DP x S23: The State, Austerity, and the Politics of Healthcare (Session 5)
Earlier this month we collaborated with the organizers the Socialism Conference to put together five sessions at this year’s conference on the political economy of health and disability.
In this session, "The State, Austerity, and the Politics of Healthcare" Death Panel podcast co-host, Phil Rocco is joined by historians Gabriel Winant and Salonee Bhaman to discuss how fiscal decentralization has become an underappreciated force driving the healthcare politics of the United States, and what it can tell us about where we are now. The healthcare struggles of the last century have been profoundly shaped by the structures of US federalism: what resources are allocated to states, and what artificial constraints are imposed on them that produce policy in the mold of austerity?
Thanks to Han Olliver for our Death Panel x Socialism Conference 2023 poster image, which is being used as the cover image for this episode on platforms that support it. See the full poster below, and find and support Han's work at hanolliver.com
Transcript by Kendra Kline. (Kendra is currently accepting freelance transcript work — email her if you need transcripts!)
DP x S23: TRANSCRIPT
The State, Austerity, and the Politics of Healthcare (Final Session)
[Beginning of transcript]
Abby Cartus 0:00
I'm going to introduce our speakers just very briefly in the order in which they will speak.
Philip Rocco is a co-host of the Death Panel podcast and associate professor of political science at Marquette University. He is the author of Obamacare Wars: Federalism, State Politics and the Affordable Care Act from 2016 and co-editor of American Political Development and the Trump Presidency from the University of Pennsylvania Press, 2020.
Salonee Bhaman is a historian who studies struggles for social provision and the politics of care and intimacy during the HIV/AIDS epidemic. She is a co-leader of the Asian American Feminist Collective. Beginning in September, she will be Andrew Mellon Postdoctoral Fellow in Women's and Public History, I think? A word was omitted in the description. [Salonee confirms missing word is “history”] Women's and Public History at the New York Historical Society.
And finally, Gabriel Winant is a labor historian at the University of Chicago. He is the author of The Next Shift: The Fall of Manufacturing and the Rise of Healthcare in Rust Belt America from Harvard University Press, 2021. He is also an organizer with the Emergency Workplace Organizing Committee.
So we will have about 30-35 minutes of presentations, at which time we will turn it over to kind of a more open audience discussion. So without further ado, I will turn it over to Phil.
Phil Rocco 1:16
Thank you, Abby. And I guess I'll just start by saying thanks to my comrades at the Death Panel - Artie, Bea, Abby, Jules, for -- it's really a pleasure, it's very fun to think with you all. So this is very much, I think, inspired by thinking with you all.
So I want to just say a few things about the present political moment in our country, what health policy has to do with that moment, and how and how not to think about the role of the US system of government in perpetuating healthcare crises. And the part of the system that I want to focus on today is the way that federal, state and local governments share funding and administrative responsibilities, which seems boring, but I think is very important to understanding that crisis. And to make the argument I want to make today, I want to tell a story. So right now, millions of people in this country are losing their healthcare coverage under Medicaid.
Medicaid is the program jointly financed by the federal and state governments that covers one in five Americans. So why is this happening? Why are millions of people being dispossessed? The typical answer to that question, which I'm going to challenge today, runs as follows, the surface level answer. Medicaid is a decentralized program. It's funded both by the states and by the federal government. In total, the federal government picks up about 72% of all Medicaid costs. But the amount of federal matching varies by state, depending on the state's per capita income. States with lower per capita income get a larger share of federal funding. The state picks up the costs that the feds don't cover. And because states every year have to balance their budgets, and because eligibility for Medicaid is contingent on income and/or disability status, governments often have incentives to disenroll people even if they are still eligible for the program.
During the first three years of the pandemic, that was different, the federal government's contribution to the states was made more generous to make sure that people could stay on Medicaid and get on it if they lost their jobs, in the early months of COVID. The Feds also temporarily paused Medicaid's most punishing tool of austerity, known as "Medicaid churn." It's a word that experts use to describe what happens when people are thrown off the program. Sometimes because they're no longer eligible for it, and sometimes because the state just determines that they didn't comply with the rules, they didn't file the paperwork correctly, and so on.
And for the first few years of the pandemic, for the first time ever in the history of Medicaid, churn didn't happen. But now as the federal government has moved to erase all traces of the still ongoing health threat, which we on the show have started to call the sociological production of the end of the pandemic, the federal funding that was increased during the early days of COVID has been wound down. Thanks to the Consolidated Appropriations Act of 2023, emergency expansions of federal aid to state governments have ended, as have the requirements that states maintain eligibility for enrollees who became eligible during the pandemic. The result is that 5 million people and counting, a third of whom are children, have lost Medicaid, and three quarters of those dis-enrollments happened for procedural reasons, meaning that they just didn't fill out the paperwork correctly or whatever.
Even so, if history is any guide, most of those people are not going to be re-enrolled this year. So that's the surface level story. Okay. It's a sort of easy enough story about the law and its evolution. But there's a puzzle here. What makes this surprising, and I think in contrast to the title of the panel, is that this is not actually happening at a moment of austerity, but actually of one of relative generosity, and an era in which Medicaid spending is only expanding, an era where more and more state governments are actually expanding Medicaid. It's not an era of devolution, but one of increasing relative federal fiscal centralization, which the federal government is taking on a bunch of new responsibilities. Payments of 550 billion to state and local governments for the Infrastructure Investment and Jobs Act, the Inflation Reduction Act pouring hundreds of billions of dollars in economic development projects, the CHIPS and Science Act, investing 280 billion in domestic production of semiconductors. Meanwhile, Medicaid coverage is phasing out. Here's the second part of the puzzle.
