Pete Souza/White House photo
The U.S. Supreme Court's current consideration of federal health-care legislation has triggered thoughts not only about health care but other policy areas where reconsiderations might be in order. How should things work?
First, health-care and other so-called entitlements programs.
President Franklin Roosevelt's Social Security legislation, passed in 1935, was the landmark measure that gave the federal government a universal, safety-net function for the first time. The country was deep in depression and FDR wanted, most of all, to provide a safety net for needy citizens. But the tradition had been for families, churches, charities, and localities to fill this role. He feared that a federal program benefiting needy citizens only could not gain majority support in the country or Congress. So Social Security was designed to be "universal" — that is, benefiting every citizen, regardless of income.
Roosevelt was right. A universal Social Security program passed the Congress and has benefited every retiree since. It has been financed by payroll taxes, withheld up to a worker's capped income level. Many retirees have thought that they had individual Social Security accounts to which they contributed over a working lifetime and from which they would derive benefits after their retirement. (You can get an earnings statement from the Social Security Administration showing your contributions year-by-year. But your total contributions will never equal your eventual benefits. The eventual benefits will be small, if you die soon after retirement, or ample, if you are long lived). Social Security is an income-transfer program. Its benefits are received by eligible senior citizens. It is financed by younger working citizens.
Depression-era workers were big Social Security winners. They contributed for only a few years, but got benefits over the rest of their lives. I can recall former Council of Economic Advisors Chair Walter Heller telling me, during his retirement, that he had received many times his total contributions to the system. My own Depression-born generation had a low birthrate and, thus, we were no great burden to the big wage-earning boomer generation behind us.
Our benefits begin to exceed our lifetime contributions about 10 years into retirement. But demographics, in the end, rule. The high-birth-rate boomers are now entering retirement but there are not enough working-age Americans to finance their benefits at current levels.
How to address this problem? You could change Social Security from a universal program, benefitng everyone, to a needs-based program, as FDR originally considered. But public opinion would not accept that. The other options are straightforward: Reduce benefits slightly; raise the eligibility age slightly; adjust the annual cost-of-living adjustments slightly downward; increase the amount of salary income subject to Fed/FICA withholding. A mixed package, including some or all of the above, would fix the problem immediately. But, as we have seen, neither successive presidents nor a congressional majority have had the guts to do it. It will happen, however, when and if enough retired boomers and others become sufficiently alarmed to force their elected leaders to act.
President Lyndon Johnson designed the 1965 Medicare program on the model established 30 years earlier by his hero FDR. He made it universal, with premiums to be paid by all during their working lives and benefits to be received by all over 65. A supplementary prescription drug benefit was added during the George W. Bush presidency, supported in particular by Democratic Sen. Ted Kennedy, paid for partially by premiums deducted from retirees' monthly Social Security payments. Johnson added in 1965 a Medicaid program designed wholly to benefit low-income Americans. It is administered and partly financed by the states, which offer differing benefit levels.
Medicare is in more difficult financial condition than Social Security. A combination of the same fixes would have to be applied to achieve long-term stability.
Over the years leaders of both political parties, of many interest groups, and in many non-profit and academic institutions strove for a federal health-care program which would provide benefits to all Americans, of all ages. In the 1950s and early 1960s, many of those who had backed Medicare proposed a universal, "single-payer" federal program, which would be similar to those in the United Kingdom, Canada, and many other countries. There would be a government-run program that would, in effect, put everyone into a Medicare-like system. The labor movement supported the concept. It appeared in several Democratic national platforms. But such a program could not be enacted, even when Democrats held the White House and congressional majorities. There were financing problems. Medicare-level payments to health-care providers (i.e., doctors, hospitals, laboratories, etc.) were not covering the cost of the services rendered. Non-Medicare patients and insurance companies were paying higher fees to subsidize Medicare and Medicaid patients. If everyone shifted to a government-run program, therapies and procedures eligible for coverage either would have to be reduced or taxes would have to be raised sharply.
Some, including myself, proposed during the 1970s and 1980s that a start be made with public catastrophic coverage for all. The fear of calamitous accident or illness was strong among all citizens. Yet, it was true, more than half of all medical expenses were incurred by about 10 percent of the population. Why not create a public catastrophic, or major medical, program with a reasonable deductible to be borne by the patient? People would be secure from calamity. The hit to the federal budget would be comparatively small. But this concept, too, ran aground.
There were conceptual problems in trying to establish a federal system. Most Americans were conditioned to a doctor-patient relationship in which the two, together, would determine which therapies and procedures were appropriate. They did not want federal bureaucrats making decisions in their place. Nor did they want insurance bureacrats doing so. But at least you could argue with your insurance company.
The British, Canadian and other experiences, moreover, were that low-cost therapies for common ailments were routinely OKd by government administrators whereas high-cost therapies for rare, complex ailments sometimes were disallowed entirely. (My late wife, for example, died after a five-year battle with a blood cancer that would not have been eligible for treatment in the UK system. We found that, as a result, all the British specialists in her disease had moved to the United States). Proponents of a single-payer system often pooh-pooh these concerns. But they cannot be brushed away. Seattle-area physicians and hospitals can tell you of instances where better-income British Columbia patients come here for treatment because they cannot get it in their home province unless it involves lower-cost and possibly less effective treatment options.
So a mixed system evolved here, with senior citizens and the poor getting health coverage through Medicare and Medicaid; others being covered through private insurance (often employer-supplied); and still others, especially the young, opting to take their chances of going without coverage.
In 1994, then-first lady Hillary Clinton led a task force that developed a national health-care plan, which was complex and hard to understand. It would have been administered in large part through state-level bodies, which skeptics believed would be subject to political corruption. Little prior consultation was undertaken with congressional leaders of either political party. House Democratic leaders advised the Clinton White House to withdraw the legislation and any effort toward systemic reform was set aside — until President Barack Obama's 2009 effort.
The Obama proposal was not as complex as the original Clinton proposal. It did not involve a federal single-payer system or even a catastrophic-coverage starter system. It focused, instead, on what eventually came to be called only "health-insurance reform." President Obama was new to the White House and had only short prior U.S. Senate service. Rather than developing his health proposal internally, as prior presidents had done, he left its design largely to House Democratic chairs who had dealt in the past with health-care issues. He also diverged from the strategies employed by Presidents Roosevelt, Johnson, and GW Bush —and in the Congress by Sen. Ted Kennedy — in which they sought bipartisan and broad private-sector support for their health proposals.
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