obajvia and the transformation of u.s. public policy: … · 2/27/2013 · obama's presidency...

OBAJVIA AND THE TRANSFORMATION OF U.S.

PUBLIC POLICY: The Struggle to ReformHealth Care

Theda Skocpol*Vanessa Williamson**

"The New New Deal—^What Barack Obama can leam fi-om FDR—andwhat Democrats need to do" was the feature story in the November 24,2008 issue of Time magazine, which hit the newsstands not long after thehistoric 2008 elections. A striking mock picture appeared on the magazinecover—showing Obama wearing a fedora and riding FDR-style in an openconvertible car, a cigarette in a silver holder dangling from his grinning lips.The cover story caught the mood of the moment, as many commentatorssuggested that the nation's first African-American president might have thepotential to redirect U.S. public policies in a way comparable to the shift indirection marked by the New Deal of the 1930s. Put another way, it seemedthat the Obama administration and the Democratic Party might begin to usepublic programs and tax measures to mitigate and reverse trends towardgreater inequality that have marked American society in recent decades.Obama's presidency could be pivotal in the same way as FDR and RonaldReagan before him, shifting the role of govemment in U.S. life.

In this article, we first examine why the Obama presidency seemedpoised to redirect U.S. domestic policy and probe the forces working forand against the accomplishment of major transformations. After delineatingthe overall context, we consider in detail the case of health care reform. In aWhite House ceremony on March 23, 2010, President Obama capped ayear-long uphill battle by signing into law the Patient Protection andAffordable Care Act ("Affordable Care"). David Leonhardt, a New YorkTimes columnist, characterized this legislation as "the federal government'sbiggest attack on economic inequality since inequality began rising morethan three decades ago," because it trims tax breaks and business subsidies

t This article was the basis for the Second Annual Edward J. Shoen Lecture, delivered atthe Sandra Day O'Connor College of Law, Arizona State University, on January 21, 2010.

* Theda Skocpol is the Victor S. Thomas Professor of Govemment and Sociology atHarvard University. Her most recent book is HEALTH CARE REFORM AND AMERICAN POLITICS:WHAT EVERYONE NEEDS TO KNOW (2010), co-authored with Lawrence R. Jacobs.

** Vanessa Williamson is a Ph.D student in Harvard University's Department ofGovemment and Social Policy.

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and taxes the wealthy to pay for benefits that "flow mostly to householdsmaking less than four times the poverty level — $88,200 for a family offour people."' The case study of health policy tells us quite a bit about whatit takes to shift U.S. public policies in the direction of enhancing securityfor lower-income and lower-middle-income Americans. Furthermore, wewill look forward, pinpointing the obstacles remaining to the fullimplementation of Obama's Affordable Care Act in a U.S. polity rackedwith partisan polarization and public anxieties about a prolonged economicdowntum. Thinking about what comes next in health policy reveals thecontending forces at work in U.S. domestic politics today.

I. WHY DID ANOTHER NEW DEAL SEEM POSSIBLE?

In late 2008 and early 2009, the U.S. political terrain seemed to haveradically shifted. There were a number of reasons to believe that theNovember 2008 election had opened the door to more than incremental orroutine shifts in U.S. public policy and politics.

First, the election outcomes themselves were remarkable. In terms of thepopular vote, the two presidential elections prior to 2008 were not wondecisively.^ But Barack Obama won quite handily. His margin over thepresidential mnner-up, John McCain, was 53% to 46% in the total popularvote, and 365 to 173 in the Electoral College. At the same time.Congressional Democrats strengthened their margins in both the House andthe Senate—carrying forward a partisan shift that started in 2006.Eventually, midway through 2009, when the protracted court battles inMinnesota were flnally settled, the Democrats plus two Independents endedup with what the media tmmpeted as a "filibuster proof supermajority inthe Senate.^

The 2008 election was also marked by the mobilization of new blocs ofvoters into greater participation, as well as enhanced support for theDemocratic Party. Younger voters raised their level of engagement;African-Americans tumed out in droves to vote for the first African-American presidential candidate; and Latino voters increased their level of

1. David Leonhardt, In Health Bill, Obama Attacks Wealth Inequality, N.Y. TIMES Mar23, 2010, at Al.

2. President George W. Bush's popular vote margins were 2.4% in 2004 and -0 5% in2000.

3. Several races for Senate were still too close to call in the days following the 2006midterm. Over the following weeks, flnal ballot counts gave the Democrats new Senate seats inAlaska and Oregon.

42:1203] STRUGGLE TO REFORM HEALTH CARE 1205

participation and shifted toward a greater margin of support for Democrats."After the November 2008 election, commentators especially noted the agegradient of partisan divisions, and tmmpeted the Democratic Party,preferred by under-45-year-olds, as the party of the future.

Obama also enjoyed an advantage that has been underlined in theresearch of political scientist Stephen Skowronek.^ Obama arrived at thepresidency at a juncture when most Americans of all political persuasionswere disillusioned with his predecessor, George W. Bush, and soured on theeconomic and foreign policy directions the country had taken under thesway of the Republican Party (which controlled both Congress and thePresidency from 2000 through 2006).* For a change-oriented president, thisis the ideal situation: to come to office backed by his own party after thecountry has repudiated his predecessor.'

In addition, some analysts say that it is good for a president who wants touse federal power vigorously to come to office during a deep economicdowntum, when businesses and people are more open to govemment help.^During the original New Deal, President Franklin Roosevelt and theDemocratic Party were able to achieve immense social policy victoriesamidst the massive Great Depression. President Barack Obama took officejust as the country plunged into the deepest economic downtum since the1930s, as a result of an epochal financial meltdown. The advent of thiscrisis helped President Obama and the Democrats build their margins ofelectoral victory against Senator McCain and the Republicans in the 2008election.

Finally, Obama came to office after being unusually straightforward withthe public about seeking to change the direction of federal social and fiscal

4. Conor Dougherty, Minority Turnout Was Critical to Obama's Election, Data Show,WALL ST. J., Jul. 21, 2009, at A3, available at http://online.wsj.com/article/NA_WSJ_PUB:SB124813588601666995.html; Mark Hugo Lopez, How Hispanics Voted in the 2008 Election,PEW RES. CENTER, NOV. 5, 2008, http://pewresearch.org/pubs/1024/exit-poll-analysis-hispanics.

5. STEPHEN SKOWRONEK, THE POLITICS PRESIDENTS MAKE: LEADERSHIP FROM JOHN

ADAMS TO BILL CLINTON (1993).

6. Dan Balz & Jon Cohen, Poll Finds Americans Pessimistic, Want Change: War,Economy, Politics, Sour Views of Nation's Direction, WASH. POST, Nov. 4, 2007, available athttp://www.washingtonpost.com/wp-dyn/content/article/2007/ll/03/AR2007110301306.html;Posting of Megan Thee to N.Y. TIMES BLOG, http://thecaucus.blogs.nytimes.com/2008/10/14/poll-record-high-for-wrong-track-rating/(Oct. 14,2008, 15:41 EST).

7. Posting of Johanna Neuman to L.A. TIMES BLOG, http://latimesblogs.latimes.com/presidentbush/2008/11/unpopular.html (November 4, 2008, 07:54 EST).

8. Robert Kuttner, Obama's Economic Opportunity, AM. PROSPECT, Dec. 23, 2008,available at http://www.prospect.org/cs/articles?article=obamas_economic_opportunity; GeorgePacker, The New Liberalism: How the Economic Crisis Can Help Obama Redefine theDemocrats, NEW YORKER, Nov. 17, 2008, available at http://www.newyorker.com/reporting/2008/11/17/081117fa_fact_packer.

1206 ARIZONA STATE LAW JOURNAL [Ariz. St. L.J.

policies. During the general election and the interminable Democratic Partyprimaries, Obama spoke about redistributive issues in a way highly unusualfor any Democratic presidential nominee in recent memory. He talked quitefrankly about the need to do more to help average Americans, and he didnot even back off from the proposition that rich families, making more than$250,000 a year, should pay higher taxes. No Democratic presidentialcandidate since the ill-fated Walter Móndale has been willing to talk soopenly about raising taxes.