This is happening not just in, you know, the standard story, cruel Republican dominated states. It's happening in Democratic states and not just mild Democratic states, but states that were once thought of as being leaders in the expansion of Medicaid, happening even as more states are signing on to expand the program, pressed in part by local Chambers of Commerce, unlikely allies that they are. And so while Medicaid is becoming this program that's this large -- increasingly dominant source of healthcare coverage, it was still built on this policy chassis riddled with all of these contradictions. Smuggled into the 1965 Medicare legislation, Medicaid was built on this earlier system of health financing we talk about on the show, called the Kerr-Mills Act, through which the federal government cross-subsidized state coverage for a small number of Americans.
Now, some political scientists have understandably, though I think wrongly, claimed that the problem here is one of federalism, the constitutional division of authority between the federal government and the states. That fundamentally misapprehends the situation. Medicaid is, above all, a policy choice embedded in legislation and regulations, not a constitutional one. If the program reinforces inequalities, it's not a federalism problem. Rather, I think that to understand what's going on with unwinding, we have to understand Medicaid's contradictions, and the way that those contradictions are emblematic of how healthcare financing in the US can simultaneously expand its federal investment as it regenerates inequalities. So at the heart of this process, I think, is the role that federal and state governments play as a support structure for capital accumulation.
Okay, that was a mouthful. Let me back up. Recall that under neoliberalism, it's a particular regime of capital accumulation, the state is actively involved in helping capital accumulate.
How does it do this? First, by guaranteeing the suppression of wages through weakening labor's power to act collectively. Second, through deregulating industries. Third, through cutting taxes. Fourth, through selectively investing in government services. In the US, reorganizing the power of states and the federal government has been really crucial to processes of accumulation. In the New Deal era, the era of regulated capitalism, programs like Medicaid were part of this web of rules some people call the capital-labor accord, that define industrial competition within the national marketplace and administrate this sort of growing array of federal programs. In 1980, at the dawn of the neoliberal era, the political theory of the Reagan administration's new federalism push was that combined with Federal Reserve Chair Paul Volcker's crunch on credit, cutting federal revenue to the states and local governments, and funding for economic development programs would induce states to create business climates that would attract investment and ensure the survival of businesses, right, the robust kind of competition.
These governing arrangements though under neoliberalism didn't really make sense. They created contradictions of their own, which generally led the system to be less effective at generating accumulation. Stagnant wages might increase profits, but they result in sluggish demand, leading to frequent recessions. Similarly, deregulation enhances profitability but creates financial risks, as we plainly saw in 2008. Third, limited government might allow for lower taxes and higher profit margins, but it leads to the decay of physical and administrative infrastructures. And worst off for the neoliberals, they realized that even a minimal level of democracy means that there are actually limits on how much you can cut government, right? Even if democracy sucks and it's not working, whatever, there are limits to what you can do.
So the long term decline in the rate of profit combined with the growth of the service sector created a familiar dilemma in healthcare: rising costs, declining access, to the slow dumping of employer sponsored insurance, and poor health outcomes. This in turn unleashed greater friction among the fractions of capital that make up the healthcare system itself. The rise and consolidation of large HMOs occasioned the emergence of large employer purchaser coalitions, which then manipulated incentives to favor lower priced HMOs or self insured plans that contracted directly with providers, dodging not only insurers, but state regulations.
Finance, meanwhile, continued to demand restrictions on government funded healthcare utilization, which led providers to search for income and cost savings elsewhere, usually through cutting staff, or increasing service charges to private payers. The result is just this system that's prone to crisis over and over again. This is symptomatic of a broader problem in the regime of capital accumulation, in which these increasingly disorganized and in a way, failing fractions of capital, have each responded to that failure by trying to place their footing with their relationship with the state on like a different footing, demanding policies to secure their short term economic interests.
There's a variety of flavors in this: government investment in R&D, building projects financed by progressive taxes or public debt, maintaining low minimum wages, privatizing government fixed assets, what McKinsey calls the $75 trillion global opportunity. When it comes to healthcare provisions, state expansion prevailed over retrenchment. So even as all of these other programs that the Reagan administration tried to cut fell away, Medicaid spending and enrollment just continued to grow, increasing by over 1,400% between 1972 and 2021. So it's wrong to call that a retrenchment of the state. That's not a retrenchment of the state. That's an expansion of the state.
So what's going on there? None of those proposals to block grant Medicaid that people talk about are ever going to be successful, by the way. Why? First, Medicaid has well known economic multiplier effects in which $1 of federal Medicaid funding into the economy generates more than $1 of economic activity. Second, means tested programs like Medicaid subsidize low wage employers. Medicaid indirectly subsidizes low wage employment by freeing large corporations from the need to purchase group insurance or create a self insured healthcare plan. Unsurprisingly, even prior to ACA's Medicaid expansion, the percentage of families with a low wage worker enrolled in Medicaid doubled between 1995 and 2010. Yet however vital Medicaid might be as a source of insurance, it doesn't empower workers as sellers of their labor. There is little evidence that Medicaid expansion actually gives workers job mobility. Third, since 1971, Medicaid is not just a source of public insurance, it's also a market making project. It was in that year, that august year, 1971, that Governor Ronald Reagan led California to experiment with for-profit prepaid health plans in its state Medicaid program, which the LA Times called the new gold rush. Within two years, Congress passed the 1973 HMO Act. By 1997, Congress eliminated the 75/25 rule. And now we all have managed care in Medicare and Medicaid.
