The target is the health business. When dark horse Harris Wofford won election to the Senate in 1991 promising top-to-bottom reform of health care, other politicians took notice. By 1992 nearly all candidates for office, including Bill Clinton and George Bush, were advocating action regarding what many now call the health-industrial complex. Everybody wants something done. How strongly can the health system resist change?
Very strongly, if dollars are any measure. In the year 1973 an important line was crossed-health care became more expensive than defense. Since then military spending has shown long-term decline, while health-care expenditures continually rise. This year the Pentagon will consume about 6 percent of the GNP, while health costs will gobble up 13 percent. “Defense and medicine have become the same,” says Richard Smith, public-policy director of the Washington Business Group on Health. “The people wear uniforms, technology is in the driver’s seat, and both cost far too much.”
Americans receive good health care by many measures, but judged by cost effectiveness the U.S. system may be the worst in the world. The United States spends more per capita on health than any nation, yet is the sole Western country in which medical expenses don’t buy universal coverage for all citizens.
Clinton has said that health reform will be a priority of his administration. But imagine tackling a system with more than double the entrenched lobbying clout of the Pentagon. “Only all-out reform has a chance,” asserts Rep. Jim Cooper, a Tennessee Democrat. “Health-care special interests have enough power to block tinkering. We’ve got to get them falling back on their heels with a broad program that changes everything.”
Countries like France and Denmark that offer high-quality universal coverage at lower cost than the United States are able to do so partly because their governments took on the health lobby years ago, when its economic dimensions were smaller. With each year doctors, hospitals and insurers control more dollars, acquiring greater lobbying leverage. This suggests that that delay in “all out” reform will only make the problem worse, as medicine’s share of the GNP keeps growing. The medical-lobby lineup:
Physicians are among the wealthiest segments of society, each averaging $164,300 in income in 1990. They spend freely to influence government decisions, with the American Medical Association always one of the top PAC donors.
In recent years an increasing number of doctors have come to favor some program to aid the “medically indigent,” the estimated 35 million Americans with no health insurance. Doctors favor the idea for two reasons: one altruistic, because universal care is a moral imperative; one selfish, because this reform could make doctors even richer.
Thirty years ago nearly all physician groups lobbied against Medicare; later, realizing Medicare allowed them to raise prices, doctors embraced it warmly. A similar progression of attitudes now applies to the medically indigent. Increasingly doctors realize that with a new government-or employer-financed universal-care program, they could charge for services now rendered on a charity basis.
A working estimate is that universal care would increase U.S. medical costs $50 billion a year, wiping out the peace dividend in a single stroke. Health-care advocates therefore assume that new cost controls must accompany universal care. But most physician lobbies want only new payments, not accompanying controls. In California, the state AMA affiliate is furiously resisting a proposal that combines universal coverage with cost containment.
The docs’ lobby has long suffered from sleeplessness and other chronic symptoms, worrying that the public will realize that physician wealth is unique to the United States. In what used to be West Germany, which has top-quality medical care, doctors earn about 25 percent less than here. Reducing U.S. physician incomes to the German level, perhaps by cuts in federal reimbursements, would save about $45 billion a year, enough to finance universal care and still leave doctors very well off. Is this possible? “The political system has shown so little courage on physicians’ incomes that the best most of us hope for is stopping future growth,” says Rashi Fein, an economist at Harvard Medical School.
The U.S. hospital industry, at $256 billion in 1990, is nearly the size of the Pentagon. Those who have crossed paths with hospital accounts offices know that when it comes to money, many hospitals are now tougher than Schwarzkopf Their lobbying can be as aggressive.
Hospitals will support new benefits for the uninsured, both because it’s the right thing to do and because it will create payments for care that hospitals now give away. But like most doctors, most hospitals oppose combining new benefits with new controls. Clinton advisers have spoken of “global budgets” for hospitals. Under this plan, hospitals would receive annual lump-sum payments, rather than submit individual bills for each patient treated: the idea is to break the pass-along mentality. Hospital lobbyists are expected to fight to the death against this notion, since health “providers” love to pass costs along.