II. CAVEATS AND OBSTACLES TO CHANGE

Even at the height of speculation over a possible "New New Deal," someof the fundamental findings of American political science suggestedcaution. Electoral outcomes tend to swing back and forth, especially inmidterm Congressional elections when one party has control of thepresidency and both Houses of Congress.' Older, richer, and whiter voters,moreover, are the ones most likely to appear at the polls in mid-termelections—and these were, all along, the demographics least enamored ofBarack Obama.'" In addition, it has long been well documented in surveyresearch that Americans are ideologically cautious about strong govemmentor governmental activism. From the very beginning of mass surveys,researchers have noted that if you ask Americans abstract questions such aswhether they believe in the govemment or the market, the resoundinganswer is the free market." However, if you ask them specific questions,such as whether they support Social Security, education payments or similarprograms, and so forth, they tend to support active government.'^

9. In midterm elections between 1934 and 2006, the President's party lost an average of25.8 House seats and 3.4 Senate seats. In years where the President's party controlled bothhouses of Congress, the average loss in midterm elections was 32.4 seats in the House and 3.9seats in the Senate. Calculated from data in John T. WooUey & Gerhard Peters, Seats inCongress Gained/Lost by the President's Party in Mid-Term Elections, AMERICAN PRESIDENCYPROJECT, UNIV. OF CAL. SANTA BARBARA, http://www.presidency.ucsb.edu/data/mid-tenn_elections.php (last updated Oct. 2, 2010).

10. Gregory A. Caldeira, Samuel C. Patterson & Gregory A. Markko, The Mobilization ofVoters in Congressional Elections, Al J. POL. 2, 490-509 (1985); Raymond E. Wolfinger,Steven J. Rosenstone & Richard A. Mclntosh, Presidential and Congressional VotersCompared, 9 AM. POL. RES. 2, 245-56 (1981); Timothy Noah, What We Didn't Overcome,SLATE, NOV. 10, 2008, http://www.slate.com/id/220425I.

11. Arthur C. Brooks, America's New Culture War: Free Market vs. Government Control,WASH. POST, May 23, 2010, available at http://virww.washingtonpost.com/wp-dyn/content/article/2010/05/21/AR2010052101854.html.

12. For instance, 86% of Americans oppose reductions in Social Security spending, and82% oppose reductions to education spending. TiME/Abt SRBI Poll, Jul. 15, 2010,http://www.srbi.com/Economy_Poll.html.


Americans have long been philosophical conservatives and operationalliberals.'^ This remains tme and means that, even if the public may approveof many steps taken by President Obama and the Democrats, the refiexiveanti-government worries of Americans can also be invoked by the politicalopponents of new measures.

During the first few months of the Obama presidency it appeared that theoptimists, those who thought that this was a moment for major changes,were probably right. Obama started out with sky-high public approvalratings,"* and quickly persuaded Congress to pass the American Recoveryand Reinvestment Act (the so-called "Stimulus"). The Stimulus was not aslarge or as bold as progressives wanted to see, but nevertheless injectednearly a trillion dollars into the economy and included "down payments" onnew policy initiatives in education, clean energy production, and healthcare.'^ In health care, the fledgling Obama Administration also quicklysigned into law expansions of health insurance for children, a bill that hadbeen vetoed under President Bush. Moreover, the first Obama budget was abold and readable document, not the usual snoozy bureaucratic treatise. Itoutlined a very broad vision of how the new president planned to addressmajor issues in education, health care, energy, and the environment. Itcalled for regulatory shifts and new directions in taxing and spending—away from providing subsidies to favored private industries and tax cuts forthe very wealthy and toward broadening access to higher education,stimulating K-12 school reform, paying for health insurance for allAmericans, and encouraging a new kind of environmental and energypolicy.

But from the early weeks of the Obama presidency, there were also signsthat changing directions in these ways would not be easy. With the nationaleconomy plunging into recession, the Republican Party neverthelessdecided to mount vigorous opposition to President Obama's leadership. TheWhite House devoted a major portion of the original Stimulus legislation totax cuts for businesses, but in retum got virtually no votes fromCongressional Republicans, even as their home states clamored for fiscalrelief As the months went by. Republican opposition hardened andgrassroots populist movements arrayed under the banner of the Tea Party

13. LLOYD FREE & HADLEY CANTRIL, THE POLITICAL BELIEFS OF AMERICANS 51-58

(1967).14. For instance, a Gallup poll conducted in the days after Obama's inauguration found a

68% approval rating, a 12% disapproval rating, with 21% undecided. Lydia Saad, Obama StartsWith 68% Approval, GALLUP, Jan. 24, 2009, available at http://www.gallup.com/poll/113962/obama-starts-job-approval.aspx.

15. Posting of Paul Kmgman to N.Y. TIMES BLOG, http://kmgman.blogs.nytimes.com/2009/02/07/what-the-centrists-have-wrought/ (Feb. 7, 2009, 17:36 EST).


took to the streets to excoriate the President and federal initiatives beingdebated in Congress.

Though the press has emphasized Obama's "supermajority" in theSenate, the Democratic majority was not that remarkable by historicalstandards. Throughout his presidential term, Jimmy Carter had a strongerSenate majority than Obama, and Bill Clinton started his first term withfifty-seven Democratic Senators. FDR and Lyndon Johnson had muchlarger majorities to work with when they pushed through far-reaching socialprograms—though back then many Democrats were southem conservatives.In any case, almost a year to the day after he was inaugurated, Obamawatched his nominal supermajority disappear, as Tea Party darling ScottBrown scored an upset victory over Martha Coakley to take the Senate seatformerly held by deceased liberal champion Ted Kennedy. This happenedin the nation's most liberal and reliably Democratic state. Blue-collarworkers disaffected by a sluggish economy and worried about health carereform bills up for debate in Washington, D.C. gave more of their votes toScott Brown than to the Democratic nominee. ' Apparently, the "New NewDeal" that appeared possible in eariy 2009 was dead in its tracks by early2010. This included comprehensive health care reform, which had beendebated in Congress for nine months and was on the verge of finalenactment when Scott Brown won the Massachusetts Special Election andpromised to go to Washington and block final passage (as the 41stRepublican vote needed to sustain a filibuster in the Senate).

III. COMPARING TWO "NEW DEAL" PERIODS

Comparisons across time to that first New Deal can ñirther deepen oursense of the obstacles Obama and the Democrats of 2009 and 2010 face. Acmcial difference has to do with the timing of economic crisis relative to thearrival of a change-oriented Democratic president in 1933 versus 2009.FDR took office several years into the Great Depression, when the U.S.economy was at a nadir, unemployment was peaking at nearly 25%, and thenation was begging for strong federal action.'^ But Obama took officeamidst a financial crisis and just as a massive recession was starting.Because FDR took charge at a moment of despair. Congressional

16. Stephen Ansolabehere & Charles Stewart III, State ofi the Nation: What happened inMassachusetts, BOSTON REV., Mar./Apr. 2010, available at http:/^ostonreview.net/BR35.2/ansolabehere stewart.php.

17. There was no official unemployment rate calculated by the govemment in the 1930s.An analysis of different methods for gauging interwar unemployment can be found in GeneSmiley, Recent Unemployment Rate Estimates fior the 1920s and 1930s, 43 J. ECON HiST 2487-93 (1983).


Democrats and Republicans alike, southemers and northemers alike, votedfor emergency bills he proposed before they even saw the written texts! ' Incontrast, Obama's steps to spur recovery met united Republican oppositionin Congress determined to "just say no" to anything he favored.

This was a cold-blooded political bet by Republicans, made possiblebecause the Great Recession was just starting, and it came on the heels ofthe Wall Street bailout undertaken by the outgoing Bush Administration.The bailout was unpopular and Congressional Republicans who had largelysupported it under Bush saw a chance to pin the bailout on Obama (indeedto try to convince the public that the bailout and the stimulus were one andthe same)." Republican strategists also knew that unemployment wasstarting to skyrocket, and would remain high for a long time. Ifunemployment were to remain high all the way to November 2010,Republicans hoped to position themselves as the only altemative toDemocrats. They did not want to be partners in early recovery steps. ForObama, it was as if he had to hold hands with Herbert Hoover, because ofthe timing of the economic downtum relative to his inauguration, andbecause his administration was of necessity involved in the early steps tostabilize Wall Street. Obama and the Democrats ended up facing the anxietyof Americans over a steep and stubbom Great Recession, without benefitingfrom the sort of boost in support for federal activism that FDR and hisCongressional allies enjoyed at the depths of economic troubles in the1930s. Obama also inherited a huge federal budget deficit from George W.Bush, who waged wars and expanded Medicare benefits at the same timethat he pushed through a huge tax cut for the wealthy.^" Deficit worrieshave only grown under Obama, given that the price tag of the economicrecovery measures was more or less forced upon him by the previousadministration.

