The Lost Chance

The Clintons were euphoric. The president had scored a huge success with his nationally televised speech laying out his vision of national health reform. Now, in October 1993, the time had come to brief the president's economic advisers on the specifics of the plan. Hillary Clinton was, as usual, articulate and commanding as she walked through the massive and detailed blueprint. But when she finished, she was greeted by silence. Somewhat gingerly, fearful of offending the First Lady, a few senior officials began raising concerns. Gradually, the questioning grew more aggressive, challenging the basic assumptions and approach of the proposal upon which the president had staked his political future. The plan was too bureaucratic, one official argued. The numbers didn't hold up, the financing was unrealistic, pressed another. Almost everyone present in the Roosevelt Room that day agreed that the plan was too complex to sell to Congress.

The chorus should have come as a warning. The men and women present, old Washington hands like Treasury Secretary Lloyd Bentsen and Wall Streeters like economic adviser Robert Rubin, had an instinctive feel for what would fly, and what wouldn't, with the special interests and politicians who would decide the fate of health reform. Mrs. Clinton, however, airily dismissed these worries. "With a wave of her hand, she simply said everybody was wrong," recalled a senior official who was present at the meeting.

The First Lady's arrogance was poorly timed. Some of her own friends and advisers would later look back on this moment as a critical lost opportunity. It was, in a sense, understandable; politicians and pundits at the time marveled that Mrs. Clinton was a cross between Eleanor Roosevelt and Lyndon Johnson. And there is still a slight chance that Congress will pass a significant version of health reform in the next few weeks. But the fact remains that Bill Clinton has no chance of realizing what he persistently called his main objective, indeed the most cherished goal of his presidency: guaranteeing health coverage to every American.

What went wrong? Mrs. Clinton blames the special-interest groups, and not without rea-son. Newsweek estimates that the inter-est groups spent at least $300 million -- more than the Democratic and Republican 1988 and 1992 presi-dential nominees combined -- to defeat health care. Much of this mon-ey was spent on blatant-ly untrue advertise-ments designed to scare the public. Many of the politicians involved also switched positions continually, and the press was confused and negligent.

Some will argue that, in the sour environs of modern Washington politics, real reform was impossible. There were just too many countervailing forces; the president's goal of universal coverage was just too ambitious. A Newsweek Poll reflects this disillusion: more people blame Congress (22 percent) and lobbyists (39 percent) than the Clintons, and most people (66 percent) think Washington should give up and start over again next year. But Newsweek reporters, retracing the progress of Clinton's campaign for health reform, reached a different conclusion. In fact, there was a real, if fleeting, chance to secure the sweeping reforms that Clinton envisioned. But because of hubris and poor judgment, the Clintons missed it. This is the story of how the president squandered the biggest opportunity to make social policy since the Great Society.

It is almost forgotten now that virtually all of the big interest groups that savaged the Clinton plan were -- only a year ago -- at least tenuously in favor of Clinton's main goal of universal coverage. The American Medical Association -- scourge of health reform for decades -- was for it. So were the big insurance lobbies. Most major corporations were for it -- they even accepted that they would have to pay for universal coverage with so-called employer mandates requiring businesses to provide insurance for their workers. That bastion of conservatism, the U.S. Chamber of Commerce, had reluctantly come to the conclusion that ever-rising medical costs could be controlled only by a system of universal coverage. A score of Republicans, including Senate Minority Leader Bob Dole, had signed on to the principle of universal coverage.

All of these mainstream groups had come to appreciate a basic reality. It is very difficult to achieve meaningful health reform -- to provide Americans with affordable coverage -- without making it universal. Costs and risks must be widely spread. If large numbers of healthy people are allowed to opt out, the costs go up for everyone else. After this basic understanding, however, consensus falls apart on the means of paying for and providing coverage. Clinton's greatest challenge was to pull together disparate interests and find a way to attract a political majority.

White House moderates like David Gergen and chief of staff Mack McLarty urged the president to propose the broad outlines of a bill that could be embraced by major business groups and Republicans. The details, they argued, could be worked out later. But the president was listening to his wife and her liberal allies within the White House. Given the task by her husband of ramrodding health reform, Hillary Clinton wanted to take a different course -- to design, in secret, a more grandiose scheme.

Instead of a "center-out" political strategy, the First Lady and most of the political advisers pressed for a "left-in" model that would build on a liberal base -- mainly labor and the seniors lobby. "The strategy was simple: screw the moderates," said an administration official. "We can do it on our own." Hillary and Co. were probably right that Bob Dole and the Republicans couldn't be trusted. The problem was that the White House health reformers didn't trust anyone else, either. Some members of Mrs. Clinton's task force now regret the lost chance to line up the "medical-industrial complex" before it was too late. "I wish there'd been an effort to embrace those groups conspicuously, to lock them in," says Paul Starr, a Princeton professor who helped write the Clinton plan.