Okay. Familiar story. That rise of managed care models not only allowed profit making companies to come inside the state and sort of gain structural power within the state, it also led states to abandon a legal doctrine called the corporate practice of medicine doctrine, which was the product of all of these different laws, which had basically been used to limit the commercialization of medical care by prohibiting non-professionals from owning or controlling medical practices. With the rise of HMOs, that completely went by the wayside. And that is why we now have private equity increasingly owning not just HMOs, but healthcare providers, nursing homes and so on. And that's, of course, why when private equity buys your nursing home, that immediately there are staff cuts and safety risks increase and so on, right. I don't have to tell you this. And that logic is not just something that's going on in the private sector to generate profits. It's also going on in the public sector to generate political capital.
So something we talked about on the show, the Talevski case that came up before the Supreme Court last year, the state and local governments are essentially diverting enhanced payments under Medicaid's upper payment limit away from facilities where patients are cared for and towards other purposes, leaving those facilities underfunded. So the Hospital Corporation of Marion County, Indiana, which is a public corporation, siphons hundreds of millions of dollars of Medicaid payments away from nursing homes, and towards new hospital facilities with world class architecture, rooftop gardens, pools, gyms, and track facilities. Meanwhile, nursing home residents in Marion County have -- there's understaffing and then a growing number of patients are subjected to chemical restraints, in violation of the federal Nursing Home Reform Act. Okay, so like that is the broader pattern here in which the state is not retrenching, it's growing, but it's growing as a market making project.
So let's get back to the puzzle of unwinding. Why, if Medicaid is such a juicy source of financial capital and political cachet, is unwinding still happening? We have to see that as part of the result of a contradiction. Start with the Biden administration. Despite advertising itself as a champion of Medicaid expansion and the right to health care, it didn't do anything to stop the unwinding because it would have clashed with the administration's actual preferences for maintaining the fragmented system of healthcare.
To call for the extension of Medicaid continuous coverage would have been, in effect, an argument for something like a new healthcare program, a repudiation of the idea of means testing, and an acknowledgement that Medicaid should not be merely counter cyclical, expanding its role as the economy contracts and vice versa, but it should instead provide continuous coverage to all people who qualify for it. With no other ideas on the table, the Biden administration endeavored to steer the healthcare state back on its course, even if this is sort of unsustainable in the long run or generates crises that top officials in the administration have learned how to navigate that system.
Okay. Second, what about the hospital associations and their members foregone profits, shouldn't that have changed things? Here, we should consider the complex relationship between Medicaid enrollment and costs. In the short term, states might spend less on Medicaid after people are cut from the rolls, but actually having insurance in the long run leads to cost savings. People who have insurance are more likely to take advantage of preventative care and see a primary care doctor, for example, and they're less likely to seek high cost care from an emergency room. And, of course, for poor, critical access hospitals, this can be a disaster, but for large health systems now that we have, as a result of all of these changes in the political economy of healthcare, they can absorb those costs. So as the American Hospital Association thought, as evinced by their lobbying materials, it was better to support a gradual transition out of temporary Medicaid expansion than a haphazard one. Those were the choices.
If you want a more specific example of this, just look at how Oregon hospitals responded to a proposal for a bridge program after the unwinding started. They said that any such programs should be temporary, and the better option would be to transition people on to "appropriate marketplace or employer based plans to ensure the sort of predictability of the care that they receive." For managed care companies, the story of unwinding is actually not so different. Unwinding placed billions in MCO profits in jeopardy, but luckily, the ACA, Obamacare provided another solution, the individual marketplace where pre-tax profit margins are about 3% higher than Medicaid managed care. So, you know, it's -- essentially now the state has given them options, if Medicaid disenrollment should happen. So to understand the riddle of Medicaid unwinding, you have to look at both sides of the Janus faced American welfare state.
Over the last five decades, Medicaid's resulted in dramatic expansions of healthcare coverage, and has occupied a growing share of national health expenditure, and yet this growth has helped to reproduce rather than redress deep inequalities. Public subsidies have helped to underwrite a corporate model of managed care and bolster the health sector's reliance on private equity. That's very important here. Providers and intermediaries have learned how to ride the waves of Medicaid disenrollment, while continuing to book record profit margins. At the same time, the means tested nature of the program has provided an indirect subsidy to low wage employers, just as it directly subsidizes low wage work in the healthcare sector itself. And it goes without saying that this fragmented federal state structure means that we don't know who to blame when bad things happen. So from one angle, this looks bleak, right? Investments in healthcare offer a mechanism of structural power that differs from the traditional threats of firm exits or capital strike. Because what capital can threaten to do is not to withhold investment in the economy or create job losses, but to actually withhold people's care. That's their threat. And it's different from traditional Marxist theories of structural power.
