Populists in a Global Market
James A. Morone
It has been a wild decade for health care policy. The Clinton administration came to office touting national health reform. Opponents defeated the plan, humbled the administration, and won Congress on the antigovernment backlash. Government seemed emphatically out of the health reform business (Ginsburg 1998: 166). The private sector seized part of the Clinton reform and rushed the American health system into managed care. Suddenly a half-century of steady inflation came to a end (or, at least, a long pause). The popular reaction? A long, loud call for new government intervention. Less than five years after the political cycle began, Democrats and Republicans were pushing health reforms in Washington while one thousand separate bits of proposed legislation floated through the states (Blendon et al. 1998: 80). This commentary first reflects on the government's "return" then analyzes the backlash against managed care.
Why did American politicians start promising public sector reforms so soon after the Clinton debacle? This is not the sharp reversal it appears to be. The same organizational dynamic that subverted the ambitious Clinton plan fosters the current profusion of ad hoc proposals, laws, and regulations. American government responds to well-organized groups seeking narrow goals--it is easier to win the thousand small reactions than the great reform. Many market advocates have denounced the broad political support for reforming managed care. When Congressional Republicans concocted the Patient Access to Responsible Care Act, John Goodman (1997: A18) fumed in the Wall Street Journal: "No, this isn't Hillary Clinton up to her old tricks. It's a Republican plan." That [End Page 887] government-bashing reflex, I argue, exposes one problem facing managed care: health care markets will work only with deft, sustained public regulation. It is not clear whether the current proposals are up to the job.
Second, I read the backlash itself as classic American populism. A frightened middle class denounces greed in the face of a new economic order. Managed care injects far-reaching changes in the world of physicians, hospitals, and patients. It challenges traditional notions of social welfare by putting new pressures on both the haves (with their employee benefit packages) and the have-nots (the growing ranks of uninsured people). Market optimists insist that taming health inflation is a precondition for expanding insurance (Enthoven and Singer 1998: 97; Goodman 1997: A18). Perhaps so. But broad redistribution efforts face an increasingly uphill fight. The problem stretches far beyond health care. Managed competition operates in a context of fierce global capitalism. The same underlying forces that drove managed health care into place push public and private institutions to squeeze harder on their costs. The consequences include a growing gap between skilled and unskilled workers, job insecurity, pressures on the social safety net--and the backlash against managed care.
Government
Market forces had been gathering for a decade. Ironically, the Clinton national health reform proposal gave them a strong push. Health care institutions braced for Clinton's managed competition with mergers, consolidations, and managed care. The market's effervescence continued after the administration's plan failed. (In Europe, the Clinton administration might have been cheered for "indicative planning"--pushing and jawboning private business toward its policy preferences.) The private sector rapidly pushed through some (but, crucially, not all) of the changes that the Clinton administration failed to win. The managed care revolution appeared to offer a sharp lesson in American political culture: The private sector acts with a legitimacy that the public sector does not enjoy.
As soon as the new system began to pinch, however, Americans turned right back to government for relief--and with a speed that caught most observers by surprise. The New York Times reported that thirty-five states had passed fifty-six laws regulating HMOs in 1996 alone (Freudenheim 1996). [End Page 888]
There is no contradiction between the fall of the Clinton plan and the rising backlash to managed care. Both reflect the same institutional reality. American government is notoriously fragmented, full of checks and balances (Peterson 1994). To take just one example on the long road to legislation: thirty-one Congressional committees and subcommittees reached for jurisdiction over Clinton's health plan; seven won it and concocted different variations of the original plan (Morone 1998: 330-333).
This multitude of semi-independent bodies (unimaginable in a Parliamentary system) offers organized groups many places to enter the process. There are all kinds of political back alleyways in which to mug an ambitious and complicated reform. By the same token, there are plenty of places to air angry complaints and seek relief. Congress (and American government as a whole) is well organized to mollify constituents--as long as they are asking for something relatively small. The same institutional dynamics make big change difficult and small ones easy. When constituents complain, legislators offer them ad hoc regulations, exceptions to the rules, and symbolic statements about their inalienable rights. Even Republican New Hampshire stood up for motherhood and forbade the notorious "drive-through" deliveries--though requiring a second day in the hospital for a specific procedure hardly addresses popular fears about the systematic underprovision of care.
