JOHN MCCAIN
UNITED STATES SENATOR

WASHINGTON, DC 20510

MAY 03 1994

April 29, 1994

Dr. Henry Kissinger
Twenty Sixth Floor
350 Park Avenue
New York, N.Y. 10022

Dear Henry:

I will long remember your moving eulogy for President Nixon. Your remembrance of that extraordinary man was as wise as it was eloquent. You reminded the nation that the statecraft of a great nation requires leaders who do not just await, but create opportunities to advance their nation's interests and values. It was a privilege to hear one of two men gifted enough to "see around the corners of history" offer tribute to the other.

NOT PRINTED AT GOVERNMENT EXPENSE

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What the Clinton plan will do for you.

NO EXIT

By Elizabeth McCaughey

If you're not worried about the Clinton health bill, keep reading. If the bill passes, you will have to settle for one of the low-budget health plans selected by the government. The law will prevent you from going outside the system to buy basic health coverage you think is better, even after you pay the mandatory premium (see the bill, page 244). The bill guarantees you a package of medical services, but you can't have them unless they are deemed "necessary" and "appropriate" (pages 90-91). That decision will be made by the government, not by you and your doctor. Escaping the system and paying out-of-pocket to see a specialist for the tests and treatment you think you need will be almost impossible. If you walk into a doctor's office and ask for treatment for an illness, you must show proof that you are enrolled in one of the health plans offered by the government (pages 139, 143). The doctor can be paid only by the plan, not by you (page 236). To keep controls tight, the bill requires the doctor to report your visit to a national data bank containing the medical histories of all Americans (page 236).

If these facts surprise you, it's because you haven't been given a straight story about the Clinton health bill. Take two examples: on November 4, Leon Panetta, the director of the Office of Management and Budget, testified to senators that the bill does not "set prices" and "draw up rules for allocating care"; a month later Hillary Rodham Clinton assured a Boston audience that the government will not limit what you can pay your doctor. The text of the bill proves these statements are untrue.

The administration also says that the bill will not lower the quality of your medical care or take away personal choices you now make. This statement goes right to the issues that matter most. How true is it? To help you decide, here is a guide to the 1,364-page Health Security Act.

No effort is made here to compare the Clinton bill with the many alternatives offered by Republicans and other Democrats or to assess the nature and extent of the health care "crisis." The purpose is to answer one question: Under the Clinton bill, if you become ill, will you be able to get the treatment you need and

make choices about your own health care?

*The Law Will Make You Get Health Care Through Your "Alliance."* Under the bill, unless you get Medicare, military benefits or veteran's benefits, or you or your spouse work for a company with more than 5,000 employees, you must enroll in one of the limited number of health plans offered by the "regional alliance" where you live (page 15). Regional alliances are government-run monopolies that select health plans, collect premiums from residents and their employers and pay most of the money to HMOs and insurers. If you fail to enroll, or the plan you choose is oversubscribed, alliance officials will assign you to one (pages 144, 146). The goal is to curb health care spending by limiting what *every* American is allowed to pay for health insurance. Restricting how much people can pay for insurance limits how much money is in the pot to take care of them when they're sick.

*The Health Care You Can Get Will Be Limited.* Under the bill, a National Health Board—seven people appointed by the president—will decide how much the nation can spend on health care beginning in 1996 (the baseline year). Based on that national budget, the board will set a budget for each region and a ceiling on what the average health plan in the region can cost. The bill outlaws plans that would cause a region to exceed its budget or that cost over 20 percent more than the average plan. After 1996, increases in health plan premiums will be strictly limited by an "inflation factor" based on the consumer price index (pages 256, 984-987, 990, 995).

Putting price controls on premiums to limit the amount of money in the health care system might wring out waste during the first year or two, but there is no doubt it will cause hardship later on. Seventy-seven million baby boomers will be reaching the age when they need more medical care. Increasing numbers of teen pregnancies and low-birth-weight babies also will require more health care dollars—$158,000 on average for each severely underweight newborn. Even the bill's authors anticipate that restricting the dollars available for health care in the teeth of these trends will produce grave shortages: the bill provides that when medical needs outpace the budget and premium money runs low, state governments

ELIZABETH MCCAUGHEY is John M. Olin Fellow at the Manhattan Institute.

FEBRUARY 7, 1994 THE NEW REPUBLIC 21

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and insurers must make "automatic, mandatory, nondiscretionary reductions in payments" to doctors, nurses and hospitals to "assure that expenditures will not exceed budget" (pages 113, 137).

Above a threshold level of quality, alliance officials will approve health plans based on lowest cost, not highest quality, to stay under the premium ceiling set by the National Health Board, explains Cara Walinsky of the Health Care Advisory Board and Governance Committee, which advises 800 hospitals worldwide. That is why Anthony L. Watson, chief executive of the Health Insurance Plan (HIP) of Greater New York, is optimistic. If the Clinton bill passes, "New York is mine," he told *The New York Times*. "I'm going to be the lowest-cost plan." HIP, with a physician staff that is 57 percent foreign-trained, already has what that newspaper calls "the image of being the least desirable health care option for city workers and others who cannot afford anything more."

**S**taying With the Doctors You Use Now Will Be Hard. Deciding for yourself when to see a specialist or get a second opinion and selecting the hospital you think is best will be even harder. The bill is designed to push people into HMOs, which restrict your choice of physicians and hospitals, and use gatekeepers to curb the use of specialists, expensive tests and costly high-tech treatments. What most of us call fee-for-service (choose-your-own-doctor) insurance will be difficult to buy. The ceiling on premiums and the 20 percent rule will eliminate most fee-for-service plans, which tend to be more expensive than their pre-paid counterparts. Although the Clinton administration insists that Americans always will be able to choose fee-for-service insurance, experts such as Dr. John Ludden, medical director of the Harvard Community Health Plan, say that option will "vanish quickly."

Even where it is possible to buy fee-for-service insurance, it will be hard to find doctors practicing on that basis. According to Walinsky, the Clinton proposal contains "very strong incentives" against fee-for-service "on the consumer side but also on the provider side." Price controls on doctors' fees and other regulations will push doctors to give up independent practice and sign on with HMOs. We've been told that the government won't be putting price controls on doctors, but the bill limits what health plans can pay physicians and prohibits patients from paying their doctors directly. Alliance officials post a schedule of fees, and it is illegal for doctors to take more (pages 134, 236).

In addition, alliance officials set yearly limits on payments to fee-for-service doctors in each field of medicine, like cardiology or pulmonology. What if a flu epidemic causes pulmonologists to see more patients with breathing problems than the region's budget allows? The bill compels insurance plans to slash doctors' fees or cut off their payments entirely until the next year "to assure that expenditures will not exceed the budget" (page 137).

**H**MOs Do the Job of Rationing. Under the Clinton bill, the federal government uses price controls on premiums to curb dollars paid into the health care system. Limiting how those dollars are spent is a job shared by alliance officials, who budget payments to doctors in the dwindling fee-for-service sector, and HMO administrators, who are expected to do the lion's share of health care rationing. Is "rationing" too strong a word? Not according to Ludden, whose HMO serves 570,000 people. He predicts that "price controls on premiums will drive us straight to rationing at bedside." Princeton Professor Paul Starr, a key designer of the Clinton plan, prefers to say that premium caps will induce "a different frame of mind" in both doctors and health care administrators. "They will have to manage under constraint."

**H**MOs already have a track record of tightly controlling a patient's access to physicians. At Kaiser Permanente, the first person a sick patient sees is the "advice nurse," who makes the decision whether a doctor is needed. In HMOs, the ratio of physicians to members averages 1 to 800, about half the ratio of physicians to the general population. Specialists are particularly hard to see.

Current HMO cost-cutting methods already are drawing criticism from Congress, government investigators and worried doctors. The Clinton bill's premium caps will compel HMOs to use even more stringent methods of limiting care, but the bill omits any safeguards to protect patients from abusive practices.

For example, missing from the bill is any effort to put a stop to "the withhold," the pervasive HMO practice of punishing doctors financially for providing care they believe their patients need. Almost all large, for-profit HMOs, including those operated by Aetna, Metlife, Oxford and Prudential (but not Cigna) withhold between 10 percent and 25 percent of a doctor's compensation until year's end, and return it only if the doctor has met HMO targets for limiting patient tests, referrals to specialists and hospitalizations. Doctors report that targets are so stringent that HMOs almost always keep part of the withhold, which means that what a doctor orders for a patient comes out of the doctor's own pocket at the end of the year.

The withhold has caused a surge in dangerous "hallway consultations," according to Dr. Alan Jasper, a pulmonologist and critical care specialist at St. Vincent's Medical Center in Los Angeles. Other doctors stop Jasper in the hospital corridors, describe their patient's breathing problem and seek a diagnosis, in order to avoid referring the patient for a specialty consultation and incurring points against the withhold. The danger, says Jasper, is that the other doctor might fail to mention a critically important aspect of the patient's condition.

The withhold motivates primary care doctors to take a "we'll see how you feel next week" or "let's try this first" approach, even if it means additional worry and needless suffering for the patient. At a Humana-owned HMO in San Antonio, for example, a 40-year-old woman

22 THE NEW REPUBLIC FEBRUARY 7, 1994

Accounting Office testified about the company's "failure to order appropriate diagnostic tests and failure to follow up on abnormal test results." *Consumer Reports* (August 1992) also investigated the shortcomings of the pilot Medicare-HMO program in Florida, and concluded that government oversight was "lackadaisical."

A nationwide investigation for Congress drew the same conclusion. Pointing out that only twenty-one of fifty-seven HMOs investigated received a passing grade, the late Senator John Heinz warned that the priority "has been to promote enrollment in HMOs and we have not given equal priority to monitoring what happens" to people "after they have enrolled."

Far from protecting patients in HMOs, the Clinton bill ties the hands of state lawmakers who want to pass protective legislation. Some states recently have enacted laws to safeguard choices patients want to make for themselves, such as which hospital or pharmacy to use. HMOs protest that these laws hobble cost containment, and the Clinton administration apparently agrees. The Clinton bill pre-empts state laws protecting patient choice (page 238).

You'll Get More Primary Care Than High-Tech Medicine, and That's Not Good News. Will patients get the care they need when gatekeepers limit their access to specialists and high-tech medicine, as the Clinton bill intends? The evidence strongly suggests that low-tech care will not be good enough. People with heart disease, for example, will suffer. HMOs already ration high-tech care to heart attack patients, according to a study in *The New England Journal of Medicine* (December 1993). HMO patients hospitalized with coronary disease (myocardial infarction, unstable angina, angina pectoris or ischemic heart disease) are 30 percent less likely to be given bypass surgery or a coronary angioplasty (declogging of the arteries) than similarly sick patients with fee-for-service insurance. Another recent study by Duke University points to the consequences of such low-tech care. In the study, American heart attack patients who tended to be treated with three costly, high-tech procedures—catheterization (inserting a thin tube into the heart for diagnosis), angioplasty and bypass surgery—recovered far better than Canadian heart attack patients, who had less access to the procedures. American patients, who were twice as likely to undergo the procedures, tended to have a better quality of life after a heart attack. Canadians suffered more recurring pain, felt more depressed and were less able to go back to work and pick up their old activities. Dr. Robert Califf says the Duke study may help people understand "the implications of reducing services in a health care system."

Is it true that we need less care by specialists? Not according to the National Institutes of Health, which recently issued a warning that patients with many common conditions should be treated routinely by a renal

(kidney) specialist. According to the NIH panel, primary care doctors frequently are overlooking the early signs of kidney failure and are hanging on to patients too long. Patients should be referred to specialists for dialysis sooner, said the NIH, before it is too late to save their lives. Twenty-five percent of kidney patients who don't receive dialysis until it is an emergency die. Dr. C. Craig Tisher, chairman of the NIH panel, warned that patients with high blood pressure, diabetes, weight problems and metabolism abnormalities should be regularly cared for by a renal specialist, not only a primary care doctor.

In the short run, the Clinton bill depends on HMOs to limit access to specialists and high-tech care. As a longer-term strategy to limit such care, the Clinton bill seizes control of medical education and requires that by 1998, no more than 45 percent of young doctors be permitted to go on to advanced training in a specialty. Specialty programs at leading medical schools will be downsized. Doctors in training will be assigned to the coveted specialty programs based partially on race and ethnicity, depending on how "underrepresented" each racial or ethnic group is "in the field of medicine in general and in the various medical specialties" (pages 509, 514-515).

Restricting medical education by government fiat undoubtedly will reduce the consumption of expensive, cutting-edge care. Doctors who are not trained in sophisticated technology cannot use it. But preventing doctors from learning about the most advanced medical procedures is a lethal way to curb health care consumption. Keeping doctors uninformed could not possibly be an improvement.

Unwritten Rationing Rules. Under the Clinton bill, you are entitled to a package of basic benefits, but you can have them only when they are "medically necessary" and "appropriate." That decision will be made by the National Quality Management Council, not by you and your doctor. The council (fifteen presidential appointees) will establish "practice guidelines" to control "utilization" of health services (pages 91, 836, 848). These guidelines will compel doctors to uniformly practice low-budget medicine. "There needs to be some point of reference for [health] plans to determine what is appropriate care," Starr said. "There is an enormous amount of excessive, inappropriate care." In Starr's view, the bill provides "high quality care." People who want access to more are asking for a "neurotic" level of care. What is most troubling about the practice guidelines is that they are not spelled out in the bill. Congress and the public are asked to approve the concept without knowing the content.

How rigorous will the standard of "medically necessary" and "appropriate" be? In other words, how much rationing based on cost-effectiveness will we have to endure? When a kidney transplant is needed, will the patient's age matter, as it does in Great Britain, where older patients are routinely denied high-tech treat-

24 THE NEW REPUBLIC FEBRUARY 7, 1994

ments? Will patients with advanced AIDS be entitled to
intensive care? Oregon's standard of appropriate care
for needy residents excludes high-tech, life-sustaining
procedures for advanced AIDS cases, as well as for
extremely premature babies and advanced cases of
certain cancers. Groopman, who treats cancer and
AIDS patients, worries that decisions now made by the
patient, doctor and family will be made by a council of
"omniscient bureaucrats" who "are looking at two
things: dollars and ideology."

Many organizations, including the American Medi-cal Association, specialty medical societies and insurers already devise what they call "practice guidelines" to help physicians keep abreast of the most effective treatments. Ludden explained that "doctors appreci-ate guidelines" when they are recommendations, "but not when they become matters of law."

Many physicians who treat the HIV-positive popula-
tion are troubled that the Clinton plan's practice
guidelines will prevent them from trying new strate-
gies to help desperate patients. Jasper recalls that he
learned quickly "through the grapevine" that other
doctors were achieving some success with treating
pneumocystis pneumonia, an AIDS-related illness, with
adjunctive corticosteroids. Mandatory practice guide-
lines would have stifled such innovation and pre-
vented Jasper from keeping his patient alive. Similarly,
Ludden recalls that at Harvard "we were using aerosol
pentamidine" to treat an AIDS-related condition "eigh-
teen months before any practice guideline would have
regarded it as appropriate." The Clinton bill would
hold changes in medical treatments to a slow-moving
government timetable, putting many patients' lives at
risk while the National Quality Management Council
deliberates.

If You're Over 65, Good Luck. Another cost-cutting measure in the Clinton bill deprives people over 65 of access to new cures. The secretary of health and human services has the power to set a con-trolled price for every new drug, and to require the drug manufacturer to pay a rebate to the federal gov-ernment on each unit sold to Medicare patients at mar-ket price instead of the controlled price. If a producer balks at paying the rebate, the secretary can "blacklist" the drug, striking it from the list of medications eligible for Medicare reimbursement (pages 365-379). The pro-posed regulation threatens to keep a new drug such as Tacrine (a treatment for Alzheimer's) from older patients.

Under the bill, the secretary weighs the develop-
ment costs and profit margin for the single drug,
rather than the overall profitability of investing in new
cures (page 373). Biotech investors point out that for
every drug that reaches market, more than 1,000 oth-
ers dead-end, with a 100 percent loss for investors.
Limiting the price and profitability of the one drug in
a thousand that succeeds will halt research into new
cures, including drugs for ovarian and breast cancers
now in the pipeline.

*Before Signing On, You Should Know....* The Clinton bill will prevent people from buying the medical care they need. Price controls on premiums will push most Americans into HMOs and pressure HMOs into sharply cutting access to specialists and effective, high-tech cures. Price controls on doctors' fees and regulations tying doctors' hands will curb the care physicians can give patients. Price controls on new drugs will keep people over 65 from getting the medications that can help them. Most important, government controls on medical education will limit what future doctors know, costing lives and suffering no one can calculate.

The administration often cites two statistics—Amer-
ica’s relatively high infant mortality rate and its lower
life expectancy—to support the need for the Clinton
health bill. But these have almost nothing to do with
the quality of American medical care. Both statistics
reflect the epidemic of low-birth-weight babies born to
teenage and drug-addicted mothers, as well as the
large number of homicides in American cities and
drug-related deaths.

In fact, if you are seriously ill, the best place to be
is in the United States. Among all industrial-
ized nations, the United States has the highest
cure rates for stomach, cervical and uterine can-
cers, the second highest cure rate for breast cancer
and is second to none in treating heart disease. In
other countries that spend less, people who are sick
get less care, are less likely to survive and have a
poorer quality of life after major illness. Consider
what happens in Canada, whose health care system
often is held up as a model for the United States. In
Canada medical technology is rationed to danger-
ously low levels. The United States has 3.26 open-
heart surgery units per million people; Canada has
only 1.23 units per million. Cardiovascular disease is
Canada's number one health problem, yet open-heart
surgery units and catheterization equipment are kept
in such short supply that the average wait for ur-
gent (not elective) surgery is eight weeks. The shock-
ing result is that in Canada, a cardiac patient is ten
times as likely to die waiting in line for surgery as on
the operating table. In the United States, there is no
wait.

The choice is not between the Clinton bill and the
status quo. Members of Congress should read this bill,
instead of relying on what they hear, and then turn
their attention to alternatives sponsored by Democrats
and Republicans. These alternatives provide urgently
needed reform of the health insurance industry, out-
lawing its worst abuses, without taking important deci-
sions away from patients and their doctors and with-
out depriving Americans of effective, high-tech
medical care when they are seriously ill. Congress also
should consider ways to provide insurance for those
who cannot afford it, and level with the public about
what universal coverage will cost. Whatever the price,
ultimately, it will be less expensive than the conse-
quences of the Clinton bill. •

FEBRUARY 7, 1994 THE NEW REPUBLIC 25

Clinton's plan on the ropes.

SHE'S BAAACK!

By Elizabeth McCaughey

On January 31 the White House press office released a statement questioning the accuracy of my recent article in TNR ("No Exit," February 7, 1993). I welcome this opportunity to engage in a dialogue with the White House about the content of its health bill. As I did in my original article, I will be documenting my description of the bill—and my point-by-point rebuttal of their arguments—with page numbers from the November 20, 1993, version. If White House representatives challenge the accuracy of my description again, I hope they will provide page numbers, too, so that TNR readers can compare the evidence and decide for themselves.

Most of the White House challenge focused on this paragraph from my article:

> If the bill passes, you will have to settle for one of the low-budget health plans selected by the government. The law will prevent you from going outside the system to buy basic health coverage you think is better, even after you pay the mandatory premium (see the bill, page 244). The bill guarantees you a package of medical services, but you can't have them unless they are deemed "necessary" and "appropriate" (pages 90-91). That decision will be made by the government, not by you and your doctor. Escaping the system and paying out-of-pocket to see a specialist for the tests and treatment you think you need will be almost impossible. If you walk into a doctor's office and ask for treatment for an illness, you must show proof that you are enrolled in one of the health plans offered by the government (pages 139, 143). The doctor can be paid only by the plan, not by you (page 236). To keep controls tight, the bill requires the doctor to report your visit to a national data bank containing the medical histories of all Americans (page 236).

