Health Quarterly
May 20, 1992
Transcript available from Journal Graphics

Spring 1992

ANNOUNCER: This year in the United States, we will spend $750 billion to
take care of our health.  We will spend more money per person than any other
country in the world; and yet, with the greatest medical establishment in
history, something is going terribly wrong.  Thirty-seven million Americans
have no health insurance.  Three-quarters of the uninsured are families of the
working poor.  A million people a year are turned away from doctors' offices
and hospitals.  Our health care system is headed for catastrophe.

ROGER MUDD:  Tonight, on The Health Quarterly, and election backround
report.  Why is health care reform so difficult?  What change is likely?

  REE SAILORS, President, Florida Health Access: Some people are against
  incremental change, but this country is not about revolution.

  THE POLITICS, 1965-1992

MUDD: Good evening.  I'm Roger Mudd and this is the Spring 1992 edition of
The Health Quarterly.  Tonight, we begin our coverage of health care as an
election issue by looking back.  In the mid-1960's, we had a crisis in health
care and lawmakers responded.  This was a revolution- comprehensive legislation
creating Medicare to cover Americans over 65 and Medicaid to cover the poor,
those below the poverty line.

  Today, America's health care system is again in crisis, but so far, despite
repeated attempts, major change has been impossible.  We wondered what has
happened in the past 25 years that fundamental reform was possible then, but
is so difficult today.  To find out, we retraced the politics from 1965 to
1992.

[voice-over] In November of 1963, America paused.  We remember where we were
and what we were and what we were doing as we watched the tragic scene unfold.
What we sometimes forget is how much change it inspired.

ROBERT BALL, Commissioner of Social Security 1962-1963: We were in the midst
of hearings on the Medicare plan at the time that President Kennedy was
assassinated.  That changed things fairly quickly.  Lyndon Johnson really
went to the country and said, "What we ought to do for the martyred President
is to pass his program," not just Medicare, but he had a whole lot of things.
And then, when that was followed by Johnson's landslide reelection, there
was the handwriting on the wall.

MUDD: Among all the items on Lyndon Johnson's social legislation agenda,
later known as the Great Society, his top concern was the creation of
Medicare and Medicaid, establishing government-subsidized health care for
America's poor and elderly, but there was immediate resistance from those
who thought they might lose.

    DONOVAN WARD, M.D., President American Medical Association 1964-1965:
    We will intensify our efforts to the American people yet again, that
    Medicare is a lure, not a cure.

JACK MEYER, Ph.D., President, New Directions for Policy: It was opposed
vigorously at that time by the powers of organized medicine, who in this a
government takeover, socialism on the march.  They feared that this would
ruin the quality of medicine.

MUDD: Johnson was undeterred.  Joseph Califano was his domestic policy
adviser.

JOSEPH CALIFANO, Former Johnson Administration Domestic Policy Adviser;
Secretary of Health, Education, and Welfare, Carter Administration: The
key meeting I remember vividly.  I mean, we sat in President Johnson's
little green office and he said, "We've got to get this bill out of the
House Ways and Means Committee.  What will it take?"  And Larry O'Brien
said, "We have to give the doctors what they want and the hospitals what
they want."  Johnson said, "What will that cost?"  O'Brien said, "Half a
billion dollars a year."  Johnson said, "Only $500 million a year?  Give it
to them.  Let's get the bill."

MUDD: Two years after he inherited the presidency, Johnson signed into law
what has remained the most sweeping health care legislation in American
history.  Johnson knew its significance.

    President LYNDON JOHNSON: [1965]: We do this because we have no choice,
    because we must advance daily or we will fail eternally.  And we do it
    because we believe in Thomas Jefferson's words, that "the care of human
    life and happiness is the first and the only legitimate object of good
    government."

     WOMAN ON STREET: I think it's a great thing and I think it'll make these
     doctors realize that they're overcharging people- $10 to go in and take
     your {*filter*} pressure, they're thieves!  And I hope Medicare gives them a
     good kick- well, I won't way where, but you can think.

     MAN ON STREET: Although I think it's going to take a great bite out of
     my paycheck, but I'm happy to give it up in order to help those in need
     and those that are sick.

