Remaking Policy: Scale, Pace, and Political Strategy in Health Care Reform 9781487515362

Table of contents :
Contents
Preface
Part I: Overview and Theory
1. Overview
2. Defining the Scale and Pace of Policy Change
Part II: The Founding and Evolution of the Health Care State to the 1980s
3. The Establishment and Evolution of the British and US Health Care States to the 1980s
4. The Establishment and Evolution of the Dutch and Canadian Health Care States to the 1980s
Part III: Remaking the Health Care State at the Millennium, 1987–2017
5. British and US Health Care Reform Strategies, Early 1990s to Late 2000s
6. The US Mosaic, 2009–10: Return to Unfinished Business
7. The English Mosaic, 2010–12: Evolution in Revolutionary Clothing
8. The Dutch Blueprint, 1987–2006
9. Canadian Incrementalism Reinforced, 2003–04
Part IV: Institutional Entrepreneurs and the Course of Market-Oriented Reform
10. Institutional Entrepreneurs and Market-Oriented Reform: Theory and Experience in Britain, the Netherlands, and the United States
Part V: Conclusion
11. Understanding Policy Change
Notes
References
Index

Citation preview

REMAKING POLICY Scale, Pace, and Political Strategy in Health Care Reform

One of the most persistent puzzles in comparative public policy concerns the conditions under which discontinuous policy change occurs. In Remaking Policy, Carolyn Hughes Tuohy advances an ambitious new approach to understanding the relationship between political context and policy change. Focusing on health care policy, Tuohy argues for a more nuanced conception of the dynamics of policy change, one that makes two key distinctions regarding the opportunities for change and the magnitude of such changes. Four possible strategies emerge: large-scale and fast-paced (“big bang”), large-scale and slow-paced (“blueprint”), small-scale and rapid (“mosaic”), and small-scale and gradual (“incremental”). As Tuohy demonstrates, these strategies are determined not by conditions themselves, but by the ways in which political actors, individually and collectively, assess their prospects for success in the present and over time. Drawing on interviews as well as primary and secondary accounts of ten cases of major change in health policy over seven decades (1945− 2015) in the US, the UK, the Netherlands, and Canada, Remaking Policy represents a bold step towards understanding the scale and pace of change in health policy and beyond. (Studies in Comparative Political Economy and Public Policy) CAROLYN HUGHES TUOHY is a professor emeritus of political science and founding fellow in the School of Public Policy and Governance at the University of Toronto.

Studies in Comparative Political Economy and Public Policy Editors: MICHAEL HOWLETT, DAVID LAYCOCK (Simon Fraser University), and STEPHEN MCBRIDE (McMaster University) Studies in Comparative Political Economy and Public Policy is designed to showcase innovative approaches to political economy and public policy from a comparative perspective. While originating in Canada, the series will provide attractive offerings to a wide international audience, featuring studies with local, subnational, cross-national, and international empirical bases and theoretical frameworks. Editorial Advisory Board Jeffrey Ayres, St Michael’s College, Vermont Neil Bradford, Western University Janine Brodie, University of Alberta William Carroll, University of Victoria William Coleman, University of Waterloo Rodney Haddow, University of Toronto Jane Jenson, Université de Montréal Laura Macdonald, Carleton University Rianne Mahon, Wilfrid Laurier University Michael Mintrom, Monash University Grace Skogstad, University of Toronto Leah Vosko, York University Kent Weaver, Georgetown University Linda White, University of Toronto For a list of books published in the series, see page 719.

Remaking Policy Scale, Pace, and Political Strategy in Health Care Reform

CAROLYN HUGHES TUOHY

UNIVERSITY OF TORONTO PRESS Toronto Buffalo London

© University of Toronto Press 2018 Toronto Buffalo London utorontopress.com Printed in Canada ISBN 978-1-4875-0245-4 (cloth)  

ISBN 978-1-4875-2253-7 (paper)

Printed on acid-free paper with vegetable-based inks.

Library and Archives Canada Cataloguing in Publication Tuohy, Carolyn J., 1945–, author Remaking policy : scale, pace, and political strategy in health care reform/ Carolyn Hughes Tuohy. (Studies in comparative political economy and public policy ; 54) Includes bibliographical references and index. ISBN 978-1-4875-0245-4 (cloth). – ISBN 978-1-4875-2253-7 (paper) 1. Health care reform – Case studies. 2. Medical policy – Case studies. I. Title. II. Series: Studies in comparative political economy and public policy; 54 RA394.T865 2018    362.1   

C2017-906959-4

This book has been published with the help of a grant from the Federation for the Humanities and Social Sciences, through the Awards to Scholarly Publications Program, using funds provided by the Social Sciences and Humanities Research Council of Canada. University of Toronto Press acknowledges the financial assistance to its publishing program of the Canada Council for the Arts and the Ontario Arts Council, an agency of the Government of Ontario.

Funded by the Financé par le Government gouvernement du Canada of Canada

For Laura and Kevin

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Contents

Preface  xv Part I: Overview and Theory  1  1 Overview  3 Mis-en-scène 3 Introduction 4 The Scale and Pace of Change: Big Bangs, Blueprints, Mosaics, and Increments  5 Defining the scale of policy change: Influence, instruments, organizing principles, and logics  7 Defining the pace of change: Enactment and implementation 11 Four strategy types; four strategic domains   12 The Evolving Agenda of Welfare-State Politics and the Case of Health Care  20 Phases of welfare-state politics  21 The case of health care policy: The agenda of market-oriented redesign 23 The Politics of Scale and Pace in Health Care Reform  28 Implementation and the Role of Institutional Entrepreneurs  33   2 Defining the Scale and Pace of Policy Change  36 Elements of Scale: Influence, Instruments, Principles, and Policy Logics 36 The balance of influence: The state, private finance, and providers  37

viii Contents

The mix of instruments: Hierarchy, exchange, and peer control   44 Organizing principles: The basis of entitlement and the functional role of the state  46 Policy logics: The intersection of influence, instruments, and principles  51 Transforming the logics of health care policy: Four nations 53 The Pace of Policy Change: Historical and Strategic Perspectives 55 Timing as history: Continuous and discontinuous change  56 Timing as strategy: Pace as a strategic choice  67 Bringing Scale and Pace Together: A Simplified Decision Tree 72 Part II: The Founding and Evolution of the Health Care State to the 1980s  77   3 The Establishment and Evolution of the British and US Health Care States to the 1980s  79 Britain: The Big Bang of the NHS  80 The window: A landslide election and a sweeping agenda 80 The strategy: An appointed date for a new institution   81 The United States: Medicare/Medicaid Mosaic  85 The precursor: The big bang of Social Security  86 The window: A landslide election and a broad social policy agenda 88 Policy Cycling in the 1970s and 1980s  94 Britain: Centralization/decentralization; integration/ independence; professionalism/managerialism  94 The United States: Regulation versus deregulation; largesse versus constraint  98 Conclusion 103   4 The Establishment and Evolution of the Dutch and Canadian Health Care States to the 1980s  105 The Netherlands: Consensus, Corporatism, and Coalition Governments under Stress  106

Contents ix

Solidarity, subsidiarity, and the “social middle ground”  106 The Dutch health care state as of the 1970s  110 Canada: Regionalism, Federalism, and the Scope and Limits of the “Sharing Community”  118 Regional differences and coping mechanisms  119 The evolving institutions, agenda, and tone of intergovernmental relations  125 Health care in the evolving federation  126 Establishing the Canadian health care state: The warm-up – universal hospital insurance  128 Establishing the Canadian health care state: The main event – universal physician services insurance  130 Denouement: “Paradigm freeze” and policy cycling  140 Conclusion 148 Part III: Remaking the Health Care State at the Millennium, 1987–2017  151   5 British and US Health Care Reform Strategies, Early 1990s to Late 2000s  153 Britain: The Big Bang of the Internal Market   154 The window: A third successive majority  155 Pace: Taking health off the election agenda  158 Scale: Splitting the hierarchy  159 The Clinton Initiative, 1993–94: Big Bang Failure  163 The window: A new Democratic president and a Democratic Congress 163 Scale: Principled centrism within an economic agenda  164 Pace: Threading the needle  168 Roads not taken?  170 Cycling in the Aftermath of Big Bang Politics, mid-1990s to late 2000s  172 Cycling in England: Market versus hierarchy under New Labour   173 Cycling in the United States: Federal-state tensions, changing coverage, and vacillating provider payments   193 Conclusion 198   6 The US Mosaic, 2009–10: Return to Unfinished Business  200 The Window: The Call of History  201

x Contents

Electoral and institutional resources: A historic election  201 Political will: “We’re gonna get this done”  203 The Strategy of Pace and Scale: The Non-Clinton  205 Pace: Time’s winged chariot  206 Scale: Eight principles  208 The Strategy Unfolds: The Chimera of Bipartisanship and a Four-Ring Circus  212 The dry runs: ARRA and S-CHIP  212 Four intersecting venues  216 Denouement: The Battle Continued in Congress, the Courts, and the States  235 Repeal and defunding attempts in Congress  235 The judicial venue  237 The states  240 Implementation: Phasing and Deferrals  241 The Republicans in Power  246 Conclusion: Process and Substance  257 Process: Multiple mosaics  257 Substance: A new logic of complementarity  259   7 The English Mosaic, 2010–12: Evolution in Revolutionary Clothing 267 The Window: A Historic Coalition  267 Electoral and institutional resources: Coalition arithmetic, centrist ideology, and centralized leadership  268 Political will: The unexpected emergence of health care reform 277 The Strategy of Pace and Scale: Boldness in Uncharted Waters 278 Pace: An electoral expiry date  279 Scale: Ambition in austerity  280 The Strategy Unfolds: Accelerated Incrementalism and Unintended Consequences  282 The Programme for Government  283 The White Paper and the Health and Social Care Bill  285 The Commons committee stage and the “pause”   302 Recommittal and the Lords  310 Implementation and Denouement: Anticipation, Reaction, and Constraint  318 Conclusion: Process and Substance  321

Contents xi

Process: Accommodation and adjustment  321 Substance: Organizational incoherence and a shift towards a single-payer logic   323   8 The Dutch Blueprint, 1987–2006  330 The Window: A Government “there to govern” Consolidates Its Power 331 Electoral and institutional resources: A boost in political capital 331 Political will: Reform of the welfare state as the second phase of liberalization  333 The Strategy of Scale and Pace: Designing the Future  335 Scale: The turn to the market   335 Pace: All deliberate speed  339 The Strategy Unfolds: Two Steps Forward, One Step Back  342 The Simons plan  342 The rise of political opposition  344 The purple coalitions  346 Adaptive and anticipatory behaviour: The shadow of the future  355 The 2002 election: A political earthquake   356 The culmination of reform: A big bang in microcosm  358 Denouement: “Still poldering”  366 Conclusion: Process and Substance  372 Process: A stuttering blueprint strategy  372 Substance: A public/private hybrid  374   9 Canadian Incrementalism Reinforced, 2003–04  376 The Legacy of the 1990s: Fiscal Swings and Constitutional Fatigue 377 Fiscal swings  377 Constitutional crisis and catharsis: The emergence of collaborative federalism  379 The politicization of health care: Partisan and federalprovincial contests  381 Shaping the agenda: Competing system reviews  389 The 2003 Health Accord: Legacy unfulfilled  392 The Window: Contest and Transition at the Federal and Provincial Levels  395 Electoral and institutional resources: New alignments  395 Political will: An intra-party wedge  397

xii Contents

The Strategy: “Buying change and buying time”  399 Scale: Buying change  399 Pace: Buying time  402 The strategy unfolds: The 2004 health accord  403 Reaction and assessment  409 Denouement: Unravelling Accords and Continued Cycling  410 The federal transfer for health care: Level, structure, conditionality 412 Cycling at the provincial level: Provider payment, scope of coverage, (de)centralization  417 Seeds of the Future? Court Challenges, New Institutions, and Technology 426 A new venue: The courts  426 Institutional change on the intergovernmental plane  428 Conclusion: Process and Substance   429 Process: A missed opportunity  429 Substance: Stability and stress  430 Part IV: Institutional Entrepreneurs and the Course of Market-Oriented Reform  435 10 Institutional Entrepreneurs and Market-Oriented Reform: Theory and Experience in Britain, the Netherlands, and the United States  437 The Role of Institutional Entrepreneurs  437 Entrepreneurialism across Power Bases  439 The Conditions for Institutional Entrepreneurialism  441 Policy design: Heterogeneity and the structural sites for entrepreneurialism   443 Strategies of policy change, uncertainty, and the impact of institutional entrepreneurs  443 Institutional entrepreneurialism in health care reform  444 Entrepreneurs as Products and Agents of Reform  446 England 448 The Netherlands  466 The United States  475 Entrepreneurialism without market-oriented reform: Ad hoc instances in Canada  491 Public and Private Objectives  500 Risk 501 Profit 506

Contents xiii

Reform Strategy and the Impact of Entrepreneurs  507 Conclusion 509 Part V: Conclusion  511 11 Understanding Policy Change  513 The Conditions for Discontinuous Change: Windows and Strategic Decision  514 Policy cycling in normal times  514 The opening of windows: Agenda formation  517 What happens in windows of opportunity: Choice within strategic domains  523 Strategic advantages and vulnerabilities  536 Policy Outcomes: Shifts in Policy Logics in Four Nations   545 England 545 The Netherlands  549 The United States  550 Canada 552 Policy logics and unintended change  553 Drawing Lessons: Market Reforms and the Hybridization of Health Care States  554 The role of institutional entrepreneurs  555 The continuing weight of the state  559 From trust/status to contract/regulation: The growth of social control   561 Filling Out the Picture: Experience in Other Nations  562 Germany 563 Other examples  574 Is Health Care Different? Applications to Other Policy Arenas 576 Notes  583 References  613 Index  681

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Preface

This book has been long in gestation. In a sense the process began about fifteen years ago, when I became interested in the Dutch health reforms under way at the time and realized that the slow transformation that they represented could be not explained by either of the two models of transformative change then prominent in the literature: they were brought about neither by a “big bang” during a window of opportunity nor by the gradual accumulation of disjointed incremental changes. Pursuing that puzzle led me to an exploration of the dynamics of the scale and pace of policy change that has culminated in this book. That exploration led me to study past episodes of health care reform in a new light, and gave me the tools to examine contemporary episodes – notably the “Obamacare” reforms in the United States and the Coalition government’s reforms in England – as they unfolded. I believe the framework that has resulted can illuminate the dynamics of policy change not only in health care, but also in other areas central to the agenda of governments. The focus of this book is different from that of my previous Accidental Logics. That book focused on the distinctive policy logics that characterized different national health care systems (US, British, and Canadian). It argued that the policy frameworks embedding these logics were, from the perspective of the health care arena, essentially accidents of history: they were adopted during windows of opportunity that were opened, not by the dynamics of the health care arena itself, but by broader political forces. While dealing in some detail with these episodes of major change, that book nonetheless emphasized the playing out of policy logics and the ways in which those logics mediated reforms adopted in subsequent windows of opportunity.

xvi Preface

This book reverses the emphasis. Here I am concerned primarily with what happens around and within windows of opportunity – the factors that create these episodes and the strategic decisions about the scale and pace of change that are made at those times. My focus here is thus less on the health care arena itself than on the “high politics” at the centre of government that drive these decisions. I believe the framework I present – which deals with the “strategic domains” within which politicians assess their current and future ability to overcome vetoes – therefore has explanatory power well beyond the field of health care policy. As political scientists we seek not to emulate our colleagues in journalism in writing “the first draft of history,” but rather to stand back from events to observe patterns of behaviour. Nonetheless, as the man­ uscript for this book was being finalized, it was necessary to try to keep pace with the unfolding of the Republican effort to repeal Obamacare in the wake of the 2016 election in the United States. By the time the book went to press, it appeared that one chapter in this saga was closing (having provided along the way a further case for brief analysis here), but that its volatile politics would continue. Many thanks are due for the help and support I received throughout the long process of bringing this book to fruition. The first set of thanks is owed to the School of Public Policy and Governance at the University of Toronto, which provided me not only research support, but also a quintessential academic home. My many conversations and exchanges with colleagues, students, and staff have shaped my understanding of policy processes and their context in ways that I might not even fully appreciate. The next set of thanks belongs to the many participants in the policy process in Britain, the Netherlands, the United States, and Canada who so generously provided their time and insights in the interviews I conducted for this book. Although a substantial number of them were willing to be identified by name, I have adopted the general policy of anonymizing my sources except where disclosing their identity is unavoidable. They have my private thanks individually and this public acknowledgment as a group. It is simply not possible to write a book of this sort without drawing upon the experience, knowledge, and perspectives of those who lived these cases. For the early cases, of course, with a few exceptions I have had to rely on first-person written accounts and secondary accounts by scholars who conducted interviews at the time. But for the later cases, the insights and information that participants shared with me formed an essential part of the empirical base for this book. I hope I have done justice to their contributions.

Preface xvii

Throughout the writing of this book I have relied on academic colleagues, as well as the anonymous interviewees noted above, for insights into their respective national systems. I am especially grateful to colleagues in the Netherlands, whose system was least familiar to me as I approached this project, for educating me throughout. Pride of place here goes to Jan-Kees Helderman, Roland Bal, and Tom van der Grinten, who organized interviews for me with numerous key participants in the web of institutions that constitute the “shared political space” of the Dutch policy process, and also offered very perceptive commentary on my work that pushed my thinking in important ways. Their knowledge of the relevant players, their personal connections, and their enormous generosity with their time opened for me an invaluable window on Dutch decision-making processes and culture. I am hugely grateful. Also in the Netherlands, Hans Maarse made a six-hour return journey from Maastricht to Rotterdam just to accommodate my schedule and to engage with me in one of the most productive conversations I had in the entire course of writing this book. For that, and for the follow-up engagement by email, he has my deep appreciation. Kieke Okma, as always, counselled me against being seduced by appearances and provided key insights, in both her written work and in conversation, into the nuances of the Dutch regime and its change over time. Wyn van der Ven, Eric Schut, and Patrick Jeurissen each opened a new facet for me. Colleagues in Britain, the United States, and Canada similarly offered comments and otherwise facilitated my inquiry. Pauline Allen, Gwyn Bevan, Anna Dixon, Chris Ham, Rudolf Klein, Julian LeGrand, Nick Mays, Stephen Peckham, Judith Smith, and Peter Smith in Britain deserve special mention, as do David Hughes and Richard Freeman, who offered key insights into the Welsh and Scottish systems, respectively, that in the end could not be accommodated in this already lengthy treatise. Numerous American and Canadian colleagues offered perspectives on the North American cases and overall commentary on my argumentation both in draft chapters of this book and in related papers. I thank in particular Daniel Béland, Sherry Glied, Colleen Grogan, Ellen Immergut, Larry Jacobs, Tim Jost, Ted Marmor, Paul Quirk, Mark Schlesinger, Michael Sparer, Joe White, and Linda White. One of these colleagues stands apart: Alan Jacobs has been both an inspiration throughout and a very thoughtful interlocutor at key points in the writing of this book. Two anonymous reviewers for the University of Toronto Press agreed to the herculean task of reviewing a lengthy manuscript and provided

xviii Preface

extraordinarily valuable feedback. The book is much, much improved as a result of their efforts. Daniel Quinlan at UTP was an author’s dream as editor – fully engaged and constructive from the very first contact through the long process of bringing the book to print. The final manuscript was greatly burnished by the insightful, careful, and graceful copy-­editing of Barry Norris, who saved me from myself countless times and offered keen suggestions for improvement. Judy Dunlop masterfully created a well-organized and detailed index to this multifaceted and wide-ranging work. Finally, to my loved ones, who must have thought at various points in the long development of this book that this time they really would not see a final product: here it is, dear family. To Laura and Kevin, who have brightened my life for all of their lives and who have brought the new blessings of Matty, Alicia, Emily, Finn, Rhys, and Pyper, I dedicate this book. And to Walter, my partner in all things, I offer the long-­ awaited gift of the end of this project, with all of the love and thanks he is due for seeing through its completion so patiently with me.

PART I Overview and Theory

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Chapter One

Overview

Mis-en-scène On 23 March 2010, against a carefully assembled human backdrop including an eleven-year-old boy whose mother had recently succumbed to cancer, President Barack Obama signed into law the Patient Protection and Affordable Care Act. The event was the culmination of a titanic legislative struggle. It was greeted with triumph by some who had long campaigned for universal health care in the United States, by deep disappointment by others who saw it as a timid set of reforms that squandered yet another opportunity for major change, and by vitriolic denunciation and implacable resistance from opponents who painted it as a massive government intrusion into the lives of citizens. Two years later, on 27 March 2012, in a much less dramatic ceremony across the Atlantic, Queen Elizabeth II gave Royal Assent to the Health and Social Care Act 2012. But her signature likewise followed an extraordinarily tortuous legislative process, resulting in a set of changes to the British National Health Service (NHS) that were variously viewed as so big they could be seen from space, as the end of the NHS as we know it, or only as yet another turn in the revolving series of changes set in train by a sweeping redesign of the NHS twenty years earlier. How are we to understand these somewhat similar politics in systems of government as different as the US checks-and-balance congressional setup and the UK Westminster parliamentary model, and with health care systems as widely divergent as the US mixed market and the British NHS? The purpose of this book is to put these and other episodes into a comparative frame, to understand the political strategies of scale and pace that mark them, to understand these strategies

4  Remaking Policy

as the products of decisions made within the political and institutional circumstances in which they arose, and, in so doing, to provide a framework for understanding the politics of policy shifts not only in health care but more generally. Introduction This book is about policy change – its scale, its pace, and its drivers. Why are “big” policy changes launched at some times and in some jurisdictions and not others? What determines the course of policy changes once they are under way? These are ambitious questions: I explore them here in the context of a particular policy arena – health care; and with a focus on a particular era – the seven decades from the end of the Second World War to the present. The lessons I draw will highlight the broad questions of political strategy entailed in any attempt at policy change, the factors that shape those strategies, and the political dynamics that flow in their wake as the logic of new policy frameworks confronts the logic of the established order. The norm for policy development in most arenas, at most times, in most advanced nations is small-scale, slow-paced incrementalism. Friction from entrenched interests, established organizational processes, and prevailing ideas works against larger changes in scale and/or faster action. But there are times when “big,” transformational policy change does occur. The pillars of the welfare state have been established and, in some cases, substantially reformed; regulatory regimes have been put in place or dismantled; comprehensive trade agreements have been negotiated and ratified; and so on. Transformational policy change has hardly been neglected in the literature of public policy. But that literature has tended to distinguish between “big bang” episodes of comprehensive and almost immediate transformation of policy frameworks on the one hand, and slow incremental change on the other. This dichotomy underlies one of the principal debates in the contemporary literature of comparative public policy: whether the dynamics of policy change are best understood as the periodic eruption of episodes of dramatic change that punctuate long periods of stability, or as a slow accretion along a path of incremental adjustments. My argument here, however, is that we need a more nuanced and less dichotomous understanding of the dynamics of policy change. First, we need to disentangle and specify the two relevant dimensions of change:

Overview 5

scale and pace.1 Doing so will make clear that there are not two but four possible patterns. Large-scale and fast-paced (big bang) and small-scale and gradual (incremental) patterns do not exhaust the range of the possible: large-scale and slow-paced (“blueprint”) and small-scale and rapid (“mosaic”) strategies can also be followed. Second, to understand the dynamics that generate these patterns, we need to distinguish between the opening of windows of opportunity for change on the one hand, and the decisions that are made within those windows on the other. Instances of each of these four patterns can indeed be found in the health policy arenas of the United Kingdom, the Netherlands, the United States, and Canada. The book explores those cases, showing how big bang, blueprint, mosaic, and incremental strategies emerged from strategic judgments made by policy-makers in particular sets of political circumstances, and how each pattern presented a different set of opportunities and challenges to political actors. Effectively, my argument focuses on what in John Kingdon’s formulation would be the “political stream” of developments that open windows of opportunity (Kingdon 1995). Developments in Kingdon’s other two streams – relating to the perception of “problems” and the identification of “policy” solutions – affect what might be termed the “direction” of change. An example is the embrace of “market-oriented” approaches to the delivery of public services in what one might call the “millennial” decades spanning the turn of the twenty-first century – that is, from the mid-1980s to 2017. But the scale and pace at which such change is pursued are inherently political decisions. Major, discontinuous change in policy means disrupting established balances of power, sets of sanctions, and legitimating principles, as I discuss in the following section. Therefore deciding on the scale and pace at which to attempt such change requires political actors to assess their political capacity and prospects. And in areas such as health care, where the political stakes and risks of discontinuous change are especially large, these calculations tend to be matters of “high” politics at the political centre, in the context of an overarching agenda and/or a threatening competitive challenge. The Scale and Pace of Change: Big Bangs, Blueprints, Mosaics, and Increments A broad and growing literature on agenda formation, led by the work of Kingdon (1995) and Baumgartner and Jones (2009), explores the factors

6  Remaking Policy

that drive a particular policy area to prominence on the agenda. These factors essentially open a “window of opportunity” of change beyond the gradual and incremental norm. In previous work on health policy, I have argued that two conditions are necessary to open a window of opportunity for major change. One is political will: a set of political actors willing to take the risk of changing the health policy framework as central to a broader political agenda. The second is political capacity: a particularly favourable set of institutional and electoral conditions that renders those actors capable of mobilizing sufficient authority to overcome vetoes and enact a program of change (Tuohy 1999). Politicians must be willing to risk destabilizing established accommodations among the key structural interests in the arena, disrupting modes of interaction, and challenging prevailing understandings of rights, obligations, and the function of the state. They must therefore have some confidence that they have the electoral mandate and the institutional resources to mobilize the authority necessary to overcome vetoes, and they must see the prospect of some partisan advantage that spurs them to take on these challenges. Absent either one of these conditions, incrementalism is the result. As I have argued in earlier work, the broad political conditions that open such windows of opportunity are largely independent of the dynamics of any particular policy arena. The particular bargains struck and ideas drawn upon in formulating policy change in these moments are therefore “accidents” of history, and will depend upon the constellation of interests and ideas at that point in time (Tuohy 1999). These factors determine what might be called the direction of change, and assessments of them form part of the “assumptive worlds” of policymakers. A leading example of this effect – of particular relevance for several of the leading cases I discuss in this book – is the attraction of “market-oriented” ideas for reforming the delivery of public services in the United Kingdom, the Netherlands, and the United States in the millennial decades. The opening of a window of opportunity places an issue – and a set of ideas about how to deal with it – on the agenda, but it does not necessarily mean that major change will occur. This is a key point, and one that responds to a common criticism of theories of punctuated equilibrium – namely, that such accounts are tautological, inferring the existence of a window of opportunity from the fact that major change occurred. Instead we need to be able to identify the factors that open the possibility of path-breaking change independent of whether or not such change

Overview 7

then occurred. In short we need to allow the possibility that, even with all the conditions in place that make discontinuous change possible, decision-makers might decide to persist in following an incremental path. These key strategic decisions about how big a change to make and how fast to do it are made in the broad political context that created the opportunity for change in the first place. That is, the factors that allow and motivate politicians to embark on major change also affect how they assess their positions of current and future influence, and thus enter into their strategic calculations of the scale and pace at which to move. This assessment of current and future influence is akin to what Alan Jacobs (2011, 44–9) refers to as the evaluation of the degree of “electoral safety,” or “competitive slack,” but it also relates, as we shall see, to the degree of cohesion within the dominant coalition itself. Because they depend on broad political forces, these strategies of scale and pace are thus also “accidents” of history from the perspective of any given policy arena.

Defining the scale of policy change: Influence, instruments, organizing principles, and logics Much of the scholarly work on policy change, including my own, has dealt with questions of scale: investigating why large-scale change occurs in some circumstances but not in others. The object of inquiry – the scale of change – has nonetheless remained somewhat underspecified: this is the “dependent variable problem” recognized by various scholars (Green-Pedersen 2004; Howlett and Cashore 2009; Kühner 2007; Pierson 2001). Several key contributions to the literature focus on the ideational dimensions of policy change, emphasizing shifts in “interpretative frameworks” (Hall 1993) or “belief systems” (Sabatier and Jenkins-Smith 1993) as the stuff of major change. Others include changes in organizational arrangements and spending patterns, as well as alterations in rhetoric, as potential markers of policy change (Baumgartner and Jones 2009). And others seek to disaggregate policy components according to level of abstraction, and to focus on ends versus means (Howlett and Cashore 2009). Each of these contributions has merit in highlighting the multidimensional nature of policy frameworks and, hence, of the appropriate measures of policy change. The numerous conceptual trees planted along the way, however, risk obscuring the pattern of the resulting policy forest. That pattern is best captured by the concept of an institutional regime with a defining logic, which captures the multiple interrelated elements

8  Remaking Policy

of policy frameworks and allows us to explore the causal dynamics that precipitate phase transitions from one set of relationships to another (Hood, Rothstein, and Baldwin 2001; Wilson 2000). The concept of a regime logic, as developed by Streeck and Thelen, is particularly insightful. They define institutional change as change in a shared logic of collectively enforced expectations (2005b, 9, emphasis added; see also Hall and Soskice 2001, 12–14). Policy frameworks can be seen as a particular type of institution in which the mechanism of collective enforcement is the ultimate coercive power of the state.2 As state-sanctioned settlements, policy frameworks govern and legitimate what Easton classically called “the authoritative allocation of values” (Easton 1953). They do so, first, by establishing a balance of influence among key interests – in the state, the market, and civil society – and delineating the lines of accountability through which those who make day-to-day decisions ultimately report. Policy frameworks also determine the ways in which those decision-makers interact, by establishing the mix of available instruments of governance: hierarchy, exchange, or peer control. That mix sets the sanctions that govern interactions among decision-makers and the types and channels of information available.3 Finally, policy frameworks embed certain organizing principles regarding the basis of entitlement and obligation of citizens and the functional role of the state, and thereby legitimize the resulting distribution of costs and benefits so long as those principles are observed. The scale of change can be assessed along each of these dimensions. In the health care arena, for example, policy frameworks vary in the differential influence they ascribe to state actors, private finance, and medical professionals; in the weight they assign to instruments of hierarchical control, voluntary exchange, and professionalism; in the degree to which they ground access to health care in citizenship, group membership, or consumership; and in the legitimate role they ascribe to the state as provider, payer, regulator, subsidizer, or delegator. Together these elements create a distinctive logic4 – and it is the magnitude of change in this decision-making logic, traceable to change in one or more of its intersecting components, that constitutes the scale of change in policy frameworks that we seek to understand. This change in scale involves not only the degree of change in policy logics, but also the scope of change across the relevant policy arena. Some changes, such as the establishment of Medicare and Medicaid in the United States in 1965, are significant in the degree of change they represent (in this case by establishing a new mandate for the state), but limited in scope (in that

Overview 9

this mandate affected only a segment of the health care arena representing about 20 per cent of the US population at the time). Such scopeconstrained cases contrast with those, such as the establishment of the British NHS in 1948 or even the sweeping reorganization of the NHS in 1990, that change the logic of decision-making across most, if not all, of the arena. In summary, I define the scale of change as changes of degree and scope in the logic established by the policy framework governing decision-making over the allocation of resources – that is, who controls the allocation of resources, the sanctions and types of information available to them, and how their decisions are legitimated. This definition can be applied across policy arenas. It nonetheless might jar with the way in which specialists define the scale of change within their respective policy arenas. For example, a substantial increase or reduction in public spending – that is, the relaxation or tightening of budget constraints – might be seen as major change. Indeed, as I note in Chapter 2, some scholars testing hypotheses of “punctuated equilibrium” in policy change have used budget allocations as a measure of change (Baumgartner and Jones 2009; Breunig 2006). But if the flow of funds is simply augmented (or reduced) without empowering (or disempowering) key actors or changing the sanctions available to them and the expectations they face, those new (or reduced) resources will flow along established channels towards established ends.5 In this book I present examples of such phenomena: during the fiscal swing from constraint to largesse in Canadian health policy in the 1990s and 2000s, the Dutch budget constraints of the early 1980s and late 1990s, and the runup of NHS funding in the United Kingdom in the 2000s. Such fiscal shifts amount to what Peter Hall (1993) has described as “first-order” change in instrument settings, affecting the level of resources but not the logic that drives how resources are allocated. Conversely the essential character – the fundamental qui bono question of resource allocation – of policy regimes such as those governing health care depends on the relationships among interests and the mechanisms of control that the policy framework ordains. As I argue at greater length in Chapter 2, it matters whether decision-makers are ultimately accountable to the state, to private financial interests, or to professional peers. It matters whether that accountability is attained through command, contract, or persuasion. And it matters whether benefits are legitimately secured through citizenship, group membership, or individual means. The gains or losses in efficiency and equity that

10  Remaking Policy

are of interest to policy-area specialists typically can be traced to shifts in these fundamental features of the policy framework. Accordingly the scale of policy change can be measured by the degree and scope of changes in these key aspects. The scale of change matters not only because these features define the fundamental character of the system; the degree and scope of change in and of themselves also have important implications for both the substance and process of policy. Large-scale change allows, at least in theory, for dealing with the interrelated elements of a policy framework in a considered, coherent, and comprehensive manner, whereas change of smaller degree and scope might reverberate through the system in unanticipated ways. Various hypotheses have been offered about how the relative coherence of a policy framework is in turn related to its durability. Patashnik (2008, 167), for example, argues that a design of multiple interrelated and complementary parts is harder for opponents to unpick over time than is a less coherent assemblage. It could also be argued, however, that the very disconnectedness of the parts of a policy framework renders it more durable, since dismantling one component does not threaten the entire structure. Other hypotheses concern the degree to which the scale of change affects platforms for subsequent political action. Large-scale reforms might effectively break up established concentrations of power or even exclude potential opponents from the policy arena. Such reforms are rare, although Patashnik points to the example of airline deregulation in the United States, which had both of these effects: it eliminated some large carriers while greatly increasing the number of players in the airline industry (169). In the context of this book, we can see the exclusion of private health insurance from the physician and hospital sectors under Canada’s adoption of a single-payer system in the 1960s as an example of the effective sidelining of a potential source of subsequent opposition. Moreover, as I discuss later in this chapter and in Chapter 10, the market-oriented reforms of the late 1980s through the first years of the twentieth century in the Netherlands, the United Kingdom, and the United States also had the effect of multiplying actors in the health care arena, and those actors then reconfigured themselves in unanticipated ways in all three countries. Nonetheless a contrary argument can be made: Béland, Rocco, and Waddan (2016) argue that, at least in areas involving intergovernmental cooperation, frameworks that incorporate existing institutional platforms are more likely to be successfully implemented than those that

Overview 11

require (potentially reluctant) actors to create new structures. How these dynamics play out will depend in part on the pace of change, to which I now turn.

Defining the pace of change: Enactment and implementation Pace has received relatively less attention than has scale in the study of policy change. To be sure, much has been written about the role of time in the politics of public policy. Most of the focus, however, is on the importance of history in understanding the evolution of public policies. Theories of “punctuated equilibrium,” path dependency, and “process sequencing” variously seek to explain how timing and sequence shape the content of policy. My principal focus here, however, is on timing as an element of the strategic judgments policy-makers make in response to their reading of political circumstances. Just as policy-makers need to decide how large a change in the prevailing policy framework is desirable and feasible in given circumstances, so they also need to decide how quickly to enact the desired change. The definition of pace might seem straightforward: it falls on a spectrum from fast to slow. But even here we need more clarity, and to distinguish between the pace of enactment and the pace of implementation. Of these the pace of enactment is most definitive. The fundamental parameters of a policy framework are set by legislative action, although they might take further shape in the implementation process. The key question regarding the pace of enactment is whether the policy framework should be enacted all at once or requires a winning legislative coalition to be established and re-established at several points in time. The pace of enactment is consequential not only for the substance of policy, but also for the process of policy-making. In substantive terms, different paces might imply a trade-off between policy adjustment and policy coherence. On the one hand, we would expect slow-paced change to allow for policy learning and for adjustments to policy frameworks as unanticipated consequences occur or as conditions change, leading to policies better adapted to their environments. By rapidly hard-wiring policy changes, fast-paced change raises the bar to making subsequent, learning-based adjustments. On the other hand, as noted, fast-paced change allows, at least in theory, for an integrated, comprehensive approach to the multiple interrelated elements of a policy framework, whereas slow-paced change could lead to incoherence if adjustments over time reflect different political settlements under different political

12  Remaking Policy

conditions – the phenomenon of “layering” described by Streeck and Thelen (2005b) is an example of such a dynamic. In terms of process, different paces also might be associated with different levels of conflict. Fast-paced change compresses veto points in time; a fast pace is thus likely to heighten the collision of interests. Slower-paced change, in contrast, allows for one-at-a-time deals without conflating different dimensions of conflict. A similar set of considerations might be expected to characterize the pace of implementation. Echoing the classic work of Pressman and Wildavsky (1973), Aberbach and Christensen (2014, 3) conclude from a review of several attempts at reforms in various policy arenas in the United States that “[r]eform, especially of the non-incremental type, is vulnerable at every stage from conception through to implementation.” The implementation stage, not only in the United States but elsewhere, thus can be seen as the playing out of a politics of pace: a race between the efforts of reformers to embed changes in the structure of incentives and expectations and the efforts of opponents to prevent changes from taking hold. The politics of implementation nonetheless are contingent. In the first place they are vulnerable to unanticipated shifts in the conditions that the reforms were meant to address. The disjunction between the policy framework and its environment then generates negative feedback, undermining the framework unless it can be adjusted to adapt. The “displacement,” “conversion,” and “exhaustion” effects that Streeck and Thelen (2005b) describe provide examples of such dynamics. Hence the fate of reforms depends on how the pace of implementation intersects with these historical forces. But even more important, implementation politics depend upon what happens in the initial, enactment phase. A pace that sees changes hard-wired up front obviously affects the degree to which those changes can be further shaped in the implementation process. In sum there is a variety of potential effects of scale and pace on both the substance and the process of policy. A key message of this book is that the ways in which these dynamics play out depend on how strategies of scale and pace intersect. The next section sets up this fundamental question.

Four strategy types; four strategic domains The varying hypotheses and conflicting evidence about the implications of both scale and pace for policy coherence, political conflict, and

Overview 13

the durability of policy reforms suggest yet a further set of contingencies. My argument in this book is that these outcomes depend on the intersection of scale and pace: what matters are the joint effects of scale and pace in policy change. The intersection of the two dimensions of scale and pace, as shown in Figure 1.1, yields four possibilities: rapid enactment of large-scale change (a “big bang”), step-wise enactment of large-scale change (a “blueprint”), rapid enactment of multiple smallscale changes (a “mosaic”), or piecemeal enactment of small-scale changes over time (incrementalism). This fourfold typology is similar to that derived by Howlett and Cashore (2009) from the intersection of the “cumulative directionality” and the “tempo” of change: classic paradigmatic, gradual paradigmatic, rapid incremental, and “classic incremental.” But whereas Howlett and Cashore are concerned with observed patterns of policy change over time, my interest is in these models as courses of action resulting from the deliberate choices of political actors at critical junctures, albeit within the constraints of institutional and political conditions.6 The principal argument of this book is that each of these types of change is a product of strategic judgments made by political actors in distinctive types of political and institutional circumstances. As I discuss further in Chapter 2, the policy process can be understood as a form of “structured” or “embedded” agency (Garud, Hardy, and Maguire 2007; Jacobs and King 2010). Policy outputs are determined, not by institutional and political conditions per se, but by the ways in which human actors, individually and collectively, read and respond to the opportunities and constraints established by those conditions. Political actors make a number of assumptions in choosing the scale and pace of reform, not only about the nature of the policy problem they seek to address, but also about their capacity to address it. This mix of assumptions underlying the choice of political strategy is what Vickers (1965) called “appreciative judgment,” what Alan Jacobs (2011), following Denzau and North (1994), calls the “mental models” of political actors), what Hall (2010, 207–8) calls “instrumental beliefs,” what Marmor and Klein (2012, 2) call “assumptive worlds,” and what “discursive institutionalist” scholars make the focus of their inquiry (Béland 2005; Schmidt 2010). Central to this way of understanding policy-making is an emphasis on its subjective and intersubjective aspects. Strategic judgments are made in a social context of shared understandings, reinforced in ongoing communication. In these contexts, political actors make judgments

14  Remaking Policy Figure 1.1. The Scale and Pace of Policy Change: Four Strategic Types

about the “science of the possible” – based on the current ideational mix of more-or-less explicit causal models about particular policy problems (and thus about their potential solutions). In the millennial period spanning the turn of the twenty-first century, for example, “marketoriented” approaches to reform featured prominently in the assumptive worlds of policy-makers cross-nationally. In addition to judgments about the science of the possible, however, political actors must make judgments about “the art of the possible” – based on assessments of their own political capacity and institutional position, both in the present and into the future. The acquisition, exercise, and maintenance of power are at the heart of the political enterprise, as a precondition for the achievement of other political objectives. Accordingly, judgments about current and future political capacity pervade the assumptive worlds of political actors and condition the choice of strategies of policy change. For each strategy type, then, there is a corresponding “strategic domain” that favours the choice of strategy. These domains are structured by objective institutional and political conditions, but they take

Overview 15

the form of shared understandings (or shared mental models) within a group of actors – about their position within the institutional setting that defines the legitimate scope of action (Marmor and Klein 2012, 4–6), and about the motivations and relative political resources of other actors (Alan Jacobs 2011, 248). In turn, those assumptions permeate and condition the ways in which political actors make other assumptions – for example, about the tractability of various policy problems and the efficacy of various technical modes of addressing them. Decisions about the scale and pace of change are made within these strategic domains. In determining the scale of change possible, political actors need to assess whether they can mobilize sufficient authority to overcome barriers to change related to each of the elements of scale outlined above: opposition from stakeholders in the established structure of influence, the inertia of established instruments, and the risks of challenging received ideas of legitimacy. That is, judgments about the scale of change to be attempted depend on how political actors assess their current position of influence – in other words, how well they are positioned to overcome vetoes at a point in time to build a winning coalition. Overcoming vetoes in the present requires navigating political space, defined by both governance and ideational configurations: what is the array of actors with independent bases of power who must be brought on board, and how well aligned are their policy preferences (Ferguson and Jones 2012)? Judgments about pace, on the other hand, depend on what political actors project their likely influence to be in the future. That is, they need to assess whether they will be able to overcome vetoes through time – in other words, whether they will be able to reinvoke or reassemble the coalition for change when vetoes are likely to re-emerge. Such considerations of vetoes through time drive the pace of enactment and implementation. In windows of opportunity for major change, then, members of a potential winning coalition will find themselves in one of four possible strategic domains, characterized by distinctive conditions as summarized in Figure 1.2. Big bang change Where the leadership of the coalition for change has the political and institutional resources to command support for a centrally driven agenda, sweeping comprehensive change is possible. Such conditions of centralized control, however, are rare. They are more likely (though not exclusively) to be found in institutional systems with relatively few

16  Remaking Policy Figure 1.2. Characteristics of Four Strategy Types and Associated Strategic Domains

Overview 17

independent veto points, such as unitary states and Westminster parliamentary systems. In the hypothetical circumstance in which a party expects persistent centralized control, it has the strategic latitude to enact large-scale change either rapidly or gradually – that is, to embark on either a big bang or a blueprint path. In modern democracies, however, such veto-free systems typically are marked by adversarial party systems in which concentrated power is also highly contested, and control of government alternates between parties at periodic intervals. Even in circumstances of one-party dominance, contests for control typically occur within, rather than between, parties.7 Leaders in positions of centralized control can take swift and comprehensive action, but they do so against the spectre of a rapidly closing window of opportunity. Such conditions drive big bang strategies of rapid enactment and implementation, to entrench the framework not only legally in legislation, but also politically (in support from its beneficiaries) and institutionally (in operating routines and expectations), and thus to make reversal less feasible even if opponents gain control of government. Big bang strategies can yield coherent policy frameworks, but in so doing they place high demands not only on the policy development capacity of the party in power, but also on its tactical ability to maintain focus and momentum. This approach is also likely to be marked by adversarial political conflict, which may or may not persist through the implementation phase, depending on the extent to which the new framework maintains or removes platforms for subsequent opposition. Blueprints A second set of possibilities arises where members of the winning coalition for reform have a reasonable expectation that they will continue to be in a position of influence for the foreseeable future. As noted above, this is unlikely to be the case for centralized governments in democratic systems, and more likely to occur in systems of inclusive governance, such as those with an established tradition of coalition governments involving multiple parties with independent power bases.8 Typically such systems, with their multiple veto points, yield incremental outcomes. But where rare circumstances create a window of opportunity for greater change, the dominant party in the coalition might be able to seize that opportunity to gain consensus on a comprehensive overall framework for change without coming to detailed agreement on all aspects of the new policy design. Each party in the coalition expects it will

18  Remaking Policy

be able to enforce the balance of the overall compromise and shape its interpretation. Hence each has an incentive to participate in designing a commonly agreed framework in which each will make some gains. In such circumstances political leaders might embark on what I call a “blueprint” strategy of large-scale, slow-paced reform. Although evocative of the overall scale and pace of this type of strategy, the blueprint label might imply rather more precision than is actually intended for this concept. I identify a blueprint strategy as having two defining features. First, it entails reaching a broad-based agreement on an overall schematic for a new regime, the endpoint of reform. Second, progress towards this endpoint occurs in successive phases of enactment over a period of time that extends beyond the current period in office of the initiating government. Although policy development might not proceed precisely in the linear sequence or on the timeline initially anticipated, the defining characteristic of a blueprint strategy is that the process builds in deliberate steps towards the realization of the principal elements of a framework set out at the beginning. The distinction between the pace of enactment and the pace of implementation is particularly important in distinguishing blueprint strategies from the others treated here. Rapid big bang and mosaic strategies of enactment can still have more extended periods of implementation – although, for reasons noted above, this is less likely in the case of big bang strategies. But both big bangs and mosaics entrench the essential features of reform in legislation all at once, and implementation timelines typically are also set out in the enacting legislation. Blueprints, in contrast, ground the overall framework in an agreement broadly endorsed up front by the relevant parties and interests, but then allow the various pieces to be enacted over time. A blueprint strategy promises, at least in theory, a more inclusive and less conflictual path to a coherent framework than does a big bang. It also allows for policy learning. Its principal strength lies in its impact on collective expectations: the initial schematic, broadly endorsed, establishes a “shadow of the future” that shapes subsequent behaviour (Groenewegen 1994). Nonetheless a blueprint strategy still places demands on the reform coalition to maintain focus over time. Moreover, this strategy type is vulnerable to contextual shifts, to tactical challenges of maintaining political balance at each step and, depending on the policy design, to unexpected developments in the way political and economic actors avail themselves of new mandates and resources.

Overview 19

Mosaics Like blueprints, mosaic strategies are likely to arise where the winning coalition for change comprises multiple actors with independent power bases. But unlike the political stability that can yield a blueprint, the more likely circumstance of a mosaic is that most members of the winning coalition judge their current power position to be precarious. The members might judge that they are sufficiently well positioned to form a minimum winning coalition within a relatively brief window of time, but because of the need to accommodate a variety of contending interests they cannot enact sweeping institutional change within that brief time. Nor, unlike the case of blueprint strategies, can they secure agreement to the outline of a comprehensive reform framework to be enacted over time, since the various actors in the coalition of support cannot be confident they will retain a position of influence at subsequent stages. Such circumstances favour mosaic strategies that typically take the form of multiple adjustments to existing institutional arrangements, enacted all at once. (In a sense mosaic strategies can be thought of as highly accelerated, and thus more jolting, versions of the incremental and disjointed “layering” phenomenon described in Streeck and Thelen [2005a] and discussed in Chapter 2.) The resulting mix is likely to include not only interconnected elements as a matter of policy design, but also a variety of ad hoc elements added as the price of securing political agreement. The multiple deals typical of mosaic strategies are also likely to include delays in the effective dates of various provisions to allow time for adjustment while still hard-wiring changes up front. Hence the main vulnerability of mosaic strategies is that they result in highly complex and inchoate policy frameworks, presenting major challenges both of public communication and of implementation. Incremental change Rounding out the set of possibilities is the type in which members of the winning coalition seek change in the prevailing policy framework (preferring change over the status quo), but at least some of the members of the coalition judge that their position might improve in the future such that they might be in a better position to effect and claim credit for the change. In such cases they have an incentive to seize their current position of advantage to make investments upon which they can capitalize in the future. This is a version of the strategy of “political investment”

20  Remaking Policy

described by Teles (2009). In such circumstances, even actors who seek major change in a policy framework, and who prefer reaching an agreement over the status quo, might not wish to see a new framework fully enacted up front or even to endorse a comprehensive blueprint, since either of those options would deprive them of an opportunity to reap greater political gains in the future. Rather, they will seek an agreement that advances the agenda and keeps it alive for future action – a strategy that yields incremental outcomes. Incrementalism, then, is not only the default or “normal” mode for policy change in the periods between rare episodes of major change – although it is certainly that, as will become apparent in the discussions of each of the nations under review in this book. But incrementalism is also a strategic option that might be chosen deliberately even when normal constraints are relaxed within windows of opportunity for major change. As in the case of blueprint change, strategies of incremental change allow for adaptation over time, but, unlike blueprints, such strategies establish no shadow of the future to draw change towards a coherent endpoint and to ensure that the pieces of the framework are complementary.9 Incremental strategies also share with blueprints a vulnerability to unanticipated shifts in context, which, in the case of incremental change, might deny its designers the ability to build upon the platforms they create. Instances of each type of strategy form the empirical content of this book. As we shall see, very different judgments have been made at various times by political actors in Britain, the Netherlands, the United States, and Canada. The actual course of policy change, then, depends upon the degree to which events unfold in accordance with initial strategic judgments and upon the extent to which strategies are accordingly modified. The Evolving Agenda of Welfare-State Politics and the Case of Health Care If we are interested in major policy change, we should look, at least in the first instance, to arenas with high stakes – that is, to arenas with large fiscal and/or economic footprints or high political salience. Dra­ matic departures from established paths can occur in arenas without these high-stakes characteristics, of course, but the results are not as broadly consequential. Changes in major areas of the welfare state such as public pensions and health care have major fiscal and economic

Overview 21

impacts, and carry substantial political risk. My focus here is accordingly on policy shifts of a particular sort – namely, those that involve the redesigning of the welfare state.

Phases of welfare-state politics The agenda of the welfare state and the associated politics have followed a roughly similar arc in national systems. Beginning with a focus on expanding access to benefits, the agenda has moved cumulatively to embrace concerns with cost and effectiveness. In the initial phase the expansion of benefits set off the classic redistributive form of politics described by Lowi (1964, 1972), marked by class conflict, ideological debate, and contests among peak associations representing powerful interests (business coalitions, labour federations, professional associations). Once the programs were established, the maturation of pension systems, developments in health care technology, and demographic change fuelled a steady increase in the costs of these programs to the public treasury, while periodic economic shocks and the rise of taxreduction agendas led to a fiscal squeeze whereby the rate of increase in the costs of welfare-state programs exceeded the rate of increase in government revenues. Tax revenue as a proportion of gross domestic product (GDP) increased by more than five percentage points on average in the two decades from 1975 to 1995 – from 30.4 per cent to 35.7 per cent across the twenty members of the Organisation for Economic Cooperation and Development (OECD) that were democracies and for which data are available for the full period10 – but then rose more slowly over the next two decades, standing at 36.6 per cent by 2014. This pattern of levelling off (or decline) varied in degree from one country to another, but held in all except Japan and the United Kingdom (author’s calculations from OECD 2016a). Meanwhile, social expenditures – defined to include income support, health care, housing, and social services, but not education – took a growing share of the constrained fisc, increasing on average across the same twenty nations from 44.5 per cent of total government expenditure in 1995 to 49.5 per cent in 2005 and further to 52.0 per cent by 2013 (author’s calculations from OECD 2016b). During this period the welfare-state agenda shifted as governments sought ways to constrain cost increases, triggering a phase (or phases) of retrenchment (Pierson 1994), the timing of which varied according to the nation’s fiscal climate. Retrenchment was marked by blunt, across-the-board

22  Remaking Policy

cuts, as well as by stealthy, less visible strategies aimed at cost-shifting among payers (Hacker 2004; Tuohy 2002, 2003b). Various strategies to avoid blame for imposing losses formed the dominant motif of this phase (Pal and Weaver 2003; Weaver 1986). Retrenchment, however, encountered strong opposition from now-entrenched interests, both providers and beneficiaries. As Pierson and others have demonstrated and as the expenditure data cited above show, the welfare state on balance proved remarkably durable in the face of these attempts at retrenchment, although there were significant variations across nations (Pierson 1994, 2001). The welfare-state programs most firmly grounded in public support appear to be those benefiting the middle class – notably health care and pensions. Support for increased spending on health care and public pensions was strong across all five advanced nations covered by the International Social Survey Programme (ISSP) from the mid-1980s to the mid-2000s.11 In the five countries in the sample in 1985 and 1996,12 support for increased spending on health care rose on average from 68 to 74 per cent over that period. The pattern of increase held in each country except Italy, where it declined from 79 to 77 per cent. Support for increased spending on public pensions showed a more mixed pattern of marginal increases and decreases across the five nations, but overall was essentially stable. In contrast, support for increased spending on more politically vulnerable unemployment benefits declined slightly in four of the five countries and overall from 34 per cent on average to 31 per cent. This pattern continued in a larger sample of thirteen advanced nations in the surveys in 1996 and 2006.13 Support for increased spending on health care rose on average from 71 to 77 per cent over that period, with ten of the thirteen nations showing increases.14 Similarly, support for increased spending on pensions rose from 53 to 62 per cent from 1996 to 2006, with increases in all but two nations.15 The decline in support for increased spending on unemployment benefits also continued, however, dropping on average from 30 per cent to 13 per cent in the thirteen nations, all of which showed declines of varying magnitude. Faced with the ineffectiveness and political costs of blunt retrenchment measures, governments have sought ways to improve the effectiveness of welfare-state programs through redesign. The politics of this redesign phase differ from both the “high politics” of welfarestate establishment and the stealth politics and short-term budgetary unilateralism of welfare-state retrenchment. In the redesign phase the

Overview 23

agenda of reallocation and reinvestment creates opportunities for new ideas, new combinations of instruments, and new coalitions of interest (Pierson 2001). The various “market-oriented” reforms of public services in many OECD nations exemplify such politics. Among other things, as we shall see, these reforms spawned a type of actor best thought of as an “institutional entrepreneur” who works in the interstices of the public and private sectors, exploiting opportunities afforded by public programs to combine public and private resources in innovative organizational arrangements. Under this broadly common arc from establishment to retrenchment to redesign, there are nonetheless important differences across nations in the unfolding of welfare-state politics. Notably, “retrenchment” is not a phase that is experienced once and left behind: rather, the phase of redesign might be interrupted at different times in different nations by episodes of retrenchment, depending on the broad fiscal and ideological agenda of governments of the day. Moreover the emergence of new economic and social stresses resulting from economic restructuring has triggered demand for new welfare-state programs, such as child care, giving rise to new, if less sweeping, “establishment” phases in some nations. The politics of these latter-day establishment phases vary, but in general they are marked by different alignments of interests than those which characterized earlier phases of welfare-state establishment (Häusermann 2010; King and Rueda. 2008; Kitschelt 2001).

The case of health care policy: The agenda of market-oriented redesign Of all welfare-state arenas, none combines high fiscal, economic, and political stakes to a greater degree than does health care. Among OECD nations, the fiscal footprint of health care is second only to the more miscellaneous category of “social protection” – which includes public pensions, unemployment insurance, social assistance, and other forms of income support. In 2013 health care accounted for 14.1 per cent of government expenditure on average across the twenty-nine OECD nations for which data were available (OECD 2016c). At the same time health care ranked among the three largest categories of public expenditure in nineteen of twenty-seven OECD nations for which data were available, and was the largest category in the United States (OECD 2015a).16 In 2015 health care accounted for 9.0 per cent of GDP on average across thirty-five OECD nations, ranging from 5.2 per cent in Turkey to 16.9 per cent in the United States (OECD 2016c).

