Budget BluesAuthor(s): Joseph WhiteSource: PS: Political Science and Politics, Vol. 27, No. 2 (Jun., 1994), pp. 214-217Published by: American Political Science AssociationStable URL: http://www.jstor.org/stable/420273 .

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National Health Care Reform

Kennedy's 1960 Presidential Campaign." American Political Science Review (Sep- tember).

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Jacobs, Lawrence, Robert Shapiro, Eli Schulman. 1993. "Poll Trends: Medical Care in the United States-An Update." Public Opinion Quarterly 57 (Fall):394- 427.

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About the Authors Lawrence R. Jacobs is associate professor of political science at the University of Minne- sota and is author of The Health of Nations: Public Opinion and the Making of American and British Health Policy (Cornell 1993). Robert Y. Shapiro is associate professor of political science at Columbia University, coauthor of The Rational Public: Fifty Years of Trends in America 's Policy Preferences (Chicago 1992) and coeditor of Research in Micropolitics: New Directions in Political Psychology. Vol. 4 (JAI 1994). Jacobs and Shapiro are currently working on a book about presidents' relationship with public opinion since John F. Kennedy's adminis- tration.

Budget Blues

Joseph White, The Brookings Institution

Budget politics has always been an obstacle to adopting national health insurance. The questions of budget politics-the risk or size of deficits and the size of govern- ment-have a conservative effect. In any country, very few people would endorse deficits for their own sake. In America, support for larger government on principle, dis- placing the market, has rarely had close to majority support and has surely been diminishing. Defining social policy expansion as a budget issue is a standard tactic for per- sons opposed to the policy.

The events of the 1980s have in many ways made budget politics more of an obstacle to sensible health care reform-which I define as reform that insures all Ameri- cans, yet keeps this country from opening an even wider lead on the

international field in the race to spend on health care.

During the 1960s a portion of elites such as economists, the press, and politicians would at least defend deficits in principle under some circumstances. Misinterpreta- tion of the events of the 1970s, ex- aggerated arguments by economists who think that hyperbole is re- quired in the political arena, the possibility that the 1980s deficits favored Republican constituencies, the fact that a Republican president was in office for those deficits, and the unprecedented scale of the defi- cit in full-employment terms during peacetime, combined in the 1980s to commit Democratic politicians, economists, and opinion leaders to at least the rhetoric of deficit-re- duction. President Clinton has con- tinued the process.1

"Paygo" and Its Impact These developments affected

both political values and structure. Persons who might previously not have worried much about the defi- cit either feel compelled to say they do, or actually do worry. A great deal of evidence indicates that the chairman of the Senate Finance Committee is sincere; in practice we only need to know that he acts as if he is concerned. Yet even if he were not, Senator Moynihan faces an institutional constraint, created as part of the budget pro- cess: the "paygo" points of order.

The Congressional budget pro- cess includes a wide range of rules to inhibit legislation that would in- crease the deficit. The most impor- tant says if a proposal to increase entitlement spending or decrease revenues is not accompanied by

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Budget Blues

offsetting spending cuts and/or rev- enue increases, then it is out of or- der in both chambers. Program ex- pansions are only allowed if Congress pays as it goes, in the same legislation. The House can waive these rules by majority vote or in a special rule. In the Senate they can only be waived by an ex- traordinary majority of 60 senators.

Paygo means that if the Congres- sional Budget Office says a pro- posal would raise the deficit in any year, senators can obstruct it with- out paying the political costs of a filibuster. Opponents of reform might have trouble defending a fili- buster that kept Congress from even considering legislation to ad- dress an enormous national issue. They would have no difficulty justi- fying a vote to support Congress's own rules against the sin of in- creasing the deficit. The burden of proof is against a filibuster, but for enforcement of the paygo rule.

That is why CBO's assessment of the costs ("scoring") of the Clinton plan and other plans is so important. There is little chance of finding 60 Senate votes for serious reform. But there might be 60 for considering reform, and 50 (plus Vice President Gore) for passing it. There will not be 60 votes for breaking the rules and increasing the deficit to do reform.

