In Defense of Incremental Health Care Reform
Big new social programs are memorable, but the history of Medicaid shows how a series of small improvements can be just as transformative.
You’ve probably never head of the Deficit Reduction Act of 1984.
The 1985 Consolidated Omnibus Reconciliation Act doesn’t exactly roll off the tongue either.
And the 1987, 1989 and 1990 Omnibus Reconciliation acts sound like unnecessary sequels so ponderous that even Kevin Costner and his accountant turned down offers to direct.
But combined, these bills and several others like them quietly transformed Medicaid, the public health care program that primarily covers poor Americans, from an afterthought into a comprehensive, broad-based and popular social safety-net program. That’s something Democrats should keep in the back of their minds as they debate what big future reforms (“Medicare for All!” “Medicare for all who want it!” “Public Option!”) they should make the health-care system if they take power again.
Medicaid at the dawn of the Reagan Era
It’s more remarkable that such a large part of Medicaid’s transformation took place in the 1980s — not exactly an ideal time for attempting to expand social services. The Reagan administration attempted to cap federal Medicaid spending in multiple budget proposals — and nearly succeeded in 1981, before settling for some short-term cuts instead.
While Democrats maintained a majority in the House of Representative throughout the entire decade, their caucus was more ideologically diverse than now, with conservative southern Democrats blunting many impulses to expand the safety net. On the other side of Capitol Hill, Republicans controlled the Senate from 1981 through the end of 1986.
Yet between 1983 and 1990, California Congressman Henry Waxman, a determined liberal Democrat, still managed to parlay his knowledge of the budget reconciliation process and a loose coalition of governors and federal legislators into a much larger and more robust Medicaid program.
Then, as now, Medicaid was a joint federal-state program. After meeting basic federal requirements, states retained latitude to design their own Medicaid programs and received generous federal matching funds that defrayed between 55 and 80 percent of a state’s Medicaid costs, with more generous matches going to poorer states.
In the early 1980s, Medicaid covered primarily poor children and pregnant women. For families, Medicaid eligibility was linked closely to a program known as Aid to Families with Dependent Children (AFDC); Derisively referred to by critics as “Welfare,” AFDC provided monthly cash payments to single mothers and their children. Prospective state Medicaid recipients only qualified for federal funding if they made less than 150 percent of the state’s cut-off for AFDC. Income limits for AFDC limits were state-specific, but extremely low — only a fraction of the poverty line. Additionally, standards were linked to specific nominal dollar amounts, meaning that high inflation rates of the period were steadily eroding eligibility levels. By 1984, the cut-off for household income averaged 47 percent of the poverty line across all 50 states, a reduction from an already miserly 55 percent in 1980.
However, after the 1982 midterm elections, a confluence of several favorable factors created opportunities to patch holes in Medicaid eligibility. First, after recessions in 1980 and 1982, economic recovery was finally sending increased revenue into state and federal treasuries. Second, the lopsided 1982 midterms resulted in large Democratic gains in state legislatures and governorships ensuring a more fertile ground for strengthening the safety net.
Finally, Waxman was in the right place at the right time. As a progressive liberal who chaired the Health and Environment subcommittee of the Energy and Commerce Committee, he was in position to advance health care expansion because the subcommittee oversaw Medicaid.
He had several powerful tools at his disposal. First, he at least initially had a coalition of governors, led by South Carolina Democrat Richard Riley, looking for more federal funding to improve children’s healthcare. Riley and several other newly elected Southern governors were upset indicators like infant mortality lagged the rest of the country. The governors came in handy in the early rounds of expansion, convincing conservative stalwarts like South Carolina Senator Strom Thurmond to support healthcare expansion alongside liberal lions like Ted Kennedy.
Second, Waxman’s subcommittee chairmanship gave him a gatekeeper role and a strong bargaining position during budget negotiations. His power to potentially block other members’ priorities in bills originating in his subcommittee muted potential opposition to his own favored positions.
Finally, Waxman was a master at using budget reconciliation, which had been originally designed to streamline the budgeting process and impose fiscal discipline, to spend money to increase insurance coverage. In the large and sprawling bills covering dozens of subjects governing tens or hundreds of billions of dollars in federal spending, it was easy to slip in small items. Waxman was quite adept at gauging how big of a program expansion he could propose and still get the votes of representatives who opposed the measures but wouldn’t vote down an entire budget bill over them.
Starting small
His reforms began modestly: reversing earlier 1981 cuts and expanding Medicaid eligibility to fill in a few narrow gaps in AFDC’s eligibility structure for pregnant women and young children.
First up was 1984’s Deficit Reduction Act (DEFRA). Waxman proposed to mandate states gradually extend Medicaid coverage to all children under five in families meeting AFDC resource standards, regardless of their family structure. It was a modest change. Children up to five years old of some poor two-parent households would now get Medicaid coverage, instead of being left out because they were not in a single-parent household. The bill also extended benefits to women who were pregnant for the first time. These women would generally qualify for AFDC and Medicaid after their child was born, but wouldn’t have been eligible during their pregnancy, making it much less likely they would get prenatal care.
The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), was most well-known for mandating that employees who lost their job could pay to remain on their employer’s health insurance for six months. However, COBRA also extended benefits to pregnant women meeting AFDC’s income and resource standards without regard to family structure; extending the looser standard to them that had been extended to children under five in the 1984 expansion.
Against the scale of national uninsured population, these victories were mere crumbs, only increasing coverage of the nation’s poor children from 45 percent to 50 percent.
Building on success
But like an industrious mouse, Waxman quietly continued to collect larger morsels.
