Hillary was Right


More than a dozen years later, Hillary Clinton wants the world to
know that she has seen the error of her ways. That health care
plan--the one that was supposed to revolutionize the medical
industry and guarantee every American insurance--wasn't such a hot
idea after all. "I think that both the process and the plan were
flawed," Clinton admitted in an interview with The New York Times,
demonstrating a level of contrition more fitting for an Iraq war
architect. "We were trying to do something that was very hard to do,
and we made a lot of mistakes."A lot of people will hear that and nod in agreement. With health
care reform emerging as a top issue for the 2008 presidential
campaign, probably no politician is more identified with botching
it than Senator Clinton. Across the political spectrum,
"Hillarycare" has become shorthand for policy overreach and
liberalism run amok. "It was too big, too complex, too government,"
former House Speaker Newt Gingrich recently said. Democrats have
been critical, too: "It was probably too dogmatic," Tony Coelho,
the strategist and former representative, told National Journal. It
"had to be X, Y, and Z." Given Hillary's enormous role in shaping
that plan, as an adviser to her husband and leader of his infamous
1993 health care task force, trying to defend it today might well
amount to campaign suicide. That, undoubtedly, helps explain why
Clinton has joined the critics, sticking it to herself not only
during interviews but also at public events, such as a gathering of
the American Medical Association last year. "Let's retire the old
debates," she said to her one-time adversaries. "They haven't
served our country well."

And maybe she has a point. After all, there's a pretty good case to
be made that the Clinton administration as a whole--and Senator
Clinton in particular-- did make some egregious strategic errors,
particularly when it came to selling the plan to Congress. If we're
supposed to judge Clinton based on her decisions in 1993 and 1994,
then it's good to know whether her political judgment was
sound--not to mention what lessons she may have drawn from the

But an equally important question, certainly, is the one nobody is
asking: Just how well would the Clinton health care plan actually
have worked? Would we have been better off under Hillarycare?
Here's one good hint: Twelve years later, we're back talking about
the very same problems, and even some of the very same solutions,
all over again.

Hillarycare wasn't always a dirty word. People forget, but there was
actually a time, not so long ago, when the Clinton health care plan
was wildly popular and Hillary was considered a hero for her role
in shaping it. It was September 1993--right after Bill Clinton
formally introduced the plan in a nationally televised address and
Hillary Clinton went before several congressional committees to
defend it. By that time, everyone agreed the nation had a health
care crisis on its hands: About 15 percent of the American
population had no health insurance, and employers--who had
historically provided private insurance to most of the U.S.
workforce--were becoming increasingly reluctant to offer coverage.
The big question was what, exactly, to do about it.

To the disappointment of the left, the Clinton campaign had, in
1992, rejected calls to create a true single-payer system--in which
the government would insure everybody directly, as it now does
through Medicare for the elderly (and through which many foreign
governments cover all of their citizens). It did so out of
deference to American political sensibilities, which traditionally
frowned on too much government, and in keeping with its genuinely
centrist instincts. As Hillary would later explain in her
congressional testimony, "If you build on the employer/employee
system, you are already building on what is available and familiar
to most Americans." At the same time, the campaign had indicated
that simply giving coverage to everybody-- a relatively simple
task, depending on how you did it--was actually not enough.
Somehow, the Clinton team had to come up with a way to make medical
care less expensive, because it was the rising costs that made
health insurance so unaffordable and would, eventually, bankrupt
not just many individuals but the country as a whole.

Late in the presidential campaign, Clinton had embraced a model of
reform known by the clunky moniker "managed competition." Its
premise was that it made sense to rely on private insurance as the
primary source of coverage for working Americans, just as had
always been the case in this country. But, in order to make
coverage affordable to everybody, government had to restructure the
insurance business. Regardless of income and medical condition,
every single American needed to be able to choose from a menu of
private plans, the way employees of large businesses generally did.
If this happened, the theory went, a true market for health
insurance would exist--and the competition to attract customers
would force insurers to find ways of providing more cost- effective
coverage. This would ultimately lead to better medical care and
lower premiums, freeing up resources that could then be used--among
other things--to extend insurance to people who didn't have it