The partisan and media climates of the mid-1930s versus 2009-2010also differed in telling ways. Both President FDR and President Obama

18. JAMES T. PATTERSON, CONGRESSIONAL CONSERVATISM AND THE NEW DEAL ch. 1

(1967).19. Fifty-three percent of Americans opposed the economic bailout plan passed under

President Bush, according to an October 2008 CBS News/New York Times poll. Press Release,CBS News/N.Y. Times, Amid Doubts About the Bailout Plan, Record Numbers Think theCountry is Headed in the Wrong Direction (Oct. 14, 2008), available athttp://www.cbsnews.com/htdocs/pdf7Oct08b-economy.pdf

20. Because of the wars in Iraq and Afghanistan, the economic downtum and the Bush taxcuts, the S 1.4 trillion deflcit for FY2009 was already estimated at well over SI trillion onJanuary 7, 2009—two weeks before President Obama's inauguration. Kathy Ruffing & JamesR. Homey, Critics Still Wrong on What's Driving Deficits in Coming Years, CTR. ON BUDGET &POLICY PRIORITIES, Jun. 28, 2010, available at http://www.cbpp.org/cms/index.cfm?fa=view&id=3036.


tried to use the new technologies of their time to talk directly to theAmerican people. Facing nearly unanimous opposition from the editorialboards of major newspapers, FDR regularly used "fireside chats" on theradio to get into the ears of ordinary Americans. President Obama postedhis speeches on YouTube for broad viewing by millions of Americans at theclick of the mouse. He has also bypassed media filters by reaching outdirectly to the American people in television appearances and interviews.But here the similarities end. Partisan polarization between Republicans andDemocrats is much more extreme now than it was in the 1930s. In theRoosevelt era, there were liberal Republicans and a large bloc ofconservative Southem and Midwestem Democrats. Now conservatives andliberals are almost entirely sorted out along party lines. Democrats,moreover, encompass a wide spectmm, from conservatives throughcentrists to liberals, while Republicans are overwhelmingly—andincreasingly—militant right-wingers.^' This lopsided partisanship ismagnified in the public debate because today's media look for extremevoices and controversy and even mainstream outlets look for "balance"between the two parties. The end result is that Obama's Administrationfaces a constant cacophony of highly publicized right-wing condemnations,above all on Fox News, combined with efforts by other outlets to balanceevery Democratic voice, however moderate, with a Republican voice that isoften far more conservative. From the very beginning of his administration,Obama faced opponents who had both the means and the will quickly todisseminate colorful and vivid messages to disparage the president and hisparty. By March 2009, Republican strategist Dick Morris's reference toObama as a "Socialist" was part of a common refrain.

The biggest difference between the 1930s and now—and the one thatmatters most as we move toward analyzing the effort to implement health-care reform—is in the nature of preexisting domestic policies. In the 1930s,the New Dealers in Congress and in the FDR Administration wereadvocating new kinds of federal-government interventions, includingfinancial regulations; labor regulations such as minimum wage andmaximum hour mies; new social benefits such as Social Security,unemployment insurance and welfare payments; and new regulationsfacilitating labor union organization. Before the Great Depression, the U.S.federal govemment was very active in economic and social affairs onlyduring major wars, so the New Dealers were advocating a series ofinnovative, permanent peacetime interventions. They were selling such new

21. For an analysis of the rise in partisanship, see JACOB S. HACKER & PAUL PIERSON, OFFCENTER: THE REPUBLICAN REVOLUTION AND THE EROSION OF AMERICAN DEMOCRACY 25-106(2005).


federal interventions in a profound economic emergency. Conversely,Obama and his Democratic majorities promised new frameworks for theU.S. economy and social programs—^but not first-time interventions. Theycame to office following a half century of previous accretions of pervasiveregulatory and fiscal interventions into society and the economy. And theyhave pushed policy changes even as they used federal spending to prevent afull-blown collapse into economic recession.

You can tum on the television almost any day and hear pundits declarethat we, in the early twenty-first century, are fighting about "govemment"versus "the market." This is very misleading. Over the past six decades.Democrats and Republicans alike,in Washington, D.C. have sponsored andpresided over steady increases in taxes and tax subsidies, regulatoryinterventions, social spending, and the like. Both parties have participated inthe building up of a massive, ramified, expensive, and pervasive subsidyand regulatory state. ^ It is tme that, on the margin. Democrats tilt the taxadvantages and subsidies to the working and middle classes, and it iscertainly tme that Republicans, since 1980, have mainly tilted thosesubsidies and advantages toward favored industries and very wealthytaxpayers. But neither party has really cut back. Every region of the UnitedStates, and every industry and social sfratum, has a stake in some aspect ofexisting federal interventions into the economy and the society.

So when a change-oriented president, like Obama, arrives inWashington, D.C. aiming to transform, in some big way, the scale andredistributive impact of federal-government interventions, he is not startingfrom scratch like FDR and the New Dealers. He is asking some people whoare already the beneficiaries of regulatory advantages, govemmentalsubsidies or benefits, or tax breaks to accept changes so that hisadministration can free up resources to devote to new purposes, especiallyto programs that benefit average Americans. We will spell out some veryspecific examples below, but overall, this has been the situation during 2009and 2010: Very wealthy Americans have been asked to give up tax breaksenacted by the Bush Administration; labor unions have been asked to acceptreductions in tax privileges for health-insurance plans they have negotiatedfor their members; and many industries have been asked to give up specialfederal subsidies—in all of these instances, so that new programs foreconomic stimulus or to help average Americans can be funded, withoutsimply adding to the long-term federal budget deficit. A "logical" economiccase is always made by the White House for the trade offs it recommends.But no interest group likes to give up advantages it has enjoyed. Those

22. See THE TRANSFORMATION OF AMERICAN POLITICS: ACTIVIST GOVERNMENT AND THE

RISE OF CONSERVATISM (Paul Pierson & Theda Skocpol eds., 2007).


asked to give up something will be quite alert to their potentialdisadvantage, and quick to mobilize against change. On the other hand,people who might benefit from rearrangements in some hypothetical futureare likely to be skeptical, and certainly not yet concretely accustomed to thenew advantages they could enjoy. The disparity of mobilization onlybecomes worse when the previously advantaged are wealthier and/or betterorganized, while the potential beneficiaries are lower- or lower-middle-income Americans who may not even vote regularly.

This dilemma has bedeviled Obama's efforts to redirect federal spendingand tax policies to help low- and middle-income Americans, although thereare some policy realms where change has been a bit easier than in others.For instance, Obama's pledge to end President Bush's tax breaks for thevery wealthy does have the advantage of comparative political simplicity.To fulfill his promise, all that is required is for Congress to take no action,because (as a device to hide their long-term cost to the federal treasury, anumber of President Bush's tax-cut provisions were set to expireautomatically at the end of 2010). Even so. Congress is arguing at lengthover this change, which a solid majority of American voters supports, and itis not easy for Obama to keep even Democrats in Congress from voting toextend tax breaks to the very wealthy. ^ What is more, in most of the policyareas where Obama aims to move federal policies in new directions, hecannot just use "expiration dates" to get things done. Especially if theObama White House wants to control costs, it necessarily must proposehigher taxes on the privileged or cut backs in subsidies or benefits toentrenched interests, in order to free up resources for new social measures.

Loans for higher education may provide a useful example. The UnitedStates has fallen to eleventh place in the proportion of our youthfulpopulation that has completed at least secondary education. '* In large partthis is because the cost of college is too high or too unpredictable for lower-income and lower-middle-income families. Over recent decades, moreover,federal and state higher-education subsidies have been diverted towardmiddle-class families and away from grants to lower-income students.^^Federal monies have also been used to ensure the profits of the middlemenwho lend to students. If students, after college, fail to repay their loans, thefederal govemment covers the loan, allowing the banks to reap interest

23. Alexander Bolton, Dems May Keep Bush Tax Cuts, THE HILL, Jul. 22, 2010, availableat http://thehill.eom/homenews/house/l 10251-tax-hikes-may-wait.

24. ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT, EDUCATION AT A

GLANCE 2009: OECD INDICATORS 29 (2009), available at http://www.oecd.org/edu/eag2009.25. See, e.g., Michael Mumper, The Future of College Access: The Declining Role of

Public Higher Education in Promoting Equal Opportunity, 585 ANNALS AM. ACAD. POL. &Soc. SCI. 97, 97, 104, 108-12 (2003).


payments on an essentially risk-free loan. A key Obama Administrationproposal was to get rid of these guaranteed profits to private bankers, andhave the govemment deliver loans directly to students through the colleges.This would save tens of billions of dollars a year. Obama further proposedto use the savings to extend Pell Grants and lower-cost loans to lessprivileged Americans and to subsidize community colleges. In a way, thiswas a simple idea, almost a no-brainer. Save money wasted on banks thatprovide very little public benefit and redirect the resources toward expandedsocial opportunity. But, of course, banks and their supporters in Congresswere strongly opposed to giving up subsidized profits! For many months,this proposal was stalled in Congress—^unable to overcome a Senatefilibuster, because conservative Democrats, like Nebraska Senator BenNelson, were determined to join Republicans in opposition, in order todefend the established subsidies enjoyed by private lenders prominent intheir states. In the end, a version of student loan reform passed onlybecause, as we describe below, it was bundled with the final steps in healthcare reform in a bill that could pass the Senate, as well as the House bysimple majority.

The instance of higher-education funding illustrates the difficulty oflegislating even a modest redirection of existing federal expenditures, awayfrom subsidizing easy profits and reinforcing economic inequalities andtoward expanding opportunity. It does not matter how logical such a shiftseems; it is much harder than creating a new federal program in the firstplace. At this point in U.S. history, any fresh New Deal involvingredirection of federal interventions in an equality-enhancing direction is amuch more fraught undertaking than an original New Deal. Again andagain, this fundamental dilemma appeared in the 2009-2010 stmggle forcomprehensive health care reform, to which we now *

IV. ENACTING COMPREHENSIVE HEALTH CARE REFORM rN AN

ENTRENCHED SYSTEM

Before 2010, powerful entrenched interests had defeated reform inAmerica for almost one hundred years. The first attempt at broad healthinsurance was in the 1910s, but it was scotched by the insurance companiesand the American Medical Association (AMA). The second opportunitycame in the 1930s, when President Roosevelt considered including healthinsurance in the Social Security legislation. It was left out because the AMA

26. The following account is ftirther elaborated and documented in LAWRENCE R. JACOBS& THEDA SKOCPOL, HEALTH REFORM AND AMERICAN POLITICS: WHAT EVERYONE NEEDS TO

KNOW (2010).


again mobilized against it. Harry Tmman's effort to pass "compulsoryhealth insurance"—^probably not the best label—^was derided as socialism.The next effort was in the 1960s, when reformers decided to start onuniversal insurance by introducing a bill that provided coverage for theelderly. This bill faced less opposition because the insurance companies didnot really want to cover expensive, older, sick people—but Medicare didnot lead to insurance for everyone. In fact, it pulled a major voting bloc,seniors, out of the fight for reform and gave conservatives a new scaretactic, convincing the elderly that Medicare might be cut back to pay forother people. In the 1970s, under Nixon and Carter, Democrats refused toaccept a better deal than they would get now. And then there was thespectacular failure in 1993-1994 under Hillary and Bill Clinton that led to aRepublican takeover of the Congress.

Thanks to this century of failed reform, the United States has been leftwith a health care system that is very unusual by intemational standards.Between the late 1800s and the end of World War II, most other advanced,industrial nations created systems of universal health-insurance coverage. InAmerica, a patchwork of policies leaves more than 46 million Americansuninsured. Most working-age people get their health insurance through theiremployers, while federal programs provide coverage for the elderly,military veterans, the poor, and families making incomes a little above thepoverty line. Our nation pays an enormous premium for this inefficient,piecemeal system. The United States spends about twice as much perperson as other major industrial countries do on average, and more thanfifty percent more than the next-biggest spender, Switzerland.^^

The complex system also disguises high risks. For doctors, getting paidrequires filling out thousands of forms, without the certainty that an insurerwill agree to pay. Hospitals have to cope with an unpredictable influx ofuninsured people who appear in their emergency rooms. Many Americans,even those who are insured, face the risk that an illness can wipe out thefamily savings. In fact, catastrophic health care costs are the leading causeof bankruptcy in America. ^

Despite the complexities and costs of the existing private and publicpatchwork that makes up the nation's health care system. Democrats werecommitted to modifying the system rather than replacing it. Manysupporters of health care reform would prefer a "single payer" system likeCanada's, where the govemment handles all payments for health services

27. KAISER FAMILY FOUND., HEALTH CARE SPENDING IN THE UNITED STATES AND OECDCOUNTRIES (2007), available at http://www.kff org/insurance/snapshot/chcm010307oth.cfm.

28. David U. Himmelstein, Deborah Thome, Elizabeth Warren & Steffie Woolhandler,Medical Bankruptcy in the United States, 2007: Results of a National Study, 122 AM. J. MED.741,741-46(2009).


delivered by private doctors and hospitals. Democratic presidents andelected officials may agree that such a system would be more efficient andless costly in principle, but in practice they are not prepared to dismptexisting arrangements between employers and private insurance companies(which are major employers in their own right). So Democrats since the1970s have advocated reforms in existing arrangements. But preserving theemployer core of the system also means taking a very mature system andsimultaneously trying to improve its efficiency while expanding its reach. Itmeans trying to squeeze out the resources to cover the uninsured, whilereadjusting existing institutions to operate more effectively and at lowercost.

This is a heavy lift politically. Most Americans do not believe that youcan pay for 46 million more people and save money at the same time. Nohealth care economists will convince them otherwise. Moreover, manypowerful groups and economic interests have a stake in the cvirrent brokensystem—where one person's waste is another's cherished benefit orcorporate profit. Insurance companies, pharmaceutical manufacturers, andhospital systems all find aspects of the current health system veryprofitable. Unions, too, have a strong incentive to protect the veryexpensive health plans that generations of workers had fought for. Duringthe 2009-2010 health care reform battles, each of these powerful lobbiescould stand in the way of critical legislative provisions. Each interest foundit easy to mn advertisements preying on public skepticism and aiming toconvince people that reform would negatively affect their own health care.

The challenges of a health care fight were certainly clear in the minds ofthe Democrats in Congress and in the White House, especially those whohad lived through the failed reform of the Clinton years.^' One could easilyimagine, particularly given the deepening economic crisis, that health carewould get pushed from the top of the agenda. Yet, Obama declared duringthe campaign and early in his presidency that he would make health carereform a priority in his first term. This was a long-standing DemocraticParty priority, and the competition with Hillary Rodham Clinton in theDemocratic primaries had cemented this issue as something that Obama hadto act on in year one. Within the White House, moreover, fixing health carewas perceived as a necessary component of a larger plan to put the federalbudget in order. So, in the early weeks of President Obama'sadministration, the decision was made to move forward with comprehensivehealth care reform, tackling expanded access and cost controls at the sametime.

29. THEDA SKOCPOL, BOOMERANG: HEALTH REFORM AND THE TURN AGAINST

GOVERNMENT 99 (1997).


The Obama Administration approached health care reform with a three-part strategy. First, the White House outlined only general, popularprinciples to define what health care reform would look like, and left thedetails to Congress. Second, the Administration tried to sideline the likelyopponents of new health care legislation by protecting or replacing some ofthe profits threatened by reform. Finally, the Administration focused on thefinancial aspects of reforming health care policies, promoting far morespecific proposals about how to pay for health care reform rather than howto implement it. Each of these strategies was designed to promotecomprehensive reform in an environment of entrenched opposition.

Featuring broad principles was an attempt to avoid "fighting the lastwar." When President Clinton had sought health care reform, theAdministration had assembled a 500-person presidential commissionheaded by Hilary Rodham Clinton, and presented a 1,342-page document tothe Congress in the fall of his first year in the presidency. The plan was socomplex that nobody could understand it except the interests that weregoing to lose out under the new system. They mobilized very effectivelyagainst the reform. Not only did the entire reform get nixed—legislation didnot make it out of a single committee—but the debacle helped sweep theRepublicans into Congress in the fall of 1994. Determined not to repeat thatmistake this time, Obama decided instead to give speeches outlining broad,popular principles such as widespread access to health care, reliableinsurance, cost containment for business, lower costs for families, and betterbenefits for the uninsured and the elderly. When it came to specificprovisions, such as an individual mandate requiring everyone to purchaseinsurance, expansions of Medicare, or the so-called "public option" to setup competition between public and private insurance plahs for working-aged Americans, the Administration left the fight to CongressionalDemocrats. The aim was to let Congressional committees work outcompromises that could actually pass the House and the Senate.

