Administration to a new agency, the Health Care Financing Administration. Hospital payments were switched from reimbursement of individual patients’ costs to the Diagnostic Related Group method that pays a fixed amount no matter how long a recipient stays in the hospital. Physicians’ fees were limited. And higher premiums, co-payments and deductibles forced beneficiaries to pay an ever-larger share of their medical expenses. Since 1984, seniors have paid a bigger percentage of their income in out-of-pocket health costs than they did before Medicare was enacted!

As the cost of care rose, fewer Americans (and their employers) could afford health insurance. This brought about “an extraordinary consensus about the need for far-reaching change,” says Marmor. Sensing the public’s mood, President Clinton’s 1992 campaign promised to cover the then 39 million uninsured. But although most Americans felt that the system needed a complete overhaul, there was little agreement on what to do.

The best way of controlling expenditures, writes Marmor, would have been to “enact universal health insurance, fold Medicare into it, and impose controls on payments to providers (an approach that had already proved so successful within Medicare in the 1980s).” Canada had good results with such a system, but Clinton “firmly rejected the Canadian model. He feared that both Republicans and the medical establishment would never weary of crying ‘socialized medicine,’ the well-worn phrase these same constituencies had used before.”

Clinton’s proposal tried to achieve universal coverage “by a combination of indirect steps.” It left Medicare largely untouched, so as not to disturb seniors, who were relatively happy with the program (and more likely to vote than other demographic groups). The president’s complicated health legislation crashed and burned in 1994. Costs continued to rise.

The 1994 elections ushered in the “Gingrich Revolution” whose Contract with America constituted a “fierce attack on the American welfare state.” Medicare came under siege. Its enemies’ crusade to pare down the program (or better yet, turn it over to private profiteers) seized upon its trustees’ baleful 1995 predictions to shake public confidence and justify demands for cutbacks.

By 1997, “The combination of persistent medical inflation and the increased popularity of anti-Washington rhetoric…transformed the image of Medicare into an out-of-control entitlement.” A bipartisan budget-balancing consensus gave new support to Medicare’s foes. “The Politics of Medicare” analyzes the surprising political flip-flop when Republican proposals defeated in 1995 were enacted with Mr. Clinton’s blessing as a part of the 1997 Balanced Budget Amendment.

Professor Marmor notes that recent debates have been somewhat unreal, with free-market ideologues pitting “idealized models of market transactions against portrayals of actual government programs, warts and all.” He makes no predictions about Medicare’s future, except to suggest that “The question for futurologists is not so much to project Medicare’s expenditures or the obvious demographic pressures but to anticipate the varying political responses that different coalitions will make in the first decades of the twenty-first century.” In other words, it’s all politics.

The nuances of these politics and the philosophies, groups and individuals behind them are fully detailed in this exhaustive study. Many scholars have long considered the first edition of “The Politics of Medicare” the definitive work on the subject. Its new version should now be accorded that distinction. This insightful, fact-filled and comprehensive opus is available at Local 802’s library.

— John Glasel