It was an ambitious notion, certainly, and it promised to deliver a
lot of what the left had always wanted--most importantly, truly
universal coverage with government guaranteeing relatively generous
benefits for all. It also involved closely regulating the insurance
industry, to make sure that insurers would make coverage available
to everybody. But, in its broad designs at least, managed
competition was still not a particularly radical scheme. The idea
actually traced its lineage back to discussions by health care
industry leaders convened by a physician named Paul Ellwood, who
had once advised Richard Nixon, and an economist named Alain
Enthoven, who had worked in the Pentagon during the Vietnam war.
And, in 1993--as Hillary's task force filled in the plan's numerous
details--the business community's interests continued to get plenty
of attention. Hillarycare would require all businesses to
contribute something to their employees' insurance, but that
contribution would be more predictable than directly paying for
insurance premiums, which could vary wildly from year to year.
While small businesses--many of which still didn't provide their
workers with coverage--might have a harder time meeting the new
obligation, the plan promised these companies special subsidies.

All of this did make for a pretty complicated schematic--at least
behind the scenes. That's why the final proposal weighed in at a
hefty 1,300 pages and critics were later able to lampoon it by
diagramming it on poster-board charts. But, from the standpoint of
the average American, the Clinton plan actually promised to work in
a remarkably straightforward way. Once a year, the government would
present people with a choice of private plans. All the plans would
have generous benefits, covering even services like mental health
that private coverage had traditionally given short shrift. The
plans would vary in cost, depending in part on the level of
financial protection they provided, with the government covering
nearly the full price of the cheapest plan and individuals chipping
in extra for the pricier alternatives. But all the plans would be
affordable. The government would prohibit the plans from
discriminating against people based on their medical condition: An
insurer couldn't charge you higher premiums, or reject you
outright, just because you had, say, diabetes. Most important,
coverage would become a birthright. Everybody would get insurance
from day one. And it would never get taken away.

Presented this way, the plan was awfully appealing, as an early poll
in the Los Angeles Times showed: After listening to the president
explain the plan in his speech, Americans said they supported it by
a two-to-one margin. And, when Hillary toured Capitol Hill to
promote the program, even some Republicans gushed over her
handiwork--not to mention her obvious mastery of the subject. "I,
for one, personally admire you," Senator Orrin Hatch told her.

But not everybody was so impressed. In late 1993, the Health
Insurance Association of America--a trade group representing small
insurers--introduced TV viewers to Harry and Louise. The fictional
middle-class couple spent a great deal of time sitting at their
kitchen table, flipping through a printed copy of the Clinton
health plan and furrowing their brows as they stumbled across what
they considered troubling details. One of Harry and Louise's
complaints was that the Clinton plan would make almost everybody
purchase insurance through giant purchasing cooperatives called
"alliances." But the alliances were what allowed managed
competition to work--they let individuals, small businesses, and
the uninsured band together and get the kind of group pricing and
discounts that large employers always had.

The following February, life imitated art when Elizabeth McCaughey,
a very real scholar at the conservative Manhattan Institute,
decided to tell the world about the myriad flaws of the Clinton
plan by writing a screed for a political magazine. (As it happens,
it's the one you are holding in your hands.) McCaughey, for her
part, was shocked to discover that the Clinton plan called for
covering only services deemed "necessary" and "appropriate." But, as
The Atlantic's James Fallows would later note in a devastating
rejoinder, every insurance program in the world had such a clause.
The Clinton plan, at least, left decisions over what those terms
meant in the hands of a democratically accountable National Health
Board, as opposed to secret discussions held within the offices of
insurance companies.

Harry, Louise, and McCaughey also worried a lot about big, bad
managed care, fretting that the Clinton plan would force everybody
into cheap health maintenance organizations (HMOs), which
restricted choice of doctors and access to treatments. "Having
choices we don't like is no choice at all," Louise explained in one
spot. The germ of truth here was that the Clinton plan really did
have incentives for people to choose HMOs, since those would likely
be the cheapest options in most cases. But study after study had
shown that the best HMOs provided superb medical care--better, in
fact, than more traditional fee- for-service insurance. (They were
more integrated and generally did a better job of emphasizing
preventative care.) Besides, the Clinton plan wouldn't actually
force people into managed care. Indeed, at a time when many
companies were doing precisely that--by choosing HMOs for their
workers without giving them alternatives--the Clinton plan proposed
to guarantee every American access to at least one old-fashioned
plan that didn't limit choice of doctor. These more traditional
plans would be more expensive, to be sure, but the option would
always be there for people willing to pay that extra premium.