Mr. BALL: It was probably the biggest peacetime government effort that the
United States has ever gone through.  The Post Office put signs on the side
of their trucks about how you had to sign up a March 31st deadline for all
the older people.  We even had the Forest Service with their eye out for
hermits in the woods who might be 65 or over, to sign them up.

MUDD: Within a few months, the job was done.  Ninety-five percent of the
elderly enrolled.  What the plan's architects did not realize was that the
way the government paid for care launched an upward spiral of costs.
Politicians were to spend the next 2-1/2 decades trying to bring the health
care spending under control.

UWE REINHARDT, Ph.D., Professor of Political Economy, Princeton University:
We told the hospitals, "Whatever your costs are, we'll reimburse them."  We
basically told doctors and hospitals, "Here's the key to the Medicare
treasury or the Blue Cross treasury.  Do for the patient what you think is
right, then take this key, go to our treasury and there are these barrels of
silver and gold and just scoop out your usual and customary scoop."  And the
method was called "usual, customary, and reasonable."  "Oh, yes," we said,
"please be reasonable."

ARNOLD RELMAN, M.D., Editor-in-Chief Emeritus, "The New England Journal of
Medicine": Beginning in the late 1960's, a lot of entrepreneurs, people who'd
been in the fast-food business or in the hotel chain business went into the
hospital business and we had the birth of a new industry, the investor-owned
hospital.

MUDD: One of the most successfully was the company later known as Humana.
Toward the end of the decade, its board of directors made a profitable
decision.

DAVID JONES, Cofounder & CEO, Humana Inc.: We came public in January of
1968 and when we became a public company, we sold a fourth of the company
to the public for $2 million.  The stock price climbed, then, in that same
year, 1968, from $8 a share to $84 a share on December the 18th.  In one
year, the market value of [the] company went up 10 times.

MUDD: But opportunities for profit from an expanded market were not what
Johnson's health policy team had intended or forseen.

BALL: In 1965, when Medicare passed, I think most of us who worked on that
legislation expected it to be just a first step.  Surely, we all thought,
it would go ahead and be a universal-type of plan.

MUDD: In 1968, Richard Nixon won the national election by a narrow margin.
When he assembled his team, he appointed Start Altman as his Assistant
Secretary of Health.

STUART ALTMAN, Assistant Secretary of Health 1971-1976:  The early 1970's
even though it was a change in direction somewhat from the '60s, still had
a lot of the momentum of the '60s.  The Great Society may have been slowing
down, but it was not stopped.

MUDD: But that momentum did not match the force of increasing costs.  By
1970, the second year of the Nixon presidency, the health care bill had leapt
from $149 billion in 1965 to $216 billion.

    President RICHARD NIXON [1970] We face a massive crisis in this area
    and unless action is taken, both administrative and legislative, to meet
    that crisis within the next two to three years, we will have a breakdown
    in our medical care system, which could have consequences affecting
    millions of people throughout this country.

MUDD: Nixon's 1971 wage and price controls included health care, but that was
not enough.  In 1973, he signed legislation encouraging the development of
the health maintenance organizations.  Theoretically, HMO's lower costs by
helping people stay healthier, but Senator Edward Kennedy, who had proposed
national health care insurance four years earlier, HMO's were based on the
wrong strategy.  At a hearing of the Subcommittee on Health, he questioned
Nixon's point man, Elliot Richardson.

    Senator EDWARD M. KENNEDY (D) Mass [subcommittee hearing] Why
    shouldn't we just have one approach for everyone?

    ELLIOT RICHARDSON, Secretary of Health, Education, and Welfare 1970-73:
    A lot depends, really, on whether or not you start out believing that
    it's a system that is so shot and riddled with deficiencies that we need
    to start over again, basically.  We feel that the system is basically
    a good one, subject to serious flaws, and we're trying to correct these.

MUDD: Given that conservative view of the problem, some were surprised when,
only four months later, Nixon called for comprehensive reform.

