Near the end of Governing America, Joseph Califano writes that “we must as a matter of social justice provide health care to the millions of poor and unprotected Americans, particularly children and minorities.”

Califano tried, but as he acknowledges, his dream of providing health care to the poor, “particularly children and minorities,” failed. He did draft a health-care plan that would have aided children and the minority poor, but not before he had tried to discredit one that would, like Social Security, have aided every American citizen and done so in the democratic tradition of the New Deal.

He tells us that both he and President Carter thought the “current health system was horrible,” and would soon be “unsupportable.” The insurance system encouraged “a system of sick care, not health care,” a system long on tubes, machines, and wires but short on human contact, a system that failed to deliver basic services to some while giving unnecessary services to others. In short, the system Carter inherited was desperately in need of a rational plan if it was not to price itself out of existence.

Just such a plan—known as the Kennedy-Corman bill, and worked out during the preceding twenty years by a coalition of labor, religious organizations, senior citizens’ groups, and others—could have done much to impose rationality, equity, and cost control on American health care. It needed only a Democratic president to guide it through Congress. But Califano tells us he felt that Kennedy-Corman “failed to build on the existing structures, particularly the health insurance coverage most Americans received as part of their employment.”

In response to Califano’s criticism, Kennedy rewrote his bill so that the insurance companies would not just be fiscal intermediaries but would also serve as monitors of the quality of care provided by doctors and hospitals. Insurance claim forms, hitherto used only to justify reimbursements, would now be redesigned to monitor as well the accuracy of the diagnosis and the appropriateness and cost of the treatment given—while providing cumulative data on the effectiveness of all sorts of current treatments (e.g., radical mastectomies).

With the revised bill in hand—now called the Health Care for All Americans Act, its administrative and monetary details exhaustively worked out—Kennedy returned to Califano and told him (as Califano writes) that he had devised the “role for private insurance, which you want…. But…there can be no compromise on the principles of universality, comprehensive benefits, and tough controls” (italics mine).

But Kennedy’s revised bill was never to receive serious consideration from Califano. Even before Kennedy rewrote his plan, Califano had made up his mind that while it “might have been talked to death for a decade,” national health insurance had been insufficiently “studied.” He set about hiring, he tells us, three leading students of the subject: Karen Davis of the Brookings Institution; Ruth Hanft, who had won an HEW medal for developing a national health plan; and James Mongan, Senator Russell Long’s number-two health aide. What he does not tell us is that Karen Davis was committed to providing care exclusively to the poor; that Ruth Hanft’s health plan had been a conservative affair applauded by the American Medical Association and the Nixonite bureaucracy of HEW; and that Mongan, a man much respected for his honesty and integrity, in working for Russell Long had as his boss a friend of the hospital industry, one long opposed to comprehensive health care and in favor only of insurance for catastrophic medical expenses.

This team of hand-picked “key players of the 1970s in the national health insurance sweepstakes” was charged with devising a plan that would correct the deficiencies of US health care: runaway hospital costs; the excessive use of hospitalization, which is reinforced by the high “deductible” limits and co-insurance of typical insurance coverage; and the astronomical costs of Medicaid, which, for all the outcry against fraud at shady “Medicaid mills,” are really caused by the reimbursement rules in the Medicaid legislation itself.

This ill-conceived legislation, of which Califano had been one of the chief architects when he worked for Lyndon Johnson, encourages hospital clinics to become the primary physicians for many of the urban poor at costs far greater than those of neighborhood physicians (who should be dealing with many of the minor illnesses that now overload the hospitals). At the same time, the Medicaid laws institutionalized a twocare system of medicine, one publicly financed and mainly black, the other privately financed and mainly white. That system, in effect, segregated the races and intensified hidden animosities as taxpayers noticed they were footing the bill for services to nontaxpayers that the taxed could barely—sometimes not at all—afford themselves.

Califano’s team put forward a plan that would combine Medicare and Medicaid into one federal program, expand Medicaid benefits to pay for more services, provide government-insured care for all pregnant women and for infants until they were two years old, and cover the employed taxpayer for medical bills above $2,500 in a given year. Then, in a swift compromise with Senator Long, infants and pregnant women were removed from coverage and the deductible limit for the employed was raised to $3,500. But Califano had taken his first legislative step, and he hoped that comprehensive (i.e., nondeductible) health insurance would eventually be extended by law to everyone.


The moment was wrong for that, Califano tells us: inflation had soured the public on comprehensive insurance, Congress was unreceptive, and, besides, Kennedy’s bill would have broken the treasury. But Kennedy himself was willing for national health insurance to be phased in—age-group by age-group, for example—and insisted only that comprehensive, universal insurance legislation had to be enacted in one legislative package, whatever its schedule of fulfillment.

As for the economic moment, the opposition to comprehensive national insurance—the American Medical Association, the American Hospital Association, the pharmaceutical and insurance industries, etc.—was powerful and well organized to lobby in Congress. It would have been difficult to pass a bill for comprehensive insurance in the best of economic times. But Kennedy believed that it was the exclusion of the middle class from Great Society programs, not inflation, that was poisoning the well of social programs, and that forceful presidential leadership could navigate a comprehensive plan through congressional resistance.

What was never in dispute between Califano and Kennedy was that cost controls were needed. Kennedy claimed that the controls in his plan would reduce medical costs while insuring more people. James Mongan, whom Califano describes as the sharpest member of his own team, has stated that Kennedy’s plan would have cost less to administer than Califano’s plan. But above all, Kennedy warned that extended coverage, cost controls, and reorganization of the system had to be achieved in one swoop; otherwise Congress might legislate wider coverage without cost controls, and that would jeopardize everyone’s health care. Ignoring the warning, the Califano team wrote two bills, one on coverage, the other on cost controls. The latter was roundly defeated by Congress. Much time had already been wasted, Carter was voted out of office, and no national health plan was passed.

Why Califano dismissed Kennedy’s plan wholesale, substituting for it one that would worsen the defects of the present system, is a matter for conjecture. What is clear is that the public seemed indifferent to Califano’s bill. That indifference may be explained in large part by his own words: “We must provide health care to the millions of poor and unprotected Americans, particularly children and minorities” (italics mine).

This is, of course, the rhetoric of Lyndon Johnson, under whom Califano served for four years. It is astonishing how bureaucrats who grew up during the New Deal (Califano was born in 1931) became mesmerized by the ideology of the Great Society, which so often expressed the class-ridden pieties of a charitable institution. To this day, and after so much study, Califano’s praiseworthy concern for the poor prevents him from seeing that some hundreds of thousands of lower-middle-class Americans—policemen, firemen, salesmen—also need relief from a health-care system whose economics are a scandal. Ineligible for Medicaid, hard-pressed to pay for medical treatment not covered by their inadequate state and company insurance, these Americans do not share his single-minded concentration on the weak, knowing as they do how much their own ability to pay has been weakened.

Elsewhere in Governing America, Califano writes that the proliferation of what he calls “what’s-in-it-for-me groups” has rendered America all but ungovernable. His grasp of the needs of the nation aside, could he not see that by providing one sort of health care for the welfare poor and the elderly and another for the employed taxpayer the government continues the errors of the Great Society, segregating two groups, both very large? One might call them, for short, Them and Us.

This Issue

October 8, 1981