The Catastrophic Health Care Blunder
England, Robert S.
Robert S. England THE CATASTROPHIC HEALTH CARE BLUNDER The story of how Ronald Reagan, Otis Bowen, and a rogue Congress came up with what might be the most expensive piece of social legislation...
...HHS's legislative people were not unleashed until the matter came up for a vote on the Ways and Means Committee...
...In any event, it was too late for any private sector initiatives that could win bipartisan support...
...Ferrara also found evidence of HHS leaks to staffers working for the equally left-wing Democratic Representative Fortney H.("Pete") Stark, who chaired the Subcommittee on Health of the House Ways and Means Committee...
...He's the most political, in the best sense of the word, governor I've ever seen," says New...
...After opposition started to gain momentum in the administration, Bowen decided in December 1986 to have a press conference to announce the results of his study and the broad outline of his recommended plan in order to drum up support...
...Congress added generous new hospital and physician benefits, along with a costly drug benefit at the behest of the powerful American Association of Retired Persons (AARP...
...Many of those close to the catastrophic issue say that ultimately the administration adopted the Bowen plan as a means of detracting attention from the scandal...
...For those over 65 it effectively overturns the supply-side tax revolution...
...AARP set about to change his mind and quickly managed to do so, according to a Capitol Hill source...
...Bowen is not a conservative Republican in the mold of Ronald Reagan...
...The White House cautioned Bowen...
...Reagan then signed the Medicare Catastrophic Robert S. England is a writer living in the Washington, D.C...
...The bill he was about to sign, beamed the President, would "provide countless Americans with peace of mind," echoing a line worn thin by his Secretary of Health and Human Services, Otis R. Bowen, former governor of Indiana and godfather of the initiative...
...But Reagan's plan was never introduced into the state legislature, and eventually died in the governor's office...
...Ferrara says he warned Kingon, " 'You're creating enormous expectations...
...The President did indicate his preference for a private market initiative or even a private/public mix suggested as a compromise by the late Commerce Secretary Malcolm Baldrige...
...Bowen said the addition of the drug benefit would lead him to recommend a presidential veto...
...There's been a revolution and the pigs have overthrown the farmers...
...The elderly will pay this surtax in additionto the premiums now required by law for Medicare's Part A, which covers hospital costs, and for Part B, which covers doctors' bills and outpatient care...
...Expectations were too high to delay a choice: the President was boxed in...
...Conservatives also made a tactical error...
...No one seemed to notice that the tax plan was a Reagan offensive, while the Bowen plan would require a defensive administration strategy to keep it from being bid up on Capitol Hill...
...Bentsen agreed to Joe Wright's demand that the cap be adjusted each year to keep a constant share of beneficiaries to 7 percent of the Medicare population...
...in fact in Indiana he was called a "Rockefeller Republican" by the conservative wing of the Hoosier party...
...He had been a conservative governor in his health and welfare programs...
...Putting the catastrophic issue in the State of the Union committed the President to an initiative even before a policy review had been done...
...If catastrophic were to have been initiated by the Democrats and vetoed by the President, it would have been a political disaster," Daniels says...
...Bentsen did not announce his decision, however, until he was asked about it at a breakfast for the health press in September 1987...
...While Ways and Means Committee Chairman Dan Rostenkowski was happy enough to push the less expensive Stark subcommittee bill, House Speaker Jim Wright is reported to have demanded the drug benefit...
...Meanwhile, the drug provision is geared toward short-term catastrophic coverage only, with a high $650 deductible...
...Some believe the fact that the President liked Bowen personally may have led him to trust Bowen's judgment...
...These benefits, HHS estimates, will raise the cost to $17.2 billion a year by 1995, and more thereafter...
...Meanwhile, Ed Meese fought vigorously to defeat the Bowen plan...
...The effort to portray Doc Bowen as a tax cutter is Orwellian...
...Like a bureaucratic Captain Ahab, Bowen won victory over the White House with his unyielding focus...
...Long-term illnesses can also be catastrophic...
...entsen became the center of marathon negotiations with the White House, OMB, Senate Republicans and Democrats, the pharmaceutical association, and AARP...
...That was for long-term health care, for which he recommended health care IRAs, a notion nixed by Treasury Secretary James Baker, who said it would undo tax reform...