    President NIXON: Now, without doubt dotting all the i's or crossing all
    the t's, I believe that comprehensive health insurance is an idea whose
    time has come.  I believe that some kind of program will be enacted in
    the year 1974.  There's long been a need to assure that no American is
    denied high-quality health care because he can't afford it.

B. KATHERINE SWARTZ, Ph.D., Economist, Department of Health, Education,
and Welfare, 1972-1973; Urban Institute 1984-1992: It really seemed, in
Washington, that winter, early spring, that we were going someplace.  There
were all kinds of efforts made to figure out, for example, how you would
interlace national health insurance with different kinds of automobile
insurance coverage that covered medical bills.  We were at that level of
detail.

MUDD: But the environment of the political debate was soon to become more
complex.

ALTMAN: It shows you how you get caught up.  I mean, I was so caught up in
national health insurance, the Watergate issue was sort of a sidelight to
me.  Of course, for everybody else in the world, Watergate was the thing
and we were a sidelight.

Senator KENNEDY: I knew that the Administration- the President, in
particular- was diverted in terms of attention, but I thought it might
just have been possible that he would have liked to begin to get a focus
on something, that real progress could have been made and that would have
been on health insurance.  And so, we didn't give up trying to pursue that
with the Nixon Administration, right up until the very end.

ALTMAN: When President Ford took over, it just seemed like all the air
went out of the tires and the forces for status quo really took over.
People were tired of the confrontation.  Costs looked like they were
somewhat under control.  The more conservative elements in the Republican
Party gained sway within the Administration and it just seemed like there
wasn't the same enthusiasm.

MUDD: But there was enthusiasm and money in the medical marketplace.  Both
the government and private business were investing in the development of
new technologies.  Their investments paid off.

Professor REINHARDT: All kinds of inventors and entrepreneurs got busy and
invented marvelous technology and some of it really, truly stunning.  That
technology was expensive and drove up health care costs.  Usually, the
statement is "Necessity is the mother of invention."  In health care, it
became the other way- invention became the mother of necessity.  Once it
exited, it was used.

MUDD: As medicine and the new technologies performed miracle after miracle,
the lines of responsibility became unclear.

Dr. RELMAN: If anything goes wrong, anything at all for whatever reason-
if it's nobody's fault or somebody else's fault- the patient may be
persuaded by a trial lawyer to instigate legal proceedings.

JAMES TODD, M.D., Executive Vice President, AMA: Justice didn't always follow
in the courtroom.  It was "Could you document everything that had been done
that was possible?"  And as a consequence, physicians began to order every
single test that they could think of, instead of relying on their clinical
judgement, which, at one point, was adequate.

MUDD: Between 1975 and 1978, nearly 60 percent of physicians said they had
raised their fees to cover malpractice insurance.

    FINANCIAL INTERVIEWER: I'm a financial interviewer.  I have to find out
    if you have any insurance through your job, through your union or do
    you have a medical green card?

    PATIENT: No.

    FINANCIAL INTERVIEWER: Nothing?  None at all?

MUDD: At the same time, the safety net of Medicaid for the poor had begun
to fray.

SWARTZ: By 1976, 1977- and this continued up through probably 1980-
roughly half of the uninsured were children and young {*filter*}s, that is,
anybody below the age of 25.  And what a surprise, I think, to people,
when they began to realize that there were still many children without
health insurance.

Dr. MEYER: You're really talking about the working poor, who have been the
have-nots of our social welfare system for many years- not quite eligible
for public assistance programs, but not able to get a toehold in the private
market.  But your average working union member, your average working white
collar worker felt quite secure and so, there was no broad constituency for
change.

MUDD: Jimmy Carter came into office, having promised to enact national
health insurance, but a sharp rise in the total federal budget forced his
Administration to look for spending cuts.  Joseph Califano was Carter's
Secretary of Health, Education and Welfare.

CALIFANO: We selected hospital costs as the first target of our improvement
of the health care system and the inflationary rises in it, because they had
been rising so recklessly.  You couldn't have hospital costs rising at 2-1/2
to three times of the cost of living.  We proposed a cap, an overall cap on
the amount of increases hospital would be permitted.