The progress of the American state follows a predictable route. Duck the big decisions; when trouble follows, offer relief for constituents who complain. Many small programs soon flourish on the ruins of large ambitious ones. The result is the paradox of American politics: a weak state is pesky, interventionist, intrusive. It is too weak to build up a systematic policy; it is also too weak to resist a great number of often ineffective reactions.
Some conservatives denounce the government meddling in the managed health care industry. They would adjust the rules, then leave the markets alone. Why not? Because private health care markets perform public functions. Analogies to other markets--for cars, or stocks, or even houses--are misleading. We expect that all sick and injured people, even the improvident who have lapsed on their insurance payments, will get some care. And in contrast to food and shelter, the health care bottom line--keeping a very sick person alive--is terrifically expensive. Moreover, someone has to struggle against raw market logic and discipline providers who duck sick people. Someone has to set guidelines for consumer information, make sure that even bad risks can get insurance coverage, [End Page 889] and worry about the health care infrastructure. (What happens when the distant corporation decides to close the last hospital in a rural area? What about training future doctors?) Tending to these public interests in a highly competitive private market puts extraordinary demands on government (Morone 1992).
Misled by simple analogies to other markets (no one is arguing about the citizens' right to trade stocks), observers sometimes forget the ironic precondition of successful medical markets: a strong, effective, nimble government that can balance the drive to make money with the basic rights to health care. Health markets and managed care will only be as good as the public sector that oversees them.
Markets and the Populist Backlash
Today, the popular backlash against managed care is all over the news. Robert Blendon and his colleagues report that Americans now rate managed care companies below the unpopular oil industry--and closer to big tobacco than to hospitals (Blendon et al. 1998: 84-85). By now, reported one breathless Time feature, "anybody who has come into contact with the system can recite a litany of horror stories" (Church 1997). A litany of horror stories was precisely the Senate Democrat's strategy for winning their "Patients' Bill of Rights." In spring 1998, they described a terrible personal story every day to drum up support for HMO reform. Each story rang with outrage: "He did what his HMO told him," ran the first speech in the series, "and he's dead because he did" (Cong. Rec. 1998: S 4136).
Each sad tale illustrated a different complaint about HMOs. But one theme ran through all of them: the great battle between sick people and distant, impersonal, bureaucracies.
"She filled out the necessary paper work and waited--and waited and waited. Six months later the HMO responded." (Mrs. Peggy Earhart) (Cong. Rec. 1998: S 5568)
"The utilization review coordinator--that is quite a title, utilization review coordinator--at Mr Kuhl's HMO refused to precertify the surgery." (Cong. Rec. 1998: S 4136)
"For more than a year she wrote letters explaining her situation. Even her doctors and the hospital urged the HMO to cover her claim." (Wendy Connelly) (Cong. Rec. 1998: S 5492) [End Page 890]
"He called and spoke with a nurse in the HMOs Utilization Review department who told him, after checking with her Supervisor[,] . . . the answer was 'No.'" (Barbara Garvey) (Cong. Rec. 1998: S 3749)
In every one of the contemporary horror stories, sick people fight an impersonal, slow moving, multilayered bureaucracy. They struggle up an indifferent, corporate chain of command--note the bureaucratic lingo and the shadowy supervisors in the back room. The faceless bureaucrats (the HMO is never named) push paper while the clock ticks and the patients get sicker. Sometimes they die.
These tales from Kafka have a long lineage in American rhetoric. They were a central ideological theme in the battle against national health insurance. Descriptions of English and Canadian health care, of Medicare proposals (in the 1960s) and national health plans (beginning in the 1930s) all featured government bureaucrats in precisely the same heartless pose (Skidmore 1970).