...Regan, however, soon found out that Bowen was not the pushover he imagined...
...One embittered former member of the Office of Management and Budget, who fought to stop the original Bowen proposal, says, "It was like George Or-well's Animal Farm...
...A study by the National Center for Health Service Research, in fact, found that the elderly who incur high expenses for medical care not covered by Medicare or medigap, usually incur them with long-termillnesses, not short-term illnesses...
...The White House was being modest...
...Originally Bentsen supported only a study of the drug benefit...
...Moreover, Burke and Bowen argued that the Prospective Payment System, implemented at HHS upon the recommendation of the advisory council, was rationing health care and sending patients home too early...
...A plausible proposal required technical know-how, Davis says, and only HHS could muster the necessary resources...
...He held back, was slow in getting numbers for cost estimates...
...After listening to a round of explanations, it became clear the industry had no single alternative...
...Some of these elderly can afford the private insurance that would give them catastrophic coverage but choose not to buy it...
...30 THE AMERICAN SPECTATOR NOVEMBER 1988...
...According to a Capitol Hill staffer, the House, in return, agreed to the Senate's higher deductibles cap and its tighter control of indexing...
...He didn't let the legislative office take the bill and run with it...
...Bowen dismissed the Baldrige compromise as he had dismissed all other plans during the past year...
...Back in Sacramento the issue attracted Governor Ronald Reagan, according to Jack Svahn, who advised the governor on social policy...
...The trouble was just beginning...
...According to Rick Davis, "Senior officials in the White House felt that Burke had been retailing the plan, trying to gain support without the President seeing it...
...in 1973 he suggested instead a plan that would require the private sector to offer catastrophic insurance...
...The drug benefit was particularly problematic, because it came with the hefty new surtax on nearly half of all senior citizens so that premiums could be kept low for the majority...
...But he was dumb like a fox...
...We warned him that their proposal would become a 'Christmas tree' and result in bigger government...
...Davis says a handful of insurance company executives met with the Domestic Policy Council, unofficially...
...According to a former White House official, however, when Domestic Policy Council staff tried to find out what Bowen's plan was going to be, Bowen refused to divulge details...
...In fact, the Catastrophic Coverage Act could turn out to be the biggest expansion of the welfare state since Lyndon Johnson launched the Great Society...
...The cut and cap on property taxes made him the most popular governor of Indiana in recent years, according to former state treasurer Jack Landon New, a Democrat who served under Bowen and four other governors...
...Some conservatives have suggested that Regan and Kingon were trying to undermine Reagan's conservative ideology during their White House tenure...
...How Ronald Reagan, often called "the most conservative President since Calvin Coolidge," led us closer than ever before to socialized medicine is a story rich in irony...
...The opening came in early November 1985 in the aftermath of infighting between Regan and former HHS Secretary Margaret Heckler, which resulted in Heckler's forced resignation...
...We tried to explain to him how things work," says Davis, "but Bowen didn't understand that whatever he came up with would be debated, that he had to build support in the administration and with conservatives...
...Private insurance companies, they maintained, could then more easily use "scare" tactics to get the elderly to buy additional insurance...
...For many, it will cost more for their benefits than they were paying through private insurance...
...An HHS spokesman denies that HHS staff leaked anything...
...A taxpayer in the 15 percent income tax bracket will be raised to 19 percent, according to Congress's Joint Committee on Taxation...
...Davis says the insurance executives countered, "It's not a good business decision for us to get into that area...
...Another former White House official reports that research by the Wirthlin Group had revealed that the Reagan Administration was unpopular with the elderly...
...If Regan had looked carefully at Bowen's background, he would have found a potentially formidable foe, a man of singular resolve who pursues a chosen policy, re-gardless of how long it takes, even against his own political party, with the political skill to bring it off...
...There was only one on the shelf, and that was Bowen's...
...In his co-authored pieces and his later testimony, Bowen insisted that private medi-gap insurance policies are a rip off, and only government can provide an insurance policy at low cost with good benefits...
...Unfortunately, the White House had not done its homework...
...The private insurers are expected to offer new policies covering the deductibles and co-pay provisions of the new law...