The White House responded:

> "There is nothing in this Act to prohibit any individual from going to any doctor and paying, with their own funds, for any service." "Under the Act, you can pay 'out-of-pocket[sic]' for anything you want at any time, to any physician or hospital willing to treat you." Price controls on doctors' fees? "That is wrong," according to the White House. "There are no price controls...."

How accurate are these statements from the White House? The text of the bill proves they are untrue.

*Can you pay any doctor any price for any service you want?*
Although it is possible to buy cosmetic surgery, psychotherapy or other uncovered services out-of-pocket, the bill prohibits doctors from accepting payments directly from you for the basic kinds of medical care listed in the Clinton benefit package. Below are the reg-

FEBRUARY 28, 1994 THE NEW REPUBLIC 17

ulations barring doctors from taking your money. If you go to a doctor for treatment, the doctor will be paid by your health plan. That is true no matter what kind of health plan you are enrolled in. The doctor is prohibited from accepting payment from you (except fixed co-payments) for any basic medical services listed in the Clinton benefit package. That applies to doctors treating patients in HMOs and doctors outside HMO networks. Doctors outside HMOs must submit charges for your care to your health plan, accept reimbursement based on the government's schedule of price-controlled fees and report your visit according to the requirement of title V of the bill, which establishes the national electronic data bank:

Sec. 1406(d) (2) DIRECT BILLING—A provider may not charge or collect from an enrollee amounts that are payable by the health plan... and shall submit charges to such plan in accordance with any applicable requirements of part 1 of subtitle B of title V (relating to health information systems).

Are you allowed to pay a surgeon more, in hopes of getting the most expert, experienced care? No:

Sec. 1406(d) (1) PROHIBITION ON BALANCE BILLING—A provider may not charge or collect from an enrollee a fee in excess of the applicable payment amount under the applicable fee schedule [page 236]...

(3) AGREEMENTS WITH PLANS—The agreements... between a health plan and the health care providers providing the comprehensive benefit package to individuals enrolled with the plan shall prohibit a provider from engaging in balance billing described in paragraph (1) [page 237].

The White House attacks the use of the phrase "price controls on doctors' fees" in my article. "Wrong," says the White House. "There are no price controls in the president's plan. Price controls—calling for government micromanagement of every health care service, doctor's fee, drug technology and product—were considered and specifically rejected."

But the text of the bill proves there are price controls on health plan premiums, new drugs and doctors' fees. Here are the price controls on doctors' fees:

Sec. 1322(c) ESTABLISHMENT OF FEE-FOR-SERVICE SCHEDULE

(1) IN GENERAL—each regional alliance shall establish a fee schedule setting forth the payment rates applicable to services furnished during a year to individuals enrolled in fee-for-service plans (or services furnished under the fee-for-service component of any regional alliance health plan) [page 134]...

(4) ANNUAL REVISION—A regional alliance... shall annually update the payment rates provided under the fee schedule [page 135].

The White House says "it is not clear why a patient would want to pay a doctor 'directly' for services that their [sic] insurance company is obligated to buy." One reason is privacy. Evading government regulations and paying the doctor directly would allow you to keep your personal medical problems out of the national data bank.

*Will your personal medical history be stored in a national data bank?* The White House says "not true" and "patently untrue" to my statement that "the bill requires the doctor to report your visit to a national data bank containing the medical histories of all Americans. The

administration argues that although "physicians may be required to submit data... for the purpose of improving quality and assessing treatments and outcomes," the bill "prevents against tying this data to specific individuals."

The text of the bill proves that the administration is mistaken. Information about your physical and mental health and any treatments or tests you have will be entered in a national data network and linked to you through your health security number. Here is what the bill says: the National Health Board will establish an "electronic data network" with regional centers to collect, compile and transmit information. The information expressly includes "clinical encounters," that is, when a physician treats a patient (page 861). A doctor who treats you (except for an uncovered service such as dental work or cosmetic surgery) and does not record your "clinical encounter" on the standardized form and submit it to your health plan will be fined up to "$10,000 for each such violation" (pages 236, 885-886). As the data about you travel from your doctor's office to the health plan, and then to the national electronic data network, this information continues to be tagged with your "unique identifier number."

The bill leaves no doubt that the network contains "individually identifiable health information," which is defined in the bill to include your "past, present or future physical or mental health" and health care provided to you (page 877). To protect your privacy, the bill offers this vagueness:

> All disclosures of individually identifiable health information shall be restricted to the minimum amount necessary to accomplish the purpose for which the information is being disclosed [page 873].

and this:

> [You] have the right to receive a written statement concerning... the purposes for which individually identifiable information provided to a health care provider, a health plan, a regional alliance, a corporate alliance or the National Health Board may be used or disclosed by, or disclosed to, any individual or entity [page 874].

It would be unfair to suggest that the bill's authors are unconcerned about privacy. The bill mandates that the National Health Board will "promulgate standards respecting the privacy of individually identifiable health information that is in the health information system" within two years and propose privacy legislation within three years (pages 871, 876). But contrary to the White House statement, doctors must report their patients' personal medical information to a national data bank or risk harsh penalties, and the information in the bank remains individually identifiable.

*Price controls on premiums will mean too little money to care for the sick.* Limiting how much money people can choose to pay for basic health coverage limits how much money is in the pot to take care of them when they are sick. That was the point of the ad on television that the First Lady criticized. A couple are discussing what price controls on premiums will mean, and the woman asks, "But what if there's not enough money?"

18 THE NEW REPUBLIC FEBRUARY 28, 1994

The bill's authors anticipate that restricting dollars available for health care will produce shortages: when medical needs outpace the budget and premium money runs low, state governments and insurers must make "automatic, mandatory, nondiscretionary reductions in payments" to doctors, nurses and hospitals to "assure that expenditures will not exceed budget" (pages 113, 137).

In a charge echoed by Michael Weinstein of *The New York Times*, the White House accused me of misleading readers by "implying that such a mechanism exists in the main proposal." The White House stated emphatically that "it does not." The White House and Weinstein argue that only under a single-payer system would payments to doctors and others be cut off if needs outpace the budget and premium money runs low. They expressly charge me with quoting the single-payer regulations and misrepresenting them to be rules for the "main" Clinton health proposal.

The text of the bill proves that the White House and Weinstein are wrong. Cutting or delaying payments to doctors, other health care workers and hospitals to stay in budget is an integral mechanism in the administration's bill, and one of the two passages I quoted (page 137) is from the "main proposal." It provides that if needs exceed budget and premium money runs low:

Sec. 1322(c) (2) PROSPECTIVE BUDGETING DESCRIBED ... the plan shall reduce the amount of payments otherwise made to providers (through a withhold or delay in payments or adjustments) in such a manner and by such amounts as necessary to assure that expenditures will not exceed budget.

*The government will decide what is "necessary" and "appropriate" care.* The White House attacks as "wrong" and "very misleading" my statement that "the bill guarantees you a package of medical services, but you can't have them unless they are deemed 'necessary' and 'appropriate.'" The administration also says it is "untrue" that that decision will be made by the government, not by you and your doctor.

Let's look at the actual bill:

Sec. 1141. EXCLUSIONS

(a) MEDICAL NECESSITY—The comprehensive benefit package does not include

(1) an item or service that is not medically necessary or appropriate; or,

(2) an item or service that the National Health Board may determine is not medically necessary or appropriate in a regulation promulgated under section 1154 [pages 90-91].

Sec. 1154. ESTABLISHMENT OF STANDARDS REGARDING MEDICAL NECESSITY

The National Health Board may promulgate such regulations as may be necessary to carry out section 1141(a) (2) (relating to the exclusion of certain services that are not medically necessary or appropriate).

The bill uses the word "regulations," not "recommendations," to describe the National Health Board's decisions. The bill also grants the National Health Board power to change the preventive treatments guaranteed in the benefit package and decide at what age and how often you are entitled to tests and screenings, immunizations and check-ups (page 94). Regarding practice guidelines, the bill makes it clear that the National Qual

ity Management Council will develop measures of "appropriateness of health care services" (page 839) and "shall establish standards and procedures for evaluating the clinical appropriateness of protocols used to manage health service utilization" (page 848).

*Racial quotas in medical training.* The White House calls such a suggestion "ridiculous," but the bill shows it is true. Government will allocate graduate training positions at the nation's teaching hospitals based on race and ethnicity. In determining how many training positions teaching hospitals will have, the National Council on Graduate Medical Training will calculate the percentage of trainees at each teaching hospital "who are members of racial or ethnic minority groups" and which minority trainees are from groups "under-represented in the field of medicine generally and in the various medical specialties" (page 515).

Protecting consumers or HMOs? The White House calls it "deliberately inaccurate" to say that the bill pre-empts important state laws protecting the ability of patients to choose the hospital they think is best and make other choices about their health care. Here is what the bill provides:

Sec. 1407. PRE-EMPTION OF CERTAIN STATE LAWS RELATING TO HEALTH PLANS

(a) ... no state law shall apply... if such law has the effect of prohibiting or otherwise restricting plans from—

(1) ... limiting the number and type of health care providers who participate in the plan;

(2) requiring enrollees to obtain health services (other than emergency services) from participating providers or from providers authorized by the plan;

(3) requiring enrollees to obtain a referral for treatment by a specialized physician or health institution....

(6) requiring the use of single-source suppliers for pharmacy, medical equipment and other health products and services.

*Fee-for-service will be almost impossible to buy.* The White House labels it wrong to predict that fee-for-service insurance will be extremely hard to buy. They point to the provision that "in general, each regional alliance shall include among its health plan offerings at least one fee-for-service plan." But many doctors, hospital administrators and health insurance experts say confidently that in practice, because of the broader provisions of the bill, fee-for-service will seldom be available. I cited these experts in my article. Here are their reasons:

(1) Regional alliances cannot permit the average premium paid in the region to exceed the ceiling imposed by the National Health Board (pages 1,000-1,005). Fee-for-service insurance, which allows patients to get a second opinion when they have doubts and see a specialist when they feel they need one, generally costs more than prepaid health plans that control patient access to medical care.

(2) Regional alliance officials are empowered to exclude any plan that costs 20 percent more than the average plan (page 132). They will have to apply the 20 percent rule virtually all the time, in order to keep total spending on health plans below the ceiling imposed by the National Health Board. In order to offer

20 THE NEW REPUBLIC FEBRUARY 28, 1994

a plan that costs more than 20 percent above the average plan and still stay under the ceiling, there would have to be other plans offered at well below the average-priced plan. That is unlikely. The bill limits the annual increase in premium prices to the Consumer Price Index, which is significantly below current annual increases in medical spending. Insurers will have a difficult time staying under the premium ceiling, and certainly will not offer plans well below it.

(3) Regional alliance officials are empowered to set the fees for doctors treating patients on a fee-for-service basis, and it is illegal for doctors to take more. In addition, prospective budgeting limits what fee-for-service doctors can earn yearly, even if they see more patients and work longer hours to make up for reduced fees. As Cara Walinsky of the Health Care Advisory Board and Governance Committee, which advises 800 hospitals, explains, the Clinton bill contains "very strong incentives" against doctors practicing on a fee-for-service basis. For all these reasons, Dr. John Ludden, medical director of the Harvard Community Health Plan, predicts that fee-for-service will "vanish quickly."

*Does supplemental insurance provide an "exit"?*
The bill requires you to buy one of the low-budget health plans offered by your regional alliance. You can't go outside the system to buy basic coverage you prefer, even after you pay the mandatory premium. Is supplemental insurance the way out? The White House states "there are no restrictions on the purchase of supplemental insurance." The fact is the bill contains two important restrictions

that will effectively close the door to better basic medical care: supplemental insurance cannot duplicate any of the coverage in the comprehensive benefit package, and it must be offered to "every individual who seeks" to buy it, regardless of health history or disability (page 244). Those two restrictions mean that the seriously ill will line up to buy it; insurers will not line up to sell it.

Finally, it is important to note one of the points the White House did not challenge: the Clinton bill is designed to push people into HMOs, which aim to limit patient access to specialized medicine and high-tech care. The premium price controls will pressure HMOs to use even more stringent methods of restricting care, yet the bill omits any safeguards to protect patients from abusive cost-cutting practices such as the withhold.

These facts, straight from the text of the bill, demonstrate the accuracy of my article "No Exit," and the appropriateness of its title. The White House would have you believe that its bill can stop rising health care spending and extend coverage to millions of uninsured Americans, without changing the quality and choice of the medical care you have now. Common sense suggests otherwise. A close reading of the bill proves it is untrue. Several alternatives by other Democrats and Republicans offer promising health insurance reform without limiting what you can buy and how much you can pay for it. It's time to give those bills a close look.

MONDAY, FEBRUARY 21, 1994

NEW YORK POST

Founded by Alexander Hamilton in 1801

RUPERT MURDOCH
Editor-in-Chief

KEN CHANDLER
Editor

MARTIN SINGERMAN
Publisher

ERIC BREINDEL
Editorial Page Editor

America's oldest continuously published daily newspaper

The health-care debate turns ugly

The GOP seem determined to push their health plan on the American people — regardless of whether or not it's good for the quality of American medical care or for the economy. It appears that even outright lying isn't considered out of bounds by the Clinton team: the White House “war room” apparently views the health-care debate as nothing more than another political campaign.

Now on the airwaves in some states is a Democratic National Committee television commercial that, for practical purposes, is an outright fabrication.

The DNC ad plays a tape of South Carolina's Republican Gov. Carroll Campbell pronouncing, "There is not a crisis" in health care. It represents an attempt to portray him and other Republicans as unaware of the existing problems in the health-care system. In fact, Campbell actually said: "... you shouldn't say there is not a crisis. There's a crisis for people that don't have health care. And there's a crisis in financing. There's not a crisis in the whole medical system..."

Gov. Campbell is rightly furious, claiming that the DNC is twisting words for partisan purposes.

But the DNC's false advertising resembles other aspects of the Clinton effort to advance the administration's ill-advised plan.

Several weeks ago, the White House press office repeatedly described an article by Elizabeth McCaughey in The

New Republic as "a lie" — before backing off from this nasty construction. Later, the press office sent a missive to journalists all over the country calling McCaughey's article "false" and "misleading." McCaughey's reply to this mean-spirited assault demonstrates that it's the White House press office that's misrepresenting the truth.

McCaughey, once again, cites explicit passages from the Clinton health proposal — passages that support her assertions so clearly that the White House denial seems ludicrous. McCaughey demonstrates that the Clinton plan would make it illegal for patients personally to pay their own doctors, would mandate racial quotas in medical training and would render it near-impossible for patients to choose their own doctors.

By taking words out of context to make TV ads, and by their intemperate and dishonest response to Elizabeth McCaughey's analysis, administration and DNC officials are demonstrating beyond any doubt that they fear honest and open debate on the actual implications of the health plan.

The GOP would prefer that the American people accept the scheme without examining it closely. Unfortunately, Americans aren't inclined to play along, which may explain the manifest desperation that informs the manner in which the White House is conducting the battle for its program.

Winston-Salem Journal, Friday, February 4, 1994

# NO LIE: Critic Claims She Wrote the Truth About Health-Care Plan

THE ASSOCIATED PRESS

WASHINGTON

What's it like to be branded a liar by the White House?

Elizabeth McCaughey says she is baffled at the administration's harsh attack on her critique of the Clinton health-care plan. And grateful for the attention.

Trying to dispel a public-relations headache, the White House now concedes that it may have gone a little overboard in its 10-page rebuttal to an article by McCaughey in the *New Republic* magazine.

The response, accusing her of lying and being "deliberately inaccurate," has brought McCaughey's piece wider notice — and handed ammunition to Republican critics.

McCaughey — a constitutional scholar who has taught at Vassar College and Columbia University and written books on the Electoral College and on the history of the Constitution — says she is puzzled by the White House attack and stands by her work.

"I'm delighted that they responded," she said in an interview. "It's in the interest of the nation to have a debate over the facts, over the content of the bill and what it will mean to you if you're sick."

At the center of the storm is her article, titled "No Exit: What the Clinton Plan Will Do For You."

**THE AUTHOR**, A fellow at the conservative *Manhattan Institute* for Policy Research, suggests that the Clinton plan would restrict people's choices of physicians, limit their access to specialists and deny new cures to those over age 65.

Her five-page analysis in the generally liberal *New Republic* also suggests that the Clinton administration has understated the cost of universal coverage.

The White House took strong issue with the article, using the word lie four times and such phrases as "this is ridiculous" and "deliberately inaccurate" in its rebuttal.

Dee Dee Myers, the White House press secretary, defended the rebuttal yesterday, although she conceded that "perhaps the language was a little strong."

"But I think what's important is we're going to challenge people who misrepresent the president's plan." she said.

Clinton, asked this week about his response to critics. said: "Well, I hate to use that word (liar), but the *New Republic* article was way off base and the *New Republic* didn't make total disclosure about the source of the article."

**ANDREW SULLIVAN**, the editor of the *New Republic*, suggested that the White House had overreacted.

"I think they're angry at us because they're angry at themselves." he said. "The plan really isn't as good as it should be."

Sullivan said that the author would respond to the White House charges in next week's issue. He also offered to hold a debate between the writer and Ira Magaziner, the White House health-care adviser.

For her part, McCaughey said she is busy writing her rebuttal to the White House rebuttal. She said she had cited specific pages in the 1,364-page Clinton health-care plan so that readers could check things for themselves.

It isn't the first time that Clinton and his aides have accused others of lying — but in the past the accused have been political figures.

When then-President Bush accused Clinton of raising taxes 128 times as governor of Arkansas, Clinton accused Bush of being "just like Pinocchio" and "incapable of telling the truth." His campaign accused Bush in a statement of "intentionally lying to win the election."

Clinton also ran ads during the New York primary accusing former California Gov. Jerry Brown of lying about his flat-tax proposal.

THE LAST WORD

GEORGE F. WILL

Came the Revolution . . .

HAVING STORMED, IN THE NAME OF LES MISERABLES, the ramparts of Republican reaction. Democrats, who call themselves "the party of compassion," now have produced a budget that slashes assistance to poor people for home heating, but cuts nary a nickel from the National Endowment for the Arts, an agency paradigmatic of government's solicitude for the already comfortable. Welcome to the revolution. Moral ostentation was liberalism's delight during the fallow years when Republicans were in power and homeless people were in the streets illustrating the "uncaring" nature of Republicans. But in the liberal party's budget the big winner is the Justice Department, primarily because of funding to put more police on the streets where homeless people still are. No wonder many liberals are uneasy and the administration's leading liberal, Hillary Rodham Clinton, is quite cross.

Television has been awash with ads that conspire rightfully unfair criticisms of her health care plan. The ads actually are mild—a prototypical couple saying gosh we don't need costly new bureaucracies to fix health care. "Propaganda!" cries Mrs. Clinton's husband. But if he and she want to see real mendacity, they should see the ad purporting to be a neutral presentation of facts.

It is sponsored by the League of Women Voters, whose agenda is liberal, and the Kaiser Family Fund, a liberal foundation. The Kaiser family name is on Kaiser Permanente, a huge HMO of the sort the Clinton's plan would favor. The ad says, "84 percent of Americans who lack health insurance are in families that work hard and pay taxes, but don't get health insurance on the job. That's eight out of ten or us, and that's a fact." No, that's not. Note the pronoun "us." The implied antecedent is the American population, all of us. But the "us" really refers to the approximately one in seven of us who at any moment lacks insurance (some briefly, between jobs, some others voluntarily, because they choose to run the risk).

