Guns or Butter

by Bernstein, Irving;

  Cohen had studied Wilbur D. Mills for years and found him endlessly fascinating. He had been born and raised in Kensett, Arkansas, a town with a population of 2500. His father was a country banker. As a “small town boy,” Mills’s view of life, said Cohen, was “uncomplicated … based on mutual respect and integrity and understanding.” At age ten he decided to become a congressman. After attending Harvard Law School, he practiced law for a few years and in 1938 ran successfully in the Second Congressional District. Thereafter he was reelected endlessly, usually with no opposition. Mills became a member of the Ways and Means Committee in 1943 and its chairman in 1957.

  Mills, Cohen said, had an “incisive mind.” Good lawyer that he was, he briefed both sides of an issue before he reached a conclusion. He was by a wide margin the hardest worker on the committee, if not in all of Congress. In Cohen’s judgment, he was one of five members of Congress who understood how Social Security was financed and was probably the only member “who completely understands the actuarial basis of Social Security.”

  Prior to 1961 Mills had served in the House under Speaker Rayburn, whom he revered. Nobody understood the House of Representatives so well and Mills learned his lessons from Mr. Sam. The House, with 435 members, was too big and unwieldy to perform legislative work efficiently. Thus, it depended almost totally upon its committees, of which Ways and Means ranked first. “I was always taught by Mr. Rayburn,” Mills said, “that our whole system was to settle disputes within the committees. It’s a waste of time to bring out a bill if you can’t pass it. I just don’t like to have a record vote for the sake of having a vote.” Nelson Cruikshank said he never observed a significant vote on the floor. “When you got it settled in the Ways and Means Committee, it was settled.”

  Article I, Section 7, of the Constitution declares, “All bills for raising Revenue shall originate in the House of Representatives.” Social Security was a revenue bill. This meant that Medicare must start in Ways and Means. Prior to the 89th Congress, the committee, consisting of 15 Democrats and 10 Republicans, was very conservative. Before 1961 a decisive majority of Republicans and southern Democrats, including Mills, rendered the prospects for Medicare hopeless. Mills had reluctantly allowed a vote in 1960 that went negative 17 to 8. As a result of the 1960 elections the majority was shaved by one vote; there remained 10 Republicans and 6 southern Democrats against 9 northern Democrats. By 1962 there was a further erosion to 14 to 11.

  Mills, reflecting the mood of his committee and the House, gradually moved toward Medicare. The pressure from Kennedy was difficult to resist. On the morning of the assassination, November 22, 1963, Mills reached agreement with the administration on a financing formula and appeared to have joined the supporters. But this guaranteed nothing because the chairman would not act without a large majority on Ways and Means.

  He was obsessed with overwhelming majorities and was remarkably ingenious and patient in devising compromises in order to get them. John F. Manley wrote, “If Chairman Mills’s idea of going on the offensive is to lean forward in his foxhole, there is a second reason behind it. Majorities are built in the House, not elected to it; therefore House politics is coalition politics.” In the game of coalition politics partisanship played a secondary role. Mills was very close to John W. Byrnes of Wisconsin, the minority leader, and he courted other Republicans on his committee.

  In the chairman’s mind a 13 to 12 victory was a defeat in disguise because it undermined his own and his committee’s credibility and could split the House. That was exactly the way the committee divided in 1964. There were two very conservative Democrats, A. Sydney Herlong of Florida and John Watts of Kentucky, who joined the 10 Republicans in opposition to 12 liberal Democrats. Mills held the swing vote, a power that made him extremely nervous.

  Thus, the prospects for Medicare in the House in 1964 were gloomy. Kennedy had expected its passage in 1965. The likelihood of a Democratic landslide in the elections must have made Mills even less inclined to force a close vote in 1964. A bit of patience and all would fall into place the next year.1

  But President Johnson was not patient. He was eager to secure passage of Medicare in 1964, that is, during the second session of the 88th Congress. He wanted to go into the presidential campaign with that major triumph added to his already impressive list of legislative victories.