The Obama Administration did intervene, however, to try to manage anddefuse longstanding interests opposed to health care reform. On March 5,2009, the White House held a fomm on health care reform that includedrepresentatives from insurance companies, doctors, hospital groups, and thepharmaceutical industry. In its talks with the health sector representatives,the White House had some leverage. Health care reform held risks forindustry groups, particularly to the extent that it held down medicalspending, but it also held new opportunities for profits. To the extent thatthe reform would insure more Americans, it also would open up a newcustomer base. So, the Obama Administration worked with the health caresector to get them on board with reform and the strategy worked to aconsiderable degree. By May 2009, six major advocates in the health care


industry signed a letter nominally supporting health care reform andoffering some voluntary cost-cutting measures.^" Though they continued tolobby actively to increase their profits under the new reform, these interestsdid largely avoid the kind of public opposition that derailed the Clintonhealth care reform.

The Obama Administration also had some success getting concessionsfrom popular interest groups. The Obama Administration worked withAARP to ensure seniors received benefits from the health care reform,including the closure of the gap in Medicare prescription-dmg coverage,known as the "donut hole." After a great deal of effort, the Administrationalso convinced the unions to accept some very limited taxes on the mostexpensive health care plans, a policy that Obama himself had opposedduring the campaign. The White House's insistence on including some kindof "Cadillac tax," as this measure was called, was partly about raisingrevenue to finance reform, and even more about creating credible costcontrols for the future.

When it came to asking for other kinds of financial concessions to helpcover the cost of extending insurance, the Obama Administration hadfailures, as well as successes. For instance, early in 2009, Obama proposedto equalize the charitable-tax deduction for wealthy people and less wealthypeople. This measure would reduce Treasury losses currently incurred whenthe wealthy are given more generous deductions for their charitable giving.Again, as with higher education reform, this might seem a logical step totake to squeeze out more resources to help provide health insurance to allAmericans. Even though the research shows that most wealthy peoplewould give almost as much to charities with or without a special deduction,that did not matter.^' Democratic constituencies in the nonprofit communitynixed the charitable deduction proposal right from the get-go. This was aclear-cut instance of supposedly "liberal" groups fighting to retainprivileges, even if that meant less money to help lower and middle-incomeAmericans. The dilemma of reforming an already established system doesnot just pit liberals against conservatives, or against business, but liberalsagainst liberals, as demonstrated by both the fight with the unions over the"Cadillac tax," and the fight with nonprofits over upper-income charitabledeductions.

30. Karen Tumulty, Health Care: The Industry Steps Up. Maybe., TIME, May 11, 2009,available at http://swampland.blogs.time.eom/2009/05/l 1/health-care-industry-steps-up-maybe/.

31. PAUL N. VAN DE WATER, CTR. ON BUDGET & POL'Y PRIORITIES, PROPOSAL TO CAP

DEDUCTIONS FOR HIGH-INCOME HOUSEHOLDS WOULD REDUCE CHARITABLE CONTRIBUTIONS BY

ONLY 1.9 PERCENT 1-2 (2009), available at http://www.cbpp.org/cms/index.cfm?fa=view&id=2700.


So far, we have seen two strategies from the Obama Administration thatserved to appease entrenched opponents of health care reform—compromise with major opponents and fiexibility on the stmcture of reform.The Obama Administration's third strategy was active intervention when itcame to paying for reform. The White House had to make adjustmentsrepeatedly, but they paid continuing attention to the total price tag and thesources of savings or revenues to pay the costs of reform.

For a number of reasons, the "number cmnchers" in charge of thePresident's budget proposal played a prominent role in guiding the ObamaAdministration strategy during the battle for health care reform. Thememory of the Clinton reform effort led Obama's strategists to emphasizethe importance of the Congressional Budget Office (CBO), the nonpartisanfederal agency tasked with calculating the budget impact of legislativeproposals. A bad (i.e., high-cost) CBO "score" can be a death knell for billsin Congress. Moreover, a key player in the Obama Administration wasPeter Orszag, the former CBO director who now mns the White House'sOffice of Management and Budget (OMB). Orszag's significance in thehealth care debate was only increased by his relatively rapid Senateconfirmation at the start of the Obama Administration, as Obama's firstnomination for Director of Health and Human Services, Tom Daschle,foundered. These factors all contributed to the Obama Administration'sfocus on the finance of health care reform.

When it came to financing health reform, Obama was quite specific inhis recommendations. The first Obama budget, released at the end ofFebmary 2009, included more than $600 million in new taxes and cost-cutting measures, intended as a "down payment" on health care reform. InJune 2009, Obama sent a letter to Senate Committee Chairmen Max Baucusand Edward Kennedy, in which he spoke in the broadest terms about whatbenefits should be included in health care reform, but explicitly outliningthe budget cuts and tax increases he would recommend to pay for the bill.For instance, when it came to whether to include an individual mandaterequiring people to have health insurance, Obama told the Senators he was"open" to their ideas. But, regarding cuts to Medicare spending, Obamaspecifically reiterated his budget recommendations and called for "another$200 to $300 billion" in cuts on top of his earlier recommendations.

Focusing on the financing side of health care reform had importantstrategic consequences. First, the cost-cutting provisions helped identify upfront which entrenched interests were going to lose out to make health carereform affordable. Second, Obama's advocacy on the fiinding sources alsoprovided Democrats in Congress with support in the face of heavy industrylobbying, and cleared the way for negotiations. Third, and perhaps moreimportant, Obama set a benchmark in terms of savings that created the room


for some significant expenditures, and therefore expanded the scope ofpossible reform.

FIGURE 1. THE TRAJECTORY OF HEALTH CARE REFORM: MAJOR BENEFITS32

Strongest Provision Weakest Provision

UniversalCoverage

Overallincrease incoveragefrom thecurrent rate(83% of legalU.S. residentsunder 65).^^

OBAMAPRINCIPLES

In his campaign.Obama called for amandate for allchildren to havecoverage.''' Aspresident, hesuggested thatreform should "aimfor universality.'^

HOUSE BILL

HR 3962:Affordable HealthCare for America

Act Passed: 11/7/09

SENATE BILL

HR 3590:Patient

Protection andAffordable Care

ActPassed: 12/24/09

94% covered.

1

FINAL LAW

PL 111-148:Patient

Protection andAffordable CareAct, as amended

by the HealthCare andEducation

ReconciliationAct

95% covered.

32. Unless otherwise noted, summary of provisions are drawn from KAISER FAMILYFOUND., SIDE-BY-SIDE COMPARISON OF MAJOR HEALTH CARE REFORM PROPOSALS (2010),

available at http://www.kff org/healthreform/sidebyside.cfm.33. Lea Winerman, Compare the House, Senate and Reconciliation Bills, PBS NEWS

HOUR, Mar. 19, 2010, available at http://www.pbs.org/newshour/interactive/static/stories/healthcare-comparison.html.

34. OBAMA FOR AMERICA, BARACK OBAMA'S PLAN FOR A HEALTHY AMERICA 5 (2008),

available at http://www.barackobama.com/pdf/HealthPlanFull.pdf35. OFFICE OF MGMT. & BUDGET, OFFICE OF THE PRÈS, OF THE U.S., A NEW ERA OF

RESPONSIBILITY: RENEWING AMERICA'S PROMISE 27 (2009), available at

http://www.gpoaccess.gov/usbudget/fylO/index.html.


Competitionto Make CareMoreAffordable

Support forLow-to-MiddleIncomeAmericans

Thefederalpoverty line(FPL) was setin 2009 at$10,830 for asingle personand $22,050for a familyoffour.

OBAMAPRINCIPLES

Obama supportedthe creation of aNational HealthInsuranceExchange and, ingeneral terms, apublic insuranceprogram tocompete withprivate insurers.

As a candidate,Obama called forthe expansion ofMedicaid andSCHIP programs.In addition, underhis plan,"individuals andfamilies who donot qualify forMedicaid orSCHIP but stillneed assistancewill receiveincome-relatedfederal subsidies tokeep healthinsurancepremiumsaffordable.""

SENATE BILL

Sets up state-basedinsuranceexchangemarketplaces.

Does not include apublic option orremove the healthindustry antitrustexemption.

Kxpand MedicaidU) all under 65with incomes up to133% of the FPL.

To familiesbetween 133 and400% of the FPL,provide tieredpremium credits sofamilies contributebetween 2 and12% of income topaying forinsurance. Tofamilies between100 and 200% ofthe FPL, provide asliding scale ofcredits to cover upto 90% of medicalcosts.

FINAL LAW

Sets up state-based insuranceexchangemarketplaces.

Does not include apublic option orremove the healthindustry antitrustexemption.