At the same time, the powerful role that the government plays in shaping market for services, combined with a growing centrality of healthcare to the American economy should make Medicaid a viable arena for contesting not only the allocation of societal resources, but the democratically accountable institutions as opposed to profit seeking firms as agents of economic planning. In other words, I think Medicaid is actually the most vital and viable ground for class struggle in the American healthcare state, in part because these crises and these contradictions are sort of everywhere you look. The total supply of RNs decreased by more than 100,000 people between 2020 and 2021, the largest drop ever observed over the past four decades. That is a crisis and a set of contradictions, you know, waiting to be exploited. But I think it requires dispensing with the normal paradigm that's dominated health reform movements for the last 50 years, which treats the rate of insurance coverage or the extension of state subsidy or state activity as the barometer of success. The American healthcare state is a mature network of institutions. And actually doing battle with it means not just like seeking to expand the number of people who have "have" healthcare coverage, but actually politicizing the idea that capital can play any role at all in delivering on these needs. And if you look at the wave of enrollment occasioned by Medicaid unwinding, the economic effect that it's about to unleash, that should make it an opportune moment over the next year or so, to link together localized struggles for better wages, better working conditions in the health sector, and a national fight against this cruel means tested logic for Medicaid, which, as a result of this sort of conflict, we might be able to short circuit the blame avoidance trap that the program itself has created, so I'll leave it there. [applause]
Abby Cartus 21:13
Thank you, Phil. That was great. I'm just advancing us to the next speaker. So Salonee, you're up.
Salonee Bhaman 21:18
Hey everyone, thank you for being here. It's a special group of people who want to talk about fiscal federalism on a Sunday afternoon. [crowd whooping and laughing] So I'm excited.
I'll also begin by thanking our organizers, the Death Panel podcast, the Haymarket crew, everyone. It's been wonderful to be here, and really kind of energizing. I'm also very grateful to both of my co-panelists who've done the kind of empirical research that allows me to fill in some of the cultural blanks in a fun way. I'm a historian by training, and my academic research focuses on both culture and policy, but perhaps more specifically, the way that culture shapes policy, and governance. I just completed a dissertation that examined the political economy of care during the first decades of the HIV/AIDS crisis. But depending on who's asking, or who's hiring, one could reasonably and honestly describe that work as a history of sexuality, a history of welfare provision, urban history, history of inequality, a history of medicine, history of social movements, you get the gist.
And I mention all that not to highlight my own versatility as a tenureable scholar [laughter], as to highlight that the healthcare emergency that HIV/AIDS was was a convergence of so many different threads in American history. To pull them apart for disciplinary clarity does a disservice to what that death knot actually reveals about our system.
One framing of the epidemic I found really useful in the last few years is that it functioned as a stress test of the American healthcare state, in the era following the Great Society. So it was the first major crisis to befall that kind of patchwork private insurance-Medicaid-Medicare system that affected the entire world. And examining how and why HIV/AIDS was so destabilizing to American healthcare does reveal a great deal about the kind of underpinnings of that system. So I'll begin with some framing about HIV for those who don't know, but I won't get too in the weeds. HIV is a virus that causes AIDS. It is not a thing of the past, but still something that many people live with and that exists today. Often we talk about it as something that ended in 1996, but that is not the case. And HIV attacks an individual's immune system, meaning that someone with HIV is particularly vulnerable to a host of opportunistic infections.
While there are patterns in the types of infections that are particularly common, among particular risk groups, so once again, kind of a -- I don't want to just wholesale mirror the language of public health, but people living with HIV or AIDS had kind of varied conditions, right, what you might get sick with or what sent you to the hospital could look very differently depending on where you lived, what you did for a living, what the conditions of your life were. That also meant that the cost of diagnosing, treating and managing HIV related illness was uniquely incompatible with the way we do American healthcare financing. That system had embraced cost containment and accounting procedures aimed at increasing efficiency and decreasing cost. In particular, Medicaid and private insurance both used a DRG form of billing, which basically meant that if you ended up in the hospital because you had liver failure, you might not actually be getting reimbursed for the specific amount of money you cost to treat, but rather the average cost of liver failure per day. Because there was no AIDS category, that made hospital billing particularly difficult and complicated in those early years. And as those of you who have navigated health care surely know, the US healthcare financing system remains a chaotic patchwork of public and private provision.
Both of those systems relied on statistical assumptions about how long people were supposed to live. HIV subverted those assumptions. The average person with HIV in 1985 lived only 18 months after an AIDS diagnosis, meaning that they were not able to actually go through the lengthy and slow disability certification processes that Medicaid required. Many were ineligible for Social Security benefits by the time they became sick enough to be hospitalized over a long term. And the sick and dying decidedly fell outside of the life expectancy and mortality curves that private insurers use to manage their claims. That made them an especially attractive population to strategically exclude from coverage and shift onto the public insurance rolls. By the end of the 1990s, a disproportionate number of people with HIV/AIDS sought care at a handful of safety net hospitals that were legally obligated to provide them with care and could not turn them away.
This also meant that those hospitals faced the strain of increased costs that they were not able to have reimbursed. Moreover, by the 1990s, it was also clear that HIV was not simply an epidemic, but rather a syndemic, in the words of a medical anthropologist named Merrill Singer, so that the illness was far more likely to be correlated with other factors or other ailments like addiction, drug use, poverty and violence. Because healthcare was often conceived of as distinct from services like housing, hospital systems actually bore the costs of patients who had nowhere else to be discharged, who struggled with drug dependencies that exacerbated their symptoms, or had limited access to the forms of private support that have traditionally assumed the cost of end of life care.
And by that, I mean, they did not have the kinds of families that could take them in and pay for their health care, right. But I will say, often when we kind of read the scholarly literature about HIV/AIDS, I think many make the mistake of saying that people with AIDS were less likely to have families. That is simply not true. They did have robust systems of care and care provision. They just simply were not as financially robust as the American welfare state assumed they would be. So in summary, the results of that stress test were basically an abundance of human immiseration, ballooning costs and an exacerbated urban crisis where urban hospitals were facing bankruptcy in some cases, facing kind of ballooning costs that they didn't know how to deal with.
