IIn recent years, major new studies have attempted to rehabilitate the presidency of Jimmy Carter, who died on December 29 at the age of 100. They emphasized a series of underappreciated achievements in everything from foreign policy to environmental protection and racial equity. These narratives still acknowledge Carter’s failures, but balance them with a longer-term perspective on how his presidency changed the United States and the world.
This positive reassessment did not, however, extend to health policy. This makes sense given how devastating the battle over health care was for Carter during his presidency. Congress rejected his major health policy initiatives, and his reluctant support for a much more limited national health insurance plan partly prompted Senator Ted Kennedy (D-Mass.) to challenge incumbent President Carter since the left during the 1980 Democratic presidential primary.
Yet Carter’s medical record merits a more nuanced assessment. More than any other modern president, he has taken on the health care industry, as well as his own allies, in an attempt to reduce the high costs of American health care. And his health care proposals pushed his party to adopt policy strategies that ultimately resulted in the landmark Affordable Care Act in 2010.
Carter’s willingness to tackle the politically perilous task of trying to control health care costs offers a model for the type of leadership and direction needed to address persistent health system flaws in 2024.
Carter took office at a time when health care costs were soaring. Between 1970 and January 1977, total national health care expenditures more than doubled, from $74 billion to $152 billion. As a percentage of gross domestic product, health spending increased from 6.9% to 8.1%.
Much of this increase is due to the enactment of Medicare in 1965, with its generous reimbursement formulas for hospitals. These formulas not only increased direct costs, but also allowed hospitals to generate new sources of revenue that allowed them to both build capital reserves and raise debt by entering the bond markets. Hospitals in turn used this access to capital to build new facilities, renovate old ones, and add sophisticated new equipment. This has created a cost spiral, with hospitals competing with each other on facilities and technology, rather than affordability.
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Carter attempted to dodge the issue of health care policy during the 1976 Democratic primaries, but the price explosion, along with continued interest in national health insurance on the left flank of the Democratic Party, made this impossible. After Carter’s victory in the Florida primary in March 1976, the United Automobile Workers (UAW) union demanded that he sign up for national health insurance as a condition of receiving its critical support. As a foreigner from Georgia, Carter needed the union’s support. So, after lengthy negotiations, he agreed to satisfy the UAW’s demand in an April 1976 speech.
However, even then, Carter stopped short of supporting Kennedy’s “health security bill” – which provided comprehensive single-payer public health coverage, with no cost sharing and no role for private insurers – although all of his main rivals for the Democratic nomination supported him. Rather, he outlined the general principles of a program that would be introduced in stages. Carter planned to rely on private and public insurance, and his plan included controls on hospital and physician fees to control costs. Carter also linked his agenda, in an unspecified way, to welfare cuts.
Since the union wanted to maintain its influence in the event of Carter’s victory, this proposal was enough to gain its support. Carter won the nomination and election in 1976.
As the president-elect and his team weighed their priorities, concerns about the federal budget deficit and rising inflation took precedence over his campaign promise on health insurance. They decided to focus on hospital costs instead. As a Carter advisor Later, they could “not even begin to talk about the possibility of establishing a national health insurance program if hospital costs had an unlimited straw in the federal treasury.”
Kennedy and other supporters of a national health program postponed to the new president – but they were unhappy about it. They agree on the need to control costs, but believe that both objectives can be pursued simultaneously.
By April 1977, the Carter team had drafted an innovative two-part proposal to contain hospital costs. The first part capped total hospital revenue growth at nine percent per year, with a few exceptions, through a limit on average revenue per admission. The second part of the Carter bill boldly proposed limiting total annual hospital capital spending to $2.5 billion nationally. This would reduce spending on new facilities and was therefore essential to slow the rapid growth of the hospital sector.
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Together, the two strands had the potential to be as transformative as Kennedy’s “health security bill” because of the way they challenged uncontrolled hospital expansion and rising costs.