36. BARACK OBAMA'S PLAN FOR A HEALTHY AMERICA, supra note 34, at 437. Id

42:1203] STRUGGLE TO REFORM HEALTH CARE Ul\

SupportforYoungAdutts andthe Elderly

EffectiveRegulation

OBAMAPRINCIPLES

Obama supportedclosing the donuthole gap inMedicareprescription drugbenefits,'* andrecommendedallowing those upto age 25 to stay ontheirparents' healthinsurance plans.''

"No American willbe tumed awayfrom any insuranceplan because ofillness or pre-existingconditions."'*'

HOUSE BILL

pcfesl, <äk8^ fe•nâaîH)0 6jste>"°

CMiMte« mm « f <m{Eimw-msM'ißsmMiM<s^ Wo

tmeûmmë ®aiBO¡pmsSmsms& Ägfiip SBSC®

m éíms 'tef (sÈM

pmwste isîaïBaBïs®

um asm «aatoiïïi

«afeaaajñiiísia)

SENATE BILL

Reduces but doesnot close the"donut hole."""

Children can stayon their parents'plans until age 26.

Insurancecompanies cannotcharge more thanthree times asmuch for olderpeople's premiumscompared to thosethey offer youngerpeople.

Prevents insurancecompanies fromcharging womenhigher premiumsthan men,excludingcustomers becauseof a "pre-existing

j condition,"rescinding a policywhen a personbecomes sick.Effective in 2010for children, 2014for adults.

FINAL LAW

Closes the "donuthole" gap inMedicareprescription drugbenefits by2020.-"

Children can stayon their parents'plans until age 26.

Insurancecompanies cannotcharge more thanthree times asmuch for olderpeople'spremiumscompared to thosethey offer youngerpeople.Preventsinsurancecompanies fromcharging womenhigher premiumsthan men,excludingcustomers becauseof a "pre-existingcondition,"rescinding apolicy when aperson becomessick. Effective in2010 for children,2014 for adults.

38. See THE OFFICE OF THE PRESIDENT-ELECT, THE OBAMA-BIDEN PLAN,

http://change.gov/agenda/seniors and_socialsecurity_agenda/ (last visited Oct. 10, 2010).39. BARACK OBAMA'S PLAN FOR A HEALTHY AMERICA supra note 34, at 5.

40. Kathleen Masterson & Mary Agnes Carey, Charting the Future of the HealthOverhaul Bill, NPR, Dec. 24, 2009, http://www.npr.org/templates/story/story.php?storyld=120068329.

41. Winerman, supra note 3 3.42. BARACK OBAMA'S PLAN FOR A HEALTHY AMERICA, supra note 34, at 3.

1222 ARIZONA STATE LA W JOURNAL [Ariz. St. L.J.

FIGURE 2: THE TRAJECTORY OF HEALTH CARE REFORM: MAJOR FINANCINGPROVISIONS

Strongest Provision Weakest Provision

OBAMAPROPOSAL

HOUSEBILL

HR 3962:Affordable

Health Carefor America

Act

Passed:11/7/09

SENATEFINANCE

America'sHealthy

Future Act(as amended

in SenateFinance

Committee)

Announced:9/17/09

None.

SENATEBILL

HR 3590:Patient

Protection andAffordableCare Act

Passed:12/24/09

FINAL LAW

PL 111-148:Patient

Protection andAffordable

Care Act, asamended bythe HealthCare andEducation

ReconciliationAct

Tax increasesfor thewealthiestAmericans.

43. Jackie Calmes & Robert Pear, To Pay for Health Care, Obama Looks to Taxes onAffluent, N.Y. TIMES, Feb. 26,2009, at AI.

44. Letter from Douglas W. Elmendorf, Dir., Cong. Budget Office, to Rep. John D.Dingell, U.S. House of Representatives (Nov. 20, 2009), available at http://www.cbo.gov/ftpdocs/107xx/doc 10710/hr3962Dingell_mgr_amendment_update.pdf.

45. Jeanne Sahadi, Medicare Tax Hikes: What the Rich Will Pay, CNN MONEY, Mar. 25,2010, http://money.cmi.com/2010/03/22/news/economy/medicare_tax_increase/index htm

46. Id

42:1203] STRUGGLE TO REFORM HEALTH CARE

Cuts toGovernment-GuaranteedCorporateProfits

OBAMAPROPOSAL

Reductions inoverpaymentsto insurancecompanies.health careproviders.drug

47

companies.and studentloan bankers.

• . - • \ c_' , \ - ; •

•• ' - - U . •• . V , ' J '

• ; • ' • . \ ^

• . • • ' • • í ' " . • ^ ., • ' ' V ú .

HOUSEBILL

S|Tí¡KaB|*'íftíaíaÉ5ahi'"VI J Ä H S i D S B • , . • : • • ; •

MWkmmm? :

SENATEFINANCE

KedueeMedicareoverspendingby $404billion over

ísÍílilEJftingÍiÍlllfcHÍ tr^nveai';

;|i7/iííia« 'includingM 17 billionfromMedieare.advantage.^'

SENATEBILL

ReduceMedicareoverspendingby S395-$400billion over 10years, including$118 billion insavings fromMedicareAdvantage."'

FINAL LAW

ReduceMedieareoverspending by$390 billionover 10 years.ineluding$136billion insavings fromMedieareAdvantage. "

47. James R. Homey & Paul N. Van de Water, CTR. ON BUDGET & POL'Y PRIORITIES,HOUSE-PASSED AND SENATE HEALTH BILLS REDUCE DEFICIT, SLOW HEALTH CARE COSTS, AND

INCLUDE REALISTIC MEDICARE SAVINGS 2, 4 (2009), http://www.cbpp.org/

cms/index.cfm?fa=view&id=3021.48. Laura Meckler, $318 Billion Tax Hit Proposed, WALL ST. J., Feb. 26. 2009, available

aihttp://online.wsj.com/article/NA_WSJ_PUB:SB123559630127675581.html.49. Letter from Barack Obama, President of the U.S., to Sen. Edward M. Kennedy and

Sen. Max Baucus, U.S. Senate (June 2, 2009), available at http://www.whitehouse.gov/the_press_office/Letter-from-President-Obama-to-Chairmen-Edward-M-Kennedy-and-Max-Baucus/.

50. Masterson & Carey, supra note 40.51. Letter from Douglas W. Elmendorf, Dir., Cong. Budget Office, to Sen. Max Baucus,

Chairman, S. Comm. on Fin. (Oct. 7, 2009), available at http://www.cbo.gov/ftpdocs/106xx/docl0642/10-7-Baucus_letter.pdf

52. Slightly differing numbers are available. See PATRICIA A. DAVIS ET AL., CONG. RES.SERV., R41124, MEDICARE: CHANGES MADE BY THE RECONCILIATION ACT OF 2010 TO SENATE-

PASSED H.R. 3590, (2010), available at http://law.slu.edu/library/research/Reconciliation%20Act%20and%20Medicare.pdf; Masterson & Carey, supra note 40.

53. DAVIS ET AL., supra note 52.


IndustryFees:

Annual feesand taxesaffectinghealth sectorcompanies.

OBAMAPROPOSAL

HOUSEBILL

SENATEFINANCE

SENATEBILL

Note: Originally a separate piece oflegislation, student loan reformwas highlighted by the President in his flrst State of the Union andpassed by the House in September 2009, but stalled in the Senateuntil a version was included with the flnal vote on health carereform.

In May 2009,PresidentObama meetswith healthsectorcompanies, andclaims to havesecuredvoluntarypledges fromthe industry tocut nationalhealth carespending by 1.5percentagepoints eachyear, but theplan lacksdetail."

2.5% tax onmedicaldevices.

Fees iacludean âitsual fe©of $2.3billion fordrugcompanies.$4 billion formedicaldeviceconipames.and $47billion forinsiitracecompanies.Estimatedten-ysarrevenue:$88-93billioa.^

Fees include anannual fee of$2.3 billion fordrugcompanies, $2billion formedical devicecompanies(rising to $3billion after2017), and atiered feesystem forinsurancecompanies:$2Bin2011,$4B in 2012,$7Bin2013,$9B in 2014-2016, and $10Bthereafter.

10% tax ontanning salons.

FINAL LAW

testmcfiFT "'srucient loo'ipfotisï, cuttiiiymidcllcnicr!baakcia (vvliu

gOYcniiucnt-

siudcnt IMIIS).savin-SG!billji.iit over iO

Fees incliiijc i\2.3% tax 00medical dc\ iciH.and a tiered fíesfsftctn for drugand in.surancocoinpaiiies.ImuranceinuLLstr)'paynicjjts ar»;dfitavcd until2ÜÍ4. butP'v:lit*ed topremiumgrowth. I IKSCubacges iavexpert I'd toraise about '>:6Üm»?rc than theSenate bill n\cr10 years.. anJmorothcfMHcr."

