Guns or Butter

by Bernstein, Irving;

  The Senate Democratic leadership coalesced around the Ribicoff strategy. Manatos reported that majority leader Mansfield, vice presidential candidate Humphrey, and Medicare sponsor Anderson agreed that it was the “only approach.” Ribicoff and Anderson would have the bill printed and Mansfield and Humphrey would cosponsor it. They urged the President to persuade the southern Democrats on the Finance Committee—George Smathers of Florida, Russell Long of Louisiana, Herman Talmadge of Georgia, and William Fulbright of Arkansas, along with Wilbur Mills—to accept the strategy. Anderson felt that if Mills did not go along they should allow the pension proposal to die. If it took effect, he said, “Medical Care is lost for all time.”

  But there were many problems. If both measures were enacted, Democratic senators from rural states might be compelled to vote against an increase in the tax which could reach $500 on a self-employed farmer. Dr. Annis had controlled the Smathers’s vote since 1950 when the AMA ran him successfully against Claude Pepper, “Mr. Social Security,” in the Democratic primary. While the immigration of oldsters into Florida was tilting the state toward Medicare and he was considering a declaration of independence in 1965, he was committed to the AMA in 1964. Russell Long had also been captured by organized medicine. His father Huey, the Louisiana Kingfish, had taught his boy that benefits to constituents should be distributed by the Long machine. The well-informed clerk of the Senate Finance Committee said that the pension bill could move to the floor “with dispatch.” If the President insisted on adding on Medicare, the committee would hold hearings which “would last until October,” that is, the middle of the presidential campaign.

  These difficulties paled alongside those raised by Mills. On July 20 Wilson informed the chairman that the administration was considering the Ribicoff strategy. He “obviously, was surprised.” He strongly opposed a conference between the houses to reconcile the bills in which pressure would be put on him to accept Medicare. He wanted to know no details of the Ribicoff bill, Wilson wrote, “lest the word get out that he was trying to dictate the Senate bill.” On August 13, Cohen wrote O’Brien, “I now have three reports that Wilbur Mills has said that under no circumstances will he accept a hospital insurance proposal in conference.” Cohen feared that “Mills had so staked himself out to so many people that he cannot possibly back track.”

  The Senate Finance Committee held hearings on seven consecutive work days between August 6 and 14, 1964. It considered three bills: H.R. 11865, the House-passed increase in old-age benefits, and two amendments to it—King-Anderson, which because of Senator Anderson’s illness was introduced by Senator Gore of Tennessee and was called the Gore amendment, and the Javits bill. The Ribicoff version was not even before the committee.

  Celebrezze spoke for the administration. “H.R. 11865,” he said, “is seriously lacking in the area of highest priority need … , hospital insurance for the aged … under social security.” Thus, he strongly urged the Gore amendment. At the same time, Celebrezze asked for enactment of the increase in pension benefits. But, Byrd pointed out, the rule was that the payroll tax should not exceed 10 percent. “If you take both of these bills, it will be 10.4.” Celebrezze explained that the combined tax would remain under 10 percent if the taxable wage base was raised from $5400 to $6600. “If I had to make a choice,” he said, “… hospital care for the aged is much more important… than a small increase in benefits.”

  This argument fell on deaf ears; the Finance Committee strongly opposed Medicare. The six liberal Democrats—Anderson, Gore, Ribicoff, Paul Douglas of Illinois, Eugene McCarthy of Minnesota, and Vance Hartke of Indiana—faced a solid phalanx of six Republicans led by minority leader Everett Dirksen and four southern Democrats—Byrd, Smathers, Long, and Fulbright. The Gore amendment went down 11 to 6. Ribicoff then offered his substitute, which was whipped 12 to 5 (Hartke switched). The Javits bill lost by voice vote. The committee then unanimously reported H.R. 11865 on August 20 and took no action on Medicare.