The proposal sparked a brutal war.
THE hospital The industry mounted an aggressive local lobbying campaign against the bill while implementing a highly publicized “voluntary effort” to control costs. Anne WexlerCarter’s special assistant for public liaison, explained that each local hospital board included “the president of the bank, the president of all the local community organizations, the leaders of all the religious organizations in the city, etc. The hospitals’ powerful allies meant that Carter had lost public opinion, “before we even started.”
Congress voted against Carter’s proposal several times between 1977 and 1979, dealing what it considered a crucial blow to his domestic agenda.
Meanwhile, a frustrated Kennedy pressed the president to announce a national health insurance plan before the 1978 midterm elections. Carter, however, recognized that Kennedy had no support from moderate and conservative Democrats in Congress and pushed to postpone the publication of a specific plan until the following year. Kennedy reluctantly agreed, but at the midterm Democratic convention in December he lambasted Carter’s inaction.
Finally, in June 1979, Carter released a plan for the first phase of a program to achieve universal coverage. He relied on both public and private insurance to cover “catastrophic” medical costs, and proposed federalizing Medicaid by combining it with Medicare into a new federal program known as “Health Care.” This would have eliminated the state-to-state variations that made Medicaid an inconsistent and unequal vehicle for insuring low-income Americans.
While covering all expenses for the poor, the health system provided a deductible of $1,250 ($5,151 in 2023 dollars) for higher-income beneficiaries. Additionally, the Carter Plan retained employer-provided private insurance with a mandate that employers provide at least catastrophic coverage to their workers for costs above a $2,500 deductible. On the cost control side, the bill limited hospital capital spending and added a new system to control doctors’ fees.
According to the administration, more comprehensive coverage could be added if economic conditions permit.
Kennedy balked at the meager benefits, understanding that Congress could not be counted on to regularly expand coverage. Despite this, Carter’s vision influenced him. Kennedy’s own proposal began to include both public and private elements, including an employer mandate and a requirement that insurance companies provide marketing and administration services for the public elements of the plan. It also provided for an annual national health budget to control costs.
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Neither bill made real progress in Congress, and Kennedy’s frustrations fueled his decision to challenge Carter for the 1980 Democratic nomination.
Despite the political damage caused by Carter’s two health care defeats, he accomplished two major things. First, he recognized growing problems with cost control in the U.S. health care system. His proposal, if adopted, would have laid the foundations for a more cost-effective and egalitarian system. He understands that such control of hospital costs is a prerequisite for achieving universal coverage.
Second, Carter changed the terms of the health care debate in favor of the Democrats. They would no longer favor universal insurance provided by the federal government as Kennedy’s proposal of the early 1970s had done. Instead, Bill Clinton (unsuccessfully) and ultimately Barack Obama in his signature bill in 2010 both adopted a mix of public and private health insurance that builds on Carter’s legacy. It is debatable whether this change was positive, but it marked a key step towards our current system.
The other element of Carter’s health care agenda – the critical but politically perilous problem of high costs – remains largely ignored. Although President Biden’s Inflation Reduction Act took important steps to control prescription drug costs, they account for only 9% of health care costs. Also under Biden, the Federal Trade Commission increased its review of horizontal and vertical hospital mergers, but this has had limited effects and occurred largely after the fact, as the industry has already undergone significant consolidation. Unlike Carter, Biden has not sought to directly regulate costs from hospitals, doctors and clinical services, although they account for 51% of health care costs.
With Americans still facing cost concerns in 2023, Carter was proven right on health care. Even if he couldn’t bend Congress to his will, his hospital spending caps could have avoided many of the challenges we continue to face. The question now is whether today’s political leaders will have the courage to follow his example.
Guian McKee is the White Burkett Miller Professor of Public Affairs at the Miller Center for Public Affairs at the University of Virginia. He is the author of Hospital City, Health Care Nation: Race, Capital, and the Costs of American Health Care, published by University of Pennsylvania Press.
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