One political problem that may cut into hospital-lobby clout: avarice at the top. The New York Times recently reported that while medical prices ran 114 percent ahead of inflation in the last decade, pay for hospital executives escalated at 142 percent. Paul Marks, CEO of New York’s nonprofit Sloan-Kettering Cancer Center, makes well over $1 million a year; H. Richard Nesson, head of nonprofit Brigham & Women’s Hospital in Boston, made $872,000 in 1991. Marks and Nesson thus earn much more than the amount that got William Aramony in hot water as head of the United Way. And since the primary source of revenue to hospitals is government, hospital CEOs are annexing their opulence from the taxpayer, whereas Aramony’s pay came entirely from donations.
Advocates of government-financed systems like those of Western Europe now say that what they want is a “single payer” plan. This soothing, neutral term plays better than “socialized medicine”–except with insurance companies. If government were the “single payer,” medical insurers would be out of business.
No national health-care system could be adapted without shutting down part of the insurance industry. But just as society may be better off with some resources diverted from defense contractors to domestic needs, the health-care system might be better off with fewer workers involved in unproductive paper-shuffling of insurance claims. America spends as much as a breathtaking $130 billion per year on health overhead, enough to fund universal care and cut medical costs simultaneously.
Clinton seems likely to propose reforms under the buzzphrase “managed competition.” One idea should be government-set basic health-insurance terms, so that buyers can make meaningful comparisons between plans. Another should be a ban on “adverse risk selection,” under which insurers bar coverage for preexisting conditions or drop policyholders who become gravely ill.
Such standards would violate one of the great sacred cows of 20th-century American politics-state regulation of insurers. Insurance lobbyists have beaten back every attempt at nationwide standards, preferring to work the 50 statehouses on a divide-and-conquer strategy. Federal health-insurance rules would open the door to federal scrutiny of auto, life and property insurance: longstanding goals of consumer advocates. Expect many, many millions of dollars of your premiums to be spent resisting this development.
How will Congress respond to health-industry lobbying? One hopeful note is the Wofford Factor. Incumbents left Capitol Hill in huge numbers this fall, replaced by candidates who ran on issues like health-care reform. Last year’s old-boy Congress, which retreated in terror before the health lobby many times, might have been too timorous to attempt substantial reform. This year’s group may have the combination of courage and foolishness necessary for the task. If so, the greatest change in health care since the 1965 creation of Medicare may be in store.
GREGG EASTERBROOK
MEDICAL CARES
The medical-industrial complex is the most powerful interest of all:
Push: Universal coverage, which doctors and hospitals call a moral imperative. (It’s also more money for them.)
Block: Government-run health insurance; spending caps (which the industry says would mean worse care, less drug research); limiting the income of health professionals.
American Medical Assoc.
Pharm. Manufacturers Assoc.
American Hospitals Assoc.
Health Insurance Assoc. of Am. ..MR0-
‘IRON TRIANGLE’ VETERANS
George Bush whittled from the Pentagon budget in each of his four years as president. Bill Clinton, eager to avoid being painted as another soft-on-defense Democrat, stayed quietly on Bush’s heels during the fall campaign. What little he had to say about defense policy heavily overlapped Bush’s message. His proposed five-year, $1.3 trillion Pentagon budget is only 5 percent smaller than Bush’s. While Clinton proposed deeper troop cuts in Europe and a new commitment to retraining laid-off defense workers for the civilian job sector, both men offered essentially the same pared-down vision of the post-cold-war military.