...Afterwards, Senator Kennedy was so tickled that he lauded Bowen as a "great American," promptly wrote up a bill based on the information released at the press conference, and introduced it even before the President had reviewed the Bowen plan...
...Since 70 percent of the elderly are already covered by a combination of Medicare and private insurance for acute-care catastrophic, the new law represents only a modest improvement in coverage for the overwhelming majority of the elderly...
...But the White House strategists were flying blind...
...Bowen began to work closely with the White House to contain Congress, perhaps also realizing his beloved proposal could be vetoed...
...Rick Davis, Kingon's assistant, said he found that White House legislative staff had learned the details of the Bowen plan...
...They were convinced that, at the last minute, Ed Meese could look the President in the eye and say, "Don't do it," as one former White House official puts it...
...The White House couldn't cancel the press conference without creating an uproar in the press, so the conference went ahead with official, if grudging, White House approval...
...Only three months after threatening a veto over the drug provision and the surtax, a lame duck White House signed off on both in behind-the-scenes negotiations, according to a Capitol Hill staffer...
...The Hill staffer says Rostenkowski insisted on making the program mandatory, which would classify the supplemental premium as a surtax instead of a premium...
...Since the Medicare plan would be financed by a tax, Ways and Means would keep exclusive jurisdiction over the program instead of sharing it with the Energy and Commerce Committee...
...The White House lost on other points, however...
...W hen Bowen's plan—now the ad- ministration's plan—was sent to Capitol Hill on February 24, 1987, it was pronounced inadequate by Democrats...
...Burke did not seem to understand the necessity of getting in early and hard on the drug issue...
...Fearing that the President was being left with no other choices, Regan decided to call in the insurance industry in a last ditch effort for a private market initiative...
...As instrumental as Bowen and Burke were in fashioning the new law, the germ of catastrophic coverage was planted in California, two decades before Doc Bowen arrived in Washington...
...Position statements were prepared, cleared by Burke and OMB, and then "the sixth floor just sat on these papers for weeks," the HHS official says...
...By then the President who gave the stalled agenda of socialized medicine its big push will be back at his California ranch, out of harm's way...
...Rahn and Ferrara accuse Burke of plotting with Capitol Hill liberals to box in the President...
...About one-third of the elderly, in fact, already have catastrophic coverage as a paid-up benefit from their retirement plan, according to the Health Insurance Association of America, and will be paying twice for the same coverage...
...THE AMERICAN SPECTATOR NOVEMBER 1988 27 dent to make catastrophic a priority was Daniels...
...The whole thing was a con game," recalls M. Stanton Evans, an editor at the Indianapolis News from 1960 to 1974...
...It wasn't a stubborn President Reagan that hot July day who had succumbed to an invincible Congress controlled by Democrats...
...They had been slaving for a decade to pass catastrophic...
...Kingon agreed to let Bowen testify on January 29 before Congressman Stark's Subcommittee on Health...
...After Bowen announced his plan in late 1986, Rahn, along with the Heritage Foundation's Peter Ferrara, tried to intervene with Bowen to drop his plans for an expansion of Medicare...
...It was now Bowen's turn to be embarrassed...
...Focus a program at those people or do something on long-term care...
...In the past Part A was mandatory, while Part B was optional...
...White House lobbyists lacked expertise in health care matters...
...Robert S. England THE CATASTROPHIC HEALTH CARE BLUNDER The story of how Ronald Reagan, Otis Bowen, and a rogue Congress came up with what might be the most expensive piece of social legislation since the Great Society— and still failed to provide real catastrophic care for our elderly...
...But there was only one remaining card up its frazzled sleeve, the threat of a veto...
...With the benefit of hindsight, Davis now says the White House could never have found a private market alternative at the last minute, or at any time, with Bowen at the helm at HHS...
...The Bowen tactic was, in fact, goof-proof...
...If Dukakis is elected, there'll be a big tax increase to pay for long-term health care and well blow entitlements sky high...
...Medicare premiums will increase from the present $122.40 a year to $511.20, the Congressional Budget Office estimates, for all 28 million Social Security beneficiaries...
...According to Rahn, the White House learned of the conference only after Ferrara, Rahn, and others brought a copy of the announcement to Kingon...
