What's blocking health care reform? - Cover Story

For all his decrying of the health care crisis, Pennsylvania Democrat Harris Wofford can say one good thing has come of it: It fueled his unexpected Senate victory over former Attorney General Richard Thornburgh last fall.

Early in the campaign, underdog Wofford discovered that voters were obsessed with the skyrocketing costs of health care, their difficulties in obtaining health insurance and Washington's seeming indifference to the problem. He devoted five television ads to health care, saying that "if criminals have a right to a lawyer," sick Americans should have the right to see a doctor.

Pennsylvania voters responded; post-election polls suggested that one of every three votes for Wofford was cast soley for his position on health care. Wofford campaign manager Paul Begala may have put it best: "This issue is strong enough to turn goat spit into gasoline."

Wofford's surprising victory over Thornburgh guarantees that health care reform will be a hot-button issue in this year's congressional and presidential elections. Opinion polls indicate that 90 percent of Americans believe the nation's health care system needs "fundamental change" or a "complete rebuilding."

In December, Wofford and three other Democratic senators -- Majority Leader George Mitchell of Maine, Jay Rockefeller of West Virginia and Bob Graham of Florida -- toured hospitals and held health care hearings in five states. On January 14 Democratic members of Congress held some 285 town meetings across the country focusing on the issue. Democratic presidential candidates are formulating their own proposals and talking up reform in stump speeches -- knowing that with 34.7 million people uninsured and health costs growing at twice the rate of the sluggish GNP, millions of Americans have concluded only government intervention can remedy the nation's ailing health care system.

For much of the past year reform proposals -- calling for everything from minor treatment to major surgery -- have been pouring out of medical associations, insurance companies, labor unions, businesses, grassroots organizations and ad hoc coalitions. Even the American Medical Association (AMA), which has used money and hardball politics to fight government-sponsored health care programs since the early part of this century, has its own limited prescription for universal coverage. Dozens of reform bills are pending in Congress.

But whether electioneering and political rhetoric will translate into concrete action is another question. Given the obvious need for change, who or what is standing in the way?

For starters, Democrats point to the White House, where President George Bush and his advisers have met repeatedly with industry leaders since Wofford's win. In December, after two-and-a-half years of study, an administration advisory panel rejected calls for a systemic overhaul and instead suggested only limited reforms, including an emphasis on "healthier lifestyles." Panel chair Deborah Steelman, a key Bush adviser on health care issues, is a lobbyist who represents the Pharmaceutical Manufacturers Assocsiation, Aetna Life & Casualty and other companies that oppose broad reforms.

Bush laid out his opposition to major change in his January 28 State of the Union message, proposing only a tax credit for low-income individuals who buy health insurance and promising more details in February. After a last-minute rebellion by congressional Republicans, the administration stopped the presses and stripped further, though modest, proposals -- including taxing wealthy Americans' employer-provided health benefits as income -- from its 1993 budget request presented the day after the president's message.

Congress has not done much better. Many Democrats want comprehensive reform but can't agree on what kind. A Senate Republican task force, after months of caucusing, produced a proposal that leaves the current system essentially intact, and a group of House Republicans met weekly for more than six months without introducing a bill.

Meanwhile, doctors blame lawyers and the government for the current mess. Health care purchasers point to insurance companies that cover only the healthy, while insurers single out greedy doctors and hospitals and unrealistic consumers. Outside analysts frame the problem as a lack of consensus; public interest groups define it as a lack of political courage; and everybody talks about how complicated the issue is.

For all this finger-pointing, few in Washington are willing to blame what may be the biggest culprit of all: the political influence of special interest groups with a vested interest in the status quo. The same insurance companies, doctors, hospitals and drug manufacturers that live off the $700 billion-a-year health care industry are battling comprehensive reform on Capitol Hill and at the White House.

"If the elected officials listen to the public, there are some pretty clear messages," says Stephen McConnell, senior vice president of the Alzheimer's Association. "But if they listen to the organized lobbyists," he adds, "it's a stalemate."