The man picked by the Clintons to design a health-care plan -- Ira Magaziner, a business consultant and fellow Rhodes scholar -- did get plenty of advice. Magaziner and Mrs. Clinton were, to be sure, conscientious and careful. Their unwieldy 500-person task force spent five precious months trying to anticipate the unintended consequences of each policy decision. Implicit in the exercise was the assumption that they could anticipate every problem. To the staff, it sometimes seemed as if Hil-lary and Magaziner thought that they were the first people ever to think about health care. "If it didn't spring from Ira's head, it didn't matter," one adviser complained. Despite the fact that congressional committees had been dealing with the issue for years, they figured they could do it better. "Both Mrs. Clinton and Ira share the same weakness -- they're terribly sure of themselves," said another health-care confidante.

Hillary and Magaziner became obsessed with leaks and secrecy. They scheduled most key decision meetings on the weekends in the White House residence with just the president and the two of them present. She was afraid that if lobbyists learned what they were deciding, they would sabotage the product. Privately, she griped (with some justification) that if the press couldn't get the presidential haircut story right, how could they be expected to accurately report something as complex as health alliances and employer mandates? She and Magaziner tried, in effect, to build themselves a policy biosphere, a sterile, protected realm in which to hatch the Perfect Plan.

The economic advisers and number-crunchers at Treasury and the budget office were cut out. Hillary dismissed Treasury Secretary Lloyd Bentsen as a Washington-tainted "incrementalist" who didn't grasp the need for boldness. Bentsen's advisers, in turn, were extremely skeptical of Magaziner and his estimates. "We will need to be very vigilant about the numbers. There is a tendency to believe any number is better than no number at all," Treasury official James Ukockis wrote about the work of Magaziner's task force in a secret memo, dated March 31. Another Treasury memo likened Magaziner to the U.S. Army general in Vietnam who had to "destroy the village in order to save it." "Mr. Magaziner is employing euphemisms such as "the current thinking is . . .' and "a consensus is forming around' to indicate certain policy choices are winning out. But who makes up the consensus, and what arguments/evidence are being considered?" the Treasury official wrote. "We need to press these issues or the Secretary may find he is confronted by a fait accompli when he is finally brought into the health policy process."

It is significant that Clinton didn't bring in Bentsen -- or his other economic advisers -- until it was too late. Because Clinton listened to his economic team -- and not just his political advisers -- in his first year in office, he was able to get a budget through Congress that actually achieved some deficit reduction. It meant sacrificing some campaign promises, like a tax cut for the middle class, but Clinton was willing to be pragmatic. His original interest in health reform was to rein in the uncontrolled spiral of health-care costs. He was at least sympathetic to the arguments of the moderates, who urged him to try a more bipartisan approach. But in the end, he sided with Hillary, who argued for sending the whole 1,342-page version to Congress, where it was immediately mocked for its complexity. Ironically, Hillary was supported in this stand by Democratic congressional leaders, including Senate Majority Leader George Mitchell and House Majority Leader Richard Gephardt, whose political wisdom was notably lacking. Clinton also rejected a suggestion by chief of staff McLarty, a former utility-company CEO, that Deputy Treasury Secretary Roger Altman, a Wall Street veteran, launch a major effort to build bridges with the business community on health care.

Hillary and the White House politicos wanted to attack business. James Carville, the chief operator of the 1992 campaign, believed it was important to have black hats and white hats in the health-care debate. So Hillary attacked the insurance industry -- even through insurers supported employer mandates, the controversial key to achieving universal coverage. Internal polls showed public dissatisfaction with doctors, so she attacked them -- even though the AMA leadership had taken the risky posture of endorsing universal coverage. "She made the AMA leadership look impotent," said one health reformer.

Hillary has always tried to keep Clinton focused, to guard against his tendency to give away too much, too soon. Gathering in the White House solarium before the president's State of the Union speech last January, Clinton's advisers talked about a "visual" to dramatize the president's demand for universal coverage. Pollster Stan Greenberg and media consultant Mandy Grunwald suggested that he hold up a pen in the air and threaten to veto any bill that didn't provide health insurance for every American. It was sure to make the 11 o'clock news.

Recalling what the veto threat had done to his fellow Republican George Bush ("No new taxes!"), adviser David Gergen argued that the gesture would limit Clinton's ability to cut a deal. But Hillary -- together with the political advisers -- pushed for the veto threat.