...It is almost impossible to know how President Reagan felt about the lack of a private market initiative...
...It was an important White House victory...
...Coverage Act of 1988, a massive new entitlement program for the elderly...
...They didn't have it under control," Rahn recalls...
...They puffed up Bowen and locked the President into Bowen's choice...
...Nevertheless, the bill was devised to fill a perceived gap of coverage, the 20 percent of the elderly who do not have both Medicare and private insurance and who do not qualify for Medicaid...
...While the final report is studded with private-market jargon, Bowen had in fact supported only one private sector plan...
...Nursing home care, which can cost $25,000 a year, was the biggest item.' The Health Care Financing Administration, which administers Medicare, finds that only 2,000 elderly a year need acute-care catastrophic insurance coverage or about .007 percent of the 28 million people on Social Security...
...26 THE AMERICAN SPECTATOR NOVEMBER 1988 strophic on his agenda...
...Choice is eliminated...
...Governor Reagan was distressed by the fact that some elderly had to spend themselves into poverty to pay for medical care...
...Bowen's proposal would have added about $6.2 billion a year in new social spending by 1993, to be paid for by the elderly with an additional optional premium to their Medicare coverage...
...But Bowen's position may have been strengthened, ironically, by the Republicans' loss of the Senate and, several weeks later, by the sudden debut of the Iran-contra affair...
...It was one of those juicy Washington moments...
...Long-term care is the real problem...
...When Bowen went before the Stark committee, with instructions not to give away details of the plan, he was greetedlike the conquering hero...
...One of the people pushing the PresiFor many elderly, the Medicare Catastrophic Coverage Act of 1988 is not truly catastrophic since it doesn't cover the one area they care most about: long-term illnesses...
...From that point, we knew we had a problem...
...There was a lot of back-room horse trading, according to a Capitol Hill source...
...No doubt reflecting official sober hindsight, HHS spokesman Teske says the final law "is not a catastrophic bill...
...When White House personnel tried to get details from HHS staff, "Tom Burke would squish 'em like gnats," the former official says...
...Catastrophic care was coming," Svahn says, "no matter whether the President did anything or not...
...For many elderly, the bill is not truly catastrophic since it doesn't cover the one area they care the most about: long-term illnesses...
...Curt Clinkscales, head of the conservative National Alliance for Senior Citizens, says the cost to an elderly couple will rise to a maximum of $3,549.60 by 1993 from its present level of $592.60, when all costs are figured in: the surtax, the old premium plus inflation, and the new premium...
...That's garbage...
...Importantly, the Senate gave up the voluntary provision...
...On July21, 1987, four senior Reagan officials sent a letter to House Speaker Wright opposing the drug benefit and threatening a veto if the full House included it in the final bill...
...The powerful AARP relentlessly pushed the drug benefit and, says the official, "they run the largest mail order drug operation in the business—they're going to make a fortune on it...
...It is a Medicare Benefits Expansion Act with a catastrophic rider...
...fitter opposition to Bowen's plan 1.0 sprang up in the administration immediately, with then Attorney General Edwin Meese leading the counter-assault...
...they say arthritis and diabetes can cost $1,000 a year for drugs alone...
...Another was to provide the funds to states to buy Medicaid coverage for those above the poverty line who could not afford it...
...Congressman Claude Pepper began a battle for an even more expensive home health care bill for the elderly, which was ultimately defeated...
...In 1972 Bowen changed his tune...
...With an eye to the upcoming 1986 congressional elections, Reagan decided to take on catastrophic to win points with this crucial voting group, "to soften the image," the source says...
...poverty line and cannot afford the insurance...
...Bowen found a few allies, notably Defense Secretary Caspar Weinberger and Labor Secretary Bill Brock...
...But a participant in those cabinet meetings says this never happened...
...T he bill-signing ceremony on July 1 1, 1988, was an event of supreme irony...
...T he President again mentioned the .1 catastrophic issue in his State of the Union address in 1987, but he had not yet endorsed the Bowen plan...
...Linda Jencks, the lobbyist for HIAA, says that leaks of the Bowen plan were all over the Hill...
...Some have claimed Regan talked the President into supporting the Bowen plan by telling horror stories of the elderly losing their life savings to pay doctors' bills...
