Why Has Health Care Reform Failed?

Henry J. Aaron
Henry J. Aaron The Bruce and Virginia MacLaury Chair, Senior Fellow Emeritus - Economic Studies

November 6, 2007

Every 15 years or so, proposals to reform the entire U.S. healthcare system seize national attention. The cycle has endured since President Franklin D. Roosevelt considered proposing universal health coverage as part of the Social Security Act. Presidents Truman, Carter, Ford, George H.W. Bush and Clinton all produced proposals for universal coverage. Though different in detail, they shared one key characteristic — failure.

Each time, supporters of reform believed, popular clamor would drive elected officials to end the national embarrassment of millions of uninsured and rein in health expenditures that were needlessly high and bought less than they should. Each time, reformers were right in their indictment and wrong in their political judgments.

Now, once again, advocates of health-system reform believe that the time for action has arrived. The U.S. spends twice as much per capita on healthcare as the average of the 10 other richest countries in the world. More than one person in six under age 65 is uninsured. And business and labor leaders alike are convinced that employer-financed healthcare is undermining U.S. competitiveness.

But the case has seemed strong before when reform efforts failed. If there’s any chance of success this time, we need to understand the barriers that prevented reform in the past:

* Elites remain deeply divided on what to do. Solid and stubborn minorities favor enrolling everyone in a nationally administered system financed largely by taxes, shoring up the current employment-based system for workers and their families or extending tax incentives to encourage individuals to buy insurance themselves. Supporters of each approach prefer the status quo to the alternatives, so doing nothing wins.

* Eighty-five percent of Americans are insured and fear change. Repeated surveys document that most are pleased with their doctors and satisfied with their last contact with a hospital. Yes, healthcare costs them more than they would like, and insurance red tape is a huge pain. But they regard any plan that threatens their current arrangements with suspicion, particularly if it is imposed by a Congress they distrust.

* Large-scale health reform is large-scale income redistribution, and the politics of redistribution is the politics of trench warfare. Unless healthcare spending is greatly increased — something no one wants — boosting spending on some groups means cutting spending on others. Increasing one kind of care means cutting another. Those who stand to lose services can be counted on to invoke high-flown reasons why reform is retrograde. To be sure, advocates of each approach to reform claim that increases in efficiency will result if their ideas are adopted. But these claims are hard to document, and they would take years to realize.

* Healthcare reform involves huge financial stakes. When Clinton proposed his reform, the U.S. healthcare system spent as much as the gross domestic product of France. Now it spends as much as the combined GDPs of France and Spain. The potential losers from any reform — insurers, hospitals, doctors — can and will marshal enormous resources to block action.

* The U.S. political system is exquisitely structured to frustrate action on large and controversial matters on which there is not overwhelming agreement. Party discipline is an oxymoron. Congressional committee chairmen can and do block action that the majority of their party embraces. The political composition of the two houses of Congress requires that to get majorities, both large and small states, despite their often conflicting interests, must make common cause. Senate rules require super-majority support for any controversial action. And all elected officials persistently obey the political corollary of the Hippocratic oath: Do not be seen to do obvious harm.

* Healthcare varies greatly across the United States, making consensus hard to come by. In Texas, 24% of the population is uninsured; in three Midwestern states and Hawaii, fewer than 10% are uninsured. Massachusetts spends 70% more per person on healthcare than Utah does. Health maintenance organizations enroll more than a third of the population in three states, including the nation’s largest, while three other states have only a single HMO and one has none.

None of this means that sweeping transformation is impossible. Seismic political events do sometimes occur. But it does mean that faith that this is the moment feels a bit like Charlie Brown’s innocent faith that, this time, Lucy will not yank the football away. It suggests that even if it succeeds, healthcare reform will not come from a single bill that transforms a $2.5-trillion industry but from repeated legislation of modest scope enacted over many years. The next president can articulate a vision, but like Moses, he or she is unlikely to see the promised land.

On a more positive note, the many barriers to national reform may in fact spur state reforms already in the planning stages. Congressional proposals to relax regulations and provide modest financial support have been introduced and enjoy bipartisan backing. The appeal of this approach is growing because even politicians unwilling or unable to agree on sweeping national reform increasingly understand that the nation cannot afford to once again walk away from the healthcare mess with nothing to show for the effort.