  But the political situation in the Senate differed from that in the House. In the latter the split in Ways and Means reflected the division in the House. The Senate, however, was much more liberal than its Finance Committee. The voting on the floor on the Gore amendment on September 2 was confused. At the outset several liberal Democrats were absent, and the vote was 42 to 42. With great publicity Barry Goldwater arrived dramatically from Arizona to cast his vote against Medicare, calling it “an insult to the intelligence of the American people.” (That afternoon Bill Moyers had the Democratic National Committee pushing the news to organizations of the elderly, particularly in Florida and southern California). On the third ballot, still with a few absent, the Senate adopted the Gore amendment 49 to 46. This was the first time either house had voted for Medicare. On September 3, 1964, the Senate passed the combined bill—higher pensions and Medicare—by a vote of 60 to 28.

  The worst fears of Wilbur Mills had come to pass: he must attend a conference on Medicare. The Senate named seven conferees: five Democrats—Byrd, Anderson, Gore, Smathers, and Long—and two Republicans—John Williams of Delaware and Frank Carlson of Kansas. In fact, only Anderson and Gore had voted for Medicare. Byrd, who opposed Social Security in any form, felt constrained to uphold the Senate at least by abstaining. That made four to two. The House designated five conferees: three Democrats—Mills, King, and whip Hale Boggs—and two Republicans—Byrnes and Thomas Curtis of Missouri. King and Boggs had voted for Medicare; Mills, Byrnes, and Curtis against.

  The conference sat for two tortured weeks in the latter part of September. Cohen sent in a stream of possible compromises which were exhaustively debated. O’Brien, Manatos, and Wilson suggested a variety of parliamentary moves. They included a metaphysical debate with the House parliamentarian over whether the bill was properly “in conference” because of an uncertain relationship between the hospital insurance trust fund and the Social Security Act. There was great pressure on the President to intervene in order to turn several of the conferees around and he came on with flags flying, but with only middling success. Smathers was persuaded to desert the AMA earlier than he had intended. Long, who hoped to inherit the position of majority whip from Humphrey, received the needed assurances. This meant that the Senate conferees were now four to two for Medicare with one abstention.

  But nothing could move Mills. He said that he was concerned about the financial soundness of Medicare and that was true. But that could hardly have justified the pressure and bad press to which he was subjected. Some thought he was protecting his friends in the House who did not want to alienate either the oldsters or the doctors by voting on the eve of the election. More likely, he must have expected the bill to fail in the House and inviting that result would violate his longstanding objection to meaningless ceremonies.

  The decisive conference vote on the Senate Medicare bill took place on October 1, 1964. Senators Long, Smathers, Anderson, and Gore were in favor; Williams and Carlson were opposed; and Byrd abstained. But only King and Boggs joined them from the House. Byrnes, Curtis, and Mills voted against Medicare.

  As a consequence, the 88th Congress did not enact hospital insurance. Wilbur Mills became the public villain. Lyndon Johnson, as Congressional Quarterly pointed out, suffered his “worst legislative defeat in an otherwise impressive record.” At his press conference on October 3, the President said, “We regret that we could never get … Mills … , Byrnes … , and Curtis to yield or to moderate their views. … ” But now Johnson and Humphrey had a powerful campaign issue which they could exploit with elderly voters.

  The loss, in fact, was only a passing incident. “From day one on Medicare,” Larry O’Brien said, “never did I envision ultimate, final failure. It was only a matter of time. Because the guts of it … demanded favorable action.” Wholly aside from the anticipated electoral landslide, Medicare by the fall of 1964 was unstoppable. Four years of hammering by Kennedy and Johnson had made an impact in both Congress and the country. The polls showed about two-thir
ds of the voters favored Medicare. The health needs of the elderly were increasing in both numbers and costs. Neither of the alternatives—Kerr-Mills or Javits—was feasible. The increasingly shrill, often false, and costly AMA campaign was losing effect, as defections among its own members and among politicians like Smathers and Long demonstrated. The competence of the Social Security Administration enjoyed universal confidence. The Senate had now voted for King-Anderson. Thus, Wilbur Mills in a speech in Little Rock on September 28 said, “I am acutely aware of the fact that there is a problem here which must be met.”