The attack on heartless bureaucracy is effective thanks to a second theme. The rationers are denying good, middle-class, lawn-mowing Americans. Like disease, the managed care bureaucrats can strike anyone. Youth, merit, or paying all your premiums on time affords no protection. Random bureaucratic rationing violates that honored American tradition: rationing by class. The wealthy have always gotten lavish care, the middle classes have done fine, the poor and uninsured faced deprivation (amid long speculation about just how "deserving" they may have been). For years, health care reformers met resistance to overturning this order. Government programs would push aside hard working Americans in favor of the poor. (In the 1950s and 1960s, "federal commissars" generally entered into it.) Now, the trusty old American fears are pinned on managed care plans.
This time, however, the traditional social welfare villain is missing. There are no "welfare queens" at the bottom of this health care trouble. Instead, the managed care backlash draws on an equally venerable American icon: corporate greed. "At the heart of the issue," announced Time, "is whether the health care system . . . is now being driven by too many [cost controls] . . . just to keep share holders happy with fat profits." One physician described the consequences: "People who are sick will be allowed to die." All thanks to the "chilling . . . bottom line mentality that is taking over" (Church 1997).
Here are all the features of classic American populism: Rapid economic change, a fearful middle class, and the image of greedy corporate [End Page 891] agents squeezing common people in pursuit of profits. This is, of course, an American caricature. But, like the portrait of demonic bureaucrats, it comes with a long American heritage, a powerful political resonance, and more than a grain of truth.
Defenders of managed care point out that cost control is a necessary condition for winning a more equitable system. In fact, the Children's Health Insurance Program of 1997 (CHIP) extends health insurance to more children than any program in more than three decades (CBO 1998). And in some areas, employers respond to the complaints by offering looser, less structured health plans (Christianson 1998). Even so, the number of uninsured adults keeps rising and there are few prospects of reversing the trend. On the contrary, the managed care regime makes redistribution harder by fostering fierce competition among providers. Wring the slack from the system and there is no capacity for using the well insured to subsidize the care of the have-nots.
The search for equity is undercut by the contemporary economic context. The markets put powerful pressures on every actor in the health care system. Publicly traded providers get punished if they fail to squeeze their operating costs and bring in higher (than expected) returns. Every quarter. The pressure prompts a wide range of strategies--from lowering the staffing levels to, yes, pinching back the services for expensive patients. Corporate payers operate under the same rules. Even those who offer rich health packages face the acid test--dollars that go to health benefits are dollars lost to investors. The financial pressures run right across the health care system. Corporate payers, insurance companies, managed care organizations, hospitals, home health agencies, and every kind of provider--directly or indirectly--feel the discipline of investor markets.
Perhaps as a result, some observers have noticed a marked shift in emphasis from employer-based solutions to direct government action on the uninsured (Ginsburg 1998: 167). But governments also face new market pressures. Financial markets shift huge sums around the globe searching out high short-term returns. The traders push policy makers in unambiguous ways: lower spending, cut taxes, balance budgets. They do not tolerate public deficits--even short-term deficits, even during steep recessions. Policy makers who resist will soon be watching capital fly to other corners of the globe, interest rates rise, and economic indices plunge.
When newly elected President Clinton first heard this news, he allegedly threw a terrible temper tantrum. I did not win this election just to cut [End Page 892] interest rates, he screamed. But before long his attention was sharply focused on the bond market (Woodward 1994). Clinton had won office on the view that the United States should foster global markets while it helped all citizens to prosper in the new environment. That meant good schools, accessible colleges, effective job training, and affordable health care. But those ambitious reforms were risky, comments Robert Reich (1999: 51), because they required money. Eventually, the proposals were cast aside for what cynical Democrats dub "TSGs"--tiny symbolic gestures.
The same economic pressures shape social welfare policies everywhere. When the German finance minister, Oskar Lafontaine, pushed for a return to old-style social democratic politics, economic markets pummeled his government. The president of the German central bank even blamed him for driving down the euro relative to the dollar. The day he stepped down, in March 1999, the markets soared. Interest rates promptly dropped (Wall Street Journal 1999: A14). The German Social Democrats were learning the same lesson that had greeted Bill Clinton: demonstrate fiscal prudence--as we define it--or face the market consequences.