The truth is that both plans merely nibble at the edges of a system in need of fundamental restructuring. To pay for a new domestic agenda and fashion a smaller but highly mobile military for 21st-century threats, Clinton will have to make far deeper cuts. That means fighting the military’s “Iron Triangle,” the cozy alliance of the Pentagon, its contractors and their friends on Capitol Hill. They’re all dug in like battle-hardened infantry:
The defense industry may be hurting, but its political-action committees still ponied up $4.4 million for congressional campaigns in 1992. The money is bound to help certain weapons projects survive. Even some of Clinton’s closest supporters are committed to programs that should be killed. Sen. Sam Nunn backs the $37 billion Protection Against Limited Strikes system (PALS), a poor-mails Strategic Defense Initiative designed to destroy incoming intercontinental ballistic missiles (ICBMs). But PALS won’t be ready in time to deal with the only significant security threat the country faces: the residual arsenal of nuclear weapons in the former Soviet Union. It would be far cheaper to buy the missiles. Ukraine is asking for cash and security guarantees in exchange for the ICBMs it inherited.
The pork barrel will bedevil many proposed reductions. Sen. Strom Thurmond offers a case in point. The ancient South Carolinian has been entitled to the top Republican slot on the Senate Armed Services Committee for years, but yielded it to Sen. John Warner so he could concentrate on other assignments. Thurmond recently said he is now claiming the seat to defend South Carolina from impending cutbacks. The state has 11 military installations, including the complex of air, naval and Marine bases around Charleston, generating $3.6 billion a year in wages and state contracts. And Thurmond certainly won’t be the only member of Congress circling the pork wagons. Pressure will come from other levels of government as well. The Bush administration proposes cutting reserves from their 1987 peak of 1.1 million to 925,000 by 1997. Even this modest decrease has stalled in Congress because of pressure from the nations governors. In many states, reserve pay is a key source of supplemental family income. Clinton is sure to hear from his ex-colleagues if he also pushes for cuts.
A rubric for various lobbies close to the heart of the Democratic Party. Their two biggest military objectives: repealing the ban on gays and allowing women into combat. Clinton risks squandering political capital in Congress and the Pentagon if he is pushed to move too hard too soon on these questions. The debates won’t go away. A presidential commission recently recommended allowing women on some naval warships, but rejected them for infantry and air combat. Clinton bought himself some time by kicking the gay issue over to a yet-to-be-appointed study group. Sooner or later, though, he’ll be forced to deliver.
Armies invariably learn more from defeat than they do from victory. Desert Storm is no exception. While the gulf war stands as an impressive technical triumph, the performance of individual services and weapons systems tells a far more ambiguous story. In a world where mobility will be the key to future military success, it took the army six months to move two corps to Saudi Arabia. Clinton will face considerable resistance in getting the military to take a clear-eyed look at the changes it must make. To force those reforms, he’ll need a defense secretary capable of nothing less than what James Forrestal did when he shaped the military’s cold-war missions in the late 1940s. Despite the many milestones since–including the reductions of the Bush-Powell era–Forrestal’s architecture, designed for a single, now nonexistent Soviet foe, remains largely in place.
It’s difficult to overstate his influence. He’s the most powerful man of the Joint Chiefs since George Marshall–perhaps too powerful for Clinton’s long-term political health. The Bush administration’s proposal for shrinking uniformed forces from 1.9 million to 1.6 million by 1997 is Powell’s brainchild. Earlier this year he insisted that any further reductions would jeopardize national security. But he’s softened his stance recently, acknowledging Clinton’s proposal for deeper cuts–to 1.4 million by 1997. The truth is that both Clinton and the Joint Chiefs will have to face the prospect of more radical reductions. Cutting troops is the quickest way to free up money for domestic programs.
The big showdown is likely to come over any attempt by the newcomers to radically alter the missions of the individual service branches to reflect new budgetary and strategic realities. Powell is likely to resist. He’s working on his own reappraisal of service missions, and sources say it proposes minimal changes. “That’s Colin,” said a senior colleague. “He’s very pro-army and he’s very conservative.” Powell’s term as chairman is up in September. Clinton might want to ease him into a high-level cabinet job. Or the new president may decide that Powell is a power-that-be that he can be without.
