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Business Interests and the Shape of the U.S. Welfare State: From the Insurance Company Model to Comprehensive Reform
Published online by Cambridge University Press: 18 February 2019
Extract
Peter Swenson's excellent article is a welcome correction to the consensus argument so often found in welfare state literature. That interpretation depicts a never-ending, dualistic struggle between capitalists and “the people,” as represented by welfare reformers. Swenson sorts through the evidence surrounding post-1960 health care debates, particularly Medicare, to demonstrate that “business” is not a fixed, homogeneous group that conforms neatly to class-based analysis. He finds significant business backing for federal programming and also shows that where trade associations took conservative, anti-reform stands, they often did so without strong member support.
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References
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35. By 1965, these Republicans supported policies beyond the 1960 Kerr-Mills Act, which directed federal funds to state programs to provide the indigent elderly with medical services.
36. Chapin, Ensuring America's Health, 205–205. Some fiscally conservative policymakers preferred Social Security financing over general revenue funding, believing that correlating federal benefits to payroll taxes would limit program expansion.
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39. Similarly, labor officials—always savvy about the inner workings of the health care market—understood that insuring retirees drained considerable resources away from younger workers. Swenson, “Misrepresented Interests,” 8–9, 12.
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42. Founded by hospitals, Blue Cross paid for hospitalization insurance, while Blue Shield plans, largely established through medical societies, covered physician bills. Owing to its association with hospitals, which traditionally relied on charitable and government funding to operate, Blue Cross was relatively progressive compared to the AMA-influenced Blue Shield. As Blue Shield developed, however, it increasingly pulled away from the AMA, behaving much as other insurance companies did regarding political stands in favor of reform and in instituting cost containment measures. See Cunningham and Cunningham, The Blues, and Chapin, Ensuring America's Health, chap. 5.
43. On the relative progressivism of northeastern insurers in comparison to other elements of the industry, see Derthick, Policymaking for Social Security, 139–42; Chapin, Ensuring America's Health, 218–19.
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48. The Blues lost their federal tax exemption during the 1980s, and their trade association, the Blue Cross and Blue Shield Association, permitted plan members to convert to for-profit companies during the 1990s.
49. Chapin, Ensuring America's Health, chap. 7; Morgan and Campbell, Delegated Welfare State. In 1992, Don Cohodes, a vice president of the Blue Cross and Blue Shield Association, told an interviewer that his “back-of-the-envelope scribbling” indicated that acting as Medicare intermediaries added approximately $200 million annually to total plan revenues. “That's not chicken feed,” he observed. Don Cohodes, transcript, July 21, 1992, Cunningham Papers.
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This analysis fits with Peter Swenson's and Scott Greer's contention that rising health care costs in the private sector condition business interests to be more favorable toward reform. Swenson, Peter and Greer, Scott, “Foul Weather Friends: Big Business and Health Care Reform in the 1990s in Historical Perspective,” Journal of Health Policy, Politics, & Law 27 (August 2002): 605–38CrossRefGoogle ScholarPubMed.
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59. “U.S. Chamber to Offer Own Insurance Plan,” Washington Post, January 26, 1974.
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62. The 1970 Kennedy-Griffiths legislation was the only major proposal that sought to remove insurance companies from the health care system. Nonetheless, Blue Cross and Blue Shield leaders worked with the bill's sponsors to create an administrative role for insurers. Starr, Social Transformation of American Medicine, 394, 404.
63. Chapin, Ensuring America's Health, 235; Cunningham and Cunningham, The Blues, 193–95.
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67. Chapin, Ensuring America's Health, 235–36, 241–42.
68. “Report of the President,” Annual Business Meeting of Blue Shield Plans (1976), 18–19, Cunningham Collection; Interview with Harold Pearce, June 11, 1973, transcript, 10–14, Cunningham Collection.
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74. Swenson and Greer, “Foul Weather Friends.” Employers initial enthusiasm for managed care reversed once health care costs started to rise again during the mid-1990s.
75. Martin, Stuck in Neutral, 178–81; Judis, “Abandoned Surgery”; Toner et al., “The Health Care Debate.”
76. Judis, “Abandoned Surgery”; Martin, Stuck in Neutral, 60.
77. By the late 1980s, 99 percent of NAM members provided employee health insurance. Morone et al., Health Politics and Policy, 299.
78. Morone et al., Health Politics and Policy, 299; Martin, Stuck in Neutral, 176–77.
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80. John J. Fialka, “Washington Battle for Health Reform Showed Possible Erosion of Blue Cross-Blue Shield Clout,” Wall Street Journal, Mary 6, 1993; Greg Steinmetz, “Number of Blue Cross Insurance Plans May Shrink under Health-Care Reform,” Wall Street Journal, June 29, 1993; Peter Kerr, “Insurers Fear They'd Be the Big Loser in a World of Managed Health Care,” New York Times, October 1, 1993.