"The people with stakes in the issue who have the most to lose are very well organized, very vocal and very well-heeled," says a high-ranking congressional aide.

WHAT REALLY AILS US

Throwing money at the process are more than 200 political action committees -- representing everything from the legendary AMA to the obscure Philippine Physicians in America, from the pharmaceutical giant Pfizer to something called the Health Care Committee for Political Responsibility. Together these medical, pharmaceutical and insurance industry PACs contributed more than $60 million to congressional candidates between 1980 and the first half of 1991. PAC contributions from the health care industry have increased far more than gifts from most other special interests: 140 percent over the last decade, compared with 90 percent for all PACs.

Almost half the contributions from the health industry to current members of Congress came from physicians, dentists, nurses and other health professionals; health insurance companies contributed nearly one-third of the total; and the remainder came from pharmaceutical companies, hospitals, nursing homes and other health care providers. The money was carefully targeted: More than $18 million -- or 42 percent -- of the contributions went to members of the four congressional committees that have jurisdiction over health-related legislation.

The top recipients of health-related PAC money all hold powerful committee positions: Rep. Pete Stark (D-Calif.), who receives contributions from almost every health-related PAC except the AMA's, is chair of the Ways and Means health subcommittee. Sen. David Durenberger (R-Minn.), a favorite of the hospital lobby, is the ranking Republican on the Senate's Medicare subcommittee. The campaign coffers of Senate Finance Committee Chair Lloyd Bentsen (D-Texas) are brimming with insurance-industry money; doctors and insurance companies are heavy contributors to Sen. Max Baucus (D-Mont.), a high-ranking member of the Finance Committee; and the AMA and other medical associations give generously to Rep. Henry Waxman (D-Calif.), chair of the Energy and Commerce health subcommittee. (Both Stark and Waxman have introduced comprehensive reform bills, while Bentsen has sponsored a more limited approach.)

Twelve of the 21 senators who received more than $200,000 from medical industry PACs serve on the Finance Committee, which has jurisdiction over Medicare and other health-related matters, as well as tax policy. All of the top 25 House recipients of medical industry PAC money serve in House leadership positions or on the key Ways and Means or Energy and Commerce committees.

Some industry players also distribute so-called "soft money" to the Republican and Democratic parties. In 1991 -- the first year the Federal Election Commission (FEC) required disclosure of soft money contributions -- Aetna, Warner-Lambert, Chubb, the American Dental Association's PAC and the Humana hospital chain each gave $20,000 to the GOP; Blue Cross and Blue Shield gave $29,000 to the Republicans and almost $17,000 to the Democrats; Upjohn gave $25,500 to the Democrats and $23,000 to the GOP; and the pharmaceutical company Glaxo gave $50,000 to the Democrats.

All that medical industry money hasn't bought better health care -- but that's not what it's for. What it has bought is access in Washington for physicians, hospitals and insurance and pharmaceutical interests, along with inaction on the issue of health care reform.

"We spend our money on those members ... most interested in maintaining the current system," says Tom Goodwin, public affairs director of the Federation of American Health Systems. The federation, which represents some 1,400 for-profit hospitals, has contributed $934,709 to congressional campaigns since 1980, making it the 11th-biggest giver among health-related PACs.

Like other PACs, those in the medical industry exist to protect their own interests. Consider the primary mission of foot doctors: to make sure that "whatever does transpire, there will be parity and equity for doctors of podiatry," says John Carson, director of governmental affairs for the American Podiatric Medical Association, which has contributed more than $1.1 million to congressional campaigns since 1980. "The PAC has helped us tremendously," Carson says. "I would hate to have been without it for the past almost 20 years."

Or take ophthalmologists, whose primary interests include increased Medicare coverage of cataract surgery and beating back the efforts of optometrists -- who also have a very active PAC -- to "encroach into their bailiwick." While ophthalmologists make up only 3 percent of the nation's physicians, they are "a very vocal group," acknowledges Cynthia Moran, director of government relations for the American Academy of Ophthalmology. The fourth-largest giver, the academy's PAC has contributed more than $1.9 million to congressional candidates since 1980.