...Finally, only one key dispute remained, between Bentsen and Joe Wright, who represented OMB at the negotiations, over out-year indexing of the spending cap, which is the limit the elderly would have to pay before Medicare would pay for medical bills...
...HHS spokesman Richard Teske says that when the plan was being developed, "we didn't expect [the Republicans] to lose the Senate—that was the biggest thing in making this bill a Christmas tree...
...It was the responsibility of HHS to lobby to stop the steamroller on Capitol Hill...
...He ran for governor and won with a pledge to cut and cap property taxes...
...The elderly who spent more than $2,000 a year in out-of-pocket medical expenses (those not covered by insurance), spent 81 percent of it on long-term care...
...There were four rancorous cabinet debates over the Bowen plan, "more than any other issue," according to Davis...
...THE AMERICAN SPECTATOR NOVEMBER 1988 25 In the broader, historical view, the new catastrophic law represents one more step toward a national health policy, a cherished goal of America's most liberal politicians...
...Some in this 20 percent group do indeed have to "spend down" their savings or lose their homes to pay for catastrophic illnesses, but they are now covered for short-term illnesses only under the new law...
...But once it was sent to Capitol Hill, the plan grew like topsy...
...this is a long way from the modest $4.92 a month Bowen originally said would pay for the program...
...He "came across like a nice old man unaware of how to operate on the Washington scene," recalls a former White House official...
...By then it was too late," the HHS official says...
...With this one hearing "the die was cast...
...A former OMB official says, "Bowen was irresistible to Don Regan...
...Under the new law the elderly will be required to pay for increased Part B catastrophic benefits...
...After the advisory council finished its work, Bowen continued to work with Burke in writing a series of articles pushing the idea...
...As instituted by the President and Congress, the catastrophic program is to be self-financed by a new premium and surtax...
...The idea was being pushed by Tom Burke, then executive director of the council, reportedly exiled there by former HHS Secretary Richard Schweiker...
...OMB chief James Miller, Council of Economic Advisers chairman Beryl Sprinkel, and Interior Secretary Don Hodel also disliked the plan...
...They revived the voucher idea, but Regan rejected it, as had Bowen, because it would likely not gain sup(continued on page 30) Davis now admits the White House could have never found a private market alternative with Bowen at the helm of HHS...
...But according to White House sources, there seemed to be little ideological component to the difficulties between the Regan White House and Secretary Bowen...
...There was only one sour note: Reagan warned that costs would have to be kept in line, even as the White House Fact Sheet boasted that the Act was the biggest expansion of Medicare since it began in 1965...
...The Regan staffer responsible for liaison with agency officials was Cabinet Secretary Alfred H. Kingon...
...The President was high in the polls and Regan also had an eye toward keeping the Hill majority happy...
...His surprise endorsement of the drug benefit, in effect, guaranteed that it would be in the final bill...
...On the Senate side the threat was taken more seriously...
...The chief of staff had undercut his own ability to contain the independence of Bowen, or of any rebellious agency head, by surrounding himself with yes-men who were ill-suited to their administrative duties...
...Remarkably, Bowen scheduled the press conference anyway...
...Bowen was recommended by Indiana Senator Dan Quayle, among others, and supported by Mitch Daniels, a Hoosier who served as the White House political adviser from 1985 to 1987...
...Kingon, who declined to be interviewed for this story, left the White House early in 1987 to become ambassador to the European Economic Community in Brussels...
...For short-term catastrophic, Bowen recommended essentially the same Burke proposal he had been pushing all along...
...Others are just above the 'The AARP, however, claims the elderly also spend heavily on drugs for out-of-pocket expenses...
...The White House, which had sat back and watched the HHS stumble and fall, finally became alarmed...
...Some vigorous arguments were raised, but in the end only eleven Senators voted against it...
...Whitcomb had thrown the Democrats out of power in 1968 on the pledge of no tax increases and kept his promise, defeating Bowen's effort to override his veto in 1971 with the help of a grassroots taxpayers' lobby...
...Rahn worked with Bowen on the Advisory Council on Social Security back in 1982-84, and was probably the first to propose the establishment of health care Individual Retirement Accounts...
...But Bowen failed to change course after the loss...