JOHN BARRY
DEFENSE MANEUVERS
Seismic changes coming. Services will compete for scarce dollars and try to thwart social reform.
Push: C-17 cargo transport (despite design problems), F-22 fighter, increased role in drug interdiction.
Block: Lifting military ban on gays (top priority), base closures, troop withdrawals.
Sen. Sam Nunn
Rep. Les. Aspin
American Legion/VFW
National Guard Assoc. ..MR0-
DOING BUSINESS WITH BUSINESS
The business lobbies in Washington are awaiting Bill Clinton with roses in one hand-and a war club tucked behind the back in the other. Business, like everyone else, wants to start off right with any new president. Hence the roses. And though he’s a Democrat, Clinton is admired by most business groups for his fix-the-economy-first campaign and for his record of consultation and compromise with business as governor of Arkansas. “This is not Mr. Dukakis coming in,” says William Archey, the No. 2 man at the U.S. Chamber of Commerce. “This is not a Democrat who is knee-jerk adversarial to business.”
But there’s still the war club. During the campaign, Clinton made dozens of social, legal, tax and labor proposals that industry deplores. These include proposals to cap executive pay, raise taxes on the rich, bar the permanent hiring of strikebreakers in labor disputes, restore the closed shop in union contracts and require every business to provide 12 weeks of unpaid family leave annually for any employee. Business claims that these proposals would erode efficiency or ruinously raise costs. Some lobbies will concede certain issues to Clinton. “Family leave and the rich man’s tax are going to pass the new Congress in 20 minutes anyway,” says Jack Albertine, a Washington lobbyist, so “why waste your ammo on a lost cause?” But the National Federation of Independent Business, a grass-roots giant with more than 600,000 members, is conceding nothing. “We’re going to take it issue by issue,” says John Motley, director of federal relations for the NFIB. “We’ll support Clinton where we can, but we will fight him when we must.”
Yet as Clinton starts out, nearly all business lobbies-even the NFIB-are upbeat. The president-elect indicated that he will focus his first 100-day policies on improving economic growth, in part by pushing a temporary investment tax credit, while simultaneously attacking the long-term deficit in the budget. These are the top priorities of business, too. “He’s addressing our agenda,” says John Ong, chairman of both B.F. Goodrich and the Business Roundtable, the country’s big-business lobby. The manufacturing sector looks to Clinton’s presidency with outright hope. The president-elect vowed to use government to rebuild the U.S. manufacturing base, notes Jerry Jasinowski, president of the National Association of Manufacturers. Jasinowski has been dickering with Clinton aides since early October. “The Clinton administration is going to be quite open to business suggestions. It’ll do anything reasonable to boost jobs, productivity and growth,” predicts Jasinowski.
The high-tech-electronics industry is even happier. Clinton met last summer with Silicon Valley executives, led by John Young of Hewlett-Packard and Roger Johnson of Western Digital, and crafted a subsidy program. He promised to make the 20 percent research-and-development tax credit permanent (worth $1 billion), to establish a high-tech civilian research-and-development agency ($5 billion to $10 billion) and to build a new telecommunications “interstate highway” hooking up all civilian research and educational library computer databases nationwide ($1 billion to $5 billion). “We’re tired of fighting Japan’s corporate state all by ourselves,” says Johnson. “Bill Clinton has a program to get this country moving.”
Some industries are directly in Clinton’s line of policy fire-and they’re openly grousing. Charles DiBona of the American Petroleum Institute notes that Clinton pledged to prohibit production in all big potential oilfields under U.S. control (the Arctic National Wildlife area, offshore California). Clinton also said that he would cut back U.S. oil consumption by 2 million barrels a day by the year 2000 to curb the greenhouse effect. “The domestic oil industry has lost 450,000 jobs in the last decade-72,000 last year alone,” DiBona says. “[Clinton] means more trouble-and worse.” And Clinton vowed to boost the corporate average fuel economy (CAFE) standard from 27.5 miles per gallon to 40 miles per gallon by the year 2000. U.S. automakers, struggling through their third year of red ink, claim they lack the know-how and the cash to meet that goal. What to do? Pray. Mike Stanton, lobbyist for the Motor Vehicle Manufacturers Association of the United States, was heartened by Clintons remarks during a campaign stop in Michigan in early October. When challenged on the new CAFE standard, Clinton “said that he didn’t want to do anything that would cost jobs,” says Stanton. “We find that encouraging.”