The stream of health-related PAC money into Washington has swelled at a time when U.S. spending on health care has shot past other economic indicators. Health care spending now accounts for 13 percent of the country's GNP -- the highest proportion in the world -- and it will consume 37 percent by the year 2030 if costs continue to increase at their current rate, according to Richard Darman, director of the Office of Management and Budget.

The average cost of corporate helath plans rose 85 percent between 1985 and 1990. Most companies passed along some of the expense to their employees in the form of higher insurance co-payments and deductibles. Health care costs have also raised the prices of American-made products. Chrysler says that some $600 of the cost of every car it makes in the United States goes into the nation's health care system. The comparable amount in Germany is $337 and in Japan, $246 -- one reason why American auto manufacturers support comprehensive change.

Washington has done little over the years to contain health care costs -- at least in part, many believe, because of the PAC contributions that have bought political access for physicians, hospitals and insurance and pharmaceutical firms. "The monied interests have caused gridlock," says Dr. Robert Berenson, a Washington, D.C., physician who served on President Jimmy Carter's domestic policy staff.

Insurance companies represent one huge obstacle. "They are actually against doing anything, because they realize that any kind of reform is going to involve some federal regulation of the insurance industry," says Robert Blendon, chair of the department of health policy and management at the Harvard University School of Public Health.

Most Americans dislike insurance companies, but few politicians are willing to take the industry on. Insurance PACs have contributed $19 million to congressional candidates since 1980, and seven of the top 20 medical industry PACs are affiliated with insurance companies or associations. The National Association of Life Underwriters ranks second, with $5.5 million in contributions to congressional races since 1980. The group's counsel, David Herbert, says candidates who support comprehensive reform are less likely to get its PAC dollars.

Insurance companies such as Prudential, Metropolitan and Travelers, along with the small-business community and a number of health care providers, helped launch a powerful anti-reform coalition in October, the Healthcare Equity Action League, or HEAL. "We are willing to support ... incremental, market-oriented changes" that leave the current system essentially intact, says John Motley, co-chair of HEAL's legislative committee and a lobbyist with the National Federation of Independent Business. In an effort to influence the "public relations game," Motley says, HEAL sent advance teams to meet with reporters in the cities where Mitchell and other Democrats held hearings in December.

Some observers doubt whether public opinion is forceful or cohesive enough to overcome the money, connections and political savvy of these groups. "There are a lot of interests at risk," says a staff member of the House Energy and Commerce Committee. "Without some clear political constituency that politicians can see and hear and touch and feel" -- the kind that materialized for Wofford's campaign -- "it's going to be very hard for them to say they have a clear mandate to move forward on reform."

HOUSE CALLS

Health care reform has never fared well politically in the United States, and for most of the 20th century there has been one enduring reason: the intractable opposition of the AMA. By the 1920s nearly all western European countries had some form of national health insurance, but when President Calvin Coolidge called for massive increases in federal spending on health care -- which then represented 3 percent of the GNP -- the AMA spearheaded opposition to the plan, calling it a "socialist" and "German" invention.

AMA resistance persuaded Franklin Roosevelt to leave health care out of the New Deal, and when President Harry Truman promoted a plan for national health insurance, AMA members wrote him angry letters on pink paper labeling the plan a "communist plot." The organization spent a phenomenal $1.3 million in nine months--$7.1 million in today's dollars -- to defeat Truman's plan.

John Kennedy made federally guaranteed health care for older Americans a key element of his 1960 presidential campaign platform. But even Medicare, a boon for tens of millions of the elderly -- not to mention doctors and hospitals -- was entacted over the strident opposition of the AMA. Calling it "socialized medicine," the AMA enlisted a Hollywood actor named Ronald Reagan to help block the program on Capitol Hill. "If you and I don't stop" Medicare, Reagan warned on a phonograph. graph record the AMA sent to doctors' wives, "we'll spend our sunset years telling our children and children's children what it was like in America when men were free."