  If there were any residual doubts, the election results laid them to rest. The Goldwater-Republican opposition to Medicare took a fearful drubbing. One estimate was that 22 percent of those who voted were over 60 and that 2 million of them switched from Republican to Democratic. Among the 10 states with the highest percentage of elderly voters, seven were traditionally Republican; all 10 went Democratic. Of the 14 doctors who ran for Congress, 11 were defeated. The three who won included one supporter of Medicare, a long-time incumbent, and one who ran in a safe district against a weak opponent. The AMA lost three sure votes on Ways and Means. Most important, both the Senate and the House would have large pro-Medicare majorities in the 89th Congress. Manatos estimated the Senate margin very conservatively as 55 to 45.

  No one ever accused Wilbur Mills of indifference to the direction of the political wind. Soon after the election he made another speech in Little Rock in which he said, “I can support a payroll tax for financing health benefits just as I have supported a payroll tax for cash benefits.” He stated that he would be pleased to present a Medicare bill to the Ways and Means Committee if the President asked him to. The President said he would ask.3

  The massive Democratic victory struck the committees of the House of Representatives like an earthquake. Judge Smith and his Rules Committee were decisively unblocked by reinstatement of the 21-day rule. Now a committee majority could dislodge a bill from Rules after a minimum delay of three weeks. More relevant to Medicare, the House abandoned the 3 to 2 ratio for committee membership, 15 Democrats to 10 Republicans, for the actual distribution between the parties, 2 to 1. Thus, Ways and Means was now composed of 17 Democrats and 8 Republicans, the ratio that prevailed after Roosevelt’s landslide in 1936. This guaranteed a pro-Medicare majority.

  The Republicans were also affected. Representative Frank T. Bow, a prominent conservative from Ohio, wrote all the House members of his party, “Social Security and medical care were primary issues in 1964, and the Republican response on these issues was a major factor in the disaster that befell us.” Minority leader Charles Halleck had led the opposition to Medicare. The House Republicans voted to replace him with Gerald Ford of Michigan, who promised “positive opposition.” While Ford’s views were virtually identical with Halleck’s, they seemed different because he was more attractive and genial.

  Johnson was implacable. In the State of Union message on January 4, 1965, he called for assistance to the elderly “by providing hospital care under social security and by raising benefit payments to those struggling to maintain the dignity of their later years.” The top priority attached to Medicare was reflected in the bill numbers: H.R. 1 and S. 1. On January 7 the President sent Congress a special message—“Advancing the Nation’s Health.” The first proposal in this comprehensive program was hospital insurance for the aged. “I consider this measure to be of utmost urgency.”

  The President called the departmental people handling legislation to the Fish Room in the White House, and Wilbur Cohen was among them. Johnson said that he had just won an overwhelming victory, but “every day while I’m in office, I’m going to lose votes. I’m going to alienate somebody.” This had happened to Wilson and to Roosevelt. Thus, “We’ve got to get this legislation fast. You’ve got to get it during my honeymoon.”

  Cohen had worked up the bill to be submitted to Congress during the fall of 1964 and had a draft ready by November 15. “We are considering a 7% increase” in old-age benefits. In 1964 the Senate amount was $7 and the House adopted 5 percent. This would be retroactive to January 1,1965. The earnings base would rise from $4800 to $5600. The combined employer-employee payroll tax rate would increase from 8.8 percent in 1966 to 10.4 in 1971. The hospital insurance draft closely followed the bill that passed the Senate in 1964. Javits was pressing again for his version. While the leadership seemed to have little objection, complementary private health insurance had aroused no interest. Neither the committee nor the conference had supported it. “Nor,” Cohen wrote, “do I see anything in it which will help us obtain support from Mr. Mills.”

