Posted by: rotenochsen | August 1, 2009



Posted by Jax Hawk on Saturday, August 01, 2009 9:18:33 AM

Behind the slippery smooth talk that president Obama spins almost every day is a calculating community organizer who wants to “change” our Republic into a collective “nanny” state.
He is a student of history in some areas, even if he did not know that Hirohito was NOT the Japanese representative that signed the surrender on the battleship Missouri.He apparently is trying to follow the methods and procedures that Roosevelt used to get Social Security passed, and LBJ used to pass the original Medicare bill.

If you bear with me, and work your way through this lengthy Blog. You will see the comparison.

In 1965 the Social Security Act was amended and Medicare became a social insurance program administered by the United States government, providing health insurance coverage to people who are aged 65 and over, or who meet other special criteria.To begin with the thrust was to help people pay for M.D. and hospital care!

Medicare operates as a single-payer health care system. The Social Security Act of 1965 was passed by Congress in late-spring of 1965 and signed into law on July 30, 1965, by President Lyndon B. Johnson as amendments to Social Security legislation. At the bill-signing ceremony President Johnson enrolled former President Harry S. Truman as the first Medicare beneficiary and presented him with the first Medicare card.

Now America stands on a precipice that may turn 1/6th of the GNP over to government control.The medical care industry is the greatest and admittedly the most expensive in the world. Therefore, it is appropriate to study how we got to this point.
Democrats and Socialists in Congress did not wake up on Obama’s inauguration day and decide we need to Nationalize the health care!

This attempt to socialize our medical care began decades ago, and this blog will review how we go to this point.
Americans now face the transferring of massive additional powers over their personal health care to the federal government. Politico-economic techniques used to pass the original Medicare legislation in 1965 are being employed again in 2009 to secure passage of expansive new health care measures despite resistance of the public at large. Passage in 1996 of the Health Insurance Portability and Accountability Act,whose less publicized provisions criminalize aspects of the practice of medicine and jeopardize the privacy of doctor-patient relations through a compulsory nationwide electronic database,was achieved largely through techniques similar to those used to pass Medicare.

Correct interpretation of Medicare’s politico-economic history is therefore central to understanding ongoing attempts to enlarge the federal government’s role in the market for medical care.

Like the Social Security Act that it amended, the 1965 Medicare program was ostensibly a vehicle for reducing dependency in old age. In reality, both laws were dependency-shifting rather than dependency-reducing: mandated dependence of the elderly on the federal government and taxpayers replaced potential dependence on family and charity. This blog describes how and why Medicare became law and considers what the observed pattern of institutional change implies for America’s future.

For more than 50 years before the 1965 enactment of Medicare, the American people repeatedly rejected the idea of government-mandated health insurance. Yet advocates of such federal power inside and outside of government did not take no for an answer. Year after year they kept coming back–pursuing incremental strategies, misrepresenting their proposals, even distributing propaganda paid for with government money in apparent violation of existing law. In the end Medicare’s passage was anything but a spontaneous societal embrace of one of the pillars of President Lyndon Johnson’s “Great Society.”

The federal government’s involvement with this issue began in earnest in 1934. In that year President Franklin Roosevelt established the Committee on Economic Security (CES) and charged it with drafting a Social Security bill. Although the original CES report on Social Security stated with Roosevelt’s approval that a “health insurance plan would be forthcoming,” the CES statement caused such a stir that Roosevelt decided to postpone the health insurance issue, fearing that it jeopardized passage of the Social Security bill (Corning 1969: 38).

The provision in the original Social Security bill proposing a “Social Insurance Board” and authorizing study of health insurance was changed so as to delete all reference to health and “rechristen” the board as the “Social Security Board” (Chapman and Talmadge 1970: 342). President Roosevelt had decided that “health insurance should not be injected into the debate at that point, nor should the final report on health be made public as long as the social security bill was still in the legislative mill.” Indeed, as of 1969 the final CES report on health still had not been made public.

By 1964 sustained efforts to legislate compulsory health insurance at the national level had continued for three decades. For 30 years since the Committee on Economic Security first endorsed the idea, Congress and the public repeatedly rejected it. In these circumstances, how could a Medicare bill possibly be passed in 1965? First, as shown below, the 1965 bill and the procedures employed in its passage were rife with transaction-cost augmentation, allowing government officials who supported it to impede public opposition.

Consistent with the theory, concurrent changes in the variables posited to be determinants of this behavior more strongly encouraged legislators to support such transaction-cost-increasing measures on the Medicare issue than at any previous time in U.S. history.