MUDD: In the spring of 1977, Carter proposed a system of controlling hospital
prices, but limiting prices meant limiting profits.  Those who stood to lose
mobilized their lobbyists.

    JAMES SAMMONS, M.D. Vice President, American Medical Association,
    1974-1990: The system is not in bad shape.  It never has been.  There
    are gaps in the system that need to be closed.  The American people are
    receiving the finest health care in the world.  There are problems with
    it, but it is not a disasterous system.

    JOHN ALEXANDER McMAHON, CEO, American Hospital Association, 1972-1986:
    And we've said before the Administration's proposal is inequitable in
    design, wrong in concept and will be impossible to administer.

MUDD: After eight months of public discussions and closed-door negotiations,
the special interests won.  Carter's hospital price controls would not be
law, but "suggestions".

REINHARDT: And at that time, the hospitals offered the so-called [laughs]
well, I laugh- the "voluntary" effort.  I still have to smile at mentioning
it because, to an economist, it sounds so incredible that a bunch of
suppliers would voluntarily agree to cut their own revenue.  And many of
us were smiling at the time.  I still have to laugh.

MUDD: By the last year of his presidency,  Jimmy Carter found himself
immobilized by circumstances.  Just as Nixon, during his tenure, found he
had to incorporate the liberal spirit of the early 1970's, Carter presided
over a time of rising conservatism.  For his part, Senator Kennedy had
continued to champion a national health care plan.

    Senator Kennedy: Without effective cost controls and without system
    changes, you eventually find out what we're seeing right here and on
    this chart here- skyrocketing costs that are going to bankrupt,
    effectively, middle-income Americans, middle-income Americans.

    [1991] We tried, during President Carter's Administration to see if we
    couldn't find some common ground.  He had not favored the more
    comprehensive program and it was not going to be a path that his
    Administration was going to support.

MUDD: January 1981- it was to be a different era.  The Reagan Administration
assumed power with a distinct ideology and a clear target.

ALTMAN: The Reagan Administration was totally preoccupied by the size of
the federal budget.  The biggest program growth, aside from the national
debt, was in the Medicare and Medicaid program, so they focused on how to
bring that program's cost under control.

MUDD: Although the Reagan presidency would become known for its tendency
to deregulate, the response to soaring hospital costs was to regulate-
a fixed price structure.

    President RONALD REAGAN [1981]: Medicare and Medicaid costs have gone
    up nearly 600 percent since 1970.  For too long, the federal government
    has had a blank-check mentality.  The hospitals simply filled in the
    amount the ywanted and then Uncle Sam- or to be more precise, the
    hard-pressed American taxpayer- paid the bill.

MUDD: So, in 1983, the Reagan strategists introduced a new term into the
language of health care- DRG's, diagnostic related groups.  The plan divided
hospital treatments into broad categories and set a price for each.  From
then on, Medicare would only pay so much for each service.  Later, the
Administration ended subsidies for training physicians and cut funding for
neighborhood health centers.

ALTMAN: Basically, the federal government backed away from its responsibility
as government.  It said, "Health care is not a federal responsibility.  It's
the market's responsibility.  It's the community's responsibility.  It's
the state's responsibility.  It's not the federal government's responsibility."
And yes, that was a fundamental departure from what had gone on under
Presidents Carter, Nixon, and Johnson.

MUDD: During the early 1980's, $4 billion were cut from Medicaid, as
eligibility standards were narrowed.  As people were eliminated from the
program, the number of uninsured jumped to more than 35 million.  Meanwhile,
the general economy had fallen into recession.

Dr. SWARTZ: We lost two million jobs in manufacturing along and only a
million of tose were refilled by 1985 and manufacturing has always had the
highest proportion of all employees covered by health insurance.

ALTMAN: As health care costs continued to grow, it affected more and more
of the middle class.  It affected more and more small and medium-size and
then large employers.  Health care was no longer a "fringe benefit" insurance
plan for employers.  It became an important cost item.

MUDD: During the early '90s, America was slowly becoming aware of a new
deadly virus.

    DAN RATHER, CBS NEWS: [May 19, 1983] The incidence of AIDS has doubled
    every six months.