24  Remaking Policy

The relative political salience of health care surpasses even its large draw on public finance. Across the thirty-five democracies participating in the ISSP in 2006, respondents were more likely on average to see “providing health care for the sick” as a responsibility of government than any of other nine other policy areas – including providing a decent standard of living for the elderly and the unemployed and protecting the environment. They were also likely to view health care, more than any of seven other policy areas – including education, retirement benefits, law enforcement, and the environment – as where governments should spend more; indeed, 38.5 per cent believed that government should spend “much” more) (International Social Survey Programme 2006). The health care arena exemplifies the succession of welfare-state phases. The redistributive politics associated with the establishment of universal or near-universal access to health care in the mid-twentieth century gave way to a retrenchment phase in the 1980s and 1990s as governments grappled with the rising costs of health care in an era dominated by tax- and deficit-reduction agendas. The instruments and­ targets of cost constraint varied somewhat across nations in the 1980s and 1990s, depending upon the established policy framework, but blunt, across-the-board freezes or cuts to the supply and remuneration of providers of health care were the tools of choice. Nonetheless a common pattern emerged: episodes of cost constraint were just that – episodes – followed by periods of increased spending. The overall trajectory of growing public spending on health care – exceeding the rate of growth in overall public spending – remained in most advanced nations, and the quest for sustainable mechanisms of health care financing continued. Moreover the restraint episodes fuelled concerns about deteriorating quality of health care – especially in countries experiencing increases in waiting times for service – and the enhancement of quality arose as an objective. The effect of these cumulating objectives was to drive a cross-national quest for the grail that would optimize access, cost, and quality through the strategic redesign of the health care state.17 Attempts at big change in health care are rare, and successful attempts even more so. Nonetheless the millennial period saw some dramatic examples of the transformation (or attempted transformation) of mature health care states, including representatives of classic idealtypical models. The health care states that had been established by the mid-twentieth century have been commonly classified, according to the source and aegis of third-party payment, into private insurance

Overview 25

systems in which the state plays a residual role in covering certain “deserving’ groups for whom the private market is deemed to fail, “social insurance systems” based on mandatory contributions to multiple quasi-public sickness funds, and “national health systems” based on general taxation (Moran 1999; OECD 1987).18 Within the general taxation category, it also makes sense from both an economic and a political perspective to distinguish between true “national health service” systems in which the state owns health care facilities and employs health care providers, and “single-payer” systems in which the state acts as an insurer remunerating privately organized providers on behalf of the patients who choose them – a form of voucher system (Tuohy 2009).19 The foundational health policy frameworks of the United Kingdom, the Netherlands, Canada, and the United States had their centre of gravity in one of the four classic models, although even from the beginning each incorporated idiosyncratic elements. The United Kingdom followed a national health service or Beveridge model, in which hospitals were owned by the state, physicians were employed by or under contract to the state under a hierarchical model, coverage was universal, and funding came largely from general taxation. In the Dutch social insurance or Bismarckian model, coverage was provided through “sickness funds” that negotiated with hospitals (owned by subnational authorities or not-for-profit corporations) and ambulatory care physicians in private practice. Financing took the form of mandatory contributions to the sickness funds by employers and employees, subsidized by the state, and coverage was based on occupational, regional, or other categories. This social insurance system applied to the population in the lower two-thirds of the income distribution, while the remainder of the population relied on voluntary private insurance. From 1968 onward the Dutch model also incorporated a universal scheme for long-term and community care, financed from general taxation but administered through insurers. In Canada’s single-payer model, physicians were in private practice and hospitals were operated by local and not-for-profit bodies. Physicians and hospitals were remunerated through a public authority from general tax sources and coverage was universal. The Canadian single-payer model applied only to physician and hospital services, where it was the strictest in the OECD. All other elements of the health care system fell into a mixed category more akin to the residual type. Finally the residual model is exemplified by that in the United States, in which the private market was the principal provider of insurance coverage, with public “safety net” programs for certain

26  Remaking Policy

groups deemed less able to participate in the private market (social assistance recipients, the disabled, and the elderly). In the United States, moreover, the residual state was buttressed by a wide variety of subsidies, regulations, and delegated mandates drawing private actors into what Mettler (2010) has described as a “submerged state” whose distributional consequences are largely hidden and little understood in the broad public domain. In later chapters I elaborate upon Mettler’s insight to explore the logic of a “shadow” state – using that term to connote the way in which the outline of the state’s role has conformed to the structure of an overtly private market. If we observe a common arc in the broad agenda of health care policy across advanced nations, as each moved cumulatively from redistribution to retrenchment to redesign, we nonetheless observe great differences in the resultant new policy frameworks. In three of these representative nations, the founding model of the health care state was transformed. Table 1.1 summarizes the changes. In Britain, internal market reforms brought in by the Conservative government in 1990 split the NHS hierarchy into separate “purchaser” and “provider” components that were to negotiate contracts for services. These changes were absorbed and mediated by established networks, and appropriated and reshaped by a successor Labour government after 1997. The Conservative/Liberal Democrat Coalition government established after the 2010 election took the internal market concept to what might be considered its logical extreme by proposing to delegate the bulk of the NHS purchasing budget to consortia of general practices, replacing existing NHS purchasing bodies. In the Netherlands reforms begun in the late 1980s and rolled out over the next two decades abolished the distinction between social and private insurers and established a universal mandate. The United States adopted its own unique “complementary” model of universal coverage, grafting a superstructure of regulation and subsidy onto its residual health care state. The targets of the US reforms were twofold. First, they enlarged the “residual” role of the state by expanding established public programs for lower-income groups. Second, they developed a new “shadow state” infrastructure aimed at ensuring coverage for those served neither by employer-based plans nor by government programs, through a combination of mandates, fines, and subsidies, and new health insurance “exchanges” to regulate and subsidize the individual and small-group market. The theme common to all of these changes is an increased use of market-type instruments of control and a parallel strengthening of the

Overview 27 Table 1.1. Shifts in Health Care Policy Frameworks in the United Kingdom, the Netherlands, the United States, and Canada, 1987–2017 Country

Founding Model (as of the 1980s)

Post-reform Model (as of 2017)

United Kingdom

National Health Service

Internal market

• services provided through unified regional state hierarchy

• purchaser/provider split

Social insurance

Mandatory insurance, comprehensive model

• sickness funds plus private insurance

• comprehensive regulation of universal mandatory insurance

Residual + shadow state

Mandatory insurance, complementary model

• tax-subsidized employerbased private insurance as norm plus public programs for the elderly and poor

• universal mandatory insurance

Single-payer plus mixed market

Single-payer plus mixed market

• single-payer for physician and hospital services; mixed market for all other services

• single-payer for physician and hospital services; some changes in organization and remuneration

Netherlands

United States

Canada

• formal distancing of the state

• employer-based private insurance as norm, plus public programs for the elderly and poor, plus managed competition and subsidies in individual and small-group markets

• increased cross-provincial variation in mixed market; some changes in eligibility, especially with respect to drugs

influence of the state as regulator – the much-remarked-upon turn to the market in health care reforms in the 1990s.20 But the principal observation to be taken from Table 1.1 is the shuffling of the characteristics of the health care state to produce new hybrid versions of earlier models. In each case the changes shifted the fundamental logic of the health policy framework in ways that I explore in subsequent chapters. Canada stands here as the exception. In Canada’s decentralized federal system, each province operated its own public program under the very general framework of federal legislation governing fiscal transfers

28  Remaking Policy

to provinces. Through both inaction and, occasionally, deliberate choice, Canadian governments continued to reaffirm the essential design of the single-payer system and the federal-provincial balance, and to follow a path of incrementalism. Ironically the most substantial “hybridization” of the Canadian system has occurred not because of policy change, but in its absence – namely, the relative shrinkage of the singlepayer world as technological change has moved various services out of the hospital setting. The Politics of Scale and Pace in Health Care Reform Not only did the outcomes of redesign differ across nations, so also did the political strategies through which these changes were brought about. The four nations that I examine in this book together provide examples of each of the strategies of change mapped according to the scale and pace of change (Figure 1.3). The principal focus is on the “millennial” period from 1987 to 2017, which captures the arc of the “internal market” reforms in the United Kingdom, the “managed competition” proposals in the Netherlands, the period of dramatic fiscal constraint and recovery in Canada, and the Clinton and Obama reform episodes in the United States. Nonetheless I also include the cases of the founding of the modern health care state in each nation (except the Netherlands) beginning after the Second World War, both as a matter of context and to expand the range of cases. In each nation a window of opportunity for major change opened at least once during the seven decades following the war – moments when the government of the day could mobilize sufficient authority, and saw health care as sufficiently central to its broad agenda, to attempt to overcome the multiple vetoes that typically frustrate changes in health policy. And in each case the strategy adopted in that moment also depended upon the prevailing political and economic circumstances. Several caveats regarding Figure 1.3 are in order. All of the cases except those in the incremental quadrant constitute strategies of major change of one type or another. As noted above, the classification of cases into these types is a matter of scholarly judgment, and needs to be justified in each case. Furthermore there is room for variation within each category. For example, I categorize the establishment of Medicare and Medicaid in the United States in 1965 as a mosaic strategy, given the relatively limited scope of the two programs and the nature of the policy package as an amalgam of proposals from several key politically

Overview 29 Figure 1.3. Strategies of Change Adopted during Windows of Opportunity, Four Nations, 1945–2017

independent sets of actors. Nonetheless I place this case close to the boundary with big bang change, given its introduction of a new role for the federal government in the health care arena and the relative simplicity of the policy design. Conversely I classify the internal market reforms in the United Kingdom in 1990 as a big bang, given their sweep across the institutional structure and their introduction of a new transactional logic. At the same time I locate them close to the boundary with mosaic change because other key features of the health care state, such as the first-dollar (or first pound) universal design of coverage, were maintained. In the two Westminster systems of the United Kingdom and Canada, universal health care coverage was brought about through big bang change. In Britain the Labour government elected in a landslide in 1945 occupied classic big bang territory, and in 1948 seized the opportunity

30  Remaking Policy

to establish the NHS. In Canada in the mid-1960s, the conditions for big bang change were less obvious, given the existence of a minority government in Ottawa. Nonetheless a moment of all-party consensus at the federal level and, equally important, a rare instance when provincial governments saw it as in their interest to agree to federal conditions led to the enactment of a cost-shared program of physician services insurance in 1966, drawing the medical profession into a bilateral monopoly with the state. In the notoriously fractured US system at the same time, even the landslide election of a Democratic president and a nominal Democratic supermajority in the Senate could not yield a big bang change. Instead the result was an ingenious compromise creating federal government programs covering at that time less than 20 per cent of the population. In the millennial “reform” era of 1987–2017, we observe only one instance of a big bang strategy: the introduction in 1990 of internal market reforms to the NHS by the Conservative government of Margaret Thatcher in the United Kingdom. A third successive majority government allowed the Conservatives to move comprehensively and rapidly to redefine the NHS hierarchy by splitting the purchaser and provider functions with a big bang reform and to implement the changes largely within two years. These changes – which have been described as a blitzkrieg followed by an occupation (Shock 1994) – were highly contested, and initially mediated by established networks in the health care arena, but their sweep across the arena created a new transactional logic of contracting and new platforms for political and economic activity. Where such rare conditions of consolidated power do not pertain, big bang strategies are likely to fail. Such was the case in the United States in 1993–94, when Democratic president Bill Clinton adopted a big bang strategy in an attempt to transform the US policy framework under a highly complex “managed competition” model. But the Democrats lacked the effective strength in Congress to enact such a reform as a single party, and Clinton failed to build the “bandwagon” momentum that would have been necessary to attract the necessary coalition of support within a very tight window of opportunity. The single example of blueprint change is the Dutch process of establishing a universal system of managed competition among insurers from 1987 to 2006. The Christian Democrats, with their third successive centre-right coalition government (except for a brief hiatus in the early 1980s) and led by the commanding figure of Prime Minister Ruud Lubbers (often described as “the Dutch Margaret Thatcher”) launched

Overview 31

a process of health care reform as part of a broader agenda of marketoriented policy change. A tradition of coalition governments and consensual decision-making in the Netherlands allowed the Christian Democrats to establish cross-party agreement on a broad schematic for a large-scale shift towards universal mandatory private insurance regulated within a common framework, whose elements would be enacted at a graduated pace over time by successive governments. The key strategic challenge of such an approach is to maintain the balance of the overall bargain at each step along the way in order to maintain the coalition of support. This is a significant problem of both politics and policy design – as illustrated by the stalling of the Dutch reforms for a time when Labour partners in the coalition government attempted to tip the balance of market-oriented and solidaristic components of the reforms more in the latter direction. Our two reform mosaics occurred in the normally very different contexts of the United States and Britain. In the United States, Democratic reformers found themselves in 2009 in an extraordinarily rare moment of opportunity, with a Democratic president and Democratic control of both houses of Congress, but with a precarious and razor-thin margin of defence against blocking tactics by the Republicans in the Senate. Seizing this moment drove a rapid strategy of enactment, but in the context of fragmented political institutions and polarized partisan conflict the Democrats had to accommodate multiple interests, not only within the health care arena, but also within the congressional Democratic caucuses themselves. As a result, the Democratic leadership assembled and secured the enactment of a mosaic package of multiple adjustments and additions to the existing employer-based system, bringing it substantially closer to the goal of universal coverage. This exclusively Democratic process further galvanized bitter opposition among Republicans and salted the ground for implementation. Various concessions necessary for building the legislative coalition resulted in an extended timeline for implementation in which this toxic politics continued to fester. Intriguingly, even in a Westminster context the Conservative/Liberal Democrat Coalition government in the United Kingdom was also drawn to a mosaic strategy in seeking to make changes in the NHS’s policy framework after the 2010 election. As in the US case, a set of political actors with a nominal majority sufficient to enact comprehensive reforms within a tight time window nonetheless needed to accommodate internal divisions. In that context the political strategy adopted by

32  Remaking Policy

the Coalition government was also one of fast-paced change involving multiple adjustments to existing arrangements – a “mosaic.” The Coalition moved quickly to demonstrate that it could take decisive action. It built upon the platforms established by the previous Labour government, even while seeking to distinguish itself from its predecessor by couching the reforms in the language of comprehensive change. The original plan conceived during the opposition years by the new Conservative health minister had to be modified quickly to accommodate some Liberal Democrat demands, creating an uneasy amalgam that satisfied the leadership of both parties, but generated increasing controversy and intra- and interparty tension within the Coalition throughout a protracted legislative process. Some of the compromises involved delays in implementation and, as in the United States, laid the ground for a contentious course of implementation. Then there are the counterintuitive cases, where a window of opportunity for major change yields an incremental strategy. One occurred in Canada in 2004, when the federal and provincial governments, given an opportunity to make substantial changes in the design of the policy framework for health care, chose instead to reinforce the existing design and boundaries of the single-payer framework with increased funding. Health care had moved to the centre of the intergovernmental agenda after decades of being held hostage to constitutional wrangling, and the fiscal climate favoured “reinvestment” after a period of restraint. The federal Liberal government, under new leadership that looked likely to continue in power in the face of a divided opposition, was determined to reclaim public confidence in one of its signature legacy policy arenas. The provinces, for their part, sought to capitalize on relatively buoyant fiscal and economic conditions to recapture the federal funding that had been eroded over the previous two decades, and were open to some rebalancing of federal and provincial responsibilities in order to do so. But the new Liberal prime minister chose to use that moment to make his mark by resolving the rankling funding issue – and only that issue – gambling that he would be in a stronger position in the future to address more fundamental change. When partisan shifts made that prospect more risky, the incremental strategy was reinforced as the safest route to securing that future position. Another example of using a window of opportunity to establish a platform for future gain can be seen in England in the early 2000s. A second landslide victory for Labour in the 2001 election established the conditions for major change. But in the bipolar government characterized by

Overview 33

an intra-party contest between Prime Minister Tony Blair and his putative successor, Chancellor of the Exchequer Gordon Brown, “Blairite” proposals for reform were tempered in both scale and pace as Brown and his supporters sought to preserve room for him to place his own stamp on the reforms in a future Brown regime. Implementation and the Role of Institutional Entrepreneurs Regardless of the scale and the pace at which it is enacted, policy change is not introduced into virgin territory: it enters terrain populated with existing interests, institutions, preferences, and understandings. We therefore need to understand how change is mediated as the logic of the new policy framework intersects with the logic of its predecessor as embedded in the existing environment. Typically this intersection acts to temper the scale and pace of change, as new rules and shifts in resources are absorbed by existing networks. As noted above, a large literature on implementation has charted the conditions under which policy reforms are more or less likely to be modified significantly in the implementation phase and thereafter. My own earlier work (Tuohy 1999) focuses largely on this intersection of new and established logics. Studying this intersection means shifting our focus. As I have argued, the politics of the enactment phase of policy change in health care are those of the broader political realm. But a full understanding of the emergence of new policy logics requires us to turn to the actions of actors within the health policy arena itself. And in this regard the cases in this book highlight a relatively understudied dynamic of market-­oriented policy reforms: the role of entrepreneurs, and particularly of what I call “institutional entrepreneurs.” Two aspects of this process are generic to episodes of policy change. First, whatever else they do, episodes of big change shake up the established system, putting its various pieces temporarily into play. This creates the sort of heterogeneous environment in which certain actors can become entrepreneurs – combining old and new elements of the changed context in innovative ways. Second, major policy change creates or substantially alters public mandates. Those new mandates constitute fresh resources that can be seized by entrepreneurial actors and combined with other resources to create new bases and vehicles for participation in the decision-making process. The “market-oriented” reforms that have characterized policy-­making in the health care arena in Britain, the Netherlands, and the United States since the late 1980s have created opportunities for a particular

34  Remaking Policy

type of entrepreneur: actors who combine public mandates with private sector resources to create new hybrid public/private entities that shape the course of policy change. These “institutional entrepreneurs” operate at the interstices of the public and private sectors to develop new, hybrid institutional arrangements that span both sectors and reconfigure control of key power bases: state authority, private capital, and professional expertise. Examples include general practitioners in England who have assumed delegated state authority for purchasing health care services, Dutch social insurers who have developed new corporate structures to pursue both public mandates and commercial ends, and the plethora of entrepreneurial activity by US governmental, quasi-governmental, and private sector actors around the creation of health insurance “exchanges” as new, state-mandated players in the private insurance market. To a degree these market-oriented reforms thus have created a selfreinforcing logic of implementation. As Patashnik (2008, 168) argues, one way of weakening organized opponents during the implementation phase of a “general-interest” reform (in which benefits are diffused and costs are concentrated) is to break up concentrations of power. Market-oriented reforms, he says, might have this effect by “greatly multiply[ing] the number and heterogeneity of interests within a given policy sector.” As we shall see in the case of Dutch health care reform, however, this effect might be only transitional, and entrepreneurial activity ultimately might reconfigure but not reduce the concentration of power in the arena. More generally the activity of institutional entrepreneurs might have unanticipated consequences: moving away from the logic of the previous policy regime, but not necessarily as anticipated by the drafters of the new framework, as in the case of the US exchanges. This process has varied across nations in ways that are ripe for inquiry. Each instance of major market-oriented health policy reform in this book (British, Dutch, and US) shook up established arrangements, creating heterogeneous and uncertain policy environments for a time. In each case the new policy frameworks, as they intersected in the prevailing political economy of health care, created quite different structural sites for entrepreneurialism – that is, they differed considerably as to which, if any, actors had both the autonomy and the incentive to take entrepreneurial initiatives. In each case entrepreneurs were buffered against economic risk for at least a transitional period as a matter of policy design. But entrepreneurs nonetheless faced considerable

Overview 35

political uncertainty, which varied according to whether the political strategy followed was of the big bang, blueprint, or mosaic variety. The nature of the four strategic types suggests the following patterns. Big bang strategies offer few, but strategically very well placed, niches for institutional entrepreneurs, and reward those who gain an early foothold. Blueprint strategies encourage entrepreneurs to make longterm investments that further the development of the policy framework. Mosaic strategies, by making numerous disjointed changes to the policy framework, offer multiple opportunities for cross-sectoral entrepreneurialism, which contributes to the turbulent dynamics of the reform process. Finally, incremental change might be only modestly conducive to cross-sectoral entrepreneurialism: although it offers periodic platforms for small-scale innovation, it creates little of the disruption that opens up multiple niches for entrepreneurial activity. Entrepreneurial activity is not the only element of interest in the implementation process, and not the only way in which the strategic decisions taken in the enactment period lay the foundation for the implementation phase. In the chapters that follow, I deal with the implementation phase in each of our principal cases, and then explore more fully the role of institutional entrepreneurialism in Chapter 10.

• With this introduction, we can move on to explore the strategic decisions that have shaped and reshaped the health care states of the United States, Britain, the Netherlands, and Canada. Before that journey commences, however, Chapter 2 fleshes out the explanatory framework that I have only sketched in this introductory chapter.

Chapter Two

Defining the Scale and Pace of Policy Change

Policy frameworks comprise three key elements: they ordain a balance of influence among structural interests, they establish a mix of instruments to govern the interaction of actors, and they embed organizing principles – ideas about entitlements, obligations, and the function of the state. The interaction of these elements gives the framework a distinctive logic. In the first section of this chapter I justify in more detail why these are the definitive elements of policy frameworks, and why changes of scale therefore need to be assessed in terms of the degree and scope of changes in these elements and the distinctive logic they create; I illustrate the argument with reference to the health care arena. In the second section I turn to a discussion of pace, distinguishing between the pace of enactment and the pace of implementation, and explore in particular the varying sense of urgency political actors feel, depending upon their projections of future influence. Elements of Scale: Influence, Instruments, Principles, and Policy Logics In the previous chapter I defined one major variable of interest, the scale of change, as changes of degree and scope in the logic established by the policy framework governing decision-making over the allocation of resources. Policy frameworks, as state-sanctioned settlements, embed a balance of influence among interests, privilege certain instruments of social control, and embody certain legitimating principles. Why focus on these elements? What makes them the central features of policy frameworks in which we should be interested? How do they drive the characteristic logics of the policy regime?

Defining the Scale and Pace of Policy Change  37

The balance of influence: The state, private finance, and providers Policy frameworks ordain a balance of influence within the structure of interests in the arenas to which they apply. In effect policy frameworks ratify and crystallize the winning coalition of interests at the time of its establishment, and reinforce that balance of interests through its effects on decision-making logics. In any policy arena in an advanced democracy, the structure of interests derives from the arena’s intrinsic characteristics, within the overall parameters of a democratic capitalist political economy. In health care, the principal pillars of the interest structure are the state, private finance, and the medical profession – a classic trinity whose power is based in authority, capital, and knowledge respectively.1 This structure of interests derives from inherent characteristics of health care financing and delivery. Arguably the most definitive of these characteristics is the information gap between providers and consumers of care, which tilts the balance of influence in the arena dramatically towards providers of care. Even as the Internet makes copious amounts of information about particular ailments and remedies broadly accessible, the diagnosis and treatment of illness requires the ability to discriminate among various options and to tap specialized and systematic bodies of medical knowledge. It is rational in such circumstances for individual consumers to establish agency relationships with providers of care – to delegate authority to professionals who are expected to make decisions in the consumer’s interest. These agency relationships lie at the heart of the health care decision-making system, and they give physicians a central place in the structure of interests in the arena. Two other characteristics of health care, however – the uncertainty of illness and the burgeoning of health care technology – have important implications for the concentration of power either within the state or within the private financial sector. In all advanced nations, uncertainty surrounding individual adverse health occurrences with potentially high human and financial costs has led to the collectivization of the individual risks of requiring health care. In most nations this collectivization involves both public and private third-party payers, although in some nations private insurance is negligible.2 The public collectivization of risk establishes the state as a key pillar of the structure of interests in the health care arena. The existence of private insurance creates large pools of private capital, giving those who control that capital significant economic and political influence, the degree and scope of

38  Remaking Policy

which vary considerably across nations depending on the mix of health care ­finance. Similarly, technological development has driven demand for large capital investments. Given the labour-intensive nature of health care, capital expenditure accounts for only a small proportion of total health care expenditure, but it is essential to the provision of many services, giving substantial leverage to those who control large pools of capital, either publicly or privately, even in nations in which the consumption of service is largely publicly financed (OECD 2011; White 2007). Inherent characteristics of health care delivery, then, provide platforms of influence for providers, state actors, and private finance. But policy frameworks establish differential balances of influence among these interests in resource-allocation decisions at both the macro and micro levels. Because policy frameworks imply lines of accountability – defining to whom decision-makers are responsible, and for what – they create the array of incentives that permeates the system. These incentives vary in systematic ways, depending upon the relative weight of influence of state actors, private finance, and social actors such as, prototypically, the medical profession. State actors In policy frameworks that assign a strong weight of influence to the state, resource-allocation decisions are shaped by the incentives that bear upon government officials and elected politicians. These groups not only have their own sets of preferences and institutional incentives; they also must maintain a coalition of support. Accordingly, health care decision-makers themselves need to attend to the requirements of coalition-building and maintenance within the complex politics of the health care system, as well as to the preferences of the officials and politicians to whom they are ultimately accountable. To some extent these incentives derive from the bureaucratic position or political office held. Career ambitions and institutional commitments create incentives for officials to perceive and act upon issues from the perspective of their place within the organization of government. In Graham Allison’s classic phrase, “Where you stand depends on where you sit” (1971, 176). Similarly, elected politicians must read and respond to electoral circumstances to maximize the likelihood that they will obtain and retain positions of power. Ultimately, officials and politicians are thus constrained by, respectively, institutional mandates and electoral imperatives. And within these constraints, state actors

Defining the Scale and Pace of Policy Change  39

operate in networks with particular and distinctive requirements for coalition-building and maintenance.3 Nonetheless, neither officials nor elected politicians are mere conduits for institutional mandates, aggregate public preferences, or particular constellations of interests. They have a degree of autonomy to interpret mandates, attend to particular interests, forge coalitions, and act on their own preferences. Even Allison recognized that each actor “pulls and hauls with the power at his discretion for outcomes that will advance his conception of national, organizational, group and personal interests” (171, emphasis added). There is considerable debate as to whether politicians “pander” to the median voter or respond to narrower slices of the electorate or to elites (Jacobs and Shapiro 2000; Quirk 2009, 2011; Shapiro and Jacobs 2010). Alan Jacobs, however, argues convincingly for an assumption that elected politicians seek public office not merely for its own sake, but because it enables them to promote their preferred policy goals: “Professional politicians are … on average likely to be a group self-selected for a strong interest in the use of public policy to achieve social conditions that they value” (Alan Jacobs 2011, 32). A growing literature on entrepreneurship in the public sector points to the roles that politicians and officials (among others) can play in shaping and channelling the behaviour of other actors in normal times as well as during windows of opportunity (Crouch 2005; Kingdon 1995; Mintrom and Vergari 1996; Ostrom 2005). Policy frameworks that ordain a strong role for state actors thus have a range of potential implications for health care decision-making. The requirements of building and maintaining coalitions of support and making numerous trade-offs among objectives make for a complicated process that militates against rapid changes of direction. On the other hand, depending on institutional circumstances, such frameworks might leave health care decision-making vulnerable to ad hoc political interventions or to rapid changes of direction with changes either in government or in senior elected or appointed officials. In particular, such frameworks expose the system to swings in the broader fiscal agenda of the government of the day. A change in the weight of state actors as established by a policy framework thus can have sweeping implications for health care decision-makers, by either increasing or decreasing their need to attend to coalition-building, political preferences, and fiscal circumstances.

40  Remaking Policy

Private finance Under any policy framework that gives a heavy weight to private finance, decision-making dynamics and lines of accountability will depend on the characteristics of the industry in question – in particular, on the degrees to which capital is pooled, the market is concentrated, and ownership and control of capital take for-profit, not-for-profit, and proprietary forms. In the health care arena, as noted above, leaving the functions of collectivizing risk and/or providing health care infrastructure in private hands generates the need for large pools of capital on the demand side and for large investments in capital plant (as well as small-scale proprietary professional practices) on the supply side of the market.4 Historically in most advanced nations, ownership of these capital pools and facilities took a not-for-profit form such as mutual aid societies, benevolent societies, and institutions governed by community boards or religious societies. The advent of comprehensive public insurance displaced these private organizations on the demand side of the market to varying degrees across advanced nations. But public insurance also altered incentives on the supply side in a way that encouraged the development of for-profit ownership and also made for a progressive convergence of the incentives facing for-profit and not-for-profit firms and organizations. The advent of government as insurer essentially guaranteed an income stream for providers, thus dramatically increasing their attractiveness as investments (Silvers 2001, 1020–1). Although the terms of remuneration under government plans also variously restricted opportunities for profit, organizations could still attract investment by building volume through increasing market share, especially if they could then use that market share as a base for the marketing of private supplementary services. This drive for growth was reinforced by the general trend of firms seeking growth in order to be attractive on equity markets, as opposed to focusing on longer-term shareholder value (Conyon 2006; Guay 1999; Hall and Murphy 2003; Martin 2011). A not-for-profit structure might be assumed to establish a different objective function for senior executives, emphasizing objectives of importance to the community served and to employees, weakening the incentive to focus on financial performance and elevating the importance of stability (Newhouse 1970). But to the extent that not-for-profits finance their capital requirements through borrowing – as they are encouraged to do under certain public policies, such as those allowing them to issue tax-exempt bonds – they are exposed to capital markets

Defining the Scale and Pace of Policy Change  41

even without taking equity investments. As Silvers notes, institutional lenders act as “intermediaries entrusted with other peoples’ money” who must focus on the financial performance of the entity to which they lend in order to assess the ability to repay interest and principal (Silvers 2001, 1023). Changes in the form of public payment for hospital services further eroded the for-profit/not-for-profit distinction. The shift from costbased to diagnosis-based payments, pioneered in the United States but widely emulated in other nations, was intended to drive efficiencies by providing payment according to a standard schedule, not based on a hospital’s costs for a given episode of care. Hospitals that could provide diagnosis-related treatment more efficiently could retain the surplus, regardless of the nature of their ownership (Silvers 2001, 1021). Furthermore, the general push for market share meant that chief executive officers of not-for-profit firms in more competitive markets were pressed to adopt strategies (such as trimming nursing staff) similar to those of their for-profit rivals (Brickley and Van Horn 2002). These trends were most apparent in the US mixed market, where the adoption of Medicare for the elderly – and to a lesser extent Medicaid for poor families – in the 1960s provided hospitals with a secure revenue base while continuing to serve private patients, and where, as noted, diagnosis-based payments were first adopted. In other nations the extent to which these trends were manifest depended on their own national policy frameworks. In some cases, such as the Netherlands and Canada, for-profit ownership of hospitals was essentially banned. In other cases, such as the United Kingdom, private hospitals were held to a small and marginal private sector, while public hospitals were allowed to take private patients. In Germany, however, where private hospitals were permitted, although regulated differently than in the United States, changes in public finance in the 1980s – the adoption of diagnosis-based payments and the reduction of capital subsidies – led to a marked increase in the overall market share of for-profit private hospitals, the concentration of the private hospital market, and the conversion of numerous public hospitals to private status (Klenk 2011). In summary, an increase (or decrease) in the weight of influence accorded by the policy framework to private finance will increase (or decrease) the need for health care decision-makers to take into account the incentives of those who control large pools of private capital, whether those incentives are transmitted directly through equity markets or

42  Remaking Policy

indirectly through debt instruments. Experience suggests that these incentives lead to risk-taking in the allocation of resources, particularly in pursuit of growth and expanded market share, and in resultant market volatility. Professionals The third base of power with which we are concerned, in addition to authority and capital, is knowledge, expertise, or specialized skill. The quintessential embodiments of such power are the major professions, whose legitimacy is grounded in commitments to exercise their expertise in the public interest (Elliott 1972). Among these groups the medical profession has stood as a “paragon” in its ability to translate specialized knowledge into economic strength, political influence, and social regard (Peterson 2001, 1147; see also Arrow 1963; and Freidson 1970). The medical profession was, as Moran puts it, “the first great interest in health care to achieve effective organization; and as mass consumption of health care developed in the wake of the transformation of the curative efficacy of medicine, [doctors] emerged as the managers of the consumption process” (Moran 1999, 186–7). Because of its early dominance, the medical profession was treated in much of the literature of health policy as sui generis in its position of power – as a cartel in the market (Kessel 1958) a hegemon in the political arena (Eckstein 1960; Garceau 1941; Hyde et al. 1954), and a pillar of regard in society (Elliott 1972; Freidson 1970). But much of the subsequent story of health care politics in advanced nations is about the ways in which the medical profession has come to share or cede its position of pre-eminence (Alford 1975; Peterson 2001; Starr 1982; Wilsford 1991). Policy frameworks now vary considerably across nations in the positions they assign to physicians in accountability chains, and these differences, over time, constitute an important aspect of the scale of change I investigate in this book. Policy frameworks assigning dominant positions of influence to professional providers mean that decision-makers ultimately are held accountable for meeting professional objectives – essentially requiring that resources be allocated in accordance with professional conceptions of need (Boulding 1966b). Such frameworks elevate the agency role of professionals to a central position in decision-making on behalf not only of individuals but of society as a whole (Arrow 1963; Peterson 2001; Tuohy and Glied 2011). Resource allocation on the basis of professionally determined need has a number of implications. The agency role of professionals puts them, at least in theory, in a position to

Defining the Scale and Pace of Policy Change  43

“induce” demand for their own services and those of their colleagues. Economists have long debated the question of the extent of “supplierinduced demand” in health care. Some argue that the agency role of physicians creates a conflict of interest, since, in addition to meeting needs as professionally defined, decisions about the allocation and distribution of resources affect the labour (and income) of professionals themselves (Evans 1997; Rice and Labelle 1989). Others argue that various market checks constrain the ability of physicians to behave in this way (Feldman and Sloan 1988, 1989). Empirical evidence, however, that physicians change the volume and/or mix of their services in response to changes in prices is mixed (Pauly 1994a). But there is another, less contested, sense in which the phenomenon of supplier-induced demand occurs. A perfectly altruistic agent might still induce demand for services other than those a patient would choose given the same information. Even with their greater expertise, professionals do not function in a world of perfect information. Diagnosis – the process of “classifying a particular patient so that the probabilities of existence of disease, extent of disease and treatment outcomes are reasonably ascertained” – requires the exercise of clinical judgment in the face of residual uncertainty (Wennberg, Barnes, and Zubkoff 1982, 812). The probabilities of the outcomes of various courses of treatment also might be more or less well understood, depending on the type of presenting problem. The judgments of individual professionals under such circumstances are likely to vary from one another, let alone from what in theory well-informed patients would choose. And individual professionals also might have different “tastes” than their patients in making risk-benefit trade-offs – weighing surgical versus pharmaceutical courses of treatment, for example. The phenomenon of supplier-induced demand – if not of the conflict-of-interest variety, then at least of the uncertainty-driven variety – must be addressed in any health policy framework; and it is particularly acute in frameworks that place professionals at the apex of the accountability chain. Changes in the policy framework that increase the influence of medical professionals might, on balance, increase the volume and/or complexity of medical services provided. But in any event such changes are more likely to generate greater variation across regions and sites of health care delivery than would be the case under state-­mandated arrangements and a greater stability in this pattern of variation than occurs with the privately motivated pursuit of market share. These effects, however, will depend upon the balance between

44  Remaking Policy

the autonomy of individual practitioners and the collective enforcement of professional norms.

The mix of instruments: Hierarchy, exchange, and peer control In addition to their implications for the balance of influence among interests, policy frameworks establish the instruments of control that govern the relations among these interests. Essentially three modes exist for governing these relations: hierarchy, the market, and persuasion through social processes. This trilogy occurs, with slightly different terminology, throughout the literature of social science. Lindblom (1977) refers to “authority, exchange, and persuasion,” Boulding (1966a) to “the threat system, the exchange system and the integrative system,” Fuchs (1993) to “central direction, the market, and traditional norms,” Bemelmens-Videc, Rist, and Vedung (2003) to “carrots,” “sticks,” and “sermons,” Stein (2006) to “hierarchy, market and networks.”5 In my own work on health care, I use the categories “hierarchy, market, and collegiality” (Tuohy 1999). Generically we can think of these categories as using rules, payments, and norms, respectively, to achieve compliance. Hierarchies are rules-based systems of command-and-control. They achieve compliance by enforcing rules through the exercise of organizational authority in superior-subordinate relationships or through inspection and enforcement in regulatory regimes. Legislative prescriptions and proscriptions with specified sanctions are quintessential examples of rules-based instruments. Exchange-based (typically market) systems rely on payments through voluntary exchange, often formalized in contracts. Compliance with collective objectives is achieved by altering prices or other payoffs for different types of behaviour. Contracts providing payment for expected performance and so-called Pigouvian taxes (instituted to discourage socially undesirable behaviour) are examples of market-type compliance mechanisms in a public policy setting. Norms-based mechanisms fall into two categories. First, there are persuasive attempts to link desired behaviour to social norms or to seek to establish or modify social norms to support desired behaviour. Much of the “public education” activity of governments and public health advocates falls into this category. The second category is peer control within organized groups. Self-regulation by peer groups, for example, is a well-established mechanism in the health care field where groups of practitioners have access to  highly specialized expertise. Norms-based compliance mechanisms

Defining the Scale and Pace of Policy Change  45

have been widely relied upon in institutional systems marked by elite accommodation in which the leadership of various organizations, including government, is linked in trust-based social networks. Although deference to elites has declined, somewhat looser models of “networked” or “collaborative” governance have grown in significance, both in practice and as a focus of study, as legitimate modes for the making and implementation of public policy.6 The mix of hierarchical, exchange-based, and norms-based instruments of control determines the sanctions that various actors can bring to bear on decisions and the types and flows of information necessary to enforce those sanctions. In hierarchical systems, compliance with rules is enforced by sanctions related to job security and career advancement (in the case of organizations) and prosecution (in the case of regulatory regimes). The type of information required will vary depending on the types of rules prescribed and on the context in which they must be enforced. Hence hierarchies place considerable discretion in the hands of senior officials as to the type of information required and the mechanism of enforcement (Hood, Rothstein, and Baldwin 2001). Information requirements may be standardized or adapted to the requirements of particular cases, times, and localities. Officials might take approaches to monitoring compliance that range along a spectrum from active to passive – relying on inspections, audits, reports submitted by subordinates, or alerts from third-party “whistle-blowers.” They might adopt strict, automatic, or “mechanical” interpretations of compliance requirements, or a more discretionary, adaptive interpretation. Shifts across the various types of information required, methods of information gathering, and styles of enforcement can, and typically do, occur within hierarchical systems over time without changing the essentially rules-based character of the system. (An example of such shifts, as we shall see, is the adoption and abandonment of centrally determined targets as mechanisms of enforcement in the British NHS.) In systems based on mutually agreed-upon exchange, in contrast, the effective sanction for each party is the ability to exit the relationship in favour of another, more advantageous exchange without giving up employment or facing prosecution. Typically the exchange takes the form of a payment for a deliverable. Both parties need to agree on the terms of exchange: what is to be supplied and for what price. Suppliers need to know what payers want; and payers need to be able to assess whether the contracted-for good or service has been delivered. If these exchanges occur on a one-off basis, the information demands

46  Remaking Policy

on suppliers and payers regarding preferences and performance can be substantial. To reduce these information costs, payers and suppliers might enter into various forms of longer-term relationships that might increase the costs of exit, but the relative ease of exit remains key to the dynamics of such exchange-based relationships. The resultant heterogeneous and turbulent nature of these systems provides fertile ground for Schumpeterian entrepreneurial innovation (Crouch 2005; Ostrom 2005; Schumpeter 1934). These aspects of exchange-based systems are critically important to understanding how “market-­oriented” reforms have played out in the health care arenas of the countries under review in this book. Finally, in norms-based systems of peer control, sanctions relate to standing in the community of peers. Those who transgress peer norms risk losing the esteem and trust of their colleagues. This is an especially powerful sanction in professional communities, but, as we shall see in the English hospital sector and the Dutch private insurance sector, it can apply as well among senior executives, even in competitive settings. Peer control systems can be more or less formalized. But because they rely so heavily on trust and common understandings, the informationgathering requirements of peer-control systems tend to be more modest than is the case in hierarchical and, especially, market systems. And because peer norms are consensually developed, these systems have neither the ability of hierarchies to make abrupt changes in top-down directives nor the ability of markets to generate unexpected innovations. Egregious instances of abuse of trust, however, can trigger abrupt shifts to more hierarchical measures of control within the professional group in order to defend the reputation of the group as a whole.

Organizing principles: The basis of entitlement and the functional role of the state Substantial shifts in the balance of interests and/or the mix of instruments, because they affect decision-making about resource allocation, represent two elements of large-scale change in a policy framework. The third key element is ideational: it relates to the broad legitimation of the framework. Policy frameworks embed particular organizing principles that establish the shared understandings about what constitutes legitimate behaviour. These understandings guide the exercise of discretion by decision-makers, and provide the ground on which broader public support is based. In the case of welfare-state frameworks, organizing

Defining the Scale and Pace of Policy Change  47

principles have to do with two fundamental questions: the legitimate basis of eligibility and payment for benefits, and the appropriate function for the state. The legitimate bases of eligibility The concept of the welfare state implies state intervention in the economy and society to secure the well-being of its citizens. As Alber (1988) has classically argued, this general definition of the welfare state allows for a wide gamut of variation as to scope of eligibility, range and quality of benefits, instruments of provision and mechanisms of finance. Different provisions regarding these various parameters reflect different orientations to community and individual autonomy, which in  turn imply different ways of thinking about need, risk, rights, and obligations. What types of need warrant a claim on society’s resources through the state? Put differently, from what risks must the state shelter its citizens? Which risks must be collectivized and which can be left to private decision-making? Does citizenship confer a right to certain benefits, conversely imposing an obligation to contribute to collective provision? If so, how should that obligation be enforced – through the tax system or through regulation? If not citizenship, should eligibility be based on some other status, such as occupational position or group membership, and be mediated by bodies in civil society? Let us first consider concepts of needs warranting a collective response. Such needs can be defined expansively to apply to all those in a particular life situation who make certain demands on their resources: “seniors” (arbitrarily defined as those above a given age), parents of “young” children (again as arbitrarily defined), students, the sick, the disabled, and so on. Need can also be defined more narrowly to apply to those who face threats to their well-being that cannot be addressed adequately through market exchange or voluntary social action: those in “poverty” (by some definition), the unemployed, and so forth. In any case a crucial aspect of the definition of “need” is its inherently paternalistic provenance. If individuals assess their own “needs,” there is little to distinguish needs from demands (Boulding 1966b). Demand, while essential to the functioning of markets, does not provide a claim on society’s resources through the state. The concept of need implies some impartial assessor with the knowledge and information to judge what is required for the individual’s well-being in a particular circumstance. This paternalistic flavour brings the concept of need into conflict with liberal notions of individual autonomy; and

48  Remaking Policy

in liberal democracies this yields an ongoing ideational tension within the welfare state. Numerous commentators have argued that there has been a general decline in confidence in state actors and “experts” to manage policy problems – and indeed a growing sense that “expert” management has made things worse (Nevitte 1996, 2011; Taylor-Gooby 2004a; Taylor-Gooby et al. 1999). Concepts of need have shifted over time along with the emergence of new risks. Taylor-Gooby and his colleagues distinguish between “old” and “new” social risks. Old risks relate largely to potential disruptions of income in an industrial society with a norm of stable (largely male) employment, prompting the classic welfare-state programs of retirement pensions, unemployment insurance, health care services, and a basic floor of income support. New risks emerged from the transition to a post-industrial society and associated social changes, creating “needs for child and elder care, new rights for women in relation to paid work, measures to ease the transition into paid work, particularly for unskilled people, and the problems of social exclusion arising for some groups from policies like pension privatization” (Taylor-Gooby et al. 1999, abstract). Public health care plans and other classic welfarestate programs must now compete with these emerging claims and vice versa. Meanwhile the reform and retrenchment of established welfarestate programs has shifted some “old” risks back to individuals, especially in the areas of social assistance and pensions (Hacker 2004, 2005). A growing number of OECD countries have reformed their definedbenefit public plans to shift some longevity risk to individuals by converting to defined-contribution plans, notional accounts, or adjustment of benefits (Whitehouse 2007). These claims on the welfare state essentially turn on beliefs about the rights and obligations of citizenship. What do citizens owe one another as citizens? At what point do these citizenship obligations bump up against the value of individual autonomy in liberal democracies, or compete with other moral bonds of community? The welfare state, whatever its design, is built on the premise that the state is a vehicle through which citizens attend to the “needs of strangers.”7 These relationships between strangers take the form of obligations and rights: paying taxes to meet the needs of others is an obligation of citizenship; having one’s one needs met is a right of citizenship. The mediating role of the state creates social distance between those who give and those who receive, and this buffer provides a measure of dignity for those who receive benefits. Somewhat ironically, however, the welfare state,

Defining the Scale and Pace of Policy Change  49

with its impersonal relationships between mutually anonymous citizens, has also been criticized for eroding the bonds of community. This is the other tension inherent in the modern welfare state, alongside that between paternalism and individual autonomy. It has long roots: for example, in the tension between “solidarity” within society as a whole and “subsidiarity” – implying that needs should be addressed at a level as close as possible to the individual and the household – that characterizes much European social thought. It is also manifest in contemporary liberal welfare states: for example, in the voluntaristic thrust of the “Big Society” agenda of the Conservative Party in Britain under David Cameron (Blond 2008; Norman 2010). Even liberal supporters of a robust welfare state recognize this tension. Ignatieff, for example, argues that the “mediated” nature of supportive relationships in the welfare state, while reducing the stigma of dependence, also “walls us off from each other. We are responsible for each other, but we are not responsible to each other” (Ignatieff 1984, 10). The legitimate function of the state In addition to the legitimate basis for claims to benefits, the other fundamental organizing principle of the welfare state concerns the legitimate function of government. This question of the particular functional role of government is distinct from the question of the overall weight of state influence prescribed by the policy framework. Any policy framework contains some inherent justification of the presence of government – to foster, supplement, or supplant the workings of market forces and social networks – and a corresponding understanding of the capabilities of the state. Government may act as provider of services – owning and operating the means of producing benefits. This is most obvious in contributory public pension plans, where funds are held and managed by government agencies, and in national health services, where facilities are owned and providers are employed by the state. Alternatively government may act as payer, providing cash benefits or purchasing in-kind benefits from private sector providers – as in the case of income-transfer programs and, in the health care arena, the case of “single-payer” health insurance. In its role as a payer of in-kind services, government may act as a passive reimburser or active purchaser. Government may play a more limited role as a payer by subsidizing the private market on either the demand or the supply side. Government plays a pure regulatory role when it controls private activity through the issuance of authoritative rules, without otherwise taking part as

50  Remaking Policy

an economic or social actor. Government may delegate its authority by giving certain private actors a mandate to achieve public objectives, as in the case of professional or industrial self-regulatory bodies. Finally, government agencies may function as market participants, as in the case of state enterprises. The health care arena has been a crucible of ferment for these ideas in recent decades. On the one hand, market-oriented reforms in health care policy represent an increased emphasis on autonomous choice as the basis of legitimate claims. On the other hand, market-oriented reforms as introduced in the United States, Britain, and the Netherlands have also embodied understandings of risk – and the limitations of private markets in dealing with those risks – that legitimate the use of the coercive power of the state to enforce citizens to share risk, either through taxation or through mandated private coverage. But, while legitimating the coercive power of the state in these respects, the ideas embedded in new policy frameworks have shifted the understanding of the state’s functional role. In particular, the notion of the state as provider (as opposed to payer or regulator) has been challenged under various market-oriented reforms in health care as in other areas of the welfare state.8 Changes in these organizing principles of entitlement and government function constitute an important measure of the scale of change in a policy framework, but they are even harder to show convincingly than are changes in the balance of influence and the mix of instruments. Organizing principles can be inferred from policy frameworks, but they might or might not be explicitly invoked by protagonists. Throughout this book, a key analytic challenge will be to draw on both inference and explicit claims to persuasively demonstrate shifts in these principles. In this regard a key question is whether such shifts are necessarily driven by broad ideological agendas or can be generated by other, more instrumental factors. In the terms of Peter Hall’s (1993) framework cited earlier, can changes in instruments trigger third-order paradigm changes involving ideational shifts as well? In Germany, for example, a move from the pay-as-you-go financing of pensions to a funded model in the late 1990s blurred the distinction between public and private pensions and opened up ideational space for a greater role for the private sector – although the degree of change was constrained by the prevailing structure of interests (Alan Jacobs 2011, 230–3). Conversely universal programs might reflect an egalitarian ideological animus, but they also might be driven by more instrumental rationales. In the latter case, for

Defining the Scale and Pace of Policy Change  51

example, a universal mandate to hold and/or to provide basic health insurance coverage was instituted in the US health care reforms of 2010 to avoid free-rider problems in an integrated framework of insurance regulation, but soon became an ideological rallying point for conservative opponents. This latter example also illustrates how a policy change might be framed by its proponents (or challenged by its opponents) as representing a dramatic new set of ideas even if the scale of change in structural balance and instrumental mix is more modest, raising the political stakes and sharpening partisan conflict – as also occurred in the British health care reforms of 2010–12.

Policy logics: The intersection of influence, instruments, and principles The various prescriptions of any policy framework, as they apply to the balance of influence, mix of instruments, and grounds of legitimacy, do not operate in isolation; rather, they intersect with one another to create a distinctive logic: a set of expectations about the rewards and sanctions attached to various actions. Consider first the ways in which the provisions regarding influence and instruments might intersect (Table 2.1). To a point, there is a natural affinity between certain bases of influence and certain mechanisms of social control, as shown along the diagonal in Table 2.1: state actors in the case of hierarchical instruments, private finance in the case of market mechanisms, and professionals in the case of peer control. Each of these affinities implies a logic. State hierarchies strike a balance of multiple objectives, grounded in a political coalition of support, and enforce that balance through superior-subordinate relationships without having to renegotiate the balance at each step. The logic of private markets, in contrast, is built on multiple negotiated exchanges in which each side seeks to gain from trade. The operation of this logic depends fundamentally on the degree of concentration of capital (and hence economic power) on either the supply or the demand side or both. Professional systems of peer control are built on a shared knowledge base and therefore tend to be closed to “non-expert” input. There is not, however, necessarily a strict correspondence between state actors and hierarchical means, private finance and market mechanisms, and professional groups and peer control. In addition to outlining the various possible regimes that can result from the intersection of different dominant bases of influence and modes of control, Table 2.1 also demonstrates that, even if the balance of influence among interests prescribed by a policy framework does not significantly change, a shift in the

52  Remaking Policy Table 2.1. Logics Resulting from the Potential Intersection of Bases of Influence and Instruments of Control Instrument of Control

Base of Influence State (Authority)

Private Finance (Capital)

Professions (Expertise)

Hierarchy (command)

Bureaucracy

Oligopoly/monopoly

Corporate practice, corporatism

Market (exchange)

“Internal market,” mandatory market

Voluntary market competition

Reciprocity, mutual obligation

Peer control (persuasion)

Public guidance, “nudges”

Industry codes

Self-regulation

relative weight of hierarchical, exchange-based, and norms-based mechanisms of social control still can bring about a change of scale of considerable magnitude in the logic of interaction among actors and vice versa. Although not possible to depict within the two-dimensional confines of Table 2.1, each of the ideal types on the diagonal of the table (state bureaucracy, private competitive markets, and professional self-­ regulation) has a corresponding “pure” legitimating principle of eligibility for services, grounded respectively in the recipient’s status as citizen (a state-granted right), consumer (a market-exercised demand), or patient (a professionally judged need). Similarly each of these ideal types corresponds to a different set of functions for the state: provider in the case of state hierarchy, regulator (and possibly subsidizer) in the case of private competitive markets, and “delegator” (and possibly passive “payer”) in the case of professional self-regulation. For other cells of the table, the legitimating ideas are more complex. In “internal markets,” for example, the state ordains certain actors, who contest to varying degrees for public resources to offer services to recipients who are entitled to them as citizens but who are able to exercise consumer sovereignty by choosing among competing suppliers. Similarly policy frameworks that establish a universal mandate conflate the citizenship and consumer bases of eligibility by requiring citizens to purchase services or coverage and entitling them to subsidy as necessary. These different principles regarding the function of government are also consistent with different weights of influence for the state, and different mixes of instruments to be used in the exercise of that influence. The “provider” role, for example, gives the state strong influence over

Defining the Scale and Pace of Policy Change  53

the benefits in question; but it is consistent with either a broad or a narrow definition of the benefits to be provided, and hence allows for a relatively strong or weak presence for the state within the arena as a whole. And although the provider role might seem to imply a heavy weight for hierarchy in the mix of instruments of control, it also allows for the use of exchange-based mechanisms among units of the state, as we shall see in the case of the “internal market” reforms of the 1990s in the British health care arena. To take another example, a “payer” role for the state is consistent, as in the private sector, with a passive thirdparty-payer stance or a more aggressive role in managing consumption.

Transforming the logics of health care policy: Four nations By the 1970s the basic architecture of health policy (principally relating to physician and hospital services) had been established in northern Europe and the English-speaking countries. As noted in Chapter  1, four ideal types can be distilled from the variety of models that had come into being, each representing a different architecture of interests, a different combination of the instrumental instruments of control, and a different set of organizing principles. The pre-reform health policy frameworks of the United Kingdom, the Netherlands, Canada, and the United States corresponded roughly to one of these pure models: • the national health service or Beveridge model (represented by the United Kingdom), in which hospitals are owned by the state, physicians are employed by or under contract to the state under a hierarchical model, coverage is universal, and funding comes largely from general taxation. This model places a heavy weight on state influence and hierarchical control. Eligibility for coverage is universal as a right of membership in the polity, and the function of the state is as provider of health care. • the social insurance or Bismarckian model, in which coverage is provided through sickness funds that negotiate with and remunerate hospitals (owned by subnational authorities or not-for-profit corporations) and ambulatory care physicians in private practice. Financing takes the form of mandatory contributions to the sickness funds by employers and employees, subsidized by the state, and coverage is based on occupational, regional, or other categories but is nearuniversal. This model (represented by the Netherlands) establishes a relatively even balance of influence, and assigns a central role to

54  Remaking Policy

peer associations on both the provider and the purchaser (insurer) sides. Eligibility for coverage is based on group membership,9 and the function of the state is as delegator and regulator. • the single-payer model (represented by Canada), in which physi­ cians are in private practice and hospitals are operated by local and not-for-profit bodies, physicians and hospitals are remunerated through a public authority from general tax sources, and coverage is universal. This model draws governments and health care providers into a tight accommodation that combines state hierarchy and professional peer associations in a bilateral monopoly. As is the case in Beveridge systems, eligibility for coverage is universal as a right of membership in the policy, but the function of the state is as payer, not provider, of health care, and as delegator of regulatory control. • the residual model (represented by the United States), in which the private market is the principal provider of insurance coverage, with public “safety net” programs, typically for low-income recipients and the elderly. This model clearly places a heavy weight on private finance and market mechanisms, with the state as one, albeit large, purchaser in the market. Membership in the polity carries an entitlement to public coverage only for certain defined groups. The principal basis of access to coverage is as consumer (although for most this relationship is mediated through employers), and the function of government is as payer (to purchase care for designated groups) and subsidizer (principally through the favourable tax treatment of employer-based insurance benefits). Even as originally established, the British, Dutch, US, and Canadian systems contained elements other than those implied by the ideal types to which they most closely correspond. In the British case the weight of state hierarchy was tempered by a foundational bargain preserving an influential role for the professional judgment of individual physicians, both within the regional managerial hierarchy and in hospital and medical practice. In the Netherlands the social insurance model covered less than two-thirds of the population: the highest-income groups (about 30 per cent of the population) relied on private insurance, while about 7 per cent were covered by government plans for civil servants and the military, and the entire framework was underpinned by a universal program of coverage for chronic and long-term care. In the United States the “residual” single-payer programs for the elderly and the poor, plus government plans covering government employees,

Defining the Scale and Pace of Policy Change  55

military personnel, prison inmates, and others, brought public spending to almost half of total health spending by the turn of the twenty-first century. Importantly, however, the role of the state in the US system extended beyond this residual function: it was embedded in the private market through a web of regulation, subsidies, and delegated mandates (Grogan in progress; Mettler 2010; Morgan and Campbell 2011a, 2011b) that wrapped around, supported, and complemented formally private entities. Indeed if one considers government tax subsidies to employerbased private health insurance, public spending had come to constitute more than half the total (Grogan in progress). Because this conditioning role of the state is occluded behind and configured by the high profile of the private market, I term it here the “shadow” state. Finally, Canada’s single-payer system applied only to physician and hospital services – all other services were left to a mix of public and private finance, largely on a “residual” model, that varied across provinces. The principal empirical project of this book is to trace the conditions under which these foundational policy frameworks and their associated logics were transformed in Britain, the Netherlands, and the United States while remaining essentially unchanged in Canada. Anticipating the discussion to come, these shifts can be briefly encapsulated within the terms of Table 2.1 as follows: from “bureaucracy” towards the “internal market” in England, from “corporatism” towards an “oligopolistic,” albeit tightly regulated, universal regime in the Netherlands; and from voluntary market competition towards a mandatory market regime in the United States, while the Canadian regime continued to straddle all three cells of the diagonal. I argue that political actors embarked on these major scale shifts under political and institutional circumstances that placed them in particular strategic domains of choice. To further lay the groundwork for that argument, I need to consider the other dimension of major policy change in addition to scale – namely, the pace at which change is pursued. The Pace of Policy Change: Historical and Strategic Perspectives Various models of policy change have treated policy outcomes as historical phenomena, showing how policy outcomes were shaped by accidental conjunctures of the trajectories of different processes – or, conversely, by cumulative positive or negative feedback effects over time. The insights of historical institutionalism have been highly influential in my own work, and continue to inform this book. My focus on timing here,

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however, adds another dimension: I consider timing to be an aspect of the strategic choices political actors have made in bringing about policy change. These judgments vary according to the time horizons of the actors and, in particular, their projections of future influence, as they read the political and institutional circumstances in which they find themselves. This second understanding of the importance of timing is in fact complementary to a historical understanding: it deals with the judgments made at particular historical moments, judgments that then shaped the subsequent unfolding of events. In this section I lay out each of these treatments of timing, and look ahead to how they inform later chapters of the book.