It's from that context that we actually get the first kind of major AIDS care bill, known as the Ryan White CARE Act, which was passed in 1990. And I kind of want to use the Ryan White CARE Act to sort of act as a case study for what I think is a kind of transition from a liberal regime of healthcare financing to a neoliberal regime, in this kind of moment. Passed in 1990, the Ryan White CARE Act was ostensibly bipartisan legislation championed by both Edward Kennedy and Orrin Hatch, they were the chief authors of the act. And we can talk a lot about the debate over its passage in the Q&A if you'd like, but I'm not going to go too far into it.
And the Ryan White CARE Act is structured not as an entitlement program or an amendment to Medicaid, but rather as a disaster relief bill. So it's kind of like the same sort of thing you would use to pay for the fallout of Hurricane Maria or Katrina or something like that. In part, that structuring is to justify why the federal government should assume the cost for people who might be otherwise classified as kind of the unworthy poor, right? We would pay for a wildfire in California, so we should also pay for this disaster that's befalling the urban centers of New York and Los Angeles. Funding for the programs covered underneath its titles were subject to further debate come appropriations season, so every year it was a new fight to make sure that things would be re-funded, postponing but not doing away with the political struggle between the undeserving and deserving populations, and debates about whether or not that money should be used for mandatory testing programs, databases that kept lists of people with HIV, etc.
It was also administered, like so many programs, by the states, with extensive guidance from the federal government and adhered to a now familiar bureaucratic framework of contracting services to nonprofits rather than having the state actually provide services themselves. And that whole structuring created some contradictory outcomes. Unlike the New Deal programs that explicitly excluded populations deemed undeserving, the Ryan White CARE Act actually explicitly targeted certain demographics for increased funding, because they were believed to be more costly. So there were special categories reserved for people, men who had sex with men, women with HIV, mothers with HIV, formerly incarcerated individuals.
And we might actually kind of bracket that as a sort of biocertification, or this moment where we see that Marta Russell term [the money model of disablement], I'm just reading Health Communism. And it is sort of this place where these disabled bodies suddenly become profitable, right, and the most at risk, the most expensive, become the most lucrative for this burgeoning nonprofit sector.
The Ryan White CARE Act also bore the legacy of the Great Society's more egalitarian and democratic impulses. State health planning councils with seats reserved for people with AIDS and activist groups actually distributed Ryan White CARE Act funds and decided how they would be allocated. This allowed the CARE Act to fund some truly innovative health programs, support groups for women with AIDS, social workers inside hospitals, therapy, massage, anything was on the table if it had a demonstrated track record of working. But it also allowed for power sharing between groups that had served underserved populations. So there's a great book called Love Your Asian Body, which is by a historian named Eric Wat, that actually talks about how the Ryan White CARE Act allowed groups of color that had been kind of excluded from the AIDS mafia infrastructure in the early years of the epidemic, to actually make a claim to a certain kind of power and governance. But that comes with some really adverse effects too. Because the Ryan White CARE Act is not an entitlement program, it tethered grassroots organizations and major service providers to government reporting systems. It generated an enormous amount of paperwork, because every new client suddenly had to be documented.
It required that organizations adopt the mandates of state Medicaid bureaucracies in order to continue providing services to clients. And it also required that they triage all of their services to see what was overlapping with Medicaid, right. Which would mean if you were actually receiving services from the Gay Men's Health Crisis, you might now have four different providers around the city that you had to get to rather than one consolidated place where you could access care. Not coincidentally, this kind of shift results in a wave of unionization efforts in those healthcare providing groups, specifically among the kind of new social workers and longtime employees who had seen themselves as activists and were now rendered employees who were subject to the same kind of work speedups that other people in the sector were frustrated by. There were also kind of other more complicated developments.
For example, in 1994, California proposes a kind of large scale universal healthcare program known as Prop 186, where a kind of universal program would be funded through taxes on cigarettes and other kinds of consumer goods. And insurance industry money is instrumental in paying for lobbyists to oppose this program. However, instead of just the usual suspects of corporate power, they enlist lobbyists from within the kind of liberal power structure. So two of the most influential of those lobbyists were David Mixner, who's a very prolific gay rights attorney. He's known as a friend of Bill, because he's Bill Clinton's first sort of gay bundler, and a civil rights feminist attorney named Lisa Specht, both of whom are paid thousands of dollars on behalf of this insurance lobby, to basically argue to the activist constituencies that they represent, that a universal program would ration health care and couldn't be trusted to actually provide for the services of their highly stigmatized constituencies. And it's effective.
The AIDS Project Los Angeles opposes Prop 186 initially. They're eventually brought back into the fold. But many of the people who are on the board of that organization, but have also been receiving services, see their healthcare is fundamentally tied to the Ryan White CARE Act, and see the state and the powers that be in the state as homophobic and likely to cut funding for the kind of expanded services that they had required. Prop 186, in their kind of worst nightmares, would be a return to the bad old days before the CARE Act, where you couldn't get coverage for certain things and you were beholden to this Medicaid bureaucracy that was rather anti-feminist, or homophobic.