    MORTON DEAN, CBS NEWS: [June 19, 1983] Eighty percent of the victims
    reported in the past two years have died.

MUDD: AIDS was to become the most devastating epidemic the world has known.
Activists called for more federal money for research and treatment.  AIDS
is an expensive long-term illness.  The cost of AIDS, however, was only one
of the factors driving up the nation's health care bill.

Prof. REINHARDT: We told the hospitals, "Behave like a business."  They
hired consultants and asked, "How do you behave like a business?"  And
what they said was, "What you do is you advertise gourmet cooking.net">food and
champagne with a birth."

    NURSE: [opening a bottle of champagne] Congradulations on your baby.

    FATHER: Thank you very much.

Prof. REINHARDT: You go look at Wall Street and you look in the '80s who
are the winners in stocks and you'll have in it consumer goods in general,
but health care is one of the large winners, almost any health care stock.
They're the darlings of Wall Street.  They became that in the '80s, a
tremendous investment.

MUDD: The amount of money in the health care system continued to climb.  By
1988, the cost had reached $539 billion and by the end of the decade,
political contributions by those in the health care business- medical
associations, insurance firms, pharmaceutical companies and hospitals- amounted
to over $60 million.

  Not surprisingly, then, the end of the decade also saw the failure of two
major reform efforts.  In 1988, Congress enacted the Medicare Catastrophic
Coverage Act.  It was to fill some of the gaps in the eldery's medical
coverage, to be paid for by a tax on the beneficiaries themselves.  Opposition
was vigorous.  The bill was repealed.

  Rep. CLAUDE PEPPER, (D) Florida, 1962-1989: I wonder if the American
  people realize the danger they're in.

MUDD: Then came the Pepper Commission on health care reform.  After nearly
two years of hearings and debates, the lawmakers did agree on a comprehensive
reform plan to cover all uninsured Americans, but they had no plan to pay
its $70-billion price tag.  There would be no major health reform in this
decade.

Mr. CALIFANO: You have hospitals, you have doctors, you have medical equipment
manufacturers, pharmaceutical companies, nurses, unions- there's a
tremendous economic set of forces here in operation.  You have a campaign
financing system in Congress that depends on private contributions and just
look at the money that this industry pours into the House Ways and Means
Committee and the Senate Finance Committee, the two committees that deal with
health care in Congress, and you'll see why they're paralyzed, why they can't
do anything.  Health care is now the single largest contributor to
congressional political campaigns in this country.

Dr. TODD: Nobody wants to give up anything that they have at the moment.
Small business doesn't participate.  Physicians are worried about having to
make more difficult decisions than they're making now.  The insurance
companies, the elderly- nobody wants to give up anything.  They want to
protect their own turf.

MUDD: Then, in 1991, something unexpected happened.  Harris Wofford, the
former President of Bryn Mawr College, decided to run for a full term in
the United States Senate.  His campaign was based on a single issue.

    Sen. HARRIS WOFFORD, (D) Pennsylvania: [TV Commercial] The criminals
    have the right to a lawyer.  I think working Americans should have the
    right to a Doctor.

MUDD: For his Pennsylvania supporters, Wofford's victory was not a surprise,
but for national observers, it was an awakening.

Mr. ALTMAN: It really send shock waves through this town, which basically
said, "Health care is an important issue to the American people and you have
to take it seriously."

MUDD: Health care became the {*filter*} issue of the early 1992 presidential
campaign.

    President GEORGE BUSH: in the sense that I want everybody to have access-
    everybody, rich or poor-

    PATRICK BUCHANAN, (R), Presidential Candidate-to New Hampshire because,
    besides the economy and jobs, it is the number one issue of an awful lot
    of people.

    JERRY BROWN, (D), Presidential Candidiate: Insurance companies can
    negotiate with doctors, with specialists, with hospitals.  Keep free
    choice.

    Governor BILL CLINTON, (D) Presidential Candidate: We've got to have an
    affordable national system that controls costs and provides basic health
    care to everybody.

MUDD: Today, health care has slipped from the top of the election agenda.