The administration's slipperiness in portraying a "crisis" and the plan to solve it has been accompanied by vituperateness when the slipperiness is revealed, as it has been by, among others, Elizabeth McCaughey of the Manhattan Institute, writing in The New Republic. A few weeks ago her withering analysis of the Clinton's plan, complete with meticulous page references to the 1,364-page bill, documented the fact that the plan would give government comprehensive control over individuals' personal medical care. The White House shrilly accused her of a "blatant lie" and of being "deliberately misleading." When The New Republic challenged the White House to send forth someone, anyone, to debate McCaughey, the White House refused—wisely, considering McCaughey's shredding, in the current New Public, of the White House's written response to her first article.

For example, the White House called "ridiculous" her contention that the bill involves racial quotas in medical training. She directs readers to page 515 of the bill. A new bureaucracy that would determine the number of training positions in each teaching

hospital would also calculate the percentage of trainees at each teaching hospital "who are members of racial or ethnic minority groups" and which groups are "underrepresented in the field of medicine generally and in the medical specialties." Too few Hispanics in thoracic surgery? Government will fix that, too.

Contronted with McCaughey's scholarly precision and tone (she is a constitutional historian with a Columbia University Ph.D.), and with other criticism, administration spokespersons, and especially

Mrs. Clinton, have unsneatned a 1960s style of discourse, treating political differences as occasions for moral assaults. Doctors, pharmaceutical companies, insurers and the rest of the private sector—it is "rife with fraud, waste and abuse," says Mrs. Clinton—are guilty of greed. It remains to be seen whether Mrs. Clinton's role in Whitewater and related matters disqualifies her as America's moral auditor. However, her moral certitude is commensurate with her intellectual confidence.

Having spent her adult life lawyering and politicking, she now stipulates, among many other medical things, the proper ratio of primary care doctors to specialists. She says: "The American people did not stand on the street corners and say, 'Give us more thoracic surgeons.'" But neither did they ask politicians and their spouses to lay down the law about such matters. When a health insurance agent asked Mrs. Clinton what would happen to her job under the Clinton's plan, Mrs. Clinton replied, "I'm assuming

anvone as obviously brilliant as you could find something else to market." Obviously another of Mrs. Clinton's assumptions is that she and her friends have a right to rearrange other people's lives.

Replying to a question concerning whether the plan's employer mandates—payroll taxes—might inure small businesses, which are most of America's businesses, she snifled, "I can't go out and save every undercapitalized entrepreneur in America." No one is asking her to come "out" and "save" them, but she should retrain from injuring businesses that would not be "undercapitalized" if the Clinton's plan did not connecate part or their capital.

The Congressional Budget Office last week issued a ruling that one Democratic senator welcomes because "it means we don't have to lie." It refuted the Clinton's preposterous contention that their plan is merely a privately funded reorganization of private programs, not a new government program, and so the costs should not show up in the federal budget. The CBO said the Clinton's plan is a new entitlement program—larger than Social Security—in which "federal law... would determine the benefits and premiums." The CBO said the revenue stream raised from employers by the compulsion of the government's sovereign power must appear, like taxes, in the budget as government receipts.

By making untenable the Clinton's pretense that their plan involves no broad new tax, the CBO protected the budget's ability to function as a record of the portion of the private economy that is taken to fund government programs. The White House lobbied furiously to dissuade the CBO from stating the obvious, which the White House rightly considers potentially ruinous.

A SENATOR
SAYS THE CBO
RULING MEANS
'WE DON'T
HAVE TO LIE'

74 NEWSWEEK FEBRUARY 21, 1994

THE LAST WORD

GEORGE F. WILL

The Clintons' Lethal Paternalism

THE DEBATE ABOUT THE CLINTONS' HEALTH CARE PLAN IS, literally, a matter of life and death. If anything like that plan becomes law, there will be much unnecessary premature death and other suffering. The plan would reduce the quantity and quality of health care and medical technologies by vastly expanding government's coercive role. To see why support for the plan plummets as analysis of it proceeds, see the analysis in *The New Republic* by Elizabeth McCaughey of the Manhattan Institute.

The plan authorizes seven presidential appointees, the National

Health Board, to guess the nation's health care needs and decree how much the nation may spend meeting them. Everyone would be locked into one system of low-budget health plans picked by the government. Fifteen presidential appointees, the National Quality Management Council, not you and your doctor, would define the "medically necessary" and "appropriate" care a doctor could give you. Escaping government control to choose your doctor or buy other care would be virtually impossible. Doctors could be paid only by the government-approved plans, at rates set by the government. It would be illegal for doctors to accept money directly from patients, and there would be 15-year jail terms for people driven to bribery for care they feel they need but the government does not deem "necessary."

Government would define a minimum level of care and herd people in particular regions into dependence on the lowest-cost organization able to deliver that level. Doctors would be driven into organizations in which they would be punished financially for giving more treatment than the organizations' budget targets permit. The primary care physician assigned to you would be, McCaughey notes, a gatekeeper with an incentive to limit your access to specialists and high-tech medicine. The premise of theClinton's plan is not just that government knows best, but that government knows everything relevant, including how many specialists there should be—no more than 45 percent of all doctors. McCaughey says many medical students will be told that the specialties they prefer are closed, or closed to them because they are not the right race or ethnicity. Yes, the plan subordinates medical values to "diversity."

To further suppress, through rationing, consumption of other than low-budget, low-tech medicine, the plan would empower a presidential appointee (the secretary of HHS) to control the price of any new drug. Control would be based on the development cost and profitability of each drug, rather than a company's full range of drug development outlays. But for every drug that becomes profitable 1.000 do not. Thus theClinton's plan would certainly suppress research that might spare millions of persons some of the ravages of AIDS, Alzheimer's, breast and ovarian cancer and other diseases.

The Clinton's plan's subtractions from public health and personal freedom would be preposterous prices to pay even to give insurance to 38 million uninsured Americans. But the actual number of chronically uninsured—those uninsured involuntarily and for prolonged periods—is only about 6 million, less than 3 percent of the population, and they are not denied medical care. Indeed, per capita spending on them is 60 percent of

per capita expenditures on the insured pre-Medicare population, according to Irwin Stelzer.

Writing in Commentary, Stelzer refutes the notion that we must be spending "too much" on health care because other nations spend less, or because we spend more than we used to, or because the results are not commensurate with the expenditures. Yes, other nations spend smaller percentages of GDP on health care. But when did, say, Japanese living standards (Japanese doctors see an average of 49 patients a day for an average of five minutes per visit) become America's aspiration? Canada? There are 1.4 million Canadians queuing for care and 45 percent of those awaiting surgery say they are in pain. America spends twice as much per student on higher education than the average for 24 industrial nations. Stelzer wonders: How many professors endorsing the Clinton's "global budgets" to limit health care spending would favor capping professors' salaries?

American values are one reason health costs are high. About 30 percent are incurred in the last six months of patients' lives. American behavior—violence, diet, unsafe sex, drug abuse, teenage illegitimacy (severely underweight babies cost an average of $158,000 in care)—produces health costs that cannot be blamed on inefficiencies in the system.

The Clinton's "projection" that without their plan health care spending, currently 14 percent of GDP, will reach 26 percent by 2030 is akin to the government's projection—remember?—of oil at $100 per barrel. Market forces—new discoveries, conservation, alternative fuels—refuted the hysteresis who trumpeted the "energy crisis" as an excuse for expanding governmental command of the economy. Government is even less competent to anticipate the future of medicine.

Health care cost 5 percent of GDP in 1960. All in favor of spending at 1960 levels signify by saying let's do without bypass operations (300,000 this year), CAT and PETT scans, MRIs, endoscopes and other diagnostic technologies, laser microsurgery and all the other capabilities that have come with increased costs.

Roy Porter, a medical historian, limns the astonishing acceleration of medical advance in our lifetimes. Since the 1930s sulfa drugs and antibiotics have made childbirth safe for mother and child. In 1940 penicillin was still being tested on mice, and pneumonia, meningitis and comparable infections were frequently fatal. The 1950s produced polio vaccines, psychotropic drugs for mental illnesses and medicines for biochemical abnormalities. Pediatric cardiology leapt forward as did, in the 1960s, organ transplants. Treating prostate cancer with hormones and arthritis with cortisone, deciphering the role of slow viruses in chronic diseases of the central nervous system—these and many more marvels constitute a therapeutic revolution in a half century.

All this success is driven by a subtle symbiosis among complex, mature professions and institutions. It is horrifying to think of these life-enhancing jewels of our civilization coming under the control of political bureaucracies. The Clinton's plan presents the face of paternalistic liberalism, of government that is bullying because it is arrogant, and arrogant because it does not know what it does not know. It is unlovely and, literally, lethal.

SUPPORT FOR
THE PLAN
PLUMMETS AS
ANALYSIS OF
IT PROCEEDS

64 NEWSWEEK FEBRUARY 7, 1994

FRIDAY, FEBRUARY 4, 1994

C1

The Washington Post

White House
Queasy Over
Health Care
Story

Scholar's Article Gets
Furious Rebuttal

By Howard Kurtz

Washington Post Staff Writer

Elizabeth McCaughey is a bit surprised that the White House is beating up on her.

"It doesn't seem to be in the best interests of the nation to attack me in this passionate, ad hominem, personal way," she says with professorial precision. "It seems inconsistent with the democratic process."

McCaughey, a career academic with a PhD in constitutional law, is the author of a Feb. 7 New Republic cover story that eviscerates President Clinton's health care plan. She says the Clinton prescription would lead to rationing, price controls, patients being unable to choose their own doctors, and various other calamities.

The president has called the article "way off base," and the White House this week took the unusual step of issuing a nine-page rebuttal, calling McCaughey's piece "deliberately misleading" and "a blatant lie," not to mention "false," "untrue," "wrong" and "inaccurate."

White House spokeswoman Dee Myers yesterday conceded that "perhaps the language was a little strong."

Administration officials grew concerned when industry television ads began quoting the New Republic charges.

"It just got to the point that this article was being talked about in a big way," says Jeff Eller, White House media affairs director. "It was starting to make an impact. We felt we needed to make a fairly strong statement. New Republic articles also tend to generate editorials. We mailed our response to every editorial board in the country."

McCaughey dismisses the counterattack in measured tones. "The style of the rebuttal is to deny what I've said and restate the same point in more euphemistic language," she says. "For example, they say there are no price controls in the president's plan. We all know that's not true."

See McCAUGHEY, C2, Col 5

New
Republic

McCAUGHEY, From C1

New Republic owner Martin Peretz solicited the article after reading two of McCaughey's attacks on the health plan on the Wall Street Journal's unflinchingly conservative Op-Ed page. "I had an instinct that she was going to get their goat, and she certainly has," he says.

McCaughey, 45, is a senior fellow at the Manhattan Institute, which happens to be the hot think tank after providing intellectual guidance to New York's new Republican mayor, Rudolph Giuliani. McCaughey's fellowship is funded by the conservative John M. Olin Foundation, which is underwriting her book on race and the legal system.

A specialist in 18th-century history, McCaughey has one degree from Vasár College and two from Columbia University and has taught at both places. But she readily admits she is no health care expert.

"I must say, I was astonished that Betsy had gotten into the health care business," says Henry Graff, a retired Columbia history professor. "But she has a probing, analytical mind. She likes being in the center of the storm."

McCaughey has one advantage over most pundits chewing over the issue: She has read and reread Clinton's 1,364-page plan.

"She'd come running into my office saying, 'Did you know on Page 365 it says you can't do this or that?' " says William Hammett, the Manhattan Institute's president. "It's an emotional issue with her."

McCaughey sent for a copy of the plan because she felt she wasn't getting the full story. "My expertise is in analyzing law, the Constitution, legal documents, and that's exactly how I approached this.... I consulted with many medical experts," she says.

While McCaughey's article seizes on every ambiguity in the Clinton plan to paint a nightmare scenario, it's her authoritative tone—with passages cited for each dire prediction—that has helped fuel doubts about the complex proposal. This, friends say, is consistent with her scholarly approach.

"The only time I've seen Betsy really worked up was when she was talking about some court case where the footnote references didn't check out," says Michael Horowitz, a former Reagan administration official now at the Manhattan Institute's Washington office. "She goes and reads every single footnote."

Says Hammett: "She's a perfectionist. She was in the office at 6 this morning, complaining because LexisNexis wasn't working. When she's writing, she takes all her pages and puts them on the wall and cuts and pastes. The room is literally papered from floor to ceiling."

McCaughey displays the same objectivity by phone from New York, calling back a half-dozen times to extend her remarks and suggest further academic references. After refusing to discuss her social life ("It's not relevant"), she

BY TAYLOR SEDDON FOR THE WASHINGTON POST

Elizabeth McCaughey, author of an article assailing the Clinton health care plan: "It doesn't seem to be in the best interests of the nation to attack me in this passionate, ad hominem, personal way."

calls back again a few minutes later to say that she is "not a fancy Park Avenue socialite" and wants it understood she does not come from a privileged background.

McCaughey rejects the conservative label but refuses to characterize her philosophy, or even to say whether she is skeptical of bureaucracy. She says she merely examines "what powers are vested in the government and what remains with the individual."

LeAnn Elliott, a Federal Election Commission member who served with McCaughey on a panel at the Center for the Study of the Presidency, says: "I would have no idea what her political leanings are. All I've ever heard her express has been on the basis of her research."

McCaughey seems to be enjoying her moment in the sun. While not a talk show regular, she held forth on the Tonya Harding case yesterday on "CNN & Company," her comments peppered with statistics and dependent clauses.

On Wednesday, at the suggestion of her friend Virginia Thomas, the wife of Supreme Court Justice Clarence Thomas, McCaughey flew to Washington to brief 60 House Republicans on her critique of the Clinton plan. But she rushed back to her Park Avenue apartment because she had no babysitter for her three daughters.

In an effort to hold on to the spotlight, the New Republic has challenged the White House to take on McCaughey in a public forum. "I'm ready to debate, any time, any place," she says.

PAGE D2 / SATURDAY, FEBRUARY 5, 1994 *

The Washington Times

Wesley Pruden Editor in Chief

Joette Shiner Managing Editor

Ronald S. Godwin Senior Vice President

Michael R. Mahr Director of Advertising

America's Newspaper

Tod Lindberg Editorial Page Editor

Woody West Associate Editor

Mary Lou Forbes Editor, Commentary

Arnaud de Borghgrave Editor at Large

Assistant Managing Editors:

P.E. Innerat

Michael Keating

Ted Agres

Barbara Taylor

Joseph W. Scopin

# Ira Magaziner attacks magazine

Tsk, Tsk. The New Republic has been very naughty. The magazine published an article last week, called "No Exit," that asked the question "Under the Clinton (health care reform) bill, if you become ill, will you be able to get the treatment you need and make choices about your own health care?" The answer, as demonstrated by a close reading of the 1,364-page Health Security Act by Manhattan Institute Fellow Elizabeth McCaughey, was a resounding no.

Now, the White House, allegedly after failing to persuade the magazine not to publish the piece, has taken Ms. McCaughey and the magazine to the Clintonian woodshed: Ira Magaziner, the brains behind the Act, issued the opinion that the New Republic and Ms. McCaughey "are either knowingly misrepresenting for political reasons or aren't very competent to be writing such an article." Take that, Ms. McCaughey!

Of course, that kind of contemptuous dismissal is par for the Clinton course in response to criticism of the president's health care package. But clearly the New Republic gets Mr. Magaziner and his policy nerds a bit hotter under the collar than does the health insurance industry—or even the Republicans. (Could it be they thought they had the New Republic in their pockets?) The White House actually issued 10 pages of rebuttal — in a document twice as long as the original article, if a bit less cogent. It sets out to disprove the New Republic's assertions one by one. Below a few samplings:

**Article:** "That decision [whether or not care is necessary or appropriate] will be made by the government, not by you or your doctor."

**Fact:** "Untrue. . . Under reform, most such decisions will be made by patients and their doctors. The National Board has the authority to issue guidelines relating to what is necessary and appropriate. The authority to issue these guidelines does not infer that there are no options left to physicians and patients, only that a benefits package guaranteed to all Americans must be consistently defined across states." Get the difference?

**Article:** "If you walk into a doctor's office and

ask for treatment for an illness you must show proof that you are enrolled in one of the health plans offered by the government. The doctor can be paid only by the plan, not by you."

**Fact:** "False. You do not have to be enrolled in a plan to be treated. If you go to a doctor and are not enrolled in a plan, the doctor will treat you. You will then be given information on available plans and you may choose any plan you want. The plan you choose then pays the physician. The purpose of this provision is to assist all individuals in enrolling in a plan."

Well, so you can sign up *after* treatment. And surely everyone will welcome the "assistance."

**Article:** "Under the bill, a National Health Board . . . will decide how much the nation can spend on health care beginning in 1996."

**Fact:** "This is untrue. The Health Security Act makes no attempt to "decide how much the nation can spend on health care" and specifically rejected the idea of global budgets or arbitrary price controls. The National Board is only authorized to set the initial premium targets — the rates at which health insurance premiums (for the comprehensive benefits package) not national health expenditures may increase from year to year."

Uh huh. And, of course, the price of insurance premiums can't possibly affect how much we spend on health care. Or can it?

**Article:** "The bill limits what health plans can pay physicians and prohibits patients from paying their doctors directly."

**Fact:** "False. Any health plan that pays physicians according to their own contracts may pay those physicians anything they like. The bill only tells most health plans what to pay physicians with whom it has no contract." How's that again?

In all, most people will find the White House's response to the article about as illuminating — and reassuring — as the Clinton healthcare proposal itself. If this kind of disingenuous obfuscation is the best the administration has to offer in defense of its most cherished initiative, it's no wonder the Business Roundtable and the Chamber of Commerce aren't buying it.

# NOTEBOOK

WAITING FOR IRA: After reading Elizabeth McCaughey's response to the White House's response to her recent TNR article, readers will no doubt make up their own minds about who's been telling the truth. For our part, we were initially surprised by the White House's characterization of the article as "a blatant lie." In retrospect, it seems mereiv a classic case of what psychiatrists call "projection." We're still waiting for a response from Mr. Magaziner to our invitation for a debate.

SAME OLD, SAME OLD: For those debating whether Nation of Islam leader Louis Farrakhan had sufficiently renounced his aide Khalid Abdul Muhammed, the real answer came two days after Farrakhan's February 3 press conference. On Saturday night, at Baltimore City Community College, in an auditorium packed with more than 400 supporters,

Muhammed himself spoke the truth. "To the news media," he boomed, pointing to the press pit, "there are those among our enemies and oppressors who want to see a split. Well, Louis Farrakhan is my spiritual father. He's my leader, my teacher and my God. There is no division here." Muhammed continued: "I didn't come here to teach black people to hate white people. I know I can't just say some words to make you hate white folk, if all that white folk have done to you hasn't made you hate white folk already." He directed many comments at the press: "My subject won't touch this stuff you guys came for," he whined, in what he thought was a white accent, with the emphasis on "guys." Outside the auditorium, devotees were hawking copies of the "Protocols of the Elders of Zion" and "The Secret Relationship Between Blacks and Jews," for only $6. For the same price, you could buy a tape of the Kean College speech, which was crackling endlessly from a tape recorder, like a vile echo of the laughter inside.

THE GAY RIGHT: *The American Spectator's* David Brock, whose career has been built on "outing" heterosexuals' private lives, last month told *The Washington Post* something about his own: he's gay. Brock lashed out at Frank Rich of *The New York Times* for a column that described Brock's reporting as laced with misogyny. Brock called the column (which made no reference to homosexuality) a "thinly veiled outing," and insisted that his sexual life was no one's business. We agree with him on that point. But the most interesting element of this twist in the tale is that Brock's newfound honesty has put another nail in the coffin

of the respectable right's double standard with regard to homosexuality. It's now true that the bastion of aggressive conservatism, *The American Spectator*. has an openly gay man as its star reporter. We wonder what the *Spectator's* readers think about that. Once upon a time, the magazine referred to homosexuals as people with heads shaped like "butternut squash" (this an alleged satire).