...This "woke up" the Domestic Policy Council, Davis says...
...Senator Ted Kennedy, for one, wants a national health policy in which the government would pay all medical bills for every American—a system not unlike that in Britain, where adequate health care is "free" but, thanks to the government's severe rationing, almost unobtainable...
...There is a strong feeling within HHS that the bill was badly managed and handled," says an official at HHS who requested anonymity...
...it should also serve as a cautionary tale for the next conservative who occupies the Oval Office...
...The Democratic House, basking in the summer glow of the Iran-contra hearings, passed the bill on July 24, 1987...
...Advanced age, in fact, can eventually make most of us invalids...
...White House staffers reportedly told the insurance executives that "the President has made this a high priority issue because of the strong political support for expanding Medicare...
...The certainty of a drug benefit also meant the certainty of a surtax on nearly half the elderly...
...But HHS was slow to move...
...Burke, who developed a close working relationship with Bowen, was a health economist who had served as special assistant to the administrator of the Home Health Care Financing Administration...
...D owen's yen for expanding Medicare first appeared when he headed the Advisory Council on Social Security, from 1982 to 1984...
...This time HHS lobbyists were unleashed, on time, with position papers, according to an HHS source...
...such old age horrors as Alzheimer's disease require nursing home care or home health care...
...Says Ferrara: "I don't think the President understood this issue...
...Bowen (who, along with Burke, also declined to be interviewed for this story) was indeed a warm, gregarious country doctor fromthe tiny town of Bremen, Indiana...
...His tax cuts were not, as is sometimes claimed, a precursor to the tax revolt that later shook California, where total taxes were actually reduced...
...All hope of stopping the spending snowball shifted to the Senate...
...For a replacement, Regan wanted "someone his age and someone subservient to him and his desires—no young David Stockmans, please," says a former White House official...
...The Joint Committee computes the maximum surtax to be $1,050 per person or $2,100 per couple in 1993...
...The impetus for the law was the Bowen plan, which started out to expand Medicare modestly by taking over existing private catastrophic insurance coverage for short-term illnesses, and extending the coverage to everyone not covered by either Medicaid or a combination of Medicare and private "medigap" insurance...
...Bowen was immediately attracted to Burke's idea, and never wavered in his support for it...
...He had dismissed every warning that the bill would expand uncontrollably in Democratic hands, andnow Congress was behaving exactly as the critics of the Bowen plan had predicted...
...If we don't like the Bowen plan, we don't have to submit one.' " Then came another extraordinary White House capitulation...
...But, Davis says, the President finally approved the Bowen plan "over massive opposition in the cabinet...
...He was gray, quiet, Republican, and wouldn't make waves...
...For the liberal Democrats the appearance of Bowen on Capitol Hill before Reagan had endorsed his plan "was one of the epic coups," says the former OMB official...
...He is as closely identified with tax increases as Walter Mondale...
...He says he told the President the issue would become a liberal obsession, much as plant closings did later...
...The President agreed and decided to go to Congress with a catastrophic proposal even before Bowen was hired...
...HHS was better prepared to fight in the Senate, where the key player was the more conservative Lloyd Bentsen...
...Regan had floated his own tax reform policy in late 1984, while he was still Secretary of the Treasury, before Reagan had approved a plan...
...Domestic policy adviser Svahn says it was very clear to him the President wanted a private market initiative when he put the paragraph in the State of the Union...
...While the main task of the council was to find ways to contain Medicare costs, Bowen devoted considerable time to a proposal that would expand Medicare to cover acute catastrophic care...
...You'll be forced to submit a plan.' And Kingon said, 'You're a neophyte...
...One disappointed former White House official, who suffered through the whole catastrophic affair, looks back in dismay: "Now we have the worst of all possible worlds: heavy spending on a program few wanted or needed, and the real needs of the elderly still unmet...
...Just as conservatives had warned Bowen the bill would become a "Christmas tree," they also warned Kingon's staff, again without success...
...Once in office he pushed through a law to lower property taxes 20 percent in 1973 and pay for it by doubling the state sales tax...
...This opens the door for even more spending...
...Bowen seemed like an ideal candidate," Svahn recalls...
