Is President Obama fighting the last war?

Jun 29 2009

Bill and Hillary Clinton are off saving the world, he through his global foundation and she via the State Department. But their presence looms over the health care debate as surely as if they were running the White House. Their epic failure to pass reform in 1994 has become the defining object lesson in how to botch health care legislation--a lesson President Obama has obviously taken to heart. Push for reform right away; let Congress hash out the details; and, above all, don't threaten people's current insurance arrangements. You can sum up Obama's strategy for health reform as "WWCD": What Wouldn't the Clintons Do.

And it's working well so far. Notwithstanding the predictable fits-and-starts of the legislative process, it seems likely that Obama will have a bill to sign by year's end, thereby accomplishing what the Clintons famously could not. But then what? Having crafted a bill that can pass Congress, will Obama be signing a bill that people actually like? It's a question best answered by examining another episode of the past--one that, although a mere footnote in political history, is fraught with warnings for today's reformers.

The episode is the fight over the Medicare Catastrophic Coverage Act, which President Reagan signed in 1988. Its purpose was to plug some of the emerging gaps in the Medicare program: If you stayed in the hospital too long, Medicare just stopped paying the bills. The Act extended hospital coverage indefinitely, capped out-of-pocket spending for beneficiaries, and offered partial coverage of prescription drugs, among other things.

Or at least that's what the law was supposed to do. After the bill passed with overwhelming, bipartisan support, a backlash developed, memorably culminating in a "riot" of angry seniors who chased a beleaguered Dan Rostenkowski--then chairman of the House Ways and Means Committee--into his car after a Chicago meeting. Less than two years after passage, before the bill's implementation, Congress voted to repeal the act, again with sweeping margins.

What had soured the public? As political scientist Jonathan Oberlander recounts in The Political Life of Medicare, a major factor was the sense among seniors--the program's intended beneficiaries--that the program's limited upside wasn't worth the cost they were paying. Medicare's lack of catastrophic care was a real problem, for sure, but not necessarily its biggest and certainly not its most visible, since only a tiny percentage of seniors ever ended up with those extended hospital stays. (Nursing home costs were a much bigger problem.) The other benefits, like the partial prescription drug coverage, would have helped more people. But few seniors understood that and the affluent among them already had supplemental coverage for many of those needs anyway.

At the same time, all seniors felt the program's burden: Determined to make the new benefit self-financing, lawmakers imposed a mandatory premium on seniors and tacked on an income tax surcharge for the wealthy among them. The financial hit to most retirees would have been quite modest, but it hit right away, before the full benefits kicked in. That made seniors a receptive audience for demagogic advertisements attacking the program.

Fast forward two decades, take a closer look at what's happening on Capitol Hill, and you may notice some familiar storylines. In order to make sure reform can pay for itself, lawmakers are talking about slowing down implementation, so that the program is not fully on line until 2014. They're also talking about offering fewer subsidies to help people obtain insurance. In a nod to centrists who don't like the idea of too much government, there's a strong push to gut or even eliminate proposals for the public insurance plan, which was supposed to provide security for individuals and competition for private insurers.

These are not small concessions. Consider the proposed reduction in subsidies. In the original schemes, families of four making up to $88,000 a year would get at least some assistance; under the alternatives under discussion, only families making up to $66,000 could get subsidies. Yet families making between $66,000 and $88,000 are precisely the sort of families who could use help--not a lot of help, but a little--paying for insurance. And that's assuming subsidies really end up at $66,000. Lawmakers could easily bid the number down more before reaching a final compromise.

Put aside, for a moment, the policy merits of these moves. The politics are lousy. Obama would be in danger of producing legislation that seems to offer little up-front benefit, particularly for the electorally vital middle class. And if some of these people end up paying even modestly higher taxes to help finance reform they're not likely to be happy about it. It's hard to imagine such legislation provoking a backlash that could produce total repeal. It's not so hard to imagine such legislation creating bad political feelings, the kind that linger around until the next Election Day and pave the way for legislative retrenchment later on.

Of course, holding out for more generous subsidies, a robust public plan, or other reform elements that deliver clear, short-term benefits would obviously carry its own set of political risks. To get something through Congress, Obama probably needs some centrist support--or, at the very least, he needs to make a good show of courting it. But Obama must be wary of conceding too much. Even in strictly political terms, a good bill that passes with a narrow margin may preferable to a weak bill that carries huge majorities.

The lesson of the Clinton health care fight is that Congress won't embrace reform if there aren't some compromises. The lesson of the Medicare Catastrophic Care Act is that the public won't embrace reform if it has too many compromises. We know that Obama has mastered the first one. For his own sake, as well as ours, he'd better master the second.

This column is a collaboration between KHN and The New Republic .

Jonathan Cohn is a Senior Editor of The New Republic.