Bromberg realized that he could not beat something with nothing, so in league with the AMA, he came up with a strategy to pass a bill with only voluntary limits on costs.13 After first warning me that he supported the voluntary program, Rostenkowski took the bad news directly to the president, urging him to support it, too. The president knew this would eviscerate his bill and refused.14
When the bill went to the Health Subcommittee of the Commerce Committee, chaired by an enthusiastic supporter, Paul Rogers of Florida, the vote was also close.15 Bromberg organized a sophisticated operation that overwhelmed ours with a basic argument that frightened members: Cost controls would mean fewer services, loss of jobs, and they would be blamed if there were not enough hospital beds in a flu epidemic or enough nurses because they had been laid off due to price controls. They also reminded members that hospitals were major employers in their district, and had some of their district’s most prominent citizens on their boards. One of the leaders of a Catholic hospital in Chicago was a nun named Sister Sheila. Every time someone mentioned health care to Rostenkowski, he would say: “What does Sister Sheila think? I’ll have to check with her.”16 And of course the AMA and the hospital organizations had political action committees that dispersed campaign cash to key members.
The AFL-CIO switched sides, fearing unionized hospital workers would bear the brunt of the cost cutting, and entered into an unholy alliance with the medical lobbies. We adjusted our bill to allow a limited wage pass-through for hospital workers, but it was not enough for organized labor, and Rostenkowski and Rogers rejected our compromise. The key vote to break a tie was held by a strapping, tough young Democratic congressman from Chicago, Marty Russo, a Rostenkowski protégé. Russo met with the hospital heads in his district, and their officials claimed that Illinois hospitals were very efficient and that Califano and Carter were protecting inefficient New England hospitals. Russo suddenly changed his vote and went against the administration’s program, which would impose cost controls if nationwide hospital inflation exceeded the overall inflation rate by at least 2 percent.
An angry Paul Rogers escorted Russo into the anteroom off the cavernous committee room, where Califano was also visibly upset. They said: “How the hell can you do this to the president?” and threatened to call Carter, but backed away when they realized that even the president of the United States could not overwhelm Chicago politics.17 This turned out to be one of the few times Carter retaliated. He pointedly singled out Russo at a White House briefing for Democratic congressmen and at the next Democratic leadership breakfast.18 Commerce Secretary Kreps canceled her appearance in his district for a small-business meeting Russo had publicized, and he became the House’s only Italian Catholic omitted from the White House delegation to the Vatican for the installation of the new pope.
We tried to pick up the pieces in the Senate, where Kennedy was reintroducing the president’s original cost containment bill, which now had no chance of passing and, even worse for Kennedy, slowed his drive for national health insurance.19 Kennedy did not like the signals he was hearing on national health insurance, and asked Califano to dinner at his Virginia home. Califano demurred on pushing forward immediately on the ground that he needed more time and that the key committees were preoccupied with energy, hospital cost containment, and welfare reform. Kennedy was more than mildly irritated. He told Califano that he had been waiting since January, that Carter had made a campaign pledge, and that he intended to hold congressional hearings to put the issue before the public.20
Kennedy and Carter spoke on successive days at the UAW’s annual convention, with Kennedy charging that health care reform was at risk of becoming “the missing promise” of the Carter administration.21 After Califano briefed him on Kennedy’s barrage, Carter promised to present a proposal early the next year. I then joined him for a meeting with the union’s leaders and other health insurance advocates. Carter emphasized that he could not pass national health insurance without containing hospital costs, asked them to help, and said: “We can’t get this overnight. If we demand too much and are not fiscally responsible, the whole thing will be rejected. This needs to be politically feasible.” For them this was a chilling message and put him at odds with the approach of Kennedy and his labor allies once and for all.22
The health insurance advocates led by Kennedy were far in front of most Democrats in Congress in terms of the ambitions—and costs—of the program. The congressional politics were also complicated by the multiple committees in the Senate and House that had overlapping jurisdiction. The special interests that were ferociously circling around health care ranged from labor unions to corporations, hospital and medical associations, insurance companies, and nurses. As we began the laborious effort of developing our own health insurance proposal and trying to marry it with Kennedy’s, there were a number of moving parts: the role of private health insurance companies; whether and how to phase in coverage, rather than hold out for the nirvana of universal coverage; and if later phases would be automatic or triggered by economic and budget conditions affecting the huge costs of a comprehensive program. (These same issues bedeviled the Obama administration decades later, when it put together and narrowly passed the Affordable Care Act, often called Obamacare.)