Still, not every objection was as unfounded as McCaughey's--or as
transparently self-serving as Harry and Louise's, who were created
by an industry (small insurers) whose standard business practices
(avoiding sick people) the Clinton plan sought to make illegal. A
different set of concerns came from more thoughtful experts like
Ellwood and Enthoven, the fathers of managed competition. Of
particular concern to them was a limit on how much insurers could
raise premiums from year to year. Government was in no position to
set such limits, the argument went, because it couldn't determine as
well as the market what the proper level of medical spending
was--or how to allocate it. If, for example, the cap was too low,
doctors and hospitals wouldn't get the money they needed--and would
begin cutting back on services.

From a policy standpoint, these caps were indeed the plan's most
controversial element--and the ones about which questions could most
legitimately be raised. But, looking back, even these concerns were
probably overblown. The task force had included this cap partly to
satisfy the Congressional Budget Office (CBO), which, in its
official estimates of the program's cost, wouldn't assume that
having a bunch of insurance plans was likely to save money, as the
Clintons insisted it would. Since CBO's projections would guide the
debate, and since political moderates were likely to abandon the
plan if it threatened to raise deficit spending or spark new taxes,
the task force threw in the cap. But it was entirely possible
premiums would not have exceeded the caps, at least not for a
while: In fact, over the next few years, premium increases stayed
under the limits set by the caps. And that was without a lot of the
administrative savings that Hillarycare would have generated. Don't
forget, too, that Congress always had the power to ease the caps if
they really threatened to disrupt medical services--although the
hope was always that limiting spending would ultimately push the
health care system to be even more efficient.

As we all now know, those objections ended up carrying the day. The
fear of rationing played directly into public fears of government
incompetence--a fear the press did little to dispel. Harry and
Louise and McCaughey may have been talking nonsense, but they
spooked a lot of Americans. And, even though many interest groups
stood to benefit from the Clinton plan--chief among them, large
employers already paying for generous worker benefits--few lifted a
finger to help. The plan died, and, just like that, Hillary went
from savior to scapegoat.

But look at everything that has happened since that time. By the end
of the '90s, virtually every American was enrolled in an HMO or
some other type of managed-care plan--in other words, precisely the
scenario that Harry and Louise, along with McCaughey, had warned
would happen if the Clintons got their way. But managed care had
evolved in a rather different direction than it might have under
Hillarycare. The Clinton plan had proposed to regulate HMOs closely.
Not only would the standard benefit package limit the ability of
insurers to skimp on necessary care for people who needed it, but
the Clinton plan also would have required all insurance plans to
collect and publish data about how well their beneficiaries were
doing (like, for example, whether they all got recommended tests,
how satisfied they were with the service, and so on). This would
have bolstered the best managed care organizations, the nonprofit
group practices (like Group Health of Puget Sound in Seattle or
Harvard Community Health in Boston, both of which had excellent
reputations in the '90s) that really did promote high-quality
medicine. There was even a patients' bill of rights, to make sure
that people who thought their insurers had denied treatments
improperly could appeal such decisions in a binding legal process.

It was these sorts of provisions, which took pages to describe, that
made the Clinton plan such an object of derision. And yet, in the
absence of such rules, the "good" HMOs never stood a chance.
For-profit insurers gobbled up the market, and, in response to
demands by employers to deliver cheaper insurance, they paid very
little attention to quality of care. Horror stories about improper
treatment denials and interference in the clinical process
proliferated. Studies showed that insurers were routinely using
medical treatment guidelines that many doctors considered
substandard. By the late '90s, the public was clamoring for a
patients' bill of rights--which, had it passed, would have looked
much like the one Hillary had thought to include in the first