Similarly, Lisa Specht talked to groups like NARAL to say that because a statewide health commissioner would decide what was covered, abortion would once again be up for debate in California. There's no real evidence to suggest that it's true, but the feeling that it might be true was so compelling that many people voted against the bill. And in 1996, when the first really successful medications to manage HIV come onto the market, known as combination therapy, they are enormously expensive, but they're paid for by the Ryan White CARE Act. And so this has a profoundly demobilizing effect on what exactly activists do, right. And in the words of one nonprofit service provider who's writing an anonymous op ed in The Washington Post in 1997, sort of trying to rally the troops to take up the mantle that they had taken up a decade before, they say:
"All of our present support programs have been created to resolve a short term crisis, a shortage in funding, the sudden unexpected availability of a new drug or a diagnostic tool, an obvious unmet service need. But all the mechanisms we've created have been little more than a complex series of band aids, not real solutions to the underlying problem."
The author continued, asking those who ran programs that were funded by the Ryan White CARE Act:
"Do you expect to succeed in getting refunded by the next 30 or 40 Congresses, for the next 10 administrations? Of course not. Few people anticipate the prospect of success next year, let alone in the next decade."
And that's a little bit of a bummer of a note to leave things on, but I do think it outlines some of the horizons that were foreclosed by both the passage of the Ryan White CARE Act and the development of sort of a pharmacological fix, right? It foreclosed the possibility of a truly international solidarity. While HIV is a manageable illness if you were insured in the United States, it is catastrophically expensive to treat in much of the world. Yet another plug for Bea and Artie's book, I just read the PHARMACOLOGY chapter, which does talk a lot about the sort of international implications of drug patenting and how many of those drugs become subject to a kind of property rights regime, that essentially commodifies health and makes it so that the Global South, or the Third World, whatever kind of heuristic we want to use, cannot in fact develop cheaper drugs to keep people alive. And it also forecloses a kind of broader visioning of what the world might look like if we were not sort of chasing funding temporary grant programs every five years.
Many of the nonprofits that I studied were transformed by the Ryan White CARE Act in good ways, right? They became permanent institutions for a certain kind of radical health care. But they were also transformed bureaucratically into institutions with large development departments rather than activist leanings, they could no longer engage in the kind of political speech that they once had. And I'll kind of pass it on to Gabe shortly. But I think that that kind of complicated legacy is something that we have to wrestle with, because the fears that those lobbyists were able to prey on of healthcare rationing, and what they often termed the managed scare, were not unfounded. The Ryan White CARE Act came into being after hearty debate about whether or not people with AIDS did in fact deserve to live. That was something that was live in congressional circles, right. And so there has to be a sort of larger cultural accounting for how we make people feel safe in order for us all to fight together. And I'm hopeful that it can exist. Thank you. [applause]
Abby Cartus 38:42
Thank you. Gabe, you're up.
Gabriel Winant 38:45
Alright. Well, I'm really sorry I'm not there with you all. I love the Socialism Conference and I'm really pleased to be able to do this panel with -- organized by the Death Panel crew, so thanks to them, especially Abby, and Beatrice, and Artie, as well as my co-panelists, Phil and Salonee. I've learned so much from Death Panel over the last couple of years. And it's been such a treat for me to get to be in conversation with those folks, and Salonee and I have been in conversation for many years. So it's nice to be on the panel with both you guys even though I can't see you.
So I'm going to talk a little bit about very similar themes, the general zone of fiscal federalism, austerity in the healthcare system, and with some emphasis on the relationship between labor markets and workers organizing and activity and structure of health policy. So I want to kind of first lay out two parts of an argument about the relationship between fiscal federalism and labor markets and I'll try to bring it together. The first is just -- and this will be familiar to you all, both from your own experience and from the previous talks, about the physical structure of the healthcare system.
So maybe the most fundamental kind of defining element of the American healthcare system, I would say, is the reliance on third party reimbursement. This is very intimately painfully familiar to all of us, right. But when we say third party reimbursement, what we mean is that our insurer, which is a separate entity from both ourselves and our provider, whether it's a doctor or a hospital or a homecare agency or something else, the insurer pays for our care, right. And the insurer might have any number of kinds of relationships, both with us as the patient, and with the care provider, right. We might get insurance from our job, we might get it from the government, we might not have it at all, in which case, then there's a whole secondary set of processes that we enter into.
Similarly, depending on what kind of actor the insurer is, there's any number of relationships they might have with the provider, right. They might be kind of consolidated in some way, that's managed care, although then there are still internal differences within an HMO, by which the insurer kind of rides the provider to make sure that too much care is not being given. They might be separate, fully and formally, right, they might be public, they might be private. And then even within these, right, there are a whole host of further fragmentations.
So although the most important by size, fiscally, insurers in our society are public, right, Medicare and Medicaid, they are not themselves a single thing. Now, at some level, their size means that they get to kind of set the pace for the healthcare system as a whole, when Medicare and Medicaid pursue through federal policy or state policy, a particular direction in terms of trying to shape healthcare reimbursement in a certain way, often, then, private sector actors will follow because in some ways Medicare and Medicaid kind of make the whole market, as Phil was talking about. But it's important to pay attention to the fragmentations among them. Obviously, Medicare is federal, whereas as Phil was saying, Medicaid is a state federal partnership. Medicaid has been growing significantly in size pretty steadily over really more than a generation now. And here, I want to note also that they tend to pay for different kinds of services, not radically, right, they're not absolutely separate. But Medicare largely pays for hospitals, doctors and drugs for Medicare subscribers, which is to say, retirees. Medicaid, which covers a wider kind of variety of forms of people, because it's means tested rather than age specific. Medicaid pays for doctors and hospitals and drugs, but also pays for long term care much more than -- much more than Medicare does.