The passage of Medicare and Medicaid were the last significant government actions to help large numbers of Americans gain access to affordable health care. In the 1970s, politics and intergroup opposition defeated numerous initiatives for further reform, and for the Reagan administration health care reform wasn't even a blip on the screen.

Meanwhile the AMA and its state affiliates' PACs have contributed more than $11.9 million to congressional campaigns since 1980 -- along with some $3 million in "independent expenditures" made on behalf of certain candidates. That's more than double the amount of contributions made by any other health-related PAC.

And political participation by physicians extends beyond the AMA PAC; FEC records indicate that individuals identifying themselves as doctors made at least $7.48 million in direct contributions to congressional races from 1981 through 1990.

Has all this physician involvement in the political process made a difference? "Let's face it," says Princeton University political economist Uwe Reinhardt, when it comes to influencing politicians in Washington, "what the head of the AMA thinks in the shower in the morning is so much more important than the aspirations of 10 million Americans."

Still, times have changed even for the powerful, anti-government AMA. The group issued its own health care reform proposal in March 1990. "The doctors have been very smart on this," says Harvard's Blendon. "After 50 years of saying 'do nothing,' they come out and say they're for universal coverage." By plunging into the debate with its own proposal, the AMA has "positioned itself to play a big role," he adds.

But there's a catch: The AMA wants to make sure Congress protects doctors from malpractice suits and doesn't hit them with cost controls, and its proposal reflects those concerns. Likewise, reform proposals pushed by insurance companies, hospitals, drug manufacturers and other interest groups emphasize their varying and self-serving priorities.

BAND-AIDS OR SURGERY?

Nowhere is the lack of consensus more pronounced than in the nation's capital, where the high-stakes battle to determine the nature of reform has begun in earnest. Neither the Democrats nor the Republicans have been able to agree among themselves -- much less, with each other -- on what course to take.

House Speaker Tom Foley (D-Wash.) opened three days of Ways and Means Committee hearings on health care reform in October warning that "many interest groups will have to hold the good of the whole above their own." Committee members then spent most of two-and-a-half days listening to pitches from such vested interests as the insurance industry, hospitals and various medical professions.

For all their differences, most reform bills fall into one of three major categories. The most limited approach seeks to make health insurance more affordable. In an effort to help small businesses and the self-employed buy insurance, supporters propose tax breaks and limited regulation of insurance premiums.

A second approach would expand the nation's current employment-based health insurance system. Employers would be required to either "pay" the government to enroll their employees in a new public health program or "play" by providing their employees with a minimum package of private health insurance benefits. The third, most far-reaching, group of proposals would create a public, government-financed health insurance program that would cover every American.

In the first category, Sen. Bentsen and Rep. Dan Rostenkowski (D-Ill.) -- heads of the Senate and House tax-writing committees -- have sponsored legislation that would make a standard benefits package available to all small-business employees, control premiums for small-group plans and prohibit insurance companies from denying coverage to employees with "preexisting conditions." Their proposals would also allow self-employed persons to deduct all health insurance costs from their income taxes. Rostenkowski says he hopes these limited reforms would meet the health care needs of many Americans until more comprehensive reform is passed -- something he believes is a long way off.

Senate Republicans offered a similar proposal after Democrat Wofford's upset victory. Sen. John Chafee (RR.I.) introduced legislation that would provide health insurance tax credits for some; more affordable premiums for small businesses; malpractice law reform; increased funding for community health centers; and greater reliance on "managed care" health programs that limit such things as doctor visits.

The "pay-or-play" reform model is embodied in the "Health America" plan introduced by Democratic Sens. Mitchell, Edward Kennedy (Mass.), Rockefeller and Donald Riegle (Mich.), and in House bills authored by Reps. Waxman and Rostenkowski.