The HMO reform debate eventually subsided in the face of some more
pressing concerns, such as the lack of prescription coverage for
Medicare recipients-- who were, as of a few years ago, desperately
struggling to pay for their drugs. But the Clinton plan had
anticipated that issue, too: As part of its effort to modernize the
entire health care system, it would have added a prescription- drug
benefit to Medicare. And it would have had the government administer
that benefit directly, as it does for the rest of Medicare. (By
contrast, the existing drug benefit--which the Bush administration
and the Republicans created in 2003--uses private insurers as
intermediaries. That costs more money, since private insurers
require extra subsidies to stay with the program, and it doesn't
apply as much bargaining leverage to the pharmaceutical companies.)

Lately, every day seems to bring word about some new employer
struggling with the costs of their employees' health insurance; if
it's not the automakers, it's the airlines or the
telecommunications industry. It's hurting American competitiveness;
in one celebrated case a few years ago, Toyota cited high,
unpredictable health care costs here as a reason to locate a new
plant in Canada instead. And it's poisoning labor-management
relations. In 2004, California grocery workers walked out for four
months because their employers-- fearful that Wal-Mart, with its
famously meager benefits, was coming into the area--were
threatening to offer lower health benefits. Now both the union and
the grocers say they support a universal health care system that,
even if it requires some employer contribution, would at least
create a level playing field and began to restrain rising costs,
which have started climbing again almost as quickly as they were
before. In other words, they support doing exactly what the Clinton
health care plan would have done.

And, of course, today some 45 million Americans have no health
insurance--or nearly 16 percent of the population, which is about
one point higher than the figure was when Hillary and her task
force got to work. You can say a lot of things about the plan that
process produced: that it was complicated to explain, that it was
botched politically, and that, above all, it was hardly perfect.
(Some of us still think a true single-payer system would work
better.) But, if Hillarycare accomplished absolutely nothing else,
it would have made certain every American had access to affordable
health care--sparing millions of people physical harm, financial
calamity, and countless indignities. For a plan that was supposedly
such a debacle, that would have been an awfully mighty

You won't hear anybody in U.S. politics admit as much right now. In
Washington, at least, praising Hillarycare will get you laughed off
the talk shows. But the rising anxiety about affordable medical
care, combined with the worries about health care's effect on the
economy, have launched yet another serious debate about health care
reform-- the first since the early '90s. And, if you look closely
at the proposals experts and officials are tossing around, you may
start to recognize some familiar elements. With the exception of
true single-payer plans, virtually every idea for universal
coverage now on the political agenda envisions creating a system in
which, like Hillarycare, people will shop around for private health
plans. They also envision, as did Hillarycare, a government role in
making sure affordable, high-quality plans are made
available--typically, by creating (again, like Hillarycare) some
sort of purchasing cooperative through which some, if not all, of
the population would buy their coverage. That's true of the plan
former Senator John Edwards proposed as part of his presidential
campaign a few months ago. It's true of the plan Senator Ron Wyden
introduced to Congress back in December. It's even true of the plan
former Massachusetts Governor Mitt Romney signed into law before
leaving office last year--even though Romney has made mocking
Hillarycare a staple of his campaign rhetoric as he seeks the
Republican presidential nomination.

Still, while just about every reformer has borrowed elements of the
old Clinton health plan, none of the leading presidential
contenders has yet proposed something as comprehensive and
far-reaching--aware, no doubt, that trying to do so much so quickly
may be more than the political system will tolerate. For the most
part, the serious reformers concentrate on getting coverage to
everybody--leaving more wholesale reorganizations of the health
care system, the kind that might yield serious cost savings, until

What remains to be seen, though, is whether Hillary herself can take
even that more modest step. No candidate in the presidential race
knows more about health care than she does. No candidate has a
stronger, more proven record of fighting to expand coverage. And,
yet, no candidate has to act with the caution that she does.
Achieving universal health care will probably require the
leadership of somebody who can push public opinion--and it's not
clear that she can do so, at least, not as long as Hillarycare's
reputation remains what it is. It's a shame, really, because if
there were any justice, she'd have the best one-liner on health
care of any candidate out there: "I was right the first time."

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