Timing as history: Continuous and discontinuous change A major point of contention among students of public policy concerns the relative importance of continuity and discontinuity in explaining the dynamics of policy change. A related area of dispute concerns the relative importance of endogenous and exogenous forces in explaining change. It is common ground that the “normal” process of policy change is incremental. But numerous questions remain. How can the “normality” of incremental processes be explained? Can incremental processes cumulate to major change over time? Or does major change require some external shock that disrupts normal processes? If so, can the factors that bring about these external shocks be generalized across cases to produce some predictive hypotheses? Or are we reduced to explaining these shocks after the fact as idiosyncratic cases? These debates are well-travelled territory, but that does not make the quest for new insights any the less compelling. In what follows I review briefly the major contributions to the debate, and suggest some ways of breaking new ground. Positive and negative feedback The dynamics of incrementalism in policy change can be understood as matter of feedback – that is, as a function of processes that are endogenous, or internal, to the policy arena in question. Positive feedback effects reinforce the status quo: as various interests become invested in the system, the costs of exit – that is, change to a new path – become higher and higher, and only marginal adjustments are possible (Pierson 2000; 2004, 65–71). Hence the sequence – the “temporal ordering” – of policy choices is critical to the substance of policy development over

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time (Pierson 2004, 71). Although this concept of path dependency can be applied to the understanding of a variety of social phenomena, it is especially relevant to political processes, marked as they are by webs of mutual understanding, institutional commitments, authoritative sanctions, and degrees of complexity and opacity that hinder the learning processes that could lead to change (Pierson 2000). Together these features lead to the evolution of intricately interlaced “fences” against departure from a given path of action. Not all feedback is positive, however. Any policy framework involves trade-offs: it implies a balancing of interests, a selection of instruments, and an emphasis on certain grounds of legitimacy. Some interests will remain dissatisfied – no instruments are perfectly suited to the challenges to which they are put – and contesting ideas about the grounds of state action will not disappear. A policy framework is in effect a type of “institutionally induced equilibrium,” maintaining a given balance among interests, instruments, and ideas in the context of some residual destabilizing forces (Schneider and Teske 1995; Shepsle 1979). These residual forces drive processes of negative or “self-undermining” feedback (Jacobs and Weaver 2015). Whereas positive feedback increases the costs of deviating from the status quo, negative feedback increases the cost of maintaining the status quo versus available alternatives. Jacobs and Weaver describe a number of potential mechanisms of negative feedback, such as the emergence of unanticipated consequences that impose costs on erstwhile supporters, or an expansion of the policy menu that increases the opportunity costs of maintaining the status quo. As discussed below, another powerful source of negative feedback is the persistence of unreconciled interests and objectives in the wake of any given policy settlement. The question of gradual transformation It is at least theoretically possible that either positive or negative feedback could culminate in transformative change over time. In the bestknown presentations of this argument, Streeck and Thelen and their colleagues describe various mechanisms whereby gradual small changes can alter the fundamental logics of policy systems. They draw examples from advanced nations, most of which involve the progressive “liberalization” of advanced political economies in the absence of explicit political mobilization or episodes of discontinuous change (Hacker 2004; Streeck and Thelen 2005a). Even as positive feedback works to maintain the status quo, various channels of negative feedback might

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result in small changes with large effects over time. Almost all the phenomena these authors describe involve a shrinkage of the relative scope of an established policy framework relative to new or previously suppressed elements. Two of these channels require deliberate action on the part of would-be agents of change (presumably those who bear the cost of the status quo), while leaving the established framework untouched: “layering” (the grafting of new elements onto existing policies and institutions) and “displacement” (the creation of a rival structure to which participants in the system defect over time). Two other channels require only a failure to act to adjust the established framework to new challenges: policy “drift” occurs when the established framework cannot deal with new manifestations of the problem to which it was originally addressed, even as it continues to perform its core function, while policy “exhaustion” can be seen as an extreme form of drift, when the established framework is overwhelmed by the unanticipated growth of the problem to which it was originally addressed. Only one of the mechanisms described by Streeck and Thelen does not involve a shrinkage of scope – namely, “conversion,” which occurs when the established policy framework continues to thrive as a vehicle, but is put to new purposes favouring a different balance of interests. For Streeck and Thelen, institutional transformation occurs at the pace at which actors switch from one institutional logic to another – which might involve a rapid dislocation, but which also might “happen gradually and continuously” (2005b, 18). These authors and their colleagues give examples of such gradual transformation through the various mechanisms described in the preceding paragraph, drawn from the fields of income security, financial regulation, competition policy, and labour relations. It is difficult, however, to find empirical examples of such cumulative  transformations of the intrinsic logic of policy frameworks in the health care field in the absence of some window of opportunity in which a phase transition is triggered. Palier describes an incremental process of change in the logic of the French health care system, which he variously characterizes as “layering” (Palier 2005) and “conversion” (Hassenteufel and Palier 2008), in which elements of general taxation and means-tested benefits were introduced and increased within a system based on social insurance contributions through the payroll system. But this process was strongly punctuated by an episode of health care reform as part of a highly contested set of broader social policy reforms under the government of Alain Juppé in 1995 – and which ultimately led to Juppé’s

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resignation – in which the power of the state was increased and the momentum of change accelerated. Hacker (2004, 2005) describes a process of “drift” in the US and Canadian health care systems, in which the failure to adapt public programs adequately to changes in medical technology and (in the US case) contractions in employer-based coverage led to a shrinkage of the scope of coverage for at least some segments of the population. Conversely, Colleen Grogan (in progress), surveying this landscape, describes the gradual augmentation of the public components of the US system (especially Medicaid) as comprising “America’s hidden national health system.” Medicaid, initially conceived as a program for the “medically indigent,” came to include middle-class beneficiaries: elderly recipients of long-term care and children (Grogan and Patashnik 2003). I address these characterizations in later chapters to argue that what nonetheless stands out in the Canadian case – and in the US case until the Obama reform episode of 2009–10 – is not the transformation of the defining logics of the systems, but their continuation through incremental change. In the United States, the persistent logic of an employer-based system, undergirded by public programs for some not in the workforce, was reflected in the rise in the share of total health expenditure borne by private insurance (from 20.6 per cent in 1970 to 32.7 per cent in 2010) and  by Medicare and Medicaid (from 17.4 per cent to 35.7  per cent), while the proportion borne by households declined (from 33.4 per cent to 11.6 per cent over the same period.) Against these long-term trends the decline in private insurance coverage from a peak of 34.6 per cent of total health expenditure in 2005 to 32.7 in 2010 appears marginal. In Canada the scope of the single-payer system of universal first-dollar coverage, applying as it did only to physician and hospital services, contracted as technological change moved more and more services out of hospitals. But, as I argue in Chapters 4 and 9, that same single-payer design established a bilateral monopoly comprising medical associations and provincial governments that continued to form the system’s central political axis and to generate its defining logic. Katherine Boothe offers an explanation as to why incremental reforms fail to cumulate to larger effects, which is relevant to the ar­ gument presented here. Boothe looks to the importance of elite ideas and public expectations, or “adaptive expectations at the elite and the mass levels” (Boothe 2012, 786; see also Boothe 2015). In the absence of any overarching set of principled ideas about the direction of reforms, incremental change sets into both elite and public expectations as the

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norm, in a mutually reinforcing loop that can be broken through only in extraordinary circumstances. Policy cycling Given the existence of institutionally induced equilibria and continuing unresolved tensions, most policy arenas will exhibit a mix of positive and negative feedback effects, depending on the characteristics of the arena and the prevailing policy frameworks themselves. The relative stability of the policy equilibrium will depend on the relative strength of positive and negative feedback effects. Where those effects are relatively equally balanced, they are likely to drive a process of cycling through the repertoire established by the prevailing policy framework. By this I mean not the classic cycling phenomena arising from intransitive preferences, as addressed by welfare-economics and rational-choice theorists (Arrow 1963; Pierson 2004, 59–60), but a balancing and rebalancing of trade-offs in response to persistent tensions. Adjustments are made in response to negative feedback, then negative feedback arises to the new equilibrium in turn. All the while, positive feedback maintains not necessarily the precise status quo, but the established menu of policy instruments, and thus limits the range of options available for adjustment. Seeking always to find an optimum, policy-makers continue to cycle through their respective repertoires, moving, for example, from greater to lesser degrees of centralization or from an emphasis on “planning” to an emphasis on “choice” and vice versa. (In Hall’s [1993] terms, this sort of cycling represents second-order change.) These cyclic changes variously reflect the ad hoc coalitions that can be built at any time, shifts in the ideological tilt of the government of the day, or sheer trial-and-error. Various observers of the policy process have drawn attention to some form of this cycling phenomenon. Theories of grand cycles of reform are a feature of some approaches to US political development – such as Truman’s (1951) “balance wheel” depiction of alternating balances of power, in which the dominance of certain interests provokes the mobilization of countervailing interests; or Huntington’s (1981) theory of sixty-year reform cycles driven by tensions inherent in the inability of any institutional settlement to satisfy democratic ideals. Andrew McFarland (1991, 264) argues that dominant groups inevitably abuse their position of advantage, and these “excesses” trigger reactions from reformers, who in turn eventually lose interest until further excesses

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occur. He also argues that these cycles of excess and reform tend to coalesce in broad contemporaneous patterns across policy arenas. Other ways of understanding policy cycles find patterns that are not simple alterations between two alternatives, but move through a number of repetitive stages. Such theories also tend to find these patterns of change within particular policy arenas, patterns that need not be aligned in any grand cycle. Anthony Downs (1972), for example, classically argued that a five-stage “issue-attention cycle” characterizes the environmental policy arena. Eric Patashnik (2008, 170) describes a four-stage reform cycle of entrenchment, reversal, erosion, and reconfiguration. This sort of cycling is akin to the “process sequencing” of attention by policy-makers to enduring aspects of policy problems and objectives (Howlett 2009). De Vries (1999, 2005) takes a functionalist approach to understanding this process of sequential attention. Any political system must, at least over time, attend to four functions: goal attainment (collective action), the addressing of latent, long-term issues (planning), conflict management (participation), and survival (the efficient use of resources). He argues that, in some policy cycles, policy-makers attend to one of these functions to the neglect of others, which drives a backlash and a subsequent shift of attention to one of the neglected functions. What any given “generation” of policy-makers does, then, is at least in part in reaction to what the preceding generation has done (or more precisely has failed to do). Theories of policy cycling are not complete explanations of policy dynamics. As Baumgartner and Jones (2009, 244–6) have argued, such theories cannot explain discontinuous change – when policy-makers periodically adopt novel approaches without parallel in previous experience; at best, they explain the dynamics of change during the “normal” periods between such episodes. Moreover, cycles are not the only possibility in normal times. Richard Rose (1976) describes a back-andforth pattern in which policy-makers deploy a relatively fixed set of instruments to trade off one goal (such as reducing unemployment) against another (such as reducing inflation) in an alternating series of emphases, but argues that this is only one of three potential patterns (in addition to discontinuous change) that might vary across a policy arena at any given time). As well, not all arenas are equally vulnerable to this cycling phenomenon. My argument here is that the health care arena is quintessentially vulnerable to the countervailing effects of positive and negative

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feedback that generate policy cycles in the “normal” periods between episodes of major change. On the one hand, health policy is subject to extraordinarily strong positive feedback effects. It is marked by very high stakes (up to and including literally life-and-death provisions for access to services) and hence by the perception that change is fraught with very high risk for current beneficiaries. Moreover the given policy framework becomes embedded in the expectations of those who are entitled to access to care and of employers and labour unions who structure employment-based benefits around the scope of public coverage. Yet more significant are the health care providers who become invested in established terms and conditions of employment or remuneration. Other major arenas of social policy, notably income-transfer programs such as social assistance and pensions, lack the central anchor of a powerful intermediary group of providers. And although powerful provider interests can be found in a variety of other arenas – notably, in areas of regulatory policy such as finance, energy, and transportation – none commands the potent resource of public respect that is accorded health care providers, quintessentially the medical and nursing professions. As we shall see in later chapters, different policy designs have involved different accommodations between the medical profession and the state, and accordingly different constraints on change in the policy framework. If health care policy frameworks are subject to powerful positive feedback effects, however, they are also highly vulnerable to negative feedback, again for reasons inherent in the nature of health care delivery. Health care policy is marked by what the planning literature terms “wicked” problems: highly complex interrelated problems not amenable to once-and-for-all resolution. In health care the fundamental wicked problem for policy-makers stems from a tension at the heart of all health care systems, arising from the “agency relationship” between the providers and the recipients of care. Information asymmetries between providers and recipients, and the high costs of error in decisionmaking related to health, mean that recipients must rely on and trust the judgment of providers as to what care they should receive. A central question then becomes how to ensure that providers, as agents, can be trusted to act in the interests of the recipients in receiving care of appropriate quality at an acceptable price. The entry of third-party payers, whether public or private, complicates this relationship further by splitting the consumer’s interest in value-for-money from the patient’s interest in receiving high-quality care. As health care has come to be

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seen as a “merit good” in advanced nations, moreover, a public interest in ensuring broad access to care has come to bear as well. Regardless of the mechanism and source of finance, therefore, much health policy development can be seen as a quest to take charge of the agency relationship – essentially, to control professional power in the interests of ensuring that care of appropriate quality is broadly accessible at reasonable cost. As noted in the first section of this chapter, this control can be asserted from essentially three bases of power: the state, private finance, or countervailing power within the profession itself. Any balance of power struck, however, will be flawed in some way. Neither state actors nor private financial interests enjoy the level of public trust accorded medical professionals; hence their legitimacy as enforcers of the agency relationship is always vulnerable. Yet entrusting the enforcement of the relationship to professionals themselves raises the perennial question: quis custodiet ipsos custodes? Similarly, there are essentially three types of instrumental options for controlling the agency relationship: hierarchy, the market, and peer control – and the very strengths of each contain the seeds of failure.10 Of these three, peer control is most consonant with the factors that give rise to the agency relationship in the first place (notably, the superior expertise of professionals). By governing decision-making according to professional norms, however, peer control replicates the potential for disjunctions in the preferences of agents and their principals. Hier­ archies and markets promise checks on professional power, but each is premised on some group of actors (either hierarchical superiors or purchasers in a competitive market) having a sophisticated capacity for making and enforcing “value-for-money” decisions. Both hierarchies and markets have strengths and weaknesses in this regard. Each type of instrument requires that expectations of professional performance be specified and enforced, either through rules or through contracts. Each has distinctive ways of dealing with related problems of information-gathering. Hierarchies filter, distil, and abstract from information from front-line providers through processes of vertical integration. They also allow instructions to be given sequentially through superior-subordinate relationships as issues arise rather than being specified in advance. But information can also be lost or distorted through these vertical information flows, and organizational routines can also discourage innovation and flexibility. Markets, on the other hand, generate information through the interactions of multiple independent actors, allowing a variety of preferences and sources to

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be brought to bear but concomitantly presenting significant problems of validation and verification. In efficient markets, actors will invest in acquiring and verifying information until the marginal benefit of doing so equals the marginal cost. But many factors interfere with the efficiency of markets, especially in areas such as health care; and even in efficient markets problems of equity can arise from unequal initial endowments (Tuohy and Glied 2011). From a political perspective, hierarchies and markets also offer advantages and disadvantages. Hierarchies concentrate accountability; markets diffuse it. Hence the attractiveness of each instrument will depend on whether political actors are seeking to claim credit or to avoid blame at any given time. Moreover, neither rules nor contracts are ever as credible as clinical judgment at the crux of the system: the providerpatient relationship, the principal axis of trust. Both hierarchical and market measures are therefore likely to raise the politically toxic spectre of “rationing” health care. In sum the countervailing effects of positive and negative feedback keep health policy frameworks constantly in flux. Because any balance of influence among the state, private finance, and providers, and any mix of hierarchy, market, and peer control mechanisms has a limiting set of flaws, the fundamental goal of enforcing agency relationships in health care can never be fully achieved. Negative feedback will therefore drive an ongoing process of adjustment. But the high political risks of change in an arena of life-and-death stakes and entrenched provider interests create positive feedback that keeps the search for alternatives within a narrow range. In this search process, adjustments are likely to occur within, rather than across, categories of interests or instruments. For example, the balance of influence among state actors, or between not-for-profit and for-profit forms of private finance, or among various types of medical providers, might shift without changing the overall balance among these three major pillars of influence. Similarly, hierarchies might be decentralized or recentralized; markets might be more or less subject to regulation and oversight; the tasks of professional self-regulation might be organized on the basis of the profession as a whole or by specialty or locale. And given the limited range of options, policies might well cycle back and forth among these relative emphases over time. We will see examples of the phenomenon of policy cycling in the histories of each of our three cases of major policy reform. In Britain

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the big bang of the internal market reforms was both preceded and succeeded by periods of cycling. In the Dutch case, cycling occurred before, during, and after the twenty-year period it took to implement the blueprint for universal insurance. In the United States, policy cycling was the norm from the 1960s through to the enactment of the 2010 Affordable Care Act, and might well resume as partisan tensions continue to plague its implementation. And in Canada policy cycling continued from the 1960s onward, uninterrupted by any episodes of major reform. Explaining discontinuous change None of the above elaborations of feedback arguments can account for episodes of rapid, discontinuous change. An alternative line of inquiry therefore sees path dependency or feedback arguments as incomplete, needing to be complemented by a recognition and explanation of episodic policy discontinuities as a result of external shocks: conjunctures of historical forces operating well outside the policy arena in question that open up windows of opportunity for major change. A leading example is the “punctuated equilibrium” argument of Baumgartner and Jones (2009, 250), which holds that institutional “friction” (the number of effective vetoes to be negotiated) retards change in normal times. Overcoming friction requires the attention of political leaders, and attention is a scarce resource that can be invested only episodically in any given area, creating “lurches and lulls,” in a “sporadic and destabilizing” process. Baumgartner and Jones find some empirical support for a pattern of episodic bursts of large-scale change in case studies, and Jensen’s (2009) quantitative analysis of a larger database reinforces evidence of such a pattern, although Jensen suggests this effect might be contingent on characteristics of particular policy arenas. The reigning critique of this model, however, is that, although it can at least explain ex post what path-dependency arguments cannot – namely, major departures from the established path – it cannot generalize across cases to generate testable hypotheses as to when discontinuous change will occur (Pierson 2004, 12). To respond to the criticism that explanations of these moments of possibility cannot be predictive, it is necessary to distinguish between the occurrence of windows of opportunity and the occurrence of major policy change, rather than falling into the tautological trap of inferring the former from the latter. It is possible, in fact, to build on ex post analyses

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of particular cases to develop some testable hypotheses. In Chapter 1, I argued that two exogenous conditions are necessary for discontinuous policy change to occur: the government of the day must (1) have the will to take on the political risk of making major changes in health care policy central to a broader political agenda and/or in defence of a signifi­ cant partisan threat; and (2) be in an electoral and institutional position to mobilize sufficient authority to overcome vetoes. Keeler (1993) makes a similar argument. He identifies three conditions for opening windows of opportunity for the emergence of what he calls “reform governments”: “authorization” (the winning of a sweeping electoral mandate), “empowerment” (consolidated support for the government of the day within the institutions of government), and “party pressure” (demands for action from within the winning party). Keeler’s “authorization” and “empowerment” mechanisms correspond to my condition regarding the mobilization of authority; his “party pressure” mechanism corresponds to my emphasis on the importance of partisan imperatives in the formation of political will. Keeler shows how these mechanisms combined to bring “reform governments” – governments with a mandate for sweeping change across a number of policy areas – to power in Britain, the United States, France, and Chile over the course of five decades from the 1930s to the 1980s. Among them are the British and US cases I treat in this book as episodes of major policy change in health care – namely, the Attlee and Thatcher governments in the United Kingdom and the Roosevelt and Johnson administrations in the United States.11 In later chapters, I show how such a confluence of electoral/institutional and partisan factors opened windows of opportunity for policy change in all four countries under review. And importantly, I include cases that might falsify the principal hypothesis. What if we observed the confluence of these conditions for major change – the mobilization of authority and the formation of political will – yet nothing happened other than a continuation of incremental change? That would suggest, at the very least, that although a critical juncture of authority and will might be necessary to bring about major change, it is not sufficient to do so. In fact, as we shall see later, the cases of Canada and England in the mid-2000s provide just such examples. Exploring the persistence of incrementalism in these cases, in contrast to where major change occurred, can yield important analytical fruit in showing how windows of opportunity can be identified, independent of whether or not they result in discontinuous change, and how incrementalism can result from strategic choice at such moments.

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Timing as strategy: Pace as a strategic choice The various historical explanations of policy change discussed in the preceding paragraphs can illuminate important aspects of the dynamics of policy change. The limitations of these approaches nonetheless suggest that complementary approaches are required for a full understanding of those dynamics. To begin to develop such a complement, we need to take a different starting point. Rather than focus on historical processes or the social and economic dynamics of feedback effects, let us take the viewpoint of the political actors who must make decisions about the scale and pace of change to attempt at any given moment. In this regard, the timing of policy changes can be seen as determined by the strategic judgments of policy-makers as they read and respond to the political circumstances in which they find themselves. Under what conditions do policy-makers choose to make policy change in a series of steps over time, and when do they choose instead to accelerate the pace? Answering these questions requires us to consider the time horizons of political actors – a matter of considerable interest and debate among students of the policy process. The prevailing assumption is that inherent features of democratic political systems create foreshortened horizons for politicians. Electoral cycles encourage politicians to demonstrate short-term payoffs in order to appeal to voters at the next election. Pierson (2004, 41) makes this argument most cogently: “Because the decisions of voters, which determine political success, are taken in the short run, elected officials generally employ a high discount rate.” Clearly, institutional arrangements and the degree of competitiveness of the party system will result in variation across jurisdictions and time in the incentives facing political actors in this regard. But democratic politics have another intrinsic characteristic: there is no analog to the “property rights” that give economic actors – including firms that persist over generations even as incumbents change – the confidence that they will be able to appropriate the returns on their investments (North 1993). Governments of the day typically cannot bind their successors, although some instruments – notably, constitutional provisions – are stronger than others in doing so. Hence they are unlikely to be rewarded in the short term for promising longer-term benefits, since they can offer no guarantee that these benefits will be realized. Nor do members of potential coalitions of support have an incentive to agree to longterm policies whose benefits they might not be able to realize in a future

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political context. These constraints on the ability of political actors to make “credible commitments” hobble long-term policy-making. Nonetheless political actors do on occasion adopt a longer-term perspective. Various scholars have sought to understand the conditions under which, for example, governments enact policies that impose losses (or forgo gains) in the short term in order to realize long-term gains – examples include establishing “funded” versus pay-as-you-go models for public pensions, or introducing carbon taxation to reduce greenhouse gas emissions. Ronald King (1993) analyses the emergence and breakdown of an “intertemporal coalition” around US tax policy in the 1960s and 1970s and the failure to reconstitute it in the 1980s. King describes the intertemporal domestic coalition of business and labour interests built by the Democratic administration of John F. Kennedy, premised on a strategy of “non-zero-sum politics.” Essentially Kennedy’s strategy was one of “political growthmanship,” mitigating or avoiding distributional conflict in the short term by promoting policies that promised economic growth and hence benefits for all in the longer term. King attributes the success of this coalition-building strategy to essentially three factors: the strategic skill of the Kennedy administration in coupling expansionary macroeconomic policies with micropolitical distributional policies, the president’s charisma and persuasiveness in framing the issue, and favourable economic circumstances. The ephemeral nature of this conjunction of factors was soon demonstrated by the erosion and collapse of the coalition under Kennedy’s immediate successors and the inability of subsequent presidents to reconstruct it. In fact, however, policy designs that involve intertemporal trade-offs, if not prevalent in politics, are nonetheless more prevalent than either the standard account or King’s account of a historical anomaly would suggest. Alan Jacobs (2011) provides a much more comprehensive exploration of the conditions under which political actors take a longterm perspective. Taking pension policy as his field of inquiry, Jacobs seeks to explain why some politicians have been able to build coalitions of support for prefunding policies involving present costs for future benefits, while others have engaged in the short-term redistributive politics of pay-as-you-go systems, in which current contributors support current beneficiaries. He offers an elegant explanatory framework as well as a rich account of pension politics in Britain, Germany, the United States, and Canada to outline the conditions that lead political actors to favour intertemporal as opposed to redistributive trade-offs. Jacobs finds essentially three factors: a degree of “electoral safety” that

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gives politicians some confidence they will survive the next election; “mental models” or belief systems that lead politicians to see investment as more socially beneficial than other competing present uses of public revenue; and institutions that provide access for multiple interests whose countervailing power relations effectively block redistributive policy options. Jacobs presents a comprehensive and sophisticated treatment of the time horizons policy-makers adopt in different circumstances. My question here is analogous, but it focuses on strategies of policy enactment, rather than on the timing of policy effects. The question then becomes not whether political actors are willing to impose costs in the present in order to secure long-term benefits, but, rather, whether they are willing to or even prefer to defer political action to some future point – to take a staged approach to policy enactment. Under what conditions, then, do policy-makers choose to make policy change in a series of steps over time, and when do they choose instead to enact a new framework in a comprehensive up-front change? The factors that determine whether political actors seek to enact their agendas rapidly or to stage them over time are thus somewhat analogous to those Jacobs identifies as affecting the politics of investment. First, actors must weigh their present degree of influence against that which they expect to have in the future. Second, they must assess whether the optimal development of the policy would benefit from a staged approach – for example, whether certain institutional or technical capacities, or additional political support, need to be developed before further steps can be taken. Third, they must consider the degree to which the institutional structure renders their preferred course of action exposed to or shielded from the subsequent actions of opponents. Present versus future influence Broadly speaking the prospect of an imminent loss of power drives a rapid enactment strategy, whereas a degree of confidence that one’s party (or faction or organization) will be in a position of power over time allows for a more measured pace. My argument here is analogous to Jacobs’s proposition that the willingness of politicians to make intertemporal trade-offs is critically shaped by the relative degree of “electoral safety” they perceive. Note that the question concerns the enactment of a policy framework, not its implementation. Sheer logistics dictates that most changes to policy frameworks in complex arenas need time to be put in place.

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From a political point of view, however, it is critically important which elements of the framework are cast into law immediately and which are left to administrative discretion. Where the coalition of support for the new framework is believed to be reasonably stable, all the various players in the coalition might be reasonably confident they will be in some position of influence in the next round of negotiations, and thus will be willing to phase the enactment of parts of the framework over time. If members of the winning coalition have reason to fear losing power to their opponents, they are more likely to seek up-front enactment in order to “hard-wire” the new framework as much as possible by making it more difficult to overturn (McNollgast 1999). And if at least some members of the coalition anticipate being in a better position to claim political credit in the future, they will seek to make relatively small upfront investments upon which they can later capitalize. Causal inferences The “mental models” to which Jacobs refers that guide political decision-makers in their choice of redistributive versus intertemporal trade-offs are of at least two sorts: assumptions about political motivations and behaviour in their respective systems, and causal maps that link policies and their effects over time (Alan Jacobs 2011, 52–7). Similar sorts of considerations underlie political decisions to accelerate or retard the pace of policy enactment. In the first place, the implications of assumptions about the incentives and norms that guide behaviour in the political system are fairly straightforward: actors who expect others to seek consensus are more likely to be comfortable with a measured pace of enactment than those who expect to confront all-out competition. The implications of different models of the causal complexity of a given policy area are less obvious. On the one hand, complexity can lead decision-makers ceteris paribus to prefer a phased enactment of the policy framework, in order to build institutional capacity or to make adjustments based on new information or new technology as it becomes available. On the other hand, a model that emphasizes the complex interrelationships of many parts of a policy arena might lead decision-makers to seek to anticipate and adjust for these multiple effects in a simultaneous sweep, in order to forestall negative spillover effects up front. As we shall see, political actors in the Netherlands generally acted in accordance with the first of these models and US actors with the second, To a degree, these differences might be seen to reflect a generally more “orderly” or technocratic map

Defining the Scale and Pace of Policy Change  71

of the causal complexity in the Netherlands and a more chaotic map in the United States, but such judgments are heavily conditioned by assumptions about whether the government of the day had the luxury of time to take a phased approach. Institutional considerations Political institutions vary considerably in the extent to which they allow policy frameworks to be “hard-wired” against subsequent reversal. The presence or absence of such institutional bulwarks affects the vulnerability of reforms during the implementation process. In systems with few veto points, typified by the Westminster model, it is difficult to inure any policy framework against subsequent reversal. Just as those who control the apparatus of government face relatively few hurdles in enacting policy change, so too will their opponents be able to dismantle the framework once they gain power. Such systems therefore create both the opportunity and the incentive to act quickly, not only to enact, but also to implement policy change, and not only to raise legislative barriers against the subsequent dismantling of the new framework, but also to entrench it in behaviour and expectations. Conversely systems with multiple veto points, typified by the US congressional model, make policy enactment difficult, but they also erect corresponding hurdles to the repeal of policy frameworks once enacted. Such systems provide a strong incentive to hard-wire policy changes into legislation in fine detail up front. But because political institutions provide bulwarks against reversal, there might be less perceived urgency to entrench new frameworks in other ways, which allows for a more leisurely pace of implementation. This is nonetheless a risky strategy: as Pressman and Wildavsky (1973) classically warned, implementation processes contain their own veto points; and even if the probability of veto is very small at any given point, the overall likelihood of failure rises dramatically as the number of potential veto points increases. Assumptions about present and future influence, orientations to complexity, and assessments of the likelihood of reversal populate the “assumptive worlds” of decision-makers. My argument, to be developed through a review of the cases in this book, is that the first of these subsets of factors – assumptions about current and future influence – are most determinative of strategic decisions about both the scale and pace of change. The next section maps these dynamics of choice in the form of a simplified decision tree.

72  Remaking Policy

Bringing Scale and Pace Together: A Simplified Decision Tree In Chapter 1 I discussed the political and institutional conditions that favour the adoption of different strategic combinations of scale and pace – big bangs, blueprints, mosaics, and increments – and illustrated that argument by summarizing the developments in each of the cases I discuss more extensively in the rest of the book. In this chapter I have laid out the theoretical underpinnings of that argument. To conclude this more abstract discussion, I offer a simplified decision tree as a way of thinking about the strategic choices that decision-makers face in moments of opportunity. The top two boxes in Figure 2.1 represent the two conditions necessary to open a window of opportunity for major change, as discussed in Chapter 1: (1) the policy must be central to a broader political agenda that serves a partisan imperative in order to create the political will for action; and (2) the government of the day must be able to mobilize sufficient authority to overcome vetoes. All instances of opportunity for major change reviewed in this book share these characteristics. What distinguish the cases are the strategic decisions made within that window of opportunity, which, in turn, depended on decision-makers’ assessments of their current and projected future position of influence. When leaders judge that they are in a position to command centralized control of a winning coalition, large-scale comprehensive change is possible. But in democratic systems, as I argued in Chapter 1, leaders in such positions are likely to face the potential loss of their centralized control in the near future. The branch of the decision tree that runs through centralized current control and potential future loss, shown on the left side of Figure 2.1, thus leads to a large-scale, fast-paced, big bang strategy of enactment and implementation. The more typical branch of the tree, shown on the right, where leaders cannot command control but instead must win the support of various members of the winning coalition through negotiation, leads to three further branches depending on how the various members of the coalition project their future influence. Where all members of the coalition can reasonably expect to remain in a position of influence – that is, under conditions of political stability – they can more confidently agree to a broad framework for systematic change that can be enacted and implemented over time: a schematic or blueprint strategy. Where at least some members of the coalition risk losing power, the likely outcome is multiple compromises that can be rapidly agreed to and hard-wired into legislation:

Defining the Scale and Pace of Policy Change  73 Figure 2.1. Strategic Decision Tree for the Scale and Pace of Policy Change

a mosaic. And where at least some members foresee an improvement in their prospects, they are likely to agree to those changes, but only those changes, that lay a platform upon which they can build in the future: an incrementalist strategy. Finally, in the cases of big bang and mosaic strategies, in which wide-ranging change is rapidly enacted, decisionmakers face the corollary question of how fast or slow an implementation timeline to prescribe in the legislation – rapid where institutional circumstances erect few barriers to the repeal of the legislation, more

74  Remaking Policy

leisurely where high hurdles to repeal exist. Since low and high barriers to legislative action respectively favour big bang and mosaic strategies in the first place, it is likely that the legislated implementation timeline will be more rapid in the former case than in the latter. This focus on strategic calculation in decision-making raises timehonoured questions of just how deliberate, conscious, and calculating are the choices political actors make. To what extent are policy frameworks the result of the strategic choices actors make in pursuit of policy goals, as opposed to being the “by-products of social processes” (Pierson 2004, 15) or inherent predispositions? In different nations, at different times, and in different policy arenas, we can observe different overall “styles” of policy-making, ranging from “synoptic” or “rational-comprehensive” to incremental, trial-and-error modes. The policy science literature, indeed, offers support for both types of approach as normative guides to policy-making. Historically the preference for comprehensive, rather than incremental, approaches to policy-making has varied across nations. The AngloAmerican tradition of pragmatic incrementalism is in contrast to the more legalist, corporatist, and technocratic styles of northern Europe (see, for example, Halligan 2010). It is now generally recognized that such national differences in policy styles have largely, if not entirely, dissolved, and that orientations to complexity are more likely to vary within traditions and nations over time and across policy arenas (Howlett, Ramesh, and Perl 2009). For example, within the Anglo-American tradition, scientific and professional expertise played a more direct role in tobacco regulation policy in Britain than it did in the United States and Canada, where the agenda was driven by lay anti-smoking advocacy groups (Nathanson 2005, 2007). Within Britain itself Hood, Rothstein, and Baldwin (2001) have identified quite different orientations to technocratic expertise in risk regulation across different policy arenas. With­ in the area of inquiry of this book, policy-making in the British NHS moved through periods of varying reliance on (medical) scientific expertise and economic rationalism (Klein 2010b, 154). My response to this challenge is threefold. First, we need to be clear about the timeframe in question. It is undoubtedly true that, over the long term, policy frameworks are shaped by myriad social forces, that policy-makers make mistakes in pursuit of their goals, and that even well-chosen strategies have unintended consequences. But, like others seeking to understand the scope for agency within structural and institutional constraints (Hall 2010; Jacobs and King 2010; Mahoney and

Defining the Scale and Pace of Policy Change  75

Thelen 2010), my focus in this book is to “bring agency back in” by understanding the choices that are made within relatively brief moments of opportunity for major change, before these long-term forces have been able to work their effects. We are dealing with moments in which the normal constraints that drive politics along established paths are relaxed, and political actors are more likely to depart from their habitual modus operandi to risk giving rein to strategic preferences they might have suppressed in “normal” times. Although there might be distinctive legacy styles in each national governance system, the approach to policy-making in any given instance is chosen in that moment, as the various dimensions of the policy-makers’ assumptive worlds come together. For example, if political actors command a dominant coalition but believe their period of influence is limited, they might be more open to persuasion that they can manage the complexity of the issue into a comprehensive format in a concentrated effort up front. Conversely, with less comprehensive political control and/or with the luxury of time before them, their assessment of current capability might be more cautious. Second, arguing that political actors make judgments within strategic domains structured by political and institutional circumstances does not mean that they always choose strategies best suited to those circumstances. These are not straightforward judgments, and actors may disagree and/or adopt unsuccessful strategies. Indeed the empirical cases in this book include examples of such misreadings, most notably the case of the failed Clinton health care initiative of the 1990s. Third, we must acknowledge that no stylized depiction such as this decision tree can capture the full nuance of the assumptive worlds of strategic decision-makers. In the “fog” of policy-making – to paraphrase von Clausewitz12 – at the pinnacles of government, policy-­makers themselves might be hard put to tease out the relative importance of these various assumptions. The patterns we discover in this book, however, suggest that an appreciation of political actors’ strategic assessments of their current and future positions is the best clue to understanding the choices of scale and pace they make – a parsimonious and powerful way of understanding similarities and differences across cases of political decision-making. A final and fundamental challenge is methodological. We can objectively observe electoral, institutional, and partisan conditions on the one hand and the outputs of decisions – the scale and pace of policy change – on the other. But we must treat those decisions themselves as

76  Remaking Policy

“revealed preferences,” and infer the strategic assumptions that underlie them. In this book, those inferences will be supported by secondary accounts of each case and wherever possible by primary accounts and in-person interviews with participants. Ultimately the persuasiveness of my explanation lies in the comparative method – uncovering broad patterns of behaviour supported by detailed case analysis. I return to these points in the concluding chapter. Meanwhile, however, Figure 2.1 can stand as the spine of the argument of Parts II and III of this book. Together with the preview of cases offered in chapter 1, it forms a reader’s guide to the detailed discussion of the cases. Part II begins this account with the foundation of the modern health care state in Britain, the United States, the Netherlands, and Canada.

PART II The Founding and Evolution of the Health Care State to the 1980s

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Chapter Three

The Establishment and Evolution of the British and US Health Care States to the 1980s

The founding of the British National Health Service in 1948 was a classic example of a big bang, immediately establishing a new institutional structure for health care financing and delivery. In contrast the US health care state was created through a mosaic strategy of rapidly assembled additions to the established employer-based system. These different strategies can be understood as the responses of the governmental actors of the day to the institutional and political circumstances in which they found themselves: a majority Labour government won in an unexpected landslide in 1945 in Britain, and a landslide victory for the Democrats in the United States in 1964 that installed a congressionally skilled president and a nominal Democratic supermajority in both houses of Congress. In both cases health care was a key pillar of the social policy agenda of a governing party eager to place its stamp by taking decisive action after an extended period of ineffective attempts stymied by partisan conflict. These electoral, institutional, and partisan factors not only opened windows of opportunity for change; they also established the incentives within which decisions about the scale and pace of change would be made. In both cases the large majority enjoyed by the governing party effectively neutralized veto points other than those within the party itself. In neither case was the party fully united behind an agenda of comprehensive reform. The British Westminster system, however, meant that these differences would be thrashed out in cabinet, and the resulting legislation would be taken through Parliament without effective footholds of opposition. In contrast the US Congress provided footholds of opposition independent of the executive, from which recalcitrant Democrats could block legislation. These differences meant

80  Remaking Policy

that the scale of change was more constrained in the United States than in Britain. In each case, however, the governing party had an incentive to act quickly. In Britain the Labourites could not be confident that their unexpected surge of popular support would carry them through the next election. In the United States the intra-party divisions that constrained the scale of change also argued for an acceleration of pace, to limit the opportunity for opponents to mobilize. In the wake of these critical episodes, each system cycled through a series of incremental changes in response to feedback, both negative and positive, as the tensions inherent in the founding models – for example, centralization versus decentralization in the NHS hierarchy, regulation versus competition in the US mixed market – played themselves out. In the United States this cycling process was punctuated by various futile attempts at broader reform in inauspicious political circumstances. Britain: The Big Bang of the NHS As the home of two eponymous classic models – the Westminster model of parliamentary government (in a unitary state) and the Beveridge model of a national health service – Britain provides a prototypical case of what Hacker (2004) terms a “veto-free, hierarchical” system of health care governance and finance. It is thus not surprising that it also offers us not one but two instances of big bang change in health policy in the post–Second World War period: the founding of the NHS in 1948 and the reconfiguration wrought by the “internal market” reforms of 1990. In theory any majority government in a Westminster system can mobilize the authority necessary for major policy change. But, as Pierson and Weaver (1993, 112) insightfully pointed out, such systems concentrate not only authority, but also accountability, and it is the rare government that has been willing to take on the political risks of making major changes in health policy. The two episodes of major change occurred under extraordinary circumstances: the Labour landslide of 1945 (a feat not to be repeated for another forty years), and a third successive majority win for Margaret Thatcher in 1987 (unprecedented in the post-war period). This chapter addresses the first of these two defining episodes.

The window: A landslide election and a sweeping agenda The political conditions surrounding the birth of the NHS were precisely those that could be expected to favour a big bang strategy. The July 1945 election, “widely considered to be one of the most important

British and US Health Care States to the 1980s  81

turning points in modern British political history” (Fielding 1992, 623), had produced a landslide majority for Labour of 61.6 per cent of the seats in the House of Commons. The magnitude of the event can be seen in Table 3.1. The size of the Labour majority would not be repeated again by either major party until the Thatcher years, and not by Labour until the Blair landslide of 1997. The election opened a window of opportunity for major policy change. Not only did the Labour government hold an extraordinary level of consolidated authority; equally important, it had the political will to enact a broad program of bold changes in social policy after a period of wartime coalition government marked by ongoing attempts to craft compromise positions between Labour and Conservative partners and among affected interests. Indeed Labour’s victory was interpreted as reflecting a public appetite for bold policy action, coupled with a perception of inertia on the part of the Conservatives in matters of domestic policy (Jacobs 1993, 169–70; Timmins 1995, 61–2). In particular Labour was rewarded for its embrace of the Beveridge report of 1942, an expansive document outlining the proposed contours of a new British welfare state. As Fielding puts it, “[i]f the Conservatives had previously won votes by wrapping themselves in the flag, after December 1942 Labour covered itself with the pages of the Beveridge report” (1992, 633–4). Journalistic commentary of the time treated the election as a “movement of allegiance away from the Old Order” (Jacobs 1993, 170) and as having granted Labour a clear mandate for a “socialist program” (Fielding 1992, 625). In a Gallup poll, 56 per cent of respondents saw the result to mean that “the British people want the Labour party … to introduce sweeping changes such as nationalization” (Jacobs 1993, 170). However, the immediate sense of resounding endorsement brought about by the election results masked the underlying precariousness of Labour’s grip on power. The swing to Labour could be seen as distrust of the Conservatives on domestic policy or a dispirited exercise of “Hobson’s choice” as much as an embrace of Labour’s bold agenda (Eatwell 1979, 44; Fielding 1992, 622). In the event, this precariousness was to be borne out with the result of the next election in 1950, in which Labour was reduced to a bare and fragile majority that it lost entirely to the Conservatives the following year, as shown in Table 3.1.

The strategy: An appointed date for a new institution In this context it is not surprising that Labour should seek to capitalize quickly on the most popular planks in its platform in order to shore

82  Remaking Policy Table 3.1. Party Majorities in the UK House of Commons, 1945–2010 Date of Election

Leader

Party

Margin of Majority

Share of Seats (%)

Share of Popular Vote (%)

1945

Attlee

Labour

72

61.4

47.7

1950

Attlee

Labour

2

50.4

46.1

1951

Churchill

Conservative

8

51.4

48.0

1955

Eden

Conservative

28

54.6

49.6

1959

Macmillan

Conservative

49

57.9

49.4

1964

Wilson

Labour

1

50.3

44.1

1966

Wilson

Labour

47

57.6

47.9

1970

Heath

Conservative

14

52.4

46.4

1974

Wilson

Labour

17

47.4

37.2

1974

Wilson

Labour

1

50.2

39.3

1979

Thatcher

Conservative

21

53.4

43.9

1983

Thatcher

Conservative

71

61.1

42.4

1987

Thatcher

Conservative

49

57.7

42.2

1992

Major

Conservative

10

51.6

41.9

1997

Blair

Labour

88

63.4

43.2

2001

Blair

Labour

82

62.5

40.7

2005

Blair

Labour

32

55.0

35.2

2010

Cameron

Conservative/ Liberal Democrat

37

47.1/8.8

36.1/23.0

Source: United Kingdom 2013d.

up and consolidate its political position. This especially meant moving ahead on social security and the NHS, the most popular items on its agenda (Fielding 1992, 634). Accordingly a comprehensive set of social policy reforms was identified – including compulsory national insurance for sickness, unemployment, and retirement pensions, a “safety-net” social assistance scheme, public housing, and workers’ compensation, as well as the establishment of a national health service. Pace: The “appointed date” The development of the social policy package and its health service component was not without considerable internal debate within cabinet.

British and US Health Care States to the 1980s  83

Nonetheless the political imperative to consolidate public support drove a rapid timeline: all of the reforms were to take effect on the “appointed date” of 5 July 1948, two years before the next election was due (Sullivan 1992, 70–2; Webster 1998, 28). Passage of the NHS legislation was in the hands of a powerful advocate: the Labour minister of health, Aneurin Bevan. In a pattern that we shall see repeated in the case of other big bang reforms, Bevan established a tightly knit process close to himself “with remarkably little reference to outside interests, Whitehall departments, or even his own senior official or ministerial colleagues” (Webster 1998, 14). The legislation was introduced within the first eight months of the Labour government’s mandate, passed eight months after that – over the opposition of the Conservatives, who supported the “ends” of comprehensive universal coverage, but not the “means” of nationalizing hospitals – and implemented two years from the date of the general election that had brought Labour to power. Bevan first presented his proposals to cabinet in October 1945, three months after the election; by March 1946 the legislation was published, and on 6 November 1946, the National Health Service Act was passed by Parliament with “remarkably little amendment” (Webster 1998, 15). Scale: A new national institution The National Health Service Act made sweeping institutional changes to the system of health care financing and delivery, encompassing hospitals, general practitioners (GPs), and public health offices in a tripartite, regionally tiered hierarchy and establishing universal access to a comprehensive range of health, free at the point of service and funded from general taxation. It nationalized hospitals that previously had been independent voluntary or municipally owned organizations, removed the entrepreneurial discretion of GPs to purchase and sell their practices, and drew local public health offices under central as well as local control. In the new tripartite structure, hospital services were organized under Regional Hospital Boards, public/community health under local authorities, and general practice under local Professional Executive Councils. These were major changes to each of the defining elements of the policy framework – and especially in the hospital sector, the changes were major indeed – dramatically increasing the weight of state influence and hierarchical instruments, and establishing the organizing principle of universal access to comprehensive health services as a right of citizenship.1

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Bevan’s original plan had been even more radical. Some concessions – notably, leaving community health services in the hands of local authorities, rather than consolidating them under the regional boards, were made within cabinet as the price of achieving cabinet solidarity (Klein 2013, 539–606). Other concessions were made to win the grudging acquiescence of the medical profession – particularly the medical elite, the hospital-based specialists, termed “consultants” in Britain. Not only were consultants incorporated into hospital executive structures; they were allowed to retain the ability to treat private patients in “pay beds” in the nationalized hospitals. GPs, who were the most bitter opponents of the reforms and who resisted them strongly through the British Medical Association, won the retention of the status of “independent contractors” remunerated by capitation under contract, rather than becoming salaried state employees as the government had originally proposed. (Their property rights were nonetheless reduced: practices could not be bought or sold; and a central Medical Practices Council was established to determine the number of practices to be funded in any given area.) Local authorities lost control of their hospitals, but retained authority over their public health services, albeit under the general supervision of the Ministry of Health. (Most local authorities at the time were under Labour control in any case, and were loath to oppose the national party [Webster 1998, 26].) Despite the accommodations with key interests, particularly local authorities and the medical profession, the establishment of the NHS brought about a major shift in the logic of the system, and created the institutional parameters of British health care that were to endure for the next four and a half decades. The new model was a state hierarchy marbled throughout with professional influence (Tuohy 1999). The design was fraught, however, with internal tensions – not only among the three organizationally distinct pillars and between localism and central planning, but also in the delicate but persistent balance it sought to strike between the state and the profession, between hierarchy and peer control. At the heart of the NHS lay a grand bargain with the medical profession, under which the state controlled the budget, but left “what happened within the budget” – that is, clinical decision-making – to physicians (Klein 2010b, 61). This bargain was reflected in a model of management effectively split into bureaucratic and professional arms (Harrison, Hunter, and Pollitt 1990, 61). It gave heavy weight to state authority and hierarchical mechanisms in budgetary matters, but left much discretion in clinical matters to individual medical professionals,

British and US Health Care States to the 1980s  85

and established collegial forums for the governance of the medical profession. Consultants, although salaried, did not “report” to local managers or Health Authorities, but formed self-governing hospitalbased medical staffs. Similarly, although GPs were effectively contract employees of the state, they prized their independence as “contractors” and the fact that their contracts were administered by collegial Executive Councils. Referral patterns from “gatekeeper” GPs to specialist consultants were determined by professional networks, not by administrative rules. Nurses performed within a hospital-based functional hierarchy dominated by the matron (Harrison 1995, 158–60; Strong and Robinson 1990, 14–19). Harrison (1995, 160) describes the role of the administrative manager in this context as that of the “diplomat” mediating across the various functional authority centres that made up the NHS, and always seen as in service to, rather than in authority over, the clinicians. These tensions laid the groundwork for the extended period of policy cycling that was to ensue. The United States: Medicare/Medicaid Mosaic An institutional structure designed by its framers to “pit faction against faction to protect minority factions from majority factions” (Steinmo and Watts 1995, 230) and a history of political development that generated highly localized bases of power for legislators rendered the United States literally a textbook case of a veto-ridden system. With an executive institutionally separate from the legislature, and two legislative houses each comprising members acutely aware of the need to maintain their local power bases, no president – and no set of congressional party leaders – could count on being able to mobilize the degree of legislative and executive authority regularly available to a majority governing party in a Westminster system. The increasingly polarized adversarial two-party system raised further barriers to agreement. Coalition-building under these circumstances, both within and across parties, was likely to be a painstaking one-by-one process, if indeed it was to succeed at all. Figure 3.1 graphically demonstrates the challenge facing presidents and congressional party leaders. It shows the effective strength of each party, taking into account not only the number of seats held in each house, but also the propensity of members of each party to vote with the majority of their party peers on “party unity” votes.2 It shows that very few presidents since the 1930s have been able to be reasonably

86  Remaking Policy Figure 3.1. Party Strength in the US Congress, 1933–2011

Note: Party strength is calculated as the number of seats times the likelihood of party members’ voting with the majority of their party on “party unity” votes (50%+ of Democrats versus 50%+ of Republicans (from “NOMINATE and Related Data,” K7MOA.com, available online at http://polarizedamerica.com/dwnl.htm, accessed 4 August 2017).

confident of carrying a majority of the House of Representatives, and none has been able to count on the solid supermajority necessary to overcome procedural roadblocks in the Senate – notably, the votes necessary to invoke cloture of debate even in the rare cases in which their parties nominally held the requisite number of seats (sixty-seven prior to 1975, sixty thereafter). Opportunities for major policy change were therefore even less likely to emerge in this context than was the case in other nations. Opportunities to pursue a big bang strategy in those rare moments were even more exceptional.

The precursor: The big bang of Social Security Indeed there has been only one episode of big bang change in the modern history of the US welfare state: Franklin Delano Roosevelt’s New

British and US Health Care States to the 1980s  87

Deal package of public works, labour market reforms, and incomesecurity programs, the bedrock of which was Social Security. Social Security initiated a market-based model that “set an agenda for incremental reform in all future efforts” (Quadagno 1988, 99). The new model established a bifurcated approach to old age security by creating a new entitlement/mandate for all workers to be covered by a publicly administered pension plan funded by employer and employee contributions and by providing federal funding (subject to certain provisions) for state-based plans covering those outside the employer-based scheme (the latter would be assumed fully by the federal government in 1969). By implicitly wrapping around private, employer-based plans and subsidizing means-tested plans, Social Security was indeed the template for the modern US welfare state. It established a new program structure, a new mode of finance based on a combination of “trust funds” and pay-as-you-go funding from general revenue, and a major new federal administrative body, the Social Security Administration. The conditions under which Social Security was enacted in 1935 and expanded in 1939 were extraordinary in historical perspective. The economy was in the aftermath of the Great Depression. Progressive social policy reform was the definitive theme of the agenda of a popular president elected in 1932 with a majority of more than 57 per cent of the popular vote and again in 1936 with over 60 per cent. His party, the Democrats, controlled the White House, and held a nominal majority in the House of Representatives and a nominal supermajority in the Senate. Only once again in the twentieth century would anything resembling such conditions coalesce – in the mid-1960s under President Lyndon Johnson. But when it came to health care policy, “nominal” is the operative word in this description of the congressional majorities. In fact the Democratic caucus in each house of Congress included a bloc of southern Democrats well entrenched in their local bases and therefore firmly ensconced in key positions in the seniority-based congressional committee structures. On average, Democrats could be expected to vote with the Democratic majority over 70 per cent of the time in the Senate and over 80 per cent of the time in the House – healthy percentages, but not enough to sustain the two-thirds supermajority (sixtyfour of the then ninety-six seats) necessary for cloture in the Senate. Southern Democrats, responding to fears in their constituencies that government-­based social security would destabilize the paternalistic authority of landowners over their tenants in the sharecropper economy of cotton farming, constituted a major interest to be accommodated

88  Remaking Policy

in the design of any income-security program (Quadagno 1988, 127– 51; Steinmo and Watts 1995, 339–40). Roosevelt was urged to include universal health care coverage as part of his New Deal reforms by some stakeholders – notably, organized labour and northern liberals – within the coalition of interests that had brought him and his party to power. But because he was essentially founding the American welfare state “starting from social welfare scratch” (Steinmo and Watts 1995, 340), universal health care appears to have been a bridge too far. Over his four terms as president, Roosevelt was equivocal, enigmatic, and, to some observers, vacillating in his attitudes towards adding a health care component to his social policy agenda (Blumenthal and Morone 2010, 27–56). Some have plausibly attributed his hesitation to a view that taking on health care would jeopardize his entire social policy package. The Depression had created a sense of urgency – never to be matched in the realm of US social policy – that was barely sufficient to keep the southern Democrats in the reform coalition despite their significant misgivings. Including health care in the package would have added an inchoate concern about what universal access to health insurance might imply for the segregation of health care facilities (Blumenthal and Morone 2010, 37) – the same concern that would bedevil Democratic attempts to establish universal health insurance under subsequent presidents. Perhaps even more potently, it would have added the power of organized medicine to the coalition of opposition to social security (Orloff 1988, 75–6). For a mix of reasons, then, Roosevelt demurred and the United States’ only big bang in social policy passed without bringing about a national health insurance program. The banner was taken up again by Roosevelt’s successor, Harry Truman, who, unlike Roosevelt, was committed to achieving universal health insurance, and made it central to his agenda. But a glance at Figure 3.1 reveals why the initiative was doomed. Democratic representation in both houses of Congress throughout Truman’s tenure was considerably lower that it had been under Roosevelt, and party unity continued to be weakened by the presence of the powerful Southern bloc. Proposals for universal health insurance introduced by Truman in 1948 and 1949 died at the committee stage.