Managed care is one feature of a broad international dynamic. The new markets press limits on every actor in the medical system--health care providers, payers, industry, governments. The rules appear to leave little slack for redistributing care. Meanwhile, the ranks of uninsured Americans grow, the middle class suddenly confronts bureaucratic rationing, and governments--pressed by a new international economic regime--respond with a great surge of legislation brimming with health care "TSGs."
The Future
What lies ahead? The questions, at least, are becoming clear. First, will the apparent savings introduced by managed care maintain themselves? Or, as many observers predict, will health costs spin out of control again? Second, can health care managers persuade Americans that they are rationing care by medical need? Or will popular perception remain fixed on bureaucratic bungling driven by greed? Third, will physicians retain their traditional culture, turning on the oath to heal? Or will they become genuine creatures of the marketplace? And, finally, what about the uninsured?
Perhaps the proponents of managed care can meet the criticisms--contain costs, persuade the insured, win over physicians, and promote a [End Page 893] plan for extending insurance coverage. The current backlash may even push the industry in that direction (see Marc Rodwin's article in this issue). At the other extreme, consider the political coalitions that would emerge from a return to rising costs, continued middle-class anxiety, sustained physician fury, and swelling ranks of uninsured people. If a combination like that comes together, then the backlash has just begun.
Yet even a much larger backlash from a very powerful coalition of disgruntled Americans will confront the constraints of the new global economy. And those limits raise the most important question of all: How do we construct a fair society--one that offers every citizen a decent chance--in the face of economic imperatives that push every sector to get lean and mean?
Brown University
James A. Morone is professor of political science at Brown University. His Democratic Wish: Popular Participation and the Limits of American Government (1998 [1991]) won the American Political Science Association's 1991 Gladys M. Kammerer Award for the best book on the United States and was named a "notable book of 1991" by the New York Times. Morone coedited The Politics of Health Care Reform: Lesson from the Past, Prospects for the Future (1994) and has written more than one hundred articles on American politics, history, and social policy. He is currently president of the Politics and History Section of the American Political Science Association. Morone was editor of JHPPL between 1989 and 1993.
References
Blendon, Robert, Mollyann Brodie, John M. Benson, Drew E. Altman, Larry Levitt, Tina Hoff, and Larry Hugick. 1998. Understanding the Managed Care Backlash. Health Affairs 17(4):80-94.
Christianson, Jon. 1998. The Role of Employers in Community Health Care Systems. Health Affairs 17(4):158-164.
Church, George. 1997. Backlash against HMOs: Doctors, Patients, Unions, Legislators Are Fed Up and Say They Won't Take Anymore. Time, 14 April.
Congressional Budget Office (CBO). 1998. Expanding Health Insurance Coverage for Children under Title XXI of the Social Security Act. Washington, DC: CBO.
Congressional Record. 105th Cong., 2d sess., 1998. Washington, DC: U.S. Government Printing Office.
Enthoven, Alain, and Sara J. Singer. 1998. The Managed Care Backlash and the Task Force in California. Health Affairs 17(4):95-110.
Freudenheim, Milt. 1996. HMOs Cope with Backlash on Cost Cutting. New York Times, 19 May, A1.
Ginsburg, Paul. 1998. Health Systems Changes in 1997. Health
Affairs 17(4):165-
169.
Goodman, John C. 1997. D'Amato Care. Wall Street Journal, 5 December, A18.
Morone, James A. 1992. Hidden Complications: Why American Health Care Competition Needs Regulation. American Prospect 10:40-48.
------. 1998. The Democratic Wish: Popular Participation and the Limits of American Democracy. New Haven, CT: Yale University Press.
Peterson, Mark A. 1994. Congress in the 1990s: From Iron Triangles to Policy Networks. In The Politics of Health Care Reform: Lessons from the Past, Prospects for the Future, ed. James A. Morone and Gary S. Belkin. Durham, NC: Duke University Press.
Reich, Robert. 1999. We Are All Third Wayers Now. American Prospect March-
April:46-51.
Skidmore, Max. 1970. Medicare and the American Rhetoric of Reconciliation. University: University of Alabama Press.
Wall Street Journal. 1999. Schroeder's U-Turn? 12 March, A14.
Woodward, Bob. 1994. The Agenda: Inside the Clinton White House. New York: Simon and Schuster.
