A Look at Program's History Can Tell Us How to Save It Medicare at the crossroads PRO

July 30, 1995|By THEODORE R. MARMOR

The Medicare program, budget deficits and maneuvering for the next presidential race have once again come into intense and very public conflict. The partisan fight has left the country bewildered by a mix of crisis talk, fact-throwing and ideological name-calling.

In May, President Clinton publicly rejected the suggestion of House Speaker Newt Gingrich that Medicare's forecasted budget be reduced substantially (about $270 billion) to "save" the valued but beleaguered program. The president also has rejected the "remedy" of a bipartisan national commission proposed by Senate Majority Leader Bob Dole, an announced contender for the Republican presidential nomination. The president finds himself on the defensive, criticizing Medicare's "attackers" but not explaining his own position. The Republicans find themselves caught among conflicting promises: to enact tax cuts, to balance the budget and to "protect" Medicare (and Social Security). It is no wonder the debate has been confusing.

Not only is this confusing, but it is familiar. In the 1992 presidential campaign there was a brief but heated flap over a Bush administration proposal to reduce federal spending on Medicare and Medicaid by about $260 billion between 1993 and 1997. Candidate Bill Clinton said the policy would eviscerate Medicare. It also would increase the shifting of medical costs to employment-based health insurance and lead to millions of lost jobs. The Bush campaign, while charging the Democrats with familiar scare tactics, nonetheless distanced President Bush from the flare-up. Mr. Bush called the proposal, which was publicly linked to Budget Director Richard G. Darman, merely one "option." And, with that, Medicare politics faded from public view, blocked for the past three years by the larger debate over health care reform.

To make sense of this debate requires historical perspective on what Medicare was expected to accomplish, some understanding of what its 30-year operational history has

wrought, and some realistic discussion of what its problems really are and what can be done about them.

Perhaps the best way to understand Medicare is to appreciate how peculiar the program is from an international perspective. The United States is the only industrial democracy that has compulsory health insurance for its elderly citizens alone. Even those countries that started national health insurance programs with one group of beneficiaries did not start with the elderly.

Peculiarly U.S. circumstances explain why compulsory government health insurance began with the recipients of Social Security cash pensions. The historical roots lie in this nation's rejection of national health insurance in the 20th century. First discussed before World War I, the idea fell out of favor in the 1920s. When the Great Depression made economic insecurity a pressing concern, the Social Security blueprint of 1935 broached health and disability insurance as items that should be included in a more complete scheme of protection.

From 1936 to the late 1940s, liberals called for incorporating universal health insurance into the emerging American welfare state. But the conservative coalition in Congress defeated this attempt at expansion, despite its great public popularity.

The original leaders of Social Security, well aware of this frustrating opposition, reassessed their reform strategy during President Harry S. Truman's second term of office. By 1952, they had formulated a plan for incremental expansion of government health insurance. Looking back to a 1942 proposal that medical insurance be extended to Social Security contributors, the proponents of what became known as Medicare shifted the category of beneficiaries to elderly retirees while retaining the link to social insurance.

Medicare thus became a proposal to provide retirees with limited hospitalization insurance -- a partial plan for the segment of the population whose financial fears of illness were as well-grounded as their difficulty in purchasing health insurance at a modest cost. With this, the long battle to turn a proposal acceptable to the nation into one passable in Congress began, stretching from its strategic birth in the early 1950s to a fully developed legislative plan by 1958.

A little at a time

These origins have much to do with the initial design of the Medicare program and the expectations of how it was to develop over time. The incremental strategy assumed that hospitalization coverage was the first step in benefits and that more would follow under a common pattern of Social Security financing. Likewise, the strategy's proponents presumed that eligibility would be gradually expanded. Eventually, they believed, it would take in most, if not all, of the population, extending first, perhaps, to children and pregnant women.

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