The window: A landslide election and a broad social policy agenda Another window of opportunity for major change in health policy opened with the Democratic landslide in the 1964 presidential and

British and US Health Care States to the 1980s  89

congressional elections, which established Lyndon Johnson as president, put Democratic supermajorities in place in both houses of Con­ gress, and thus placed an extraordinary concentration of legislative and executive authority in the hands of Democratic leaders. Johnson made the passage of Medicare his first legislative priority after the election (Marmor 2000, 46; Sirgo 1985, 827). He had a keen sense that the window of opportunity – the honeymoon enjoyed by a newly elected president – would soon close (Blumenthal and Morone 2010, 166, 174), and was prepared to commit his substantial political capital to securing Medicare’s enactment. The energy driving Johnson’s prioritization of Medicare was twofold. First, Medicare had been a key theme in the Democratic campaign, and formed one of the pillars of an ambitious agenda of social policy change that also included a suite of community-development and poverty-­ reduction programs that flew under the banner of the “Great Society.” As Lawrence Jacobs has argued, the Republican challenger in the 1964 election, Barry Goldwater – who was widely viewed as, among other things, “a foe of Social Security” – created an arch-conservative foil for the Democrats, and “posed a distinct choice between pursuing change or returning to the period before the 1930s and the New Deal” (Jacobs 1993, 191). Johnson’s landslide election thus could be seen as a resounding endorsement of the Democrats’ progressive social policy agenda. Second, Johnson’s commitment to Medicare in particular was further fuelled by the fact that it was one of two pieces of the comprehensive legislative agenda he had inherited from his assassinated predecessor – the other being the legislative entrenchment of voting rights for African Americans – that remained to be accomplished after the passage of the Civil Rights Act in 1964 (Blumenthal and Morone 2010, 178). Not for the  last time would a sense of “unfinished business” drive a major push to accomplish health care reform in the United States. Johnson’s electoral majority in the popular vote, at more than 61 per cent, surpassed even Franklin Roosevelt’s – indeed, any president’s since 1820. But even with large majorities in the Senate and the House, the Democrats’ party unity was strained, as it had been for the previous three decades, by the presence of the southern conservative bloc. Even with his legendary legislative and persuasive skills, Johnson could count on levels of party unity of only about 75 and 78 per cent in the Senate and House, respectively. In similar circumstances Roosevelt had nonetheless accomplished a big bang change with the establishment of Social Security. Why Johnson did not attempt another big bang – in this case to bring about universal

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health insurance – remains one of the enduring puzzles of US social policy development. Some see this as a leading example of the “blinders of incrementalism” that have hobbled social policy development in the United States over time and that prevented reformers from recognizing the opportunity afforded them by Johnson’s win (Jacobs 1993, 210–11). But the answer might well be that the same dynamics that dissuaded Roosevelt from including universal health insurance in his own big bang strategy – the combined opposition of southern Democrats and powerful interests in the health care arena – were at play for Johnson as well. The earlier inchoate concerns of the southerners about the implications for segregation were given sharp focus by the intersection between a government program of health insurance and the other major initiative inherited from the Kennedy administration: civil rights legislation. For the southern Democrats, the passage of the Civil Rights Act in 1964 not only represented a major loss; it also “raised the stakes” of other reforms by requiring that no program receiving federal funding could discriminate on grounds of race, colour, or national origin (Blumenthal and Morone 2010, 195–6). Rather than abandoning the quest, however, Johnson and the health policy reformers in his administration opted for a mosaic approach to major change, and moved quickly to propose a framework that built on existing institutions and programs. They then negotiated with key veto players, welding them into a coalition of support by cobbling together their respective proposals. Scale: Building on Social Security Reformers within the administration were central to the first phase of this strategy. Johnson himself had not been definitive about the scale or shape of the reform. A number of the officials dated from the Truman years, and brought with them the scars and the lessons of that era.3 Chastened by the failure of the Truman initiatives, they had begun to consider a smaller-scale strategy that would build on the by now broadly popular Social Security program. They therefore devised a program of hospital insurance for the elderly – a group enjoying broad public respect and sympathy – as an addition to Social Security. Legislation to this effect had been unsuccessfully introduced in the House in the months prior to the 1964 election. The sweeping result of that election, as Marmor (2000, 45) trenchantly and classically has observed, dramatically changed the context, creating a “politics of legislative certainty” regarding the passage of health

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care insurance for the elderly in which “[t]he only question remaining was the precise form the legislation would take.” Most intriguingly, it was in this next phase – involving efforts to cover off potential vetoes in Congress and to temper the opposition of the politically powerful medical profession, whose members would, in the end, be key to its implementation (Sirgo 1985, 827) – that negotiators were drawn into a broader mosaic strategy, touching on more aspects of the health care arena and more segments of the population than the initial hospital insurance for the elderly plan. Central to these negotiations was the relationship between President Johnson and Wilbur Mills, the southern Democrat (from Arkansas) who chaired the powerful Ways and Means Committee in the House (Blumenthal and Morone 2010, 178–95). Together4 they devised the “three-layer cake” that Mills was to put forward in his committee, combining a number of proposals each representing an incremental change to the existing policy framework. The first layer was “Medicare Part A,” a compulsory hospital insurance plan for the elderly similar to the original administration proposal. The second was “Medicare Part B,” a government-subsidized voluntary plan to cover medical services to the elderly similar to one of the competing Republican proposals that, in turn, was built on an American Medical Association (AMA) proposal dubbed “Eldercare.” And the third layer was Medicaid, a program of expanded federal assistance to the states to provide medical and hospital care to the indigent (defined according to federal criteria), building on an existing but unsuccessfully implemented program for the elderly poor (the “Kerr-Mills” program established by legislation co-sponsored by Mills five years earlier), which had also been pressed as a model by some Republicans and by the AMA.5 The entire package was framed as a set of amendments to the Social Security Act. As we shall see in other cases of mosaic strategies, it was the strategy itself – the rapid cobbling together of multiple adjustments and addenda to existing programs – that drove the substance of the resulting reform package. As Marmor puts it: “The outcome of 1965 was, to be sure, a model of unintended consequences. The final legislative package incorporated features that no one had fully foreseen, and aligned supporters and opponents in ways that surprised many of the leading actors. Yet the eleventh-hour expansion should not draw one’s attention away from the constricting parameters of change” (2000, 58–9). As Marmor then goes on to point out, the mix of age-based, voluntary, and income-tested programs making up the Medicare/Medicaid package

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stands in sharp contrast to the universal programs prevailing in other advanced nations – a contrast that indicates how much of the policy framework was not changed. The reforms left the vast swathe of the health care arena essentially untouched. Only about half of the elderly (age sixty-five-plus) population had private insurance in the early 1960s, representing about 7 per cent of the private insurance market.6 The target population for the Medicaid program either had no coverage or relied on state plans, which varied widely. Hence the 1965 reforms had little impact on the private insurance market, and even Medicare itself “followed the Blue Cross-Blue Shield model” and essentially “adopted the norms of the private insurance industry” (Oberlander 2003, 31). Private insurers were contracted as carriers of Medicare, thus essentially acquiring another product to market, together with the private supplementary coverage they could offer. Nonetheless the package represented a substantial increase in the weight of state authority in the health care arena, and established new entitlements for the elderly and the poor. It did so by importing an established framework from income security into the health care arena, thus extending the reach of the organizing principles of Social Security. But drawn as they were from programs of cash transfer to individuals without powerful intermediaries, those principles had no implications for the organization of the delivery of health care, which, unlike the establishment of the NHS in Britain, was left essentially intact. Pace: No dead cats Johnson’s strategy was to strike quickly – to press for passage through the legislative process before opposition could build. Blumenthal and Morone quote his salty admonition: “For God’s sake don’t let dead cats stand on your porch … When you get one [of your bills] out of your committee, you call that son of a bitch up before they [the opposition] can get their letters written” (2010, 190, brackets in original).7 And indeed the process through which the legislative package and the coalition of support were assembled was breathtakingly swift. A bill was reported out of Mills’s Ways and Means Committee in the House in March 1965, only two months into the new legislative session, and passed by the House in early April. The Senate Finance Committee reported out its bill at the end of June, the Senate approved it in early July, and the House and Senate bills were reconciled in conference to

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produce the final legislation passed by both houses at the end of July. Later reformers would look back in envy. Assembling legislative support required both intra-party and crossparty coalition-building. The Democrats had a solid majority in the House, as indicated in Figure 3.1, but Johnson could not count on the sixty-seven votes among Senate Democrats necessary for cloture. But if Democratic leaders faced problems of unity within their own party, they could benefit from the even greater disunity among Republicans. As was the case with the original Social Security Act, the legislative coalition of support included some Republicans as well as Democrats. In the end, fifty-seven Senate Democrats voted in favour, joined by thirteen Republicans. In the House, exactly half of the 140-member Republican caucus joined 237 of 295 Democrats in voting in favour. Even after passage Medicare/Medicaid would face challenges to implementation. As Marmor notes, grafting an insurance program for an arena with a complex web of providers onto a Social Security program aimed at relatively straightforward income transfers presented a “historically unprecedented level of complexity for Social Security’s administrative elite” (2000, 97). Not least of the challenges was the need to deal with hostility from the very intermediaries – hospitals and physicians – upon whom implementation would depend. Under different political circumstances, having to develop the infrastructure to deal with such complexity might have argued for a “blueprint” strategy in the first place. For example, agreement on the three layers of the Medicare/Medicaid cake could have been reached up front, with each layer to be added through sequential legislative action, beginning with Medicare Part A, hospital insurance. As we shall see in Chapter 8, such a strategy was followed in building the regulatory infrastructure necessary for the Dutch reforms.8 But a blueprint strategy could not have succeeded in the adversarial US system. The various veto players who had agreed to the three-layer package needed to secure it by enacting it as a whole, lest they not be in a position to affect future legislative phases. In addition to sheer complexity, there were two looming threats to implementation: the resistance of hospitals to desegregation in recalcitrant southern states and a potential boycott by physicians (Blu­ menthal and Morone 2010, 195–202; Marmor 2000, 88). It was still early in the presidential mandate; an implementation date could have been set at least two years later and still have been in place before the

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next election. Presumably to build on the momentum of swift legislative passage, however, its authors set a rapid timetable for implementation: the programs were to come into effect in less than a year – on 1 July 1966. Johnson and his officials could have ducked the first of the challenges: the Justice Department had given an opinion essentially stating that the president could choose whether or not the provisions of the Civil Rights Act requiring non-discrimination within federally funded programs would apply to hospitals under Medicare and Medicaid. But to duck would have undercut the spirit, if not the letter, of the hard-won civil rights legislation, and the Johnson administration drove hard and fast to enforce the desegregation of southern hospitals. “In one year,” report Blumenthal and Morone, “American hospitals underwent a racial transformation that has few parallels in any sector” (2010, 198).9 As for the doctors, Johnson brought the full force of his presidential and personal persuasive power to bear in negotiations with the leadership of the AMA around implementation, making concessions in an unrelated federal program to which the AMA had also objected and appealing to misgivings among the generally socially prominent physicians about disobeying the Medicare legislation that would be “the law of the land” (Blumenthal and Morone 2010, 198–201). Medicare administrators also adopted an accommodating stance. And, as was the case of the introduction of the NHS in Britain, participation in the program was richly rewarded – in this case through generous rules on remuneration of doctors for “customary costs” and hospitals for “reasonable charges” (Marmor 2000, 96–9). In the end the rapid timetable was met, the programs launched on target, and implementation proceeded without outright medical obstructionism. But the need to accommodate providers would create enduring tensions – as generous payment schedules contributed to unanticipated levels of program expenditure, and reliance on mechanisms of peer control clashed with a growing emphasis on planning within the administrative apparatus. Policy Cycling in the 1970s and 1980s

Britain: Centralization/decentralization; integration/independence; professionalism/managerialism In the British health care arena the 1950s have been characterized as a period of consolidation and the 1960s and 1970s as one of technocratic

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change and planning and reorganization (Klein 2010b; Webster 1998). As Table 3.1 showed, these years were marked by instability in the fortunes of both major parties. The Conservative governments of the 1950s were led by three different prime ministers, including the unpopular Anthony Eden, who presided over the foreign policy debacle of the Suez crisis. Labour governments in the 1960s and 1970s under Harold Wilson enjoyed for the most part slim or non-existent majorities. Meanwhile, the NHS was growing in popularity, and acquiring the status of a national icon – this despite the fact that Britain was one of the most parsimonious spenders on public health care among OECD countries. The relative frugality of the system resulted in part from state control of the budget in a salaried and capitated system of physician remuneration. But because administration was largely about the management of budgets, not about the provision of care – which was left to clinical discretion – administrative costs were also relatively low. By the 1970s and 1980s the health care agenda in Britain was therefore defined not by the growing cost pressures of health, as in other nations, but by mounting criticisms of the effects of cost constraint. Policy cycles were driven largely by the internal tensions inherent in the particular ways in which the initial design of the NHS had sought to reconcile state and professional power, hierarchy and peer control. Because the design generally suited the interests of key actors in the system, notably the medical profession, it generated considerable positive feedback. But the arrangements for the NHS not only contained their own tensions, notably between localist and centralist values (Klein 2010a; 2010b, 21); they also sat uneasily within the broader bureaucratic climate of Whitehall. The latter was marked by an agenda of civil service reform to improve organizational efficiency, which took on various flavours over time and under different governments – beginning with a “new rationalism” of program analysis in the late 1960s and culminating in an emphasis on emulating private sector “managerialism” in the 1980s (Allsop 1995, 42–4; Harrison, Hunter, and Pollitt 1990, 75–6; Heclo and Wildavsky 1981, 266–88; Pollitt 1993, 66ff.). For a time, positive feedback from those interests that benefited from the system’s unique design shielded the NHS from this agenda, despite criticisms of the tripartite model from successive commissions of inquiry in 1956, 1959, and 1962. But over time the negative feedback effects of the disjunction between the NHS model and the broader ethos of civil service reform began to open the door to organizational change within the NHS and to drive an incremental series of reforms.

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The first cycle of reform occurred in 1974. A series of ministerial documents from 1968 to 1972 culminated in a new organizational model for the NHS, conceived under a Conservative government and implemented under its Labour successor. It replaced the three separate organizational pillars of hospital services, public/community health, and general practice with a unified model that brought all three sectors under the tiered authority of Area Health Authorities (AHAs), Regional Health Authorities (RHAs), and the central National Health Service. The unification, however, was more apparent than real, in two respects. First, management under the new arrangement was in the hands of “management teams,” combining elements of each of the formerly distinct wings, and was to be conducted under norms of “consensus management.” This arrangement effectively formalized the coordinating mechanism that had grown up under the former tripartite structure (Harrison, Hunter, and Pollitt 1990, 79). Second, general practice continued to be, de facto, an “autonomous enclave” (Klein 2010b, 70). Family Practitioner Committees (the successors to the Executive Councils) shared boundaries with the AHAs, but were in effect independent bodies dealing directly with the centre. No sooner had the new structure been adopted than dissatisfaction began to grow, not only among civil service reformers who saw it as an unsatisfactory compromise in which no one was “in charge,” but also among professionals themselves. The reform was seen at the local level as having been imposed from the top, even as decision-makers at the centre were frustrated by the lack of clarity of roles at the local level that made central direction feel like pushing on a string. This negative feedback drove another round of adjustment, culminating in a 1982 reorganization. The government, then Conservative and more favourable than its Labour predecessor to local discretion, abolished the AHAs and created a larger number of more locally defined District Health Authorities – evincing a pattern of ongoing redefinition of the number and boundaries of local and regional authorities that was to mark the next three decades. The incremental changes that were to have the greatest effect on the internal dynamics of the NHS, albeit not as intended, were the managerial reforms introduced by the Conservatives after 1983, following a commissioned review of NHS management (the Griffiths inquiry), which recommended a structure based on general managers who could be clearly “in charge,” with clear performance targets for which general managers would be accountable, to replace the structures and practices

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of “consensus management.” As I have previously noted (Tuohy 1999, 165–9), the general management structures adopted in accordance with the Griffiths recommendations represented, at least potentially, a strengthening of the hierarchical at the expense of the collegial dimensions of the NHS. The challenge they presented to established NHS structures was to a considerable extent absorbed and blunted by the system; put another way, positive feedback continued to reinforce existing arrangements. But the Griffiths reforms had a number of longerterm effects on the dynamics of the system: they established clearer channels linking politicians and line managers along which reform edicts could flow (Butler 1992, 18); they began the development of a capacity to measure and assess performance upon which later reforms would depend; and they spurred physicians to mobilize in defence by developing their own capacity for “medical audit.” This latter effect led to yet another cycle in the on-going attempt to balance professional autonomy with managerial imperatives – this time through collegial mechanisms, with the development of “clinical directorates” in which a clinical director (typically a member of the consultant staff) held the budget for the clinical unit, and reported in that capacity to the hospital general manager (Harrison and Pollitt 1994, 90; Tuohy 1999, 166–7). As we shall see shortly, however, the threat posed by the post-Griffiths reforms also led to the increasing engagement by physicians in political agitation. The cyclic changes of the first four decades of the NHS thus represented in part an ongoing tug-of-war between those seeking managerial efficiency and those wishing to preserve the scope of clinical discretion, all within the established NHS hierarchy. Other tensions related to the degree of centralization/decentralization within the hierarchy (typically tending to the former under Labour and the latter under the Conservatives), reflecting an ongoing attempt to balance other competing objectives. The inherently localized nature of health care delivery argued for respecting local discretion, while the desire to maintain common standards within a universal system and to ensure accountability for public spending called for centralized control. This oscillation between centralization and decentralization, which has been the subject of much commentary by observers of the NHS (see, in particular, Harrison, Hunter, and Pollitt 1990, 85–7; Klein 2010a), was also driven by the competing political imperatives for central officials to distance themselves from local resource-allocation decisions, while being seen to respond to public outcry.

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A related pattern of cycling related to organization at the centre: the degree of autonomy of NHS headquarters within the Department of Health. Under the Conservatives in the 1980s, the establishment of an NHS chief executive, with a management executive board as a distinct entity within the Department of Health, inaugurated a pattern of greater NHS independence under the Conservatives and less under Labour that was to continue over the following two decades (Jarman and Greer 2010; Tuohy 1999, 163).

The United States: Regulation versus deregulation; largesse versus constraint In the United States, as Figure 3.1 shows, the Democrats would not return to a position of strength comparable to the Johnson peak for more than forty years. The Republicans, for their part, would never approach that height, even when they held the White House and both houses of Congress from 2003 to 2007. The only route to major change in health policy in those four decades would have been bipartisan agreement. In the US system, however, opportunities for bipartisanship proved fleeting, and their outcomes dependent on personalities. The history of those decades is therefore marked by numerous fruitless bipartisan attempts at major change, a few incremental successes, and one infamously failed partisan big bang initiative. Meanwhile, policy-makers cycled through a process of tightening and loosening various regulatory and fiscal constraints. Legislative failures During the Nixon presidency the Republican and Democratic parties were fairly evenly matched in effective strength, and the relatively low levels of party unity opened the doors to bipartisanship – as occurred, for example, in the environmental arena. In the health care field the Nixon administration did indeed attempt a bipartisan deal based on an employer mandate, with a government plan for those without private coverage. Democrats countered with an alternative bipartisan plan based on a Medicare model. But a key Democratic constituency, organized labour, refused to support either compromise, and key negotiators, including (once again) Wilbur Mills, who had been involved with both proposals, proceeded cautiously. The moment was lost when both Nixon and Mills were politically ruined in separate (and very different)

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scandals (Blumenthal and Morone 2010, 235–46; Steinmo and Watts 1995, 350–2). On its face the Democratic surge in the 1976 election that regained the White House as well as retaining both houses of Congress (with sixtyone seats in the Senate) might seem to have created the conditions for another major health care reform effort. But health care was only one among many agenda items for President Jimmy Carter, who was undecided about the issue. Even more disabling than the president’s ambivalence was the disunity among Democrats, which doomed effective action on many fronts, including health care – most apparent in, but not limited to, the open challenge from health care champion Senator Ted Kennedy to Carter’s quest for a second term. Another bipartisan initiative – this one actually resulting in the passage of legislation – occurred in 1988, during a Congress marked by an unusual level of bipartisanship when the Republicans held the White House and the Democrats held the House and the Senate (with less than the effective strength needed for cloture). The Medicare Catastrophic Coverage Act (MCCA) of 1988 passed with overwhelming majorities of 328 to 72 in the House and 86 to 11 in the Senate. It placed a $2,000 per year limit on the expenses that individuals would be expected to bear for a range of Medicare-covered services, as well as adding benefits such as coverage for prescription drugs outside hospital. It also provided that those benefits would be financed by increased contributions, and hence would be revenue-neutral to the government. It was to be financed through an increase in the Part B premium and a new income-related “supplementary” premium for the mandatory Part A coverage. In effect it universalized, under public auspices and at comparable or lower premium rates, a form of the private “Medigap” coverage that most beneficiaries carried for expenses not covered by Medicare (Rovner 1995, 166). The MCCA was repealed, however, the following year. The rise and fall of the MCCA illustrates the intricacies and complexities of bipartisan politics in US health care policy. The initiative was driven by a dedicated policy entrepreneur, Otis R. Bowen, the secretary of health and human services in the Reagan administration. But it typified the “insider politics” of incremental adjustments that had come to characterize the health policy process (Marmor 2000, 175–6; White 1995). The fate of the MCCA also demonstrates the dangers of a disjunction between the logic of insider politics and public perception.

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Certain key benefits – notably, long-term care, which was of primary concern to many middle-class beneficiaries – were not included. For upper-income beneficiaries the new arrangements did little more than to replace their existing Medigap coverage with less choice of plan. And possibly most important, the new income-related premium made the financing of the program more progressive, and did so in an explicit way. Wealthier beneficiaries saw themselves as paying more in order to subsidize benefits for lower-income groups. In the face of the furious backlash that ensued, both parties rapidly distanced themselves from legislation that neither had wholly owned.10 Congress repealed all the Medicare-related provisions of the Act (leaving in place some provisions related to Medicaid) in 1989. Although more successful bipartisan initiatives were to occur during the second Clinton administration in the late 1990s, attempts in the 1970s and 1980s thus yielded only failure. In that context incremental change prevailed, tinged by the partisan proclivities of the administration in power, as briefly discussed in the next section. Administrative action and budgetary politics In the 1970s and 1980s the US health care agenda was dominated by concerns about costs. Although annual rates of increase in health expenditure by both private and public payers declined over this period, they remained well above the general inflation rate. But fundamental features of the policy framework – the existence of multiple payers in the mixed market and the generosity of Medicare’s founding bargain with the medical profession – provided few levers of cost control. Accordingly the US health policy process cycled through various available options. There were few adjustments to overall provisions for eligibility and scope of coverage – the most significant were the extension of Medicare eligibility to the disabled in 197311 and the ill-fated increase in the scope of Medicare benefits to include catastrophic costs, as discussed above. A more limited expansion of Medicare occurred in 1989, when eligibility for home health care was effectively expanded, not through legislative action, but through an administrative “clarification” in the form of a revised payment manual. A similar “clarification” expanded eligibility for nursing home care. As a result, expenditures in each of these categories expanded exponentially, albeit from a very small base (Tuohy 2003c, 81). Most changes, however, showed a pattern of alternating tightening and loosening of regulatory and budgetary restraints within the bounds of the prevailing policy framework.

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This process was driven in part by developments in the private market, which variously highlighted different aspects of the ongoing tensions in health care, and in part by the political practicalities of identifying measures around which ad hoc coalitions of support could be built.12 Much of this activity was fuelled by the behaviour of institutional entrepreneurs who exploited the complexity of the mixed market to find footholds for innovation, as I discuss more fully in Chapter 10. As in Britain, one tension generating these ongoing policy cycles was that between state/bureaucratic and professional/collegial mechanisms of controlling the behaviour of physicians. In 1972 interest in collegial mechanisms for cost control under Medicare led to the establishment of Professional Standards Review Organizations (PSROs) through a set of further amendments to the Social Security Act. PSROs were voluntary, not-for-profit, locally based organizations of physicians charged with conducting a process of “concurrent review” of physicians’ Medicare billings for hospital services to ensure that care provided was both cost-effective and of an acceptable standard of quality. They succumbed, however, to mounting medical opposition and to conflicts that have bedevilled exercises in other countries with similar mandates aimed at both cost control and quality assurance. In 1982 PSROs were succeeded by Peer Review Organizations (PROs), with a strengthened mandate for both cost control and quality assurance, but in a time of sharply rising costs, cost control became an increasingly important policy objective, and the PROs satisfied neither physicians nor state officials. The work of the PROs was hobbled by numerous cycles of revision to their enabling legislation and declining funding over time, and they were effectively supplanted by more direct bureaucratic measures of controlling payments to providers under Medicare through prospective payment schemes for hospitals and global caps for medical services (Dans, Weiner, and Otter 1985; Jost 1991). A second tension bedevilling the quest for cost control was that between hierarchical (especially regulatory) mechanisms and respect for the functioning of the private market on which the entire system was premised. The history of regulation following the passage of Medicare and Medicaid was one of alternating decentralist and centralist impulses and attempts variously to harness or give rein to private sector entrepreneurialism – all marked by a pattern of action and reaction as private actors responded strategically to regulatory initiatives and vice versa. The initial phase was one of enthusiasm for federal regulation through locally based agencies – an emphasis on the more

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hierarchical and statist instruments within the policy repertoire, albeit marked by deference to professional expertise and local experience. Arrangements for local planning to regulate the growth of health care facilities were kept in constant flux as Congress moved through a series of legislative provisions for Regional Medical Programs in 1965, comprehensive Health Planning Agencies in 1966, and Health Systems Agencies (HSAs) in 1974. Overlapping with this period was a focus on providing incentives to greater cost-effectiveness through organizational change. The demonstration effect of a number of high-profile, pre-paid group practices gave rise to a zeal for that model, resulting in the passage of the Health Maintenance Organization (HMO) Act of 1973, soon diluted in its effect through progressively expansive interpretations of the term under the legislation (see Chapter 10). Under the Reagan administration in the 1980s, these various enthusiasms were overtaken by the twin objectives of tightening control over payments to providers under public programs while loosening regulation of the private market. Regulatory controls on HMOs were loosened, HSAs were eclipsed by a succession of state-level planning mechanisms and ultimately “swept … to the bureaucratic periphery” (Morone 1990, 318), and PROs were overtaken by greater constraints on professional discretion, as noted above. In Morone’s apt summary, the policies of the 1970s and 1980s “amounted to an inchoate series of contradictory, incremental programs, alternately pursuing regulation and competition with little systematic purpose or consequence” (320). Much of this activity, especially in the 1980s, occurred in the context of the budgetary process, typically resulting in omnibus legislation (Tuohy 2003c). The Tax Equity and Fiscal Responsibility Act of 1982 established new payment formulas for hospitals that were to have farreaching implications for entrepreneurial behaviour in the hospital sector. The Consolidated Omnibus Budget Reconciliation Act of 1985 established a Physician Payment Review Commission with a mandate to develop a new payment formula, and also mandated transitional insurance coverage for those leaving employment with employer-based health benefits. And the Omnibus Budget Reconciliation Act of 1989 enacted various changes to physicians’ remuneration. The pattern would be repeated with the Balanced Budget Acts of the latter half of the 1990s, as discussed below. These changes marked an evolving accommodation between the medical profession and the state somewhat analogous to what prevailed under Canada’s single-payer system, as I discuss in Chapters 4 and 9, but much more limited in scope. (Applying

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as it did only to payments under Medicare,13 this accommodation did not bind the profession in a bilateral monopoly with the state, but merely established the relationship with one large payer.) Moreover, given the share of the federal budget involved, Medicare politics became, as a former senior official has observed (Vladek 1999), “indistinguishable from macrobudgetary politics,” but they were also subject to the full range of trade-offs and log-rolling associated with the microbudgetary process. The one exception to this pattern (which proved the rule) was the doomed Medicare Catastrophic Coverage Act, discussed above. Conclusion The British NHS was born in a big bang that greatly expanded the footprint of the central state, nationalizing hospitals and drawing formally independent general practitioners and the community health functions of local authorities into a common tripartite hierarchical framework offering universal coverage for the great bulk of health care. The founding bargain with the medical profession established an accommodation that preserved medical influence and clinical discretion in the delivery system while granting broad budgetary control to the state. Although the balance of centralization and decentralization within the hierarchy and the respective roles of managers and clinicians would shift over time in response to enduring centre/local and profession/state tensions, the fundamental features of hierarchy, profession/state accommodation, and universal eligibility would persist for the next four decades. The foundational changes that created the modern US health care state were not as sweeping. They did not encompass the full health care system, but added two major federal government programs to the mix of public and private programs currently in existence. A federalstate shared-cost program for the poor drew existing piecemeal statelevel programs under a common federal framework, and two new health care entitlements (covering hospital and physician services) were added to the existing Social Security program for the elderly. The federal government became a significant payer in a multipayer system, and from the base of this expanded footprint the federal role vacillated over time between tighter and looser regulation, and between more and less generous compensation settlements in response to shifts in the partisan complexion of government, the behaviour of market participants, and the fiscal climate. The medical profession entered

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into an accommodation with the state around the terms of physician remuneration under government programs, but physicians continued to deal with multiple payers. Private health insurance continued to be the modal form of coverage, and employer-based insurance expanded over the course of the next three decades, making relationship to the labour market the key determinant of eligibility for different forms of insurance. The British and US health care states were born in strategic domains that were emblematic of the two political systems. The British Westminster model afforded a big bang strategy of sweeping institutional change, carried out by a majority government with a large but precarious mandate. The veto-ridden US congressional system meant that even a president with a sweeping popular mandate had to negotiate change with the congressional leadership of his own party. The result was a mosaic strategy, rapidly combining rival proposals to add two major new government programs (covering about 20 per cent of the population) to the mixed market. Both the British and US sets of changes, however, were pivotal in setting the context for the evolution of their respective systems over successive decades – an evolution buffeted by positive and negative feedback effects. Windows of opportunity for major change would not occur again until the early 1990s.

Chapter Four

The Establishment and Evolution of the Dutch and Canadian Health Care States to the 1980s

The Netherlands and Canada present contrasting cases in a number of respects. Perhaps the most obvious difference lies in the geo-demography of the two countries: Canada, with its vast territory thinly populated beyond a narrow strip along the border with the United States, contrasts with the geographically compact Netherlands, one of the most densely populated nations on earth. Of more relevance for the subject of this book are differences in governance. Canada is a highly decentralized federation; the Netherlands is essentially a unitary state in which regional governments have limited powers and exert influence primarily through the upper house of the central government. Both are constitutional monarchies, but Canada’s is a Westminster system in which coalition governments are virtually unheard of, while the Dutch tradition of coalition government traces back to the nineteenth century. The Dutch history of corporatism, establishing a shared political space for the state and intermediary organizations, contrasts with Canada’s Anglo-American liberal political economy. The foundational health care states of the two countries also present a stark contrast: Canada’s single-payer model (limited to physician and hospital services) against the Dutch system of comprehensive, group-based social and private insurance. Notwithstanding these differences, there are some marked similarities. In both countries, long-established traditions of elite accommodation bridged deep divisions (regional and linguistic in Canada’s case, religious and cultural in the Netherlands). In both countries these elite accommodations yielded a historical pattern of incremental policy change. Nonetheless, in both nations path-departing episodes of policy change in health care did occur in rare instances when those elite

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accommodations could be galvanized to embark on more sweeping change. In Canada this would occur in a brief window of “cooperative federalism” in a context of province-building in the 1960s, when the modern health care state took shape. In the Netherlands the essential features of the modern health care state were established under the German occupation – hence this “founding moment” is anomalous, and is not treated here as a case. The model was then incrementally adjusted over time, until an episode of major reform occurred in the late 1980s, at a time when the traditional institutions of Dutch corporatism were coming under intense pressure. The strategic domains in which the Canadian and Dutch episodes played out were markedly different. Canada experienced its one and only big bang with the establishment of universal physician services insurance in 1966. The Dutch, in contrast, would generate a “blueprint” for a scheme of universal regulated private insurance, which I discuss in Chapter 8. This chapter reviews the experience of both nations until the late 1980s – a period that captures Canada’s founding moment and brings the Dutch story to the brink of its reform episode. The Netherlands: Consensus, Corporatism, and Coalition Governments under Stress Dutch health policy bears the hallmarks of a nation with a long history of corporatism, consensus decision-making, and coalition governments. At first blush the apparent harmony implied by these traditions can mask enduring tensions in Dutch political culture. On closer examination, however, these very institutions and practices can be seen to have arisen as ways of managing deep tensions: most fundamentally the ongoing embrace of solidarity and subsidiarity as core values. The broad accommodations fostered by these features of the Dutch policy process also made possible and encouraged another defining characteristic: technocratic approaches to developing and implementing the details of policy (Bijker, Bal, and Hendricks 2009; Minogiannis 2003, 101; Okma 1997, 182; Timmermans and Scholten 2006, 1115).

Solidarity, subsidiarity, and the “social middle ground” The defining tension of Dutch political culture is that between the values of solidarity and subsidiarity. Each is deeply rooted in the country’s Catholic and Protestant religious traditions and its social history of



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cooperation (Lijphart 1989; Vollaard 2010). The value of subsidiarity – long associated with Christian, especially Catholic, social thought – implies that decision-making should be left to the smallest unit in society capable of taking the relevant range of considerations into account, and emphasizes the important role of intermediary organizations that stand between the individual and the state. The value of solidarity – embedded in both Christian and social democratic thought – implies improving the conditions of the least well off in society through redistribution from those better off. If the value of subsidiarity implies a scepticism towards central state power, the principle of solidarity implies a recognition that the ultimate authority of the state and a population-wide purview are necessary to ensure broadly based redistribution. A hallmark of Dutch policy-making is the insistence that these two values be kept in some sort of balance – that neither be sacrificed for the other (Schut 1995). Much of recent Dutch health policy can be seen, both before and after the significant policy shift in the mid-1980s, as oscillating among different balances and interpretations of these two values, generally coinciding with shifts in the partisan complexion of the coalition government of the day. A second and related tension is that among functional, territorial, and confessional approaches to organizing what the Dutch call the “social middle ground”: the set of intermediary organizations that function not only as units of self-administration and agents of interest accommodation, but also as grounds of identity, rights, and obligations (Schut 1995, 622–3). “Functionally” defined groups such as professions, trade associations, and unions, territorially defined units of local governance, and confessional faith-based organizations all historically laid claim to this role. The tensions among them shaped the traditional interwoven institutions of Dutch corporatism (Okma 1997, 138). Under a distinctively Dutch model of “pillarization,” providers of health and social services such as hospitals and charitable organizations, as well as peak associations of employers and trade unions, were organized within separate Catholic, Protestant, and secular pillars, which assumed responsibility for the welfare of their members in an overall policy framework. (A notable exception, especially relevant to our inquiry here, was the medical profession, whose peak association was not divided along religious lines [Okma 1997, 79]). Within these “pillars” and peak associations, moreover, federal-style structures within the unitary state allowed for local autonomy and influence, and institutions of provincial and local governance in the Dutch unitary state have long historical roots (Bos

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2013; Hulst 2005; Okma 1997). With the advent of the modern industrial and post-industrial state, these institutions entered into a “shared political space” (Crouch 1993, 50–63) with the state to form a distinctive type of “neocorporatism,”1 mediating not only worker-employer but also citizen-state relationships. Even as confessionally based pillarization declined as an organizing principle, the role of intermediary functional and regional organizations remained strong (Schut 1995). This tightly woven associational and institutional web allowed for the development of a uniquely Dutch “polder model” of tripartite consensus-building and collaboration among peak associations of business, labour, and the state. Through these arrangements, exemplified in the central Social-Economic Council of the Netherlands but elaborated at the sectoral level, the social partners struck a series of grand bargains to set the guiding parameters of economic and social policy. An important corollary to this regime of self-administration was the degree to which societal groups provided a ground of belonging and “citizenship” complementary to the state within shared political space.2 Within the corporatist and neocorporatist model, membership in functional groups, including firms and industries, was assumed to be stable and enduring. Hence group membership provided the basis of entitlement to various benefits (including health insurance), and functionally based organizations assumed obligations to provide those benefits and to share in the broader governance of the benefits regime. In the workplace this amounted to a form of “industrial citizenship” – a status relationship quite different from the contract-based relations in more pluralistic political economies (Streeck 1992, 58–64). This notion of group-based dimensions of citizenship formed a key legitimating principle of the Dutch welfare state.3 Alongside and interlinked with these corporatist structures was a web of advisory bodies reflecting the technocratic strand of Dutch political culture. Beginning in the immediate post–Second World War period, an extensive network of advisory bodies with heavy academic representation developed (Halffman 2009). Interest groups and corporatist institutions often maintained technocratic arms, and government ministries maintained internal expert capacity. The leading sources of technocratic advice, however, were advisory bodes that, while created and appointed by government, remained deliberately and resolutely independent. These bodies variously flagged emerging policy issues, developed proposals, and advised on proposals emanating elsewhere. In this associational web, consensual bargains around the broad



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architecture of policy were typically accompanied by the expectation that the details of policy development and implementation were to be worked out on the basis of scientific and technocratic expertise. Taken together, these emphases on consensus, consultation, pragmatism, and ideological balance meant that policy-making in the Netherlands, even more than in most nations, was characterized by a measured pace. From the 1980s onward the traditional institutions of Dutch corporatism faded and mutated, increasingly operating under the “shadow of hierarchy” (government edict). The confessional dimension of the social middle ground eroded steadily over the last three decades of the twentieth century and had vanished entirely by the mid-1990s. The functionally organized structures of collaboration and consultation also came under severe stress in the 1980s and 1990s, in part as a matter of deliberate policy by governments frustrated with the pace of change. Part of the story of Dutch public policy in health care, as in other areas, is the transformation of the social middle ground through the reconfiguration of the web of advisory and administrative bodies, the regrouping of coalitions of interests, and the reconstitution of the channels of influence from non-state actors. As a result Dutch politics underwent a marginal shift “from the politics of accommodation to the politics of relatively less accommodation and relatively more adversarial relations” (Lijphart 1989, 151). Nonetheless the institutional legacy was a set of expectations that policy-making would involve a net of consultations, and that the details of policy development and implementation would be guided by expert advice. Most important, the ethos of subsidiarity and solidarity, and the expectation that policies would strike a balance between the two values, remained powerful (Helderman et al. 2005; Schut 1995; Minogiannis 2003, 112–13) – as exemplified in the ongoing requirement that proposed policies be assessed by the Ministry of Finance not only for their macro- and microeconomic effects, but also for their effects on households across the income distribution (Okma 1997, 21). The Dutch state itself was characterized by coalition government in a multiparty system: no party ever gained a parliamentary majority (Schut 1995, 622). Historically the two largest parties were the centrist Christian Democratic Appeal (CDA) and the social democratic Labour party. The third major party was the conservative Liberal party, and the spectrum was filled out by a range of smaller parties of the left and right, the most significant of which was the socially liberal and economically free-market D66, founded in 1966. Except for the period

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between 1994 and 2002 and again after 2012, the continuous presence and often predominance of the CDA (or its predecessor Christian parties) in the governing coalition meant that successive coalitions were either centre-left or centre-right, depending on the representation and relative size of Labour and/or the conservative Liberals in the coalition. Like the polder model, this coalition model reinforced the importance of consensus-building in Dutch public policy. Like the corporatist institutions of the social middle ground, however, the Dutch party system underwent significant change over time. Indeed the changes in the partisan arena were considerably more tumultuous. First, a dramatic break occurred in 1994 with the exclusion, for the first time in four decades, of the CDA from government and the establishment of an odd-bedfellow “purple coalition” of Labour, the Liberals, and D66. Second, and more destabilizing, the first decade of the twenty-first century saw a pattern of surges of a succession of small but pivotal populist parties of the right.

The Dutch health care state as of the 1970s As consistent with the broader values and institutions discussed above, Dutch health care policy historically sought to balance strong roles for intermediary associations – notably, insurers and professional bodies – and for the state as regulator and subsidizer of the system and as explicit delegator of certain responsibilities. Over the first seven decades of the twentieth century, the health care system evolved very much within the social middle ground and the structures of Dutch corporatism, with the state playing a limited and fairly passive role. The establishment of the modern health care state The historical core of the Dutch system of health care coverage comprised a set of “sickness funds” tracing their roots back to guild-based associations. Prior to the Second World War membership in sickness funds for workers was voluntary, as was private insurance coverage for the “bourgeoisie,” while the indigent relied on “poor relief” from the state (Götze 2010, 1). In 1941 the German occupation government made membership in a sickness fund mandatory for employees in roughly the lower two-thirds of the income distribution, and established a comprehensive common framework to govern the funds’ operation4. The funds covered a broad basic benefit package. Equal employer and employee contributions were collected into a central fund, which retrospectively



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compensated the funds for their expenditures. Those not covered by the sickness funds fell into two categories. Non-employees with low incomes, including retirees, could join the sickness funds on a voluntary basis at community-rated premiums. The remainder of the population was ineligible for social insurance, but had the option of taking out voluntary private insurance – an option exercised by almost all. After the war the desire to “naturalize” this occupier-imposed system was frustrated by lack of domestic consensus on what the new system should be (Companje et al. 2009, 251). The only immediate change, in 1949, was the restructuring of the governance of the sickness funds, replacing the office of commissioner established by the Germans with a body more consistent with Dutch corporatism: a Sickness Fund Council representing sickness funds, providers, employers, unions, and independent experts appointed by government (Helderman 2007, 188). Tensions inherent in these arrangements drove incremental change over the 1950s and 1960s. First, as Companje et al. (2009) note, the provision for voluntary sickness fund coverage proved to be the Achilles heel of the system. Not surprisingly this option attracted a high-risk population, driving premiums out of the reach of those with low incomes. Limited ad hoc fixes – such as reductions in benefits, modest government subsidies, and cross-subsidization from the compulsory arms of the sickness funds through transferring reserves and moving particular high-risk groups such as the elderly and disabled into the compulsory regime – all proved inadequate to the problem. Nonetheless ideological differences continued to frustrate more comprehensive action. Solidaristic models, such as compulsory national insurance, attracted support on the left, while mixed models more grounded in the principle of subsidiarity were advocated by the centreright confessional parties. Finally, in the early 1960s, Gerard Veldkamp, the centre-right coalition government’s pragmatic health minister, skilled at working across party lines, cobbled together a package of adjustments that replaced the wartime German decree with “purely Dutch” legislation. The Sickness Fund Act of 1962 amounted to “old wine in new bottles,” but it had the effect of removing the Nazi taint (Companje et al. 2009, 255). Even so the passage of the Sickness Fund Act was possible only because Veldkamp promised companion legislation on a universal model to cover serious medical risks unsuited to coverage on an actuarial model – principally those relating to long-term care and chronic conditions. Accordingly, in 1966, the Exceptional Medical Expenses Act

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(Algemene Wet Bijzondere Ziektekosten, AWBZ) established a compulsory program aimed at covering such risks, principally by covering care in long-term care facilities and institutions for the mentally and physically disabled. The AWBZ was funded primarily through income-based contributions by individuals, collected through the tax system. Some services required co-payments. Because the AWBZ replaced some government spending on social care, the financing structure also included a subsidy from general taxation. Insurers – both the sickness funds and private insurers – acted as carriers of the AWBZ, but they were totally passive vehicles: eligibility was determined and care organized through local government offices. Essentially the AWBZ constituted a single-payer government program undergirding the bifurcated system of coverage for “curative” services. Its adoption was as much a pragmatic shoring up of the employer-based social insurance and private insurance model as it was an ideologically based balancing of the system. Nonetheless it provided a vehicle of universal coverage that was to expand gradually to include additional services, and it attracted periodic interest on the left as a path to broader reform. By the 1970s, then, through a series of incremental adjustments, the Dutch health care state had reached a mature form characterized by three components. First, a basic tier of universal coverage for “exceptional medical expenses” (the AWBZ), accounting for about 40 per cent of total health expenditure (den Exter et al. 2004, 34), covered the costs of long-term care and chronic illness including mental illness. Second, a comprehensive range of acute inpatient and outpatient services was covered through social insurance carried by occupationally and regionally based sickness funds, and funded through compulsory contributions from employers and employees below a prescribed income threshold (set to cover about two-thirds of the population). Social insurance was also available on a voluntary, tax-subsidized basis for non-employed, low-income groups. Third, voluntary private insurance was available for all those above the eligibility threshold for social insurance (except for civil servants, who were covered under a separate arrangement). About half of those with private insurance acquired it through their employer (Maarse 2008, 134). Hence private health insurance for upper-income employees played a significant role in the benefits structure of firms, giving employers a significant interest in this component as well as in social insurance.5 The high take-up of private insurance even beyond the employerbased arrangements resulted from the peculiar character of the Dutch



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private insurance market. Private insurers offered a basic benefit package largely mirroring that provided by the sickness finds (Götze 2010, 20) at community-rated premiums, under a voluntary accord among insurers not to engage in risk-rating or risk-selection. This “egalitarian” behaviour by private insurers might have reflected in part the dominance of not-for-profit insurers in the sector, although not-for-profit status has not dissuaded insurers in other nations from engaging in competitive risk-selection. In the Dutch context this behaviour can also be attributed in part to the playing out of the solidaristic norms of the social middle ground and in part as self-defence against the prospect of further expansion of mandatory social insurance. As Okma points out, an agreement to keep social insurance coverage under 65 per cent of the population formed part of the grand bargain in the early 1960s underlying the Sickness Fund Act and the AWBZ (2009, 6). Private sector  behaviour that contravened these established norms would risk calling into question this “peace border” between the public and private sectors. Private insurance differed from social insurance, however, in some respects. Although the sickness funds held (and were constrained by) local monopolies, private insurers were competitors. Beneficiaries of the sickness finds received benefits in kind, but those covered by private insurance paid providers for service and were reimbursed by insurers (Götze 2010, 20). Insurer-provider relations differed as well: the sickness funds contracted with providers (although they were obligated to contract with all providers in their respective regions), and remunerated them through capitation payments (for general practitioners) and fee-for-service (for specialists). Capitation rates and fee schedules were negotiated by the umbrella association of the sickness funds with the central associations of general practitioners and specialists. In an open-ended arrangement, hospitals were retrospectively compensated for their costs on the basis of volume contracts collectively negotiated at the regional level with the sickness funds, and with the participation of a representative of the region’s private insurers (Maarse 2008, 138). These regional agreements were subject to approval by the Central Office on Hospital Prices (Centraal Orgaan Ziekenhuistarieven, COZ), a central corporatist body comprising representatives of the sickness funds and hospitals and a number of independent experts (Helderman 2007, 202–4). Private insurers paid both GPs and specialists on a fee-forservice basis according to (higher) schedules negotiated by the peak association of private insurers with the provider associations (Götze 2010,

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16). But even though treating privately insured patients was more lucrative for both GPs and specialists, strong solidaristic norms prevented physicians from providing preferential access (Flood 2001, 14; Schut 1995, 621). Because of the various consensual constraints on underwriting and price negotiation, basic health insurance was generally not a profitable line for private insurers. Instead, it was a means for private insurers to attract customers for other lines, including supplementary health insurance to cover “non-essential” services. Social insurers were prohibited from offering such supplementary coverage, but a number of them established separate private divisions in order to do so. Oscillations in the state-society balance, 1974–86 In the 1970s and 1980s this system came under increasing stress. As in most other OECD nations, both public and total health spending rose in the Netherlands as a proportion of GDP throughout the 1960s and 1970s. In the 1970s these rising costs became less and less tenable as the economy deteriorated rapidly in the wake of the oil price shocks of 1973–74, triggering responses in both the private and public sectors. Private insurers began to abandon their voluntary commitment to community-rated premiums and to offer age-related premiums and less expensive (high-deductible) policies to healthier groups, notably students. These measures eroded the solidaristic ethos pervading the system, as private insurance became less accessible to higher-risk groups. Those high-risk individuals who were eligible for voluntary coverage under social insurance then tended to exercise that option, driving up the sickness funds’ community-rated premiums.6 In a vicious cycle of adverse selection, the premium differential between voluntary social insurance and private insurance predictably led healthy individuals to abandon the former for the latter, leaving the sickness funds with a higher and higher risk pool and requiring increased government subsidy (Companje et al. 2009, 264; Helderman 2007, 205–6; Okma 1997, 105–7). The cumbersome processes of corporatist decision-making proved incapable of generating an effective approach to cost constraint, leaving government to take a number of ad hoc incremental measures (Companje et al. 2009, 265). The first comprehensive response to these growing problems was the attempt of Prime Minister Joop den Uyl’s cabinet in 1974 to reform the policy framework. They proposed a root-and-branch shift to a model of universal coverage through a single, regionally administered social insurance scheme and a strong regulatory role for the central government



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over supply and prices. The circumstances surrounding this attempt were highly unusual in the Dutch context, and highly unfavourable to the prospect of major policy change. It was a period of both political ferment and economic destabilization. The party system was in the process of a realignment on the centre and right. The two centrist parties, the Protestant Anti-Revolutionary Party (ARP) and the Catholic People’s Party (Katholieke Volkspartij, KVP) – which were to combine as the Christian Democratic Appeal in 1974 – had joined with parties of the right in the coalition government led by Piet de Jong in the late 1960s, spurring the exodus of dissidents on the left of each party to form the progressive Political Party of Radicals (PPR). In 1973, after almost two decades out of power, Labour formed a coalition government under den Uyl that included the PPR, the social-liberal D66, and a few members of the ARP and the KVP, creating “the farthest left administration in Dutch history” (Götze 2010, 4). Not only was the den Uyl cabinet an ideological outlier, it was also minority government, with less than a majority of seats in the parliament – highly unusual in the Dutch context. Moreover, immediately upon taking office the new government was confronted with the oil price shock, the effects of which were especially problematic for the Netherlands. One was an attack of the eponymous “Dutch disease,” when the inflows of foreign currency to buy Dutch-owned North Sea oil led to an increase in the exchange rate, with devastating effects on the export-oriented manufacturing sector. These effects were exacerbated by a corporatist-driven wage structure that maintained a similar scale across sectors. The attempt by the den Uyl cabinet to transform the health policy framework in these circumstances can only be read as a move to seize a rare opportunity – the most ideologically favourable government possible in Dutch politics and the sense of crisis induced by the oil price shock – to enact a progressive agenda after a fifteen-year run of centreright governments (Minogiannis 2003, 122). But it was a great strategic miscalculation. As would happen again with the Clinton reform initiative in the United States twenty years later, the Dutch reformers greatly overestimated their capacity to pull off a big bang. A minority government, especially one incorporating dissidents from other parties, could not hope to mobilize the necessary authority. In 1974 the government presented to the parliament a “memorandum” outlining its three goals for health care reform: a single national social insurance plan, a hospital planning framework, and a comprehensive national tariff of health care prices. In the face of sustained opposition – from other political parties,

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employer groups, health care providers, and from within the Ministry of Finance itself (Helderman 2007, 202–3; Minogiannis 2003, 123), the government indefinitely postponed the introduction of legislation to establish the single insurance plan. It moved ahead on both planning and price regulation, but neither piece of legislation passed before the government’s term ended in 1977 (Götze 2010, 4; Minogiannis 2003, 122–4; Okma 1997, 90–1). The centre-right coalition led by the Christian Democrats after the 1977 elections had no appetite for sweeping health care change, and the pattern of ad hoc incrementalism resumed. For one thing, the government faced sustained opposition from Labour, which held a plurality of seats in the parliament but which had refused to form a coalition with the CDA.7 For the next decade the CDA formed successive coalition governments with different parties. From the outset these governments wrestled to establish a balance between corporatist bargaining and state action in the governance of health care, and cycled through a series of incremental measures driven largely by a cost-containment agenda at a time of severe economic stress (Companje et al. 2009, 267–8). After a period of turmoil in 1980–82 in which the CDA struggled to form a stable coalition government, a centre-right coalition was formed after elections in 1982 under a new and forceful CDA leader, Ruud Lubbers – who had been one of the few CDA participants in the den Uyl government – in coalition with the People’s Party for Freedom and Democracy (Volkspartij voor Vrijheid en Democratie). I address the broader agenda of the Lubbers government in Chap­ ter 8, but here I note that, at first, the government’s focus on the economy meant that its initiatives in health care were limited to ad hoc measures aimed at controlling costs, amounting to new cycles of incremental state activism. The first cycle in this process saw a renewed emphasis on the intermediary organizations in the system, “returning to a more regulated form of corporatist governance in health care, and abandoning the most etatist elements of the Den Uyl proposals” (Helderman 2007, 203). In 1982 two pieces of legislation that had been under consideration in various forms since the den Uyl government were passed. One tightened the price regulation regime, taking a “middle path between collective bargaining by corporatist organizations and direct price regulation by government” (Helderman 2007, 203). The corporatist COZ, which approved hospital prices negotiated by insurers and hospitals, was replaced by a quasi-independent agency of government, the Central Council on Health Care Prices (Centraal



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Orgaan Tarieven Gezondheidszorg, COTG), whose mandate was extended to include physician remuneration as well as hospital prices (den Exter and Holland 2005). Although all its members were appointed by government, the COTG continued to include representation from providers and insurers, as well as independent experts and government (Helderman 2007, 189) and, like the COZ, it was responsible for approving agreements reached by the associations of insurers and providers. The government was now entitled to give binding instructions to the COTG under specified conditions, but these proved fairly narrow grounds for intervention (Götze 2010, 4; Helderman 2007, 204). Companion legislation for the regional planning of health care facilities established a complex tiered division of responsibilities among municipal, regional, and central authorities and assigning primary, secondary, and tertiary/quaternary services to each level of government, respectively. Given their complexity, the new regional planning arrangements were to take effect initially in only three demonstration areas (Schut 1995, 627). These uneasy balances proved neither sustainable nor particularly effective (Companje et al. 2009, 267–70; Helderman 2007, 204; Schut 1995, 627). The three goals of the den Uyl triptych – national health insurance, capacity planning, and price regulation –in fact had constituted a three-legged stool of state intervention. With the failure of the proposals for a national health insurance plan, the remaining two legs lacked the support of a complementary financial regime, and the incentives embedded in the existing bifurcated corporatist system remained in place. In the face of these incentives, the government could do little but rely on blunt instruments of constraint. The planning regime, divorced from financial instruments, could forestall the addition of capacity, but did little to reduce or reallocate it. Similarly, in the price regulation regime, insurers lacked the incentives to drive down prices, and simply relied on the government to negotiate with providers. But agreements reached by the government with the specialist peak association on a global cap for specialists’ earnings fell apart over the association’s inability to enforce compliance on its individual members (Schut 1995, 631–2). (Similar “common resource problems” have plagued attempts to place global caps on physicians’ income in other fee-for-service systems, such as Canada, as we shall see in Chapter 9.) The government did establish global budget limits for hospitals, not including specialists’ fees, initially historically based and then calculated according to negotiated formulas (Maarse 1989). Co-payments for prescription drugs were

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also introduced in an attempt to restrain use. Together these measures succeeded in stabilizing health costs as a proportion of GDP. But they failed to address the underlying issues of system performance, while fuelling continuous conflict between the government and health care providers (Helderman 2007, 205; see also Götze 2010, 4; Okma 1997, 91; Schut 1995). Meanwhile the breakdown of the corporatist bargain around community-rating in the private sector continued to drive more and more high-risk individuals into the voluntary segment of social insurance. Then, in 1986, as a temporizing measure, two pooling mechanisms for funding high-risk insurees were instituted. The first compensated sickness funds with a high proportion of elderly beneficiaries, and was funded by surcharges on private insurers with relatively healthy risk pools. The second required private insurers to offer a basic benefit package, at regulated rates, to elderly beneficiaries and first-time entrants to the private market who were otherwise unable to find affordable coverage, and was cross-subsidized among private insurance firms. The voluntary social insurance options for low-income groups were abolished as part of this reform. Although not recognized at the time, in retrospect these state-organized pooling and cross-subsidization arrangements heralded and facilitated the convergence of social and private insurers that was to occur over the next two decades (Helderman 2007, 207). That convergence, however, would require fundamentally changing the expectations of actors, in the broad political arena and in the health care field itself. And that, in turn, would require either an abrupt change in the regime of the Dutch health care state or the establishment of the belief that such a change was under way. For reasons I discuss in Chapter 8, the Netherlands would choose the latter route in the late 1980s, when the Christian Democratic coalition government of Ruud Lubbers embarked on a blueprint strategy that established a schematic for a universal regime as the “shadow of the future” for the Dutch health care state. Canada: Regionalism, Federalism, and the Scope and Limits of the “Sharing Community” There is no historical Canadian counterpart to the shared political and social space that mediated citizenship and forged consensus in the Netherlands. But there are analogies. Region as well as country historically had a claim on the identities of Canadians, especially among the



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francophone population concentrated in the province of Quebec, and successive waves of immigration provided further ethnocultural communities of “belonging.” The two principal modes of mediating this diversity were institutional – the pattern of “elite accommodation” that defined Canadian policy-making through much of the country’s history; and electoral – the rise of two large, centrist brokerage parties at the federal level. In the late twentieth century each of these modes came under severe strain. The history of Canada’s federal framework of health care policy is bound up with these developments. The framework was forged at a time when the elite-based mechanisms of “executive federalism” were being redefined in the 1950s and 1960s, and when the federal Liberal party, which had successfully brokered an electoral coalition that allowed it to govern for most of the first half of the century, was undergoing a competitive crisis and an associated internal rebuilding. These two formative influences – executive federalism and the competitive position and internal politics of the federal Liberals – were central to the adoption of Canadian medicare, and they deserve a brief sketch to set the scene for the remainder of this chapter.