It has also run gay-baiting material from, among others, Tom Bethell and P.J. O'Rourke. Now it's a pathbreaking publication, whose two most recent blockbusters were written by an openly gay man. Asked if the magazine would publish anti-gay material in the future, R. Emmett Tyrrell Jr., the magazine's editor, says, "It goes without saying that someone's sexual orientation is their own business. We never gave a damn about [Brock's] orientation, or yours, or that Polish guy on the staff [managing editor Wladyslaw Pleszczynski]. At *The American Spectator* we'd be just as happy all to be considered homosexuals, except for the Polish guy." As for the "Polish guy," Pleszczynski agrees with Tyrrell: tolerance reigns at *The American Spectator*.

MEETINGS WE'D LIKE TO MISS: On December 5 we invited readers to submit their entries. Competition was fierce. Honorable mention goes to James A.

10 THE NEW REPUBLIC FEBRUARY 28, 1994

[10]

Clinton's plan on the ropes.

# SHE'S BAAACK!

By Elizabeth McCaughey

The White House responded:

> "There is nothing in this Act to prohibit any individual from going to any doctor and paying, with their own funds, for any service." "Under the Act, you can pay 'out-of-pocket(sic)' for anything you want at any time, to any physician or hospital willing to treat you." Price controls on doctors' fees? "That is wrong," according to the White House. "There are no price controls...."

ulations barring doctors from taking your money. If you go to a doctor for treatment, the doctor will be paid by your health plan. That is true no matter what kind of health plan you are enrolled in. The doctor is prohibited from accepting payment from you (except fixed co-payments) for any basic medical services listed in the Clinton benefit package. That applies to doctors treating patients in HMOs and doctors outside HMO networks. Doctors outside HMOs must submit charges for your care to your health plan, accept reimbursement based on the government's schedule of price-controlled fees and report your visit according to the requirement of title v of the bill, which establishes the national electronic data bank:

Sec. 1406(d) (2) DIRECT BILLING—A provider may not charge or collect from an enrollee amounts that are payable by the health plan ... and shall submit charges to such plan in accordance with any applicable requirements of part l of subtitle B of title V (relating to health information systems).

(3) AGREEMENTS WITH PLANS—The agreements ... between a health plan and the health care providers providing the comprehensive benefit package to individuals enrolled with the plan shall prohibit a provider from engaging in balance billing described in paragraph (1) [page 237].

(4) ANNUAL REVISION—A regional alliance ... shall annually update the payment rates provided under the fee schedule [page 135].

Will your personal medical history be stored in a national data bank? The White House says "not true" and "patently untrue" to my statement that "the bill requires the doctor to report your visit to a national data bank containing the medical histories of all Americans. The

administration argues that although "physicians may be required to submit data ... for the purpose of improving quality and assessing treatments and outcomes," the bill "prevents against tying this data to specific individuals."

and this:

> [You] have the right to receive a written statement concerning ... the purposes for which individually identifiable information provided to a health care provider, a health plan, a regional alliance, a corporate alliance or the National Health Board may be used or disclosed by, or disclosed to, any individual or entity [page 874].

Price controls on premiums will mean too little money to care for the sick. Limiting how much money people can choose to pay for basic health coverage limits how much money is in the pot to take care of them when they are sick. That was the point of the ad on television that the First Lady criticized. A couple are discussing what price controls on premiums will mean, and the woman asks, "But what if there's not enough money?"

16 THE NEW REPUBLIC FEBRUARY 28, 1994

[LC]

Sec. 1322(c) (2) PROSPECTIVE BUDGETING DESCRIBED... the plan shall reduce the amount of payments otherwise made to providers (through a withhold or delay in payments or adjustments) in such a manner and by such amounts as necessary to assure that expenditures will not exceed budget.

Sec. 1141. EXCLUSIONS

(a) **MEDICAL NECESSITY**—The comprehensive benefit package does not include

(a) ... no state law shall apply ... if such law has the effect of prohibiting or otherwise restricting plans from—

Does supplemental insurance provide an "exit"? The bill requires you to buy one of the low-budget health plans offered by your regional alliance. You can't go outside the system to buy basic coverage you prefer, even after you pay the mandatory premium. Is supplemental insurance the way out? The White House states "there are no restrictions on the purchase of supplemental insurance." The fact is the bill contains two important restrictions

NEW YORK POST FRIDAY JANUARY 28, 1994

# A VOICE OF SANITY ON HEALTH CARE

PRESIDENT Clinton's State of the Union address made clear that the decks are being dusted off for a health-care donnybrook.

At this stage, the issues remain poorly understood. While much has been published about "the health-care crisis," most coverage has left readers rubbing their eyes at the subject's complexity. Journalists who have no problem making grand disquisitions on questions of war and peace find themselves — where health care is concerned — clinging to certain stock phrases like life-rafts: "37 million uninsured"; "surg-ing costs which threaten to overwhelm the American economy," etc.

Few, moreover, have shown much inclination actually to read the 1,364-page Health Security Act — which is probably what administration officials prefer. Indeed, for most of the past year, commentators have taken at face value White House claims that the plan will neither deprive patients of their choice of doctors nor set limits on how much care they can receive.

When TV news celebrated Hillary Rodham Clinton's journey to Capitol Hill — where she informed the nation that the plan reflected her interests "as a mother, as a wife, as a daughter, a sister, a woman" — the nuances of "the debate were hardly advanced.

In this context, a single writer who undertook to read the entire Clinton plan carefully — and to think it through — has been able to have a dramatic impact.

Last September, Manhattan Institute constitutional scholar Elizabeth McCaughey was working on a book about the

American jury system. One evening she read a newspaper article about the Clinton plan and its promise to provide coverage for the nearly 40 million uninsured — simply by raising cigarette taxes. And she recognized that wasn't the least bit logical.

Of course, others had noted that the Clinton plan seemed fiscally dubious, but few sought to analyze how the

interaction between Americans and their doctors. McCaughey refutes, point by point, the "don't worry" assurances that cabinet members have been making around the country.

For starters, the Clinton plan would make it hard for Americans to keep their own doctors. The plan is designed to push both patients and doctors into HMOs, which restrict patient choice as a matter of policy. Doctors who try to maintain traditional fee-for-service practices will find themselves hampered by the fact that the Clinton "health alliances" place strict price ceilings on fee-for-service insurance plans — rendering them economically unviable. Paying doctors directly for medical care will be against the law.

Thus, while Hillary Rodham Clinton is not misrepresenting the truth entirely when she asserts that patients will still be able to choose their own doctors, those doctors will no longer be in private practice. Patients may be able to find familiar physicians in the assembly line-like circumstances of HMOs.

The Clinton plan treats specialists as a particularly bad feature of American medicine. Heart surgeons and hematologists are out; general practitioners are in. By 1998, the Clinton plan would set strict limits on the ability

of young doctors to choose their specialties.

According to McCaughey, "Doctors in training will be assigned to the coveted specialty programs based partially on race and ethnicity, depending on how 'under-represented' each racial or ethnic group is in the field of medicine in general and in the various medical specialties." (McCaughey doesn't elaborate, but it seems clear that the Clinton's hope to use health-care reform as a means to surrendertly in-

troduce quotas into what has long been one of the most meritocratic of American professions.)

Her piece goes on to analyze HMO care, which is expected to flourish under the Clinton health alliances. HMOs, for example, sanction doctors who miss their cost-control targets, and patients frequently face health-threatening delays before being referred to specialists.

Moreover, McCaughey questions the need for overturning — instead of reform-

ing — the current system. As she notes, "If you are seriously ill, the best place to be is the United States." The U.S. has the highest cure rates in the world for several common cancers: cervical, stomach, and uterine; the second-highest for breast cancer; and the best treatment of heart disease. By turning the current system upside down, the Clinton bill would put all such accomplishments at risk.

Other journalists are also beginning to read the proposed Clinton legislation and tell people what's inside, instead of merely relying on Clintonite spokespeople to pooh-pooh any objections.

On the eighth page of the Oct. 4 Newsweek's 10-page treatment of the health-care debate, it is noted that while the Clintonists assert that private doctors will continue to exist, their claim is "some-what disingenuous." Newsweek explained why "many experts think" that the regulated environment will destroy private practitioners.

Given the tremendous significance Americans attribute to this very issue, one wonders why such an observation was buried so deeply in the story.

Hopefully, the American people will come to recognize such consequences before Congress finishes deliberating the Clinton plan. If so, much credit must go McCaughey, whose writing has brought a new standard of rigor and sharpness into the health-care debate.

She also has demonstrated that one doesn't need to be a certified health-care expert to think through the Clinton proposals and understand the effects they could have on the country's doctors — and on those who need them.

## MEDIA WATCH

Clinton's hoped to make their figures add up. The answer, McCaughey concluded after reading the preliminary plan, was a regulatory system that would cut back the quality of health care insured Americans now receive.

McCaughey's first articles appeared last September in the Wall Street Journal. Then came a cover story in the current New Republic — a piece that so worried the White House that Vice President Al Gore called TNR chairman Martin Peretz to complain. Her work explains tersely — with page references to the mammoth Clinton document — how the plan would place coercive restraints on the in-

> A single writer who undertook to read the entire Clinton health-care plan carefully — and to think it through — has been able to have a dramatic impact.

New York Post: Don Halowy

BEACON: Elizabeth McCaughey, Manhattan Institute writer-scholar, is leading the way on inclusive analysis of the Clinton health-care plan.

THE NEW YORK TIMES **EDITORIALS/LETTERS** SUNDAY, FEBRUARY 6, 1994

Editorial Notebook

Fear-Mongering on Health Reform

Thousands of Americans pronounce judgment on President Clinton's health care plan; probably fewer than a dozen have read its 1,364 turgid pages. Perhaps that is why a five-page

attack by Elizabeth McCaughey in The New Republic magazine has soared to prominence. Conservatives, ranging from Senator Bob Dole to the columnist George Will, have embraced her broadside as gospel. The rule seems to be if you know you don't like the plan but do not bother to master its details, let Ms. McCaughey do your thinking.

But Ms. McCaughey's analysis is careless, misleading and wrong. Her litany of criticisms-by-page number gives the article an aura of scholarship. But true scholars are precise; Ms. McCaughey is not. The White House labels Ms. McCaughey's assertions as lies. That implies that her distortions are deliberate, which may be unfair. In any case, the issue is not her character but her fear-mongering falsehoods that threaten to warp the debate.

Start with the title, "No Exit." Ms. McCaughey argues that Mr. Clinton would stop you from buying medical services you want to buy. You are, she says, entitled only to benefits the Government deems necessary and appropriate: "Escaping the system and paying out-of-pocket to see a specialist ... will be almost impossible." Wiggle word ("almost") aside, the declaration is false. The bill unequivocally protects your right to buy out-of-pocket any treatment from any doctor at any price.

Under the bill, government would set the benefits included in the basic package that every American would be required to buy. And government would set the prices that doctors charge patients who use insurance to pay for these basic benefits. But government would not stop you from buying supplemental policies that offer additional benefits — beyond those deemed necessary and appropriate. Nor would government set the price you pay for supplemental benefits or for any service you decide to pay for out of your own pocket (outside your own insurance policy). Yes, Ms. McCaughey, there are exits.

The Clinton Plan
Misrepresented

Ms. McCaughey points with alarm to a provision that empowers states to make "mandatory, nondiscretionary reduction in payments" to doctors and hospitals if health care costs exceed preset budgets. But what she forgets to tell readers is that the citation comes from a section of the bill describing the states — which the Administration expects to be few, if any — that reject Mr. Clinton's managed-competition approach and adopt instead a Canadian-style single-payer system.

She scares readers more by citing a provision that seems to require government rationing: Officials would "set yearly limits on payments to fee-for-service doctors in each field of medicine, like cardiology or pulmonology." But Ms. McCaughey forgets to say that this citation comes from a section describing a regulatory option that states could, but are not expected to, adopt.

Ms. McCaughey raises fears another notch when she cites "mandatory" practice guidelines that would "compel doctors to uniformly practice low-budget medicine." What she doesn't say is that treatment guidelines would not be compulsory. They would merely be recommended procedures that, if followed, could serve as a backstop against malpractice suits. Health plans would still decide how to treat patients. Mandatory is her word, not Mr. Clinton's.

Her misrepresentations have spread quickly. George Will repeats several, and then adds a juicy one of his own. The plan must ration care, he reasons, or why else would it need to propose 15-year jail terms for bribery? One reason is to punish patients who bribe doctors to help defraud insurance companies; another is to punish plans that bribe officials running state regulatory agencies.

Even many of those who favor managed competition — the basis of Mr. Clinton's bill — want the President's plan drastically amended. But that's no excuse for scaring the public silly with tendentious accusations.

MICHAEL M. WEINSTEIN

THE NEW YORK TIMES **EDITORIALS/LETTERS** SUNDAY, FEBRUARY 20, 1994

# Clinton Plan Means New Era of Family Doctor

## What the Bill Says

To the Editor:

I would like to correct the two most serious factual errors in Michael Weinstein's Feb. 6 Editorial Notebook, "Fear Mongering on Health Reform," which criticizes "No Exit," my Feb. 7 New Republic article.

Mr. Weinstein states that the Clinton Administration bill "unequivocally protects your right to buy out-of-pocket any treatment from any doctor at any price." The text of the bill proves this is untrue.

Although it is possible to buy cosmetic surgery, psychotherapy or other uncovered services out of pocket, the bill prohibits doctors from being paid cash for the basic medical services listed in the Clinton benefit package. The bill states that a doctor "may not charge or collect from an enrollee amounts that are payable by the health plan" (Nov. 20 version, page 236). If you need bypass surgery, are you allowed to pay a surgeon extra, in hopes of getting the most expert care? No. The bill provides that a doctor "may not charge or collect from an enrollee a fee in excess of the applicable payment amount under the applicable fee schedule" (page 237).

If you walk into a doctor's office and ask for treatment for an illness, the doctor must be paid by your health plan (except for a fixed co-payment). To keep controls tight, the bill requires the doctor to report your visit to a national data bank containing the medical histories of all Americans. If you pay a doctor cash to avoid having your personal medical problems reported to the data bank, your doctor will face a $10,000 fine for

The White House and Mr. Weinstein argue that only under a single-payer system would payments to doctors be cut. The bill proves Mr. Weinstein and the White House wrong.

The bill anticipates that price controls on premiums will cause money to run low, and when that occurs, the bill provides that health plans "shall reduce the amount of payments otherwise made" to doctors "in such a manner and by such amounts as necessary to assure that expenditures will not exceed budget." This statement comes from the "main proposal" of the bill (page 137).

If the White House or Mr. Weinstein challenge my description again, I hope they provide page numbers too so that readers can compare the evidence and decide for themselves.

ELIZABETH P. MCC AUGHEY
John M. Olin Fellow, Manhattan Inst.
New York, Feb. 16, 1994.

failing to report your visit and another $10,000 for not submitting the charge to your plan (pages 885-86).

Mr. Weinstein's second error is to deny that the Clinton proposal includes a mechanism for slashing or withholding payments to doctors if medical needs exceed the Government-imposed budget, and premium money runs low. He echoes a Jan. 31 White House press release that accused me of misleading readers by "implying that such a mechanism exists in the main proposal."

"It does not," the White House em-
phatically stated.

## Worse Than Medicare

To the Editor:

Michael Weinstein in "Fear-Mongering on Health Reform" (Editorial Notebook, Feb., 6), accuses Elizabeth McCaughey of misrepresenting the Clinton health care plan in her New Republic article. We need only to look at our Medicare payment system to realize that Ms. McCaughey's predictions exist now for the elderly, notwithstanding Mr. Weinstein's attempts to temper the similar restrictions that will apply to all of us should the plan be passed as it stands.

Under Medicare law, patients are entitled only to those benefits the Government deems necessary and appropriate. Escaping the system and paying out of pocket to purchase what nonmedical bureaucrats consider "unnecessary" services are illegal, and any physician who charges a Medicare patient for that service is subject to a $2,000 fine per offense and possible criminal charges for multiple offenses.

The physician is allowed to perform the service if he and the patient deem it appropriate. But he is not allowed to charge the patient a fee for it, no matter how small or large. A patient in New Jersey recently brought suit against the Medicare financing agency, charging that his civil rights were violated when he was denied the right to purchase the services of an assistant surgeon at the time of surgery on his only eye.

In addition, Medicare has established maximum fee amounts for all "necessary" services. In my specialty, ophthalmology, surgical fees have been reduced by approximately 60 percent over the last seven years in a rather arbitrary manner.

Whether one calls this rationing or setting yearly limits on ophthalmology budgets, this reduction has made access to ophthalmic surgery much more difficult for those older than 65.

I fear, like Ms. McCaughey, that governmental regulations under the Clinton health plan will multiply Medicare restrictions and will apply them and others to our total population.

ANDREW A. DAHL, M.D.
Fishkill, N.Y., Feb. 6, 1994

[LC]

# CORRESPONDENCE

## No end

To the editors:

Elizabeth McCaughey could be speaking for the majority of practicing physicians in the United States who are concerned that the Clinton health care plan, as well as many other ideas for health care reform, will restrict physicians' ability to deliver first-rate and appropriate health care to their patients ("No Exit," February 7). Access to health care for the Clintonites really means access to primary care, which is supposedly cost-effective, while limiting further referral and utilization. McCaughey is rightly concerned that decisions regarding medical management will be made by nonphysicians who will likely face severe budget constraints. For example, the projected savings for the proposed Medicare plans are pure fantasy unless severe restrictions, as indicated by McCaughey, are instituted. Primary care physicians under ClintonCare will become "gatekeepers," not gatekeepers.

The keys to health care reform are: (1) reform the health insurance industry to allow universal access at a reasonable price and include health insurers in malpractice risk for their influence on medical management decisions, (2) increase direct costs to the public for their use of the health care system based on ability to pay and/or preference and (3) allow adequate physician and patient autonomy so that doctors work for their patients, not for the government or an insurance company.

MARTIN D. CAPLAN, M.D.

Richmond, Virginia

To the editors:

Elizabeth McCaughey lays out the Clinton plan clearly. What we get is lowest common denominator medicine, a scheme not calculated to produce excellence. How can it when the medical professionals are out of the loop when it comes to making decisions? Where does progress come from in medicine? Surely not from the layers of bureaucracy that will second-guess and judge the professionals. Pass this bill and we're on the road to diminishing returns in medical care.

MARIUS BRAMBILLA

Arlington, Virginia

To the editors:

Elizabeth McCaughey paints a haunting and frightening picture to both patients and physicians about the future of

health care—about thirty years too late. Unfortunately, the future is now, and virtually every scenario described in her article is already in full force for the vast majority of Americans, the result of years of "market-oriented" strategies dating from the Nixon years through the Reagan-Bush era. Blaming the current ills of the medical care system on a future health plan seems rather bizarre. As for the complexity of the Clinton plan, multiply the 1,364-page Health Security Act by 1,000 and read the underwriting documents, utilization review protocols and payment contracts for every health insurer in the country. Add layers of federal and state insurance laws and hospitals' cost-shifting accounting and I'll show you a truly complex health care plan.

The Clinton plan or some other version of national health care hopefully will simplify health care for all parties, which is exactly what many do not want. It is the complexity of the current system that allows undeserved protits to be wrung out by those clever enough to exploit the rules and by consultants hired to interpret them. Many aspects of managed competition are indeed complex, but consider one of the strategies—booting certain services out of health insurance coverage. The ultimate simplification of fee-for-service medicine will occur—pay cash on the barrel, as you go, no third parties please. For services such as in vitro fertilization, no more need for private technology assessment, actuarial analysis, utilization review, certification and contracting with doctors. Imagine, all that energy now plowed into making in vitro fertilization cheaper and better. Obviously, this is not a solution for many medical services, hence complexity returns, but the willingness to state that care will and must be limited with some semblance of fairness is a major strength of the Clinton plan.