...Even now Daniels believes "the Reagan Administration minimized [the extent of] the bill by having its own initiative...
...6 A cute catastrophic care," which the Act is designed to cover, is a term of art referring to a short-term illness that costs so much money it is a financial catastrophe for the patient or his family...
...What embitters Bowen's critics is that he posed as a tax-cutter while merely shifting the tax burden from farmers, homeowners, and businesses to blue-collar laborers and the poor...
...It denotes such things as an accident, a heart attack, or a stroke whose effects are financially devastating but short in duration...
...Bowen sent a letter to Rostenkowski on June 13, 1987, warning it was a "cruel hoax" to pass the bill as it had developed, since it would lead to a deficit in Medicare and impair the whole system...
...Bowen's former economic policy adviser, Bill Styring, now a vice president with the Indiana Chamber of Commerce, credits him with keeping costs down as governor and steadying the tax burden on Hoosiers...
...The world inside the Washington beltway was waiting for a big initiative...
...This would have made these private plans truly acute-care catastrophic...
...It was Reagan himself who inserted his first mention of catastrophic in the State of the Union address in 1986, calling on the newly appointed Bowen to conduct a study and come up with a proposal, according to Svahn...
...Bowen flatly denied suggestions that HHS or Burke were leaking details of the plan to the Hill, and, Davis says, "we had no choice but to accept his word...
...The insurance industry disputes Davis's version of the meeting with the Domestic Policy Council...
...The AARP asked Bentsen for his terms, and he set them: the drug benefit had to be phased in, "deficit neutral," and truly catastrophic, not just a routine Medicare benefit...
...T he decision on who to hire as Heckler's replacement was made primarily by Regan, Svahn, and Mitch Daniels...
...The tax burden, in fact, did not rise as steeply under Bowen as his critics predicted, although it did rise...
...The surtax begins at 15 percent in 1990 and rises to 28 percent in 1993, giving the elderly the highest income tax rates in the nation...
...The AARP agreed to those conditions...
...Bowen's arrival, it seems, was rather sudden...
...Also at the Rose Garden podium for the ceremony were some of the President's friends and a large number of hisbitterest political and ideological foes...
...Negotiations had set the cap at $1,370 in 1990 for Part B and $564 for Part A, indexed to the Consumer Price Index...
...He said, `No, it wouldn't.' " Rahn's ire is also aimed at Tom Burke, Bowen's ironfisted chief of staff, a career bureaucrat who first developed the idea for a catastrophic proposal after discussions about the future of Medicare at the Social Security Council meetings...
...When White House Chief of Staff Don Regan was fishing around for new initiatives at the beginning of Reagan's second term, Svahn, then at the White House, suggested the President put cataHow Ronald Reagan led us closer than ever before to socialized medicine is a story rich in irony...
...The letter, signed by Bowen, Baker, Miller, and Brock, also said the tax on the elderly was unacceptable and would bring a Reagan veto...
...Another 10 percent of Americans are covered by Medicaid for all catastrophic illnesses, including short-and long-term care...
...At the same time, a private insurance market, estimated at $5 billion, has been taken over by the government...
...Burke and Bowen have offices on the sixth floor...
...One was a plan to offer vouchers for acute catastrophic care to anyone who couldn't afford private medi-gap insurance...
...Also, the Bentsen bill was still voluntary: the elderly did not have to pay the premium or surtax if they did not feel the benefits were worth it...
...Burke's delaying strategy "blew up in their faces," says the HHS official...
...I told him it might as well be him and his conservative viewpoint and private sector viewpoint that develops this program...
...Meese counseled the President to change Medicare regulations to allow private insurers to offer unlimited coverage instead of the 365-day limit mandated by federal law...
...Reagan and others viewed this as a "do-nothing" scenario...
...He asked Kingon for his approval and Kingon said no...
...Improving Medicare should be limited to the 20 percent not covered...
...Bowen, in fact, acted not like a cabinet secretary but like "the governor of HHS," Davis says...
...The report dismissed some promising initiatives...
...But he was dumb like a fox...
...He did not, however, want to have the government provide insurance for the elderly...
...The new law does not cover this kind of catastrophic care, only short-term illnesses...