Regional differences and coping mechanisms Canadian federalism is grounded in a highly regionalized economy and society, in which the institutional powers of provincial governments both reflect and are reinforced by distinctive regional characteristics. The provinces range in population from Prince Edward Island with just under 150,000 to Ontario with nearly 14 million. Regional economies differed in their reliance on resource-based, manufacturing, and financial industries, and these differences drove the various regions through asynchronous periods of economic growth and recession, during which provinces alternated between “have” and “have-not” status. Although various forms of “equalization” of tax revenues under the aegis of the federal government from the late 1950s onward sought to smooth these disparities and to “equalize” fiscal capacity, they continued to be a source of tension within the broad Canadian polity. Coincident with these economic differences were regionally concentrated linguistic and cultural differences, not only in Quebec, but also in the West, where “alienation” was a strong and gathering force in the latter part of the twentieth century. There is no formal mechanism – akin to Germany’s Bundesrat or the US Senate – for managing these tensions by incorporating subnational

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governments or elected representatives of the provinces per se into the structures of government at the national level. The Canadian Senate is a weak body with little legitimacy – its members are appointed by the prime minister according to regional quotas established in Canada’s Constitution. Accordingly, informal mechanisms of accommodation developed: first, conventions of regional representation in the federal cabinet; and, second, the growing importance of the practice of “executive federalism,” through which the so-called first ministers (the prime minister and the provincial premiers) or the line ministers in particular portfolios (such as health, education, the environment) meet periodically to negotiate policies in areas of jurisdictional overlap. Executive federalism Historically, Canadian policy-making relied on elite accommodation to forge the compromises necessary to govern a diverse country. In a classic study, Presthus found the Canadian policy elite to be engaged in “continuous exchanges of technical information and normative preferences about issues among [its] three segments [that is, elected politicians, bureaucrats and leaders of major interests]” (1973, 3). Presthus further found the network to be distinctively more cohesive and exclusive than its US comparator (Presthus 1974: 458–63; see also Porter 1965). There is no equivalent in the Canadian experience of the grounding of citizenship in this shared political space as in the Dutch case. Rather, Canada’s reliance on elite accommodation to resolve enduring tensions – not solidarity versus subsidiary, but “centre” versus “hinterland,” anglophone versus francophone, and loyalty to Britain versus proximity to the United States – was built into its institutions as a pragmatic necessity. As I have argued elsewhere (Tuohy 1992), Canada’s political institutions accommodated these tensions over time through a form of “institutionalized ambivalence,” building competing principles into institutional arrangements and relying on political elites to work out pragmatic interpretations of those principles on a case-by-case basis as issues arose. Even the founding bargain between anglophones and francophones that established the country was ambiguous in its implications for the status of Quebec (Cameron 2012, 44.) One striking dimension of Canada’s institutionalized ambivalence is the disjunction between revenue sources and program responsibilities that the Constitution assigns to the federal and provincial governments,



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and the acceptance of a federal “spending power” to overcome that disjunction. All major revenue sources are effectively available to both levels of government,8 with the following exceptions: customs and excise duties belong exclusively to the federal government; and through a series of constitutional amendments and interprovincial agreements, the federal government has ceded control of almost all revenues accruing from the public ownership of natural resources to the provinces. The federal government’s formal taxing power greatly exceeds its formal program responsibilities, since large swathes of social policy – notably, health care and education – remain constitutionally in the hands of the provinces. Over time the courts have recognized the federal authority to spend (and attach conditions to spending) in areas of provincial jurisdiction, a role the federal government has fulfilled largely through transfers of funds to the provinces. Accordingly the Canadian federation is markedly decentralized in international perspective, especially in terms of program spending. At the turn of the twenty-first century, the federal government accounted for less than 40 per cent of total public spending, although it raised almost half of total government revenues (Boadway 2001). The need for institutional mechanisms of coordination and nego­ tiation in this context spawned a sprawling set of networks linking officials at the federal and provincial levels9 that have varied over time and across program areas (Bakvis and Skogstad 2012; Dupré 1985). Such patterns of “executive federalism” characterize all federations that concentrate power at each level of government in parliamentary arrangements, as opposed to congressional systems based on the separation of powers (Watts 1989). As historically the first national marriage of parliamentary and federal institutions, Canada’s distinctive brand of executive federalism is particularly entrenched. This portrait, however, needs some shading. Although patterns of elite accommodation have held at the federal level, the political cultures of the individual provinces vary greatly. And, over the course of the last three decades of the twentieth century, the legitimacy of elite accommodation even at the federal level steadily eroded. Nonetheless elite accommodation has survived, faute de mieux, in the institutions of “executive federalism,” through which strong regional identities, and interests based in differing provincial political economies, are filtered. The existence of Westminster systems at both levels of government has meant that federal and provincial executive bodies have had

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significant authority to negotiate with each other during the course of their respective mandates. But because electoral cycles are specific to each jurisdiction, these mandates are not coincident – a phenomenon that, as we shall see, made for a significant degree of “churn” and uncertainty in the context of federal-provincial negotiations. As in the case of Dutch corporatism, the structures and processes of Canadian executive federalism – and elite accommodation in Cana­ dian federal politics more generally – can be seen in historical perspective to have reached a sort of cooperative apogee in the 1960s, when the pillars of the Canadian welfare state, including public health insurance, were established. After that, those structures and accommodations were subject to increasing pressure and dysfunction. Just as the strain and shifts within the structures of Dutch corporatism altered the terrain for health policy development there, so too did the changing motifs of federalism and partisan advantage in Canada. Brokerage parties Canada’s electoral system has served variously both to amplify and to moderate the political effects of regional differences, and the balance of these two effects has shifted over time. Under the first-past-the-post rule, parties with regional bases can dominate in their respective regions, while parties with more thinly spread support struggle for representation. These effects are felt at both the provincial and the national levels. In Canada’s decentralized federation, provincial governments provide strong platforms for the expression and reinforcement of regional identities (Cairns 1977). At the federal level, various regionally based parties have sprung up over time. One of these, the agrarianpopulist Co-operative Commonwealth Federation (CCF), forged an alliance with the labour movement in 1961 to form the social-democratic New Democratic Party (NDP), which has played an enduring role as a third party at the national level, and has formed the government at various times in different provinces. These regional effects on inter- and intra-party dynamics at the federal level, and on the relationship between federal and provincial party systems, form an important part of the context of health policy in Canada. The federal party system is nonetheless dominated by two major “brokerage” parties: for most of the twentieth century, the Liberals and Progressive Conservatives (PCs) (Bakvis and Tanguay 2012). The major parties have built cross-regional coalitions, which, in the case of the



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Liberals, enabled them to form the government for over two-thirds of the twentieth century – leading to its appellation as Canada’s “natural governing party.” As we shall see, the history of federal health care policy in Canada is intimately bound up with the history of the Liberal party and its fluctuating ability to play this brokerage role. Like the institutions of the federal government itself, the party system has failed to provide ways to knit national and provincial party systems together. Although federal and provincial party organizations might be partisan “cousins” and in some cases bear the same label,10 they are independent entities.11 Accordingly they have had a rather asymmetrical effect on intergovernmental relations: control of federal and provincial governments by parties of different partisan stripes can exacerbate intergovernmental conflict, but “cousins” at both levels rarely have played an active role in moderating conflict. The partisan complexion of the provinces has varied significantly. In the early twentieth century, populism of the left and right took root in the then agrarian societies of Saskatchewan and Alberta, respectively, while in Quebec a nationalist party forged a hegemonic alliance with the Roman Catholic Church within the province’s insular clerically dominated political culture. These changes have yielded periods of single-party dominance at the provincial level. In the late 1950s this landscape was transformed by a dramatic shift in Quebec, as religious nationalism was replaced, at head-spinning speed, by a statist nationalism aimed at building the capacity (and, for some, the independence) of the Quebec state (Cameron 2012, 45). This “Quiet Revolution” presented both new challenges and new opportunities for Canadian federalism, with important implications for the establishment of the modern Canadian welfare state. In the latter part of the twentieth century, both the Liberal and PC parties were driven to increasingly regional redoubts. Western alienation grew under the policies (especially the energy-related policies) of the federal Liberal governments of Pierre Trudeau from 1968 to 1984. Accordingly the party’s base became increasing concentrated in Ontario, Quebec, and, to a lesser extent, the Atlantic provinces. For a time the PCs were the beneficiary, winning a majority government in 1984 by building support that spanned the West, Ontario, and Quebec. Within a decade, however, the PC Party itself was to fracture into regional blocs, some of which then regrouped as the more rightist Conservative Party of Canada, with a strong base in the West.

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The sharing community and the importance of health care Through all these developments provincial political cultures have varied significantly in the definition of what Banting (2005, 38) has called the “sharing community”; the sense of “who is part of the network of shared obligation, for whom considerations of horizontal and vertical equity are relevant.” In almost all parts of the country, there is a tension between seeing the bounds of solidarity as predominantly “countrywide” and as predominantly regional, and the balance between these competing views varies from one province to another. Most important for our purposes, Canada’s single-payer hospital and medical insurance system became a key element of the countrywide “sharing community” (Banting 2005, 44-6). Almost since its inception in the 1960s, it has been extraordinarily politically popular. Indeed attachment to this system forms a key element of the Canadian identity and political psyche (Tuohy 1999, 102–3). In a 2005 national public opinion survey, 85 per cent of respondents believed that “eliminating public health care” would fundamentally change Canada, and 87 per cent believed that the direction of change would be negative. These were higher proportions than those holding similar views of any of the other policies included in the survey question, including abandoning the establishment of English and French as the country’s two official languages and eliminating the Canadian military’s peacekeeping operations (Soroka 2007). Moreover these views generally held across regions. In a comprehensive review of public opinion polls from the mid-1970s onward, Mendelsohn has found consistent majority support across regions for the single-payer model, and concluded that, despite some differences in openness to some forms of privatization, “inter-regional similarities far outweigh any minor differences of opinion” (2002, 20). In such a context, politicians of all partisan stripes and at both levels of government not surprisingly have approached changes to the organizational and financial structure of the health care system with great caution. Rarely have parties competed on health policy, other than by attempting to outbid each other with spending promises. Knowing that they would “own” the consequences of any decisions they made in such a high-profile area of policy, moreover, governments have been unwilling to give up such levers of control as they do exercise. Together with the centrifugal forces of economic disparity, partisan difference, and regional conceptions of community that frustrated federal-provincial



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negotiation of any change, this caution around tampering with the single-payer system entrenched the parameters of health policy in Canada during the last three decades of the twentieth century.

The evolving institutions, agenda, and tone of intergovernmental relations The rules of engagement within the structures and processes of Canadian federalism vary by program. In this regard Banting (2005) has provided a useful typology of federal-provincial arrangements: classic federalism, in which governments have non-overlapping jurisdiction in specific areas, and act independently within those areas; “shared-cost” federalism,” in which the federal government, using its spending power, transfers funds to provinces to support provincially operated programs, subject to such conditions as may be attached to the federal transfers; and “joint-decision” federalism, in which formal agreement between the federal and one or more provincial governments is necessary for a program to operate. The institutional and political ability of governments to act unilaterally declines as one moves along this spectrum, and the need for federal-provincial consensus accordingly increases. Canada’s system of physician and hospital insurance falls into the “shared-cost” category, and Banting’s description of this model therefore bears quoting at some length. He notes that, although governments retain the right to act unilaterally, the political scope for unilateralism is still more constrained than in the classical model. As long as the two levels of government remain committed to the policy sector, they both have stakes in the programs and are held accountable by the electorate. Governments tend to push back politically against unilateralism at the other level, generating pressures over time for a return to consensus decision-making. Over the decades, as a result, the pattern has been a fluctuating one of co-operation, followed by unilateralism, followed by uneasy co-operation. All of which inclines the sector towards a more incremental, evolutionary pattern of policy change than is possible in the classic model. (Banting 2012, 143)

As we shall see, the health care arena quintessentially illustrates the patterns Banting describes.

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In broad terms federal-provincial relations can be seen to have evolved through overlapping eras, defined by differing degrees of consensus and conflict (Bakvis and Skogstad 2012). In the first three decades of the twentieth century, the system tended more towards the “classic” model, and federal-provincial interaction was limited: federal-provincial conferences of first ministers were held about once a decade. But as governments at both levels wrestled with responding to the Depression and then with post-war reconstruction, some redefinition of jurisdiction through shared-cost and joint-decision arrangements became necessary, and the pace of negotiations picked up dramatically. From 1931 to 1946 eight federal-provincial conferences were held. Then, from 1950 to 1967, a period marked by the emergence of what came to be called “cooperative federalism,” conferences were held on average once a year. In perspective these years can be seen to mark a brief flowering of federalprovincial concordance, when the pillars of the Canadian welfare state were established.

Health care in the evolving federation The formal powers of the federal government in health care were limited to product safety (including new drugs and devices), price regulation of patented drugs (through its trade and commerce power), and the provision of health care services to Aboriginal people on reserve, veterans, and inmates of federal penal institutions. Under various heads of authority, the federal and provincial governments shared power over health promotion and protection and the collection of data. In 2016 federal direct spending under these heads of authority was an estimated $6.92 billion, or less than 5 per cent of total public spending on health in Canada (Canadian Institute for Health Information 2016b). It should be noted, however, that the federal government also “spent” an equivalent amount ($6.6 billion in 2011, the latest year for which data were available) through “tax expenditures” such as the non-inclusion of employer-paid health and dental benefits in personal taxable income, tax credits for medical expenses, and the exemption of health care services, medical devices, and prescription drugs from the federal goods and services tax (Canada 2016). This division of power guaranteed that federal-provincial negotiations would be an endemic feature of the Canadian health care arena. The first attempt at establishing a comprehensive federal-provincial framework for universal health insurance was in the immediate post-war



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period, when the federal government presented a package of proposals for social policy initiatives and fiscal arrangements to the provinces at the Dominion-Provincial Conferences on Reconstruction in 1945–46. The package, which essentially would have entrenched the expansion of federal power that had occurred during wartime, was rejected in its entirety by the provinces. Had this federal initiative succeeded, the Canadian health policy framework would have borne much greater similarity to the national health service model being adopted in Britain at the time and attracting great interest in Canada (Tuohy 1999, 44). But this must remain one of history’s intriguing what-ifs. A pared-down version of one proposal in the federal package – for a federal program of universal old age pensions – was adopted five years later under a constitutional amendment agreed to by the provinces. But the prime minister of the time, William Lyon Mackenzie King, in the words of one later critic, “gave up on Medicare after one rebuff from the provinces” (Coutts 2003). The political dynamics of Canadian health care in the last four decades of the twentieth century was then marked by two distinct periods, the establishment of the fundamentals of the health care state from 1957 to 1971 (the subject of this chapter), and the wake of that critical moment (covered in Chapter 9). During the first period the dynamics were defined by the intersection of two axes: partisan politics at both the federal and provincial levels, and intergovernmental relations. This intersection established a contrapuntal rhythm marked by non-coincident elections at the federal and provincial levels and federal-provincial conferences of first ministers (Taylor 1979, 332). After this foundational period the resulting single-payer model for physician and hospital services assumed iconic public status and broad political attachment, and for the next three decades health care virtually disappeared from partisan conflict. The intergovernmental axis remained a defining feature of the politics of the arena, but the contests were essentially between federal and provincial governments per se, almost regardless of the political complexion of the governments at either level. In any event the salience of health care in the intergovernmental arena was vastly overshadowed by continuous constitutional conflict. This period accordingly was marked by unilateral actions by successive federal governments that sought to continue to exert influence while reducing their fiscal stake, and by provincial governments jealous of their jurisdiction. Meanwhile, at the provincial level, the logic of the singlepayer system had introduced a new central political axis: an ongoing

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accommodation within the bilateral monopoly formed by provincial governments and the medical profession.

Establishing the Canadian health care state: The warm-up – universal hospital insurance The basic framework of Canada’s single-payer system for physician and hospital services was put in place over a decade beginning in the late 1950s, a rare period of relatively cooperative intergovernmental relations, marked in particular by Quebec’s emergence from an extended period of isolationism with an assertive but modernizing agenda. The first act in this drama was the establishment of a cost-shared federal-provincial program of universal hospital insurance. The impetus came from the provincial level. Four provinces had established universal programs with somewhat varying provisions, and were seeking federal fiscal support. Any federal framework, however, would have to include at least one of the two largest provinces (Ontario and Quebec). Quebec was still in the grip of a political accommodation between the Roman Catholic Church and a conservative government led by Maurice  Duplessis, under which social services were largely in the hands of local parishes and the government adopted a decidedly non-­ interventionist stance. Under these circumstances a critical mass of support for a federal-­provincial framework could not emerge among the provinces until the largest, Ontario, warmed to the idea in the mid-1950s. Ontario’s entry into the coalition of provincial governments seeking federal cost-sharing for governmental hospital insurance came about in part through the demonstration effect of provincial programs already in place, as advanced by the opposition parties in the provincial legislature (Maioni 1998, 104), but primarily as a result of the federalprovincial dynamic. The PCs had formed the provincial government for more than a decade, and enjoyed a comfortable majority with no pressing electoral threat. But the party’s success rested on its pragmatic centrism, which involved periodically incorporating the positions of potential opponents, who were now pressing for hospital insurance. Moreover a change in personal chemistry within the tight circle of elite accommodation that characterized federal-provincial relations also eased Ontario’s transition. In 1951 George Drew, the PC Ontario premier, whose confrontational stance against the federal Liberal government was fuelled in part by partisan animosity, resigned to enter federal politics, and was replaced by the less adversarial Leslie Frost. Frost’s



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reasons for coming to favour governmental hospital insurance were largely pragmatic: he believed that a means-tested plan alongside private insurance would be administratively unwieldy and would leave substantial gaps in coverage (Boychuk 1999, 113). The federal government essentially had tossed the ball to Ontario by refusing to move without Ontario’s participation. Frost now sought to return the onus to the federal government (Taylor 1979, 116). The response of the federal government was one of “reluctant acquiescence” (Taylor 1979, 332). In their fifth successive mandate the federal Liberals faced eroding public support as they neared a general election in 1957; and their ability to withstand pressure from both the provinces and the social-democratic party in Parliament faded. They agreed to a framework of cost-sharing, but insisted that it would become operative only when six provinces with a majority of the population signed agreements under the terms of the federal program. The Hospital Insurance and Diagnostic Services Act was enacted in April 1957, just before the election in June. Beginning what was to become a pattern, it passed in Parliament with unanimous support. The Act provided for federal cost-sharing (essentially 50:50) under fairly detailed bilateral agreements to be signed by each participating provincial government specifying the conditions to be met by the provincial program. Under the minority PC government that replaced the Liberals after the 1957 election, the “six-province” rule was immediately relaxed, allowing the arrangement to be put in place at a rate determined by each individual province. Within two years, however, all provinces except Quebec had signed agreements. Quebec’s entry would await the advent of the Quiet Revolution. Thus was adopted the first instance of universal government insurance for health care services under a framework of federal-provincial cost-sharing under uniform conditions. Although significant in itself, and important in paving the way for universal physician services insurance within a decade, it was not, however, the major episode in the founding of the Canadian health care state. The stakes were not as high as they would be for physician services: the plan essentially underwrote the costs of hospital facilities, but did not touch medical practice. Accordingly, as Taylor put it, compared to the adoption of physician services insurance in the 1960s, the hospital insurance episode would look like a “contest between farm teams” (1979, 333). The principal “losers” were private insurance companies, but Ontario set the tone for an accommodation with the not-for-profit Blue Cross Blue Shield (BCBS)

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operations that dominated the industry. Much of the Ontario BCBS operation – an arm of the Ontario Hospital Association – morphed into a new Ontario Hospital Services Commission; the remaining entity continued as a non-profit insurer covering amenities not covered by the government plan (Boychuk 1999, 111). Commercial insurers, most of which were US-based, “could easily suffer the loss of their Canadian business since it represented only a tiny fraction of their North American premium income” (113), and most simply exited the market.

Establishing the Canadian health care state: The main event – universal physician services insurance The adoption of a federal-provincial shared-cost program for hospital insurance was an important landmark in federal-provincial relations. But it represented only limited progress towards the goal of ensuring universal health insurance coverage. In the 1950s and 1960s, hospitals in Canada, as in the United States, functioned essentially as “physicians’ workshops” or “physicians’ cooperatives” under the de facto control of their medical staffs (Pauly and Redisch 1973). Governmental hospital insurance essentially underwrote the costs of these “workshops,” while still leaving patients at risk for the costs of the medical services provided therein. The adoption of physician services insurance in 1966, therefore, constituted the real big bang that instituted the modern Canadian health care state. The window: Liberal rebuilding, cooperative federalism, and minority government Between 1957 and 1960 several developments dramatically changed the political landscape of social policy formation in Canada. On the federal plane the Liberal government was defeated in 1957 by the Progressive Conservatives under a new populist leader, John Diefenbaker, whose short-lived minority government was converted into a resounding majority in another election in 1958. These defeats drove the Liberals into what would be a six-year period of rebuilding while in opposition. On the provincial plane, a new cohort of reform-minded premiers came to power in elections between 1958 and 1960 (Coutts 2003). Especially significant was the election in Quebec in 1960 of the Liberals under Jean Lesage to replace the long-time Duplessis government. That election encapsulated and advanced Quebec’s Quiet Revolution – the shedding



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of an insular, clerically dominated conservative regime to embrace a modernizing agenda of state-building. The federal level, meanwhile, was marked by turbulence. An election in 1962 marked another defeat for the Liberals, but reduced the PC government to a minority and reinforced the caution of their governing stance. In the subsequent election in 1963 the Liberals returned to power, but with only a minority, fuelling the impetus for rebuilding the party. These developments also had important ramifications in the intergovernmental arena: once the Liberals were re-elected in 1963 with an agenda of social policy reform through “cooperative federalism,” they found strong interlocutors at the provincial level willing to engage in negotiations to advance their respective provincial agendas within a national frame. As in Ontario, personal networks played an important role. Quebec’s Premier Lesage was, in the words of an observer, “one of life’s original networkers” (Coutts 2003, 14). Tom Kent, the principal policy adviser to the federal Liberals, had personal connections within the federal bureaucracy, the social-­democratic NDP, and the Quebec Liberals. The new federal Liberal leader, Lester Pearson, who had won a Nobel Peace Prize as Canada’s foreign minister in the 1950s, brought his diplomatic skills to his domestic political relationships. In this context national health insurance was integral to an agenda of social policy reform that met key political imperatives in both the federal and intergovernmental arenas, although in both it came second to public pensions. At the federal level social policy reform was the recipe for the rebuilding of the Liberal party, as “social” Liberals contested with “business” Liberals in a wrenching internal party conflict (Bryden 2009). Before their defeat in the 1957 election, the Liberals had been in power for twenty-two years. Towards the end of that time, the Liberal agenda increasingly had been dominated by the “business” side of the party, and its defeat was attributed in large part to the perceived arrogance of that group and the niggardliness of its social programs. (The PCs had successfully tarred them as “the six buck boys,” with reference to a modest increase in old age pensions [Coutts 2003, 14; Kent 2009, 27]). In the party’s subsequent rebuilding, “social” Liberals saw the opportunity to seize the initiative. They organized a “thinker’s conference” in 1960 and a rally of party members in 1961 to mobilize support around a new agenda of social reform that would carry the party back to power. The opening for a Liberal social agenda was further widened

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by the inaction and temporizing of the governing PCs. The Liberal leader, Pearson, aligned himself with neither the social nor the business factions of the party – as he had come from the successful foreign policy side of government, a large part of his appeal was that he was “not tarnished by the old Liberal regime’s image of domestic policy fatigue” (Coutts 2003, 14). Correspondingly, however, Pearson had no strong views on domestic policy. Rather, he presented himself as a champion of “consensus Liberalism” (Newman 1968, 82–5). An important part of that approach was the pursuit of “cooperative federalism”12 – a pursuit that would have to focus on social policy, given provincial powers and agendas. Substantively, Pearson was not inherently a social policy reformer. He was an institution-builder, and he came to support social policy reform only when he saw it as central to the agenda of rebuilding the Liberal party. As one of his close associates from the time reports: “[W]hile Pearson spoke the words of social policy reform … he didn’t fully buy in to the changes until he saw them as the last route to redefine Liberalism and regain power after 1960. From that point on, his commitment continued until the programs were enacted” (Coutts 2003, 15). At the provincial level, and in the intergovernmental arena, social policy reform was central to the agenda of “province-building.” The Liberal government in Quebec in particular saw the need to reach some sort of accommodation with Ottawa to tap federal revenue sources in furtherance of its agenda. The desire for such an accommodation was reciprocated by the federal Liberals, who wished to support Lesage and his modernizing agenda as a way to stave off what even then was seen as the growing threat of Quebec separatism (Kent 2009, 28). The first act: The Canada Pension Plan The Liberals’ social policy reform agenda comprised a mix of universal and targeted programs, aimed at securing broad public support while still allowing for the direction of resources to those deemed most in need (Coutts 2003, 14). The two major universal initiatives were public pensions and national medical care insurance. Targeted programs included the development of a Canada Assistance Plan – a consolidation of federal support for provincial programs of social assistance under an umbrella of standardized, strengthened, and clarified conditions (Banting 2012, 151) – and an income-tested Guaranteed Income Supplement to existing federal universal old age pensions.



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After the 1963 election that brought them to power with a minority, the Liberals began to move forward with their social policy agenda. The first major item was the adoption in 1965 of the Canada Pension Plan (CPP), a contributory public pension plan for employees and the self-employed, operated jointly by the federal and provincial governments under a common governance framework. To accommodate Quebec’s insistence on distinctiveness within the federation, a separate Quebec Pension Plan was established under Quebec-only governance but with provisions similar to those of the CPP regarding eligibility, financing, and benefits. The decision to move first with the CPP was both political and pragmatic. Politically, on the federal plane, support from the Liberals’ grassroots was strongest for pensions among the items on the social policy agenda, in order to remove the party’s “six buck boys” stigma (Bryden 2009, 322; Kent 2009, 27). Pearson, the tactician in matters of diplomacy, “understood the tactical need to pace reform. He felt you have to press for a while, then back off and wait for more good openings” (Coutts 2003, 17). Another observer at the time referred to Pearson’s “superb sense of timing, honed during a lifetime spent in diplomacy, which had taught him that large problems can be solved by allowing them to ripen precisely to that point at when decisive action becomes acceptable” (Newman 1968, 307) – and in 1965 Pearson believed the pension issue was “ripe.” In the federal-provincial arena, moreover, Quebec provided further impetus with a relatively well-developed plan for which it sought access to federal revenues. Pragmatically, moreover, pensions lay in an area of federal jurisdiction as a result of a 1951 constitutional amendment, although provincial consent would be necessary to extend that jurisdiction to include support for survivors and the disabled (Banting 2012, 147; Kent 2009, 27). A CPP had been discussed at three successive federal-provincial conferences in 1963 and 1964, at which the participants wrestled over payas-you-go versus funded models of finance, levels of benefits, and other matters. To win Ontario’s somewhat grudging support, a compromise was reached between the generous, largely funded Quebec proposal and the original, less generous pay-as-you-go federal proposal. The final price of provincial cooperation was a “joint decision-making” model of governance (Banting 2012) that, without much exaggeration, made the CPP legislation “more difficult to amend than most parts of the constitution” (Banting 1998, 58). The Canada Pension Plan Act, passed in April 1965, had all-party support but not unanimity. The next major

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item on the social policy agenda post-election would be national physician services insurance. Pace: A closing window There were other reasons to move swiftly. In the context of minority government, the social-democratic NDP was an important ally of the reformist Liberals. Close personal networks connected the two parties (Kent 2009) – indeed, in 1965, secret negotiations were held regarding a possible merger (Coutts 2003, 17). Arguably the Liberal reformers had greater leverage within their own party in a minority government context than they would have in a majority. Opinion within the government was divided as to strategy: some argued for temporizing, in the expectation that they could be in a better position with a majority after an election; others saw this as “profoundly wishful thinking” (Kent 2009, 30), and argued for seizing the moment. Within a fairly tight frame the Liberal cabinet “wrangled over timing – when to begin negotiations [with the provinces], when to call an election” (Bryden 2009, 325). Ultimately the government convened a federal-provincial conference in July 1965, and went to the polls in November. The election, which returned the Liberals to government but with another minority, not the hoped-for majority, was deeply discouraging to Pearson and destabilizing for the party’s reformists (Bryden 2009, 327). But it gave new urgency to the reform agenda. Doubts arose as to whether the Liberals, having failed to secure a majority in five successive tries, could win the next election. Moreover the election brought into the Liberal caucus new recruits in the persons of three rising stars from Quebec: Pierre Trudeau, Jean Marchand, and Gérard Pelletier. The three Quebec federalists brought a different agenda, one of constitutional reform, and were committed to renewing the federation in a way that could accommodate Quebec’s ambitions without granting it any form of special status. Although a welcome rejuvenation, the arrival of Trudeau, Marchand, and Pelletier gave the social reformers in the party an added incentive to accomplish their agenda before the focus turned to other matters. Finally, the defeat of Jean Lesage’s Liberal government in Quebec in 1966, once negotiations on physician services insurance were well under way, provided yet another reason to move quickly. The election of a conservative Union Nationale government with a slim majority under Premier Daniel Johnson “unsettled intergovernmental relations, if only because Premier Johnson was an unknown quantity,” and created an opening for other provinces to press their demands



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(Bryden 2009, 327). The federal Liberals then needed to move swiftly to demonstrate that an accommodation with Quebec was possible before a firmer indépendantiste agenda took shape and initiatives from other provinces gathered force. Scale: The Saskatchewan catalyst The scale of policy change to be attempted in these circumstances was not a given. Essentially the scale had to balance the need to attract a coalition of support in the context of a minority government at the federal level and the demands of increasingly activist governments in the federal-provincial arena. Normally these sorts of circumstances would suggest a mosaic strategy of multiple compromises over adjustments of existing arrangements – such as was being pursued in the US health care arena at the same time, and had been followed in the development of the Canada Assistance Plan a year earlier. Such an approach might have yielded federal support for an essentially residual model of coverage, on which provinces could have built using their own resources should they have chosen to do so. In the Canadian health care context, however, several factors militated in favour of larger-scale reform. The first of these was the demonstration effect of the adoption of universal physician services (or “medicare”) by the social-democratic CCF government of Saskatchewan in 1962. The Saskatchewan plan, which required the government to weather a lengthy physicians’ strike, almost immediately came to play a role in defining the federal agenda similar to that played by the Massachusetts example in the United States in 2009. In 1960, during the political debate over medicare in Saskatchewan, the Canadian Medical Association (CMA) had appealed to the federal PC government of the time to establish an independent committee to “study methods of ensuring the highest standard of health care for all citizens of Canada, bearing in mind the CMA Statement on Medical Services Insurance” (quoted in Taylor 1979, 335). The CMA’s own statement favoured government subsidization of premiums for those who could not afford them for private pre-payment plans such as those operated by provincial medical associations. In response to this request, the federal PC government had appointed a Royal Commission on Health Services in 1961, chaired by Justice Emmett Hall of Saskatchewan. The composition of the commission did not presage a radical report: two physicians (including a past president of the CMA), a dean of nursing, a past president of the Ontario Dental Association, a Progressive Conservative businessman, and an academic

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economist (Taylor 1979, 342). From the government’s perspective the appointment of the commission had been essentially a temporizing move, an attempt to take health care off the agenda – the PC Party, for example, made no mention of health care in its 1963 election platform (333). Yet, in its report three years later, submitted to the then Liberal government, the Hall Commission recommended a universal program of health services insurance. The great puzzle of why a conservatively constituted commission would yield such a radical recommendation has a fairly straightforward answer: like many Royal Commissions, it was essentially dominated by its chair, who guided every stage of the drafting of the report. Hall formed his views through a marriage of pragmatism and principle. As a member of the commission’s research staff was later to recall, “this individualistic jurist … gradually [became] convinced, on the basis of the evidence presented, that a publicly-sponsored medical insurance scheme would be the most efficient and just system” (Boan 2012, 293). The commission’s report justified its recommendation for a universal program with the pragmatic argument that “the number of individuals who would require subsidy to meet total health services costs is so large that no government could impose the means test procedure on so many citizens, or would be justified in establishing a system requiring so much unnecessary administration.” Similarly, it recommended wrapping the existing hospital insurance program into a new more comprehensive model “in order to achieve full integration of all health services, and thus to obtain the most efficient administration of all sectors of the proposed health services program” (Canada 1964, 743–4). But the recommendations themselves were presented as a set of principles, in the form of a “Health Charter for Canadians,” that ultimately would inform the elegant simplicity of the subsequent legislation. (In another curious what-if, it is nonetheless intriguing to speculate on what the commission’s report might have said had one of its most vociferous conservatives, businessman Wallace McCutcheon, not left as a result of his appointment to the Senate and the PC cabinet.) The Hall Commission report was radical as to the means of financing of health services, but not as to the organization of their delivery. It announced its opposition to “state medicine,” included a commitment to “free and self-governing professions” in the Health Charter, and essentially recommended the underwriting by government of the costs of the existing system. In the buoyant economic climate of the times, such a model appeared both feasible and desirable (Coutts 2003).



Dutch and Canadian Health Care States to the 1980s  137

As experience with the Saskatchewan scheme built – and particularly as its positive effects on physicians’ incomes, no longer shrunk by bad debts, became apparent – it took on greater attractiveness as a generalizable model. With the Saskatchewan example and the Hall Commission report before it, the pressure of the opposition NDP at its back, and the neutralization of the PCs, whose own government, after all, had appointed the Hall Commission, the support of the Liberal cabinet for a universal model began to gel (Maioni 1998, 134; Taylor 1979, 353). Divisions nonetheless remained in cabinet, which constrained the scale of change somewhat. Importantly (and presaging an ongoing debate), concerns of fiscal conservatives about the uncertain trajectory of prescription drug costs meant that drug coverage was not included, as Hall had recommended. Further adjustments to scale at the margin were made in the course of negotiations with the provinces. The strategy unfolds: Closing the deal Despite the relatively positive climate of federal-provincial relations, with Pearson’s approach of “cooperative federalism” and provincial incentives to tap federal resources for capacity-building, the course of negotiating the medicare program was somewhat rocky. As in other cases reviewed in this book, tactical decisions played an important role in the actual implementation of strategy. Within all of the constraints discussed so far, certain individuals played key roles in this regard. Pearson’s emollient diplomacy, Lesage’s networking, the inherent caution of Ontario’s centrist PC premier, John Robarts, and the brilliance of seasoned civil servants in the federal Finance Department were all important factors. At first, at a federal-provincial conference in July 1965, the tenor of discussions was muted. A number of provinces, most notably Quebec and Ontario, resisted having the “Saskatchewan model” adopted nationwide. Quebec could be, and was, accommodated with a separate arrangement, as in the CPP negotiations: the province was allowed to “opt out” of federal cost-sharing arrangements, receiving instead an equivalent transfer of “tax points,” provided that it offer a plan on terms similar to the federal conditions. In this case, unlike the pension case, however, the same offer was made to all provinces, although none except Quebec took it up. The resistance of other provinces to complying with federally prescribed conditions was assuaged (though not eliminated) with a master stroke proposal from A.W. Johnson, a federal assistant deputy minister of finance who had served in the Saskatchewan government during the building of a substantial

138  Remaking Policy

professional bureaucracy under successive CCF governments, including the period when Saskatchewan’s medicare program was adopted. Johnson’s proposal was that, rather than signing detailed provinceby-province agreements as was the norm for programs of federal costsharing, including hospital insurance, the federal government should simply enact certain conditions under which it would share the costs of provincial programs. Any provincial program meeting those conditions would then be eligible for federal funds, without the need for separately signed agreements (Bryden 2009, 326). The resulting federal legislation, compared to the founding legislation of other health care states covered in this book, thus was simplicity itself: its key provisions, setting out the conditions for federal transfers, comprised two pages of text. The conditions were as follows: • Public administration: the plan must be “administered and operated on a non-profit basis by a public authority appointed or designated by the government of the province” and subject to provincial audit. • Uniformity and lack of financial barriers: the plan must provide “insured services” [defined as “all services rendered by medical practitioners that are medically required”]13 on “uniform terms and conditions to all insurable residents of the province” through reimbursement “in accordance with a tariff of authorized payments” established under provincial law, that provides for “reasonable compensation for insured services … and that does not impede or preclude, either directly or indirectly whether by charges made to insured persons or otherwise, reasonable access to insured services by insured persons.” • Universality: the plan had to cover 95 per cent of the “insurable residents” of the province (after a three-year transition period in which 90 per cent coverage was acceptable). • Portability: the plan could not impose more than a three-month waiting period for coverage, had to insure residents during temporary absences from the province, and had to continue to cover those who moved to another province during the transitional three-month waiting period. The full legislative package comprising Canadian medicare would, of course, include the various provincial acts establishing programs in compliance with these principles. But in comparative context, this federal footprint appears remarkably light.



Dutch and Canadian Health Care States to the 1980s  139

Although these principles were seemingly incompatible with the model of government subsidization of private insurance preferred by several provinces, discussion at the July 1965 conference was low key and opposition muted (Taylor 1979, 354–66). As the federal program took shape over the ensuing months, and especially after the 1965 election, provincial opposition mounted, and misgivings within the federal Liberal cabinet increased. Financing the program, as well as other items of the Liberals’ social policy reform agenda, would require a 2 per cent “social development” income surtax, raising the concerns of fiscal conservatives such as Finance Minister Mitchell Sharp, who argued for shelving the legislation. In what we shall see to be timehonoured cross-national practice, the chosen way to assuage opposition was to delay the effective date of implementation. Pearson and others had aimed for a symbolically important effective date of 1 July 1967, Canada’s centenary, but agreed to amend the legislation between second and third reading to extend the date to 1 July 1968. The Medical Care Act passed in December 1966 with all-party support and only two dissenting votes, belying its rather tortuous progress to that point. After the passage of the federal legislation, and particularly after the 1968 federal budget instituted the “social development” surtax, a number of provinces (including Ontario) protested that they were effectively being coerced into participation in the federal program (Taylor 1979, 375). Nonetheless, over the period from 1968 to 1971, all provinces entered the plan by establishing medical care insurance plans that met the federal criteria. These plans provided first-dollar coverage for all “medically necessary” hospital services and “medically required” physician services. Neither federal nor provincial legislation defined the basket of “medically required” or “medically necessary” services: hospitals would be funded on a per diem basis deemed sufficient to cover all “medically necessary” services, and the schedule of benefits for physician services would be determined by the provinces with their respective medical associations as a by-product of medical fee negotiations. Initially the provinces agreed to cover 85 per cent of the fees as established in these negotiations, and most physicians agreed to accept that amount directly from the government insurance agency as payment in full. About 10 per cent of physicians, largely specialists, exercised an option to charge additional fees at their own discretion; patients of those physicians would be remunerated at the government benefit rate. These practices were consistent with the operation of the physician-sponsored insurance plans that predated universal insurance, but the “extra-billing” option did not persist for long.

140  Remaking Policy

Denouement: “Paradigm freeze” and policy cycling From the early 1970s to the late 1990s, health policy in Canada was essentially held hostage to other acrimonious agendas on the federalprovincial plane: constitutional wrangling under the threat of Quebec separatism until the mid-1990s, interprovincial tensions arising from the very different effects of the sharp rise in oil prices in the mid-1970s on Canada’s highly regionalized economy, and deficit-reduction agendas at both levels of government, with consequent blame-shifting, in the 1990s. Constitutional change and stalemate Almost immediately after the passage of the Medical Care Act, the federal-provincial agenda shifted radically, as the period of cooperative federalism gave way to a more conflictual epoch of constitutional dispute, fuelled largely but not entirely by competing views of the role of Quebec within the federation. Canada’s Constitution at that time was still formally embodied in an act of the British Parliament. The nation’s centennial year, 1967, provided a symbolic moment to consider a constitutional vehicle befitting a more mature nation. A newly emergent Quebec, with a modernizing state and an increasingly restive separatist movement, meant that any consideration of constitutional legislation would be a fraught process, and so it was. A conference of provincial premiers, convened by the premier of Ontario in November 1967 and billed the Confederation of Tomorrow conference, launched a threeyear process of meetings of heads of Canadian governments and their officials, but no agreement was reached. Meanwhile, a charismatic new federal Liberal leader from Quebec, Pierre Trudeau, led the party to a majority government in the 1968 election. The new prime minister’s agenda was strongly oriented to countering the thrust of separatism though constitutional and other change that would incorporate the newly modernized Quebec state within a strong federal framework. Trudeau kept the constitutional issue alive even after the failure of the first three-year round of negotiations in 1971. The rise and growing force of the indépendantiste Parti Québécois (PQ) dominated much of the agenda of this period, which saw the “patriation” of the Canadian Constitution, including the adoption of a Charter of Rights and Freedoms, in 1982, over the objection and without the signature of the then PQ government of Quebec. Subsequent revisions in



Dutch and Canadian Health Care States to the 1980s  141

1987 and 1992, intended to secure the signature of Quebec governments (then Liberal), were agreed upon through federal-provincial structures, but foundered on popular opposition, contributing to the fading of the legitimacy of elitist forms of decision-making. A Quebec referendum on a form of “sovereignty-association” with the rest of Canada failed by a 60–40 margin in 1981, but fourteen years later a similar referendum came perilously close to passing, failing to achieve a majority by less than a percentage point. Federal-provincial relations were further strained in the 1970s by the increase in the world price of oil, which destabilized the bargain between western producers and eastern consumers on which Canadian energy policy was premised (Tuohy 1992, 263–9). Even the subsequent granting of jurisdiction over natural resources to the provinces in the 1982 Constitution did not resolve the acrimony around energy policy. Together these issues crowded most else, including health care, off the agenda. Of thirty-eight federal-provincial conferences between 1967 and 1992, twenty were dominated by discussions of constitutional issues and another twelve were devoted largely to the economy, including energy policy and regional economic disparities (Canadian Intergovern­ mental Conference Secretariat n.d.) On only two occasions, in 1973 and 1976, in the runup to the restructuring of federal transfers for social programs (discussed below), did health care appear on the agenda. After the catharsis of the 1995 Quebec referendum, constitutional politics faded from the federal-provincial scene, overtaken by the deficitreduction agendas of the latter part of the 1990s. The freezing of the policy framework Major change in the federal framework – such as changing the principles underlying the single-payer model for physician and hospital insurance, extending that model to other health care sectors, or establishing a different common national framework for those other sectors – would have required negotiation between the Federal government and the provinces. Even modifying the administrative interpretation of those principles on a consistent basis across provinces would have required pan-Canadian agreement. But, as noted, until the late 1990s federal-provincial negotiations on health policy were essentially held hostage to the constitutional and economic issues that dominated the intergovernmental agenda. Meanwhile, other forces within the health care arena itself were militating against change. One was the extraordinary political popularity of

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the single-payer model for physician and hospital services. The second was the logic of the bilateral monopoly established by the single-payer model itself, which made provincial-level accommodations between the state and the medical profession the political core of the system. As both sides became increasingly invested in the maintenance of this relationship, the most powerful payers and providers in the system exerted strong stabilizing influences (Tuohy 1999, 203–37). Together these various forces brought about what has been described as a “paradigm freeze” in Canadian health care policy (Lazar et al. 2013). Nonetheless, like all policy frameworks, this new Canadian model crystallized a bargain struck at a moment in time, and it contained unresolved and ongoing tensions. The balance of influence between the state and the medical profession, and the mix of hierarchy and peer control in governing that relationship, had to be fine-tuned as fiscal and other circumstances changed, driving alternating patterns of largesse and constraint in provider remuneration and cycles of centralization and decentralization in the negotiations. The borders between public and private finance similarly needed ongoing adjustment as provincial governments confronted demands for coverage of services outside the physician and hospital sectors. And even within the state, the uneasy role of the federal government in an area of provincial jurisdiction drove continuing adjustments to the level, structure, and degree of conditionality of the federal transfer. The effect of these buffeting forces of positive and negative feedback was to drive cycles of policy change, as briefly sketched in the remainder of this chapter. Federal transfers: Structure, conditionality, level The structure of the federal transfer for health – its composition and the degree to which it was coupled with or decoupled from transfers for other purposes – was changed in 1977, 1995, and again in 2003. The annual rate of change in the level of the transfer also went through cycles of liberality from 1968 to 1985, constraint from 1985 to 1997, and liberality again from 1998 to 2014. The degree of de jure conditionality of the transfer also underwent cycles of change: loosening in 1977, tightening in 1984, loosening in 1995, tightening in 2000 and 2003. (As we shall see, however, the de facto conditionality of the transfer was limited.) Here I deal with these cycles as they played out from the early 1970s through the early 1990s; in Chapter 9 I pick up the story in the mid-1990s. Changes in the composition of the federal health transfer began in fiscal year 1976/77, a decade after the passage of the Medical Care Act



Dutch and Canadian Health Care States to the 1980s  143

and five years after the last province entered the federal scheme. Under the original terms of the Hospital and Diagnostic Services Insurance Act and the Medical Care Act, the federal government shared with the provinces the costs of providing services covered by that legislation on a rough 50–50 basis.14 This open-ended mode of calculation left the federal government at risk for costs over which it had no control, and the federal transfer increased along with provincial spending on hospital and physician services. In 1975 the federal government began a series of moves aimed at establishing greater certainty regarding its fiscal exposure. For fiscal year 1976/77, a ceiling was placed on the increase in the transfer as the federal government entered into negotiations with the provinces to change the structure of finance (Provincial and Territorial Ministers of Health 2000, 4). In 1977, under the shadow of a threat by the federal government to act unilaterally, these negotiations resulted in the conversion of shared-cost arrangements for health care and post-secondary education into a block grant for “Established Programs Financing” (EPF), with an annual escalator based not on program costs but on the growth of the population and the economy. Furthermore, only half of this amount would be in the form of a conditional cash transfer indexed to population and GDP. The remainder would be produced by the federal government’s unconditionally transferring to each province the revenue generated by a specified number of “tax points,” defined as the respective proportion of the federal basic income tax in each province that would yield revenue equivalent to the remaining half of the previous per capita transfer (based on the experience of fiscal year 1975/76). The composition of the transfer was destined to shift over time: as tax points generated more and more of a given province’s entitlement, the cash component correspondingly would shrink (Madore 1991).15 Although the federal government continued to consider the value of the tax points as part of the transfer in its ongoing dealings with the provinces, provincial governments soon came to treat the transferred tax room simply as part of their own revenue sources, and their subsequent demands focused entirely on the cash transfer. These changes in structure also had, as intended, an impact on the level of federal funding. From 1968 to 1975 the rate of increase fluctuated along with the costs of hospital and physician services within a range of about 10–19 per cent in total nominal terms and about 0–6 per cent in real per capita terms – that is, adjusted for inflation and population growth16 – before being capped at 14.5 per cent for fiscal year

144  Remaking Policy

1976/77. After the EPF structure was put in place in 1977/78, the level of the total transfer continued to rise into the early 1980s along with population and GDP growth, hovering at about 12 per cent per annum in nominal terms (Madore 1991). This level of increase was nonetheless below what it would have been under the previous 50–50 cost-sharing arrangement, as the rate of increase of health costs outpaced both population and GDP. In 1985 the upward cycle that had characterized the first decade and a half of medicare’s existence reversed, and a decade-long downturn in federal financing commenced. A Progressive Conservative government elected in 1984 reduced the per capita transfer in 1986 from GDP growth to GDP growth minus 2 per cent, and in 1991 froze the per capita transfer at its nominal fiscal year 1989/90 level. As a result of these changes, the annual adjustment to the total nominal EPF cash transfer declined from about 12 per cent in the early 1980s to negative 5–10 per cent in the early 1990s. I view these funding cycles over a fuller time span in Chapter 9. The degree of conditionality of the transfer also fluctuated. In the era of cost-sharing before 1977, the terms of the transfer required the provinces to provide fairly detailed information on their expenditures on covered services. With the switch to block funding in 1977, there was no requirement that the federal funds be spent in any given area, as long as the province complied with the principles of the federal legislation. (The federal government nonetheless continued to assume a “notional” allocation of roughly 70 per cent for health care and 30 per cent for post-secondary education.) Furthermore, the new structure of the EPF reduced by half the amount of federal funding for health that was conditional on provinces’ complying with federal legislation, and that proportion continued to decline.17 On the other hand, federal financing for health and post-secondary education was now comingled and fungible, and the only conditions on the transfer were related to health care. More significantly, in 1984 the federal Liberal government, which was to lose to the PCs in the September election, unilaterally moved to strengthen its leverage over provincial plans through legislative action.18 As part of the founding bargains between provincial governments and medical associations, most physicians had agreed to accept the negotiated government benefit as payment in full. But six of the ten provinces allowed physicians the option of “extra-billing” their patients – that is, billing patients over and above what the government



Dutch and Canadian Health Care States to the 1980s  145

plan would pay – by opting out of the government plan and billing patients directly, on the understanding that patients would be reimbursed at the government rate. Only about 10 per cent of physicians exercised this option, and the amount of extra-billing was estimated at only about 1.3 per cent of total physicians’ billings under medicare. In no province did this amount exceed 3 per cent (Tuohy 1988). The economic and political significance of extra-billing was increased, however, by the fact that it was “clustered” in certain specialties and localities. Moreover the symbolic importance of extra-billing gave it a political salience far beyond these tangible effects. For the medical profession, extra-billing was the last vestige of the individual physician’s entrepreneurial discretion over the price of service, and thus a symbol of the autonomy of private medical practice. For a federal Liberal government declining in popularity, opposing the extra-billing allowed by mostly PC-governed provinces offered an opportunity not only to assign guilt by association to the federal PC opposition, but also to be seen to defend one of the fundamental principles underlying Canadian medicare. The federal Liberals’ action came in the form of the Canada Health Act (CHA), which, despite their attempt to associate the PC opposition with the extra-billing issue, passed with the support of all parties in Parliament. The Act, however, embraced much more than extrabilling: it became the new comprehensive vehicle for the Canadian single-­payer model. It incorporated both the Hospital Insurance and Diagnostic Services Act and the Medical Care Act, clarifying and giving sharper point to the conditions set out in the predecessor legislation. Those conditions were restated as five principles: universality, accessibility, comprehensiveness, public administration, and portability. The interpretation of each principle was also elaborated. With regard to the “accessibility” principle, in particular, the CHA prescribed “dollar-fordollar” penalties for provinces allowing extra-billing and other user charges. It also explicitly enabled the federal government at its discretion to withhold payment from a province for non-compliance with any of the CHA principles. Notwithstanding the elaboration of the principles and penalty provisions, the CHA was still a relatively concise document: the English and French versions together totalled slightly more than thirteen pages. The only regulation under the CHA – prescribing the terms under which the provinces were required to submit information on extra-billing – added just two pages of English and French text. The CHA thus not only reinforced the single-payer model; de jure it also sharpened the federal instruments of enforcement, and all

146  Remaking Policy

provinces passed legislation to bring their plans into compliance. De facto, however, the CHA narrowed the scope of conditionality. The only information provinces were now required to submit concerned extrabilling and user charges. Moreover, successive federal governments have proved reluctant to exercise the sanctions available to them against the marginal infractions that continued to occur. No federal government has ever exercised its broad discretionary authority to withhold payment for non-compliance with any principle. The CHA in effect requires provinces to “confess” to non-compliance by submitting information on extra-billing and user charges, and the federal government lacks any other enforcement tool. At least some under-reporting has occurred, as was made apparent in a high-profile case involving private clinics in British Columbia in 2012 (see Chapter 9). Under PC governments from 1984 to 1993, no penalties were levied.19 The election of a Liberal government in 1993 inaugurated a period when the federal health minister took a firmer public stance and began to levy penalties that were tiny in comparison to the overall transfer. Cycling at the provincial level: Largesse and constraint As each province adopted a single-payer system in accordance with federal legislation between 1968 and 1971, it entered into a founding bargain with the province’s medical profession. According to the terms of this bargain, the profession essentially traded off some entrepreneurial discretion in return for the maintenance of clinical autonomy. The profession accepted the role of the state as the “single payer” for medical and hospital services, recognizing that this inevitably would limit the ability of individual practitioners to set the prices of their services. The state, for its part, accepted that, within broad budgetary parameters, resource allocation would be determined largely by the clinical decisions of individual professionals in individual cases. As such the bargain was similar to that struck around the founding of the NHS in Britain. In Canada, however, the deal came in more buoyant times, allowing governments to be more generous in their terms. Clinical autonomy was deemed to include the freedom for individual physicians to choose their mode of practice – meaning that private, fee-for-service would continue as the predominant mode of practice for the foreseeable future. Moreover, governments initially accepted the schedule of fees established by each provincial medical association as the schedule of benefits for physician services, and paid those rates on a pro-rated basis. As the provincial plans became established,



Dutch and Canadian Health Care States to the 1980s  147

structures for central negotiations were established in each province. The CHA further entrenched these structures by tying the extra-billing ban to a requirement that provinces provide physicians “reasonable compensation,” as evidenced through processes of negotiation with provincial medical associations that included mechanisms of conciliation or binding arbitration. The profession-state axis in each province was shaped by the different governing styles that emerged from the economic, political, and cultural context (Lomas, Charles, and Greb 1992; Tuohy 1999, 207–34). Over time these various provincial-level accommodations generated different trade-offs, especially as matters relating to the organization of health care delivery rose on the agenda. Throughout the 1970s and 1980s, however, negotiations focused almost entirely on the overall rate of increase in the medical fee schedule, leaving the distribution of fee increases across specialties to be determined by the profession itself, and giving very little consideration to alternative modes of remuneration. On balance these negotiations produced cycles of largesse and constraint in overall levels of spending on physician services (see Table 4.1). The physician-sponsored insurance plans that had been established by provincial medical associations in the 1950s had generated a sharp rise in medical incomes, as physicians were guaranteed payment for their services to beneficiaries according to a fee schedule set by the associations themselves. The establishment of government plans between 1968 and 1971 accelerated this trend, as coverage was universalized and governments simply underwrote existing medical fee schedules. Shortly thereafter, provincial governments established processes of central bargaining with medical associations. Possibly because these governments were accustomed to collective bargaining and medical associations were not, the first years of experience with these processes were marked by a decline in medical incomes, despite an increase in “utilization” – the volume and complexity of services provided per capita. Real average medical incomes declined between 1971 and 1975 and flattened out thereafter until the early 1980s (Grant and Hurley 2013, 3–6). Although medical associations were gaining experience at the bargaining table, any potential gains were suppressed in the late 1970s by provincial compliance with federal wage-control legislation, making medical fee schedules temporarily subject to approval by a federal Anti-Inflation Board (Grant and Hurley 2013, 6). Then, in the early 1980s, a decadelong upward cycle in medical remuneration began. Pent-up demand expressed though increasingly experienced medical negotiators led

148  Remaking Policy Table 4.1. Trends in Medical Income, Canada, 1971–2010 Period

Annual Rate of Change Income per Physician

Average Fee

Utilization per Capita

Population per Physician

1971–79

−1.32

−3.05

4.18

−2.30

1979–91

1.34

−0.30

3.43

−1.72

1991–96

−0.96

−0.54

−0.78

0.36

1996–2001

2.33

0.06

2.65

−0.38

2002–10

3.23

3.69

0.40

−0.84

(percentage change)

Source: Grant and Hurley 2013.

to fee schedule increases, magnified by continuing rates of increase in utilization to produce a steady rise in medical incomes. Thus was established a pattern of cycling in medical remuneration that would continue into the 1990s (with a downturn) and the 2000s (with an upward cycle). I discuss these latter two phases of the pattern in Chapter 9. Conclusion Both Canada and the Netherlands present cases of political systems historically reliant on elite accommodation to bridge social and economic divides. Those accommodations made for slow-moving policy processes in which abrupt, path-departing change was particularly unlikely. As in Britain and the United States, however, a rare window of opportunity in Canada in the 1960s allowed for the main contours of the modern Canadian health care state to be established in a big bang episode of major policy change. That Canadian policy-makers should have found themselves in a strategic domain favouring a big bang is, on its face, particularly remarkable – especially when that domain was characterized by a federal minority government attempting major change in a field of provincial jurisdiction. Nonetheless the internal dynamics of the federal Liberal Party of the day led it to seize the opportunity offered by a shift in the climate of federal-provincial relations to diffuse a model of universal physician insurance that had been pioneered at the provincial level. Together with the program of universal hospital insurance adopted eight years earlier, this model of Canadian “medicare” – as universal physician and



Dutch and Canadian Health Care States to the 1980s  149

hospital services came to be known – expanded the fiscal footprint of the state, and drastically reduced the role of private insurers for such services. The role of the federal government vis-à-vis the provinces was enhanced, but only with regard to the laying out of certain basic organizing principles, not to the actual operation of health insurance programs. The medical profession was drawn into a bilateral monopoly with the state at the provincial level in an accommodation that would become the principal political axis of the health care system, and that would ensure the continuing central influence of the profession. This founding bargain arguably has elevated the medical profession to a position of influence that is stronger in Canada than in most other advanced nations (Tuohy 1999). This influence is not unfettered, of course, but the compromises that emerged from the profession-state accommodations at the provincial level have set the key structural parameters of health policy. The scope for market mechanisms in financing the insurance function (for physician and hospital services) was clearly reduced, although private insurers continued to cover other health services and amenities. Similarly the process of constraining the entrepreneurial ability of individual physicians to set the prices of their services – which was already well under way with the rise of physician-sponsored “pre-payment” plans – was accelerated. Most profound was the shift in organizing principles, as citizenship replaced consumership and relationship to the labour market as the basis of eligibility for health care coverage, and the functional role of the state shifted from residual subsidizer to hegemonic payer. The scale of this big bang, however, should not be exaggerated. The buoyant economic climate of the times allowed governments to assuage opposition with generous provisions. Federal contributions to provincial plans initially were open-ended, on a rough 50:50 basis. The role of the state as single payer left the existing delivery system intact (Tuohy 1999, 55–6). The generous underwriting of this system, moreover, essentially froze in place the delivery model of the 1960s – including fee-for-service modes of remuneration and freedom of choice for both patients and providers – and Canada experienced nothing like the subsequent turbulent market-driven transformation of health care delivery and finance in the United States. This “parting at the crossroads” of two systems that, until the fateful policy choices of the 1960s, were as similar as any on earth, is one of the most dramatic natural experiments to have occurred in comparative public policy, and an undeniable watershed in Canada (Maioni 1998; Tuohy 1999, 47, 248–9).