81. Kerr, “Insurers Fear They'd Be the Big Loser”; Judis, “Abandoned Surgery.”
82. Paul Starr, “What Happened to Health Care Reform?” The American Prospect (Winter 1995), http://prospect.org/article/what-happened-health-care-reform; Neikirk, “Insurers Weigh Profit”; Dana Priest and Michael Weisskopf, “AMA Split on Clinton Health Plan,” Washington Post, December 6, 1993.
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85. Business Roundtable, Health Care Costs in America.
86. Kolb quotation in “Six Major Corporations Join Better Health Care Together,” Health & Wellness at Walmart.com, https://corporate.walmart.com/_news_/news-archive/2007/05/08/six-major-corporations-join-better-health-care-together-governors-rendell-schwarzenegger-cite-importance-of-the-coalitions-efforts-at-summit. See also “CED Releases Quality, Affordable Health Care for All: Beyond the Employer-Based Health-Insurance System,” CED Forum (Winter 2008): 1–2.
87. The AMA also registered concerns about the Independent Payment Advisory Board and sought a permanent fix to Medicare fees, which, though scheduled to automatically drop, had in past years been repeatedly raised by Congress. Starr, Paul, Remedy and Reaction: The Peculiar American Struggle over Health Care Reform (New Haven, CT: Yale University Press, 2011), 114, 203, 206Google Scholar; Chapin, Ensuring America's Health, 244; Dan Eggen, “Familiar Players in Health Bill Lobbying,” Washington Post, July 6, 2009; Tom Hamburger and Kim Geiger, “Insurers Poised for a Healthy ‘Bonanza,’” Chicago Tribune, August 24, 2009; Robert Pear, “Insurers Seek Presence at Health Care Sessions,” New York Times, December 17, 2008; Noam Levey, “Obama Health Care Overhaul Gets Boost,” Baltimore Sun, May 11, 2009; Kim Geiger and Tom Hamburger, “Doctors Go for Obama's Reform,” Los Angeles Times, September 15, 2009.
88. “Health Policy Brief: Individual Mandate,” January 13, 2010, Health Affairs accessed at https://www.healthaffairs.org/do/10.1377/hpb20100113.974560/full/; Tom Hamburger and Kim Geiger, “Healthcare Insurers Get Upper Hand,” Los Angeles Times, August 24, 2009; Robert Pear, “Insurers Offer to Soften a Key Rate-Setting Policy,” New York Times, March 25, 2009; Dan Eggen, “Health-Care Firms Have Supported Lawmakers Debating Reform,” Washington Post, July 21, 2009, http://www.washingtonpost.com/wpdyn/content/article/2009/07/20/AR2009072003363.html?sid=ST2009072003679.
89. Eggen, “Familiar Players in Health Bill Lobbying”; Hamburger and Geiger, “Healthcare Insurers Get Upper Hand; Pear, “Insurers Seek Presence at Health Care Sessions.”
90. This proportion is referred to as the medical loss ratio (MLR). America's Health Insurance Plans, AHIP Statement on MLR (Washington DC: AHIP, November 23, 2010). Brill, Steven, America's Bitter Pill: Money, Politics, Backroom Deals, and the Fight to Fix Our Broken Healthcare System (New York: Random House, 2015), 119–22Google Scholar.
91. Brill, America's Bitter Pill, 107–109, 143, 186–87.
92. Avery Johnson and Janet Adamy, “U.S. News: Signs of a Split Emerge in Insurance Industry,” Wall Street Journal, October 15, 2009; Hamburger and Geiger, “Healthcare Insurers Get Upper Hand.” Some large Blue Cross companies, such as WellPoint, that had invested heavily in the individual and small-group market, also saw the reform legislation as a threat. Reed Abelson, “A Scrappy Insurer Wrestles with Reform,” New York Times, May 16, 2010.
93. Starr, Remedy and Reaction, 218–19; Swenson, “Misrepresented Interests,” 22; Rick Ungar, “Busted! Health Insurers Secretly Spent Huge to Defeat Health Care Reform While Pretending to Support Obamacare,” Forbes.com (June 25, 2012), https://www.forbes.com/sites/rickungar/2012/06/25/busted-health-insurers-secretly-spent-huge-to-defeat-health-care-reform-while-pretending-to-support-obamacare/#62da89164248
94. Chapin, Ensuring America's Health, chap. 8; Steven Brill, America's Bitter Pill.
95. Note that the 1974 Employee Retirement Income Security Act (ERISA) allowed large employers to self-insure their employee groups and thereby skirt state regulations that might, for example, require certain expensive policy benefits like drug and alcohol treatment. Even with self-insurance, however, these employee groups were run on the same insurance company model, with the same financing relationship between service providers and third-party financiers. Indeed, many insurance companies established third-party administration firms to offer administrative services to large self-insured employee groups.