Politically, what changed in 1964 was the resounding victory by Democrats in the general elections in November.( sound familiar?) Many perceived the election of Lyndon B. Johnson as an endorsement of compulsory national health insurance and other social programs regarded as pillars of his personal vision of the “Great Society.” Congress was heavily in the hands of the Democrats.(This is the way we find ourselves today).
A Gallup poll released on January 3, 1965, showed that efforts to sway public opinion on the national health insurance issue had been at least superficially successful: 63 percent of respondents now approved of the idea of a “compulsory medical insurance program covering hospital and nursing home care for the elderly. To be financed out of increased social security taxes”,even though 48 percent of those interviewed still did not know why the AMA opposed the program (Gallup 1972, Vol. 3: 1915).

Political and ideological winds had shifted, nursed by the incremental politics of preceding years. But they had not shifted enough to procure compulsory health insurance for Social Security beneficiaries without deploying a full arsenal of transaction-cost augmenting stratagems to deflect and silence the opposition.

A major obstacle to Medicare legislation was widespread fear that compulsory federal insurance would result in federal control over medicine and over doctor-patient relationships. To counter this fear, the bill’s authors drafted a provision specifically disavowing such control,( sounds strangely similar to Obama, Pelosi and Reid’s line) the same strategy used to secure passage of public education bills in 1958 and 1965 (Twight 1996).

Questioned about whether the 1964 bill represented socialism, Celebrezze directly addressed the issue of control, stating: “There is nothing in this bill which tells a doctor whom to treat or when to treat him.There is nothing in this bill by which the Government would control the hospital, and as I understand socialism, it is Government control and operation of facilities.It is merely a method of financing hospital care, and that is all” (U.S. House Hearings 1963-64: 50).

He added,we are a paying agency and I don’t see where you get any control of any kind out of that.(today we know he who pays the piper, calls the dance) Naturally, there will be minimum requirements like these which are required now under Blue Cross. I see no evidence where this would lead to control over the doctors [U.S. House Hearings 1963-64: 54]. Note: In those days Blue Shield was still run by the Doctors!

Underlying government officials’ support for the insurance approach and the myth of the separate trust fund was their desire to remove the associated taxing and spending from the official budget. Such off-budget strategies exemplify a recurrent form of political transaction-cost augmentation in the United States (Twight 1983). Testifying before the House Ways and Means Committee, HEW Secretary Celebrezze stated that “what we are attempting to do,is that we are trying to get away from making the assistance program our first line of defense. To get away from heavy Government expenditures out of general funds”( a flat out lie!) (U.S. House Hearings 1963-64: 67).

They succeeded, at least initially. As Marmor (1970, 1973: 22) noted, the Social Security programs were “financed out of separate trust funds that were not categorized as executive expenditures; the billions of dollars spent by the Social Security Administration were until 1967 not included in the annual budget the president presented to Congress.” But in 1967 that came to a screaching halt!!

In addition to manipulating political information costs in the ways described above, governmental supporters of national health insurance used a variety of other transaction-cost-increasing strategies to increase the costs of taking political action to resist the Medicare proposal. Even in 1965, proponents of compulsory health insurance feared that it could not be passed as a stand-alone measure. Accordingly, they packaged it with the “Social Security Amendments of 1965.” Most politically irresistible among the measures contained in the amendments was an across-the-board 7 percent increase in cash benefits to Social Security recipients, a benefit increase made retroactive to January 1, 1965.

The Social Security amendment package also contained politically appealing benefits such as grants for maternal and child health services, liberalization of disability coverage, and the like. Without doubt, these linkages increased the political transaction costs facing the public and facing members of Congress of resisting the compulsory medical insurance proposal.

The tying was not happenstance. In 1964 hearings held by both the House and Senate on Social Security amendments, including compulsory medical insurance as well as an increase in Social Security benefits. The House and Senate passed different versions of the bill increasing benefits, with the medical insurance provisions omitted from the House bill but included as an amendment to the Senate bill. When the conference committee appointed to reconcile the two bills ended in deadlock over the Medicare issue, conferees decided to forgo the Social Security benefit increase passed by both the House and the Senate in a deliberate effort to give Medicare another chance in the following year. As Rep. Byrnes (R., Wisc.) put it, “The amendments to the old-age survivors disability insurance sections of this bill could have been passed last fall if the word had not come down, and the insistence made that ‘Oh, no, you have to tie all of these together because of the fear that the medical part of this program could not stand on its own merits'” (U.S. Cong. Rec.-House 7 April 1965: 7219). The administration’s insistence on this linkage was central to its transaction-cost-increasing strategy.