DAVID H. MARK, M.D., M.P.H.

Milwaukee, Wisconsin

To the editors:

In "Cassandra's Law" (February 14), Theodore Marmor and Jeffrey Mashaw attack Elizabeth McCaughey's critique of the Clinton health care reform plan as an unrealistic dystopia. If Marmor and Mashaw recalled the Greek legend accurately, they would know that Cassandra (daughter of King Priam of Troy) was given the gift of prophecy (correctly predicting the future) by Apollo, but a curse was placed upon her such that no one would believe her predictions. Thus, by calling McCaughey a Cassandra, and by claiming not to believe her predictions of the pernicious effects of Clinton's health plan, they imply that

her warnings are in fact accurate!

RICHARD FUCHS, M.D.

New York, New York

## Kinsley esq.

To the editors:

Michael Kinsley's tactics are seeming more and more like they are derived from so many LSAT preparatory classes. The most recommended (and predictable) argument structure is one that presents opposing arguments and methodically deconstructs them. Classic and effective. Unfortunately, in lawyer Kinsley's hands, the tactic has become "present opposing argument and deconstruct opponent."

Case in point: in "Second Opinion" (TRB, February 14), Kinsley, after some gratuitous sarcasm directed toward Elizabeth McCaughey, attacks *The Wall Street Journal* for decrying the HMOs' harmful effects on patients through their stingy controls on testing, while the same *journal* advocates controls on malpractice suits. The reason? Hypocrisy. It seems that the *Journal* consulted with malpractice experts for its opinion. Talk about non sequiturs! The *Journal* has never implied that malpractice specialists are unreliable or incompetent, only that it has a problem with the boundaries set by many of these specialists (i.e., none). Kinsley takes the *Journal*'s arguments on malpractice to extremes that were neither intended nor implied.

Kinsley then follows with yet another attack, this time on The Heritage Foundation's "fantastic" numbers relating to the new taxes the Democrats would impose and the projected deficits, yet fails to consider the "fantastic" number of people allegedly without health care that the Clinton camp frequently resorts to, a number that has been questioned repeatedly by friend and foe of the administration.

In an amazingly bold finish to this essay, Kinsley asks if we are capable of having a rational debate on health care. I've gathered that a debate is only rational to Kinsley if it precludes any straying from the Democratic Party line.

ANWAR M. GHULOUM

Pittsburgh, Pennsylvania

4 THE NEW REPUBLIC MARCH 7, 1994

NEW YORK POST. THURSDAY, JANUARY 27, 1994

NOW that President Clinton has disappointed apostles of caution on his own team by drawing a line in the sand on health care, the question is whether Republicans have the wit and guts to take advantage of it.

Two months ago, it seemed unlikely the GOP could stand up to the president's threat: If your bill does not guarantee universal health insurance coverage. I'll veto it. But now, despite continued unease inside the party (notably expressed by National Chairman Haley Barbour and House Minority Whip Newt Gingrich), Republicans have bought into the formulation of conservative activist William Kristol that there is no national health-care "crisis."

No crisis, no need for a massive governmental remake of one-seventh of the economy. Kristol is voicing the basic Republican philosophy sounded a half-century ago by Ohio Sen. Robert A. Taft that the business of the "opposition" is to oppose.

It is working. Whereas before Christmas, former Defense Secretary Dick Cheney was the only big-name Republican to adopt Kristol's no-crisis theory, it is now embraced by two major players: Sens. Robert Dole (Kan.) and Phil Gramm (Tex.). Even the Democratic chairman of the Senate Finance Committee, Daniel Patrick Moynihan (D-N.Y.), says there is no crisis. During the winter recess, members of Congress found many constituents worried about the socialization of health care.

Approaching his first State of the Union address, Clinton

BILL'S HARD LINE

Tough stand on health plan gives GOP chance to say no

INSIDE REPORT

was at a crossroads. There are senior administration figures who agree with Dole's four nos: Congress will accept no employer mandates, no cost controls, no regional health alliances, no new bureaucracy. That also means no universal coverage.

So, the president could have backed up toward a limited plan that would be passed easily. Instead, Tuesday night, he drew his line in the sand.

The White House fretted about the no-crisis chorus, especially a cover story in The New Republic magazine by the Mannattan Institute's Elizabeth McCaughey detailing now the Clinton plan would devastate American health care. Vice President Al Gore telephoned his friend and mentor, New Republican owner Martin Peretz, to complain.

In demanding universal coverage, Clinton emotionalized the crisis question. He cited how Richard and Judy Anderson of Reno, Nev., were

forced into bankruptcy because their health insurance was not portable (a problem all sides want to correct by legislation). For lawmakers "who say there is no health-care crisis," Clinton had this dramatic message: "Tell it to Richard and Judy Anderson."

That frightens key Republicans. At a closed session of the Republican National Committee last Friday, Chairman Barbour delivered a homily on health care that — though carefully worded — was taken as a rejection of the Kristol thesis. He stressed the perils of seeming unconcerned. "I thought it was a shot at the Kristol-Cheney approach," a national committeeman told me.

More surprising is Gingrich, the prototypical Republican pit bull about to ascend to House leadership. The Georgian told me his disagreement with Kristol is real. "We are in danger of looking like George Bush, really out of touch," said Gingrich. He expressed his problem with party policy being made by "people who don't run for office."

However, Kristol and Gingrich conferred Tuesday afternoon and agreed their differences are "semantical." In any event, Kristol's Project for the Republican Future

ROBERT A. TAFT

Model for Republicans.

worked through the night and Wednesday at 3 a.m. finished a 30-second television spot with this conclusion: "The Clinton health plan. Everything good about your health care is at risk."

Following the Robert A. Taft line projects a high-stakes game. Kristol believes liberalism in America is like communism in Russia a decade ago: supremely powerful but decaying from within. Just as invading Afghanistan caused the rotting communist edifice to fail, he says, the overreaching of Clinton's health plan could impede liberalism.

But by moderating, Clinton could split the Republican Party and enlist officeholders uneasy over where Kristol is going. The president's drawing of the line Tuesday night makes that harder and offers the GOP a rare opportunity.

A4 WEDNESDAY, FEBRUARY 2, 1994

THE WASHINGTON POST

# Clinton Asks Critics to Compare His Health Care Plan With Alternatives

By Ann Devroy

Washington Post Staff Writers

President Clinton yesterday confronted critics of his health care proposal head-on, asserting that the system is in a crisis and that advocates of reform should not let "Washington rhetoric pull the country apart" over how much to revamp it.

In back to back speeches, Clinton rejected the Republican retcon, led by Senate Minority Leader Robert J. Dole (Kan.), that the health care system has problems, but no crisis. He asked that his proposal be compared with the current system and proposed alternatives, not analyzed in a vacuum.

The president also rejected Democratic critics who complained yesterday he may be giving away too much before the negotiations begin. A group of governors on Monday quoted Clinton as saying he was willing to compromise both on the price controls in his plan and on the mandatory alliances that would negotiate for insurance on behalf of most Americans.

Sen. John D. "Jay" Rockefeller IV (D-W.Va.) yesterday called those signals a mistake, but Clinton said the senator had made a bigger mistake by believing the news reports on his statements, which he said were misinterpreted.

"I didn't say anything differently [to governors] than I have said repeatedly," Clinton said, "which is that we are and we should be flexible on the size of the alliances, and that in order to have a health care plan which passes muster in the Congress, we have to have some way of showing how much taxpayer money is at risk" by having a mechanism to constrain price increases.

While Clinton was addressing the American Hospital Association and the National Governors' Association on health care, the White House was also lobbying members of the Business Roundtable to keep that group from backing a rival health care plan.

The administration released a detailed analysis and rebuttal of a lengthy critique of its plan by Elizabeth McCaughey of the Manhattan Institute, a conservative think tank that advocates free-market approaches to social policy reform.

The critique, published in the New Republic last week, has become "part of the debate and had to be answered," one official said, while Clinton dismissed it as "way off base." Some of its premises—that consumers will have less choice and poorer health care and will face extensive government regulation and manipulation—have begun appearing in advertising campaigns against the Clinton plan and have been cited frequently by critics of the plan.

A senior administration official yesterday described the president's State of the Union Address last week, the two follow-up speeches yesterday, the intense lobbying of the governors and the business group this week, along with policy statements being issued by the White House, as attempts at "putting the president in a stronger position when we get into the actual negotiations."

Officials feared that those who called for less radical changes in the health care system were beginning to get the political upper hand. To counter that, Clinton and his advocates have gone everywhere that health care has been debated during the past week, intent that no ground be lost before negotiations with Congress begin.

Clinton rejected the thesis that no

crisis exists in the health care system during both of his speeches yesterday. "To anybody who thinks there are no serious problems, no crisis in the health care system. I would say, 'Go visit your local hospital,'" he said. The crisis, no crisis argument, he said, is a "linguistic battle" in which the facts are on his side.

He said the number of uninsured Americans is going up significantly, along with the number of working Americans whose insurance is being cut back or eliminated, resulting in a total of 58 million Americans who are without coverage at some time during each year.

Another 81 million Americans have pre-existing conditions that prevent or limit their coverage or keep them from changing jobs.

State budgets, Clinton said, are

"exploding" because of the increasing cost of providing the states' share of Medicaid. He said hospitals are bearing or shifting at least $25 billion a year in costs for patients who cannot or will not pay their bills and small businesses are paying premiums that average 35 percent more than large businesses or the government.

Those, Clinton said, "are the facts" that lead to his health care bottom line: "Guaranteed private insurance for every American is the only way we'll ever be able to control the cost of this system, simplify it, and provide the American people with security of benefits that can never be taken away."

Dole, in a speech to governors viewed as conciliatory by many of them, called for an end to the debate over language. "We're all pre-

pared to work for health care reform, but if we have to take a litmus test and say there is a crisis" the debate will bog down, he said.

Dole repeatedly called for a spirit of bipartisanship, leaving the White House—and many Republicans—in the usual guessing game about the GOP leader, who is prone to change his tone day by day.

Clinton, however, praised Dole, and White House officials cited Dole's statements about not wanting Republicans to be in the bleachers as the health parade passes by as a sign he wants the Republicans to be part of the negotiations, not simply the opposition.

Clinton also adamantly defended his decision to avoid taxing employers for health insurance premiums that cover more than minimum benefits. The governors' association and other groups have suggested that those who get such so-called Cadillac benefit packages should pay taxes on them to help pay for coverage for the uninsured.

But Clinton showed little sign of giving on that. "Why take something away from hard-working people before you squeeze the system and its unconscionable burdens ... ?" he asked. He said no new taxes should be imposed until Washington is certain that his reforms do not reduce health costs in the way he projects. Taxing benefits should be a last, not a first, resort, he said.

Answering charges that his program would be awash in government bureaucracy, Clinton said the current system—where insurers decide who is covered, what it costs and what is covered—is more complex than his plan. "Even Rube Goldberg" could not have devised a system as bureaucratic and complicated as the one in place today, he said.

The White House analysis calls the McCaughey article a series of distortions, "misleading portrayals" and "outright lies." The article, for example, asserts that "avoiding the system and paying out-of-pocket to see a specialist" will be "almost impossible."

The rebuttal calls that statement a "blatant lie," because under the Clinton proposal, patients can pay out of pocket "for anything you want at any time to any physician or hospital willing to treat you." The article makes a series of such assertions, and the White House answers them in its rebuttal, one by one. Dole yesterday questioned the harsh language of the rebuttal, but Clinton said the article itself was misinformation that had to be answered.

On Capitol Hill yesterday, Senate Democrats lambasted former representative Willis D. Gradison Jr. (R-Ohio), president of the Health Insurance Association of America, for sponsoring television advertisements designed to scare Americans away from supporting health care reform, Reuter news agency reported.

"I think the advertising that your HIAA has been putting on television [featuring characters named Harry and Louise expressing concern about Clinton's health plan] ... is probably the single most destructive effort that I can remember in 30 years of public life," said Rockefeller.

"I've known Bill Gradison a long time," Sen. Thomas A. Daschle (D-S.D.) told the Senate Finance Committee. "The one word that I've always associated with Congressman Bill Gradison was integrity. These ads do not have integrity."

Staff writer William Claiborne contributed to this report.

## UNDER 65 AND UNINSURED

The coverage of uninsured Americans is one of the major issues in health care reform. The District had one of the nation's highest rates of uninsured residents in 1992.

UNITED STATES

Of the 221 million Americans under age 65, 38.5 million were uninsured.

One in 6 lacks insurance

THE DISTRICT

Of 474,000 residents under age 65, 121,000 were uninsured.

One in 4 lacks insurance

VIRGINIA

Of 5.4 million residents under age 65, 943,000 were uninsured.

One in 6 lacks insurance

MARYLAND

Of 4.2 million residents under age 65, 585,000 were uninsured.

One in 7 lacks insurance

SOUTHERN ILLINOIS BENEFIT RESEARCH CENTER, 1000 W. Oakton Street, Suite 1000, Champaign, IL 61824

www.soutHERnIllinoisBenefitResearch.com

[L]

Cassandra's law

"No Exit," the critique of Clinton's health reform plan by Elizabeth McCaughey that appeared last week in these pages, borrows its title from Sartre's play *Huis Clos*. Sartre's drama is almost as grim as McCaughey's vision of the plan. Happily, both are largely fictional accounts, although one might argue that Sartre's brilliantly imagined fiction is in many ways truer to life than McCaughey's horror story is to the world of "Clintonized" medical practice.

Virtually none of her stark claims about the bill is indisputably correct. There is, of course, a grain of truth in the worry that the provisions of the Clinton bill would complicate the lives of patients, professionals and payers. (We count ourselves among those worried by the bill's complexity and workability.) But that grain is obscured by McCaughey's hyperbole. In the spirit of restrained deconstructionism, just reconsider her more outlandish assertions.

McCaughey claims the law will prevent you from going outside the system to buy basic health coverage you prefer, even after you pay the mandatory premium. But the bill explicitly permits citizens to choose physicians and to pay extra for such coverage if they so desire. McCaughey's language illustrates an extremely casual use of the rhetoric of legal compulsion when the reality is a more complex one of relative prices and their impact on the kind of insurance plan Americans might choose were the Clinton bill to be enacted.

Or again, McCaughey assumes patients will be forced to enter HMOs. But neither physicians nor patients could possibly be forced into HMOs by a bill that requires each alliance to offer at least one fee-for-service plan. This fact is indisputable from a simple reading of the pages McCaughey cites. The role of HMOs in the Clinton plan is, of course, open to a number of interpretations, none of which is settled by the language of the bill itself. But what McCaughey presents is a crude anti-HMO tract, offering anecdotes as evidence that HMO economics regularly produces medical nightmares.

In fact, of course, the quality of care in American medicine varies enormously both for HMO and fee-for-

service medicine. The better HMOs offer service that's at least the match of good fee-for-service practice. The worst HMOs rival the worst traditional care. It's true the Clinton bill rewards less expensive HMOs, but its impact on the quality of American medical care is unlikely to have the draconian effects McCaughey predicts. Interestingly, most insured Americans (some 70 percent) are already in one or another form of managed care and the effect of that dispersion has been to weaken the controls that managed care has managed. So, for instance, staff-model HMOs represent a small proportion of managed care and the direction of development has been to make most HMO-style bodies more like fee-for-service medical care than the much touted model of Kaiser Permanente. Moreover, the growth of utilization review is neither restricted to HMOs nor more intrusive in such settings. Utilization review does hassle American patients and physicians, but is completely independent of the HMO form of practice, whether Clinton-supported or not.

McCaughey describes the Clinton plan as a rigid set of restrictions on the doctors Americans can consult, the scope of insurance they can purchase and the services they can receive. She builds up her specter with a continuing set of inaccuracies. Is it technically correct that the Clinton bill would force one to "settle for one of the low-budget plans selected by the government?" Well, no. In fact, the bill specifically states that "nothing in this Act shall be construed as prohibiting ... an individual from purchasing any health care services" (pages 15, 16). It is true the Clinton reform would highlight which plans are more expensive than others. In that sense, it provides incentives to choose lower-cost plans. But a good deal of the bill's complexity is designed to countervail the dangers of selective enrollment, reductions of benefits and the like that such economies entail.

Likewise, McCaughey distorts the impact the Clinton bill would have on American choices of specialist care. Seeing a specialist for needed care will be, for most people, no more difficult than it is today, and for many it will be easier. For those without insurance, the expansion of choice is obvious. Moreover, since more and more employers are dropping so-called indemnity plans (with completely free choice of physician), the Clinton

plan's requirement of fee-for-service options can be legitimately interpreted as supporting wider choice than many now have. To be sure, other reforms could widen that choice, but the McCaughey appeal to a world of unlimited medical choice is surely anachronistic and misleading.

If anything, the "necessary and appropriate" care provision in the bill delegates authority to the medical profession, rather than interposing further government bureaucracy between patient and physician. For most Americans today, it is the insurance company, not the doctor, that has final authority over what is necessary, appropriate and reimbursable. They invoke utilization review, deny payment if they think your doctor charged too much or determine that a treatment was "experimental." The world McCaughey invokes—in which patients go to doctors, have anything they want and the insurance company pays it all without question—vanished years ago.

Other aspects of "No Exit" merely secure McCaughey's place as the Cassandra of Clinton plan critics. In Cassandra's world, all attempts at cost control have wholly perverse effects; they deny or delay needed care; stifle drug development; drive physicians into hallway diagnoses to outwit wicked utilization reviewers; and so on. Even more oddly, global budgetary controls in this horrid world merely increase intrusive micromanagement by audacious fools in accounting departments. In every real-world case of overall budgetary control, of course, just the opposite has been the case.

By now the plot of this dark comedy should be all too clear. McCaughey's dystopia of what the Clinton plan will mean is profoundly linked to her imagined utopia of what health care in this country now is. Most Americans know better. They know that costs are rising too fast; that choices are already being limited; that too many people go without care at all. When Cassandra whispers some dreaded "what if?" in their ears, they will surely listen to the replies of those who are prepared to consider, "as compared to what?"

THEODORE R. MARMOR
and JERRY L. MASHAW

THEODORE R. MARMOR is professor of public policy and management and JERRY L. MASHAW is professor of law and organization at Yale.

20 THE NEW REPUBLIC FEBRUARY 14, 1994

THE NEW REPUBLIC FEBRUARY 21, 1994

CORRESPONDENCE

Round three

To the editors:

I had hoped that my description of the
Clinton health bill would encourage a
nationwide debate on the content of the
bill and what it will mean when you need
medical treatment. The two responses in
THE NEW REPUBLIC (February 14) are dis-
appointing. Michael Kinsley concedes at
the outset that he has not read the bill.
How then can he offer guidance to read-
ers who want to make an informed judg-
ment about it?

The other respondents, Theodore
Marmor and Jerry Mashaw, challenge my
statement that "if the bill passes, you will
have to settle for one of the low-budget
health plans selected by government."
But anyone who reads the bill will see
that it expressly prohibits Americans
from buying the kinds of extensive, high-
quality health plans that many now
choose.

The bill requires you to buy basic
health coverage from the limited choices
offered by the regional alliance where

you live. It will be illegal to go outside the
system and buy a basic health plan you
prefer, even after you pay the mandatory
premium (see pages 15 and 244 of the
bill). Will you be restricted to low-budget
health plans? Yes.

Under the bill, a National Health
Board will decide what each regional
alliance can spend on health plans, and
will set a ceiling on what the average plan
in the region can cost. To sell health cov-
erage in a region, insurers and HMOs must
stay under the ceiling (pages 984-987,
990, 995).