Proposals therefore have to be financed in a way that CBO will approve. That is not all bad news for the left. CBO's analysts do not much believe in the cost-saving claims for managed competition (this has a lot to do with the evi- dence). They give more but hardly complete credence to the claims for single-payer models (for the same reason). CBO's judgment may have determined the internal administra- tion debates between two factions: those who believed in managed competition mostly, and those who did not believe in it much. The former group could not avoid a pre- mium cap, because everybody knew CBO would not accept much in the way of savings claims with- out it.

Any proposal faced the same constraint. Many of the sponsors of the Cooper-Grandy bill appear to really want to cover everybody,

but they could not promise to do so without a hoot from CBO. Cooper- Grandy therefore had no schedule for universal coverage. Both the Cooper-Grandy and Chafee bills also had no benefits packages, at least in part for a related reason: in order to pass CBO muster, given the cost controls and revenues pro- vided, they would have had to ad- mit covering much less than Clinton or McDermott-Wellstone. The paygo rule has shaped the op- erating structures and promises of the plans presented.

Paygo means that if the Congressional Budget Office says a proposal would raise the deficit in any year, senators can obstruct it without paying the political costs of a filibuster.

The rules slightly favor support- ers of something closer to the inter- national standard of cost control. They do not really favor reform. The system may well prefer to give up universal coverage rather than adopt those cost controls: it is eas- ier to expand programs first and correct errors in the cost controls later. If you care more about uni- versal coverage than controlling costs, you would do better without procedures in which formal esti- mates are enforced by requiring supermajorities to ignore them.

Estimates and the Argument for Delay

Of course, the estimates could be wrong. That estimates are always wrong, and in the wrong direction, is close to being conventional wis- dom. The classic examples are costs for Medicare as compared to the forecasts at time of enactment and the deficit effects of Reagan's 1981 proposals. Naturally opinion

leaders and politicians are skepti- cal, mainly sincerely, of budget estimates for a large health care reform.

In fact, estimates are not always wrong: estimates of savings from the Medicare cost controls of the 1980s have been fairly accurate. And the Reagan example is decep- tive: Senate Republican leaders and Stockman knew they were wrong, yet went ahead anyway. Yet the risk is real, and even people who might be expected to support the goals of reform feel compelled to occasionally remind us that esti- mates could be too optimistic. Un- fortunately, those reminders set a standard that cannot be met. Only life can prove (or disprove) predic- tions. Emphasizing that estimates might be too optimistic inherently favors the status quo.

More precisely, emphasis on un- certainty favors arguments that re- form cannot be done all at once: we must earn the savings first. The Chafee bill thus claimed to have a plan to phase in subsidies for per- sons of lower incomes as savings were realized from cuts in Medi- care and other measures. Alas, it is hard to write a plausible rule for phasing in the increases. Chafee failed. The bill set fixed targets, and if federal spending was no more than those targets, subsidies could be put into effect. The good news was, if general inflation and growth were lower than expected, those targets might be met without the projected specific savings from health care; the bad news was, if they were higher than expected, the targets might be missed even with the savings.

Even if one could devise a sensi- ble way to condition increases on prior savings, it is a bad idea. Peo- ple who do not have good coverage tend, if they do get care, to depend on more expensive providers (as hospital charity cases, rather than as insured patients in physician of- fices). Many cost controls work better with universal coverage. If the two were antithetical, the United States would not have both less coverage and higher costs than all other advanced nations. Yet it is possible to reduce costs without increasing access: most evidently,

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National Health Care Reform

by abolishing insurance! Thus argu- ments that cost control requires universal coverage will not win over persons who do not care about the latter.

Put bluntly, the political opportu- nity for universal coverage is based on fear among the currently insured and their employers. The former fear the latter will reduce coverage because of rising costs; the latter fear they will not be able to do so-and on average probably do not want to. If costs are controlled before covering the uninsured, fur- ther expansion would depend on those who already have and are paying for coverage agreeing to pay more without gaining much. Don't bet on it. Politically, cost control and coverage expansion happen together or not at all.