The next stage of Medicaid expansion moved from slightly loosening enrollment criteria to completely detaching eligibility standards from the vise grip of state AFDC income limits.
The 1986 Omnibus Reconciliation Act provided federal matching funds to give states the option to extend Medicaid coverage to pregnant women and children under the age of 6 in households earning under 100 percent of the poverty line. Within two years, 44 states had accepted the expansion.
Then the 1987 OBRA provided optional matching funds to cover children up to age 8 living under 100 percent of the poverty line. The law also established an additional state option to cover pregnant women and infants up to 185 percent of the poverty line. By 1989, 15 states had embraced the latter option.
As more states picked up the programs, Waxman used their success to turn the options into mandates to lock in coverage gains.
The 1988 Medicare Catastrophic Coverage Act (MCCA) is generally remembered for its failed attempt to cap out-of-pocket costs for Medicare beneficiaries. That part of the law was repealed when angry senior citizens vigorously protested increased premiums. However, Waxman authored several parts of the law that weren’t repealed, one of which mandated state Medicaid programs to cover pregnant women and children under the age of six in households below the poverty line.
In the 1989 OBRA, that requirement grew to encompass all pregnant women and children under the age of 6 in households earning less that 133 percent of the poverty line. The 1990 OBRA extended mandatory eligibility again, this time to all children between the ages of 6 and 18 living under 100 percent of the poverty line.
Finally, Waxman’s push also detached standards for Medicaid assistance from Social Security Disability Insurance (SSDI) income criteria and expanded the number of disabled and elderly people getting help from Medicaid — eliminating their premiums and out-of-pocket Medicare costs.
The 1988 MCCA contained a provision that required state Medicaid programs to pay Medicare premiums and cost-sharing for all disabled and elderly individuals living below the federal poverty line. In 1990, budget reconciliation extended those benefits to the elderly and disabled population living below 120 percent of the poverty line.
The crumbs of the small-scale 1984 and 1985 reforms had turned into generous slices.
After the 1990 OBRA, governors revolted against increased state costs imposed by the mandates, despite generous federal matching funds. In response, Congress passed the Budget Enforcement Act (BEA) in 1990 to shut down Waxman’s technique of using budget reconciliation to expand Medicaid without offsets. The BEA choked off the next logical steps for the program: further relaxation of income eligibility standards and its extension to more parents and childless adults.
Totaling up successes
However, Waxman’s achievement was still remarkable.
Before 1984, Medicaid covered only a few classes of the poorest of the poor, was reeling from a series of cuts, linked closely to the stingy eligibility levels of an unpopular welfare program, and vulnerable to inflation and political attacks.
After 1990, the program was phasing in mandatory coverage of all poor children, pregnant women, elderly and disabled Americans, with eligibility criteria that automatically adjusted for inflation and were robust to cuts during economic downturns.
Before the reforms, Medicaid covered 19.6 million Americans in 1982, during the bottom of the economic cycle, or about 8.5 percent of the total population. During the 2001 recession after the expansions fully phased in, the program covered 36.9 million Americans, roughly 13 percent of the population.
Expanded eligibility provided a large, more financially stable and more politically powerful constituency to protect Medicaid from future attacks. By showing the small expansions were useful and sustainable, Waxman’s work also prepared the ground for larger expansions of public health insurance, like the State Children’s Health Insurance Program (SCHIP) in 1997 and the Medicaid expansion of the 2010 Affordable Care Act (ACA).
What does it all mean?
The point isn’t that Democrats should abandon big reforms if they have big enough majorities to pass them. The creation of Medicare and Medicaid only could be passed by the overwhelming Democratic majorities in Congress in 1965. That same was true for the ACA, which passed when Democrats had 60 seats in the Senate and 256 in the House. If Democrats somehow can get big majorities in 2021 or 2025 or some other point in the future, they should have some coherent outline of big-ticket legislation ready to go.
Nor is the takeaway that bipartisanship is necessary to push through improvements to the social safety net. If anything, Waxman’s reforms — especially the later ones — passed in spite of Republicans. Also, Republican elites today are much more unified and conservative than they were in the early and mid-1980s, when a moderate faction still played a role in the GOP Congressional caucus.
But what we must remember is that the work of governing is the slow, steady boring of hard boards. Even big victories like Social Security and Medicare were the result of decades-long campaigns. Nor did those programs come into being fully formed; they require steady tinkering to keep making improvements. It took decades of reforms to extend Social Security coverage to the disabled, domestic employees and other underprivileged workers left out of the initial reform. Medicare didn’t provide drug coverage until four decades after its initial passage, and still doesn’t cap out-of-pocket costs for many beneficiaries.
Most importantly, we must recognize that small and medium-sized wins are worthwhile in their own right — especially if that’s all that’s available at the time. Each victory helps real people, no matter how few. Though small victories may be unsatisfying in isolation, they can combine over time to help tens of millions of people.
So if the 2020 election leads to no Medicare for All, but a number of useful extensions, patches and add-ons to the ACA, we should take a moment to celebrate success, then keep pushing the next improvement.
That’s not selling out. That’s morally upright, practical, and effective public policymaking.
A General note on sourcing: Though the analysis and conclusions here are my own, most of the history of the individual 1980s legislation affecting Medicaid in the piece is ably documented in Chapter 4 of Shanna Rose’s 2013 informative book, Financing Medicaid: Federalism and the Growth of America’s Health Care Safety Net. It’s a marvelous resource and analysis of the development of Medicaid and has influenced my thinking on the program greatly.)