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Moreover the changes applied only to part – albeit the core part – of the health care system: the physician and hospital sectors. In effect the Canadian model of health insurance coverage presented yet another example of “institutionalized ambivalence”: it combined the strictest single-payer model in any OECD nation for physician and hospital services with a US-style residual model for all other services. Outside physician and hospital services, private insurance and out-of-pocket payments remained the dominant modes of financing. As well, over time, provinces would develop varying programs of coverage, with different provisions regarding eligibility, co-payments, deductibles, and so on, as I discuss further in Chapter 9. In the Netherlands the actions of an occupying government during the Second World War pre-empted whatever domestic forces might have generated a founding moment for the modern health care state. The German occupiers essentially imported a German model of social insurance into the Dutch context. The model, however, was not inconsistent with Dutch corporatist structures and practices, and it was essentially “patriated” and incrementally adapted over the next four decades. It relied heavily on self-regulation and mutual accommodation among providers and insurers within the shared political space of the Dutch “social middle ground,” and it grounded health care eligibility in uniquely Dutch concepts of social citizenship. As the accommodations on which the system rested came under increasing strain in the 1970s and 1980s, incremental adjustments became more frequent. In the 1980s a growing disillusion with the capacity of Dutch corporatism to cope with social and economic problems led to the rise of a political leader with a mandate for decisive action. The window of opportunity opened by those developments would lead to the transformation of the Dutch health care state – the subject of Chapter 8.

PART III Remaking the Health Care State at the Millennium, 1987–2017

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Chapter Five

British and US Health Care Reform Strategies, Early 1990s to Late 2000s

From the early 1990s to the late 2000s curiously coincident strategies of policy change can be seen in the British and US health care arenas. The early 1990s was an era of big bangs – leading to success in enacting a new policy framework in Britain but to failure to do so in the United States. After that, policy-makers in both nations resumed a pattern of cycling through the prevailing policy repertoire. But new governments in the United States (in 2009) and Britain (in 2010) embarked on major change through “mosaic” strategies aimed at rapidly enacting compendium legislation comprising multiple adjustments to their countries’ health policy frameworks. Nothing in the political systems of the two countries (the relatively “veto-free” Westminster system versus the “veto-ridden” congressional system) or the nature of the policy challenge (in the relatively parsimonious British system versus the high-spending US system) would have led us to expect these broadly similar patterns of strategic choice. Nonetheless both systems generated circumstances that led the governments of the day to make similar decisions about the scale and pace of policy change. In other words, decision-makers in both countries found themselves in similar strategic domains not once but twice in the millennial period. Exploring this curious coincidence can illuminate the central argument of this book: although broad political, institutional, and partisan factors open windows of opportunity for change and structure the environment within which strategic choices are made, these factors per se do not determine the choices made. It is the filtering of these contextual factors through the judgments and agency of political actors that determines strategic choice, as those actors assess their own present

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and projected future capacity. In both Britain and the United States, government leaders of the day judged they could command a coalition of support for comprehensive change in health care policy. They also judged that position of influence to be precarious. Those judgments were made in different electoral and institutional circumstances, but they nonetheless placed both sets of actors in big bang territory. In the British case, these judgments would be vindicated, as a comprehensive “internal market”1 reform was enacted in 1990. In the United States the failure of a big bang strategy represented at the very least a set of tactical errors that undermined the strategy; alternatively it can be seen as a historic strategic error. One other significant puzzle arises in the British case. Windows of opportunity opened not only in 1989 and 2010, but also in 2002. The Blair government, however, did not seize the moment afforded by a historic second consecutive landslide victory to redraft the policy framework of the NHS as part of its New Labour agenda for public service reform. Instead it continued with incremental changes to the framework established under the Conservatives. The answer to this puzzle lies in intra-party dynamics – namely, the factional contest between the prime minister and the chancellor that defined the Labour years. To round out our understanding of the British case, then, we need to see the incrementalism of the New Labour government not as a default in the absence of the opening of a window of opportunity, but as a deliberate response to the opportunity it was given. The current chapter will take this story up to the late 2000s – to 2008 in the American case and 2010 in the British case. Chapters 6 and 7 will then take up the stories of the twin episodes of health care reform that convulsed the American and British political systems almost simultaneously at the end of the first decade of the twentieth century. Britain: The Big Bang of the Internal Market The election of 1979 marked a striking turn in British politics. For two decades the Conservative party had floundered and equivocated in seeking an ideological direction, embracing a “middle way” that sought an uneasy balance between celebrating free enterprise and embracing collectivist responses to the increasingly pressing challenges of the British political economy.2 A trope of “British decline” had come to characterize much media and academic commentary, although multiple explanations for the empirical trend were advanced (Hall 1986,

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25–47). For a rising group of Conservatives the view was growing that a sharp break with the past was needed: Thatcherism arose because a loosely articulated group of people close to the heart of the Tory Party, and in particular Margaret Thatcher herself, were disenchanted with the condition of Britain as they saw it in the late 1970s and were skeptical of the ability of continued “middle way” policies to provide a remedy for that condition. Thatcherism triumphed within the Tory Party because a sufficient number of Mrs. Thatcher’s Parliamentary colleagues …. wanted a “new direction” and were prepared to steer their party on their preferred course. (Letwin 1992, 88)

That “new direction” was heavily identified with monetarism in economic policy (Hall 1986). But it has also been described as no less than a moral project, finding its moral centre in reinvigorating and respecting the “vigorous virtues” of energetic self-reliant individualism versus the paternalism of the welfare state (Letwin 1992, chap. 2). The NHS, a hierarchical state apparatus infused with deference to professional determination of patient needs, might have seemed an obvious target.

The window: A third successive majority Thatcher’s Conservatives nonetheless waited for two more elections before taking on major change in health care policy. In their first two terms they had no appetite for large-scale change in the NHS. The historically based public suspicion of the Conservatives’ commitment to the NHS had been reinforced early in Thatcher’s first term by the leak of an internal policy document considering a number of options, including replacing the NHS with a system of mandatory private insurance. Thatcher herself later reported that she had been “horrified” by the paper, whose “radical options … had never seriously been considered by ministers or me” (Thatcher 1993, 277). This incident solidified Thatcher’s disaffection with the unit that had produced the options paper, the Central Policy Review Staff (CPRS), and her view that “a government with a clear sense of direction does not need advice from first principles” (277). She disbanded the CPRS shortly afterwards and relied instead on a Policy Unit of close advisors. In both the 1983 and the 1987 elections the Conservatives were forced to reiterate their commitment to the NHS, famously declaring in 1983 that “the NHS is safe with us” (Klein 2010b, 112). Throughout her first two terms in office,

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Thatcher “treated the NHS like an unexploded bomb, liable to be set off by any imprudent move” (109; see also Letwin 1992, 215). In the runup to the 1987 election, even as proposals for significant change in education and housing were being developed, and despite what Thatcher herself described as “a good deal of political pressure” regarding the NHS, Thatcher was not yet prepared to act: I was reluctant to add the Health Service to the list of areas in which we were proposing fundamental reform – not least because not enough work had yet been done on it. The NHS was seen by many as a touchstone of our commitment to the welfare state and there were obvious dangers of coming forward with new proposals out of the blue. The direction of reform which I wanted to see was one towards bringing down waiting lists by ensuring that money moved with the patient, rather than got lost within the bureaucratic maze of the NHS. But that left so many questions still unanswered that I eventually ruled out any substantial new proposals on Health for the manifesto. (Thatcher 1993, 571)

Even with all the policy levers afforded a majority government in a Westminster system, the prime minister was not yet prepared to take on the complexities and political risks of major change in health care policy. Thatcher’s third successive majority mandate brought about the necessary conditions. Her government’s move, however, was not prompted by any objective crisis in the NHS or in the health care arena more broadly. Real public spending had risen by about 4 per cent annually in the 1980s – a modest rate in both cross-national and UK historical perspective, but one that represented a recovery from the constraint of the late 1970s under Labour (Figure 5.1). The rate of increase fluctuated, however, quite sharply from year to year – again, not a new phenomenon – and was not applied evenly across the NHS. In some years and in some areas the NHS was subject to real constraint, and overall the NHS was experiencing “relative deprivation” in historical perspective (Klein 2010b, 113). Negotiations over provider remuneration had been conflictual, but again this was hardly unprecedented: as Klein notes, “pay disputes had … been a chronic condition of the NHS ever since its creation” (145). Rather, what emboldened Thatcher to act was the salience of health care in the broader political context. The incremental reforms since 1983, aimed at strengthening the managerial capacity of the NHS with

British and US Health Care Reform Strategies  157 Figure 5.1. Annual percentage Change in Real Government Expenditure on the National Health Service, Britain, fiscal years 1955/56–2015/16 (2015/16 prices)

Source: Harker 2017, fig. 2.

respect to clinicians, had strained the foundational bargain of the system. Together with the “relative deprivation” in financing, they made for an increasing restive medical profession. Clinicians responded with a stream of anecdotes – for which the variations in funding across time and regions provided ample fodder – to demonstrate the damage the Conservatives were inflicting. As the media picked up and amplified these reports, the issues moved into the broader public arena. Public opinion polls showed a dramatic rise in levels of dissatisfaction with “the NHS” overall, reaching dangerously close to a majority view, even as dissatisfaction with local providers and Health Authorities remained below 20 per cent of respondents.3 Sensing the Conservatives’ vulnerability on the issue, the Labour Party, cloaking itself in its mantle as creator of the NHS, went on the attack. Health care became a dominant theme of the 1987 election, and despite losing, Labour continued to pummel Thatcher on the issue during the weekly Prime Minister’s Questions in Parliament. In this context the Conservatives debated announcing a “fundamental review” of the NHS. The cabinet was internally divided on the question,

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but Thatcher’s appointee as health secretary, John Moore, was a strong advocate of sweeping reform. Thatcher herself resisted until a final straw of public denunciation was added in the form of a joint statement by the presidents of the three Royal Colleges of the medical profession – published in the British Medical Journal in December 1987 (Presidents 1987), reinforced by a press conference and given wide media coverage – criticizing the government’s underfunding of the NHS. With the consolidated authority available to a Westminster-system prime minister with a majority government, Thatcher made a decision shared with only a few of her cabinet colleagues, including Health Secretary Moore. On 25 January 1988 she chose a BBC-TV interview to announce, without further detail, that the government would conduct a review of the NHS that would consider “all possibilities” (Warden 1988). As was the case for the foundational big bang under Bevan in the Attlee government, the review process was very closely held: the review was conducted by a “ministerial group” (Thatcher 1993, 609) chaired by the prime minister and including the health secretary, the chancellor of the exchequer, a minister from each of those departments, and a small number of trusted advisers from the prime minister’s Policy Unit. Thatcher herself was closely involved throughout the process.

Pace: Taking health off the election agenda Thatcher’s first strategic decision concerned pace. It was not, however, a straightforward choice, but one that was reconsidered along the way. Thatcher’s commitment to complete the review within a year was met with the publication of the White Paper, Working for Patients, in January 1989. The prime minister did not want to contest another election on the back foot regarding health care; she wanted the reforms to be legislated and implementation under way by the next election in 1992. Over the course of the review, Treasury officials argued for a slower-paced, more incremental approach. But Thatcher overruled these concerns: she “was suspicious of the distinction that was emerging between short- and long-term changes, generally worried about the slow pace of the review and thought we were losing our way” (Thatcher 1993, 614). Legislation was unveiled in November 1989 and enacted by June 1990, with the new framework to be in place by April 1991. Along the way, however, Thatcher’s commitment to rapid action began to waver when the barrage of criticism from the medical profession that had greeted the White Paper was sustained through the legislative process,

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and it appeared that, once again, the Conservatives would be electorally vulnerable on the health care front. But Kenneth Clarke, who by that time had replaced the ailing John Moore as health secretary, argued for staying the course to implement the legislation according to schedule; Clarke later reported that Thatcher had “grudgingly” agreed.4 Clarke’s view was that “it was better to proceed and to demonstrate that the worst fears of the Government’s critics were not realized than to delay and to allow the opposition to capitalize on the concerns expressed by the medical profession” (Ham 2000, 12). In a sense this was a British echo of Lyndon Johnson’s colourful admonition to get dead cats off the porch before they stunk (see Chapter 3). In November 1990, however, not long after her grudging agreement, Thatcher moved Clarke to Education and replaced him in Health with William Waldegrave, with instructions to “calm down” the doctors and slow the pace towards legislation. But very shortly afterward Thatcher herself was deposed, and Waldegrave, in what he later described as “the most important single thing I did as Secretary of State” chose to proceed with the original timetable because “having been launched down this path with a coherent rational scheme of reforms to which the best people, I thought, within the management were deeply committed, to have backed off at that point would have been chaos. And of course the [British Medical Association] wouldn’t have stopped lobbying. They’d have just moved the boundaries and started lobbying against whatever else one was doing” (quoted in Ham 2000, 13). In the event, the Conservatives won a fourth majority in 1992 under a new prime minister, John Major. The new health secretary, Virginia Bottomley, was committed, like her predecessor, to pressing ahead with the rapid implementation of the reforms. In a clear determination to hard-wire the reforms against subsequent partisan change, she saw her objective as “to ensure that the reforms were so well established … that they would no longer be part of the party political debate” (quoted in Ham 2000, 19). By the time she completed her tenure in July 1995, all the changes envisaged in the legislation had been rolled out, although incremental adaptations continued to occur under her successor, Stephen Dorrell.

Scale: Splitting the hierarchy If Margaret Thatcher quickly established the pace of reform, the scale was less clear at the outset. Senior Conservatives believed they had the political scope to consider “all possibilities.” As Klein reports, the

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review initially “tacked rather erratically between different options” (2010b, 149). Although Thatcher had distanced herself from the proposals of the now-disbanded CPRS, advocates of a model allowing for a much greater role for private insurance – notably, Thatcher’s close colleague John Moore – continued to hold considerable sway (149). Treasury, however, resisted, as did Kenneth Clarke when he joined the review in July 1988. Clarke’s view was based on pragmatic considerations: he saw insurance-based systems as “just very high cost with insurance companies as a useless intermediary” (quoted in Ham 2000, 4). His preference was to improve the efficiency of the delivery system, rather than change the basis of finance. Enter the concept of the internal market, which Alain Enthoven (1978, 1985) initially proposed in the US context and subsequently applied to the NHS. In Timmins’s account, “[s]lowly but surely, ... it became plain that in terms of big ideas for reform of the delivery side of the NHS there was only one idea in town: some version of Enthoven’s internal market” (1995, 462). The concept itself, however, was open to multiple interpretations, which varied greatly in their implications for the scale of change. One interpretation with considerable currency within Whitehall was that Health Authorities would be permitted to contract with each other for the provision of services, largely with a view to reducing waiting times (Warden 1988) – an incremental change. But others within the senior ranks of the Department of Health favoured a root-and-branch approach, grounded in the objective of giving providers (especially hospitals) more autonomy while harnessing the resulting entrepreneurialism to public purposes by requiring providers to contract explicitly as to what they would provide for the public funds they received. Thus arose the model of the purchaser/provider split: Health Authorities would no longer directly manage hospitals and community providers; rather, they would contract with newly independent hospital and community “NHS trusts” that would be directly accountable to the secretary of state in a separate line through the NHS Management Executive. An initially small component of the reforms, but one that gained increasing importance, was general practitioner fundholding. Indeed, in this particular dimension, the British approach was somewhat closer to a blueprint than a big bang model in that it was designed to be phased in, beginning with larger practices. A fundholding practice received a capitated budget with which to buy drugs and approximately 20 per

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cent of hospital and community services for the patients it enrolled. The fundholding option was successively opened up to smaller practices, and extended to a broader range of services, a reform that would have implications for the scale of change in the system far beyond what was initially envisaged. As noted, implementation proceeded rapidly, and by 1995 the formal shape of the NHS had been transformed. The unified NHS hierarchy had been replaced with a framework in which contracts between Health Authorities as purchasers and newly independent trusts as providers accounted for over 95 per cent of NHS expenditure on hospital and community services, and GP fundholding practices covered 40 per cent of the population (Dixon and Glennerster 1995). By the time of the 1997 election, all remaining “directly managed” hospitals had converted to trust status, and more than half of GPs covering more than half the population were involved in some form of fundholding. The actual change in the decision-making process within the NHS was less than might be inferred from these formal changes. In part this was because the actual freedoms allowed hospitals in the implementation process under Thatcher’s successor, John Major, were less than originally envisaged (Ham 2003). Furthermore, as I and others have documented extensively, the degree of competition among providers varied greatly by locality, only some of which had a sufficient number of hospitals to make competition feasible. Even where competition was feasible, practical considerations often militated against it. As I have noted elsewhere, [f]or the most part … at least the initial effect of the internal market reforms was not to increase levels of competition among providers for purchasers’ contracts, but was rather to transform the managerial relationship between [District Health Authorities] and the provider units in their areas into a relationship of explicit bargaining … The high transactions costs associated with writing, executing and enforcing contracts in the health care arena drives attempts, as we have seen in the American case, to establish long-term stable relationships. As the hierarchical relationships which once provided this stability were transformed into contractual relationships, the contracts were likely, de facto if not de jure, to be long term … In practice, then, the internal market did not approximate the classical market of atomized buyers and sellers but was rather what Ferlie [1994, 221] calls a “relational” market … made up of local markets of

162  Remaking Policy near-monopsonists and near-monopolists who had well-established networks of relationship with each other … The “purchasers” and “providers” who made up the market were created, after all, by the division of established entities. Case study evidence suggested “a high degree of continuity in the personnel staffing at the upper reaches” of both purchasing authorities and trusts. The market was hence “socially embedded” in professional and managerial networks. (Tuohy 1999, 171)

At most, under such circumstances, markets were likely to be “contestable,” rather than competitive. As Appleby and his colleagues have put it, “[i]f long-term contracts exist, competition is likely to take place for markets at periodic stages of contract negotiation, rather than in markets on a day-to-day basis” (Appleby et al. 1994, 26, emphasis in original). Despite the early attraction of Thatcher and others to policy options more heavily weighted to private finance, the policy framework of the internal market reforms as adopted made little change in this regard. A government-wide initiative to encourage public/private partnerships, known as the Private Finance Initiative (PFI), was instituted in 1992. Its impact on the NHS under the Conservatives was essentially nil: despite the loosening of restrictions on the ability of the newly independent trusts to seek private finance for capital projects, no major PFI project was under way by the time of the 1997 election. Only under the subsequent Labour government did the PFI become a significant policy instrument, as discussed below. However mediated was the initial impact of the reforms by established networks, and however limited their effect on the balance of influence across the three pillars of the health care system, the “social embedding” of the purchaser/provider split had major long-term effects. It set in train a transformation of the organizational principles underlying the function of government that was to continue unevenly over the next two decades. It shifted the balance of influence within the medical profession, strengthening a sizable proportion of GPs in their dealings with hospital-based specialists. It established the new repertoire of options within which policy cycling would now occur. And perhaps most significant, the introduction of exchange-based mechanisms provided footholds for certain entrepreneurial actors to play key roles in affecting the direction of change, and hence in shaping the menu of options available when the next window of opportunity for major change occurred.

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The Clinton Initiative, 1993–94: Big Bang Failure The one and only US attempt to make a big bang change in the health policy framework was the failed Clinton initiative of 1993–94.

The window: A new Democratic president and a Democratic Congress The inauguration of President Bill Clinton in 1993 appeared to open a rare window of opportunity for major change. The new Democratic president had made a commitment to health care reform a key component of his electoral campaign, under the banner of a “New Democrat” agenda. His party not only controlled the White House; it also had a majority in both houses of Congress. Two factors, moreover, made the political context more fluid, offering opportunities for coalition-­building that had eluded earlier reformers contending with “iron triangles” linking business and professional interests with powerful committee chairmen in Congress. First, reforms to congressional processes beginning in the early 1970s had made for a more decentralized structure of power in the House of Representatives, and the threshold for cloture in the Senate had been lowered. Second, by the early 1990s, the phalanx of medical, hospital, insurance, and business interests that had opposed universal health insurance in the past was fragmented into multiple competing interests after the turbulent changes in the health care market in the 1980s, including the rise of a for-profit-dominated managed care sector (Baumgartner and Talbert 1995; Peterson 1993, 2011; Tuohy 1999, 81–3; see also Chapter 10). Health care had been rising on the political agenda since the early 1970s, as indicated by the increasing attention paid to it in Congress (Baumgartner and Talbert 1995). This rise in itself had not been sufficient to open a window of opportunity for change at any given point. But, in the early 1990s, spurred by a surprise upset victory in a special Pennsylvania senatorial election in 1991 by a Democratic candidate (Harris Wofford) who had made health care reform a key plank in his platform, health care became a centrepiece for candidates for the Democrats’ 1992 presidential nomination (Hacker 1997, 31; Johnson and Broder 1996, 60–1; Skocpol 1996, 27–8). Health care represented the major piece of unfinished business in the Democratic social policy project that had begun with the New Deal (Johnson and Broder 1996, 622), and the party, including candidate Bill Clinton, sensed that its

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moment had arrived. As Clinton later put it, “[w]e thought we had a little window of opportunity, a needle we could thread” (Johnson and Broder 1996, x). There was no consensus, however, within the health policy community, the political class, or indeed within the Democratic Party itself as to the definition of the problem and how it should be addressed. There were at least four principal types of policy options at the time, each with its set of advocates: a “single-payer” plan – essentially an extension of Medicare; incremental reforms of the health insurance market; a system of “play or pay” employer mandates supplemented in various ways by governmental programs; and some updated form of “managed competition” on the model Enthoven had suggested in the late 1970s (Enthoven 1978; Tuohy 1999, 74–5).

Scale: Principled centrism within an economic agenda The key to understanding the scale of change Clinton attempted was the place of health care within his overall agenda. The key objectives of that agenda were economic and fiscal: the promotion of economic growth and the reduction of the federal government deficit (Blumenthal and Morone 2010, 352; Jacobs and Shapiro 2000, 79–84). Health care fit centrally within that agenda. The private costs of employer-based health care coverage were seen as a drag on business firms, and the public costs of Medicare and Medicaid represented a significant proportion of federal spending.5 Embracing health care reform would respond to the rising political salience of the issue and the sense of unfinished business, to be sure, but first and foremost for Clinton it was an economic and fiscal issue. A decade and half later, a similar mindset would mark the Obama initiative. But Clinton’s overall economic program, including his first budget, also established a key constraint: health care reform had to be accomplished without any significant tax increase. As Rockman (1995, 399) observes, “[b]y pushing first for a budget bill that, among other things, produced tax increases, Clinton could not immediately followup with another seemingly massive tax increase without being tarnished as a ‘tax-and-spend, big government liberal’.” The fundamental question for Clinton was where to establish the centre of gravity for his proposed reform. He had essentially two strategic possibilities, each implying a rapid pace but differing in scale. A mosaic strategy would start from the centre, seeking bipartisan compromise through multiple adjustments to the existing system. A big bang

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strategy would start from the left, with a comprehensive Democratic plan, and move only as far towards the political centre as necessary to build a minimum winning coalition of support.6 At this early stage of his presidency, Clinton was practicing what Quirk and Cunion (2000) call “principled” or “integrative” centrism – attempting to find innovative policies that serve the goals of both the left and the right – through his “New Democrat” agenda. Only later would he adopt a more “opportunistic” centrism, tacking left and right to negotiate and seize agreement where it could be found. While eschewing the left-most of the major options in play (a single-payer plan), the Clinton strategists nonetheless were drawn – as a result of their economic and fiscal objectives, their principled centrism, and an “us against them” view of the Republicans within the strategic environment (Edwards 2000, 35) – towards a big bang approach. Clinton’s principled centrism – like that of New Labour in Britain – meant developing policies that harnessed the power of private markets to public purposes, thereby avoiding excessive regulation and limiting public spending (Jacobs and Shapiro 2000, 78–83). In the health care arena this meant seeking a comprehensive restructuring of the incentives on both the supply and the demand sides of the mixed market to squeeze out rents and inefficiencies, in order to drive down costs and achieve universal coverage without increasing either private or public spending. This nirvana, Clinton and his closest advisers believed, could be achieved through some form of “managed competition.” In the US context, as in Britain and the Netherlands at the time, the general concept of managed competition was particularly attractive, its malleable nature making for broad ideological appeal. The very flexibility of managed competition as a route to universal coverage, however, meant that the label could cover changes to the existing policy framework of widely varying scale, depending on the mix of voluntary versus coercive instruments involved and the scope of its application. From the outset Clinton wanted a comprehensive sweep for his reform package. But he was drawn only reluctantly to recognize that achieving his objectives would require not only sweeping reorganization of the private insurance market, but also a substantial increase in the presence and influence of government in the health care arena and a more muscular exercise of its regulatory function. Having abjured tax increases and focused on driving down costs, Clinton was forced to trade off his desire for a “light hand” in regulation. Controlling costs meant changing the behaviour of myriad actors within the highly complex health

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care system, with its multiple interconnected parts. As we shall see in Chapter 8, analogous challenges of design caused policy-makers in the Netherlands to take a staged approach to their interpretation of “managed competition,” in order to develop the necessary technical instruments. Clinton and his advisors, however, read the interconnectedness of the dimensions of reform to mean that they needed to be tackled simultaneously. Jacobs and Shapiro (2000, 84) summarize the problem: “Once Clinton, [Ira] Magaziner and other senior advisers defined the problem as controlling costs and using the savings to finance reform, then incremental reform lost its attraction and there was an overriding need to implement the whole package as soon as possible. ‘If we took it on piece by piece,’ Clinton insisted, ‘we might solve some problems but we might make others worse’.” Clinton had developed the elements of his approach during the election campaign: he would build upon the existing system of private finance, but do so by restructuring the private insurance market. The supply side would be populated by competing pre-paid health plans of various “managed care” varieties, and the demand side would comprise purchasing cooperatives (or “sponsors” in Enthoven’s term) plus an employer mandate and government subsidies for some individuals. Once Clinton was elected, this plan was further developed through an exclusionary and closely held process within the White House: a task force chaired by First Lady Hillary Clinton. Clinton and his advisers, who had ridden their “outsider” status throughout the successful campaign, did not believe that the mould of the current structure of incentives in the system could be broken by those who had spent their careers within that system. A similar mentality had motivated the small group around Thatcher a few years earlier in the United Kingdom. But unlike the crafters of the British internal market reforms – in which all the basic elements were put in place through a legislative big bang, with the details left to be worked out during the process of implementation – the Clinton administration, driven in part by congressional requirements for the costing of all proposals, chose to spell out and “hard-wire” many of the details of the new framework in the proposed legislation itself, famously more than a thousand pages long.7 The task force and the process associated with it8 had two procedural objectives. The first was to flesh out the president’s plan by bringing to bear the ingenuity and fresh thinking of leading experts on the various dimensions of health care delivery and finance, outside the federal bureaucracy (Johnson and Broder 1996, 113–18). But the second, and

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arguably more fundamental, objective was to build a consensus of expert opinion in support of the plan and to foresee and forestall potential objections and competing proposals (Jacobs and Shapiro 2000, 85–8). By so doing, the tactic was to avoid a contest of duelling plans in Congress, each with its group of expert supporters, and to persuade the public that the plan had been developed by an apolitical group of experts and enjoyed a consensus of expert support. This tactic drove Ira Magaziner, who led the task force’s advisory process, to cast a wider and wider net to cover off potential opposition. But the drafters dramatically overestimated the potential for consensus within a fractious health policy community. Accordingly the consultations generated an exponential increase in complexity, as the drafters succumbed to the “seductions of technique … Each time someone raised a problem, the specialists hammered out a technical adjustment” (Blumenthal and Morone 2010, 382; see also Hacker 1997, 179). The resulting plan made multiple adjustments to the existing employer-based model, mandating employers – except those with more than five thousand employees, accounting for only a small fraction of employers but for about a third of all employment in the United States – to provide health insurance for their workers, regulating private insurers under a system of managed competition, and providing government subsidies for small businesses and low-income individuals. So far, this could be seen as a mosaic strategy. But the degree and scope of change entailed in two other elements placed this initiative in big bang territory. The reforms would have created two powerful new sets of institutions spanning the entire health care arena. Regional purchasing alliances with a comprehensive scope, to be established by state governments, would be the bodies through which all but the largest employers as well as some individuals would be mandated to purchase a regulated common basic benefits package from competing private insurers. The existing Medicaid program for low-income recipients would be rolled into the regional alliances, and recipients of Medicare (the elderly and disabled) would have the option of transferring their entitlement to a regional alliance. Premium revenue would flow through the alliances, which would collect premiums and distribute revenue to insurers on a risk-adjusted basis. Accordingly the alliances were considered agents of the state and their revenues government receipts by the Congressional Budget Office in calculating the fiscal implications of the legislation (United States 1994, xv, 50). A second major institutional innovation, a federal National Health Board, would monitor the

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system, and was empowered to impose caps on premiums if costs exceeded targets it established. Essentially the bulk of the private insurance market (excepting only the largest employers) would fall under the purview of these new institutions. As we shall see in Chapter 6, this would have been a change of a greater scale than would be proposed in the next major episode of reform, under Barack Obama. Realizing this plan in a single legislative sweep would indeed have constituted a big bang, but Clinton’s ability to mobilize the authority necessary for such an approach was at best highly tenuous. (See Figure  3.1 in Chapter 3.) Having won an election in which a thirdparty candidate took 19 per cent of the popular vote, Clinton entered office with only a 43 per cent plurality of the popular vote. Equally debilitating, the Democrats enjoyed only a nominal majority in the Senate, less than the 60 per cent necessary to prevent effective Republican vetoes through procedural manoeuvring (as opposed to Lyndon Johnson’s massive nominal supermajority of 1968). Taking into account the greater degree of Democratic Party unity in the Senate (about 87 per cent in the 1993–95 period), Clinton could count on the support of only about 49 Democratic senators on average. In this relatively weak position as president, Clinton could succeed in a major initiative such as health care reform only by creating a “bandwagon” momentum that would draw supporters to a winning cause.

Pace: Threading the needle The desire to “thread the needle” – to capture the moment – as well as to create a bandwagon effect, argued for a swift pace. Clinton had pledged during the campaign that he would introduce a full health care reform plan to Congress within his first one hundred days in office and that it would yield universal coverage within five years (Blumenthal and Morone 2010, 359; Johnson and Broder 1996, 192, 613). This timeline was established, however, before there was any clear sense of the magnitude of the reform that would be attempted. Clinton would later express regret about his “mistake in not going for a multi-year strategy” (Johnson and Broder 1996, 127), but it was a strategic judgment made at the outset, and adjusted only marginally along the way. In Clinton’s early days in office, there was a strong sense that “time was of the essence” in order to forestall the mobilization of opposition (119). In Clinton’s case, however, scale was the enemy of pace. The task force, seeking to work out the many interrelated components of the

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plan, went through various rounds and drafts while the president’s first one hundred days ticked down and his attention was drawn to the pressing issue of securing congressional approval of his first budget. Indeed the initial strategy had been to include the health care reform in omnibus budget legislation, thus allowing for a truly rapid big bang enacted through a budgetary process of “reconciliation,” requiring only a simple majority in the Senate and obviating the threat of a filibuster. As noted above, various health care measures in the past had been passed as part of omnibus budget legislation – several through the reconciliation process. But none had been anything close to the scale of the Clinton reform proposal, and the Senate’s effective gatekeeper to the reconciliation process, Robert Byrd, ruled that including its sweeping and complex provisions within budget legislation would be an abuse of the budget process. The loss of the reconciliation option might have occasioned a change in strategy – either to maintain pace but decrease scale by seeking a bipartisan mosaic compromise, or to maintain scale but slow the pace by opting for a staged blueprint. Each of these options had its advocates within the White House and the Democratic congressional leadership. Robert Reischauer, director of the powerful Congressional Budget Office, among others, advocated the blueprint option (Johnson and Broder 1996, 118), and Clinton did briefly consider it after Byrd’s dictum but quickly rejected it. Although, as noted, Clinton later came to regret this decision, it was totally understandable in the circumstances, and it is highly unlikely that a blueprint strategy would have succeeded. In light of the history of the 1970s and 1980s, it would have been an enormous political gamble to risk that the Democrats would remain in positions of sufficient power in the White House and Congress to ensure the enactment of the reform on a phased basis over a number of years. (It is worth noting that blueprint strategies adopted in much more favourable political circumstances at the state level at the same time soon fell apart; see Tuohy [1999, 85–9].) As it was, Clinton did slow the pace somewhat after Byrd’s ruling in order to focus on other priorities – including the North American Free Trade Agreement – assuming that his window of opportunity for health care reform would stay open for a few more months. But as one of his close advisers was later to reflect, the electoral payoff of health care for both Wofford and Clinton led strategists to “misjudg[e] the health care politics of 1993 as a change in the climate when it was only a change in the weather” (quoted in Blumenthal and Morone 2010, 381).

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The legislation was finally introduced in November 1993 – just a year after Clinton’s election and ten months after his inauguration. But after a year of fruitless attempts at passage, lacking the sixty votes necessary to overcome an effective veto by a filibuster in the Senate, the Democrats declared defeat in September 1994 without bringing the legislation to a vote. Contrast this history with that of the two big bang episodes in Britain in 1946 and 1990. The Attlee government introduced its NHS legislation in Parliament within eight months of its July 1945 election victory. Thatcher announced her review of the NHS within seven months of her third election victory, but took a year to develop the plan and another ten months to introduce the legislation. Both, however, saw their legislation enacted within eight months of its introduction. The Clinton episode stands as a dramatic demonstration of the vulnerability of big bang approaches in the United States and their exquisite sensitivity to tactical decisions, and it was to have a profound effect on the next attempt at major change in health care policy under the Obama administration.

Roads not taken? Might a different strategy have worked? Perhaps Clinton’s big bang strategy was doomed by its tactics: the cloistered task force, the delay, and so on. John McDonough attributes its failure to two fatal flaws: “[m] issing the moment by not moving forward when the time was most auspicious in January 1993,” and “overestimating the size of the open window of opportunity by proposing a policy change that went far beyond the public’s sense of the problem” (2000, 244). McDonough treats these problems as having occurred in the “policy” and “problem” streams, because they have to do with the failure to identify a saleable policy in response to a perceived problem. But in my terms these are strategic failures of pace and scale, respectively, attributable to factors in the political stream. Clinton and his advisers overestimated Clinton’s ability to draw on his electoral mandate to “sell” a policy, leading to an overreach of scale – indeed the initial public response to the Clinton plan garnered majority support in polls (Jacobs and Shapiro 2000, 114–16). And that overreach spent precious time developing an ambitious policy as the timetable for a bandwagon ticked away. In short, Clinton misread the political circumstances. The scale of change he sought – strengthening the regulatory reach of the state across the entire health care system, and changing the organizational

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principles of the policy framework through employer mandates – was a Democratic project, albeit a “New Democrat” version. With Clinton’s slim plurality-based electoral mandate and lacking a filibuster-proof Senate, the Democrats simply lacked the political and institutional capacity to accomplish change on this order of magnitude. Although reading counterfactual possibilities back into history is a dubious exercise, it is possible to surmise that a “mosaic” strategy based on bipartisan compromise driven by the creation of a bandwagon effect (Kingdon 1995, 161–2) might have succeeded. Such a strategy would have seized upon the climate of elite opinion that, this time, the push to universal health care would succeed (Skocpol 1996, 55; Tuohy 1999, 78),9 summarized in the opinion expressed in the Economist (6 February 1993, 26) that “[t]he momentum behind some kind of federal reform to America’s health system now seems unstoppable.” It would have created a version of the “politics of legislative certainty” that had driven the Medicare and Medicaid legislation to successful passage in 1965 (Marmor 2000, 45–62). For a brief period it might have been possible to mobilize bipartisan support for a compromise scheme by negotiating a mosaic of adjustments to existing arrangements. With the exquisite benefit of hindsight, it now appears that 1993 was the last time in US history when a bipartisan route to universal health care coverage was still open. The president initially wanted to “enact a bipartisan health reform to ‘prove that the government could do something positive’” (Johnson and Broder 1996, x), eerily foreshadowing the desire of the next Democratic president a decade-and-a-half later. Republicans were divided. Moderates in the Senate such as John Chafee believed that the time for universal health care had arrived, and wanted Republicans to be on the right side of history. They believed they could craft an alternative to the Clinton plan that ultimately would garner a winning bipartisan coalition of support and bring the president and his party onside. On the other side of the Republican party stood a group of House Republicans, quintessentially represented by Newt Gingrich, who saw opposing Democratic initiatives on health care as a strategic matter of existential significance. If health care reform was the last major piece of unfinished business in the Democratic welfare-state project, it was conversely the extinguishment of that project that would allow the Republican party to retake Congress and usher in a “historic period in which the role of government in American life would be dramatically reduced” (Johnson and Broder 1996, xi). In another eerie foreshadowing of a future crusade,

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strategists around Gingrich saw “vanquishing Democrats in the health care battle [as] their Stalingrad, their Gettysburg, their Waterloo.”10 The pivotal Republican actor in this intra-party contest was Senator Bob Dole, whose judgments were shaped by his own presidential ambitions for 1996. Democrats such as Senator Daniel Patrick Moynihan thought for a time that they could craft a deal with Dole and Republican moderates. Dole initially had given cautious support to a bill developed by Chafee, based on an individual mandate to have private health insurance, bolstered by government subsidization as necessary. Clinton himself later regretted that he had not seized that opportunity to reach “a direct understanding with Dole” (Johnson and Broder 1996, 394). Such an understanding, had it been possible, very likely would have involved multiple regulatory and fiscal adjustments to the existing system to make an individual mandate feasible (as was to occur sixteen years later), but the changes would have been less sweeping than those proposed in the Clinton plan. In fact, however, it would have taken extraordinary deftness to negotiate a bipartisan compromise in the increasingly polarized atmosphere of Congress. Levels of polarization in both houses – defined as the proportion of roll-call bills in which the majority of one party voted against the majority of the other – were higher than at any time since the Truman years.11 By the end of March 1994, however, Dole had backed away from his support of the Chafee model in favour of a voluntary plan. Republican strategy hardened around the implacable resistance driven by Gingrich. Republican success in the 1994 congressional election vindicated that strategy for a time, returning control of both the House and the Senate to the Republicans and further polarizing the partisan split in both houses. Cycling in the Aftermath of Big Bang Politics, mid-1990s to late 2000s After 1991 the health policy process in Britain cycled through the policy repertoire established in broad outline by the internal market reforms. Under the Conservatives, this phenomenon involved great and lesser degrees of autonomy for the newly structured purchasers and providers, as will be further discussed in Chapter 10. After the election of a Labour government in 1997, the evolution of health policy diverged in the four countries of the United Kingdom. This was especially the case

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after constitutional reforms in 1999 devolved authority over many policy areas to subnational legislatures and administrations in Scotland, Wales, and Northern Ireland, although NHS policy in those jurisdictions had differed somewhat from the pattern in England since the 1970s (Ham 2004, 25). The purchaser-provider split took root only in England, and was essentially reversed or abandoned elsewhere. The different patterns of change post-devolution are of considerable significance for students of comparative public policy as a demonstration of the effect of introducing a quasi-federal system into a formerly unitary state (Greer 2004). As an analysis of these differences is well beyond the scope of this book, I will focus on developments in England, which accounts for more than 80 per cent of UK public spending on health and more than three-quarters of NHS employment.

Cycling in England: Market versus hierarchy under New Labour At first blush the circumstances surrounding the landslide election of Tony Blair’s Labour government in 1997 would seem to have provided an ideal environment for big bang change. After eighteen years of Conservative majority governments – and conversely four consecutive electoral defeats for Labour – the party won a majority in Parliament that surpassed even that of the post-war Attlee government (see Table 3.1 in Chapter 3). Blair was a gifted and charismatic campaigner who had risen to power under a “New Labour” banner that distanced the party not only from its Conservative rivals, but also from the taint of defeat and decline that clung to the “old” Labour past. The “Third Way” agenda of New Labour echoed Clinton’s “New Democrat” agenda in the United States:12 it sought to marry sound economic management with progressive social policies, to recognize and embrace the power of markets and private finance, and to establish the incentives that would channel those private forces to public purposes. But despite its campaign slogan on the eve of the 1997 election that voters had “24 hours to save the NHS,” Labour essentially persisted with the fundamentals of the “internal market” reforms while changing the language in which they were described.13 The heart of the reforms – the purchaser-provider split – remained, but “purchasers” became “commissioners,” not “contracting” with hospitals and other providers, but rather commissioning services from them. GP fundholding was formally abolished, but the central role of GPs in commissioning was retained and indeed universalized through the establishment of Primary Care

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Groups, soon fused with Health Authorities to become Primary Care Trusts (PCTs). Hospitals initially lost some of the autonomy they had gained under the Conservatives, but were to regain that autonomy, and more, in subsequent years. In fact the story of the Labour years is one of cycling through greater or lesser degrees of centralization and shifts in the balance of hierarchical and market mechanisms within the repertoire implied by the reforms of the 1990s. The dynamics of this cycling owed much to the relationships among key actors in government and “institutional entrepreneurs” in the health care system, as I discuss in more detail in Chapter 10. Why did the Labour government make only incremental policy changes in the context of electoral success of unprecedented proportions? The answer to this puzzle comes in two parts: one relating to Labour’s first term in office from 1997 to 2001, and the second relating to the period after the 2001 election. Blair’s first mandate: Consolidating power In Labour’s first term only one of the two necessary conditions for major change in health policy existed. Its massive win certainly gave the party the consolidated electoral and institutional authority necessary to make big changes in the health policy framework. Not only did Blair command a large parliamentary majority; he also adopted a highly centralized approach to the prime ministership, significantly strengthening the “institutional capacity” of the Prime Minister’s Office with the enhancement of the role of the Policy Unit and the addition of a Prime Minister’s Strategy Unit and a Prime Minister’s Delivery Unit (Richards 2011, 34). In this context the government might, for example, have reversed the internal market reforms at which Labour politicians had levelled such vitriolic criticism in the past. Similar dramatic reversals and policy swings had characterized the relationship between conservative and labour parties in another Westminster system, Australia, and would soon occur in New Zealand. And indeed, just such a reversal was to occur in Scotland, after powers over health care were devolved in 1999. But although it had the authority, the Labour government at Westminster lacked the other key ingredient for embarking on major change: the will to transform health policy as a key component of a broader agenda. Health care was simply not initially central to the New Labour project, ranking only fifth among the ten priorities of Labour’s manifesto, and warranting fewer than half the words devoted to education. And whereas in the United States the perceived burden of health care costs

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on private business and the public treasury had helped to drive health care to the centre of Clinton’s economically focused New Democratic agenda, the relatively parsimonious NHS did not present a similar challenge to economic policy in Britain. In Anthony Gidden’s The Third Way, the treatise generally seen as providing the intellectual grounding of the first Labour mandate, health care rates a scant two mentions – one insisting on taking health care in “a wide sense commensurate with the idea of positive welfare” (such as reductions in environmental pollution), and the second invidiously contrasting increases in health spending from 1975 to 1995 (thus embracing periods of both Labour and Conservative governments) with decreases in spending on education, housing, and social security (Giddens 1998, 109, 113). Beyond the middling priority assigned to health care in its agenda, Labour had in fact come to terms with the use of market-style instruments in the public sector as inherent to its New Labour agenda. Blair himself was later to remark that, “while the Tory reforms [in health and education] may have been badly implemented and badly explained, their essential direction was one that was in fact nothing to do with being ‘Tory,’ but to do with the modern world. These reforms were all about trying to introduce systems were the money spent was linked to performance and where the service user was in the driving seat” (Blair 2010, 262). How better for the party to demonstrate its fresh, new, creative approach to the tired questions of market versus state than to embrace the Conservative reforms while giving them a New Labour face? Fur­ thermore the Conservatives themselves had already begun to move away from the emphasis on competition that had characterized the early stages of their reforms, as they came to terms with the way those reforms were being mediated by the established networks of the NHS (Tuohy 1999, 169–79). As Ham concisely puts it: “In reality, the common ground between the Conservatives and Labour became larger as a result of movement on both sides” (2009, 51). Labour’s principal election promise for the NHS was thus to “reduc[e] spending on administration and increase[e] spending on patient care.” While promising to “end the Conservatives’ internal market in healthcare,” the manifesto in the next sentence states that “[t]he planning and provision of care are necessary and distinct functions, and will remain so” (Blair 1997). Even the Private Finance Initiative was embraced: claiming authorship of the idea of public/private partnership, the manifesto promised to “re-­ invigorate” the PFI, while abjuring any privatization of clinical services.