Recognizing the complexity of making massive changes to the American health care system, and our lack of data on it, in April 1977, Califano appointed his talented undersecretary, Hale Champion, to chair a committee of government and private stakeholders.23 We knew it would be unlikely to have a proposal for at least eighteen months, and on November 9 the president got his first briefing. Twenty-six million Americans had no health insurance and another 28 million had inadequate coverage. Califano underscored that among the prime reasons for the exorbitant costs were the absence of competition among insurance carriers, no cost controls, new technologies, and uninformed consumers. The options extended from a federally run and financed program, as Kennedy was proposing, to various alternatives, including roles for private insurance companies and employer-provided insurance. Carter pointed out that none of these options would work without controlling costs and phasing in coverage.24
As we left the meeting Califano and I shared the same concern about pressure from the UAW and Kennedy. He suggested a holding action by announcing a set of broad principles. On November 18, 1977, I met with the senator, his health care expert, Dr. Larry Horowitz, and Dr. Peter Bourne, the president’s drug policy adviser.25 Kennedy had an imposing physical presence, with a shock of hair, a large neck, and a chiseled face sitting on broad shoulders above a barrel chest. He also had the indefinable aura of the Kennedy brothers, whose legacy he consciously tried to preserve. I vividly remembered his brother’s stirring 1962 speech on the importance of public service while I was at the University of North Carolina, and my overnight drive to Washington only a year later to see his flag-draped coffin at the Capitol. With us Ted Kennedy was brusque: We would get nowhere if labor opposed the program, and he warned: “I will move it myself if you don’t.” Delaying a presidential proposal was unacceptable to him because “there never is a right time” to begin, and it would need two or three years to get through Congress. I could see a train wreck ahead.
On December 21 I met with the UAW leadership and its president, Doug Fraser. Normally not a bombastic person, he was quietly seething: “We want national health insurance before the midterm elections [in 1978]. You can’t back away!” I raised the idea of including private insurance carriers to broaden the political support and avoid having a total federal system, and this message got through to Kennedy, who set up a conference call with both our staffs. I thought it was the first breakthrough to a possible compromise.26 Thus began a tug-of-war that neither side won and the nation lost.
When we held our first significant negotiating session with the senior staff of the UAW and AFL-CIO in February 1978, the unions put forward a list that amounted to government-run health care at an even more generous level than most European single
-payer systems—a national health care budget administered by a central government authority with no patient deductibles or copayments to help control costs. I thought this was totally unrealistic. They accepted the idea of phasing in coverage starting with those most in need, but only if the law made it clear that the end result would be universal coverage; and they ignored our warning that this would entail massive government costs.27 At the end of February, Kennedy told me he had reached an “important breakthrough with the unions in accepting a role for private health insurance companies.” He asked for a meeting with the president and the labor leadership.28
But first Carter, Califano, Blumenthal, and I convened in the Oval Office to discuss the timetable. The two cabinet secretaries wanted to delay formal introduction of a bill because it would clash with reform of taxation and Social Security. Carter emphatically refused: “I made a commitment to the UAW and Kennedy, and I would be lying if I put it off.”29 Later that same day Califano and I met with Kennedy and his union allies, and the senator came part of the way toward our ideas, agreeing to greater private-sector involvement by sharing part of the costs with employers and taking some of the load off the federal budget. He declared: “We have come a long way … and we are willing to give up on a big role for the private insurers. But this is our bottom line. The key is universality and comprehensiveness.”30 In one way or another every American would have to be guaranteed full health insurance. His concept was still top-heavy with government involvement: two federally funded corporations to negotiate health care budgets with the states on the one hand, and with doctors and hospitals on the other. Thus began several months that can best be described as a slog through the political weeds with Kennedy and labor.
THE CLASSIC CHOICES IN HEALTH CARE REFORM
With all the options the health insurance experts had laboriously examined, we settled on two basic choices. One was championed by Senators Russell Long and Abraham Ribicoff—one conservative, the other liberal—that called for government protection against catastrophic expenses, combined with the federal government taking over all expenses of Medicaid coverage for poor and low-income Americans. Califano and I favored a plan that would meld Long’s approach with a comprehensive program, as the only one consistent with what Carter had pledged in the campaign and repeated several times in office. But ours differed significantly in fiscal effect from Kennedy’s plan. We would start by mandating a minimum level of employer coverage, and thus build on the existing system that already covered more than 150 million Americans through the jobs of the family breadwinners. Then coverage would expand in stages, with government support. It did not take long for the press to catch on to a split within the administration, with the Washington Post quoting Budget Director McIntyre saying to “heed the lesson of Proposition 13,” the antitax referendum in California.31
It used to be said that Social Security was the third rail of American politics, but as a lethal issue it has been replaced by health care. We now saw the start of that shift. Kennedy and the unions inhabited a New Deal–Great Society island of their own, oblivious to the growing inflationary and fiscal pressures and the conservative swing in the country. They were far ahead of most Democrats in Congress, especially young Watergate “babies” elected in traditionally Republican districts and Southern Democrats, who were telling us to stay away from it before the 1978 midterm elections. And most Republicans viewed national health insurance as “socialized medicine,” which today they demonize as Obamacare.