So if you, for example, need to be in a nursing home for a period of time, again, it depends on the kind of conditions in which you're discharged from a hospital, whether you're going to go into -- and your ability to pay, whether you're going to go into a skilled nursing or intermediate nursing facility, but Medicare will only pay for a limited amount of so-called skilled nursing facility time, I forget the exact number of days within a year. And the only the only form of access to indefinite long-term care, whether within an institution or at home, in our society, other than self paying or buying a kind of semi fraudulent insurance policy that doesn't really cover it, is Medicaid, which means that Medicaid plays an unusually large role in long-term care. Particularly long-term care, I think, thus really illustrates in an especially powerful way, a lot of the kind of paradoxes of both Medicaid and of fiscal federalism and healthcare austerity more generally, because it's so dependent on Medicaid.
Last time I looked, which was a couple years ago, Medicaid paid for about two thirds -- up to about two thirds of all dollars going into long-term care were Medicaid dollars. I imagine that's probably gone up, if anything. And Medicaid, as again, I'm sure it's familiar to everyone, is in fiscal terms kind of a worse program than Medicare, right. It's designed as a poverty program, it reimburses at lower rates than Medicare reimburses at. If you ask a doctor or a hospital, would you rather have a Medicare patient or a Medicaid patient, they will uniformly say a Medicare patient. And in fact, that's encoded in which kinds of care are covered by which program, right? Skilled nursing facilities, SNFs, are covered by -- right, that can be covered by Medicare for a limited amount of time. Whereas what they call intermediate nursing, because they don't want to call it unskilled nursing, is covered by Medicaid, as is homecare.
What that means is that the structure of fiscal federalism, the question of which policies cover which kinds of patients for which kinds of services has very direct consequences for who's doing care work, under what circumstances. In particular, the most labor intensive forms of care provision, which is to say long-term care, right, the forms of care provision that involve less technology and tests and more someone paying attention to a patient, someone actually using the effort of their body and of their mind and other kinds of interpersonal capacities to meet the needs of a patient and hear a patient and work together with a patient and their loved ones to actually provide care, right, the thing that we're actually describing when we use the word care, as opposed to technology and drugs, and so on, right, that is disproportionately a part of what happens in long-term care and is therefore disproportionately paid for by Medicaid. And the function of Medicaid, seen in this way, is to hold down labor costs, because the most labor -- to repeat, the most labor intensive parts of the healthcare system are the parts that are most paid for by the cheapest of programs. The result of this is that Medicaid has a kind of indirect function as a labor cost control mechanism through austerity. And the manifestation of this is understaffing, systemic understaffing across the long-term care system, which is also present in hospitals in a whole bunch of ways, but it's especially concentrated in long-term care.
So this brings me to the labor side of the story that I want to talk about, but I want to take a quick step back from healthcare to talk about a more general labor market phenomenon, sometimes called the fissuring of employment. It's a term coined actually by a liberal bureaucrat, David Weil, who was an undersecretary of labor for Obama and teaches at Brandeis University. And Weil described something in a book that came out about 10 years ago, called The Fissured Workplace.
He observes the growing number of American jobs that are enmeshed in complex kind of systems of contracts in which the relationship between the worker and the employer is broken or fissured. So sub contracting would be a kind of classic example of this and was one of the first places that the labor movement came to kind of encounter and confront this phenomenon, in particular, famously in building services. So if you think about like a commercial office building, right, there's someone who owns a building, which is probably like a real estate investment trust or something like that. The real estate investment trust hires a building management management firm to manage the building in various ways. The management firm then hires subcontractors to do things like clean the building, and run its security and so forth. So then, a labor union wants to work with the custodial workers to organize. And they run into the problem, well, who is the employer, right? At a kind of nominal, legal level, the employer is the subcontracting building services cleaning firm, right?
But there are nested legal relationships and economic relationships above that firm, linking all the way back up to the real estate investment trust that ultimately owns the company, and where all the profits actually accrue, right? So the purpose of the kind of nested layers of relationships is to separate the workers from the profits, and to give the employer -- the ultimate sort of de facto but not de jure employer, the power and ability to squeeze labor costs by squeezing its subcontractors, right, such that when the workers organize and put pressure on the subcontractor, you know, give us a raise, improve staffing, we need benefits, etc., the subcontractor can and will say to them, and it will be true, I can't afford that, right? Because for the subcontractor, they got the bid to clean that building by saying we can do it at this cost. And by saying we can do it at this cost, the corporation above them hired them. That's their budget, right?
Now, firms and employers always lie actually about where that line actually is. But that's not to say the line doesn't exist, right? This system is set up, in fact, to create a kind of actual reality that imposes that kind of ceiling on workers activity. So that's the kind of general picture of how the fissuring of the workplace works in controlling labor costs and disciplining workers and limiting their ability to fight and win. And it's something that's expanded, you know, a very familiar story for many of us. I'm sure many of us have been caught up at various times in our work and our lives in relationships like this. It's a very familiar story. It's expanded enormously over the past couple of generations. David Weil, who coined the term, estimates that between 20% and 40% of all American workers are what he describes as fissured jobs. Obviously, it characterizes like the gig economy in its entirety, as well as many other kinds of jobs. And employers in all of our workplaces, I mean, if you pay attention anywhere you work basically, you will sniff out your employer trying to introduce subcontracting around the margins of your workplace.
So to bring together these two parts of what I'm talking about, I want to suggest that we should see, in fact, the entirety of the healthcare industry as a kind of fissured workplace. I mean, there are literal examples increasing all the time, right. There are nurse staffing apps that you hospitals are being sold and so on, but I don't mean the literal example. I mean, the kind of more general concept actually I think applies to the healthcare industry as a whole, because of its structure of fiscal fragmentation. So in this sense, the provider - the hospital, the nursing home, the homecare agency - is the subcontractor, right? They're like the company that's been hired to clean the building. But what's strange here is that the contractor is the insurer and the contractor in particular is fragmented, right?