    Governor CLINTON: The work week lengthened- unemployment went up.  That
    happened and it's not right.

    President BUSH: We started to bring it together by doing everything we
    could to assist the local law enforcement people, 'cause the American
    people are outraged by the {*filter*}.

Dr. MEYER: The great irony of the American health care system is that we have
both too much and too little.  We have an overbuilt industry and yet, we have
people who have nothing.

Mr. ALTMAN: The costs are going to continue to go up.  The number of uninsured
are going to continue to grow and the shifting of those costs onto private
employers- businesses and workers alike- are going to continue to grow.  The
only thing that's going to stop it is when we sort of run out of money.

  REFORM WITHIN REACH

MUDD: So the obstacles to change have been mounting for 25 years, but at the
same time, public opinion in favor of change has been increasing, too.  
Eighty-seven percent of Amerians now say health care needs a major overhaul
and Congress is considering about 50 reform proposals.  Experts say, however,
the only change likely in the foreseeable future is step-by-step legislation.
You'll hear it called "incremental reform."

In this segment, we focus on one of those proposals, a bill to help small
business owners insure their workers, to see what kind of reform is within
reach.

There are a few places in this country where the landscape itself reminds us
of American values- independence, hard work, family.  Doug Hale was raised
here in the Texas panhandle on his father's cattle ranch.  He wants to pass
on to his children the spirit of ranch life.  On weekends, his wife Debbie
and their two children make the 25-mile trip from their home in Perryton.

Downtown Perryton is just a mile long and a few blocks wide- a theater, a
few blocks of stores, a couple of farm supply businesses.  Perryton is like
much of America.  It's built on small businesses.  Across the country, 35
million people work for companies with fewer than 50 people.  That's 40
percent of our workforce and these Americans face a critical problem.  Most
of them do not get health insurance through their jobs and cannot afford to
pay for it themselves.  Surprisingly, it is these working, tax-paying Americans
who make up three-quarters of the uninsured.

One of Perryton's most important businesses is the President National Bank.
Doug Hale is the President.  The bank is one of the pillars of this small
town and Doug is proud that he can provide not only good jobs to 19 employees,
but also security to their families.

DOUGLAS HALE, President, Perryton National Bank: The bank has always offered
health insurance to employees.  It's a nice benefit to the employees.  We
feel like it's something the employees need.

MUDD: But within the last year, Doug has faced a sharp rise in the premiums
he has to pay.

Mr. HALE: Our rates over the last 2-1/2 years have gone up 168 percent.  Our
bank now, for 19 employees, is paying over $10,000 a month in premiums for
our health care.

MUDD: That's more than $250 per employee per month.

Mr. HALE: Now, how long we can continue to provide health insurance to the
employees, I don't know.  We're a small bank.  We're located in a community
of 7,000 people.  Our annual health insurance premium is going to be over
$120,000 this year.  A some point in time, we're going to have to look at
alternatives to either decrease coverage or do something to try and lower
that premium.

MUDD: The first alternative was to look for another insurance company that
would charge lower rates.  Doug has tried this.

Mr. HALE: Our agent here in town, who has approached 30 companies- they have
not offered a quote for coverage.  We've gone through some bankers associations
here in Texas and they have been unable to obtain a quote for us.

MUDD:  There's a reason that Doug cannot find affordable insurance.  One of
the members of his group has a serious and expensive health problem.  It was
four years ago that Doug's wife, Debbie, got some unexpected news.

DEBORAH HALE, Cancer patient: I first discovered that I had cancer when I
went to my gynecologist for a pap smear.  My treatments for cancer have
included, first of all, surgery, next chemotherapy and then radiation, a
six weeks' radiation period, and then radium implants.  And then, I was in
remission for about two years and then about a year ago, I found a knot under
my arm and it turned out to be malignant.

MUDD: Most of Debbie's bills were covered under Doug's insurance policy from
the bank.  Even so, the Hales must themselves pay a large portion of the
expenses and that seriously strains their finances.

Mrs. HALE: I can remember, when I first was diagnosed, asking our insurance
agent if we had enough money to cover it.  And he said, "Well, you've got a
million-dollar limit," but I had no idea that, you know, three years later,
I would still be undergoing treatment.