  The Senate seemed safe. In 1962 Senator Robert Kerr of Oklahoma, who led the opposition, had tricked the supporters and had won by the close margin of 52 to 48. By 1964, however, the lineup was reversed. As a result of deaths (including Kerr’s), defeat in the 1962 elections, retirements, and changes of position, the opponents had lost 10 votes and had gained 4 for a net loss of 6. The proponents of Medicare for the same reasons had lost 6 votes and had gained 12, for a net advance of 6. By this simplest method of calculation Medicare would pass the Senate 54 to 46. Further, Senators Russell of Georgia and Sparkman and Hill of Alabama had voted with Kerr for reasons that were now moot and Senator Monroney of Oklahoma had done the same as a courtesy to his fellow Sooner. Mike Manatos, who covered the Senate for the White House, thought it likely that these and other southern gains could push the majority to 60-40.

  The House was another matter. On February 17, 1964, Henry Hall Wilson, who handled the House for O’Brien, thought it impossible to get the bill onto the floor, “if it can be got out of committee at all.” This was because Mills would avoid breaking a tie at almost any cost. Further, the committee division probably reflected an extremely close vote in the House which might easily go against Medicare. As Mills saw it, this was no time to lean forward in his foxhole.

  Shortly after becoming President, Johnson had invited the chairman and Mrs. Mills to dinner at the White House for an evening of persuasion. In the State of the Union message in January he declared, “We must provide hospital insurance for our older citizens financed by every worker and his family under Social Security.” He sent Congress a special message on health on February 10 which covered six major topics. He placed Medicare first and he strongly urged its passage. This was all very well, but it changed the minds of none of the 10 Republicans or 2 opposition Democrats on Ways and Means.

  Mills had begun hearings on November 18, 1963. His plan was to listen to testimony for nine days and to be finished in the latter part of the month. November 22, the day Kennedy was assassinated, was the fifth day, and Mills promptly stopped the hearings. They reopened on January 20 and ran for five consecutive days. A spectacular number of witnesses representing an extraordinary range of interest groups testified. The hearings filled five volumes, a total of 2,502 pages.

  The subject was broadly defined as “Medical Care for the Aged.” While there were many bills, three were most important. The administration proposal, introduced by Representative Cecil King of California and Senator Clinton Anderson of New Mexico, had been before Congress in 1962 and was the real Medicare. It would cover persons under Social Security and Railroad Retirement 65 and older and some of the elderly who were not entitled to pensions. They would be insured for hospital, nursing home, home health, and outpatient diagnostic services, but not for doctor bills. These benefits would be financed mainly by an increase in the Social Security tax. Benefits for the uninsured would be paid out of general revenues. The estimate was that 18 million people would be eligible in January 1965, 2.25 million of them uninsured.

  The Health Care Insurance Act, also known for its sponsor, Senator Jacob Javits, was the progressive Republican alternative to Medicare. The New Yorker had a political problem: he was up for reelection in 1964 and in his liberal state he dared not vote against Medicare. He told Cruikshank, “I’ve got to have something here that has a Javits element in it or a Javits label.”

  His cosponsors constituted the little band of Republican liberals—Clifford Case of New Jersey, John Sherman Cooper of Kentucky, Kenneth Keating of New York, Thomas Kuchel of California, and Margaret Chase Smith of Maine. The National Committee on Health Care of the Aged, a distinguish
ed group of experts, Democrats and Republicans, chaired by Arthur S. Flemming, president of the University of Oregon and former secretary of HEW, drafted the bill. It offered a choice either of Medicare under Social Security or essentially the same benefits provided by a private carrier who would be reimbursed by the government. But Javits went beyond Medicare. His private insurance policy would pay for physicians’ services at an estimated cost of $2 a week. The AFL-CIO liked the Javits bill. “It is significant,” Cohen wrote, “that not a single Republican on the Ways and Means Committee has introduced … the Javits bill. Nor has Mr. Mills in our discussions with him indicated any interest. … ” But Mills had taken careful note of the feature providing for the payment of doctor bills.