If–and when–it comes to a fight with Clinton, the business lobbies are already preparing their strategy: grass roots, grass roots and more grass roots. William Archey of the chamber notes that there will be 110 new lawmakers in the House next year and that domestic policy dominates voter concern, to the total exclusion of foreign policy, more than at any time since 1936. “National security-a president’s showcase–isn’t even in the top 10 issues,” says Archey. “This means power shifts to the Congress, where members will vote the views of the folks back home.” The chamber and the NFIB have elaborate newsletter and wire communications with their members. The nets include computerized telecommunications systems that can trigger letters and phone calls from important local business leaders-within hours if necessary-to every member of Congress on Capitol Hill.
This kind of muscle doesn’t guarantee business victories: congressional Democrats thwarted business interests in numerous votes last year. But the NFIB’s Motley has done his congressional nose count for next year and says that he’s encouraged. He figures that he can count on 165 of the 176 Republicans in the House, as well as an additional 30 conservative Democrats. “This leaves me with one to two dozen votes to scramble up elsewhere when we’re really sweating a vote,” says Motley. “That should be doable on a lot of issues.” Motley hopes that it won’t come to that too often. Despite Clinton’s promises to liberals during the campaign, he’s the only current governor ever to have won an NFIB plaque as a “Guardian of Small Business”–one of the NFIB’s highest awards.
RICH THOMAS
INDUSTRY AGENDA
Business interests will fight hard to protect and expand their tax breaks and subsidies:
Push: A 50 percent capital-gains tax cut for new businesses; a new R&D agency; new subsidies for high-tech projects; overall deficit reduction.
Block: Excise-tax increases; loop-hole-closing on deductions.
Dividend on: Economic stimulus.
Am. Council for Cap. Formation
Am. Business Conference
Business Rountable
Nat’l Assoc. of Manufacturers ..MR0-
WITH FRIENDS LIKE THESE
Saying no to your friends is hard. But if Bill Clinton is truly “a different kind of Democrat,” he will disappoint his liberal allies. They know that. In a rare moment of mutual understanding, liberal interest groups are lying back, respecting Clinton’s difficult balancing act, and not putting the squeeze on him. At least not yet. Sobered by 12 years out of power, these groups have less of a sense of political entitlement. They know how fragile their hold on power is with a president who won because he moved the Democratic Party to the middle. But self-restraint is not a popular virtue among activists of any kind. And the betting is that President Clinton will eventually feel the heat from his progressive friends.
How hard they push for their pet programs and how Clinton handles the onslaught will be a central theme of his presidency. What could save Clinton is the memory of Jimmy Carter being overwhelmed by the demands from his own party. “For those of us who remember, that tempers our sense of expectation,” says former Arizona governor Bruce Babbitt, a contender for a top environmental post. A Carter health-care proposal and legislation curbing hospital costs failed mostly because they weren’t far-reaching enough to please Sen. Ted Kennedy and an array of interest groups. The chance to draft more politically correct bills ended with the election of Ronald Reagan. Clinton’s transition chief, Vernon Jordan, was among Carter’s earliest critics. Then head of the Urban League and a longtime Carter friend, Jordan hurt the new president’s credibility by charging that he had not fulfilled promises made to the civil-rights community.