In addition, the bill outlaws any plan
that costs more than 20 percent above
the average plan in a region (page 132).
The goal is to limit what every American
is allowed to pay for health coverage.
Limiting what you can spend on a health
plan limits the money in the pot to pay
for your medical care when you are sick.

In conclusion, Marmor and Mashaw's
statement that the Clinton bill merely
"would highlight which plans are more
expensive" and provide "incentives to
choose lower-cost plans" is untrue. The
Clinton bill compels you to buy one of
the low-budget health plans offered by
your regional alliances, and outlaws all
other choices. Before commentators
advocate the Clinton health bill, they owe
it to their audience, at the least, to read it.

What makes the Clinton bill different
from any of the other Democratic or
Republican reform bills is that it gives the
government control over your personal
medical care. Only the Clinton bill limits
the medical care you can get and what
you can pay for it. The other proposals in
Congress attack the worst abuses by
health insurance companies, reform lia-
bility laws that force doctors to practice
wasteful, defensive medicine and devise
ways to make insurance affordable if you
don't work for a large company. All these
proposals could be expanded to provide
universal coverage, if the American peo-
ple want to pay for it.

ELIZABETH MCCAUGHEY

Manhattan Institute

New York, New York

THE WASHINGTON POST

SUNDAY, FEBRUARY 13, 1994 A3

# Company for 'Harry and Louise'
## In Debate on Health Care Reform

With Attack Ads and Slogans, TV Blitz Addresses Issue Campaign-Style

Harry and Louise are at it again.

"This plan forces us to buy our
insurance through these new man-
datory government health ali-
ances," says Louise, holding a copy
of President Clinton's health care
proposal.

"Run by tens of thousands of new bureaucrats," husband Harry grumbles.

"Another billion-dollar bureaucrat-
cy," Louise agrees.

This television ad, part of a $10
million media campaign by the Health
Insurance Association of America, is
one of a spate of 30-second spots that
has filled the airwaves in recent
weeks. Industry lobbies, labor coali-
tions and nonprofit groups have all
joined the fray, using campaign-style
attacks and slogans to drive home
their points.

Interestingly, the groups that
favor the Clinton proposal, or some-
thing like it, make no effort to de-
fend the complicated plan in their
ads. They say nothing about man-
aged competition or health ali-
ances. Instead, they highlight cur-
rent health care problems or ridi-
cule opponents of reform.

Those working against the Clin-
ton plan are airing attack ads that
warn of a nightmarish bureaucracy.
But they offer no alternatives and
make no mention of their financial
stake in maintaining the status quo.

For many people, these ads are
the most visible part of an arcane
and often mystifying health care
debate. Most of the spots have been
airing here and in selected congres-
sional districts. Some of the half-
dozen Harry and Louise ads, for
example, have been carried nation-
ally only on CNN. Nevertheless, the
White House has gone to consider-
able lengths to denounce the com-
mercials.

"What the insurance industry is
trying to do is pretend they're for
health care reform and scare peo-
ple," said Mandy Grunwald, a Clin-

Committee. "We will never, ever be
able to equal what they spend on
advertising."

Willis D. Gradison Jr., a former
Republican congressman from Ohio
who heads the health insurance
group, said the administration in-
advertently has helped his cause.

"What gave our ads a visibility way
beyond what we paid for them was
the criticism from the White House,"
he said. "The networks had no choice
but to show our ads free on the net-
work news. Never in our fondest
dreams did we think we'd get as
much attention as we received."

Some media analysts discount the
importance of the televised blitz,
noting that the issue will be re-
solved by 535 lawmakers. "The tar-
get audience here is not just the
public but members of Congress
and other opinion leaders, and they
would tend to discount the ads as
being partisan," said Darrell West, a
Brown University political scientist.

Still, advertising in local markets
can raise an organization's profile.
The Health Care Reform Project, a
coalition of labor, consumer and
senior citizen organizations, has
drawn little national publicity. But
its ads have generated articles in
the Philadelphia Daily News, Ar-
kansas Democrat-Gazette, Tampa
Tribune, Memphis Commercial Ap-
peal and other papers.

The current crop of health ads
falls into two basic categories:
Things Are Terrible Now, and
Things Could Get a Whole Lot
Worse. But the techniques vary:

■ Some ads simply mock the pres-
ident's opponents while skirting the
difficult questions of price, consumer
choice and cost containment
raised by the White House plan.

The Health Care Reform Project,
whose members include the AFL-
CIO, the American Association of
Retired Persons, Consumers Union
and the Children's Defense Fund,
has endorsed the key principles of
the Clinton plan. One ad uses grainy
black and white footage of past
presidents to dismiss incremental
reforms.

When Franklin D. Roosevelt calls

"Why cover everyone?" When Ron-
ald Reagan demands that the Berlin
Wall be torn down, a "Senator
Doubtful" says: "Lower the wall,
use less barbed wire. Why take the
whole wall down?"

After a clip of Clinton calling for
"health care that is always there,"
the screen says: "Support Health
Security for Every American/Noth-
ing Less."

A Democratic National Committee
ad takes a similar tack by showing
videotape of four prominent Repub-
licans insisting there is no health care
crisis. This is interspersed with such
statistics as "58 million Americans
have no health coverage for some
time each year." Reprisring a 1992
campaign theme, the narrator says:
"The Republicans. They said there
was no recession. Now they say there
is no health care crisis. They just
don't get it."

■ A second group of ads takes the
rhetorical high road, suggesting
sympathy with the Clinton approach
without endorsing any particular
plan.

The League of Women Voters
and the Henry J. Kaiser Foundation
use this just-the-facts approach to
spotlight cracks in the system. A
soft-spoken female narrator says:
"A lot of people think that most un-
insured Americans are poor and
unemployed. Not true. In fact, 84
percent of Americans who lack
health insurance are in families that
work hard and pay taxes but don't
get health insurance on the job."

Healthright, an alliance that in-
cludes the American Federation of
Teachers, the National Association
for Home Care and the National
Council of Senior Citizens, also fo-
cuses on problems, not solutions,
using taped interviews with people
around the country.

One, Frances Hightower of Tal-
lahassee, talks about the burden of
caring for her relatives: "During the
last three years, we've used up all
the savings and all the money we
had available. . . . We mortgaged
my family's house and my house
and my brother's house. And the
frightening part is, when that mon-

pens?" The tag line: "Health care
should be a right, not a privilege."

■ Three groups are mounting fron-
tal attacks on the Clinton plan, led
by the Health Insurance Association
of America with its Harry and Lou-
ise spots. In the ad quoted earlier,
Harry says: "We just don't need
government monopolies to get
health care to everyone." "Congress
can fix that," Louise says. "And they
will, if we send them that message,"
Harry says. An 800 number flash-
on the screen.

White House spokesman Jeff Ell-
er called the group's ads "mac-
rate and misleading." But unertain-
ty about the impact of the 1,364-
page Clinton proposal makes it dif-
ficult to conclude that any of the ads
is wrong.

When Harry warns of tens of
thousands of new bureaucrats," for
example, the screen cites a New
York Times article. That article
quotes Laura D'Andrea Tyson, chair-
man of the Council of Economic Ad-
visers, as estimating that each ali-
ance would cover 1 million people
and have about 200 employees. Mul-
tipled to reflect the size of the pop-
ulation, that would mean a staff of
40,000.

Eller did not contest the point,

what final form the alliance struc-
ture will take."

The Project for the Republican
Future, headed by former Bush ad-
ministration official William Kristol,
uses negative articles to assail the
Clinton plan: "There will be rationing.
Waiting lines will develop. (Wall
Street Journal, Oct. 18, 1993.) You
will have to settle for one of the low-
budget health plans selected by the
government. (The New Republic,
Feb. 7, 1994.)" The narrator ends by
saying: "Everything good about your
health care is at risk."

While the White House strongly
denies these charges, the quotes con-
vey the authority of supposedly ob-
jective news accounts. Left unsaid is
that they are drawn from a journal
editorial and from a magazine piece
by one of the plan's leading critics,
Elizabeth McCaughey.

The American Medical Associ-
ation has not taken to the airwaves,
but one of its print ads asks: "Would
you rather trust your life to an MD
or an MBA?" Current proposals
"don't guarantee that your phys-
cian will continue to set the quality
standard, for medical care. That
means government and insurance
company administrators could end
up determining which types of ad-

mention that insurance companies
already have substantial power to
deny medical payments.

■ One group, the Pharmaceutical
Manufacturers Association, concen-
trates on image-building. Opposi-
tion to the Clinton plan, which
would allow the government to de-
mand rebates on certain drugs, is
implied but never stated.

In one ad, a woman says: "My
family has a history of breast can-
cer, so this is very, very important
to me." Another woman says: "My
brother is HIV-positive. We don't
have 10 or 15 years to wait for a
cure." The narrator picks up the
theme: "Right now pharmaceutical
companies have 55,000 people
searching for cures and 174 med-
icines in development to fight
breast cancer, AIDS and Alzhe-
mer's disease."

At the very least, such negative
ads have fueled public doubts about
health care reform at a time when
Clinton's plan has run into heavy
political weather.

Ben Goddard, media consultant
for the Health Insurance Associa-
tion of America, said the ads have
given his client "a seat at the table.
Harry and Louise have become
such common terms in the debate.
Anyone in a Washington waterpo-

The Republicans
They just don't get it.

In a year,
Americans are without health
insurance for some period
of time.

SOURCE:
Journal of the American Medical Association
January, 1994

Democratic National Committee

League of Women Voters, Henry J. Kaiser Foundation

Trentonian
Feb 1, 1994

Second opinion
on health reform

By DAVID B. COOPER

Knight-Ridder Newspapers

Doubts about the Clinton health-care plan began to enter my confused mind soon after Hillary Rodham Clinton convened her health-care reform task force.

My initial doubts have now mushroomed.

Before I explain why, let me confess that I am no expert in the complex health-care arena, but I do have my own set of biases, or expectations.

Like a lot of us, I suspect, I want to pick my own doctor; I don't want someone else doing that for me. I want good health care delivered by well-trained people in well-managed hospitals or other facilities. I'm concerned about rising costs, but more concerned about good care for my loved ones and me.

And, taking into account the fact that 38 million-plus Americans have no health insurance at any one time, I firmly believe we have in the United States if not the highest quality of health care in the world, darn near it.

Enter the Clinton health-care initiative, a noble and important undertaking for the new president.

My doubts kicked in early last year when Mrs. Clinton gathered 511 people — all “experts,” we were told — into rooms and offices in Washington as her health-care task force.

The White House did not want to tell us who these people planning health-care reform were. They operated in secrecy until late March. when the persistent Wall Street Journal forced the release of their names. It turned out almost all were government bureaucrats or committee staff members in Congress.

That bothered me. I wondered why some doctors weren't on the task force. My doctor, for example. After all, I think he knows more about health care than most people, and he's level-headed, caring and reasonable. TheFACTS, in effect, told me I was naive, that this was too important a subject to be placed in the hands of those who actually work in the field. I began to worry that the task force was composed of fuzzy-headed policy wonks.

I was underwhelmed when Mrs. Clinton began boosting her plan by attacking people and industries involved in health care. The drug companies are indeed in business to make a profit, but they do not strike me as evil profiteers compared, say, to lawyers and consulting-company owners flocking around theFACTS.

It also turned out that one of the FACTS' closest and deepest thinkers, a man named Ira Magaziner, was heading the whole health-care team. I had not heard of Ira Magaziner before, and I did not know much about him until I read a long article on him by Jacob Weisberg in the Jan. 24 edition of the New Republic.

According to Weisberg, Magaziner was a very bright, somewhat radical student at Brown University in the 1960s who met Bill Clinton when they were later both Rhodes Scholars at Oxford in England.

Also according to Weisberg, and documented by him in great detail, Magaziner has never succeeded as a planner, thinker and activist with any of his grand designs for colleges, industry or local government. He's been paid well along the way, but nothing much he's touched has ever worked.

Weisberg's article about the FACTS' health-care guru concluded
with this:

"Magaziner's blueprints have become less and less government-based over the years, in keeping with political fashion. But he does remain in his heart a social planner with an unbounded faith in the grandiose systems he designs, whatever mixture of private sector and public sector they draw upon. His recipe may work this time. Unfortunately, there's little in his record to support that hope."

Weisberg's article about Magaziner, supported in other publications, added to my growing unease.

In the Feb. 7 edition, the New Republic published a six-page ex-
amination of the Clinton health-care plan by Elizabeth McGaughey,
identified as a John M. Olin Fellow at the
**Manhattan Institute.**

On reading her article, my doubts reached crescendo level. Her
'analysis of theFACTS' 1,364-page Health Security Act has rein-
forced my worst fears about it.

She says the president's bill would place price controls on what Americans could pay for health insurance. That in turn, she says, will lead to medical rationing and mean you may not be able to choose your own doctor.

She says the Clinton plan will lead to delays in getting care, will limit high-tech care, and will lead to a proposed National Quality Management Council, not your doctor, deciding when care is "medically necessary" and "appropriate." She says that people over 65 will be denied access to new cures, and that the overall costs of the Clinton plan will be very high.

In the article, Elizabeth McGaughey is neither shrill nor strident.
She is ploiddingly dogmatic, but persuasive, at least with me.

My own concerns about this complex proposal were that it was too
complicated for people to grasp, that it would create a huge,
overstuffed and costly new federal bureaucracy, that it would drive
some small employers out of business, and that it would make health
care more difficult for Americans to get.

Her analysis has now added volumes to those concerns. Coupled
with the fuzzy numbers the Clinton White House has produced, there
is loads of room for doubt about this plan.

The subject is still important and well worth tackling. Health-care
costs are going up too fast. Too many people don't have insurance. Too
many lose protection just because they change jobs.

Even so, it increasingly seems to me that Congress should be wary
of what's in the president's health-care reform act and consider every
alternative before passing anything.

THE MANHATTAN INSTITUTE

REVIEW OF PROGRAMS

The Manhattan Institute is a nonpartisan, independent research and education organization supported by tax-deductible gifts from individuals, foundations and corporations. It is governed by a Board of Trustees who act on behalf of those donors. The Institute's goal is to encourage public policies at the federal, state and local levels which will allow individuals the most scope for achieving their potential, both as participants in a productive economy and as members of a functioning society. Since its founding in 1978, the Institute has established its reputation by the successful formation of programs in areas of vital importance to the nation's future, which are described below.

## Judicial Studies Program

**Objective:** To provide an authoritative and articulate analysis of critical trends within the civil justice field, especially in liability and tort law, while providing fresh intellectual roots for alternative frameworks.

**History:**
1986 to 1992: published four books, two academic volumes and numerous papers and reports; hosted many major conferences and numerous seminars for judges, journalists and policy makers; produced a 30 minute video program on litigation hosted by Walter Cronkite; generated hundreds of news stories in both print and broadcast media on the subject of liability reform.

1993: Publication of *Phantom Risk: Scientific Inference and the Law* (Peter Huber, et. al., editors - MIT Press); co-sponsored (with NFIB) Washington, DC conference on "Small Business Owners and the American Legal System;" released White Papers on contingency fees and auto insurance; published first issue of "Civil Justice Report", a quarterly newsletter; published articles of the trial bar's influence on television news programs in *The Wall Street Journal*, *The Washington Post*, *National Review* and other outlets (*Reader's Digest* forthcoming); articles published in *Scientific American*, *Science*, numerous law reviews plus Peter Huber's regular *Forbes* column; Institute book cited in Supreme Court decision.

**Staff:**
Senior Fellows: Michael Horowitz (Director)[former Chief Counsel, Office of Management and Budget]; Peter Huber; Elizabeth McCaughey, Walter Olson.
Editorial Assistant: Michael Anton.

**Budget:**
1993: $525,000
1994: $750,000

## Center for Educational Innovation

**Objective:** To create effective learning environments within America's inner cities and help put systems in place to insure their maintenance. A "hands-on" approach which goes beyond advocacy, the CEI acts in the role of catalyst - or agent of change - within bureaucratic structures that are too often resistant to reform.

**History:**
1989 to 1992: designed and helped implement a successful choice program on the Upper West Side of Manhattan (District 3); designed and helped implement alternative school programs in Philadelphia, Baltimore, several districts in New Jersey and throughout New York City; hosted several city-wide conferences and dozens of workshops for educators; produced a series of reports, articles and news features on educational reform.

1993: Publication of *Miracle in East Harlem: The Fight for Choice in Public Education* (Times Books), by Seymour Fliegel; helped launch school choice in East Orange, New Jersey, two charter high

schools in East Brooklyn, the Wildcat Academy for disruptive students, and the New American School Design Corporation school in the South Bronx; successfully urged the New York City Board of Education to adopt city-wide school choice policy; co-sponsored a conference with the Manhattan Borough President on a plan to decentralize governance of the nation's largest school system; held conferences in Indianapolis and Seattle; established the Fund for Innovative Schools and the General Electric/Wriston Award for Educational Innovation; established the Gilder Initiative with the goal of creating schools of choice throughout New York City to make real the system's choice policy.

**Staff:**
Senior Fellows: Seymour Fliegel (former Superintendent NYC School District 28); Carlos Medina (former Superintendent, NYC District 4); Cole Genn (former Superintendent, NYC District 27); Reginald Landau (former Superintendent, NYC District 29); Administrative Assistant: Cynthia Conklin.

**Budget:**
1993: $770,000
Innovative Schools Fund: $235,000
1994: $1,300,000
$ 750,000

## Center for the New American Community

**Objective:** To foster a renewed commitment to a common American civic culture and shared identity among the many diverse people who built this nation and live in it today.

**History:** Established in 1992. Published *Out of the Barrio: Towards a New Politics of Hispanic Assimilation* by Linda Chavez (Basic Books).

**1993:** Launched newsletter "The American Experiment" and "Diversity Update by Linda Chavez"; hosted New York City conference on Asian Americans; regional workshops included "Alternatives to Afrocentrism" in St. Louis, MO and "Multiculturalism in K-12 Education" in Prince George's County, MD; numerous appearances by Chavez on national television and public radio as well as dozens of speeches on campuses; opinion columns by Chavez and Miller in *The Wall Street Journal*, *The Washington Post*, *The New Republic*, etc.

**Staff:** Linda Chavez, Senior Fellow and Director (former head of U. S. Civil Rights Commission); John Miller, Associate Director.

**Budget:** 1993: $275,000
1994: $400,000

## Fellowship Program

**Objective:** To produce books that challenge prevailing wisdom, enrich the tenor of public debate, and advance scholarship in their respective fields.

**History:**
1979 to 1992: over thirty books commissioned and funded, including *The New Protectionism* (Melvyn Krauss); *Markets & Minorities* (Thomas Sowell); *Regulation By Prosecution* (Roberta Karmel); *Privatizing the Public Sector* (E. S. Savas); *The Economy In Mind* (Warren Brooks); *The State Against Blacks* (Walter Williams); *Losing Ground* and *In Pursuit* (Charles Murray); *Liability and Galileo's Revenge* (Peter Huber); *New York Unbound* (Peter Salins); *The Growth Experiment* (Lawrence Lindsey); *The Litigation Explosion* (Walter Olson).

**1993:** Books published: *Scarcity By Design* (Gerald Mildner & Peter Salins, Harvard University Press); *Second Thoughts* (Donald McCloskey, Oxford University Press); *The Dream and the Nightmare* (Myron Magnet, William Morrow); *Miracle in East Harlem* (Seymour Fliegel, Times Books). Works in progress: *Overcoming the Narcissism of Minor Differences* (Elizabeth McCaughey); *Catching the Next Wave* (James Pinkerton); *Job Wars* (Walter Olson);

*Assimilation: Ethnic Diversity and the American Idea* (Peter Salins); *A House Divided: Race and the Politics of Multiculturalism* (Linda Chavez); *Whatever Happened to Integration?* (Tamar Jacoby); *America in Black and White* (Abigail Thernstrom); biography of Saul Bellow (James Atlas) [Bradley Foundation pass-along grant].