...He traced the leaks back to Democratic committee staffers on Capitol Hill, including those working for ultraliberal Democratic Representative Henry A. Waxman, on his Subcommittee on Health and Energy of the Committee on Energy and Commerce...
...Like many of the elderly who have learned about the new law, Clinkscales finds the idea of higher premiums and new taxes to pay for coverage that's restricted to acute care to be a lousy one...
...Bowen conducted the Reagan-ordered study with great fanfare, traveling all over the country to conduct splashy, well-advertised hearings...
...Stark generated a love feast around him," recalls a former OMB official...
...A more generous proposal sailed through Stark's subcommittee, and Waxman's subcommittee tacked on the drug benefit...
...A conference committee was formed to resolve the House and Senate differences...
...111 "Bowen came across like a nice old man unaware of how to operate on the Washington scene," recalls a former White House official...
...Only 6 percent went for hospital care and 6 percent for doctors' bills...
...Circumstantial evidence of collusion between HHS and liberal Democrats began to surface after the press conference...
...Says one Capitol Hill veteran: "The President put catastrophic on the front burner, and Congress worked its will...
...Svahn followed Reagan to Washington to be head of Social Security from 1981-83 and chief White House domestic policy adviser from 1983-86...
...The surtax will be levied on about 40 percent of the elderly, those with annual incomes over $6,000 and who pay at least $150 a year in taxes...
...In October the Bentsen bill went to the Senate floor for one of the few full debates on the issue during the bill's sixteen-month journey into law...
...HIAA represents companies that sell medi-gap policies and corporate employee health benefits...
...Bowen rejected these ideas, according to HHS spokesman Richard Teske, "because they wouldn't fly on Capitol Hill...
...it was too late to adopt any other plan," the former official says...
...The Pharmaceutical Manufacturers Association, already in high gear, demanded and got a role in the negotiations...
...The industry people say they were shocked the White House seemed to expect a single unified proposal, since the many cornpanies in HIAA all had different ideas...
...Regan and Kingon called in Bowen to confront him on the leaks...
...OMB objected, saying that in fifteen years, rising medical care costs would make 30 percent of the elderly population eligible, rising from only 7 percent the first year...
...area...
...Rick Davis, former assistant director of cabinet affairs and Kingon's liaison with agency heads, says, "The follow-up was left to Bowen...
...Agreement was finally reached in late May 1988...
...On the podium in the Rose Garden was President Ronald Reagan, who as governor of California two decades ago had railed against Medicare and who had won the White House on his pledge to contain runaway government social spending and strengthen competition and free markets...
...A recent study by the Wirthlin Group found that the elderly most wanted (40 percent) nursing home coverage and least wanted (8 percent) prescription drug coverage...
...28 THE AMERICAN SPECTATOR NOVEMBER 1988 port from congressional Democrats...
...Davis says that Regan thought they could float the Bowen plan as a trial balloon and gauge the reaction...
...But in the end a horse looks into the barnyard and sees the pigs and farmers dancing together, and he can't tell the pigs from the farmers...
...It would have to support the Bowen plan for lack of an alternative...
...But on Capitol Hill, he apparently looked less impressive...
...Regan didn't care about any agenda or ideology, only scheduling, maintaining control...
...erhaps none of the warriors 1 against an expanded Medicare is more saddened by the conservative defeat than the chief economist for the United States Chamber of Commerce, Richard Rahn...
...In his days as Speaker of the House in Indianapolis, Bowen waged a relentless campaign to raise taxes against his own party's governor, Edgar T. Whitcomb, in 1969 and 1971...
...It was a chastened President, painted into a corner not only by his own desire to help the elderly, but also by a colossal failure in strategy and competence at the White House and, most importantly, by a stubborn, vainglorious Secretary Bowen...
...His natural ability is tremendous...
...Regan asked them, "How do you beat this proposal with private coverage...
...Geza Kadar, counsel for the HIAA, says, "We told them catastrophic acute care is not a problem that needed fixing for 80 percent of America...
...The surtax was made necessary by the drug benefit and additional hospital and physician benefits tacked on by Congress...
...PMA, whose members would reap a windfall of new drug sales, was nevertheless skeptical of the benefit, fearing it would be the beginning of price controls on drugs...
Vol. 21 • November 1988 • No. 11