54. Letter from Douglas W. Elmendorf, Dir., Cong. Budget Office, to Rep. Nancy Pelosi,Speaker of the House of Representatives (Mar. 20, 2010), available at wwwcbogov/ftpdocs/l 13xx/docl 1355/hr4872.pdf

55. Ceci Connolly & David Hilzenrath, Obama Endorses Health Industry's Goal, WASH.POST, May 12, 2009, available at http://www.washingtonpost.com/wp-dyn/content/article/2009/05/11/AR2009051100263.html.

56. Greg Hitt, Janet Adamy & Jonathan Weisman, Senate Bill Sets Lines for HealthShowdown, WALL ST. J., Sept. 17, 2009, at Al , available at http://online.wsj.com/article/NA_WSJ_PUB:SB125310546537515699.html.

57. Note that this analysis comes from the minority's summary. See Legislative Notice No.35: H.R. 4872—Health Care and Education Affordability Reconciliation Act of 2010, U.S. S.REPUBLICAN POL'Y COMM. (Mar. 22, 2010).


CadillacTax:

Tax ofi themostexpensivehealth plans.

OBAMAPROPOSAL

None. Obamastronglyopposed a taxon health careplans during hiscampaign,attackingSenator McCainfor his supportof such aproposal.

HOUSEBILL

None.

1 SENATE 11 FINANCE 1•••••

•MÊÊÊK^• • •

•SENATE

BILL

^ ^ ^ ^ ^ ^ ^ ^

TirailiBiil

FINAL LAW

On most health .plans valued atover $10,200for an individualor $27,500 for afamily, there isa tax set at 40%of plan value.The provision iseffective as of2018, andlinked toinflation after2020. Estimatedrevenue: $32billion.*"

58. Letter from Douglas W. Elmendorf to Sen. Max Baucus, supra note 51.59. Letter from Douglas W. Elmendorf to Sen. Harry Reid, supra note 59.60. Letter from Douglas W. Elmendorf to Rep. Nancy Pelosi, supra note 54.


Free-riderPenalty:

Penalties onindividualswithoutqualifyingcoverage andlargeemployersnot providingcoverage.

OBAMAPROPOSAL

Obama neverexplicitlyendorsed anindividual oremployermandate, callingonly for a "planthat put theUnited States ona clear path tocover allAmericans."*'In response tothe Committeesplans tointroduce amandate.Obamaemphasized theneed to makeplans affordableto individualsand smallbusinesses. -^

HOUSEBILL

Un insuredwould pav2.5% ol"huu-schotd•4djtai."tedmcome tp locost ofnatinoalpremium

basic plan.

Fmplovcrs

must c-over72.5% ofprciniy-m far

m üidiviÄatlor 65°'j for a

fa-niily, or paySi-;, of payrottinto the

HealthInsuranceExchangeTru.st Fund.funploveiswiili payi'dBless tlianS^OQk arc

cxcmpu andfees are lowerthan 8% f «biis.mes.<«svvith a payrollle^s that!S75ük.

Kstrmtted te»3'ear revenue:SI68bit lio 11.""

SENATEFINANCE

Uninsuredwould pay atax of $750per adult peryear.

Employerswith morethan 50employeesnot offeringcoverage paya fee basedon theaveragenational taxcredit foreachemployeereceiving atax credit, or$400 timesthe totalnumber ofemployees inthe firm.

Estimatedten-yearrevenue: $27billion.^

SENATEBILL

Uninsuredwould pay a taxequal to thegreater of 2%of householdadjustedincome or S750per person upto $2250.Employers withmore than 50employees notofferingcoverage whohave at leastone employeereceiving a taxcredit pay $750per fuU-timeemployee. Ifemployer doesoffer coverage,they must paythe lesser of$3000 for eachtax credit or$750 peremployee.Employersofferingcoverage mustoffer vouchersfor employeesbelow 400% ofthe federalpoverty linewho buy on theexchange.Additional feesfor long waitingperiods forcoverage.Estimatedrevenue: $39billion.*'

FINAL LAW

Uninsured jwould pay a taxequal to thegreater of 2% ofhousehold \adjusted income 'or $695 perperson up to$2085.Employers with [more than 50employees notofferingcoverage whohave at least one :employeereceiving a taxcredit pay$2000 times thenumber of fulltime employeesminus 30. Ifemployer doesoffer coverage,they must paythe lesser of$3000 for eachtax credit or$2000 times thenumber of fulltime employeesminus 30.Employersofferingcoverage mustoffer vouchersfor employeesbelow 400%FPL who buyon theexchange.

Estimatedrevenue: $65billion.**

61.62.

note 49.63.64.65.

See OFFICE OF MGMT. & BUDGET, supra note 35.

Letter from Barack Obama to Sen. Edward M. Kennedy & Sen. Max Baucus, supra

Letter from Douglas W. Elmendorf to Rep. John D. Dingell, supra note 44.Letter from Douglas W. Elmendorf to Sen. Max Baucus, supra, note 51.Letter from Douglas W. Elmendorf to Sen. Harry Reid, supra note 59.


Though progress was painfully slow, the Obama strategy—setting outprinciples, providing a lot of behind-the-scenes budget advice, and lettingCongressional committees do their work—seemed to be proving its worthby late 2009. Relatively similar bills were passed in November 2009 by theHouse of Representatives, and then, finally, just before Christmas, by theSenate. As Figures 1 and 2 spell out, although there were differencesbetween the two houses and between their bills and what the White Houseoriginally outlined, the final House and Senate bills met most of theprinciples the President laid out at the start of the battle for health carereform. These bills increased affordable coverage, provided support forsmall businesses, ended insurers' most abusive practices, and created anational exchange to encourage insurer competition. The House bill wasgenerally considered more liberal—it included a public option, moregenerous benefits, and higher taxes on the privileged. But both bills fellrelatively close to the promises Obama had made during the campaign. Asof the end of 2009, it looked as if comprehensive health reform would soonappear on the President's desk for his signature, after a few compromiseswere worked out between the House and the Senate early in 2010.

V. How SCOTT BROWN THREATENED AND THEN STRENGTHENED

HEALTH CARE REFORM

Even this close to success, reform nearly did not happen. In mid-January2010, a special election was held to fill the Massachusetts Senate seat heldfor decades by a liberal champion of comprehensive health care reform, TedKennedy, who died in the late summer of 2009. The election occurred justafter unseemly deals were stmck to get sixty votes to break a filibuster inthe Senate, and at a time when Americans were increasingly angry about thedeep economic downtum. Facing an inept Democratic opponent, ScottBrown promised to oppose costly deals in Washington, D.C., and offered toprotect Massachusetts, which already has universal health insurancecoverage, from having to pay for benefits for people in other states. Brownwon amidst low Democratic tumout, and with considerable support fromblue-collar workers, whose union leaders had spent the previous monthcomplaining about health care reform provisions that might reduceinsurance benefits for unionized workers. The union leaders persuaded the

66. Letter from Douglas W. Elmendorf to Rep. Nancy Pelosi, supra note 54.


White House to scrap most of these provisions, but the word did not getaround before the Massachusetts election.*^

After the surprise election of Scott Brown in Massachusetts, it lookedlike, once again, health care reform would fail. Because of the filibusterthreat—an evolution of Senate procedure unintended by the FoundingFathers*^—major legislation required a sixty-vote supermajority to moveforward.*' Brown's election made him the forty-first Republican, giving theRepublican minority the capacity to torpedo legislation without the supportof a single Democrat.

For a time, the Democrats seemed paralyzed, despite their still sizablemajorities in the House and the Senate. In due course, however, the Brownvictory in Massachusetts spurred Democrats to finish a bolder and morecomprehensive health care reform. Provoked in part by the announcementof huge insurance rate hikes that reminded the public of the need for somenew legislation to rein in insurance companies, the President took the leadat a public health care summit convened in late February 2010. For the firsttime. President Obama advocated a ftiUy fleshed-out legislative approach—including, not coincidently, the very provisions upon which the House andSenate bills already agreed upon. In taking responsibility for finishinghealth care reform, Obama gave the Democrats in Congress the cover theyneeded to put together a negotiated agreement between the House andSenate Democrats.