MUDD: The Hales never questioned the expense of Debbie's lifesaving treatment,
but as the bills piled up, the numbers were daunting.

Mr. HALE: Pharmacy, $31,243; I.V. therapy, $18,919-

Mrs. HALE: I went to Dallas, where my doctor is now, and had a bone marrow
transplant.

Mr. HALE: -chemotherapy and injection, $8,019-

Mrs. HALE: Right after Christmas, went back to the doctor and they found
another knot under my arm and it was malignant.

Mr. HALE: -laboratory, $11,242-

Mrs. HALE: Then, I had six weeks of radiation therapy to my shoulder area.

Mr. HALE: -total charges, $117,344.

MUDD: The Hale's insurance company has paid its share of these expenses, but
at the same time, it continues to raise the bank's premiums.  On May 1st,
the rates went up another 17 percent.

Mr. HALE: I'm in a unique situation here in that, as President of the bank,
I look at the bottom line.  My job depends on whether the bank is profitable
or not.  Now, health insurance may be one of those things that we may have
to do without.  And yet, on the other hand, here I am, one of the biggest
users of the health insurance.  I'm the one who has probably caused our
premiums to increase over the past 2-1/2 years, so it's a difficult
situation that I'm in.

MUDD: But he's not alone.  This is, after all, a town of small businesses and
no one is in a better position to know about the problems than Doug.  He's
the mayor.

Mr. HALE: I've actively pursued the problem.  I've written to my state
senator, I"ve written to my state representative.  I've written to my U.S.
senators and representatives.  I've been active in the problem.  I know
there's a problem there and I know we need to try to find a solution to it.

    Senator LLOYD BENTSEN, (D) Texas: If people would be seated, this meeting
    will get under way.

MUDD: In Washington, calls for reform from people like Doug Hale are being
heard.  Texas Senator Lloyd Bentsen has proposed one of the 50 health care
reform bills now under consideration.  Late last year, he announced his plan.

    Senator BENTSEN: I have also included a bipartisan bill I introduced
    with Senator Durenberger to help Americans who work for small businesses
    get and keep health insurance.

MUDD: Right now, a company like Doug Hale's with high medical bills pays the
highest premiums, while a company with low medical bills will pay more
affordable premiums.  Under the Bentsen bill, these costs would be spread
more evenly.  Doug's rates would come down, but other groups' rates would go
up.  Senator Bentsen's bill would also guarantee that all members of a group
will be eligible.  Policies could not be canceled due to health status or the
claims history of group members.  Newly-covered employees could not be
excluded due to pre-existing medical conditions.

This bill is only one of several recently that target the problems of small
business.  In a rare show of consensus, Democrats, Republicans and the
Administration all support these measures.

HENRY AARON, The Brookings Institution: Well, the nice thing about small
suburban insurance reform is that it requires next to no change in
government spending, at least next to no direct change in government spending;
and consequently, it does not affect the government deficit.  That's something
you can do, even though the deficit is $400 billion a year and the President
has sworn there will be-this time he means it- no new taxes.  You can still
go ahead and do something in this area.

Senator BENTSEN: Well, this is one where I thought  I could bring a
bipartisan coalition and get it passed to take care of the problem now.  I
don't want to see it as any obstacle to total reform because, ultimately, I
think that's what has to come about.

MUDD: In addition to changing the rules for insurance companies, Senator
Bentsen is asking for money to organize small businesses.  Under this pilot
program, businesses would have the opportunity to band together, forming
large groups with more leverage to bargain with the health care industry.
This idea is based on a program already operating in Tallahassee, Florida.

Paul Scranton is one of Tallahassee's many small business owners.  His days
revolve around work and family.

PAUL SCRANTON, Small Business Owner: About 8:30, I run my kids to school
every day, so that gives me 15, 20 minutes with them on the way to school
every day, which is nice.

MUDD: After he drops the girls off, Paul heads to work.  He owns Looper's
Super Sub Shop, a business he started 14 years ago.