This approach expands on the current system, which already provides some health insurance to 83 percent of all Americans under age 65. Tax incentives and insurance reforms for small businesses, along with an expanded government medical program to replace Medicaid, would provide insurance for persons not covered through the workplace. Because a pay-or-play plan would keep intact much of the current system, supporters believe it might survive politically. For those who seek more sweeping reform, pay-or-play is a good first step, they say.

Others believe that nothing short of a radical overhaul will do. They support a "single-payer" program similar to the national health care system in Canada. There citizens choose their own doctors and receive care in private clinics and hospitals, but the government imposes strict cost controls and functions as the nation's insurance company, reimbursing doctors, hospitals and other health care providers for their services.

The single-payer proposal introduced by Rep. Marty Russo (D-Ill.) has garnered more cosponsors than any other reform bill. Democratic Sen. Paul Wellstone (Minn.) and Reps. Stark, Mary Rose Oakar (Ohio), John Dingell (Mich.) and Sam Gibbons (Fla.) have also introduced single-payer bills, and presidential candidate Sen. Bob Kerrey (D-Neb.) has proposed a variation of the single-payer system.

NO EASY CURE

Of course, health care reform won't come cheap. Even the limited proposals offered by Bentsen and Rostenkowski carry estimated price tags of $10 billion over five years. For the more sweeping reform proposals, there are widely varying cost estimates -- and while sponsors prescribe different methods for paying for universal coverage, almost all would require tax hikes of some kind.

Financing a single-payer system would be the most costly, in a direct sense, for the government and would require increases in corporate and personal income taxes. But supporters say the taxes would replace insurance premiums as well as a host of indirect costs that employers and employees now pay. In a Gallup poll conducted last July for the Employee Benefits Research Institute, roughly half of those questioned said they would be willing to pay more in taxes for guaranteed health coverage.

The GAO estimates that a single-payer system would save $67 billion in administrative costs -- which, according to the agency, consumed 12 cents of every health insurance dollar in 1987. A study by the American Federation of State, County and Municipal Employees (AFSCME), Public Citizen and Physicians for a National Health Program concluded that a single-payer system would save state and local governments -- whose budgets are being crippled by increasing health costs -- up to $30 billion a year.

A key sticking point is how to control health care costs. Limited reform proposals would merely control access to health care services. More direct cost-control provisions range from the Kennedy-Mitchell bill's recommended spending targets to the strict health care budgeting contained in Rostenkowski's pay-or-play proposal and Russo's single-payer plan.

Naturally, doctors and hospital administrators strongly oppose efforts to regulate their fees. "We would have problems with any reform based on global budgeting and mandatory cost controls," says Richard Davidson, president of the American Hospital Association (AHA). The AHA, which represents some 5,500 not-for-profit hospital, reinforces its position with six well-connected lobbyists as well as PAC contributions -- nearly $1.8 million to congressional races since 1980.

The Federation of American Health Systems -- the for-profit hospital people -- is also worried about cost controls, "even if they're voluntary," says public affairs director Tom Goodwin. "The bottom line is rate-setting for hospitals. They anathema, and we will oppose them as vigorously as we possibly can."

Russo's more far-reaching, single-payer proposal -- which calls for strict cost controls -- has been endorsed by numerous liberal organizations and labor unions. But few believe such a comprehensive reform proposal can withstand interest-group opposition.

BITTER MEDICINE

Significant movement on the issue would require overcoming the insurance companies and small businesses that oppose all but the mildest reform proposals. A single-payer system would do away with the need for most private health insurance, and insurance executives worry that a pay-or-play system would give employers more incentive to pay into the public program than to provide their employees with private insurance. "We oppose that strenuously, and are working to see that it is not enacted," says David Hebert of the National Association of Life Underwriters.

The Health Insurance Association of America (HIAA), which represents 300 commercial insurance companies that cover some 95 million Americans, "strongly opposes" both pay-or-play and single-payer proposals, says spokesperson Donald White.

To strengthen its hand against federal action, HIAA plans to spend at least $4 million on lobbying, public relations and legal work in 15 "target states." What HIAA does support are "bare-bones" policies for small businesses, provisions that allow workers to keep their insurance when changing jobs and curbs on the denial of coverage due to preexisting conditions.