The Clintons would later blame "Harry and Louise," the fictional couple in the ads aired by the insurance industry, for undermining health reform. But the real saboteurs are named Herman and John. Herman Cain is the president of Godfather's Pizza and president-elect of the National Restaurant Association. An articulate black entrepreneur, Cain transformed the debate when he challenged Clinton at a town meeting in Kansas City, Mo., last April. Cain asked the president what he was supposed to say to the workers he would have to lay off because of the cost of the "employer mandate." Clinton responded that there would be plenty of subsidies for small businessmen, but Cain persisted. "Quite honestly, your calculation is inaccurate," he told the president. "In the competitive marketplace it simply doesn't work that way."

The switchboard at Godfather's was lit up with supportive calls. It was as if the small business community -- a very large and politically powerful group -- had been told to march on Washington. Cain, said Larry Neal, an aide to Sen. Phil Gramm, "was the lightning rod."

While Cain looks the part of a striving small businessman, John Motley, chief lobbyist for the National Federation of Independent Business (NFIB), looks like, well, a Washington lobbyist. But he's one of the smarter ones. He understood that the real battle would not be fought on the TV airwaves or at the expense-account res-taurants of Washington but back home, in the districts of members of Congress. Motley mobilized thousands of small busi-nessmen, including "the Guardians" (the NFIB's 40,000 most reliable members), to work their local representatives. Armed with computer files showing pertinent facts -- like whether certain members of Congress had kids who worked as waiters in the summer -- the NFIB and the restaurant association went after their targets. Rick and Ralph Tevis, owners of Tevis's Restaurant in Topeka, Kans., talked to one of their regular customers -- Rep. Jim Slattery, a member of the Energy and Commerce Committee. Slattery came out against universal coverage.

The NFIB was also effective in lobbying other lobbying groups. They had small businessmen lean on their doctors -- and before long, the AMA, dissed by the Clintons, came out against employer mandates. The NFIB pressured the Chamber of Commerce by urging small businessmen to quit in protest of the chamber's support of employer mandates. When the chamber's dues began to drop precipitously, the chamber, too, reversed its position in February. A day before, the Business Roundtable had also slammed the employer mandate.

A wave of scare-tactic advertisements by other groups added to the hemorrhaging of support for health reform. A study by the Annenberg Public Policy Center at the University of Pennsylvania found that fully half the broadcast ads were "unfair, misleading, or false." Empower America, led by former Bush administration official William Bennett, charged that the Clinton plan would limit choice of doctors. In fact, it would increase choice for the 15 percent of Americans who now have none. Another conservative lobbying group simply made up a horror scenario that every American would be given a wallet-size card at birth that would hold a micro computer chip containing private medical facts ("treatment for hemorrhoids, psychiatric care") that the government could use to "control every aspect of YOUR life." Herman Cain -- the "Hermanator" as his friends called the pizza entrepreneur -- went on a satellite TV broadcast on July 12 to warn restaurateurs around the country: "Who's going to enforce [health care]? The health-care police! You think the IRS is a friendly bunch of people -- wait until the health-care police come knocking at your door looking for premiums because you didn't pay your alliance!" Never mind that the notion of health-care alliances had been dropped from the Clinton plan by then.

Hillary was infuriated by these attacks. "This is so misleading and false," she complained to Magaziner. "We cannot just sit back. These people are hammering us with lies and we're not responding." She was driven by a feeling that she couldn't let down all the people with tragic health-care horror stories she had met during her constant travels. "She will never get rid of those faces," a friend says. "She will never get rid of those voices."

When attacked, Hillary's instinct has always been to hit back. A "war room," modeled on the '92 campaign, had already been set up. On the computer screen of war-room media chief Jeff Eller was the sign honor every threat. In practical terms, that meant magnifying every threat. Harry and Louise, the AMA, the restaurant lobby -- every shot they took at Clinton, the war room fired back. The press was mostly mystified. Never able to grasp the substance of health reform -- or at least convey it simply to their readers and viewers -- reporters settled on the horse race. Would Clinton pass a bill?

That depended on whether he was willing to make a deal. It became increasingly apparent that Clinton lacked the votes to pass employer mandates. His moderate advis-ers, including his friend Mc-Larty, urged him to compromise. But the groups known as the "fight, fight, fight" team -- Hillary, Magaziner and top political operative Harold Ickes -- resisted. They suspected -- probably correctly -- that if they moved to the center, Dole and the conservatives would just move farther right.

Mrs. Clinton has been blamed for being too ideological and inflexible, caricatured by the right as a leftist shrew. In fact, she was sometimes willing to make deals. The original plan included huge payoffs for seniors (guaranteed reimbursement for their Medicare drug prescriptions) and for heavy indus-try and Big Labor (guaranteed health coverage for early retirement). Newsweek has learned that she even sent a feeler to Republican Sen. John Chafee, a leading moderate reformer, as early as the win-ter of 1993 to begin secret negotiations. Chafee refused.