In 1965 the executive support, party support, ideology, and media publicity variables more strongly favored transaction-cost augmentation on the Medicare issue than in any previous year. Both President Roosevelt and President Truman had favored compulsory national health insurance, but for a variety of reasons,Social Security, World War II, the Korean War,each put Medicare legislation on the back burner. President Kennedy was constrained by his narrow electoral margin.

In contrast, after making Medicare a major campaign issue, President Lyndon Johnson won a landslide victory and proceeded to support Medicare actively as one of the pillars of his “Great Society” agenda. Active presidential support for Medicare and the transaction-cost-increasing measures needed to pass it thus encouraged other government officials to employ transaction-cost-augmenting measures on this issue as never before.

The fact that no public hearings were held in the House of Representatives in 1965 meant that the media was less able to inform the public regarding transaction-cost-increasing features of the legislation. Rep. James F. Battin (R., Mont.) noted that if open hearings had been held “the working press of the country could then have advised the people of all 50 States on what the proposals were, the arguments for and against, and then we as representatives of the people could have had an expression from our constituents on their thinking” (U.S. Cong. Rec.-House 8 April 1965: 7399). The lack of publicity given to transaction-cost-increasing features of the legislation also favored government officials’ support for such measures.

Moreover, following the general practice of the Ways and Means Committee, Mills insisted that the committee’s bill be considered by the House under a “closed rule” that prevented floor amendments. In floor discussion, representatives complained bitterly about these transaction-cost-increasing strategies. Rep. Curtis (R., Mo.) said he had “urged that there should be open hearings and people with knowledge in our society on this subject should be given the opportunity to come before us” (U.S. Cong. Rec.-House 4 April 1965: 7229). Curtis recounted the secretive nature of the committee’s deliberation:

Congress members knew in 1965 that in passing Medicare they were legislating for all time to come. Political transaction costs had been molded to accomplish precisely that end. Senator Mundt (R., S.D.) regarded it as an “irreversible step” in that Medicare “would be exceedingly difficult to discontinue without breaking faith with those who have to pay the tax” (U.S. House Hearings 1963-64: 264). Senators and administration officials alike understood that they were “legislating in perpetuity” and would face strong pressures to expand the program (U.S. Senate Hearings 1965: 134).

They also knew that Medicare would create a vast new public dependence on the federal government for financial security in old age, continuing the pattern set by Social Security in 1935. Senator Mundt (R., S.D.) described it as “another step toward destroying the independence and self-reliance in America which is the last best hope of individual freedom for all mankind” (U.S. Cong. Rec.-Senate 9 July 1965: 16122). Moreover, legislators knew that Medicare would take money from the poor and middle classes to subsidize the rich. Senator Gordon Allott (R., Colo.) described it to the Senate as a “program of ‘Robin Hood in reverse'” that showed “complete disregard for need in disbursement” and represented a “giant step” toward making “every citizen as dependent as possible on his Government for his every need” (U.S. Cong. Rec.-Senate 8 July 1965: 15935).

But they also knew that Medicare would serve their political interests. As majority leader Rep. Carl B. Albert (D., Okla.) told his colleagues on the House floor, H.R. 6675 “is a bill which in my opinion will serve well those of us who support it, politically and otherwise, through the years” (U.S. Cong. Rec.-House 8 April 1965: 7435). Or, as Rep. Phillip Burton (D., Calif.) more crassly expressed it, “This bill is going to put into the pockets of my fellow Californians some $213 million its first year.

All in all our fair State and its people in the first year will be favored to the tune of some $550 million, a not modest sum” (U.S. Cong. Rec.-House 8 April 1965: 7429). Without doubt, the Social Security Amendments of 1965 were “so drafted that quite a bit of honey had been placed under the beehive in order to attract the bees” (U.S. Cong. Rec.-Senate 9 July 1965: 16071). TODAY WE CALL IT PORK!

We have seen that political transaction-cost augmentation enabled government officials to embed Medicare in America’s institutional structure at precisely the time when all the theoretical determinants of such behavior supported its pro-Medicare use for the first time in U.S. history. Indeed, the strategies most influential in passing and entrenching Medicare had as their goal and effect the manipulation of political transaction costs. By tying Medicare with a 7 percent increase in Social Security benefits, proceeding incrementally, narrowing the bill’s coverage, misrepresenting its content, concealing its costs, and using countless other transaction-cost-increasing strategies described in this blog, government supporters of Medicare were able to achieve their objectives. These same tools, so instrumental in passing Medicare, today continue to serve those who seek further increases in federal control over U.S. health care. SOUND FAMILIAR?
Source: Ihe Cato Institute


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