**Staff:** Lawrence Mone, Vice President for Research

**Budget:** 1993: $665,000
1994: $475,000

## City Journal

**Objective:** To provide the vision and intellectual framework needed to meet the challenge of restoring the quality of life in America's cities.

**History:** 1990 to present: Established a circulation base of 15,000, comprising a broad range of opinion leaders and office holders both in New York and elsewhere (e.g., Mayors Stephen Goldsmith of Indianapolis, Ed Rendell of Philadelphia, Richard Riordan of Los Angeles). Articles have been extracted in all of the New York dailies as well as several out-of-town papers, including *The Washington Post*. *City Journal* has been credited in the press and by knowledgeable observers as playing a key role in broadening the range of public debate within the city.

**1993:** Articles from the four issues published this year which generated the most attention include: Heather Mac Donald's on deinstitutionalization and the city's homeless; William Eimicke and Anne Reisinger's on privatizing municipal hospitals; Ed Rubenstein's on understanding city government; William McGowan on race and reporting; Louis Winnick's on reinventing government; Julia Vitullo-Martin's on the quality of urban life; Paul Glastris' on Chicago's Mayor Daley; and Kay Hymowitz's on school restructuring in the Bronx.

**Staff:** Editorial Staff: Peter Salins, Lawrence Mone, Mary Schwarz, James Taranto.
Publishing Staff: Margaret Laws, Liz Hilliard, Lynne Henderson.

**Budget:** 1993: $790,000
1994: $950,000

## Communications Program

**Objective:** To help bring about an informed citizenry by the dissemination of ideas, research findings and successful policies through a national network of opinion makers.

**History:** 1980 to present: over 500 Manhattan Forums have been held, with over a thousand journalists and national opinion leaders in attendance; a regular stream of reports and reviews supplied to some 3,000 journalists nationwide.

**1993:** Forum speakers included authors James Q. Wilson, Myron Magnet, Richard Cornuelle, Melvyn Krauss, Rudiger Dornbusch, Thomas Patterson, Richard Vedder, Peter Salins, William Tucker; Board of Education members Carol Gresser, Nina Segarra, Michael Petrides; School Board Chancellors Joseph Fernandez and Ramon Cortines; Mayors Bret Schandler, Stephen Goldsmith, Ed Rendell; political candidates Rudolph Giuliani, Herman Badillo, Andrew Stein. Speakers at foreign conferences in Mexico City, Santiago and London included Lawrence Lindsey, Allan Meltzer and Bret Schandler.

**Staff:** Heidi Arnold, Communications Director; Mabel Weil, Events Director.

**Budget:** 1993: $275,000
1994: $250,000

THE NEW YORK TIMES **METRO** FRIDAY, DECEMBER 31, 1993

B1

# Conservative Thinkers Are Insiders
## It's Now Their City Hall, and Manhattan Institute Is Uneasy

By TOM REDBURN

With Rudolph W. Giuliani about to become Mayor, the conservative Manhattan Institute should be riding high. The iconoclastic research group has seen some of its favorite ideas — selling city hospitals to private groups, cutting local business taxes, curbing the excesses of multicultural education — adopted as pillars of Mr. Giuliani's campaign.

The group's stalwarts are on first-name terms with the new City Hall team. One trustee, Peter M. Flanigan, managing director at Dillon, Read & Company, had lunch this week with Donna Hanover Giuliani, the Mayor-elect's wife. Nina Segarra, the new Deputy Mayor for health, social services and education, has praised its work on giving parents more choice of the public schools their children attend. And Richard J. Schwartz, senior adviser to Mr. Giuliani, calls the institute an "integral part of the movement for a new urban agenda for the 1990's."

Yet for all its ties, the Manhattan Institute for Policy Research, as it is formally known, is finding it hard to switch from outside critic to inside participant. No one thinks it is harder than William Hammett, the institute's president since 1980.

"For most New Yorkers, politics is about little more than jobs; what we care about are ideas," Mr. Hammett said in the earnest manner that friends consider his most endearing trait.

Surrounded by books and papers by authors he has sponsored, Mr. Hammett was in his office at the institute's headquarters at 52 Vanderbilt Avenue, near Grand Central Station.

"The commitment of New Yorkers to ideas does not, to say the least, run very deep," he said. "What New York is about is amassing money, acquiring influence and power. Whose law firm is up and whose is down. Which developer is in, which is out. That's how this city runs. But when the new people come in, without fresh ideas they'll be dead."

### Idea Merchants vs. Power Politics

The clash between idea merchants and power politics is already evident.

Stephen Kagann, an outspoken advocate of lower taxes and a prominent contributor to City Journal, the institute's quarterly magazine, was the Giuliani campaign's research director. Pushed out after the election, Mr. Kagann gave an angry parting blast in a Newsday interview last week. The Mayor-elect's top advisers, he charged, were "all political operatives and former prosecutors" with "no managerial talent."

"I'm not meant to be an insider," Mr. Kagann says. "You'd

*Continued on Page B2*

[11]

Conservative Institute Uneasy as City Hall Insider

Continued From Page B1

have to say I've burned my bridges in a most spectacular blaze. I guess I'm just more comfortable playing the role of critic."

Others at the institute already express disappointment with several, Giuliani appointments. They complain that the new Mayor is much too sanguine about the pain required to tame the fiscal crisis. And like Mr. Kagann, they doubt Mr. Giuliani's team has the skill or fortitude to carry out a far-reaching overhaul of city government.

The nonprofit Manhattan Institute, with a budget of $5 million and a staff of about 30 people, would seem wildly out of place in liberal New York. Its attacks on what it calls the welfare state, which New York City embodies in so many ways, branded the institute as an outpost of the anti-urban Reaganism that swept Washington in the 1980's. The institute's founding in 1978 by William Casey, Mr. Reagan's C.I.A. director, didn't help.

Indeed, the institute emerged from obscurity by sponsoring two books that helped define the conservative counter-revolution: George Gilder's "Wealth and Poverty," a 1980 paean to tax cuts and freewheeling capitalism, and Charles Murray's "Losing Ground," a tough-minded 1984 attack on social welfare programs (both published by Basic Books).

In recent years, however, the Manhattan Institute has turned its attention closer to home. Its three-year-old City Journal, now edited by Peter Salins, has built a following in government, academia, the media and business with its detailed analyses of the failures of local government.

Ringmaster and Fund-Raiser

Mr. Hammett, once an investment banker, serves as the institute's ringmaster and fund-raiser. Among its luminaries are Dr. Salins, an urban affairs professor at Hunter College who advocates an end to rent control; Seymour Fliegel, once a deputy school superintendent in Manhattan's District Four and author of "Miracle in East Harlem: The Fight for Choice in Public Education" (Times Books, 1993), and Linda Chavez, who headed the United States Civil Rights Commission and now runs the institute's Center for the New American Community, based in Washington.

Driving the institute's thinking is the conviction that New York's government can no longer ignore the economic changes that have transformed the globe. "In this world economy, you can't hide anymore," Mr. Hammett said. "Even socialist governments are changing — but New York is still trying to be the last centrally planned political system."

That belief is common among conservatives. What distinguishes the

Manhattan Institute is its work to translate its ideology into concrete proposals that appeal to a wide spectrum of political beliefs.

"They've become a kind of Alcoholics Anonymous for many liberals," said Sol Stern, executive director of Gov. Mario M. Cuomo's Commission on Juvenile Justice Reform. "We can go there and confess that we, too, think something is fundamentally wrong with the way the city works."

Institute ideas once considered hypothetical, like cracking down on homeless drug addicts who gather in public places, are now urged even by such liberals as Pete Hamill, the writer.

Less Theory, More Garbage

"I respect them as responsible conservatives," said Andrew Hacker, a professor at Queens College who wrote a scathing indictment of racism in American society, "Two Nations: Black & White, Separate, Hostile, Unequal" (Scribner's, 1992). "I'd rate them well above the American Enterprise Institute, the Heritage Foundation and others of that ilk in Washington. They are not concerned so much with grand theory as with the best way of collecting garbage."

To be sure, the Manhattan Institute is not lacking in critics.

Peter Marcuse, a professor of urban planning at Columbia University, said he "welcomes their focus on urban issues, but most of their reme-dies are wrongheaded."

"The consensus among professionals in the field is that the prosperity of the city cannot be left simply to private initiative," Dr. Marcuse said.

They have also been accused of extraordinary narrowness. Last year the institute co-sponsored a forum on "Rethinking New York" at which all 12 speakers were white men. "Never even thought of it, to tell you the truth," Mr. Hammett said.

Not the Most Sensitive Soul

Ms. Chavez, an advocate of assimilation for Hispanic people and other minorities, strongly defends Mr. Hammett, though she says he may not be the most sensitive soul. "All institutions have their own networks, but it's not just white males," she said. "I'm not interested in being a token anything, and at the Manhattan Institute, I don't think I am."

The move from a libertarian emphasis on individual freedom to a focus on the nuts and bolts of local issues has cost the institute some early supporters, like the Adolph Coors Foundation. "We don't have far-right funding," Mr. Hammett said. "They hate New York and would be just as happy to see it go to hell."

Still, it has such conservative backers as the Sarah Scaife, Smith Richardson and John M. Olin Foundations. It is also aided by the more liberal J. M. Kaplan Fund and the Commonwealth Fund. Corporate sponsors include Chase Manhattan Bank, State

Farm Insurance and Citicorp.

In the late 1980's, nearly all the local seers expected New York to weather the nation's economic slump better than most places. Manhattan Institute experts were among the few who rightly predicted the worst.

"We were almost the only people who took the decline of the city seriously," said Fred Siegel, a Cooper Union professor who recently stepped down as editor of City Journal. "That gave added force to our argument that there was something profoundly dysfunctional about the political culture of New York."

Mitchell Moss, director of the Urban Research Center at New York University and an unpaid adviser to Mayor David N. Dinkins, praises the institute for taking on such neglected issues as fostering small business, overhauling urban transport and having city services done privately.

"The Manhattan Institute has superseded the traditional foundations based in New York — the 20th Century Fund, the Ford Foundation, Rockefeller, Carnegie — as a source of new ideas for the city," he said. "The others have gone off into another world."

But Dr. Moss also sees a hard road ahead: How does the institute, which "thrived as a critic of the liberal welfare state," stay vital "now that it has friends in high office?"

The Leverage of Ideas

Mr. Hammett replies that the institute will stick to what it does best. "The real leverage is on the side of ideas," he said. "The best way to insure that the 'outs' keep them in mind once they're 'in' is to keep the ideas flowing."

Ms. Chavez said the group's thinkers probably should avoid political office. "Success for us doesn't necessarily mean you take the people who generate the ideas and put them in public positions," she said.

Despite its focus on New York, the Manhattan Institute has had its greatest influence in other cities. Mayors in Philadelphia, Indianapolis, Jersey City and Phoenix have praised it and adopted some of its advice.

If the institute is no longer the intellectual bomb thrower it once was, it hopes at least to throw off enough new sparks to catch the practical politicians' attention. The obstacles remain immense.

"There is not going to be any quantum leap under Giuliani because everybody realizes how hard it is to get anything done in New York," said an institute senior fellow, Edward N. Co-stikyan, a seasoned Democrat and a senior partner at Paul, Weiss, Rifkind, Wharton & Garrison, who served on the Giuliani transition council. "It is very easy to write an article saying what should be done. But nobody has written the article on how you do it."

Sieve Berman for The New York Times

Karin Anderson for The New York Times

William Hammett has been president of the conservative Manhattan Institute since 1980. Linda Chavez heads the institute's Center for the New American Community, located in Washington.

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ANNALS OF IDEAS

INTELLECTUAL STOCK PICKING

*Once a bastion of Reaganism, the Manhattan Institute and its "City Journal" are suddenly finding respectability in incorrigibly liberal New York.*

BY JAMES TRAUB

IN mid-March of 1992, a think tank called the Manhattan Institute for Policy Research conducted a morning-long symposium entitled “Re-thinking New York: Policies for Renewal.” Some two hundred and fifty New Yorkers from business, media, and government turned up at the Roosevelt Hotel in the midst of a snowstorm to hear about the institute’s vision of the government of a great city. The speakers—there were twelve, most of them academics who wrote for the institute’s quarterly, *City Journal*—described an urban crisis brought on, in large part, by the liberal order: by compassionate policies for the homeless (which wound up increasing homelessness), by market restrictions (which drove up the cost of housing), by a concern for due process which had run wild. Fred Siegel, a professor of history at Cooper Union, traced the increasing meanness of daily life and the decline of the city’s public spaces to liberalism’s attack not only on illegitimate but also on legitimate authority. “We’ve handed over our public spaces to the most predatory among us,” he said, and he warned that “what was once unthinkable is now very much thinkable, even for New York loyalists, and that is the desire to leave.” Like several of the other speakers, he returned again and again to the theme of restoring a vanished sense of civility and civic order.

The Manhattan Institute had invited Governor Mario Cuomo, Mayor David Dinkins, and former Mayor Ed Koch. None of them came; perhaps the snow had put them off. But one public figure sat quietly up front, scribbling on a yellow legal pad from eight-thirty until noon: Rudolph Giuliani. Giuliani had run for mayor in 1989, and though he had come within a hair of beating Dinkins, he had since been almost entirely ignored by the city's governing and policy élite. He had run on his record as

a heroic prosecutor, and had only occasionally, and not very convincingly, addressed the issues that most New Yorkers cared about. For the 1993 elections, Giuliani needed to have a serious critique of Dinkins' handling of those issues if he was to capture the moderate and liberal voters who were coming to feel disillusioned with the Mayor (and perhaps, as Siegel implied, with New York itself). Since January, the candidate had been busy acquiring such a critique, in his laborious, lawyerly fashion: his chief policy aide, Richard Schwartz, had been hauling him around to the city's sages and special pleaders like a novice being given a crash course in enlightenment. It was Schwartz who brought Giuliani to the March symposium; they had already had two long lunches with *City Journal's* editorial board.

Schwartz, who is concerned lest the new mayor be seen as the captive of any group, and especially a conservative one, will not discuss Giuliani's relationship with the Manhattan Institute except to say that it is "one of many groups and elected officials across the country that are describing a new type of urban agenda." But others are less reticent about connecting the dots. "Privatization, the homeless proposal, social-services reform, his budget-cutting proposal—all that came from the Manhattan Institute circle," says Lawrence Kudlow, an economist who served in the Reagan Administration and acted as a periodic consultant to the Giuliani campaign. Giuliani's focus on "quality of life," which proved more appealing in this election than his standard-issue anticrime nostrums had in 1989, also bore the fingerprints of the institute. Fred Siegel, who served as an adviser to the campaign, not only wrote much of Giuliani's standard speech on the subject but began it with a lengthy quotation from himself on "the 'street tax' paid to drunk and drug-ridden panhan-

37

dlers" and "the 'squeegee' men shaking
down the motorist waiting for a light"—
some of the most potent images of Giu-
liani's candidacy.

The Manhattan Institute, a fifteen-
year-old public-policy-research body
that was associated until quite recently
with the Reagan right, has suddenly at-
tained a level of respectability—of un-
dismissability—amazing in a city usually
thought of as incorrigibly liberal. Its
star has risen with Giuliani, but will
not necessarily fall if, as seems perfectly
possible, he ignores the institute's pro-
posals for systematic change now that
he's in office. The real source of the
think tank's influence is the extent to
which it has shaped the new
type of urban agenda that Rich-
ard Schwartz referred to. It
has filled a void on the right
by offering conservatives a posi-
tive and pragmatic way of
talking about poverty and the
cities. And it has also filled a
void on the left. "The reigning
ideas in the city were just
ripe for exploding," says Jim
Sleeper, a columnist for the
News, who is both a liberal
and a leading critic of New
York's liberal order. "The Man-
hattan Institute has changed
the terms of the intellectual
debate, because there is no one
on the left-liberal side that has
put out anything remotely as
fine-grained as they have."

THE institute began its life
as a missionary outpost
of a fighting faith. It was
launched by Antony Fisher, a
British poultry magnate who
had become a disciple of the Austrian
free-market theorist Friedrich von Hayek.
Hayek had told Fisher that the best
thing he could do with his wealth was
to enlist in the battle of ideas on be-
half of capitalism. In 1955, in Lon-
don, Fisher established the Institute of
Economic Affairs, an aggressively con-
servative think tank, whose great claim
to fame is the education of Margaret
Thatcher. In the early seventies, he came
to North America to direct a similar
think tank in Vancouver. Shortly there-
after, Fisher hooked up with William
Casey, who was soon to be the head of
Reagan's C.I.A. but was then a wealthy

lawyer, businessman, and demobilized
Ford Administration official. In 1978,
they founded the International Center
for Economic Policy Studies, in New
York. Its funding came from a small
band of right-wing foundations, from
corporations, and from conserva-
tive business figures who sat on the
board.

The Center was born just as the sap
was rising in right-wing Anglo-Ameri-
can circles. In 1979, Thatcher became
Britain's Prime Minister; the following
year, Ronald Reagan was elected Presi-
dent. Both saw themselves as conserva-
tive agents of change, fighting against
the entrenched but exhausted ideology

of liberalism. They needed a counter-
ideology, and Reagan, during his first
term, seized on a fervid tract called
"Wealth and Poverty." Its author,
George Gilder, was the program direc-
tor of the Center. Gilder inveighed bit-
terly against liberal academics, liberal
values, and the liberal custodians of old
money. Gilder actually stood up for the
"robber barons"; it was his book, more
than anything else, that fostered the cult
of the entrepreneur that became a cen-
tral tenet of the Reagan era.

The smashing triumph of "Wealth
and Poverty" might have insured the
Center a permanent status as a holy

place of free-market theory, cherished
by initiates and ignored by heathens,
if Gilder had not reduced his role there
in order to tend to his newfound ce-
lebrity. In 1980, he asked William
Hammett, the head of an even more
obscure and minuscule Manhattan-
based outfit called the Center for Lib-
ertarian Studies, to join the Center as its
president.

Hammett crosses all sorts of lines. He's an Anglophile of forty-nine, and cultivates a Tory-establishment style: he wears a dark suit and wing tips to work, and only a ruffle in his graying hair keeps him from looking altogether bankerly; he's gracious and charming and has a slightly patrician air of detached amusement. But he is not in fact an establishment figure, and his politics are a matter of conviction rather than of breeding. In the late sixties, Hammett led the Southern Illinois University chapter of Young Americans for Freedom, and he went on to study at the University of Chicago's Committee on Social Thought, one of the few congenial spots at the time for a free-market theorist. Now he considers himself, he says, "a classical liberal," a child of Adam Smith.

Hammett has a very differ-
ent temperament from the men
who founded the Center. He
isn't a man of power or an en-
trepreneur, and neither is he a
professional intellectual; he is an
enthusiastic amateur. He lacks
altogether the fervor, the theo-
logical cast, of a George Gilder
or of any of the innumerable
liberal or left-wing apostates known as
neoconservatives. He is a lifelong con-
servative with no demons to exorcise
and no points to prove. But he is not
only unusually secular for a true believer
in anything; he is also, by background
and by temperament, a salesman. Dur-
ing college, Hammett sold encyclope-
dias and pots and pans, and after college
and a stint in the Army he spent about
four years selling securities at Lehman
Brothers and other brokerages. After
that, he spent a year selling condos at a
resort in Maine. "I don't have any pre-
tensions that I'm an original thinker or
an intellectual," Hammett says. "Mar-

Manhattan Institute president William Hammett: He's not an intellectual, but he knows how to sell ideas.

SCOT HUNTER

38

THE NEW YORKER, FEBRUARY 7, 1994

keting is fun, and here we're marketing ideas."