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There was yet a more fundamental reason for Labour’s lack of will to take on major change in health care after the 1997 election. The overarching priority for Blair and his colleagues was not any particular policy item, but to consolidate their historic win: their sights were fixed on the next election as soon as they assumed power (Blair 2010, 95; Rawnsley 2010, 3, 8).14 And the strategy was to be bold in rhetoric – at which the master communicator Blair excelled – while, with the notable exceptions of financial and constitutional reform, being cautious in action. The “first one hundred days” of the Labour government – a US-style milestone imported into British politics – were marked by some remarkable and substantial achievements: granting independence to the Bank of England for monetary policy, introducing reforms to the regulation of the financial industry, embarking on the process of devolution of legislative authority (as well as greater administrative autonomy) to governments in Scotland and Wales, and pressing towards a political settlement in Northern Ireland. But in social policy, even in signature areas such as education, prudence and caution were the keynotes. A strategy of raising literacy and numeracy standards in primary schools was announced, together with increased funding. Notably, the only mention of health in Blair’s own listing of the accomplishments of his first one hundred days was “reforms to the National Lottery to allow the proceeds to go to health and education” (Blair 2010, 25). In the remainder of its first term, the Blair government embarked on a series of incremental changes in health care policy, beginning an ongoing process of cycling through the possibilities afforded by the basic model of the purchaser/provider split in response to the tensions inherent in that model as applied to health care. The first cycle, after a period of some considerable ambiguity as the Labour government struggled to find a balance between hierarchy and market, was marked by a tilt towards hierarchy. A White Paper issued in December 1997 sought to reposition Labour in the environment created by the purchaser/provider split. While formally abolishing GP fundholding and concentrating purchasing in the local Health Authorities, Labour effectively built on the fundholding concept under another name. “Primary Care Groups” – consortia of GPs and community nurses would “grow out of the range of commissioning models that have developed in recent years” (United Kingdom 1997, para. 5.8), and would be granted authority and (indicative) budgets by the Health Authorities to structure long-term “service agreements” with providers

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of hospital and community care. On the provider side, hospital trusts were placed under an obligation to work in partnership with the Health Authorities, and the latter were given “reserve powers to ensure that capital investment and new consultant staffing decisions of NHS trusts did not cut across the strategy set out in [the Health Authorities’ Health Improvement Plans]” (Ham 2009, 55). Legislation enacted in 1999 provided for the Primary Groups and Health Authorities to be reorganized as Primary Care Trusts advised by “Professional Executive Committees” of GPs (as was accomplished in 2002), and for NHS trusts to be subject to performance management by Strategic Health Authorities. Furthermore, as in education, the focus was on developing national standards for improved performance, supported by annual increases in real funding. Provider performance would be assessed not against competitors, but against these national standards, to be established by central bodies: the National Institute for Clinical Excellence (later the National Institute for Health and Care Excellence) and the Commission on Healthcare Improvement. At least in theory, central authority was to be exercised not through hierarchical prescription of rules, but through the prescription of objectives and performance metrics, leaving the means of achieving performance objectives to the discretion of local agents. This was the era of “targets” – aimed particularly at the reduction of waiting times – and a “star-rating” system of assessing and publicizing the performance of hospitals, all backed by increasingly detailed central guidance. The most significant development of Labour’s first term, however, was Blair’s announcement in January 2000 that Britain would move to the “European Union average” in public spending on the NHS over a five-year period.15 In a doubtless unintended but nonetheless notable echo of Margaret Thatcher’s announcement of the NHS review almost exactly twelve years earlier, Blair also chose a television interview as the venue for this announcement. He recognized that this was a preemption of his chancellor and principal antagonist, Gordon Brown, who reportedly was outraged (Blair 2010, 264–5; Rawnsley 2010, 14; Richards 2010, 140). Blair projected 5 per cent annual real increases in NHS spending in order to reach this goal: in fact increases were to average more than 8 per cent annually in real terms over the next five years (calculated from Harker 2017, table 1). Never in the history of the NHS had increases on this order been sustained over such a period (Figure 5.1). To oversee the effective implementation of this expenditure increase, Blair turned to one of his closest and most trusted

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cabinet colleagues, Alan Milburn, whom he had elevated from minister of state for health to health secretary three months prior to the January announcement. As consistent with the pattern of “sofa government” through which Blair dealt with key ministers on a largely bilateral basis outside the normal machinery of cabinet (Diamond 2014, 236–40; Richards 2011, 33), Blair began to work closely with Milburn and a key group of advisors in the Prime Minister’s Office on the next cycle of reform. Negative feedback – dissatisfaction with the centralizing thrust of the first cycle – was already setting in. In his memoirs, Blair reports that “I increasingly came to see the centralized systems themselves, and the denial of user choice which they entailed, as a fundamental part of the problem. I wondered … whether we had been right to dismantle wholesale GP commissioning in the NHS and grant-maintained schools in education, instead of adapting these concepts of local self-governance” (Blair 2010, 211–12). A “ten-year” NHS Plan was published later in 2000. Despite its billing, however, it was “very largely an old-style input plan … concentrating on increasing staffing and the capacity to provide services” (Dixon and Jones 2011, 113). All of this was merely prologue to what would occur after 2001. The window: A reaffirming landslide and a “bistellar administration” The real window of opportunity for major change opened with the results of the June 2001 election. Labour won a second landslide, accomplishing the government’s primary objective of consolidating its 1997 win. And health policy was now central to the agenda, having been one of five areas in which “pledges” were made in Labour’s election manifesto. Moreover, the opposition parties had used alleged failures in health care as a stick with which to attack Labour during the election, and the issue was directly blamed for the loss of at least one parliamentary seat (Klein 2013, lcn 6480). The reduction of waiting times was still a key goal, but structural reforms to give greater authority to local purchasing authorities and hospitals were now somewhat more specifically signalled. The greater profile of health policy in the manifesto, however, was an indication of a deeper source of commitment: the prime minister was now fully engaged, and the portfolio was in the hands of one of the cabinet’s strongest and most active members. Moreover, with the reaffirmation of the 2001 election, Labour could adopt a somewhat longer time horizon. The Conservative party was in

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disarray, weakened by cross-cutting in internal divisions and infighting over issues of “modernization” versus traditionalism, attitudes towards Europe, and social liberalism versus social conservatism (Hayton 2012, 61–5; Rawnsley 2010, 66). The Conservatives flailed through a succession of ineffectual leaders elected in 1997, 2001, and 2003. Although Labour could take nothing for granted, they were not facing a serious electoral threat. Tony Blair could muse on occasion about surpassing Thatcher’s record of almost twelve years as prime minister (Rawnsley 2010, 262).16 Gordon Brown, on the other hand, could anticipate his own period as Labour prime minister after Blair. Indeed the strategic universe of the Labour government from 2001 to 2007 was defined by the constant tension between these two towering figures, in a government variously described as “bi-polar” (Klein 2010b, 192), a “duumvirate” (Keegan 2002; Richards 2011, 36), an “unstable diarchy” (Rawnsley 2010, 72), a “dual monarchy,”17 a “virtual coalition” (Stevens 2010), and a “bi-stellar administration with policy constellations revolving round the two stars in Downing Street” (Hennessy 2001, 545). This complex relationship was marked by interdependence (and mutual respect) and increasingly bitter rivalry between the two principal protagonists in the government and by the associated alignment of factions around them. Brown and Blair famously had agreed in 1994 that they would not compete for the leadership of the party, but would seek it in succession. Once in government, however, Brown awaited his turn with increasing impatience. This concordat also extended to policy-making: there was a tacit “de facto agreement that [Brown] would be given the autonomy to determine key spheres of government economic, industrial and social policy” (Richards 2011, 35). Within the centralized structures that characterized the Blair government, there were in fact two principal power centres: one in the Prime Minister’s Office and one in the Treasury. Each built up its own policy capacity, and communications between them were notoriously guarded. In the style of a European coalition government, governmental departments were aligned with one or other of the partners in this virtual Downing Street coalition: there were “Blair” departments and “Brown” departments – and Health was a “Blair’ department. Although they came to be identified with opposing views, especially on the place of “competition” in public services, Blair and Brown had only modest ideological differences. From the mid-1990s both saw the New Labour marriage of state and market as the route to gaining and

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consolidating power. Both sought to direct public policy towards the strengthening of the economy through the fostering of private industry and entrepreneurship. Both sought to revitalize the delivery of public services and tame the power of providers by changing the incentive structure within the apparatus of the state: principally through a department-led but centrally coordinated departmental delivery strategy, pluralizing delivery agents and allowing for consumer choice among them (Diamond 2014, 84; Richards 2010, 33–5) – indeed the Prime Minister’s Delivery Unit was itself transferred to the Treasury in January 2003. Both men were willing to increase public spending as necessary to accomplish their aims, but both were prepared to curb that willingness as necessary. Indeed, on fiscal issues, according to a Westminster journalist who watched both closely, the two “swapped sides several times” in the early years of the government. “Who was in favour of increased spending? Who was against? It was not always easy to tell” (Richards 2010, 138). The differences between Blair and Brown that were to temper both the scale and pace of reform arose from their different policy temperaments and institutional positions, as well as from their political rivalry. Blair was much more likely to respond to the appeal of the new and the potentially “transformative” idea; Brown was famously prudent,18 and much more inclined to see the nuances and complexities of policy proposals. As prime minister, Blair’s scope of responsibility and vision was of necessity broader than Brown’s purview as chancellor. The Treasury reinforced Brown’s instinctive caution, and had far closer focus on the economic and financial implications of policies; moreover, its rhythms were established by the budget cycle, not by the multiplicity of demands that beset the office of prime minister. Nonetheless Brown took strong control of the Treasury after the department became demoralized and discredited by the currency crisis that forced Britain to drop out of the European Exchange Rate Mechanism in 1992. And he could be bold when he chose, as in his establishment of the independence of the Bank of England within eight days of assuming office. Under Brown, the Treasury adopted a guiding principle of “investment for reform” (Kampfner 2002). The dramatic increase in funding for the NHS after 2001 was presented by Brown’s allies as a hallmark of his time in office (Blitz 2010). Brown himself deeply resented any implication that he was opposed to the government’s reform agenda. Although the tension within government was sometimes portrayed in the media (with some encouragement from the Blair camp) as a battle between

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the “transformers” and the “consolidators,” Brown and his colleagues fiercely resisted the “consolidator” label (Kampfner 2002). Scale and pace, 2002–07: Policy oscillations With two strong majority wins behind it and a prime minister centrally engaged with the file, the Labour government might have been expected to expand the scale and/or accelerate the pace of health care reform. And in one aspect it did take a significant policy step, committing to increase funding for the NHS by 43 per cent in real terms over five years (to fiscal year 2007/08), financed through tax increases. In all other respects, however, from 2002 to 2007 the government’s reforms were incremental, gradually increasing the emphasis on market mechanisms, while reconfiguring the central regulatory agencies under which these mechanisms were to function. As Mays, Dixon, and Jones put it in their definitive assessment of health policy in the Labour years, “Labour’s reintroduction of explicit market-like mechanisms was a gradual, pragmatic process rather than a one-off overarching ‘big bang’ set of reforms” (2011, 6). Klein has described the process more acerbically as one of “a series of policy lurches, with policy makers responding to a variety of pressures and learning from their mistakes, with some confusion (and even contradictions) between different and overlapping policy streams (2010b, 219). The Labour government sought to transform the delivery of health care as part of its agenda of public service renewal, with a greater emphasis on local autonomy, especially for hospitals, and, increasingly, on “consumer” choice. But it chose to do so by turning its attention sequentially to various pieces of the project, rather than articulating a comprehensive framework to address their interrelationship. The measures were laid out in a series of planning documents (such as White Papers and Green Papers), linked by common themes but varying in emphasis and focus. The release of such a document became an almost annual event, occurring in 1997, 1999, 2000, 2001, 2002, 2003, 2004, 2006, 2007, and 2008. The sequence of steps over the 2002–07 period, accomplished through a mix of legislative and administrative action, can be summarized as follows: • In 2002, under the 1999 legislation noted above, the model of Health Authorities devolving indicative budgets to Primary Care Groups of GPs morphed into one of PCTs advised by Professional Executive Councils of GPs. The NHS regional hierarchy was again

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reorganized: Strategic Health Authorities, with no direct purchasing or regulatory role, took on the planning functions of the former Regional Health Authorities and also replaced NHS regional offices. In 2006 a wave of centrally driven mergers reduced the number of PCTs from 302 to 152. After 2005 some PCTs adopted a model of “practice-based commissioning,” functioning much like the earlier Primary Care Groups, with indicative budgets to plan and commission services from local providers. • In 2003, under administrative procurement policies, Independent Sector Treatment Centres began to be introduced on a phased basis. These were privately owned facilities approved for the provision of diagnostic services and a limited range of elective surgeries, under contract with the NHS. Notably, these contracts were negotiated and held centrally, not by local purchasers. Most of the first wave of such centres were established in 2005 and 2006, with a second wave opening beginning in 2007. These privately owned facilities remained small players in the provision of NHS services. • In 2003, in what proved the most significant of Labour’s reforms, legislation was passed to enable certain hospitals to convert to Foundation Trust (FT) status as independent not-for-profit entities. The authorization of conversions began in 2004. While still formally part of the NHS, FT hospitals no longer reported through the hierarchy to the secretary of state for health; rather, they were overseen by a central independent regulator called Monitor, which reported directly to Parliament. Monitor was charged with approving applications for FT status and overseeing the soundness of the financial status and governance arrangements of FT hospitals. • In 2006, again through administration action and following a series of pilot projects from 2002 on, all patients referred by GPs to other providers were granted the right to choose, at the point of referral, among four or five locally commissioned providers of elective services. The range of choice of provider was extended progressively over the following two years to include Independent Sector Treatment Centres and approved private sector hospitals, as well as NHS hospitals, and also to include providers throughout the NHS, rather than only in the local area. • Throughout this period, central regulatory agencies were continually reconfigured through legislation, not only with the establishment of Monitor, but also with the progressive integration of quality

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regulators, culminating in the establishment of the Care Quality Commission in 2009. • The Private Finance Initiative framework for attracting private capital to public/private partnerships was much more aggressively employed under Labour than under the Conservatives, and the NHS was home to the largest number of these initiatives (see Chapter 10). This incrementalism has been described as a process of institutional layering, with the adoption of “neo-liberal management” within a hierarchical state (Diamond 2014, 83). But this was layering of a particular type – another classic example of policy cycling as Labour oscillated between different emphases on the hierarchical versus market-oriented tools within the internal market repertoire. Indeed the description of the process by one of those closest to the deliberations in Downing Street at the time supports this interpretation of oscillating emphasis. Simon Stevens, policy advisor first to Alan Milburn and then to Tony Blair, describes the Labour reforms as falling into no fewer than twelve categories under three broad rubrics – supporting providers (as increased funding went to increasing supply and modernizing infrastructure), adopting and enforcing national standards, and strengthening both market incentives and democratic accountability at the local level. “Although the emphasis has been shifting over time,” he writes, “strategies associated with all three dimensions are running in parallel” (Stevens 2004, 42). If somewhat “overly tidy,” in Klein’s (2010b, 249) assessment, Stevens’s account captures the range of initiatives and, more important for our purposes, describes the thinking behind them. He sees the three streams of Labour policies as seeking to turn the fundamental and ongoing tensions around the control of the agency relationship at the heart of health care into a virtue – a potential source of “constructive discomfort” necessary to “overcome … inertia” and to generate ongoing improvement in health care: “There is little alternative but to embrace professional ‘conscience,’ not just contract and regulatory oversight” in health policy. The shifting emphases and multiple prongs of Labour policy thus represented a “search for the optimal policy mix to generate that constructive discomfort” (Stevens 2004, 42–3). Choosing incrementalism Why did this incrementalism continue even when Labour had the institutional and political resources to break free of the feedback loops

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that typically drive such cycling? A big bang reversal of the purchaser/ provider split was possible in theory, but it would have been incompatible with the New Labour agenda. The pace of change could have been accelerated by introducing omnibus legislation that included all the changes at once on a mosaic model, but the sense of relative electoral safety blunted the impetus for speed. Yet another option was possible: why did the Labour government not follow a blueprint strategy by laying out a comprehensive framework for reforms at the outset? The opportunity to do so would have been in the 2002 policy document, Delivering the NHS Plan, which is generally acknowledged to have marked the most “decisive change of direction in New Labour’s policy programme” (Klein 2013, lcns 6591–2). Despite the ambition implied in the radical rhetoric of its executive summary, however, Delivering the NHS Plan simply identified the elements of reform, as neatly summarized by Stevens above, and indicated a number of initial steps amounting to a set of pilot projects: patient choice of provider for a limited range of services, Foundation Trust status for certain hospitals, private providers contracted to provide up to what would amount to 15 per cent of elective surgery, and so on. As Dixon and Jones note: “It was not until as late as 2005 that the market-based policies were presented explicitly as ‘a coherent and mutually supporting set of reforms, which together provide systems and incentives to drive improvements in health and health services’ … This post hoc description appears to have been driven by the needs of a new Secretary of State, Patricia Hewitt. The Department of Health was struggling to give a clear and cogent account of the reforms and what they were aiming to achieve” (2011, 114). Powell and colleagues quote a somewhat more nuanced assessment by a senior policy-maker at the time: “Not enough thinking had been done about how it all fits together and therefore the right sequencing, pace of development and implementation. So it did feel a bit like a rescue act. [But] I think post hoc rationalisation is probably a bit unfair because the diagram didn’t come from nowhere … but it would have been better if that simple framework had just been set out more clearly earlier” (Powell et al. 2011, 89). There was broad consensus within the Labour government on the overall direction of change for financing the operation of the NHS, a necessary condition for the pursuit of a blueprint strategy. As in Canada at the same time (see Chapter 9), a range of financing options had been put forth in policy debate in the early 2000s, and had been considered by a high-profile commission – in this case a government-commissioned

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review by Sir Derek Wanless. Among other options, the Wanless review looked at mechanisms of private finance such as user charges, and a social insurance model such as was being advocated by Conservative Party leader Iain Duncan Smith. The review recommended in favour of continued (and increased) tax-based finance – a recommendation that suited the Labour consensus and was quickly embraced. If the consensus around financing was clear, the Labour government’s position on questions of organization of delivery was more ambivalent. There was consensus around the overall direction of change: there would be no return to the pre-1990 hierarchy; the purchaser/­ provider split would remain. (Such a reversal, however, would not have been impossible: the Labour/Liberal Democrat Coalition government in Scotland at the time, with its newly devolved powers, was pursuing a reintegration of purchasing and providing functions in new regional health boards. But, as noted above, a reversal of the purchaser/provider split in England would have run counter to the New Labour agenda of marrying the market and the state.) Furthermore, as consistent with New Labour’s broader agenda of public service renewal, the new investment could not simply reinforce old ways of doing things – rather, “decentralization, localism and diversity” (Klein 2010b, 219) were to be the hallmarks of a new regime. Local purchasers, providers, and patients would enjoy much greater discretion in the local allocation, management, and utilization of health care resources, while purchasers and providers would be held to account for meeting quality standards. Within this broad consensus, however, there was scope for confusion, ambivalence, and disagreement. In particular, just how much “diversity” could be encouraged (or even tolerated) in a universal system? Here the polar extremes were represented by Secretary of State for Health Alan Milburn and Chancellor Gordon Brown. In a sequence of speeches in early 2002, Milburn summarized the vision as one in which the NHS would continue to provide services on a universal basis free at the point of service, but the role of government would shift from management to oversight. In Milburn’s words, the resulting state of affairs would be one “where government no longer runs a nationalised industry but instead oversees a system of care” (Milburn 2002). He pointed to the role of community-owned not-for-profit providers in other nations to argue that there was no need for the central government to own facilities in order to provide universal care. And he went further, to embrace the role of the for-profit sector by arguing that for-profits such as Bupa, the largest private health insurer and owner of private hospitals in England,

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could not only provide select publicly funded services, but might also operate an entire hospital under the NHS aegis – indeed noting that negotiations for Bupa to do so were already under way (Milburn 2002).19 For his part Gordon Brown confined his comments at the time to a vigorous defence of universal tax-based financing (Brown 2002). Within a year, however, Brown made publicly apparent his disagreement with Milburn over the scope of private sector delivery. In a carefully reasoned address to the Social Market Foundation in March 2003, Brown began by aligning himself with the New Labour agenda. He fully embraced the government’s intent to “make New Labour the party not just of social justice but of markets, competition and enterprise and show that advancing enterprise and fairness together best equips our country to succeed in the global economy” (Brown 2003, 9). But he went on to circumscribe the appropriate area for private sector delivery to include not those areas where complex medical conditions and uncertain needs make it virtually impossible to capture them in the small print of contracts but those areas where the private sector can contract with the NHS for routine procedures, where we can write clear accountable contracts to deliver NHS clinical standards, where private capacity does not simply replace NHS capacity and where we ensure that patients are given treatment solely on clinical need. (27)

He nonetheless made clear that, having made the case for the limits of markets in health care for both finance and provision, I do not accept that the future lies in a wholly centralised service, that we should rule out contestability or a role for the private sector in the future or that we need devalue or ignore the important issue of greater consumer choice. Even in a world where health care is not organised on market principles with consumers paying for their care, it is in the public interest to have devolution from the centre and to champion decentralised means of delivery. (26)

The grounds of disagreement within the Blair cabinet were thus relatively narrow, though not inconsequential. It has also been suggested that the relevant policy-makers were sufficiently uncertain about the implications of various design options that they could not resolve these internal disputes and could agree only to experiment.20 But this sort of disagreement over choices within a broadly agreed-upon framework,

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and uncertainty as to their likely effects, had not been a bar to adopting comprehensive change in other cases reviewed in this book. The Lubbers government in the Netherlands in 1987, the Thatcher government in Britain in 1989, and the Clinton administration in 1993 all navigated internal disagreements of no lesser magnitude by establishing processes for rapidly reviewing options and designing the new framework: Lubbers’s Dekker Committee, Thatcher’s Working Group, Clinton’s task force. Indeed the Lubbers blueprint approach was designed to accommodate just such uncertainty by providing that each of the series of steps it proposed would be enacted as the necessary conditions, including the relevant information, were put in place. Why, then, did Blair fail to establish an analogous process to secure agreement on an overall schematic to guide the process, instead embarking on a series of incremental steps along parallel paths that only several years later yielded anything that could be described as a comprehensive redesign of the internal market? In this context the incrementalism of the Blair government can best be understood as a matter of deliberate strategic choice, emanating from accommodations at the very centre of the government: the political relationship between Blair and Brown. Essentially, although each of the “stars” in the bistellar administration was in a strong position of influence, and both essentially agreed on the direction of reform, one of them was anticipating that he would be in an even stronger position in the future. Though to some extent rooted in disagreements over the direction of policy, Brown’s resistance to proposals from Blair and his close colleagues and advisers was motivated less by ideology than by political rivalry. It has been speculated plausibly that at least some of Brown’s defiance was intended to preserve discretion, and to claim credit, for himself once he became prime minister.21 Rawnsley quotes one senior Labour politician’s view that Brown’s resistance was “about authorship as much as anything” (2010, 78). Sheldon suggests that Brown was motivated by “a desire to store up ideas to announce himself once he became Prime Minister, as shown by his adopting Blair’s policies almost wholesale after he succeeded, and by announcing ideas, such as citizens’ juries in September 2007, which the Treasury had previously blocked” (Seldon 2007, xii–xiii). This desire not to be “upstaged” (Klein 2010b, 205) was apparent in his furious reaction to Blair’s 2000 “announcement” of increased funding for the NHS, even as he proceeded to surpass the levels projected by Blair. Whether or not this speculation

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is correct, it does appear that Brown believed he had a better understanding of what was required to make the reform agenda effective than did Blair. This belief in itself would have been sufficient to motivate a desire to see that reforms were adopted, but at a scale and pace that would continue the Labour government’s momentum while allowing Brown to author further initiatives once he acceded to the top job. Ham (2009, 141) describes the policy-making apparatus for health care in the early 2000s as a British version of an “iron triangle,” with the PM/Cabinet Office, the chancellor/Treasury and the secretary of state for health/Department of Health as its three points. Milburn was the key advocate of the push for diversification of provision and consumer choice championed by Blair. Brown initially was not closely involved in the development of health policy – indeed, given that Health was a “Blair” department, and in particular given the animosity between Health Secretary Milburn and Brown, there was very little communication between the Department of Health and the Treasury. On some key matters, however – especially the centrally important matter of diversifying the range of suppliers of publicly funded services to include privately capitalized providers, the involvement of the Treasury could not be avoided. Moreover, as Blair’s attention was increasingly drawn to international matters – especially the conflicts in Iraq and Afghanistan – Brown’s influence in matters of domestic policy grew (Richards 2011, 35; Russell 2011, 8). The conflict between Milburn and Brown erupted into public view over the issue of Foundation Trust status for certain NHS hospitals. The Foundation Trust model was a centrepiece of Labour’s agenda of providing greater choice and competition in public service delivery, paralleling the move to establish an “academy” model for secondary schools. FTs – as noted, not-for-profit entities independent of the hierarchy reporting to the secretary of state for health – were established on a new model as “public benefit corporations,” with governance requirements, powers, duties, and obligations as specified by the Health and Social Care Act 2003. Unlike non-Foundation Trusts, whose boards of directors (other than the executive members) were appointed by the secretary of state, governance of Foundation Trusts was grounded in the local community. Each FT had a “membership” that local residents and trust staff were entitled to join and that elected representatives to a board of governors. The latter body, which also included representatives of the local authority and Primary care Trust, in turn appointed the “non-executive” members of the board of directors. FTs had modestly

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increased latitude in personnel and financial matters, the principal ones being the relaxation of the requirement to balance the budget each year, and the ability to invest surplus capital in independent companies (Allen et al. 2011). As originally conceived by Milburn and his advisers, the financial freedom of FTs would have included complete discretion to borrow in private markets, subject only to the oversight of their regulator Monitor. This would indeed have been a dramatic unfettering of NHS hospitals, which would have become more similar in status to hospitals in Britain’s small parallel private sector, albeit much more closely regulated, than to the remaining non-FT NHS hospitals. It would have moved the system still closer in organizing principle to a single-payer system, with public payment of independent providers, especially when added to the historic formal independence of GPs. Brown’s ambivalence about the potential scope for competition and choice in health care sharpened into opposition in the case of Founda­ tion Trusts. First, he saw the FT model as an opening to an eventual “voucher” system in which patients would seek care from privately organized providers and be publicly reimbursed for some, but potentially not all, of the charge. More immediately, however, he had a basic Treasury concern about what would happen in the event that an FT encountered financial difficulty or failure, believing that in such cases the government would have to come to the rescue to preserve publicly funded services. Assuming open-ended liability for borrowing by FTs was simply too reckless a risk. It is worth noting that Brown’s opposition to private finance did not extend to the Private Finance Initiative for hospital capital, which took off under Labour and continued to expand, with Treasury approval, throughout the Blair and Brown governments (United Kingdom 2009a). The cabinet secretary, under Blair’s authority, brokered a compromise: Foundation Trusts would have all of the characteristics in Milburn’s proposal save one – their financial accounts would be part of the government’s consolidated accounts, and hence their borrowing would be on the government’s books and would have to fall within the overall government borrowing strategy. Monitor, the regulator, would have to take those limits into account in approving borrowing limits for each trust. In the event, as we shall see in Chapter 10, although some FTs began to exercise their new freedoms quite entrepreneurially, most were slow to exploit the full range of their ability to borrow and to retain and invest surpluses (United Kingdom 2008, 15–19). At the outset, only

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the best-performing hospitals would be approved for FT status. But to blunt the criticism that this would lead to a two-tier hospital sector, and emulating the plan for academy schools, all NHS hospitals were to convert to FT status by 2008. Even in this limited form, the adoption of the FT model constituted the most radical of Labour’s incremental steps (Vizard and Obolenskaya 2013, 26), and opened the way for institutional entrepreneurs to take further transformative steps. The 2003 law establishing FTs proved to be one of the two pieces of legislation on domestic issues – the other being university tuition fees – that generated the greatest internal contention within the Labour Party in Blair’s entire period in office. Brown’s concern about the “slippery slope” towards privatization was shared by many in the party. As Seldon reports: “Nine separate rebellions occurred during the sixmonth passage of the Health Bill, threatening its survival all the way through to its final vote … In total eighty-seven Labour MPs voted against it at various points; had they united on the same vote, they would have defeated Blair, but dissenters ebbed and flowed” (2007, 246). The final passage of the bill was a desperate overnight affair: passed by the Commons, rejected by the Lords, passed again by the Commons, and finally assented to by the Lords all within the space of nineteen hours on 19–20 November 2003. The Commons majority was the slimmest attained by any Blair government legislation to date, with sixty-two Labour MPs joining the opposition and others abstaining.22 Brown supported the bill, although the suspicion at 10 Downing Street was that he did so only to avoid the government’s defeat and the reinforcement of the charge that he was “anti-reform” (Seldon 2007, 246). In short, in a context in which a solid majority government in its second term was committed to making major change in health care as part of a broader agenda of public service reform, the pursuit of a strategy of incrementalism presents a puzzle. But it can be understood as the result of a contest between two towering political figures, each with a somewhat different interpretation of the reform agenda, and one with a fundamental interest in ensuring the Labour Party’s continuing electoral success while laying the groundwork for his own undertakings as future prime minister. By the time of New Labour’s second term in office, Blair and Brown had become “less than the sum of their parts” (Rawnsley 2010, 75). The scale and pace of reforms was defined by the lowest common denominator in their respective interpretations of the agenda at any given time.

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Nonetheless Labour’s reforms, though incremental, were complementary. As I show later in the book, these complementarities, especially as exploited by institutional entrepreneurs, continued to transform the NHS and prepared the ground for the next wave of reform under the Conservative/Liberal Democrat Coalition after 2010. Taken together, the Labour reforms pushed the logic of the market as established under the Conservatives in the 1990s – a logic that, as we shall see in the cases of the United States and the Netherlands – ironically also required an elaboration of the role of the state as regulator. These changes moved the system closer to the logic of a single-payer model, although potential further shift in that direction was forestalled. It is important to recognize, however, that the market-based force of the reforms was on the supply side. On the demand side, allowing patients choice of provider at the point of referral had little impact. More significant, the Primary Care Trust/Professional Executive Council model amounted to yet another reorganization of commissioning without developing the sophisticated purchasing function needed to balance the market model (Ham 2009, 296–7; Smith and Curry 2011). Denouement: Brown in office – ambivalence and policy standstill If Gordon Brown had sought to position himself to put his own stamp on health policy as prime minister, his own ambivalence prevented him from doing so once he acceded to the office in June 2007 – a pattern that characterized his behaviour in other fields of policy as well. (Russell 2011, 11). His irresolution on the role of competition in public service reform had been signalled in his fullest public commentary on the issue in his address to the Social Market Foundation in February 2003, in the midst of his confrontation with Alan Milburn over Foundation Trusts. This ambivalence continued to inform Brown’s government, which sent conflicting signals on the direction of NHS reform and made no significant policy changes, while slowing the pace of implementation. Just as Labour had changed the language but not the substance of reform when it succeeded the Conservatives in 1997, so too Brown subtly altered the language with which choice and competition were described. While not completely eschewing those terms, he tended to emphasize patient “empowerment” or “personalization” (Griffiths 2010, 60). Brown’s first major speech on the NHS as prime minister, delivered in January 2008, embraced the legacy of the Blair years. He framed it

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as having had two cycles of reform (he termed them “stages”): setting minimum standards and widening the diversity of supply and patient choice, which he lauded as “success stories.” Notwithstanding his earlier expressed misgivings as chancellor, his embrace of the second stage of the Blair legacy included “foundation hospitals and the use of the private sector” – indeed he proposed to extend the role of FTs by allowing them to provide primary care services through vertical integration and, as appropriate, to take over and turn around failing hospitals. (This stance caused one knowledgeable observer to remark that “the foundation trust hospital that Brown at Treasury did so much to scupper has become a model of reform for Brown at No. 10” [Griffiths 2010, 61].) He also introduced a signature “third stage” of reform focused on preventive measures, the tackling of health inequalities, and greater quality control. This third stage would “create a more personal and preventative health service … to give people the choice of taking a more active role in managing their own care”: “Patients benefit from being treated as informed users and choice will help deliver this – so we will continue to make it more widely available … But this third stage of reform involves moving beyond people being seen as simply consumers and empowering them to become genuine partners in care.” At the same time, he signalled an eclectic and opportunistic stance: “We will use all mechanisms available to us to improve our NHS – public, private and voluntary providers can all play their part and there will be no ‘no-go areas’ for reform” (Brown 2008). As part of this third stage of reform Brown commissioned a comprehensive review of the NHS by an eminent surgeon, Lord Ara Darzi, to coincide with the sixtieth anniversary of the NHS. Darzi’s report similarly endorsed the importance of patient choice – recommending that a right to choice be included in the NHS constitution – but his rhetoric emphasized patient “empowerment,” and made much of the importance of provider engagement and leadership. As for concrete policy steps, however, health policy under Brown has been described as “a dog that did not bark” (Carvel 2008) and as a case of “similar reforms, less money” (Griffiths 2010). Despite Brown’s embrace of Blair-era initiatives such as commissioning from Independent Sector Treatment Centres and the accreditation of FTs, implementation was slowed for essentially pragmatic, not ideologically driven, reasons. The capacity of Independent Sector Treatment Centres had proved to be less than expected. The extension of the target date by which all hospitals would convert to FT status from 2008 to 2014 resulted from the

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recognition that many hospitals simply were not yet ready to acquire such freedoms. Otherwise, the status quo prevailed even as conflicting signals were sent regarding the degree and form of provider competition that was to be encouraged. On the one hand, Health Secretary Andy Burnham announced a “preferred provider policy” in early 2010, whereby commissioners were to accord preferred status to NHS providers. The ambiguity of this announcement led some PCTs to refuse bids from non-NHS providers, triggering a furious backlash, a formal appeal by private and voluntary sector providers, and a strong pushback at the cabinet table (Gainsbury 2010). The resulting procurement guidance from the Department of Health in March 2010 made only one passing reference to the phrase, with no indication as to its implications or enforcement. The next procurement guidance, in July 2010 under the Coalition government, completely abandoned the term. Meanwhile, on the pro-competition side of the ledger, the NHS Operating Framework for fiscal year 2010/11, published by the Department of Health in December 2009, indicated that, “[a]fter 2010/11, we shall move to a position where national tariffs represent the maximum price payable by a commissioner, as opposed to the mandated price for particular activity” (United Kingdom 2009b, 35–6) – in other words, that providers could compete on price. Price competition, which had been part of the internal market under the Conservatives, had been steadfastly resisted by Labour to that point, and this announcement flew in the face of any assumption that the Brown government was cool to competition in public services. On balance, the era of health policy under Labour from 2001 to 2010 thus ended in irresolution.

Cycling in the United States: Federal-state tensions, changing coverage, and vacillating provider payments Bipartisan incrementalism under divided government In the United States the failure of the Clinton initiative meant that federal health care politics reverted to their normal incremental mode, with the focus on making adjustments to established public programs, and the channel the congressional budgetary process. The 1994 congressional elections ushered in a divided government in which both houses of Congress were under Republican control, while the White House was in the hands of the Democrats. These conditions need not necessarily lead to stalemate (Mayhew 1991; Schick 1995, 250–1). But the 104th Congress was marked by the most polarized conditions in both houses

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since the 1930s.23 In the House, Speaker New Gingrich read the results of the election as providing a clear mandate for conservative policies (Quirk and Cunion 2000, 208); he also undertook a step-change increase in centralization under the party leadership (Beaussier 2012; Peterson 2011; Sinclair 2008). The confrontational stance led to utter policy deadlock with the White House, culminating in a dramatic “shutdown” of the federal government in November 1995 resulting from the inability of the two parties to enact a budget that would both pass Congress and survive the president’s veto. It was the Republicans who bore the brunt of public anger this episode, and in its wake they adopted a somewhat less aggressive mode. Clinton, having himself been chastened by the health care defeat, shifted from his mode of principled centrism to a more opportunistic approach (Quirk and Cunion 2000). The result was to open the door to incremental bipartisan deals – a pattern that continued for the remainder of Clinton’s first term and the beginning of his second. With one exception, these deals were accomplished through the budgetary process. In part this was because, as in the 1980s, the log-rolling of budgetary politics offered the broadest scope for compromise. In addition, the use of the budget vehicle in the 1996–98 period reflected the fact that it was virtually the only legislative arena in which the Republicans had to cooperate with the administration, even when the prospects of bipartisanship plunged again in the 1998 impeachment crisis, lest they be punished for forcing another unpopular government shutdown (Quirk and Cunion 2000, 213). The most significant changes related to health care were enacted in the Balanced Budget Act of 1997, and consisted of a negotiated package drawn from each party’s wish list. The Act extended coverage somewhat, while reducing payments to providers to hold down costs – including through a Sustainable Growth Rate mechanism for capping Medicare payments to physicians – and giving the Republicans some toeholds for their preferred voucher-style model in the form of a Medicare “Part C” that expanded the options for enrollees to choose coverage through qualifying private plans, rather than through traditional Medicare. The major extension of coverage was the Children’s Health Insurance Plan, later termed the State Children’s Health Insurance Plan (S-CHIP). Negotiated by Democratic senator Ted Kennedy and Republican senator Orrin Hatch, S-CHIP provided federal funds to match state expenditures on increasing coverage for low-income children, either through

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an expansion of their Medicaid programs or by establishing standalone programs.24 It was presented at the time as a bipartisan triumph, and has been described with some justification as the largest expansion of taxpayer-financed health insurance coverage since the establishment of Medicare and Medicaid in 1965 (McDonough 2011, 29; Rosenbach et al. 2007, ES.1).25 Overall, it more than offset the contraction of Medicaid coverage that had occurred as a largely unintended by-product of welfare reform legislation in 1996 (Burke and Abbey 2002; Holahan and Yemane 2009). But Medicaid and S-CHIP enrolment varied greatly across states and over time, and remained a volatile area of coverage (Burke and Abbey 2002; Rosenbach et al. 2007). Each of these provisions generated negative feedback. Providers pushed back against constraints on payment, which were relaxed in another Balanced Budget Act in 1999. The Sustainable Growth Rate mechanism was honoured much more in the breach than in the observance. The bipartisan facade of S-CHIP masked an enduring partisan split over what it was meant to accomplish, and the states’ exercise of flexibility under the federal funding formula triggered opposition at the federal level from both Republicans and Democrats (Grogan and Rigby 2009). Attempts to reauthorize S-CHIP in 2007 were vetoed by President George W. Bush. The one exception to the pattern of using budgetary vehicles to make incremental changes in health care policy was the Health Insurance Portability and Accountability Act of 1996, a bipartisan initiative negotiated by Ted Kennedy and Republican senator Nancy Kassebaum. The Act was intended to bring consistency to the welter of federal and state laws and regulations in two principal areas: security of coverage when workers changed or lost their job, and the privacy of electronic patient records. In this Kennedy and Kassebaum identified two areas in which incremental reform was relatively noncontroversial,26 since the larger employers and health care providers to whom the Act applied saw consistency as easing their burden of compliance – although the bill nonetheless did have to navigate the headwinds of the 1996 presidential election (Atchinson and Fox 1997). The “portability” and “accountability” (privacy) provisions of the legislation, particularly the latter, generated a stream of regulations and some federal-state tension over the following decade, but in this instance the result was a fairly systematic implementation process with little negative feedback.

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Partisan incrementalism under George W. Bush With the bitterly contested 2000 elections that gave Republicans control of the White House and, briefly,27 both houses of Congress, the prospects for a continuation of bipartisan incrementalism faded almost to black. Had the Republicans been able to mobilize the necessary authority, they might well have attempted a big bang transformation of Medicare on the voucher-type model they had been advocating since 1995. This would have had to be virtually an entirely Republican project – there was no prospect of any significant Democratic support. But even after the Republicans strengthened their nominal control of the Senate after the 2002 congressional elections, they lacked the effective strength to undertake such a dramatic shift of scale on their own. Furthermore, as the British Conservatives would do under David Cameron, the Republicans were confronting the need to detoxify their brand on Medicare issues. Their departure from Medicare orthodoxy after 1994 to embrace models oriented to private insurance had allowed Democrats successfully to present themselves as defenders of Medicare (Morgan and Campbell 2011b, 118–19). Lacking a window of opportunity for major change, the Republicans instead attempted to lure some Democratic support by linking an expansion of Medicare to the establishment of footholds for their preferred model in one sector: prescription drug coverage. There had been multiple abortive attempts over the years to add prescription drug coverage to Medicare, and the issue had figured prominently in the 2000 election, but in the deadlocked circumstances that followed, no progress could be made (Morgan and Campbell 2011b, 112–16; Oliver, Lee, and Lipton 2004). After the 2002 congressional elections the Bush administration – having backed away from an earlier proposal that would have offered prescription drug coverage only through private plans – presented a broad framework proposal to give Medicare enrollees the option of receiving catastrophic drug coverage for annual costs above a given amount under traditional Medicare or choosing from among a variety of coverage packages offered by qualifying private insurance plans. The proposal encouraged Congress to flesh out the details. The politics of the congressional response played out quite differently in the two houses. In the Senate bipartisanship initially reigned. The Bush administration sweetened the proposal by including a US$400 billion fiscal commitment over ten years to fund the program – a strong inducement to some leading Democrats, most notably senators

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Ted Kennedy and Tom Daschle, to support the program as providing “money in the bank” (Oliver, Lee, and Lipton 2004, 311). The initial Senate bill, crafted by Republican Charles Grassley and Democrat Max Baucus, who would also play key roles in the Obama reforms six years later, passed with a strong bipartisan 76–21 majority. The House version, however, hewed much more closely to the Republican line, and the bill barely passed on a largely party-line 216–215 vote, with only 9 Democrats in support and 19 Republicans opposed. The reconciliation of the two bills in conference committee removed several key provisions of the Senate bill that had attracted Democratic support in the first instance, and many erstwhile Democrat supporters, including Kennedy and Daschle, switched to an opposing stance. But the conference process also watered down some of the provisions of the House bill, thereby losing some Republican supporters. In the end the legislation passed with only a modicum of Democratic support: 220–215 (with 16 Democrats in favour and 25 Republicans opposed) in the House, and 54–44 (with 11 Democrats in favour and 9 Republicans opposed) in the Senate. The resultant Medicare Prescription Drug, Improvement, and Mod­ ernization Act (MMA) of 2003 provided voluntary prescription drug coverage for Medicare recipients through multiple private insurers, funded through beneficiary premiums and income-scaled government subsidies, which became “Part D” of Medicare. The so-called donuthole structure of coverage was odd in international perspective: it provided coverage of costs for beneficiaries up to an annual maximum, above which they were 100 per cent at risk for additional expenses up to another threshold, at which they would qualify for coverage of “catastrophic” costs. Few limitations were placed on insurers and none on drug prices; automatic annual funding for federal subsidies was authorized; and no new sources of revenue were added. The MMA was the last of the incremental changes to the health policy framework before the opening of the next window of opportunity for major reform in 2009. Nonetheless it was one of two significant additions to Medicare in the history of the program – the MMA expanded benefits; the addition of coverage for the disabled in 1973 had expanded eligibility. And ironically it made more possible the passage of a larger set of reforms on a strict party-line basis by the Democrats seven years later. Its generous provisions for payment drew pharmaceutical manufacturers and insurers into a yet greater reliance on the state for a substantial portion of their revenues and softened their resistance to further state action (Hacker 2010, 865). Moreover, as McDonough

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astutely points out: “If the MMA had not passed, any viable health reform proposal would have had to include a prescription drug benefit for seniors, which would have ballooned the total cost of the reform law. MMA took a costly and contentious issue off the Democrats’ to-do list, an issue that likely would have prevented any agreement between the Democrats and the pharmaceutical industry” (2011, 30). On the other hand the failure to provide any new source of revenue for the MMA would present a different challenge to later reformers. By 2008 federal funding for the program had totalled US$117 billion (in current dollars), and was projected to cost US$727 billion from 2009 to 2018 (Boards of Trustees 2009, 120). Given the deficit spending that prevailed and was projected to continue over this full period, these sums were effectively added to the deficit. The MMA, then, came to shape the context for future reform and to form one piece of the prevailing framework that would be adjusted by the Democrats’ mosaic reform strategy in 2009. All told, the combined effect of the cyclic changes in provider payments and coverage under Medicare and Medicaid over the course of the 1970s through 2008 was to produce wide swings in total spending (for Medicaid) or per enrollee spending (for Medicare) around a general secular trend of the expansion of the share of these two programs in total health expenditure. In the case of Medicaid, expansions and contractions in eligibility – in part owing to business cycles, but more directly attributable to policy changes – led to a decline in enrolment over the 1994–99 period largely as the result of welfare reform, and then a spurt in enrolment from 2000 to 2005, fuelled in part by an economic downturn, but also by the adoption of S-CHIP programs (Burke and Abbey 2002; Truffer et al. 2012). In the case of Medicare, the various expansions and contractions of provider payments and the expansion of drug benefits from 1980 through 2008 generated annual changes in real spending per enrollee that fluctuated widely within a range of −3.6 per cent in 1998 to 11.8 per cent in 1981 and again in 2006.28 Meanwhile the overall share of Medicare and Medicaid in total US health expenditure increased from 25 per cent in 1980 to 34 per cent in 2008 (Centers for Medicare and Medicaid Services n.d.). Conclusion As in other nations the normal pattern of health policy development in the modern British and US health care states has been one of cycling

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through the repertoire of options offered by the prevailing policy framework. But with regard to the political strategies of health care reform adopted in rare windows of opportunity for major change, the two nations present a study in contrasts. Britain’s modern health care state was founded in a big bang; that of the United States resulted from a mosaic strategy. The Conservatives in Britain introduced major reforms to the founding model in another big bang in the 1990s; the Dem­ocrats in the United States attempted and failed to do so at roughly the same time. Big bangs are not the only strategic possibilities for major change in Britain: the choice of strategy will depend on political considerations within the party leadership, as shown by the choice of incrementalism as the lowest common denominator of agreement within the leadership of the Labour government from 2002 to 2007. But the review in this chapter reinforces the prevailing wisdom that big bangs are more likely in the Westminster system than under US-style checks and balances. In the latter the only example of successful enactment of major change in health care up to 2009 was the mosaic strategy that brought about Medicare and Medicaid. This contrast between Britain and the United States renders even more remarkable the coincidence to which I now turn: the twin mosaics of health care reform in these two nations at the end of the first decade of the twenty-first century. It is not surprising that the United States would have adopted a mosaic strategy in its latest attempt to reach universal coverage. It is extraordinary, however, that such a strategy should be adopted in Britain – and it was only the unprecedented occurrence of a Conservative/Liberal Democrat Coalition government that brought about this episode. Within the limits to be expected given their very different political and institutional circumstances, the experience of both nations shows some intriguing similarities and puzzles. In particular, it is striking that, in each nation, reforms built on ideas that had been broadly accepted across partisan lines in very recent history nonetheless generated vituperative political conflict and extraordinarily tortuous legislative wrangling. The next two chapters trace out these parallel histories.

Chapter Six

The US Mosaic, 2009–10: Return to Unfinished Business

As the history traced in Chapters 3 and 5 shows, the United States presents a particularly inhospitable environment for making major changes in health care policy. The checks-and-balances design of its political institutions and the extraordinary complexity and size of the US health care arena create numerous veto points and hurdles that any attempt at change must navigate. In the latter half of the twentieth century, only one episode of major change occurred: the enactment of Medicare and Medicaid in 1965 at the initiative of President Lyndon Johnson. And even that episode did not result in sweeping change: these programs covered health care expenses for only a minority of the population at any time. The modern US residual health care state comprised four worlds of health insurance coverage – employer-based private insurance, individually purchased private insurance, government programs, and lack of any insurance at all – undergirded by a “shadow” state presence of regulation, delegation, and subsidy (such as the favourable tax treatment of employer health benefits). Americans variously navigated these four worlds depending on their employment status, income, and age.1 All attempts to introduce universal coverage, including President Bill Clinton’s attempted big bang in 1993–94, ended in failure. Nonetheless in 2009 the challenge of achieving near-universal coverage was taken up once again. And this time, as in the 1960s, a mosaic strategy of fast-paced reform aimed at filling the gaps in the US coverage patchwork would result in legislative success. Exploring this case, not only in comparison with the experience of other nations, but also in comparison with the Johnson and Clinton cases, further

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illustrates the effect of choice in strategic domains upon the course of policy change. The Window: The Call of History As in the other cases under review in this book, the window of opportunity for major change in health care policy in the United States in the late 2000s was not a result of developments in the health care arena itself. The perennial problems of cost and coverage in the US mixedmarket system had worsened (Hacker 2010, 873; Peterson 2011), but there was nothing to mark the years immediately preceding the 2008 election as critical. Hacker puts it well: The collapse of America’s patchwork public-private system has been predicted many times, and each time it has continued to limp along, hemorrhaging dollars, enrollees, and good will, yet still maintaining crucial reservoirs of support. Indeed, on a variety of measures, public opinion of health care in the late 2000s looked remarkably similar to the contours of opinion in the early 1990s, when reform went down in flames. … Looking across the large range of surveys on health care, one would be hard pressed to identify a major swing in favour (or against) reform in the run-up to the 2008 election. (2010, 864)

Rather, the opportunity for change arose because the Democratic Party acquired the electoral and institutional capacity to build a winning coalition in support of reform and formed the political will to do so.

Electoral and institutional resources: A historic election A charismatic young African-American rode a powerful narrative of change and hope to electoral victory in the presidential election of 2008. The Democrats retained control of both houses of Congress as well, with a supermajority in the Senate. As Figure 3.1 in Chapter 3 shows, Democratic party strength in the Senate surpassed even that enjoyed by Franklin Roosevelt and Lyndon Johnson. In theory this gave the Democrats the electoral mandate and institutional resources to overcome the gamut of multiple veto points that public policy-making must run in US political institutions. Peterson (2011) has argued that, with regard to many aspects of the policy problem, institutional setting,

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and political resources he could bring to bear, Barack Obama had a more favourable environment for reform than that faced by any of the presidents who had unsuccessfully attempted health care reform since the 1940s. Consider in particular the comparison with Clinton, since that comparison weighed heavily in the minds of the Obama strategists, as we shall see. Nominally the party positions in the 103rd Congress (1993– 95) were remarkably similar to those of the 111th Congress (2009–11). In the 103rd, Democrats held 258 seats in the House of Representatives and the Republicans held 176, with 1 Independent; in the 111th, the division was 257 Democrats and 178 Republicans. The 103rd Senate was divided 57–43 Democrat-Republican, while the 111th began with 56 Democrats, 41 Republicans, and 2 Independents who caucused with the Democrats, with one seat embroiled in a protracted process of judicial resolution. Within three months, however, the Democratic caucus crossed a threshold never reached in the Clinton era: it gained a nominal “filibuster-proof” three-fifths of the Senate seats with the defection of one Republican senator to the Democrats, and solidified its (still razorthin) supermajority with the resolution of the remaining seat in favour of the Democrat. Obama was in a much stronger electoral and institutional position than Clinton had been in other ways as well. He had won the popular vote decisively: 53 per cent compared with Clinton’s 43 per cent. His campaign had mobilized demographic groups – the young, Hispanics, and African-Americans – who were seen as key to a potential partisan realignment, creating a sense that the Democrats were the party of the future (Jacobs and Skocpol 2010, 38). On the congressional front the Democrats’ hand was greatly strengthened not only by the achievement of the nominal sixty-vote Senate caucus, but also by the potential to translate that nominal figure into effective strength as a result of the greater party unity and leadership authority that had developed over previous decades. The Democratic caucuses in both houses had become more liberal as the Republicans became more conservative, as I discuss further below. Although there were still conservative Democrats in both the House and the Senate, there was no counterpart to the southern conservative bloc that had confronted Roosevelt, Harry Truman, and Johnson, nor even to the conservative wing of the congressional party in the Clinton era (Oppenheimer 2009). The power of the parties’ leaders to bring their members into line with party positions had also

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increased as a result of procedural changes, especially in the House, since the 1970s and particularly since 1995 (Beaussier 2012; Peterson 2011; Sinclair 2008).

Political will: “We’re gonna get this done” Since health care reform remained the last major piece of unfinished business for the Democrats, it inevitably featured in the 2008 presidential campaign. The issue had been kept alive in the unsuccessful presidential campaigns of Al Gore in 2000 and John Kerry in 2004, although neither made it a central priority and both advocated incremental steps – a number of which, such as Gore’s proposal to allow for a voluntary, subsidized “buy-in” to Medicare for those ages 55–64, would feature again in the 2009 debate. In the campaign for the 2008 election, health care was more central to the platforms of each of the major contenders in the Democratic primaries – John Edwards, Hillary Clinton, and Barack Obama. Initially, however, Obama gave the issue less prominence and less attention than either of his two Democratic rivals. As a US senator, he had listed his priorities as energy, education, and nuclear non-proliferation (Alter 2010, 33). In the presidential primaries, his performance in a candidates’ forum on health care in March 2007 was the weakest of the three (Washington Post Staff 2010, 12). Although he stated that “I will judge my first term as president based on … whether we have delivered the kind of health care that every American deserves and that our system can afford,”2 he offered very little by way of elaboration. Over the course of the campaign, however, the issue gained greater importance for him, and by the summer of 2008, even as his staff was arguing to the contrary, Obama determined to make health care reform a central plank in his presidential campaign, privately stating that it would be a principal priority for his first year in office (McDonough 2011, 60). This firming of the president’s will was a critically important condition for the opening of the window of opportunity. Without succumbing to an individualistic “great man” theory of the history of this episode, it nonetheless needs to be recognized that the decisions to embark on major change and to persist in its pursuit would not have come about without Obama’s personal willingness to commit a huge stock of his political capital to the project. Most assuredly other factors, including the institutional and electoral developments noted above,

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were necessary as well, but they would not have been sufficient. The importance of presidential commitment in the US system is a quintessential demonstration of the role of structured agency: government institutions and the broader political economy constrain what any individual can do, but they also create key points of leverage. In the US system, major change in health care policy requires profound presidential commitment, on the order that Johnson brought to bear. As two observers of the sweep of history in this area have put it, in the US system: “[m]ajor health care reform is virtually impossible: difficult to understand, swarming with interests, powered by money and resonating with popular anxiety. The first key to success is a president who cares about it deeply. Only a president with real commitment will invest in such a dangerous and risky venture. It costs time, energy and political capital. This is no arena for half-hearted efforts” (Blumenthal and Morone 2010, 410). Why then did Obama embark upon this risky venture so wholeheartedly? The full answer to that question likely will not be known until he writes his presidential memoirs, if then. But some strands of the answer can be drawn from accounts of those who observed him and those around him closely. The first and most obvious reason for Obama’s conversion to the importance of health care is that, like Bill Clinton before him, he came to see grappling with health care costs as central to his broader economic agenda (Feder 2011; Jacobs and Skocpol 2010, 17ff; McDonough 2011, 74). Moreover Obama faced a much more challenging economic environment than had Clinton: the onset of the most severe economic downturn since the 1930s. Knowing that combatting the effects of the recession would require a substantial deepening of the fiscal deficit in the short term and an escalation in debt, Obama and his advisers struggled to find ways to keep government spending in check over the longer term. “Bending the cost curve” in health care – that is, reducing the rate at which costs were projected to increase – became a major potential tool in the fiscal kit. In addition Obama saw out-of-pocket health care costs as yet another demand on shrinking household budgets in precarious economic times. And, again like Clinton, Obama saw the burden of health costs on employers as a major drag on productivity and thus a constraint on returning the economy to sustainable strength over the long term. These economic and fiscal factors could justify placing health care among the government’s top priorities. But why make it the key priority after the passage of a stimulus package as an emergency response to

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the economic crisis? Why elevate it above the president’s commitments to education and energy? Here we enter more speculative territory. One likely factor is that Obama felt the weight of history – a history of failed attempts and unfinished business, and a history that pointed up just how rare were the electoral and institutional circumstances that now provided him with an extraordinary opportunity, and how important was the president’s own commitment. That history was poignantly embodied in Senator Ted Kennedy, for whom health care was a lifelong cause, and whose life was known to be coming to an end after a diagnosis of brain cancer in May 2008. Kennedy had endorsed Obama in the Democratic primaries, despite a long-standing friendship with the Clintons. Although Kennedy had not made Obama’s full commitment to health care reform an explicit condition of his endorsement, his moral authority was a constant presence (Alter 2010, 399; Jacobs and Skocpol 2010, 43; Washington Post Staff 2010, 7). Leading an ailing Kennedy into a health care forum with key interests in March 2009, Obama assured him before advisers, “Ted, we’re gonna get this done” (14). In public addresses Obama also gave evidence of his growing sense of history and his role in it. In September 2009, in a joint address to Congress, he averred, “I am not the first President to take up this cause, but I am determined to be the last. It has now been nearly a century since Theodore Roosevelt first called for health care reform. And ever since, nearly every President and Congress, whether Democrat or Republican, has attempted to meet this challenge in some way” (United States 2009b). He closed the address with the conviction that deferring health care reform once again was “not what the moment calls for.” Six months later, in March 2010, on signing the ultimate legislation, he stated proudly that “[t]onight, we answered the call of history.” In looking for Obama’s motivation, it is at least plausible to take him at these words. The Strategy of Pace and Scale: The Non-Clinton The strategy pursued by Obama and his advisers was heavily influenced by the desire to follow the negative lessons learned from the failure of the Clinton reforms3 and, to a lesser extent, from the positive lessons of Johnson’s Medicare and Medicaid success. Many of Obama’s advisers, a number of whom had served in the Clinton administration, paid close attention to the history of that administration’s attempt at big bang change. On balance, indeed, they seem to have overlearned from the Clinton episode. Clinton was criticized for turning over the

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development of his plan to a lengthy administrative task force process that excluded Congress; Obama, in contrast, sought to involve Congress from the beginning. The complexity of the Clinton plan frustrated attempts to mobilize support behind it; Obama initially set out only eight broad principles for reform, none of which implied a particular institutional framework, allowing Congress to devise the concrete provisions that would realize these principles. Clinton had allowed the momentum created by his election to dissipate; Obama established “deadlines” for congressional action at the outset. The Republicans had used the health care issue effectively as their principal partisan weapon against the Clinton presidency; Obama sought to neutralize Republican opposition by engaging them in a bipartisan process, as consistent with the narrative that had brought him to power. Clinton’s sweeping proposals to reorganize the greater part of the market for private health insurance and to restructure the way in which health care was managed alarmed the majority of the population who had health care coverage and who feared that the reforms would threaten what they had; Obama made a central point of assuring those with employer-based insurance that they could keep what they had. These considerations, among others, would strongly shape the pace and scale of the Obama reforms.

Pace: Time’s winged chariot During the campaign, Obama had promised only that he would see that health care reform was adopted by the end of his first term. Over the course of the transition after the election, and once in office, he and his advisers adopted a more urgent attitude towards their key priorities. Strategically Obama and his chief of staff, Rahm Emanuel, believed that Obama’s political capital should be leveraged with “early wins.” As Jacobs and Skocpol report, the view was that “‘victories would beget victories’ – winning on health care reform would add momentum to moving forward other parts of his agenda, including reform of the financial system” (2010, 44; see also Alter 2010, 80). Obama in particular felt the need to capitalize early on his victory. Even more than most presidents, he felt the fleeting nature of the opportunity he was given. Already before his election, he knew that the dire economic circumstances and unpopular wars he would inherit if elected would limit his chances of securing a second term in office (Alter 2010, 35). Numerous times in the early days of his presidency he would refer to his willingness to risk being a one-term president in order to take on difficult tasks

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(Woodward 2012, 28–9). During his first week as president, he mused that “[t]wo years ago, hardly anyone thought I’d be here. Life’s unpredictable and we’re all living on borrowed time. Let’s figure out how to get it [health care] done” (quoted in Alter 2010, 116). Key Senate Democrats, most notably the chairs of the two committees that would have carriage of any health care bill – Max Baucus of Finance and Ted Kennedy of Health, Education, Labour, and Pensions – also pressed Obama to move ahead on health care as the highest priority after economic stabilization (Jacobs and Skocpol 2010, 43). They believed that, even though the Senate Democratic caucus initially lacked the votes necessary to overcome a filibuster, sufficient Republican votes could be found to push legislation over that threshold. Kennedy, Baucus, and others had been working on bipartisan legislation for months – initially hoping to have a bill ready for presentation to the president as soon as he took office (McDonough 2011, 65–9). They were keenly aware of the importance of capturing momentum in a precarious moment: one Senate seat (in Minnesota) remained in dispute for months after the election, and a decision in favour of the Republicans could erode the Democratic advantage. Democratic senators Kennedy and Robert Byrd were ailing. And, as always in the US system, the mid-term congressional elections of 2010, when nineteen Democratic seats would be up for re-election, loomed as soon as the polls closed on the November 2008 election. A consensus to move immediately on health care did not fully determine the pace of change. The next question was whether to get “points on the board” with immediate, relatively small-scale initiatives and then proceed step-by-step over the course of the first term, or to launch at once into a larger-scale project. Obama was urged by his close advisers in the White House to adopt the first approach, proceeding cautiously on the health policy front. The only exception was Tom Daschle, Obama’s initial choice for the position of secretary of health and human services, who soon was compelled to withdraw from nomination because of conflict-of-interest allegations. All the other members of Obama’s White House team, most especially Emanuel, urged prudence. A veteran of the Clinton White House, Emanuel was especially leery of taking on major health policy change (Alter 2010, 80; McDonough 2011, 74), while Vice-President Joe Biden represented the view that the need to deal with the financial crisis precluded a comprehensive initiative on health care.4 After Daschle withdrew, no one in the White House advocated major early action on health policy.

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No one, that is, except the president. The same factors that led Obama to make a central priority of health care also led him to agree with his erstwhile Senate colleagues Kennedy and Baucus that the depth of the problem required tackling multiple dimensions simultaneously. He did not want the task of “cleaning up” the aftermath of the Bush administration to deflect him from his key priorities (Alter 2010, 174). His first major initiative – the stimulus bill discussed below – had allowed him to make down payments on competing priorities such as education and energy, and he was ready to move forward on health care (116). The remaining question was that of scale: whether this objective would be accomplished through a big bang or a mosaic strategy of multiple small adjustments.