Under this agreement, the House would vote for the Senate's version ofthe bill and then pass a second "sidecar" bill that included a list of agreed-upon fixes and improvements. The House Democrats received a publicpromise from over fifty Senate Democrats to support the sidecar bill, whichthey could pass with less than sixty votes by a process known as"reconciliation." Reconciliation is an established procedure by which fiscalbills can avoid filibusters; when in the majority. Republicans haverepeatedly used reconciliation to pass tax cuts and other policy priorities.

Ironically, the election of Scott Brown gave Congressional Democratsthe leeway to use reconciliation. This meant that a majority, instead of asupermajority, could enact a more progressive reform. Though thereconciliation procedure did not allow changes in administrative orregulatory aspects of the health care reform bill passed by the Senate in late2009, it did enable adjustments in fiscal matters. In addition to removing a

67. As late as January 12, 2010, the President of the United Steel Workers made anappearance on Fox Business News to oppose the "Cadillac tax." (Fox Business Networkbroadcast Jan. 12, 2010).

68. SARAH A. BINDER & STEVEN S. SMITH, POLITICS OR PRINCIPLE? FILIBUSTERING IN THEUNITED STATES SENATE 33 (1997).

69. Id.


number of special deals, such as the Comhusker Kickback that the Senatehad used to get Ben Nelson's vote in December 2009, the sidecar billreduced and delayed the "Cadillac tax" on generous employee health plans,increased taxes on health care industries, and imposed higher taxes on thewealthiest Medicare beneficiaries. The final bill also included the studentloan reforms that were stalled due to the Senate filibuster. This had theeffect of moving federal dollars from the pockets of bankers to its intendedbeneficiaries, the students. It also allowed some of the savings from reducedbank subsidies to cover health care refonn costs and reduce the long-termfederal budget deficit. Thanks in part to this progressive measure, the CBOprojected that health care reform would actually cut the federal deficit. Thefinal health care reform bills, passed in late March 2010, had a muchstronger redistributive component than the Senate legislation passed in2009. Scott Brown's election, therefore, backfired on his promoters becauseit not only failed to prevent the enactment of health care legislation, but itmade the legislation more generous toward average Americans and shiftedcosts toward the wealthy.

After some intricate maneuvering by Senate Majority Leader Harry Reidand House Speaker Nancy Pelosi, the House and Senate Democrats finallyhad the votes to pass health care reform, without the support of a singleRepublican. The House passed the Senate's health care reform by a vote of219 to 212 and the sidecar bill by a vote of 220 to 211. The Senate, after aweek of wrangling and delays, passed the reconciliation bill by a vote of 56to 43. On March 23, 2010, several hundred people crowded into the EastRoom of the White House to watch President Obama sign into law thePatient Protection and Affordable Health Care Act. One week later, hesigned the sidecar bill, and comprehensive health care reform was finallycomplete. It was a major victory for Obama, who had declared at the verystart of his campaign for the presidency, "I will judge my first term asPresident based on the fact on [sic] whether we have delivered the kind ofhealth care that every American deserves. . . ."™ The enactment ofcomprehensive health care reform was also extraordinary against thebackdrop of the previous century of failed efforts to accomplish similarchanges in U.S. health care.

70. Baraek Obama, Candidate for President of the United States, Remarks at "NewLeadership on Health Care: A Presidential Forum" (Mar. 24, 2007), available athttp://www.kaisemetwork.org/health_cast/uploaded_files/032407_CAP_Healthcare_transcript.pdf


VI. THE NEXT BATTLES OVER REFORM IMPLEMENTATION

In many ways, the enactment of the new laws in March 2010 marked abeginning, not an end, a promise of accomplishment, not a fait accompli.Like Social Security and Medicare, Affordable Care is likely to faceobstacles and redirections long after passage of the legislation itselfLooking at the response, so far, to the passage of health care reform, we candiscem the likely outlines of the upcoming battles over implementation.^'

After a year of conftising and ugly legislative wrangling, the public'ssupport for the new legislation is lukewarm, while on the far right, there issignificant motivation to repeal the legislation entirely. Analyst Nate Silverlooked at multiple national polls conducted after the passage of health carereform and concluded that the bill itself had received a small bump insupport and that the Democrats were doing "marginally better," at least incomparison to their terrible approval ratings as health care reform appearedto stall out.'^ There was no overwhelming shift in support towards the newhealth care law, nor towards its proponents. Among the conservative base,however, the repeal of health care reform quickly became a rallying cry.

Within hours of the passage of health care legislation, more than a dozenconservative state officials, most of them running for office in the 2010election, rushed to court to argue that the new laws are unconstitutional, andthe ranks of challengers grew in subsequent weeks. Republicans inCongress promised their supporters a complete repeal of the newlegislation. For the midterm election, when turnout is heavily dependent onthe party faithful, this could be an effective strategy. In any case, the historyof incumbent losses in midterm elections suggest that the Democrats arealmost guaranteed to lose seats in 2010, particularly in light of thestruggling economy. A motivated Republican base could hand a major lossto Congressional Democrats, perhaps large enough to cede control of theHouse or the Senate to the Republicans, or at least spook conservativeDemocrats into derailing health care implementation.

By the summer of 2010, cautious majorities of the American public seemmore amenable to "wait and see" than total repeal. Many concrete stepshave ah-eady been taken to implement the health care bill throughnegotiations between the Obama administration and the health insurancecompanies. Even if Republicans win resoundingly in the fall 2010Congressional elections. President Obama would likely veto any outright

71. See Theda Skocpol, The Political Challenges That May Undermine Health Reform, 29HEALTH AFF. 1288,1288-92 (2010).

72. Nate Silver, Are Democrats Better Off for Having Passed Health Care? Yes—and No,FIVETHIRTYEIGHT, Mar. 25, 2010, http://www.fivethirtyeight.com/2010/03/are-democrats-better-off-for-having.html.

42:1203] STR UGGLE TO REFORM HEALTH CARE 1231

repeal legislation. Presumably, Republicans can elect a President in 2012and then try to repeal the health care reform bill. But by then, manyAmericans will be accustomed to new insurance regulations that protectpatients. For instance, Americans twenty-six and under will enjoy stayingon their parent's health plans; older Americans will enjoy enhancedprescription drug coverage under Medicare; and millions of lower andlower-middle income Americans will have health coverage throughMedicaid or by purchasing plans on the new health insurance exchanges.Some Republican strategists publicly expressed concems that pushing for arepeal might alienate moderate voters, especially after the quickimplementation of visible and popular provisions."

Instead of repeal, gradual chipping away at tax, regulatory, and benefitprovisions is more likely. Many of the most redistributive policies in thehealth care reform package do not come into effect until 2014. Possibly thetax increases on the wealthy and the subsidies for lower-income Americanscould shrink before they materialize, if Congress dominated by Republicansor by Republicans and conservative Democrats, take a series of quietactions to modify the reform framework enacted in 2010.

In the end, much of the fight over implementation is likely to happen in aless-visible arena: the states. Affordable Care, in its final version, called forstate-level health insurance marketplaces, rather than creating a nationalexchange. In states dominated by conservatives and where administrativecapacity is weak, it will be relatively easy for lobbyists to undercutAffordable Care's new consumer protections. On the other hand, in stateswith strong progressive majorities, highly effective health insuranceexchanges that can serve as models to other states may be possible. Theeffectiveness of the health insurance exchange provision, therefore, is likelyto vary across state lines. It may take years before we know whetherparticular state solutions to widespread problems of access and cost canserve as a model for additional states or the nation as a whole.

VII. CONCLUSION

Regardless of how the future implementation struggles play out, thepassage of the Affordable Care legislation in 2010 is a remarkableachievement, enough to support a claim that President Obama and theDemocrats in Congress from 2009 to 2010 have fashioned parts of anotherNew Deal. In a highly partisan atmosphere, in the midst of a burgeoning

73. Christina Bellatoni, Republicans Back Off Health Care Repeal Pledges, TPMDC, Apr.1, 2010, http://tpmdc.talkingpointsmemo.com/2010/04/republicans-backing-off-health-care-repeal-pledges.php.


economic crisis, and with a smaller majority compared to other Democraticpresidents who have pushed through major social reforms. President Obamapiloted through a sea of entrenched interests and secured a wide-rangingand remarkably progressive health reform bill that draws resources from theprivileged in order to spread access to affordable health insurance to mostof the U.S. citizenry. But, Affordable Care is merely a blueprint, and thebitter politics of comprehensive health care reform continues. In the comingmonths and years, we will see to what extent the promise of AffordableCare can be made a reality.

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