Hillary was willing to compromise -- but only at the right time. She thought it was a mistake to cave in too soon. On at least five occasions over the course of a year, White House moderates pressed Clinton to move to the middle. Clinton seemed to wobble, at one point suggesting that a health plan covering 95 percent of the people was close enough. But, thanks in part to the veto pen promise, he believed he had to hang on to the idea of universal coverage.

By holding out, the Clintons hoped for a last groundswell for reform. But it never came -- and the networks, amazingly, refused to give Clinton time for a final plea to the public in August. Instead, health reform simply petered out. Although staffers for Senator Chafee and Democratic leader Mitchell are close to working out some kind of incremental legislation, there probably is not enough time left before members of Congress have to go home and face the voters in the November elections. The great health-care debate is not over, of course, and the Clintons deserve credit for bringing it to the fore. They risked a great deal to take on an issue most presidents have shied away from. But the president, and particularly his wife, must be held responsible for missing an opportunity they helped to create.

Who has been most responsible for the difficulty Congress is having in passing health-care legislation this year:

9% President Clinton 9% Hillary Clinton 18% Republicans in Congress 4% Democrats in Congress 13% Medical industry 21% Insurance industry 5% Small-business owners (The Newsweek Poll, Sept. 8-9, 1994)

What should be the main goal of health-care reform?

49% Guaranteed basic medical coverage for all Americans 23% Reducing the cost of care to people like me 17% Reducing the nation's overall health-care spending The Newsweek Poll, Sept. 8-9, 1994

Should health-care-reform legislation be passed this year, or should Congress take more time to examine the various proposals and start over next year?

28% Pass reform this year 66% Start over next year The Newsweek Poll, Sept. 8-9, 1994


Amid all the rumors about an impending White House staff shake-up, there is no mention of what Hillary Rodham Clinton thinks, or whom she wants in which job. During the '92 campaign no one made a move without first running it by the candidate's wife. And many of President Clinton's cabinet appointments and top staff jobs bore a clear Hillary stamp. That she has taken herself out of the personnel-and-policy loop surprises some White House aides. But it seems she has no intention of reclaiming her role as de facto chief of staff. "She's shellshocked," says a friend, who predicts that Mrs. Clinton will act like a much more traditional First Lady for the rest of her husband's term.

Hillary's disengagement may be emotionally therapeutic. She has been humbled by the health-care fight and by how easily the historic moment of opportunity disintegrated into a raw partisan battle. "She's a little stung," says an aide. "She wants to take it easy for a while." She was once certain about her ability to judge people, confidantes say, but the experience of the last year has shaken her faith in her own political skills. She doesn't think it was a fair fight, and she is angry and bitter. At this point she is trying not to play the blame game, at least in public. In private, she fumes at everybody.

The surest sign of a chastened Hillary is her willingness to let chief of staff Leon Panetta have a free hand in trying to strengthen her husband's presidency. She thinks that Panetta, a Washington insider, may better understand the alien place. And if a shake-up means straining old friendships or alliances, it is better to let Leon do it than for her to get involved. The president was anxious to get back to work last week, but Hillary had no desire to return to Washington. She headed for Santa Barbara, Calif., where she extended her vacation a few days with old friends, Hollywood producers Harry Thomason and his wife, Linda.

A year ago Hillary wowed lawmakers with her command of health-care reform, but now she's as tired of them as they are of her. She will continue to be "a voice for health-care reform," says an aide. "But what she says will not be targeted to the latest moves of Congress." Like her husband, Hillary has decided that her political recovery depends on escaping from the minefields of the Hill to the safety of broad themes that most people can agree on. As part of that strategy, she is expected to begin speaking out against the violence in American society, particularly violence against children. Her goal is to rally individual, corporate and community support, says an aide, not to engineer legislative solutions.

But Hillary's top priority is to ensure her husband's re-election. She hit the campaign trail last week, appearing with gubernatorial candidate Kathleen Brown in California, a critical state for Clinton in '96. The question is: will she be a liability? Polls show that the First Lady is almost as controversial a figure as her husband, with many voters uneasy over the activist role she chose. Last month in Owensboro, Ky., a smokers' rights group actually burned her in effigy -- the mayor called it "an act of hate." But Clinton campaign strategists say Hillary is essential to turning out Democratic votes, especially among women. In California a million women who voted in '92 stayed home from this year's primary; turnout was the lowest ever recorded. "Those who love her really love her," says a White House aide. And those who don't won't have the old Hillary to kick around anymore.