  The final important proposal was Kerr-Mills, technically Medical Assistance for the Aged. It had nothing to do with Social Security. Rather, it was a welfare program with a means test for persons 65 or older who did not receive old-age assistance and who could not afford health care. The federal government made grants to the states which must share between 20 and 50 percent of the costs. The states determined the services that would be covered. In 1964 10 million people were potentially eligible; in fact, only about 500,000 were covered, one in 20. The AMA strongly supported Kerr-Mills as an alternative to Medicare and sought to strengthen it. The fact that the beneficiaries were by definition too poor to pay doctor bills and the government would pay for them must have been an attraction.

  Of the great number of organizations which testified before the Ways and Means Committee, only four were significant: the American Medical Association, AFL-CIO, the American Hospital Association, and the insurance industry.

  As it had been for many years, AMA was the opposition to Medicare. Its leading spokesman, Dr. Edward A. Annis of Miami, became the president of the association in 1963. “Our objections to this bill are manifold,” he said. “ ‘We disagree with its basic philosophy. We oppose its method. We are deeply concerned over the effects it would have upon the Nation’s standards of health care.” Medicare would lock the practice of medicine into an iron girdle, “socialized medicine.” This would destroy the doctor-patient relationship and undermine the present high quality of medical care. The AMA also charged that the proponents falsely advertised the program by calling it a form of “insurance.”

  Many critics of the AMA were convinced that these arguments were window dressing, that the doctors really sought to protect their already very high incomes. Cohen disagreed. Under Medicare “they’re going to make more money, and they know that their incomes are going to rise.” Rather, the doctors had swallowed their own propaganda and had concluded “on a very high ethical plane” that the central issue was the “quality of medical care.” They honestly believed that Social Security would destroy American medicine.

  The labor movement was the counterweight to organized medicine. AFL-CIO had supported Medicare from its inception and, because of growing numbers of retired union members with health needs, had stepped up its lobbying. Health insurance under Social Security was its aim. While it also backed private health programs, including those collectively bargained, and the Kerr-Mills welfare law, labor considered them supplementary. The unions provided the foot soldiers in the battle for Medicare.

  The American Hospital Association had gone through a sea change in viewpoint. In the forties the hospitals had opposed the Wagner-Murray-Dingell health insurance bill. Now, according to Cohen, AHA said, “There ought to be something,” and “something” might include Medicare. He had asked Kenneth Williamson, who represented AHA in Washington, “If it passes, don’t you want it to be the best kind of a bill?” Williamson did indeed and helped Cohen make the bill workable and protect the autonomy of the hospitals.

  The insurance industry did not hear the whistle and missed the boat. It might have sailed into a sea of new business, as Javits proposed. But it spent all its time denouncing Medicare, allegedly because it was not insurance. Javits said he made “great efforts” to persuade the health and life insurance companies to support his bill, but “ran into the problem of their being against anything.” As a result, he said, “they ended up having no influence.” Thus, as noted above, neither the Republicans nor Mills on Ways and Means had any interest in the Javits bill.2

  The second session of the 88th Congress, that is, 1964, was not a happy year for Wilbur Mills. While he did not receive the famous Johnson “treatment” until later, he was under continuous pressure from Cohen, O’Brien, and Wilson. Supporters of Medicare accused him of “single-handedly” preventing its passage, and, even worse, some charged that he had been captured by the AMA. The AFL-CIO denounced his big majority strategy and made muffled noises about running someone against him in Arkansas.

  The more Mills studied the Medicare problems, the more complicated and intractable they seemed to become. King-Anderson covered only hospital bills. This made little sense in a measure supposedly providing health care for the aged, who, of course, must pay their doctors as well as their hospitals. In fact, a very large fraction of those who supported Medicare incorrectly assumed that physicians’ bills would be insured. Both the Javits bill and Kerr-Mills provided payment for doctors. But this added benefit would require a higher tax, which raised another serious problem.

  Old-age pension benefits had not kept pace with the rise in the cost of living. A powerful congressional movement emerged in 1964 to increase pensions fueled by the fact that almost no member of Congress, Republican or Democrat, wanted to face his elderly constituents without having voted for fatter benefits. A rule of thumb had emerged that the Social Security tax rate should not exceed 10 percent of covered earnings. A combined increase in the pension tax and a new levy for King-Anderson could easily push through this arbitrary ceiling. In an election year no Democrat, starting with the President, was eager to impose two tax increases simultaneously.