The wealth and power of the insurance industry are hard to overstate. "The health insurance industry . . . has tons of money and they love to spend it to get their way on Capitol Hill," says Public Citizen spokesperson Robert Dreyfuss. "In this case they're fighting for their lives." Last fall, congressional aides say, insurance companies and trade associations were doing more lobbying than any of the other interest groups.

In addition to the National Association of Life Underwriters, top insurance interests with PACs include the American Family Corp., Travelers, Prudential, Metropolitan Life, Torchmark Corp., CIGNA, HIAA, and Blue Cross and Blue Shield. Sen. Bentsen is one of the top recipients of insurance-industry money, and his bill has been endorsed by many in the industry, as well as other members of the anti-reform coalition HEAL.

Small business also wields big clout. With premiums 25 percent to 40 percent higher than those for larger firms, the cost of health insurance is the "No. 1 problem" of some 500,000 small-business owners, according to the National Federation of Independent Business (NFIB). As a result, many don't provide coverage and don't want to be forced to. They favor tax breaks and lower premiums such as those contained in the more limited reform proposals.

The wealthy pharmaceutical companies have so far been relatively quiet. But should a viable reform plan include coverage and cost controls on prescription drugs, "the drug companies will go crazy" and deploy their lobbyists to defeat it, warns Harvard's Blendon.

That leaves the AMA at the forefront, where doctors will retain their traditional activist role. "You underestimate the AMA's influence at your peril. They have truly awesome power," says AMA member Dr. Quentin Young, a Chicago physician who heads the 4,000-member Physicians for a National Health Program. It supports a Canadian-style, single-payer system.

Referring to the influence of the AMA PAC, spokesperson James Stacey says modestly, "We support a large number of congressional candidates. We don't expect that we are buying their minds, their hearts or anything else. Yet we hope that we will have some access to them. The bigger issue is to get physicians involved in the political process."

PROGNOSIS DOUBTFUL

In the absence of federal action, several states, overwhelmed by skyrocketing Medicaid costs, have undertaken their own health care reform programs. Through a combination of mandated employer-provided coverage, insurance reforms, Medicare and Medicaid, Hawaii provides basic coverage for virtually all its residents at premium rates roughly 50 percent lower than those in California. Massachusetts and Oregon have passed, but not yet implemented, pay-or-play programs, and single-payer legislation is being considered in Michigan, California and other states. On the other hand, cash-strapped Maryland

recently stopped paying hospital bills for some 29,000 of its poorest residents.

Many would like to see comprehensive reform efforts confined to the state level -- at least for now. The administration's advisory panel recommended a federal outlay of $3 billion for state-level experiments. But others say that's not enough.

"A Band-Aid approach won't stop the hemorrhanging of the system," says John Ball, executive vice president of the American College of Physicians.

Backers of major reform have organized grassroots campaigns and formed coalitions, with strategies that range from public relations and street-smart politics to policy analysis. In New Hampshire 180 organizations sponsored a media and advertising campaign designed to force all presidential candidates to deal with the issue.

In November the National Leadership Coalition on Health Care Reform proposed a variation on the pay-or-play theme that has won endorsements from a couple of dozen corporations, unions and associations, including Chrysler and the United Steelworkers, and former presidents Jimmy Carter and Gerald Ford.

During this key election year, grassroots activity is likely to intensify as the health insurance dilemma worsens for individuals and families of all income levels. A new Public Citizen study shows that the number of Americans without insurance increased by 1.3 million between 1989 and 1990, with 74 percent of the new uninsured earning more than $25,000 a year. With the economy mired in recession and large-scale layoffs a daily occurrence, workers increasingly worry as much about losing their health benefits as their paychecks.

All of this misery may force Congress to enact some type of reform soon. "The issue of the uninsured is not enough to move the process," says one congressional aide. "But as the problem becomes worse for the middle class, for working people and people who vote, people will begin to say that this is not acceptable."

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