Defenders of the status quo claim reform is not necessary because the uninsured receive charity care when urgent. But cost control means lower provider incomes, so both logic and experience (for ex- ample with the effects of managed care in California) tell us that char- ity care would decline in proportion to cost control's success. Thus budget pressures for "cost control first" threaten reform that would hurt the uninsured, whatever its claims.

Getting the Long Run Right Given the power of budget poli-

tics, it should be no surprise that supporters of reform have tried to turn it to their advantage. They have good arguments. Forecasts that the deficit will begin to grow late in this decade are based en- tirely on projected increases in fed- eral health care programs. But the real right wing can say the solution is to cut those programs, not to create a new one.

Total costs for health care are best controlled in a universal sys- tem, and federal spending might best be limited in that context. But whether reform in fact would slow the projected growth of federal debt depends entirely on the legis- lation: the benefit package, new revenues, and cost controls.

National health insurance sys-

tems by no means guarantee lower spending by the government or anyone else. But whether a na- tional guarantee works by regulated insurers (Germany and France), government insurance (Canada), direct provision of care (the United Kingdom, more or less) or a mix (Australia), the system allows na- tions to choose their expenses. Having a national policy ensures neither cost control nor adequate finance of the costs incurred. But it makes both possible, as our current arrangements evidently have not. That is why countries whose costs rose about as quickly as America's in the 1970s were able to slow the increases dramatically, relative to ours, in the 1980s.

Politically, cost control and coverage expansion happen together or not at all.

In short, the claim that health care reform can reduce the differ- ence between the growth of federal health spending and of federal reve- nues is correct-but that means it has to be done right. And that re- turns the argument to support for or opposition to specific mea- sures.

In this context, budget politics is important not because of how it constrains health care reform, but because of what it teaches us about its policy and politics. Some key parallels between budget and health care policy and politics are rarely noted, perhaps due to misunder- standings of the budget dispute.

From the perspective of the cur- rent conventional economic wis- dom (whatever that is worth), the benefits of deficit reduction and health care reform are very similar. Mainline economists argue the defi- cit must be reduced in order to in- crease national savings, and thereby increase investment at the expense of consumption, so the economy will grow more quickly. The economic argument for health care cost control is parallel: re-

sources are being used for con- sumption, and if corporations (es- pecially) had lower costs, they could invest more. From an eco- nomic perspective, the costs of change are also similar: short-term pain from cutting income or jobs held by those who lose in the tran- sition.

Thus health care reform can be seen not only as a means to deficit reduction, but as an alternate means to the same end: a transfer of resources towards uses that are more likely to increase productivity (especially the productivity relevant to international competition).2 But all the benefits of deficit-reduction are long-term and dubious: in es- sence, whatever economic growth emerges, down the road, from the amount of more productive invest- ment that occurs. Health care re- form actually offers short-term ben- efits to a large proportion of Americans-done right, to a sizable majority. Even if it did not reduce the deficit itself, health care reform may offer a superior way to achieve the economic ends for which deficit reduction is said to be a means.

Budget hawks have argued for years that the whole country should sacrifice to control the defi- cit. Yet only packages that clearly target some minority pass, because no one wants to pay their "fair" share.3 In 1981 the working poor took the hit; businesses and hospi- tals in 1982, financial firms in 1984, the military in the post-1985 period, and the wealthy in 1990 and 1993. Each time there was at least an overtone of justificatory stigmatiza- tion of the victim. More "bal- anced" packages (like the 1990 summit) failed because both left and right were opposed.

The odds for passing real na- tional health insurance are not good. But if deficit politics teaches anything, it is not just that the ma- jority must feel like winners, but that they are more likely to believe it if they can see who the loser is, and if the loser is easy to justify.

My readers are students of poli- tics. Draw your own conclusions.