  During 1964 several Democratic members of Ways and Means whose votes seemed certain began to waffle. Clark W. Thompson of Texas publicly refused to say where he stood on Medicare. The President reminded him that Johnson had written to 2500 of Thompson’s constituents to support him in the 1962 primary. The congressman was reconverted.

  Mills, hoping to break the thirteenth vote deadlock, had persuaded John C. Watts of Kentucky to give him his proxy. But Dr. Annis outsmarted the chairman. The district Watts represented in western Kentucky was tobacco country. In early January 1964 Annis addressed the Kentucky legislature, noting that the Surgeon General would issue a report in a few days asserting that cigarette smoking caused cancer. “The A.M.A.,” he told the legislators, “is not opposed to smoking and tobacco, but it is opposed to disease.” On February 7 six leading cigarette companies gave the AMA $10 million to study smoking and health. Watts withdrew his proxy and lined up against Medicare.

  During the spring Mills proposed a number of amendments in the hope of shaping a firm majority. These included using Blue Shield to administer hospital insurance; raising the earnings base, that is, income subject to Social Security tax, from $4800 annually to $5800; amending Kerr-Mills to make it more attractive to the states; allowing the beneficiary the option of either hospital coverage or a monthly cash sum; and exploring about a dozen combinations of reduced benefits in order to narrow the costs. None worked.

  The votes were simply not there. The Ways and Means Committee was locked into a 12 to 12 split. Even worse, the House itself was against Medicare. Mills had a list of 220 congressmen who opposed the bill. A head count on September 4 showed that representatives who were “reasonably certain” of their position would vote against King-Anderson 222 to 180. Even if all “probable/possibles” were considered in favor of the bill, it would be defeated 222 to 209.

  On June 24 Mills called the committee to vote. Cecil King, certain that his beloved bill would go down to defeat, withdrew it at the last moment. Mills then offered a 5 percent increase in pension benefits, which would raise the contribution rate to almost 9.5 percent. John Byrnes, the Republic
an leader, then moved to raise the pensions to 6 percent. This would push the tax rate to the ceiling and allow no room for Medicare.

  The voting was dramatic. The northern Democrats, because one was absent, had only 11 votes. The 9 Republicans were joined by Mills, Herlong, and Watts for a total of 12. But Bruce Alger, the extremely conservative Republican from Dallas, dumbfounded everyone by voting against the Byrnes motion, defeating it by a tie vote. He explained that he opposed Social Security on principle and consistency demanded that he vote against its extension.

  On July 7 the Ways and Means Committee reported a 5 percent increase in pensions to offset in part the 7 percent rise in the cost of living. On July 29 the House adopted this proposal by a massive majority of 388 to 8. Neither the committee nor the House had acted on Medicare.

  These discouraging developments created what Henry Hall Wilson called the “Medicare dilemma,” a euphemism for defeat. But the President on the eve of his nomination was in no mood to accept a defeat. The House would automatically forward its bill, H.R. 11865, to the Senate. There the administration would load Medicare onto the increase in pensions.

  Cohen had anticipated this problem. On July 13 he had proposed to his boss, HEW Secretary Celebrezze, a substitute for the House bill. All retired and disabled workers would receive a flat $7 increase in the benefit per month. He/she would then have the option of either taking it in cash or using $5 to buy insurance, 45 days of hospitalization without a deductible. A modest increase of 0.2 percent in the contribution rate for both the employer and the employee would finance this program.

  On July 20 Senator Abraham Ribicoff, former HEW secretary, wrote the President that the Senate would easily vote for higher pensions and would then be reluctant to vote for “the big tax increase that would be needed to add hospital insurance.” Thus, the House bill “may well foreclose all hope of a medicare bill for a long time.” The solution was to offer the worker “a choice at age 65 of whether he wanted an increased cash benefit or hospital insurance instead.” Ribicoff then laid out Cohen’s plan with the added options of 90 days of hospitalization with a small deductible or home nursing care. The senator was convinced that it would pass both the Finance Committee and the Senate and that it would be “a hard one for Wilbur Mills to reject after Senate passage.”