So although when you think about a building, ultimately there is an entity that owns it. When you think about a hospital, the entity that is riding kind of herd fiscally on the provider, right, that is negotiating rates at which the provider is going to be reimbursed, that control the cost structure of the hospital or the nursing home, there's not one, there's many of them, right? But the most important of them are the public programs, Medicare and Medicaid. They're the largest. They're the most consolidated. And so this means that in a very strange way, this is somewhat hyperbole, but in a strange way, right, we could see the relationship between Medicare and Medicaid, and a given hospital, but especially nursing home or home care agency, is not dissimilar from the relationship between like McDonald's HQ and a McDonald's franchise, or the owner of a building and the subcontractor cleaning the building. Medicare and Medicaid don't totally dominate in the way that the owner or McDonald's central totally dominates a franchise or subcontractor. But it's, I think, a reasonable parallel to that relationship. And the effect of this is that there are a set of limits introduced to what healthcare workers are able to win, fight over and win in a somewhat similar way to what happens to fast food workers or building service workers.
And this became clear really as soon as collective bargaining existed in the healthcare system. So the original National Labor Relations Act did not cover healthcare when it was passed in 1935, and it was sort of ambiguous. That was clarified by the Taft-Hartley Act of 1947, which unambiguously said healthcare is not covered by labor law. It was not until 1974 that the National Labor Relations Act was extended to cover hospitals and nursing homes, and even then under kind of special extra rules. And as soon as that had happened, and unions and employers were trying to kind of come to understand what the pattern of collective bargaining would be in the healthcare system, almost immediately this dynamic became -- unions encountered this dynamic where they would organize the workers, they would make a set of demands, they would get to the bargaining table, and the administrator of the hospital would say, look, we would love to help you. We agree, you're underpaid. But you have to take it up with Albany, you have to take it up with Sacramento, you have to take it up with Springfield. If you want a raise, reimbursement rates from the state Medicaid program have to go up. And that would then produce these kind of strange political coalitions and this is still very much a pattern today, especially in blue states all over, like New York, Illinois, California, where you get political coalitions of typically SEIU, but healthcare unions generally, and their bosses, right, who they're kind of fighting it out with on the shop floor and in bargaining, they ally in the state capitol. And that we can talk more about the kind of strange paradoxes to come out of that.
So this is a kind of limit that is imposed on workers' ability to win things through collective bargaining. I want to wrap up, though, by also suggesting that in a way, I think there's also an opportunity there. Because unlike in building services, or in fast food, even though the role of Medicare and Medicaid is not identical to the role of the franchisor, or the building owner, it is amenable to public pressure and to workers' power in a different kind of way, right? The public is already present in the healthcare system, indirectly, everywhere, through these kind of subcontract -- what I'm describing as subcontracted or franchise relationships, and well organized groups of workers, and I would also say patients -- and we can talk more about the kind of patient side of this, which I think is important -- have and can use that as an opportunity to discipline and attack their employers from an unexpected angle. And this is actually kind of already an everyday part in certain ways of how healthcare, politics of healthcare, employment work when you think about, for example, Quality Certification in long-term care, right.
It is the case in lots of states, including Illinois, where you all are and where I normally live, right, Illinois requires nursing homes to provide a certain number of hours of care a day to every patient and to submit huge amounts of reporting on whether they're meeting that requirement. Now they systematically don't meet the requirement, and that's a whole relevant issue that we can talk more about, right, but that's a kind of de facto labor market regulation of long-term care through this kind of subcontracted relationship. Another example is the kind of frequent campaigns carried out by nurses unions all over the country for staffing ratios. That's legal, that's a kind of constitutional thing the state can require, through its role as a buyer of care. And then finally, there was an attempt recently in Pittsburgh, or sorry, in Pennsylvania, which I know about because my research is on Pittsburgh, to impose through Medicaid, a labor peace rule on all Medicaid contractors, which is to say virtually every healthcare provider in the state. So in other words, the state, the governor actually did try to do this and then eventually backed off of it because he got intimidated. The state for a moment proposed a rule that said, if you are going to participate in the state's Medicaid program, you have to guarantee that services are not going to be interrupted by labor disruption.
Now, what that does is it gives workers an enormous amount of power, right? Because it means that if they can successfully organize and threaten to strike, they can cut their employer off from one of its major streams of revenue, which means that an employer has to do everything it can to prevent a strike. As I say, that didn't go through. But I think it indicates the ways that this kind of -- what I'm describing as subcontracting, or fissuring, is both a real obstacle but also could potentially generate sites of opportunity where we can both win potentially like immediate reforms that improve conditions of work and care, but also that bring to the surface, the fundamentally public and social quality of care provision, not all at once, right. It's not socializing the system in the way that we would want and need. But it does, I think, point somewhat in that direction by expanding public capacity and public power in the system. I'll stop there. Thanks. [applause]
Abby Cartus 56:56
Thank you so much. All three of those talks were fantastic. So now we're going to move on to kind of more of the discussion portion of this session. And so what I'm going to do, if you want to get on stack …
[End of transcript, remainder of the session focused on discussion between panelists and participants which has not been shared to preserve privacy of participants]
Transcript by Kendra Kline. (Kendra is currently accepting freelance transcript work — email her if you need transcripts!)