  The AMA, stumbling politically, decided that it must appear “affirmative” and trotted out what it called Eldercare. In essence an extension of Kerr-Mills, federal and state grants would subsidize private health insurance for old people who chose the plan voluntarily. The main feature was the coverage of both doctor and hospital bills. Herlong and Curtis, who were members of the Ways and Means Committee, introduced the Eldercare bill on January 27. The AMA then launched a massive and expensive advertising campaign to persuade the public that Medicare would cheat the elderly by failing to pay their doctor bills. But no one took Eldercare seriously. Representative Frank Thompson of New Jersey suggested an alternative, which he called “Doctorcare”:

  It was to be financed by a two-per-cent federal tax on applesauce, and the funds were to be used to provide special therapy for any physician who felt himself suffering from an urge to make house calls; if he didn’t respond satisfactorily to the arguments of his colleagues over the phone, he would be rushed to the nearest Cadillac showroom.

  On January 28, Byrnes introduced the Republican bill. It had been written by an insurance company and represented the views of House minority leader Ford. The federal government would administer and finance private health insurance for those who chose it. The attraction of the Byrnes bill was that its coverage was much broader than Medicare, including physicians’ services, drugs, private duty nursing, and care in mental hospitals. Byrnes called his bill Bettercare. Both Mills and Cohen worried that the Republicans could claim that they offered, as Cohen put it, “a more comprehensive and a better package” than Medicare.

  From late January to early March 1965 the Ways and Means Committee took expert testimony in executive session from Blue Cross, the American Hospital Association, the Kaiser Health Plan, Group Health, state health officials, the Council of Economic Advisers, and the Treasury. The committee also discussed technical aspects of the bills before it. Cohen was continuously present and made regular reports to the White House.

  The developments on March 2, 1965, Cohen wrote the President, were of “major significance.” In the morning Mills asked Cohen to review the bills before the committee. He finished with the Byrnes bill about 3 p.m. “You know, John,” Mills said to Byrnes, “I like that idea of yours.” He proceeded to speak out loud about the ideas that had been turning over in his mind. Everyone in the room studied each word with care because they realized that he was laying out what would become the national policy.

  Mills viewed the Republican bill not as an alternative to Medicare, but as a supplement to it. He then proposed what he called a “three-layer cake.” An expanded Kerr-Mills would be the bottom layer, to take comprehensive care of those without means. Medicare would be the middle layer to provide hospital care for those under Social Security. The Byrnes bill would be the top layer, a voluntary system to cover doctor bills.

  “Like everyone else in the room,” Cohen recalled later, “I was stunned by Mills’s strategy. It was the most brilliant legislative move I’d seen in thirty years. … Mills had taken the A.M.A.’s ammunition, put it in the Republicans’ gun, and blown both of them off the map.” Byrnes “just sat there with his mouth open.” The beauty of the Mills strategy was that it disposed of all the substantive issues and guaranteed that the legislation would clear Ways and Means, the House, and the Senate with overwhelming majorities.
No wonder Cohen was stunned.

  When he finished Mills asked Cohen whether he could weave the Byrnes bill into King-Anderson that night. Cohen said that he could. Mills told him to do so, to have Robert Myers, Social Security’s chief actuary, estimate the added costs, and to have everything ready the next morning. On March 3 Cohen presented the amended bill. Myers would fund medical coverage by having each individual pay a $50 deductible, along with a contribution of $6 a month, $3 by the covered person and $3 from the Treasury. “O.K.” Mills said, “it sounds fine.” He adjourned the meeting.

  That afternoon Cohen was in the Oval Office with his written report. “Mr. Mills has become very much concerned—as I am—over the fact that the Republican proposal … provides for medical benefits much broader in scope than our proposal.” If the administration enacted King-Anderson, the GOP could attack it for being narrower than Bettercare. The Mills strategy was “unassailable politically.” But it would require $400 to $500 million from the Treasury to pay the $3 for doctor bills.

  Johnson was dazzled by the chairman’s master stroke. He asked what he could do to help. Cohen, puzzled, asked about the $500 million. The President said, “I’m going to run and get my brother.” More puzzled, Cohen said he did not understand. Johnson said the railroad gave a prospective switchman an intelligence test. “What would you do if a train was coming from the east going 60 miles an hour and another one was coming from the west going 60 miles an hour, and they were heading for each other at just a mile separate?” “I’d go get my brother.” “Why?” “Because he hasn’t ever seen a train wreck.” The President gave Cohen the $500 million and told him to watch out for trains.