Concerned about the conflict between congressional reluctance and Kennedy’s determination, Califano and I met the president alone in the Oval Office on May 18. Carter was clearly torn, realizing the political stakes on the one hand and the economic and budget realities on the other. He told us his word of honor was at stake, but at the same time instructed us to emphasize controlling costs.32
Another meeting on June 1 with the president and the administration’s two factions underscored the exquisite box the president was in; both the fiscal and the political boundaries could not have been worse. As Califano reminded him and he surely knew, his own ability and credibility to deliver on his promises were at stake. But OMB’s McIntyre and White House economic adviser Charles Schultze stressed the huge costs of a comprehensive bill, from $30 to $40 billion by 1983.
Carter was groping for a way to salvage his campaign commitment and find common ground with Kennedy. Carter had asked whether costs would be kept down by savings through preventive care to tens of millions of Americans who would benefit from full coverage. Treasury Secretary Blumenthal argued it would be “mind-blowing” to control costs with federal regulations. Even Mondale, the liberal voice in the White House, feared the consequences of Carter endorsing Kennedy’s comprehensive plan at this time. In the end Carter exclaimed: “It is ridiculous to think about endorsing a bill like Kennedy’s. I am not going to destroy my credibility on inflation and budgetary matters!”33
In a rational world, Kennedy and the labor unions would have recognized the president’s economic constraints and the antitax tide, and agreed on a more limited program that would establish the principle of universal coverage and grow by increments. But there was nothing rational about this debate. One way to square the circle between Kennedy’s insistence on wrapping all benefits into one huge bill and our concern about the long-term costs would be to phase in the benefits over a long period of time, starting with coverage of children and catastrophic expenses, and introducing Mondale’s creative idea of economic triggers that would give future presidents the right to slow down or postpone each successive phase, depending on what the nation could afford.
After long hours of negotiations over many days in his small but ornate and beautifully appointed “hideaway” Capitol office reserved for senior senators, I reached agreement with Kennedy about phasing in coverage. But he had raised difficulties with anything that would delay eventual universal coverage. I told Ham, who would run Carter’s reelection campaign, that I feared Kennedy would pull out of the talks and use his withdrawal as a pretext to contest Carter’s nomination. I suggested that we try to rope Kennedy into a partnership on health insurance that would deprive him of a rationale to mount a challenge. Ham replied that Kennedy would base his decision purely on whether he could beat Carter and would find any excuse to challenge him if he thought he could win.
We had a showdown at a June 26 meeting with Kennedy in the Oval Office. Carter told Kennedy he favored a “comprehensive plan but it would take a long time to implement,” and that by the end of July he would give a speech on the principles of a bill that would move toward comprehensive coverage in stages, with formal authorizations at each step. Then the president asked Horowitz and me to leave. The accounts of what happened between the two reflect what each wanted to hear.
After Kennedy and Horowitz left the White House, I explained to Carter that while Kennedy was open to phasing in coverage, he wanted all the phases to be mandated in one bill that would define in advance what benefits would be provided in each phase and at what point the nation would move to the next level of coverage. This was far different from Mondale’s idea of phasing in the stages depending upon economic conditions.
But when Horowitz called me, he said Kennedy had been pleased by the meeting, had talked to Fraser and Meany, and that while the unions opposed mandated triggers between phases, Kennedy did not oppose them as long as the goals that had to be met at each stage were clearly specified. Horowitz agreed it was “reasonable to see if one phase works before we get into another one” and thought Kennedy could persuade the unions to accept that because “we can’t stand a misjudgment on cost” and need to reassure the public that it would not happen again. This was music to my ears, but the tune would soon sound considerably more discordant.34
The president was pleased when I told him this in his private study, and said: “I feel it is a way to satisfy my obligation to the UAW without inflation concerns.”35 It seemed that we had resolved our internal debates a
nd that we were also close to an agreement with Kennedy and labor. But no sooner than things seemed to come together, they crumbled into pieces. I believe labor’s pressure on Kennedy was the principal force behind the collapse. July became the crucial month to bring it all together—or to break it irrevocably apart. Horowitz carried a jarring message: Kennedy wanted our plan before the midterm elections and felt that he was “losing credibility and getting led along.”
Horowitz now said, probably under union pressure, that their version of how a trigger would work was radically different from our conversation a few weeks ago: They would not accept a trigger built into the bill on the basis of general economic conditions, but only one that would give the president limited authority to request a delay on the basis of problems with the program or the economy; then Congress would have to approve. This would make any trigger meaningless. The president instructed me to tell Kennedy there would be no complete plan before the midterm elections in November.36
The deep divisions were clearly illuminated during the next seventy-two hours and became decisive not only for the relationship between Carter and Kennedy, but for the future of health insurance for a generation. At a July 12, 1978, meeting with the UAW’s Steve Schlossberg, with whom I had negotiated our national health principles in return for their endorsement during the 1976 presidential campaign, he was fuming mad at Carter and the administration for being “ineffective eunuchs” on national health insurance.37
When I next met with Horowitz, he hardened Kennedy’s terms, demanding that the stages leading to universal coverage must kick in almost automatically. The president would have no power to stop them moving forward over the years, and Congress could modify but not stop them from coming into force. Horowitz bluntly told me that by negotiating with us, Kennedy was “los[ing] credibility and getting led along.”38
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