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Notes 1. For the long version of the story, see

Joseph White and Aaron Wildavsky, The Deficit and the Public Interest: The Search for Responsible Budgeting in the 1980s (Berkeley: University of California Press, 1991). For a focus on economic theory and the Clinton administration, see James D. Savage, "Deficits and the Economy: The Case of the Clinton Administration and In- terest Rates", Public Budgeting & Finance Vol. 14, No. 1 (Special Symposium, spring 1994).

2. By definition, if Ford reduces its labor costs by reducing its health care expenses per worker, its productivity per dollar of labor expense improves, as does the market- ability of its vehicles against foreign compe- tition. This is the general version of the do- mestic automakers' argument that they are handicapped by their health care expenses.

3. Since the benefits are long-term and dubious and costs short-term and obvious, anyone who pays a fair share thinks that is a bad deal.

About the Author Joseph White is a research associate at the Brookings Institution in the Governmental Studies Program. He is author of Competing Solutions: American Health Care Proposals and International Experience (Brookings, forthcoming).

Federalism and Health Care

Federalism and Health Care

Virginia Gray, University of Minnesota

Among the many issues in the na- tional health care debate is the role of the states. Some have asked whether the states can tackle health care on their own and have an- swered with a resounding "no." Deborah Stone (1992), for example, argues that health care is too big a challenge for the states to handle: they lack sufficient autonomy from the federal government in certain areas and sufficient power over pri- vate interests in others.

But apparently, states are unde- terred by such thinking. In the early 1990s, three states-Minne- sota, Washington, and Florida- passed comprehensive bills incor- porating elements of managed competition. Massachusetts, Ore- gon, and Vermont had already en- acted (but not implemented) major reforms based upon different phi- losophies. And Hawaii led the way in 1974 with its enactment of an employer mandate.

Today, reform activity is every- where. In 1993, 1,850 health care reform proposals were introduced in state legislatures; this year virtu- ally every governor is working on some health care initiative. Even Lowell Weicker, Jr., governor of Connecticut, home to the nation's largest insurance companies, has announced his intention to provide universal coverage by 1997. The states are definitely not waiting around to see what the feds will do.

By waiting until 1993 to mount a serious effort at national reform, the feds have vastly complicated the strategic calculations involved in passage. Not only are they at- tempting reform after powerful pri- vate interests have mobilized, they have waited until public interests have become vested in the out- come. Vermont wants assurance that it can consider the single-payer option; Governor Mario Cuomo warns that New York public em- ployees will lose existing health benefits; Hawaii wants to keep its system, which has worked well for 20 years. Each state that has en- dured the agony of reform will try to defend its legislation.

But every state, whether an inno- vator or not, has a vested interest in the outcome of the health care battle. Clinton's plan affects states very differently because they are so varied in their health care situa- tions. For example, the states vary from 8% to 25% in the proportion of uninsured workers. This means that the employer mandate would hit harder in some states than in others (i.e., hardest in the South), but Clinton's subsidies would offset that, so much so that members of Congress from the Northeast and Midwest are the ones complaining about redistributional effects (Greenhouse 1993, E5). States' in- terests vastly complicate achieving passage of a national program.

Given these considerations, let's examine three possible outcomes of the congressional battle over the Clinton plan.

Can the States Go It Alone? The first outcome is for the fed-

eral government to do nothing and let the states continue to handle the problem. This scenario would oc- cur if Congress deadlocked and did not pass any of the comprehensive proposals currently before it. The pressures on states are already so intense that almost certainly more states would create their own health care systems if Congress does nothing. But who adopts and what they adopt depends on the pattern of the diffusion process- who emulates whom.

For 20 years no state has chosen to imitate Hawaii's program requir- ing employers to provide insurance for all nonunionized workers. By all accounts, it has been a success- ful program, though various gaps in coverage and rising costs drove Hawaii to adopt further measures in recent years. Interestingly, in 1974 Hawaiian leaders did not ex- pect to take this bold step alone; they thought the federal govern- ment was about to pass a national program (Neubauer 1992, 156).

In 1992-93 Washington, Minne- sota, and Florida enacted and be-

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