In this chapter Katz recounts the development of the U.S. healthcare system and notes its chronic inability to provide reasonable coverage at reasonable costs to those most in need of public assistance. Throughout its development, America remained the only developed country that did not consider healthcare a citizenship entitlement. This was partially a consequence of linking the welfare state to employment (257).
Forms of health insurance with enduring significance developed in the 1930s and 1940s. By the 1950s, America had a nascent system of health insurance; however, it tied benefits to employment because medical care was considered in terms of rights rather than citizenship (259). In the 1960s public policy created a dual system private insurance for the working population and public insurance for the needy. The 1964 Democratic victory ushered in Medicare and Medicaid, which were created as public assistance rather than social insurance programs. This dual system resulted in cost inflation; at the same time it excluded millions of Americans. Yet, by 1980, Medicaid was often the largest program in state budgets, and by the 1990s, Medicaid had broadened into a program that assisted a broader range of people. In some states it cost six times as much as AFDC (262-263). With the ascendance of conservative politics in the 1980s, Medicaid and Medicare came under fire along with other social spending programs. Katz argues, that the Reagan administration ran up an enormous deficit in order to justify cutting these programs.
Consequently, the Clinton administration was faced with the imperative to restructure health insurance. At a time when public trust in government was low and anti-tax sentiment flourished, Clinton had to assert a stronger role for government (267). Clinton devised a system of "managed competition" through which private health plans would compete under terms set and supervised by the government. This system, Clinton believed, responded to new labor market conditions, based on labor mobility rather than job security. Yet, business interests feared that the generous benefits required under the plan would be too expensive. At the same time, the general popular sentiment swung against the plan as people feared losing their own unrestricted access to care or higher costs. The program never passed. As a result universal coverage was sacrificed.
Instead the 1997 budget bill changed Medicare along the lines of a 1995 Republican proposal 1995, which promised to introduce savings by scaling back payments to providers and by increasing premiums for beneficiaries. The legislation reduced Medicare spending faster and more sharply than expected and the budget office revised projected spending downward for the next four years. Katz cites a 1998 study, which found that 2 million persons who lived at or below the poverty line spent more than 50 percent of their income on medical expenses not reimbursed by Medicare.
The politics of Medicare reform in the 2000 election reflected the public anger at health insurers and managed care. Popular sentiment expressed waning support for a healthcare system radically restructured by powerful corporate interests, which had aggressively limited the authority of providers and the choice of individuals. Industry consolidation had furthermore reorganized hospitals, insurers, and physicians into vast regional systems that controlled markets for health care. Katz concludes that the close election results in 2000 left the resolution of the health care issue ambiguous and less likely to be resolved soon (292).