This time, interest groups are packaging their demands differently. They are avoiding big price tags and tailoring their wish lists to fit Clintons trimmed-down agenda. Their strategy in some key areas:
Teachers are among the Democratic Party’s biggest financial backers and voting blocs. They want Clinton to be the “Education President” that Bush never was and fully fund Head Start, rebuild inner-city schools and turn high schools into technology centers. Clinton supports these goals, but not all at once. The 2 million-member National Education Association is a major player in presidential politics. This year the group gave the Clinton campaign more than $1 million. In 1984, the NEA presented Democratic nominee Walter Mondale with a list of programs that added up to $11 billion. Mondale’s eager acquiescence tagged him as a tool of the special interests and another tax-and-spend Democrat, labels the party is still trying to shake. This time, the NEA’s proposals are more modest. “We don’t have a lock on anything,” says NEA president Keith Geiger. The union may have downsized its dollar expectations. But it still poses trouble for Clinton on philosophical grounds. The NEA opposes public-school choice across district lines, and national service as a way for college students to repay federal student loans-programs at the heart of Clinton’s reform agenda.
The Green Group, a coalition of environmental organizations, recently broadened its franchise to include population-control advocates and the Children’s Defense Fund, where Hillary Clinton is a board member. “If it is narrowly defined as just birds and bees, nobody is going to play,” says Jay Hair, head of the National Wildlife Federation. Environmentalists, who have a strong ally in Al Gore, are biding their time to let Clinton build political capital with Congress and the voters. For now, they are asking for things that don’t cost money: elevating the Environmental Protection Agency to cabinet level; lifting anti-abortion controls on international family-planning programs; convening a summit on the spotted owl controversy in the Northwest. “We don’t want to ruin what could be a good relationship any sooner than we have to,” says Jim Maddy of the League of Conservation Voters. Environmental concerns have never been one of Clintons priorities. But he sees potential in environmental cleanup as an industry of the future.
Clinton promised repeatedly in his campaign to include women in equal numbers in his administration. To help him keep that pledge at all levels, women’s groups are sending long lists of names to the Little Rock transition office. This week the National Political Congress of Black Women will unveil its list to make sure African-American women are represented. Pro-choice groups would like Clinton to press for Freedom of Choice legislation, but he does not want a contentious battle over abortion rights to divert him from his economic agenda. Instead, Clinton is expected to sign executive orders immediately that lift the ban on abortion counseling in federally funded clinics, allow fetal-tissue testing and ease import restrictions on RU-486, the French abortion pill.
In traditional political terms, Clinton “owes” very little to big-city mayors. His campaign was pitched toward white suburban voters, who are now a voting majority. During the campaign, a $35 billion package to revive the cities was treated coolly by Clinton. But the cities should benefit from Clinton’s emphasis on job training and public investment in rebuilding the nation’s crumbling infrastructure. The Rev. Jesse Jackson, who traveled tirelessly to register new voters for Clinton, wants early White House leadership on statehood for the District of Columbia,
Clinton’s best defense is to keep a relentless focus on his economic agenda. And the interest groups understand that: cramming bits and pieces of their agenda into an omnibus economic package will occupy them for the coming weeks and months. But once at the table, will they be able to take no for an answer? Clinton will also face strong opposition from senior citizens’ groups to any kind of deficit-reduction package that includes restraints on entitlements. Many organizations have flourished over the last decade because they had a clear enemy in the White House, but pillorying enemies is a lot easier than promoting patience. If Clinton is to prevail, he must reverse the natural order.
ELEANOR CLIFT
LIBERAL INTERESTS
Clinton won’t play Santa, so liberals will have to restrain themselves:
Push: Freedom of Choice Act, RU-486 approval, fully funded Head Start, inner-city school rebuilding, environmental regulation, NAFTA revisions, striker protection, campaign-finance reform.
Block: School choice, entitlement reform, nonunion national service.
Planned Parenthood, NARAL
National Education Assoc.
Environmental Defense Fund
Ralph Nader, Common Cause
Am. Assoc. of Retired Persons ..MR0-