When Gilder approached Hammett, the Center was foundering and was close to shutting down. Hammett immediately set about raising its profile. He changed its unrememberable name to the snappier Manhattan Institute for Policy Research. And he refused to link the institute with other think tanks Fisher helped create in the United States. Today, they remain obscure bas-tions of conservative ideology.

But Hammett's special gift was his nose for the Zeitgeist. The institute's current chairman, Richard Gilder (no relation of George's), refers to Hammett as "the greatest intellectual stock picker of our time." And his first great act of selection was his decision to fund the research of Charles Murray, a formerly liberal social scientist who had recently written a short study for the Heritage Foundation which attacked the welfare system. Murray argued that the principal cause of the persistence of the black underclass was not racism or Republican policy or structural changes in the economy but welfare itself. Welfare was more appealing than work; and recipients, once on it, became dependent. At the time Hammett met Murray, in 1982, he was unemployed and was virtually unknown. Hammett was so taken with Murray's frontal attack on sacred liberal principles that he immediately signed him up to write a book on the subject. The usual right-

wing foundations declined to subsidize Murray's work, so Hammett agreed to victual the scholar for a year or so, even though the institute's treasury was almost empty.

When Murray's book on welfare, "Losing Ground," appeared, in 1984, Hammett secured a grant from the Liberty Fund to hold a two-day conference in New York on "the Murray thesis," and he invited not only fellow-travellers and academics but also liberal journalists and card-carrying members of the intelligentsia. He mailed out a thousand copies of the book, and sent early favorable reviews to other potential reviewers, counting on the herd instinct. And he spent every available penny in the institute's budget to send Murray barnstorming around the country. Even Hammett's critics on the left acknowledge his remarkable gifts in the field of intellectual marketing. Mitchell Moss, who is a professor of urban planning at New York University and served as an adviser to David Dinkins during the 1993 mayoral campaign, says, "Bill Hammett has mastered the ability to take an idea, turn it into an op-ed piece, then into a conference, then into a book. He understands that people aren't waiting for ideas; you have to promote them."

"Losing Ground," which has sold an amazing eighty thousand copies so far, put both Charles Murray and the Manhattan Institute on the map. "Wealth and Poverty" had given conservatives a

rallying cry; Murray's book was a conversion document, and it arrived, as Hammett intuitively understood, at a propitious moment. Many nonconservatives were already becoming more sympathetic toward Daniel Patrick Moynihan's theory that family breakdown was largely responsible for the problems of the black underclass. But while Moynihan had stated that welfare contributed to these problems and that it needed to be reformed, Murray insisted that the War on Poverty was their chief cause and that welfare needed to be abolished altogether. His single-mindedness lost him many liberal readers, and critics charged that the book contained significant factual errors, but there's no question that "Losing Ground" achieved the Hayekian goal of shifting the debate from liberal to conservative terrain. Experiments in "workfare" and President Clinton's call for a "two years and out" welfare system at least indirectly reflect Murray's influence.

BY the mid-eighties, however, the Zeitgeist was moving on, and the Manhattan Institute was moving with it. The right was less preoccupied with terminating vestiges of liberalism, and liberals were increasingly open to the virtues of deregulation and free markets. Hammett began steering the institute into less ideological waters, though without sacrificing its core principles. He nominated Nathan Glazer, the co-author, with Moynihan, of "Beyond the Melting Pot" and a former big-city liberal who had migrated to a more or less neoliberal position, to the board of trustees. Hammett also brought in school reformers to staff the institute's Center for Educational Innovation, a mini think tank devoted to school-reform issues, and founded the Judicial Studies Program to study the issue of tort reform.

On a more symbolic level, in 1991 the institute moved out of its old home, an elegant town house on East Seventy-first Street, which for some years had been serving as a conservative clubhouse, and moved to a featureless suite of rooms in an office building near Grand Central Terminal. Visitors are greeted by six stout copies of Adam Smith's "Wealth of Nations" sitting on a book-case. (Hammett's own office, though, is

"If Neil Simon's going to keep writing them, we're going to keep seeing them."

ANNALS OF IDEAS

a lone throwback to the clubhouse. With twin crimson wing chairs, two slightly battered old desks, and shelves crowded with political-economy texts, Hammett's digs have something of the scuffed charm of a senior common room.)

But the great turning point in the history of the Manhattan Institute was the establishment of *City Journal*. There was a widespread feeling in the institute's circle that, with the economic boom having run its course, New York City was heading for a crisis, and that most of the existing prescriptions for dealing with that crisis amounted to waiting for the state and federal governments to kick in their fair share. *City Journal* was born, in 1990, to explore other options.

From the outset, the distinguishing feature of *City Journal* was that many of its pieces criticized big-city liberalism while celebrating urbanism itself in a way completely at odds with the small-town boosterism of the conservative tradition. *City Journal*'s implicit politics were much less evocative of George Gilder or Charles Murray than of the "new Democrat" positions of groups like the Progressive Policy Institute. The writers' faith in the marketplace was tempered by their admiration for the activist city government of another era and also by their own vestigial liberalism. The publication played a critical role in making the Manhattan Institute a different kind of place, a site of convergence for conservative businessmen like Hammett; disillusioned, formerly left-wing intellectuals like Fred Siegel (who has covered politics for *Commonweal*, the liberal Catholic biweekly, since 1981, and until last year served on the editorial board of Irving Howe's magazine, *Dissent*); and New York's traditional governing class of liberal centrists. The institute gained a reputation as a place where ideas were taken seriously and differences of opinion were respected. "To their credit, the Manhattan Institute ran an ecumenical church," Siegel says. "There was no attempt to impose a Party line."

*City Journal*, in effect, created a new center, to which members of the old center swiftly migrated. Henry Stern, who was the president of Citizens Union, a venerable good-government group, until last year, and is now Mayor

Giuliani's parks commissioner, says, "They've made the moderate right a respectable political position to hold in New York City. They're not pro-life or anti-immigrant—that's not you. And you can take or reject things." Stern has been a regular at the institute's luncheons and forums for the last several years. Laurance Rockefeller, a moderate Republican with strong environmental concerns, recently joined the board. The institute's most important alliance, however—at least, symbolically—was with the late Robert F. Wagner, Jr. Wagner was the closest thing New York had to a civic conscience; he virtually defined what Arthur Schlesinger, Jr., has called "the vital center." Wagner was also a living link with an older brand of liberalism, typified by his father, New York's mayor in the fifties and early sixties, and his grandfather, the great New Deal senator: a restrained, pre-Great Society liberalism, with which many *City Journal* writers identify. According to Henry Stern, Wagner had come to feel that "the answer to every problem cannot be another government solution." Wagner's decision to endorse Rudolph Giuliani—a stunning blow to the Dinkins camp—may have been a public sign of his fear that the vital center was slipping away.

Wagner had been participating in institute events since the early eighties. In 1989, he was chairman of a panel at an institute conference on school choice. "We were really thrilled about it," says Hammett, who made sure that a picture of Wagner with one of his board members at that event found its way into the think tank's ten-year review. Henry Stern says that Wagner was "wary" of the institute, but he became an occasional visitor and participant. A week before the mayoral election, Wagner was chairman of another institute-sponsored quality-of-life symposium at the Roosevelt Hotel. And when he died, some two weeks after the election, he was in San Antonio working on a piece about public housing for *City Journal*.

The institute has broadened its sources of funding as well as its contacts. Its annual budget now approaches five million dollars, and it has received large grants not only from the usual roster of right-wing foundations but also from

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I OFTEN wondered about Hammett, who apparently had never wrestled with his conscience as the institute's disillusioned liberals had. Hammett is notorious for the abruptness with which he can turn off his charm, and is said to be not only mercurial but tyrannical; no editor of *City Journal* has lasted much more than a year, and at least one has apparently come close to a nervous breakdown. One afternoon, as Hammett was going on about the evils of welfare, I said that I found the laissez-faire approach to the poor rather harsh. He shot me a condescending look. "I'm never one to give money to panhandlers in the city," he said. "Give one of these characters out here in the street asking for money—give 'em food and see what happens. They'll throw it in the gutter." Hammett's gray suit jacket was open, and he was absent-mindedly tapping a cherry-wood penknife against his thigh. "They don't want food," he continued. "They want money for drugs and booze. And anybody who thinks otherwise is just so damn naïve."

Hammett went on to say that he couldn't fathom why black kids didn't behave like immigrants, working hard and getting ahead. I suggested that their collective experience to date might not have given them much faith in the likelihood of success. "Are you saying it's racism?" Hammett asked incredulously. Now he stopped tapping; he was leaning forward, his thin mouth set. "Is that what you're saying?" It was as if he had suddenly realized that I was lost to reason. I asked Hammett if he thought that racism was no longer an important factor. "Of course there's racism," he said. "But there's also plenty of discrimination among whites. I mean, there's clubs in this city that you and I can't join, there's

all sorts of discriminatory practices against us that are just there."

It seems incredible that an institution so closely associated with Republicanism and Anglo-American conservatism could capture such a significant part of the center in a city like New York. Hammett says he hasn't changed his principles, and his scorn for the city's down-and-out bears witness to his visceral politics, but he seems to have been influenced by the readiness of conservatives like Jack Kemp to confront the problems of cities and of the urban poor. At the same time, the rise of the institute has a great deal to do with the decline of traditional liberalism—a feeling that what was once a consensual faith, almost a civic religion, has degenerated into entrenched interests, on the one hand, and the petty absolutisms of “political correctness” on the other. Henry Stern asks, “Did we change? I don’t think so. What they were doing changed. P.C. pushes the envelope ever leftward.” Stern still clings to his liberalism like a union label. What is illiberal, he argues, is the “redistributionist” tilt of the city’s budget, the siting of facilities for the homeless in the midst of stable communities, the loss of a sense of personal responsibility—issues that have all been explored extensively in the pages of *City Journal*.

Such anguished parsing and realigning make it almost impossible to recall what liberal idealism actually accomplished, or the power politics to which it was opposed. At a 1991 *City Journal* roundtable, a group of disgruntled liberals agreed that the principal legacy of the sixties was “moral deregulation”—a phrase of Fred Siegel’s. Charles Morris, a former director of New York City’s welfare program, even claimed, as archconservatives have, that “the civil-rights revolution . . . led straight to the reigning amoralism.” Jim Sleeper became so annoyed with the echoing denunciations of welfare dependency and of the values of the poor that he tartly observed that the behavior of the rich in recent years had set “a standard of irresponsibility” that others could scarcely be blamed for imitating. “I felt a noticeable chill,” Sleeper says. And then the discussion swerved back to the sins of the liberal élite, as if Sleeper had committed a breach of etiquette that was

ANNALS OF IDEAS

[L]

41

best ignored. Perhaps that was why Bobby Wagner was wary. There was something excessive in this scorn for failed gods.

Nonetheless, *City Journal* itself has increasingly shed the polemical edge of the earlier era of the Manhattan Institute's history. The best pieces have the bracing quality of honest inquiry into settled opinion. A recent article explained why enterprise zones, the anti-poverty miracle cure of Jack Kemp Republicans and of many new Democrats as well, won't actually work: "The primary reason for ghetto unemployment is not the lack of nearby jobs but the absence of social networks that provide entry into the job market." Another piece explained why the former schools chancellor Joseph Fernandez's "school-based management" program, beloved of the policy élite, was a failure: it had been hijacked by the teachers' union, and had failed to include either principals or parents. An article entitled "Hard Lessons on Homelessness" described a tight correlation between a rise in the number of people entering the shelter system and policy decisions that made it easier to gain access to permanent housing through the shelter system. The classic liberal assumption that nobody would choose to become homeless in order to reap the benefits of doing so was simply wrong, the author, Thomas Main, wrote. He quoted Dinkins' former director of services for the homeless, Nancy Wackstein, as saying, "This was something pretty wild, something we hadn't contemplated."

*City Journal's* alternative proposals tend to be rooted in a market model rather than a bureaucratic one, and also in a sense of history and a deep knowledge of the system. Thus Randall Filer, an economics professor at Hunter College, argued that "the housing market needs to be changed so that its lowest rung is no longer out of reach for the homeless." Filer pointed out that the flophouse, the dormitory, and the "cage" hotel of another generation had been eliminated through an array of housing regulations designed to prevent exploitation of the poor. The result, however, was a "choice between a shelter or the street." Filer suggested that the city reform, among other things, its zoning regulations and housing-maintenance

and building codes, which together had made the construction of low-income housing virtually impossible. It was a proposal that held a risk of renewed exploitation, but it seemed scarcely worse than the current system.

*City Journal* articles have also called for the elimination of some of the oddities of New York's tax system, such as the unincorporated-business tax and the commercial-rent tax; the curtailment of rent-control laws; the privatization of the municipal-hospital system and of the vast stock of housing accumulated through tax foreclosure; a partial reinstitutionalization of the mentally ill; and a transformation of police culture to focus as much on quality-of-life issues as on crime prevention. And all these pieces cohere into a single claim, which Nathan Glazer formalized in a recent article entitled "Fate of a World City." In the nineteen-sixties, Glazer wrote, "New York stopped trying to do well the kinds of things a city can do"—repair bridges, pick up the garbage, protect its citizens—"and started trying to do the things a city cannot do," such as redistribute income and solve "the social and personal problems of people who, for whatever reason, are engaged in self-destructive behavior." Any number of *City Journal* articles have documented both the staggering cost of maintaining

New York's unique level of social services and the loss of business caused by high taxes and the failure to improve the quality of life.

But if New York shucks off a burden it never should have shouldered, who will take it up? Glazer admits that he doesn't have a very good answer to that question. A larger issue is whether cities can ever return to the golden age invoked by Glazer and others. Richard Wade, a professor of urban housing at the Graduate Center of the City University of New York and a pillar of the city's liberal establishment, flatly declares that "there's no way in which the cities will ever become self-sufficient again." The only answer, he says, is coöperation between cities and suburbs.

**W**HAT effect will all these theories have on the real world? Eventually, perhaps, a great deal: welfare reform was once just an idea batted around in policy circles. Much of the institute's agenda comes from experiments already under way in cities like Phoenix, Indianapolis, Jersey City, and Philadelphia—although none of them, critics point out, are comparable to New York. Perhaps that's New York's fault. "New York City is like the last dinosaur," says Sol Stern, a Manhattan Institute regular, who was the senior policy adviser to An-

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drew Stein when Stein was City Coun-
cil president. Stern blames liberals for
"clotting our institutions." But Man-
hattan Institute people don't feel very
confident that the new mayor will be
able to make much of a difference.
Many of them consider Giuliani a half-
hearted convert to the cause of reform;
their skepticism was vindicated when
he appointed loyalists and patronage
beneficiaries to the upper ranks of his
administration.

In any case, the Manhattan Insti-
tute's job, as Bill Hammett tirelessly
points out, is to put ideas into circula-
tion, not to intervene in the political sys-
tem. In one area, though—school re-
form—the institute has entered the
realm of action. If City Journal pushed
the institute toward the middle, the
Center for Educational Innovation has
given it enough of a liberal cast to call
into question the meaningfulness of
ideological labels. Hammett began the
Center by hiring not the sort of con-
servative academic who would simply
deplore the plight of the public schools
but Seymour Fliegel, an admin-
istrator who had worked with
the reformer Deborah Meier to
create small, effective alternative
schools in East Harlem. In fact,
everyone Hammett hired to staff
the Center for Educational Innovation
was a public-school educator. When
school officials began asking it for help
in replicating the success of Meier and
Fliegel, the Center became directly in-
volved in reform. It has helped develop
alternative schools in all the boroughs
except Staten Island and in parts of
New Jersey. The Center's work has pro-
duced a raft of heartwarming stories for
Hammett to pass on through his exten-
sive mailing list and has lent the insti-
tute a warm philanthropic glow that
thoroughly irritates some school reform-
ers. Deborah Meier says that she finds
some of the institute's positions so
offensive that she has to keep remind-
ing herself that they have nothing to do
with Sy Fliegel.

In the model proposed by Fliegel and
others at the Center, the Board of Edu-
cation would agree to decentralize power
to the local level; teachers, parents, prin-
cipals, and others would work together
to create new schools that meet the lo-
cal needs and interests of students; and
parents would then be permitted to

choose whichever school they wish for
their children. This "public-school
choice" system depends on decentraliza-
tion, a core institute principle, and on
the power of markets to reward success
and punish failure. But public-school
choice implies a commitment to the
public sector which most conservatives
do not share. Hammett, who, during
our interviews, kept throwing passing
shots at conservatives for my benefit,
said, "Our allies on the right don't share
our view with regard to the public
schools." Still, some of the conservatives
within the institute favor the use of
vouchers for public or private school.
Public-school choice is a perfect instance
of the ideological convergence that
Hammett hopes to orchestrate.

EVERY fall since 1987, the Manhat-
tan Institute has held a gala din-
ner and invited a speaker to deliver the
Wriston Lecture—named for Walter
Wriston, the former chairman of Citi-
corp, who is an institute trustee. Until
recently, the speakers were drawn from
the ranks of famous cultural or
political conservatives, and have
included Milton Friedman,
Rupert Murdoch, Tom Wolfe,
and V. S. Naipaul. In 1992,
however, the lecture was given
by Johnny Ray Youngblood, a black
minister and community activist, who
was featured in Sam Freedman's book,
"Upon This Rock." And the featured
guest this past November was Edward
Rendell, the Democratic mayor of
Philadelphia, who is a reformer in the
"reinventing government" mold.

The event, which was held at the
Plaza Hotel, was an implicit testimonial
to the Manhattan Institute's growing
prestige. Most of the old center was
there, and three of Joseph Fernandez's
four chief critics on the Board of Edu-
cation—known as the Gang of Four—
and at least one member of the Dinkins
Administration, and newspaper colum-
nists and foundation executives and
policy types. One of the very few black
people present was Roy Innis, the na-
tional chairman of CORE and a right-
wing fringe candidate for mayor last
year. The crowd, however, consisted
largely of the corporate executives and
professionals whose contributions sup-
port the think tank.

Dinner was served in the Baroque

Room, which was painted with charming scenes of château life. Afterward, Mayor Rendell rose to speak. He described, to a rousing reception, how he had eliminated a four-hundred-and-fifty-million-dollar deficit by facing down unions, renegotiating leases on city office space, and rooting out waste from dark corners. During his speech, he also took a number of traditional big-city-mayor positions that the institute opposes, maintaining that cities cannot balance their budgets and provide an adequate level of services without much more help from the federal government and without a more equitable system of sharing with wealthy suburbs.

Rendell also said something that the crowd disliked so much that it let him know it. After talking about the way he had stuck it to bloated municipal unions, Rendell said that he was also going after people like the eye surgeon who comes into the city twice a week to earn his fortune and returns at night to his suburban home, escaping city taxes. At that point, several dozen gentlemen in tuxedos audibly hissed. Rendell was talking about equity and shared sacrifice, but the tuxes seemed to identify with someone he was characterizing as a rich parasite. Harvey Robins, Mayor Dinkins' director of operations and a sometime friend of the institute, said that he was stunned by "that display of almost outward hostility. There was a level of contradiction in that crowd that was very disturbing to me."

It wasn't Fred Siegel or Nathan Glazer
who was hissing. Yet the contradic-
tion was not only between the crowd
and the intellectual endeavor it sup-
ported but within the endeavor itself.
The Manhattan Institute has moved
to occupy the center, but it still con-
tains strong elements of single-minded
free-market boosterism. Over the next
four years, as Mayor Giuliani tries to
make good on his pledge to steer city
government in a new direction, the
Manhattan Institute is almost sure to
become an increasingly powerful voice
for reform. The unanswered question
is whether the institute will insist upon
the sense of equity, and of compas-
sion for the poor, that has been miss-
ing from conservative reforms of the
past. ♦