Mr. SCRANTON: We've got all kinds of things to do, basically, just to get
ready for the lunch rush and then, I'm kind of a slicing machine.

MUDD: Paul oversees the whole operation, from slicing tomatoes to paying the
bills, but he has one major frustration.

Mr. SCRANTON: Health insurance, for years, has been a problem.  We would
always get calls- I mean, every month, we still get them from three or four
different companies that say they want to come and pitch me for health
insurance.

MUDD: But as soon as insurers found out that Paul's daughter was born with
a heart defect, even though she's healthy now, they turned him down.  The
only insurance Paul could get cost him more than $500 a month, had a $5,000
deductible and wouldn't cover his daughter.  Then, Paul read an article in
the local paper about Ree Sailors.  Ree Sailors started Florida Health
Access, an organization that pools some businesses into large groups.

REE SAILORS, President, Florida Health Access: Well, Florida Health Access
is a unique invention.  Its mission is to try and find ways to bring
affordable health plans and health coverage to small, uninsured businesses
in the State of Florida.  These businesses aren't- they are not all stories
of Apple Computer.  Their margins are not huge.  Their lifestyles are not
luxurious and I think that's a reality.

MUDD: Florida Health Access is able to keep rates down by negotiating large
group rates for small businesses.  Paul and his employees each pay half of
the premiums and the State funds the administration program.  Today, Paul
is able to insure his entire family, his full-time employees and their
families as well and he pays less than the $500 he used to.

RESTAURANT EMPLOYEE: It makes me feel a lot better, 'cause I have a nine-
year-old daughter and she likes to climb trees and skate and all that sort
of thing and she's bound to get hurt sometime.

MUDD: Last year, the State of Florida gave the program nearly $6 million.
That was only enough to cover one in 20 eligible small businesses and
without more funding, most small businesses in Florida will remain uninsured.

Ms. SAILORS: State funding is absolutely our lifeline at this point.  We
have- without it, we don't exist and I think we are a public service
corporation in that respect.

MUDD: Florida Health Access is thought of as a success, but its reliance
on public money makes it vulnerable and many people are left uninsured.
Any program aimed at a small segment of the population will not solve
America's health care crisis.  Still, Senator Bentsen thinks this kind of
change is a move in the right direction.

Senator BENTSEN: I believe that this helps build support for overall reform-
this is a step forward- but I don't know when we're going to get, finally,
the consensus to pass a major reform.  Hopefully, after this election, we'll
be able to sit down with the President, whomsoever that might be, and bring
about a total reform.  But what you're seeing now is people haven't decided
what they want.

RON POLLACK, Executive Director, Families USA: my fear is that the wrongful
lesson that members of Congress will get out of this is that, if we have
problems passing incremental legislation imagine the problems we're going
to have when we pass comprehensive legislation.

MUDD: If the continuing debate of the Bentsen bill is any indication, reformers
will be in for a long haul.  Although the bill seemed to have enough support
in the Senate, it was dropped in a procedural squabble with the House.  Its
future is uncertain.

Mr. AARON: The political reality of 1992 is that we have an enormous budget
deficit and a division, politically, between a president seeking election
and members of Congress seeking election for themselves and a majority of
whom would like to see a different party occupy the White House.  In that
atmosphere, there is no prospect of any major legislation becoming law this
year.

MUDD: For some, changing the health care system step by step is a matter of
facing political reality, but for others, it heightens the frustration.

Mr. POLLACK: The health care crisis that we're experiencing really needs
comprehensive change.  We need comprehensive reform that deals with cost,
that takes on the special interests, that gives us the opportunity to make
sure that everyone has a right to health care.

Ms. SAILORS: You know, some people are against incremental change, but at
this point, I'm saying incremental's better than nothing.  I mean, we've
been standing still for too long and we've been going backwards, actually,
for too long.  This country is not about revolution.

Mr. AARON: Claude Pepper dies and goes to Heaven, meets God and says, "Do
you have any questions?"  And Claude Pepper says, "Yes.  Will there be reform
of health care in the United States?"  And God said, "Yes, but not in my
lifetime."

--
                                                     Doug Fierro
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