Scale: Eight principles The rarity of the institutional and electoral conditions that had created the opportunity for reform and Obama’s personal commitment and tone of swift and bold action might have suggested seeking large-scale change in the institutional structures of health care through a big bang, driving a comprehensive bill through Congress, as Clinton could not do. Obama’s campaign narrative, ambiguous though it was, suggested a grand scale. The narrative was one of confidence in the ability of Americans, demonstrated throughout their history, to overcome adversity and meet great challenges in moments of deep crisis. It portrayed the present moment as one in which a synchronous global recession and the legacy of a period of misguided leadership and dysfunctional politics required a new and different approach.5 Obama’s own personal story as a biracial American and the first African-American to gain the presidency symbolized this ambitious and hopeful outlook. And the unarguable need for government action to respond to the economic crisis appeared to usher in a period in which the undercurrent of distrust of government in US political life would subside, at least for a time. If there was ever a moment for a big bang early in Obama’s term, it would have been in the nine-month window between 28 April 2009, when Senator Arlen Specter was seated as a Democrat after leaving the Republicans, and 4 February 2010, when Scott Brown, a Republican, filled the seat vacated by the death of Senator Kennedy. During this period the Democratic caucus comprised either fifty-nine of ninety-nine votes or sixty of one hundred votes, in either case achieving the threefifths majority necessary for cloture.6 This Senate supermajority might

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have allowed the Democrats either to mobilize a single-party winning coalition in both houses of Congress in support of a big bang or to establish the threat of a single-party bandwagon in order to bring a few Republicans on board. Institutional and political changes in Congress over the previous three decades made single-party mobilization plausible, while rendering the likelihood of bipartisan support remote. Both chambers, but especially the House of Representatives, had moved from a pattern of oligarchic control by long-serving committee chairs in the 1960s through a progressive decentralization to subcommittees, small groups, and individuals in the 1970s through the early 1990s, to a stronger role for the majority and minority leaderships after the mid-1990s (Beaussier 2012; Peterson 2011; Sinclair 2008). The centre of political gravity among congressional Democrats was the most liberal it had been in a century.7 Even more important in the present context, this movement to the left had characterized the most conservative 10 per cent of the party as well as the mean. Those, however, were long-term trends. The Democratic caucuses of 2009–10 were only marginally more liberal than they had been in 1993–94, when Clinton’s reforms failed.8 If Clinton’s proposal had been “too far from the median [conservative Democrat] voters” to succeed in the 103rd Congress (Brady and Buckley 1995, 448), there was little to suggest that change on a similar scale would succeed in the 111th. What differed between the two eras was the greater power of the party leadership, as noted above. But what did not differ was the need for the leaders to exercise their power through extensive intra-party deal-making. Moreover the ability to pursue a big bang approach was fatefully constrained by another element of the narrative of change that had propelled Obama to power, which promised a less divisive, more inclusive politics. Heavily influenced by this narrative, by advice from Senate leaders, as discussed below, and by learning (and arguably overlearning) from the Johnson and Clinton episodes, the Obama administration chose not only to involve Congress from the outset, but also to encourage a bipartisan outcome. In other circumstances a bipartisan focus might have allowed for a blueprint strategy – gaining consensus on a “grand bargain” on the broad principles of reform and leaving the detailed elements to be developed and enacted in stages. But it would have required both parties to have reasonable confidence they would be in positions of sufficient influence to enforce the overall principles

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of the negotiated bargain over time. In the prevailing hostile and polarized partisan climate of US politics, no such confidence was possible; both parties foresaw electoral risk and partisan conflict extending well into the future. Moreover the landscape of policy ideas upon which this window opened was different in a number of respects than the terrain on which the Clinton reform attempt played out. Some of the same options – a single-payer plan and “pay-or-play” employer mandates – were still around, as were many of the same advocates. But, as I discuss further in Chapter 10, the Clinton-era enthusiasm for various forms of “managed competition” among private insurers was being supplanted by a new idea: a narrower application of managed competition in the form of a “health exchange.” The exchange would fill an important gap in coverage by offering those without employer-based insurance a clearinghouse through which to navigate the private insurance market, and subsidize those who could not afford private coverage. A ready example of such a model was at hand at the state level: Massachusetts had introduced just such a program in 2006 in a bipartisan initiative propelled by a Republican governor and a Democratic legislative leadership. The basic idea of the health exchange could admit of numerous permutations and combinations with other elements of reform. Senate Democrats, notably Kennedy and Baucus, were already at work on proposals. In November 2008, very shortly after the election, Baucus published a White Paper recommending a national health exchange combined with expansions of established government programs: Medicare (on a voluntary basis for those ages fifty-five to sixty-four), Medicaid (for all households at or below 133 per cent of the federal poverty line), and S-CHIP, thus capturing and combining a number of the options being considered in Democratic circles. Within this universe of ideas, other complementary possibilities were taking shape. One was the concept of requiring individuals to have health insurance coverage (the “individual mandate”), born as a conservative proposal in the 1980s and 1990s as a way of preserving and strengthening the private insurance market by correcting for one of its signal failures, “adverse selection.” This problem occurs because less healthy people have a greater incentive to take out health insurance than do healthy people, leading to risk pools heavily populated with high risks and premiums that reflect that high-risk pool, making it even less likely that low-risk individuals will join voluntarily (Butler 1989; Pauly 1994b; Pauly et al. 1991). During the Clinton episode the plan

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proposed by Republican senator John Chafee included an individual mandate though not Clinton’s companion employer mandate. By the late 2000s this conservative market fix, though still strongly supported by private insurers, had attracted the support of more Democrats, in the process leading a number of its conservative progenitors to disavow it. It was part of the Massachusetts reform, and was included in the platforms of two of the three leading candidates in the Democratic presidential primaries: John Edwards and Hillary Clinton. Notably, Barack Obama opposed the concept (Lizza 2012). A third policy idea circulating among liberal groups was that of a “public option”: a government plan that would compete with private insurers through the health exchanges. A number of different proposals from 2001 to 2009 by a variety of health policy advocates shared the basic idea of having a public plan compete on a “level playing field” with private insurers through an exchange. Several proposals were grounded at the state level, either building on existing self-insured plans offered by state governments to their employees (Nichols and Bertko 2009) or creating a new public plan (Holahan, Blumberg, and Nichols 2002; Lewin Group 2008). The most prominent proposal, however, was developed by political scientist Jacob Hacker, who suggested a nationwide plan using Medicare’s administrative infrastructure, including its regional organization, but with a separate risk pool. In his model the plan would be offered through a national exchange (Hacker 2009). Various references to a public plan that individuals could choose instead of private insurance were included in the campaign platforms of all three major candidates in the runup to the 2008 Democratic presidential nomination. Neither Obama nor Hillary Clinton gave much emphasis to the concept or provided any detail, but Edwards made it a more central and fully developed plank. The desire for a bipartisan outcome, the need for negotiations within the Democratic Party, and the availability of a range of proposals for incremental additions to the existing employer-based system thus set the stage for a fast-paced mosaic strategy of multiple adjustments to the prevailing framework, attempting to build a bandwagon by offering those who joined the coalition the opportunity to shape the reform. Ideally the winning coalition would include members of both parties; failing that, it would bring all members of the Democratic caucus on board. The president’s budget request submitted to Congress in February 2009 and the concurrent budget resolution passed in April set out the

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broad parameters of scale and pace. The limited scale of the reforms was established in eight “principles.” Although the reform should “aim for universality” while reducing the financial burden of health costs on families and businesses, any reform was also to maintain “choice” by allowing Americans the option of keeping their employer-based coverage.9 The reform was also to pay for itself and not to add to the deficit – a fiscal line in the sand analogous to Clinton’s no-new-taxes stipulation, but importantly different in that it allowed revenue tools to be brought into play. (Obama was later, in September 2009, to further specify that meeting this requirement would mean that the net costs of the bill could not exceed US$900 billion.10) The rapid pace of the reform was signalled through the setting of deadlines for congressional action and the inclusion of “reconciliation instructions” in the budget resolution passed by Congress in April 2009, allowing the Democratic majority to circumvent a filibuster if necessary. The refusal of Senate leaders to include reconciliation instructions had doomed the Clinton reforms, and their presence in the 2009 budget resolution was to prove fatefully important for Obama. Nonetheless one of the president’s parameters contained the seeds of some delay: Obama’s insistence on fiscal neutrality complicated the legislation. Each of the numerous drafts, redrafts, and adjustments that would ensue had to be “costed” by the Congressional Budget Office (CBO) – an institutional hurdle that had not existed at the time of the original passage of Medicare and Medicaid, but that had greatly complicated the Clinton reform process as well. At least some of the complexity of the Affordable Care Act, and much of its timeline for implementation, can be attributed to the need to stay within Obama’s fiscal parameters as assessed by the CBO. The Strategy Unfolds: The Chimera of Bipartisanship and a Four-Ring Circus

The dry runs: ARRA and S-CHIP The prospects for a bipartisan outcome in the 111th Congress were bleak. Although it could not be known at the outset, this would prove to be the most polarized Senate since the Reconstruction era after the Civil War – substantially more so than the Senate Clinton faced in 1993– 94. Seventy-five per cent of Senate roll-call votes pitted the majority of Democrats against the majority of Republicans: a peak in a trend

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that had been building since the early 1990s. In the Congresses of the 2000s there had been about a 90 per cent probability that a senator or representative would vote with his or her party on these majoritarian “party unity” votes, and that trend continued into the 111th Congress. The distance between the modal ideological positions of the two parties had been growing since the 1950s. Ideological overlap between the parties in both chambers had declined dramatically since the mid1980s, and had disappeared entirely in the mid-2000s. The most conservative Democratic senator in the 111th Congress, Ben Nelson of Nebraska, was still to the left of the most moderate Republican, Susan Collins of Maine.11 The earliest test of bipartisanship under Obama concerned his first priority upon taking office – the passage of a stimulus package – and it foreshadowed what was to come. During the transition period, Obama and his staff had worked with the Bush administration on the design and implementation of the Troubled Assets Relief Program to stabilize the financial industry, and there was some initial hope that the bipartisan effort could carry over to the stimulus project. Immediately after taking office, Obama brought together the Democratic and Republican leaderships in the House and Senate to discuss the stimulus. Accounts vary as to the level of good faith or, conversely, provocative behaviour on either side in these discussions.12 Whatever the motivation and cause, it soon became apparent that the atmosphere was inimical to cooperation, that bipartisanship was a “chimera” (Blumenthal and Morone 2010, ix) and that the Republican response would be one of total opposition (Grunwald 2012, 140–60; Woodward 2012, 16–22). Presaging the mosaic strategy that would be pursued on health care reform, the stimulus bill – the American Recovery and Reinvestment Act (ARRA) – became the vehicle not only for key components such as the extension of unemployment benefits, aid to state budgets, and infrastructure spending, but also for a miscellany of other provisions. It included targeted infusions into Medicaid and other established welfare-state programs such as Head Start and food stamps, as well as areas that were seen as providing leverage on future economic priorities, such as health information technology, renewable energy, and highspeed rail. It also provided support for a few particular projects that risked being characterized – as they indeed were by Republicans – as the sort of “earmarked” spending that the Democrats had promised to eschew. The miscellaneous nature of the bill clouded some of its most substantial components, and allowed the Republicans to characterize

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it as “larded up with every Democratic policy wish since they lost the House in 1994” (Grunwald 2012, 195). The Democratic House leadership under Speaker Nancy Pelosi fast-tracked the legislation, which passed 244–188 with no Republican support and with 11 Democrats joining the opposition. In the Senate the Democrats at that point lacked the numbers to forestall a filibuster, even assuming they would retain the support of both Independents. Passage therefore would require at least one Republican vote – and realistically more than one, since it was doubtful that a single Republican would bolt. In contrast to the tight control in the House, the Senate process was more open, and a number of Republican amendments were offered and passed, including various tax credits. The moderate Republican Collins and the conservative Democrat Ben Nelson brought together an informal bipartisan group to explore possibilities. Although the group’s membership shrank over time, ultimately the stimulus package passed 61–37, with the support of three Republicans (Collins, Snowe, and Specter) and with one Republican abstention. In the House the revised bill passed with no Republican support. The ARRA was an omnibus package that could be seen rightly as “five landmark pieces of legislation in one [comprising] the biggest tax cuts for the middle class since Reagan, the biggest infrastructure bill since the Interstate Highway Act in the 1950s, the biggest education bill since Lyndon Johnson’s federal aid to education, the biggest scientific and medical research investment in forty years, and the biggest clean energy bill ever” (Alter 2010, 132). Grunwald calls it the “New New Deal” – indeed, “[i]n constant dollars it was more than 50 percent bigger than [Franklin Roosevelt’s] entire New Deal” (2012, 10). But there was a crucial difference: the ARRA did not create new institutions such as Social Security. Instead it made infusions into existing institutions – notably, state governments and established welfare-state programs – and it funded catalytic projects such as health information and clean energy technology. The stimulus bill was thus the first use of a mosaic strategy by the Obama administration – a forerunner of health care reform, though conducted even faster, at breakneck speed. It “cobbled together and squeezed through Congress” (Grunwald 2012, 10) a miscellany of large and small components – some central to the administration’s agenda, others added to win key supporters, all within a fiscal envelop dictated by the need to build a coalition that spanned progressives and fiscal conservatives. It was an almost exclusively Democratic project. And it

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suffered from the same political vulnerability that would hobble health care reform: it was a compendium of items that, while popular individually, together amounted to a highly complex, fiscal colossus that was toxic in the arena of public opinion (20). Somewhat more encouraging regarding the prospects for bipartisanship in the 111th Congress was an incremental initiative: the reauthorization and expansion of the State Children’s Health Insurance Plan (S-CHIP). Having passed twice with bipartisan support in both chambers in 2007 only to be vetoed by President Bush, S-CHIP seemed to offer just the sort of bipartisan early win the White House was seeking. For a brief time this issue was caught up in the broader strategic debate about the scale and pace of health care reform. Alter describes the competing arguments: “Tom Daschle and his team argued that [SCHIP reauthorization] should be attached to a larger health care reform bill as a sweetener to draw votes. Rahm wanted it separated out and passed as a stand-alone measure to put some ‘points on the board’ …; he believed that pushing something too big on health care in 2009 was a mistake” (2010, 245). In this case the president agreed with the piecemeal approach, and the Children’s Health Insurance Program Reauthorization Act (CHIPRA) was quickly introduced. But even then, things did not run smoothly. In addition to the expansion of coverage envisaged in 2007, the 2009 bill also extended eligibility to the children of legal immigrants without a waiting period, thereby eliminating one of the concessions made to Republicans in 2007 ­(McDonough 2011, 153). This provision angered and alienated two of the original Republican supporters of the 2007 bill, Senators Chuck Grassley and Orin Hatch, who voted against the 2009 legislation. Nonetheless the legislation attracted enough Republican votes to pass comfortably. The House vote was 290–135, with 249  Democrats and 41 Republicans in support, 2 Democrats and 133 Republicans ­opposed, and 7 members not voting. In the Senate eight Republicans joined all members of the Democratic caucus except the ailing and absent Ted Kennedy for a vote of 66–32 in support. The passage of CHIPRA in one sense did put bipartisan “points on the board.” But it also signalled difficulties ahead. If even an incremental increase in coverage focused on a sympathetic demographic group – children in low-income working families – and designed to be paid for through tobacco taxes could attract only such modest Republican support, the challenge of achieving a broader reform appeared daunting (Oberlander and Lyons 2009, 407–9).

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Four intersecting venues The process of achieving that broader reform would be played out in four intersecting venues: the tables of interests, the House of Represen­ tatives, the Senate, and the final reconciliation process. In each of those contexts, and between them, negotiations generated countless bargains, undertakings, and concessions as the price of building coalitions of support. The tables of interests In addition to setting the parameters of reform at the outset and playing a role as behind-the-scenes nerve centre throughout the process, Obama and his staff moved early to establish what they saw as a key condition for success – namely, securing the support of three central pillars of interest in the health care arena, the hospital, pharmaceutical, and insurance industries, whose opposition had contributed to the failure of the Clinton reforms. Central to this project would be the creation of a bandwagon effect – to persuade the key interests that they had more to gain from joining and shaping a winning cause than from entrenched opposition. The fate of the reforms arguably hinged on the acceptance of this proposition. As discussed above, Republicans early on decided in favour of opposition as central to the broader project of defeating the president, but the major interests in the health care arena did not share that overarching objective. The hospital, pharmaceutical, and insurance industries all stood to gain from the expansion of insurance coverage on the right terms. They faced a key strategic choice “between waging another scorched-earth campaign against reform (a strategy that might perhaps kill it but, should it fail to do so, would leave them without political leverage on the surviving legislation) and adopting a ‘constructive’ approach that would enable them to smooth the rough edges of the emerging reform and to amass political capital they could invest in further favorable legislative and regulatory adjustments as reform played out” (Brown 2011, 425). Or, as the president of the Chamber of Commerce put it more pithily in March 2009, “[i]f you don’t get in this game … you’re on the menu” (quoted in Washington Post Staff 2010, 17). The major interests decided not to be on the menu, and had begun meeting collectively in April and May 2008 to discuss how they might shape the anticipated reforms (Alter 2010, 251). Between March 2007 and March 2009, America’s Health Insurance Plans (AHIP) issued a series of proposals for limited reforms to insurance regulation

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(McDonough 2011, 55). Executives of pharmaceutical firms met with Ted Kennedy over the course of 2008. The task of the White House was to translate these developments into concrete quid pro quo commitments to neutralize opposition to health care reform. The overall trade-off for the interests was, as Hacker notes, simply grasped: “accept greater public regulation and involvement in return for greater guaranteed financing. In particular, government had a power the industry did not – the power to require that people had health insurance – and it was this requirement that the insurance industry in particular wanted to harness” (2010, 865). Translating this general objective into specific deals, however, would require careful analysis and tough negotiation. On 5 March 2009 President Obama convened a White House forum of 150 representatives of all of the major interests – industry, professions, and labour (McDonough 2011, 55, 75; Washington Post Staff 2010, ­16–19). In a subsequent meeting with industry representatives on 11 May, broad-ranging and generally constructive discussion led to a target of reducing the annual rate of increase in total health care expenditure by 1.5 per cent a year for ten years while establishing a path to universal coverage (Alter 2010, 253; McDonough 2011, 75). Negotiations then moved to industry-specific tables and much more detailed agreements, involving Baucus and his Senate Finance Committee staff as well as White House and industry representatives. Unlike the specificity of the Clinton reforms that had aroused instantaneous opposition, Obama’s broad principles left much scope for deal-making (Alter 2010, 254). For example, the actual target for increased coverage was set in negotiations with the hospital industry over Medicare payment: economic modelling showed that, at 95 per cent coverage, hospitals would gain sufficient revenue from the increased demand for their services to more than offset the reductions in Medicare rates that the government was seeking – so 95 per cent coverage became the target (McDonough 2011, 77). The pharmaceutical industry stood to make substantial gains from increased insurance coverage as well as the provision of subsidies within the “donut hole” for seniors with Part D Medicare coverage, and agreed to US$80 billion in price discounts and other concessions. As well as increased demand for their products through the broadening of coverage the reforms would bring about, the pharmaceutical industry also gained an implicit commitment from the White House and Demo­ cratic Senate leaders not to allow “re-importation” of their products that could be obtained at lower prices in Canada (Washington Post Staff

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2010, 24). Both industry groups publicly supported the reforms over the entire course of legislative process and thereafter, and adopted a significant media presence through advertising. The insurance industry presented a more difficult problem. Even more than the other groups, it was fraught with internal political divisions. The insurers stood to make major gains with the adoption of a universal mandate for health insurance coverage, but sections of the industry were highly resistant to the concomitant regulatory constraints on their underwriting behaviour. Internal divisions muted the opposition of AHIP, the umbrella industry lobby, which “quietly funneled millions to the Chamber of Commerce to support a massive lobbying and attack-ad campaign designed to limit the law’s reach [but] never adopted the take-no-prisoners approach that insurers had taken in 1993” (Hacker 2010, 865). Insurers had supported and benefited from reforms in Massachusetts very similar to those being considered federally. AHIP president Karen Ignagni held the view that the industry should not adopt the belligerent stance of 1993, but this time should play a “leadership role” in shaping the reforms. At the White House forum, she assured the president that “[y]ou have our commitment to play, to contribute, and to help pass health care reform this year” (McDonough 2011, 55). The White House, however, distanced itself from negotiations with AHIP, which proceeded unsuccessfully with Baucus and his staff until being abandoned after a few months (McDonough 2011, 78; Washington Post Staff 2010, 23). By the autumn the rift with insurers had deepened – ironically because of a loosening of one of the major provisions of the legislation by lightening the tax penalty for not having health insurance, the mechanism for enforcing the universal mandate that was of such importance to insurers (Jacobs and Skocpol 2010, 73). Nonetheless insurers gained a number of specific concessions during the detailed Senate markup process, as discussed below. The reasons for the lack of a firmer overall entente with the insurance industry might have had to do with incentives on both sides: not only the resistance of insurers to regulatory change, but also the strategic desire of the White House to be able to target the practices of some insurers as illustrative of the problems the reforms were intended to fix (McDonough 2011, 78; Washington Post Staff 2010, 23). And, indeed, certain insurers were to provide just such illustrations at key moments in the reform process.13 The fourth major pillar of the arena, the medical profession, was less problematic. The profession was deeply divided regarding policy options for health care, ranging from liberal groups such as Physicians

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for a National Health Program and the National Physicians Alliance, which supported a single-payer model, through associations of primary care physicians that advocated for improved affordability and access to health care, to various specialty groups that favoured health savings accounts and other private sector–based options. The American Medical Association, seeking to straddle this range, had moved from its historical opposition to a more ambivalent and vacillating stance towards the Clinton reforms (Tuohy 1999, 153–4). In 2009 it moved yet further, greeting the direction of the Obama proposals with qualified approval while continuing to seek resolution of the rankling issues such as medical liability tort reform and, especially, the Sustainable Growth Rate formula (SGR). Established in the Balanced Budget Act of 1997, the SGR set a cap on total physician payments under Medicare such that payments in excess of the cap in any given year would be clawed back from payments in the subsequent year on a pro rata basis. In other countries, however, including Canada, such caps have proved unsustainable. Among other things they create great “common resource” problems for the medical profession – no physician has the incentive to curtail charges if the penalty for doing so is broadly shared across the profession. In fact Congress regularly acted to defer the imposition of SGR clawbacks, with compounding effects such that, by fiscal year 2009/10, the CBO estimated the cost of covering the SGR deficit to be US$210 billion (McDonough 2011, 174–5). On the other hand, as McDonough notes, the physician reimbursement rate under Medicare declined by 17 per cent in real terms from 2001 to 2010; hence, “[e]ven though physicians have averted the impact of direct SGR-triggered cuts … the SGR has had an indirect and substantial effect in depressing physician payments below what they might otherwise be” (175). No specific agreements were reached on this or other issues up front, although the president and others signalled their commitment to address them. As the legislation began to take shape, this pattern of qualified support and attention to specific issues continued. In response to legislation at each stage – the draft legislation considered in House and Senate markups, the passage of the legislation in each chamber, and the final reconciliation process, the AMA and various associations of primary care physicians announced their support, while specialist groups were largely hostile. The division reflected the interests of these subgroups: primary physicians generally stood to gain from various provisions promoting preventive care and reducing hospital utilization,

220  Remaking Policy

while specialists likely would see their incomes suffer relative to increases expected under the status quo. A number of state-level medical societies also took positions on the legislation, generally reflecting the overall political complexion of their respective states (Lowes 2010). The key issue for the AMA, the resolution of the SGR, proved intractable. There was common agreement that the practice of year-byyear overrides and an accumulating overhang of pending cuts had to be addressed, but wiping out the overhang in the health care reform legislation would push costs above the US$900 billion threshold established by the president. The House therefore chose to pass a permanent revision of the SGR as a separate piece of legislation in November 2009, with an estimated cost of US$210 billion over the 2010–19 period (United  States 2009a), to howls of protest not only from Republicans but also from fiscally conservative Democrats. That legislation was blocked by the Senate,14 which included a temporary fix in its own bill, a provision that, in turn, did not survive the reconciliation process, as I discuss below. The practice of periodic temporizing overrides of the SGR would continue, and the SGR, as well as medical liability tort reform and Medicare payments, would remain live issues even with the passage of the Affordable Care Act. The SGR would not be repealed until April 2015, in legislation providing for a restructured Medicare payment formula. The House of Representatives In the broader context of the 2009–10 health care reform episode, three features of the legislative process in the House of Representatives stand out: the more liberal centre of political gravity of the Democratic caucus in the population-based House vis-à-vis the state-based Senate, the nonetheless crucial role at the margin of the more conservative voters in the Democratic caucus, and the importance of the tactical skill of the Democratic leader, Speaker Nancy Pelosi, within the overall mosaic strategy. Two groups of relatively conservative Democrats complicated the coalition-building process. One was a self-styled “Blue Dog coalition,” an informal group of about sixty members of the House. The Blue Dogs and their pivotal status as marginal voters have been well described by Joe White: [T]he core swing votes in both chambers pretty much shared the views of the House Blue Dog Democrats, who represent themselves as particularly

The US Mosaic: 2009−10  221 interested in balancing the federal budget and who generally do not take an oppositional stance toward business, particularly their local business interests, or the wealthy, particularly their local elites … They seem much more likely [than Republicans] to believe that society should help people who could not afford health insurance, and they are especially interested in helping rural areas … [They] did not want government to compete with private insurers or exercise power against providers, believing that this could be unfair and that it already led to payments being too low in rural areas. They sought reform that was “deficit neutral,” would “bend the cost curve in the long run,” and “maintain competition within the marketplace.” (White 2011, 444)

A second group of House Democrats, also numbering about sixty, whose potential vetoes needed to be covered off comprised social conservatives concerned about the implications of reform for traditional religious and family values – in particular, access to abortion. As we shall see, there was considerable overlap between the Blue Dogs and these social conservatives. The political and institutional developments that had created a polarized Congress set the stage for Pelosi to play a pivotal role in forging a coalition that embraced the liberal wing of the Democratic Party (of which she herself was part), the fiscally conservative Blue Dog Demo­ crats, and the socially conservative opponents of access to abortion. As noted above, procedural changes since the 1970s, consolidated and extended by the Republican majority after 1995, had given the party leaderships powerful influence over the careers of their members. Where once seniority had been the route to committee chairmanships, violations of the “seniority rule” had become common, and the leadership increasingly made committee assignments on the basis of party loyalty. The speaker had also become the “driving force” in the Rules Committee, which determines the conduct of debate (Beaussier 2012, 759–60). Together these developments had the important effect of allowing the House leadership to act as a cohesive team. This cohesion was nowhere better illustrated than in the “Tri-Committee” process through which the chairs and staffs of the committees with principal carriage of health care reform worked together expeditiously to coordinate their efforts. This process was used for the ARRA and CHIP, and the three committees involved – Ways and Means, Energy and Commerce, and Education and Labor – then moved “seamlessly” to consider health

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care reform (McDonough 2011, 72). The three committees agreed on a common draft by mid-June, then proceeded with their individual “markups.” Throughout the process within and between committees, with Speaker Pelosi playing a key role in mediation and direction, various policy ideas arose and were shared and multiple deals made and remade. The Energy and Commerce Committee was the most representative of the overall ideological complexion of Congress – in particular, the pivotal Blue Dog Democrats – and it exercised the heaviest weight in the process. The Blue Dogs on the committee insisted on several concessions, including limiting subsidies, exempting more small businesses from the requirement to insure their employees or pay a tax, and modifying the “public option” plan, as described below. Even so only four of the seven Blue Dogs on the committee voted for the bill that was finally reported out (McDonough 2011, 85). Despite the growing ideological convergence within the House Dem­ ocratic caucus, there were still two major issues on which a division or at least a spectrum of views had to be spanned to create a majority: the so-called public option, which occupied much of the Tri-Committee process, and access to insurance coverage for abortion, which dominated much of the floor debate. In 2009 the concept of the public option, especially in the incarnation developed by Hacker, was seized upon by liberal Democrats in Congress – particularly in the House – and for some it became a sine qua non for their support of health care reform. Equally, however, it became a flashpoint of opposition for insurers, some providers, Republicans, and some conservative Democrats. An analysis of positions taken by members of Congress between June 2009 and March 2010, as reported in the Capitol Hill newspaper Roll Call, found that among the twentysix most common proposals, the public option was the most likely to garner explicit support from Democrats and the most likely to be explicitly opposed not only by Republicans, but also by other Democrats (Rigby, Clark, and Pelika 2014, 67). To an international observer the intensity of opinion both supporting and opposing the public option is a matter of some bemusement. Within the reform framework that was developing, the public option would be available only to the approximately 10 per cent of the population that would acquire health insurance through the health exchange mechanism for the individual and small-group market. More important, however, unless a sophisticated risk-adjustment mechanism were

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to be put in place immediately, a public plan competing against private insurers surely would become a sink for bad risks. The incentives for public and private insurers are fundamentally different: however a public plan is designed, elected officials cannot escape accountability for its operation, and shedding bad risks is not politically defensible. Hacker himself, of course, acknowledged this, and included both prospective and retrospective risk-adjustment in the design of his model. International experience here, however, offers a cautionary tale. The only example among advanced nations that comes close to approximating a “public option” exists in Germany, albeit at the upper, rather than at the lower, ranges of the income distribution. There, those in roughly the upper-income quintile of the population may opt to be covered by either social or private insurance. Even with a risk-selection mechanism than has been honed for two decades, “cream-skimming” by private insurers remains a problem (Greß 2007). Why, then, was a public option embraced by liberals and opposed by insurers, who arguably stood to gain from an individual mandate with a public plan sopping up the worst risks? There were two reasons. First, providers saw a financial threat: in some versions the rates paid by the public plan were to be pegged to Medicare rates (or Medicare plus a given percentage), rather than negotiated in the market against competing private insurers. Since Medicare rates were generally lower than those paid by private plans, given the superior bargaining power of the huge public program, this aspect of the proposal generated opposition not only from providers, but also from private insurers who feared it would give the public option a competitive advantage – notwithstanding the suggestion from advocates such as Hacker that private insurers could “piggy-back” on the rates paid by the public plan. The second reason for the political divide over the public option was the way in which some of its advocates presented it: as a potential precursor to a single-payer system. Indeed supporters made it quite clear they were pursuing an incremental strategy at a moment of opportunity, securing a limited base from which to make gains in the future. In including the public option in his primary campaign platform, John Edwards had stated that, “over time, the system may evolve toward a single-payer approach if individuals and businesses prefer the public plan” (quoted in Hacker 2010, 873). Representative Barney Frank, a liberal Democrat and strong advocate of a single-payer system said, “I think if we get a good public option it could lead to single payer …

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The best way we’re gonna get single payer, the only way, is to have a public option to demonstrate its strength and its power” (quoted in Fabian 2009). Hacker himself later described it as “a major element of the single-payer vision” (2010, 866). Meanwhile, among conservatives, the public plan was portrayed with horse metaphors – either Trojan or stalking. “A public plan is essentially a stalking horse for a single-payer plan,” claimed Republican senator Judd Gregg of New Hampshire. Then, mixing his animal metaphors, he went on: “It is more than the camel’s nose under the tent. It is the camel’s neck, and probably front legs, under the tent. There is no way the private sector will be able to compete” (quoted in Pear 2009). In the context of a mosaic strategy, however, the public option had to enter into the mix of trade-offs necessary to building a winning coalition. And it posed a problem for the Democratic leadership in securing the support of one set of critical marginal voters: the Blue Dog Democrats. If the Blue Dogs were to support a public option, it would have to be greatly tempered. The key concession was to require public plans offered through exchanges to negotiate rates with providers in the private market, not to use Medicare-pegged rates, as had been proposed in the original Tri-Committee bill. One element of strength nonetheless did survive: the public plan would be offered nationwide through a national exchange. Even so, five of the thirty-six Democrats on the Energy and Commerce Committee joined all twenty-three Republicans in opposing the bill, which was reported out with the narrowest margin of the three committees, thirty-one to twenty-eight (Beaussier 2012, 767). Work then began on the floor of the House, where another aspect of the growing power of the leadership came into play. Party leaders’ influence over individual careers extends not only to committee assignments, but also to individual electoral campaigns. As Beaussier reports, “Republic and Democratic congressional campaign committees in both chambers have become increasingly important in centralizing the resources for their members’ elections … [L]eadership positions in both chambers seen to have been increasingly captured by legislators [such as Harry Reid in the Senate and Nancy Pelosi in the House] who have raised considerable amounts of money [for] their party” (2012, 761–2). This attentiveness to electoral prospects as well as legislative accomplishment gave the leaders credibility with their colleagues, as well as an arsenal of positive and negative sanctions. It also created a

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delicate and ongoing calculus: “a Speaker trying to rally majorities for controversial legislation must work very hard to find the ‘ideal point’ that will garner more than 50% of the entire House without unduly hurting the electoral chances of too many members of her party” (Jacobs and Skocpol 2010, 60). This was exactly the challenge facing Speaker Pelosi, and it required her to deal one-by-one with the Democrats who comprised the margin of victory, accepting additions that were important to particular districts while also pressing her members as far as possible without sacrificing their chances of re-election. This meant effectively holding a number of coveted “passes” that she could give to some reluctant members of her caucus as part of the overall calculus of support (Beaussier 2012, 767). Various elements of the House legislation were added in these one-byone negotiations: reducing certain tax items, modifying various regulatory provisions, and improving the Indian Health Service (Washington Post Staff 2010, 20–1). As the legislation approached its final vote, Pelosi sought to create a bandwagon momentum, just as White House and Senate negotiators had done with the stakeholders. “The store is open,” she is reported to have told at least one recalcitrant Democrat. “Now is the time to get in your provisions” (30). Even with these concessions a number of Blue Dogs and other conservative Democrats had to be wooed with other inducements. (In yet other cases they were given “passes” to oppose the legislation once the necessary numbers for passage had been reached.) These negotiations not only added to the miscellany of provisions in the legislation; they also intersected with another hot-button issue: access to insurance covering abortion. The issue arose when pro-life members of the House sought to extend the “Hyde rule” prohibiting federal funding for abortion to insurance acquired with federal subsidies. Pelosi agreed to allow Democrat Bart Stupak to offer an amendment to this effect, which passed 240–194, with 38 Blue Dog Democrats in support. The intersection of these two issues – the public option and abortion – might have been critical to the passage of the legislation by a narrow 220–215 vote, with 39 Democrats in opposition and a lone Republican in favour. Twenty-eight Blue Dogs supported the bill, including fifteen who had supported the Stupak amendment. Although it cannot be known with certainty, it is plausible that concessions on the public option and abortion together made the marginal difference to the construction of a winning coalition (Tomasky 2009).

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The Senate The process in the Senate was marked, like that in the House, by partisan polarization and tense intra-party bargaining, but it was different in several respects. First, it was more decentralized. The two committees with principal carriage of health legislation – Finance and HELP – produced separate and quite different versions of the bill. And with the changes of the previous four decades, the procedures and conventions of the Senate made individual senators more powerful than their counterparts in the House. This power was enhanced by a second feature: the need for a sixty-vote supermajority to overcome procedural hurdles, which increased the number of effective vetoes that had to be bargained away. Third, despite the prevailing political climate, there remained a lingering hope that some semblance of bipartisanship could be achieved. The HELP Committee had a more liberal hue than did Finance. It was formally chaired by the liberal “lion” of the Senate, Ted Kennedy, and then in his absence and after his death by two other liberals, Chris Dodd and Tom Harkin.15 Furthermore the centre of gravity was farther to the left for HELP Democrats than for their Finance peers.16 But tensions not only between Democrats and Republicans, but also among Democrats themselves, made for a laborious process, captured in this description by one of the committee’s senior staff: “[T]he arduous five-week stretch of formal legislative markup proceeding [was] the longest markup of a bill in the committee’s history and among the longest in the Senate’s history … The HELP markup lasted fifty-six hours, stretching across twenty-three session over thirteen days … Of the 788 amendments submitted, three-quarters were filed by the ten Republican members … In all, 287 amendments were formally considered, and 161 Republican amendments were adopted in whole or revised form” (McDonough 2011, 83). The HELP committee was the first of the five congressional committees considering the legislation (three in the House and two in the Senate) to report out a bill – on 15 July 2009. The Finance Committee process and its outcome differed markedly from the HELP experience. For months the committee struggled for a bipartisan consensus, an aspiration that had its impetus in the personal histories of some of the key players. Even in the increasingly polarized environment, the longer (six-year) terms of senators, the smaller size of the chamber, and the remaining degree of independence of individual senators still meant that personal networks and friendships had greater purchase there than in the House. In particular cross-party friendships

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forged by Kennedy had resulted in several co-sponsored bipartisan bills over his long Senate career. (He had also worked with the Republican governor of Massachusetts to arrange the continuance of funding under a federal waiver that made possible the Massachusetts reforms of 2006, as discussed in Chapter 10.) Even more significant in the current episode was the friendship between Max Baucus, the Democratic chair, and Charles Grassley, the ranking Republican on the Finance Committee (Jacobs and Skocpol 2010, 86). Although in the end these bonds were not sufficient to overcome the partisan divide, their tugs dragged at the pace of progress as the clock inexorably ran on. In June 2008 Baucus and Grassley had co-hosted a bipartisan meeting that they billed “Prepare to Launch: Health Reform Summit 2008,” to build momentum towards health reform. Immediately after the November 2008 election Baucus released the White Paper mentioned above. He organized meetings of a small “Group of Eleven” comprising Democratic and Republican senators, including Kennedy, Grassley, and six others – five Democrats and four Republicans in total – plus the Democratic majority and Republican minority leaders, represented by their staffs, with the goal of reaching a bipartisan agreement. In the new Congress Baucus pulled together the Finance Committee members of the “Group of Eleven,” which, after one defection, became a “Gang of Six” – three from each party – to craft a consensus position for the full committee’s consideration. The prospects for this bipartisan initiative, however, soon weakened. In the wake of the partisan conflicts over the ARRA and CHIP, and in the face of gathering Republican intransigence in the House, the White House and the Democratic congressional leadership progressively lost confidence in the prospects for broad bipartisanship in the 111th Con­ gress, assuming that at most one or two votes in the Senate and none in the House would ever likely be in play (Alter 2010, 131–2). Obama had set a “deadline” of the August congressional recess for the committees to report out their bills, and in July the president and his staff began to press Baucus to move more quickly (256). Majority Leader Harry Reid also met with Baucus in early July to express concerns about the danger of watering down the bill to “secur[e] the support of Grassley and at best a few additional Republicans” (McDonough 2011, 85). Meanwhile a Republican tactic of running out the clock appeared to be taking shape. In a widely reported comment made on a teleconference call with a conservative group in early July, Republican senator Jim DeMint exposed this tactic – and eerily reprised the Napoleonic

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allusion of the Gingrich Republicans of fifteen years earlier: “I can almost guarantee you this thing won’t pass before August, and if we can hold it back until we go home for a month’s break in August, [members of Congress will hear from constituents opposed to the reforms] … Senators and Congressmen will come back in September afraid to vote against the American people … If we’re able to stop Obama on this it will be his Waterloo. It will break him” (quoted in Smith 2009). Nonetheless the Finance chair remained convinced that he and Grassley could overcome the partisan divide, and both Obama and Reid deferred for a crucial length of time to Baucus’s judgment. Although the House committees and HELP met the August–recess deadline for reporting out their bills, the Finance Committee did not. And then the first part of DeMint’s prediction held: Grassley was among the Republicans who encountered fierce protests mobilized by selfstyled “Tea Party”17 activists when he returned to his Iowa base in August, and began to denounce the health care reform project. Baucus finally acknowledged the failure of the Gang of Six, but continued to work with one of its Republican members, Olympia Snowe of Maine. The Finance markup process, when it finally got under way on 22  September 2009 after another intervention from Reid (Beaussier 2012, 768), was also a lengthy one. Unlike the other committees, Finance focused on a detailed “conceptual draft” from the chair, to be converted to actual legislation after the markup. As McDonough reports, “[i]n all, 564 amendments were offered to the 223-page summary document and 135 were considered over eight days of sessions, the longest Finance Committee markup in twenty-two years” (2011, 88). The committee reported out a bill on 16 October on a fourteen to nine vote, with Snowe joining the thirteen Democrats in support and all other Republicans voting against.18 The bill was more conservative than either the House Tri-Committee bill or the HELP bill. For example, it included no public option, amendments to add a provision similar to that in the House and HELP bills having failed in the markup process with three Democrats, including Baucus, voting against (136). Like the HELP bill it provided for state-based exchanges, and like the House and HELP bills it included individual and employer mandates, but in both cases it provided broader exemptions. It also included an expansion of Medicaid eligibility up to 133 per cent of the federal poverty line – less than the 150 per cent level in the HELP bill but similar to the House bill’s provision. Precious time had been lost during the long Finance process while Republican opposition became more strident and, as had occurred over

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the course of the Clinton episode, public opinion became more negative (Brodie et al. 2010). With both the HELP and the Finance bills reported out, Harry Reid began the process of producing the final Senate legislation and of whipping the sixty-vote Democratic caucus into support while also seeking the votes of a few Republicans to avoid a strict partyline vote. Notwithstanding the potential for using the simple-majority budget reconciliation process as provided in the March 2009 budget resolution, neither the White House nor the Democratic congressional leadership was willing to pick up that tool at this stage. For one thing, not all elements of the highly complex legislation, some of which were intricately interrelated, could be cast in the budgetary terms necessary for objects of reconciliation. More important, a critical mass within the Democratic caucus balked at the political risk of bypassing their more conservative members to press such consequential, complex, and controversial legislation through on a simple majority, especially when a supermajority might be in sight (Jacobs and Skocpol 2011, 79–80). Thus the tortuous process of crafting the health reform legislation entered its penultimate phase, under the unflagging leadership of Majority Leader Harry Reid. As in the case of Speaker Nancy Pelosi in the House, Reid’s tactical leadership was critical. In the Senate he had to deal with individual members who had firmer independent bases than their House counterparts. He operated from a mindset that was primarily pragmatic, and, unlike the liberal Pelosi, ideologically slightly to the right of the median in the Democratic caucus.19 Like Pelosi during the Tri-Committee markups in the House, Reid took a firm hand in merging the HELP and Finance bills while seeking to respect the views of each set of senators. Merger meetings of staff from the two committees and the leader’s office worked towards a common draft, while Reid conducted multiple meetings with the full Democratic caucus and negotiations with individuals, seeking to span the liberal-conservative spectrum and to offer inducements to individuals as necessary to overcome reservations (Beaussier 2012, 769; McDonough 2011, 89). Reid unveiled his merged bill on 19 November; two days later, the bill passed the key procedural barrier with a 60–40 party-line vote to proceed for consideration. Procedural wrangling was far from over, however, and as various roadblocks were thrown up and overcome, Reid engaged in continual bargaining – a process marked by increasing marginal difficulty as the coalition built towards sixty votes. A number of these negotiations involved satisfying the wish lists of individual senators. Reid was quoted as saying: “There’s a hundred senators here, and I don’t know if there is

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a senator that doesn’t have something in this bill that was important to them” (Washington Post Staff 2010, 43). Nonetheless much of the negotiation focused on those members close to the Senate’s ideological centre, principally conservative Democrats but also including Snowe. Some of these negotiations involved favourable conditions for Medicaid funding in particular states (Nebraska, Louisiana, and Florida), which were instantly derided in the media as the “Cornhusker Kickback,” the “Louisiana Purchase,” and “GatorAid” respectively. Others involved policy provisions of general applicability, largely moving the legislation farther to the right – for example, strengthening the prohibition of federal funding for abortion and reducing certain penalties associated with the employer mandate – and in each case requiring further discussions to assuage the concerns of the liberal wing (Moscardelli 2010, 15). The principal concession concerned the public option. Given the presence of a public option proposal in the HELP bill but not in the Finance bill, Reid’s initial merger bill included an attempt at compromise: a public option provision from which individual states could choose to opt out. At least one veto-holder – independent senator Joseph Lieberman – objected to this provision, and Reid worked with more liberal senators to offer them a quid pro quo. For a brief moment an option to open up Medicare eligibility on a voluntary basis to those ages fifty-five to sixty-four was considered, until that too was vetoed by Lieberman. The liberals had to content themselves with strengthening some aspects of insurance regulation and a provision for a private, not-for-profit insurance option to be offered through each state exchange. All these changes were amalgamated into a “manager’s amendment” incorporated into Reid’s initial bill as a separate Title – on the expectation that this “messiness” could be tidied up after passage in the process of combining the House and Senate bills into the final legislation (McDonough 2011, 93). The Senate bill passed on 24  December on a vote of 60–39, with the support of the full Democratic caucus and no Republicans.20 Reconciliation With legislation now passed by the House and Senate, the next step was to combine the two bills into common legislation to be passed again in each chamber. Normally the drafting of joint legislation occurs in a “conference” committee representing the two chambers, but the results of the special election in Massachusetts to fill the seat vacated by Ted Kennedy’s death radically changed the political calculus. The seat was

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won by a Republican, Scott Brown, thus depriving the Democrats of the critical sixtieth vote they needed to take the common bill back through the Senate. The election was also portrayed as having registered public disapproval of the health care reform legislation, although local factors, including a weak Democratic candidate, also played important roles. The result was deeply ironic: not only was the seat of the longest-­ standing and most passionate crusader for health care reform lost, but the loss also occurred in the state that had piloted the very model on which the Democratic legislation was premised. The Massachusetts election forced a choice: would the Democrats abandon the House and Senate bills and turn instead to an incremental approach? Or would they pick up the only tool remaining to them – the budget reconciliation process – to carry the existing legislation forward? The decision at this key juncture was a matter of sheer political will at the highest level: the president. The debate among Obama’s advisers and the Democratic congressional leadership was fierce, with Pelosi in particular arguing for staying the course and Rahm Emanuel arguing for turning to other priorities and reverting to incrementalism on health care. As he had done a year earlier, Obama determined to press ahead. He spearheaded the drive, meeting with Republican members of the House in a televised setting, making health care a dominant theme of his State of the Union address, outlining in concise terms a plan that summarized key features of the House and Senate bills and stamping it with his endorsement, and convening a bipartisan summit with the intention of showcasing both his own case for reform and the paucity of the Republican alternatives (Jacobs and Skocpol 2010, 112–14; Washington Post Staff 2010, 50–2). Taking the budget reconciliation route would require yet another round of intensive bargaining in a contorted process. Fatefully there would be no opportunity for the anticipated “tidying up” of the legislation: because the Senate would not be able to pass a full revised bill, the House would have to pass the existing Senate bill verbatim. Pelosi was sure, however, that the Senate bill as it stood could not pass the House. House liberals objected to some of its more conservative provisions, including the lack of a public option; pro-life advocates felt the language on abortion was not strong enough; and there was widespread revulsion against a number of the state-specific special deals. The solution to this dilemma was a procedural quick-step: the House would pass the Senate bill, which the president would then sign into law, and the House would then immediately pass a set of amendments

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to the Senate bill (a so-called side-car), which would in turn go to the Senate for passage with a simple majority under budget reconciliation. In that process only amendments with budgetary implications could be considered, meaning that the House would have to accept various regulatory aspects of the Senate bill as well as, crucially, its language on abortion. Furthermore the House would have to trust the Senate to pass the amendments once its original bill became law. And the resulting package would be even messier, in drafting terms, than the Senate bill had been. The use of budget reconciliation in the final phase of the Obama initiative contrasts sharply with the fatal inability of the Clinton administration to do so, and deserves some explanation here. Senate Robert Byrd, who had stood in the way of the Clinton attempt, also opposed the inclusion of health care in the reconciliation instructions in the 2009 budget resolution, and withheld his vote. In 2009, however, Byrd’s opposition was not determinative. Reid and the Democratic leadership of the Senate in the 111th Congress were more amenable to the provision for reconciliation than their counterparts in the 103rd had been, and they allowed its inclusion in the 2009 resolution. More important, however, the actual use of reconciliation in the 2010 end-game was for the passage of amendments to legislation that had already cleared the supermajority hurdle in the Senate. Byrd raised no objection to the use of the procedure in these circumstances, and in March 2010 he explicitly and publicly endorsed it, in response to critics who had cited his earlier reservations (Live Pulse 2010). In yet another irony of this saga, the reconciliation process moved the legislation in a somewhat more liberal direction, since the most conservative senators no longer had to be accommodated (Jacobs and Skocpol 2010, 115). The most egregious of the state-specific deals were removed, essentially by universalizing the enhancements to Medicaid funding that certain states had been given. An excise tax on so-called Cadillac (that is, generous) employer-based plans, which was anathema to unions, was delayed until 2018, while taxes on health care industries and financial income and Medicare contributions from higher-income beneficiaries were increased. On the other hand, fiscal conservatives insisted on strengthening various cost-containment measures – notably, what became an Independent Payment Advisory Board under Medicare. But yet again the principal drama of this final phase revolved around the two most controversial points of contention between liberals and conservatives: the public option and abortion. These were the

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two areas in which Democrats themselves were most divided (Rigby et al. 2014, 67). It was the judgment of the two congressional leaders, Pelosi and Reid, that they did not have the votes for a public option even under the reconciliation process. Pelosi publicly stated that the Senate did not have the votes, and she was committed to sending the Senate a bill that would survive passage there. Various progressive media disputed this view, producing their own speculative vote counts (Stein and Grim 2010). But in any event it was not at all clear that the House itself now had the votes for a public option. As noted above, the intersection of the abortion and public option issues had been critical to the passage of the original House bill. Reconciliation rules did not allow any amendments to the Senate bill’s language on abortion, and without a strengthening of that language a number of original House supporters would now vote against the legislation. That meant that some earlier “no” votes had to be converted to “yes” – and the way to do that was by dropping the public option. Even so it was only with the president’s commitment that he would sign an Executive Order reinforcing the legislative language on abortion that Stupak and some other pro-life advocates were persuaded to support the final legislation. The loss of the public option inflicted on House and Senate liberals a quid for which they insisted upon a compensating quo (Jacobs and Skocpol 2010, 81–2, 116). In addition to the gains noted above, they also acquired changes in an unrelated area: federal student financial aid. Liberals had sought to pass legislation that would allow for direct federal loans to students, rather than subsidies for bank loans, but the legislation had been blocked by the Senate. The March 2009 concurrent resolution on the budget had also included reconciliation instructions allowing for increases in federal aid to students on a deficit-neutral basis, and liberals now seized on the opportunity to clear the Senate hurdle by bundling student aid provisions into the “side-car,” which then became the Health Care and Education Reconciliation Act. On 21 March 2010 the House passed the Senate’s Patient Protection and Affordable Care Act on a vote of 219–212, with 34 Democrats joining all 178 Republicans in opposition. Two days later the president signed that legislation in the ceremony noted at the outset of this book – a ceremony only slightly clouded by the knowledge that the legislation was immediately to be amended substantially. On 25 March those amendments were passed as the Health Care and Education Reconciliation Act (HCERA), by votes of 220–211 in the House and 56–43

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(with 40 Republicans and 2 Democrats opposed and 1 Republican not voting) in the Senate. Obama signed HCERA into law on 30 March. Together the two pieces of legislation constituted the Affordable Care Act (ACA) of 2010. With all of its myriad provisions the ACA had five fundamental features. First, it left the existing employer-based system of coverage in place, while universalizing constraints on various underwriting practices of insurers. Notably, practices such as the denial or withdrawal of coverage based on pre-existing conditions and the establishment of annual or lifetime caps on benefits – which had already been variously constrained under the terms of some employer plans and under regulations in a number of states – were to be prohibited by federal regulation. Second, the Act required individuals to have health insurance or pay a fine, and provided for government subsidies for those facing financial hardship in paying for insurance. It also included a convoluted form of “employer mandate”: large employers (those with fifty or more employees) would be fined if any of their full-time employees qualified for coverage and subsidy through the exchanges as a result of a lack of employer-based coverage. Third, in the sole significant institutional innovation, the ACA required new health insurance exchanges21 to be established in each state to organize and regulate the market for private health insurance for those lacking either employer-based insurance or coverage under Medicare or Medicaid. The exchanges would facilitate choice among qualifying competing plans and administer the federal subsidy program. They could take a variety of organizational forms at more or less arm’s-length distance from government; and in those states that did not establish exchanges, the federal government would operate the exchange. Fourth, Medicaid would be expanded substantially to embrace all households with income up to 133 per cent of the federal poverty line, financed largely by the federal government but dependent on statelevel implementation. Fifth, the overall costs of the reforms would be covered by increased revenue – from taxes on higher-income individuals, increased Medicare contributions by higher-income beneficiaries, and excise taxes on employer-based plans whose benefits exceeded prescribed maximums – and from cost controls in the Medicare program, administered through the operation of an Independent Payment Advisory Board and

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through various organizational efficiencies to be fostered by a Center for Medicare and Medicaid Innovation. The ACA also included a plethora of provisions reflecting numerous policy ideas circulating in Washington at the time of its drafting. The Center for Medicare and Medicaid Innovation, for example, was mandated to “test innovative payment and service delivery models,” including a number of types of models explicitly identified in the legislation itself. Other provisions were aimed at promoting “preventive health and wellness strategies,” quality of care, and patient safety. In all the Act stood as a veritable compendium of current thinking in schools of public health across the nation. Denouement: The Battle Continued in Congress, the Courts, and the States

Repeal and defunding attempts in Congress The passing of the ACA “hard-wired” its reforms and a timetable for their implementation into law. The very hurdles that the legislation had to clear in the first instance would also have to be cleared in any attempt to undo it through repeal. Indeed the hurdle for repeal was even higher: the party seeking it would need either to control the White House and both houses of Congress with at least sixty votes in the Senate or, lacking control of the White House, to control both chambers with the ability to muster at least two-thirds of the votes in each to overcome the inevitable presidential veto of any attempt at repeal. The Democrats were confident enough in these buttresses against reversal that they allowed the implementation period to extend well past the next presidential election in 2012. Nonetheless Republican opposition did not subside with the passage of the ACA. Symbolizing their attempt to weaponize the ACA against the Obama presidency, the Republicans seized upon the media-­generated label of “Obamacare” as a perjorative. (The Democrats, however, would soon turn the tables by embracing the term as a brand [Hopper 2017, chap. 2].) As had occurred in 1994, the Republicans rode their hostility to electoral success in the mid-term congressional elections in 2010. They made even greater gains in the House in 2010 than they had in 1994, taking control of the chamber with a net gain of 63 seats for a total of 242. Unlike in 1994, however, the Democrats retained control of the

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Senate but with their majority reduced by a net loss of 6 seats for a total of 51 (plus the two independents who caucus with the Democrats). There is good evidence that attitudes towards health care reform played a strong role in these election results. Richardson and Konisky (2013) find that negative attitudes towards the ACA were significantly related to the probability of voting against Democratic candidates for the House and Senate, controlling for a range of other variables, including attitudes to the other major policy initiatives of Obama’s first two years – the stimulus legislation and the climate/energy bill – as well as evaluations of the economy, party identification, ideology, incumbency, and a number of demographic characteristics. Attitudes to health care reform had the largest association of any of these variables.22 Moreover the ACA seemed to have become a synecdoche for the broader Democratic agenda. Attitudes to health care reform pervaded the elections not only at the federal but also at the state level – the same association between opposition to the ACA and voting against Democrats held in elections for state governors and attorneys general. Finally the anticipated collective effect of the ACA was more strongly associated with anti-Democratic voting than was its anticipated effect on personal circumstances (Richardson and Konisky 2013; see also Nyhan et al. 2012).23 The Republicans also campaigned on opposition to the ACA in the 2012 presidential and congressional elections. But early analyses suggested that, at least in the presidential race, health care had lost its force as an electoral issue: Sides and Vavreck (2013) show that the effect of the economic upturn was much more definitive in returning Obama to the White House. The 2012 election also saw the Democrats retain control of the Senate, with a net gain of two seats, while the Republicans retained the House with a reduced majority, with a net loss of eight seats. In Congress itself, notwithstanding the futility of the gestures, Repub­ licans in the House repeatedly introduced legislation to repeal the ACA or deprive it of funding. Repeal legislation had no hope of passage in the Democratic-dominated House at that time, but after gaining control of the House in the 2010 mid-term elections and maintaining control in 2012 and 2014, the Republican majority passed some forty-five pieces of legislation, as well as non-binding budget resolutions, each year from 2011 to 2016 to repeal, amend, or defund the ACA in total or in part. Twenty other related bills were passed with bipartisan support and signed into law from 2010 to 2016 (Redhead and Kinzer 2017). Most of these amended aspects of the ACA that had been overlooked in the

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messy process of passage or that needed to be adjusted in the face of changed fiscal and/or economic circumstances. In other cases, however, funding constraints related to the ACA were added to annual appropriations bills, leading to rancorous periods of manoeuvring before reluctant compromises were achieved. The most significant of these agreed-upon funding reductions were included in the overall bargain to avoid a “fiscal cliff” in January 2013: the repeal of a section of the legislation (known as the CLASS Act) establishing a long-term-care insurance plan, which had substantial fiscal implications, and cutting off as-yet-uncommitted startup funding for not-for-profit multistate plans (the alternative to the “public option”). As the January 2014 deadline for the implementation of the bulk of the ACA neared, the Republicans staged a last-ditch attempt to forestall it. Conservatives in the House pressed the party leadership into a budgetary standoff, refusing to pass any continuing budget resolution that contained funding for the ACA, and thus forcing another government shutdown on 1 October 2013. As in 1995, this tactic redounded against the Republicans in public opinion. After seventeen days the Republicans backed down, providing sufficient votes to join the Democrats in passing a budget resolution including funding for the ACA. Speaker John Boehner admitted defeat, saying, “[w]e fought the good fight – we just didn’t win” (Weisman and Parker 2013).24 The continuing resolution provided funding until 15 January 2014 to allow for another round of budget negotiations. That round yielded bipartisan support for a Bipartisan Budget Act, which passed with broad majorities in both the House and the Senate (332–94 and 64–36, respectively) and was signed into law by President Obama on 26 December 2013. After the Republicans gained control of the Senate in the 2014 midterm elections, the House continued to enact various measures targeted at the ACA. One of these – repealing those sections that could be dealt with through budget reconciliation – passed the Senate as well, and was sent to the president for his signature; instead, Obama vetoed it in January 2016, and the House failed to muster the two-thirds majority necessary to overcome the veto.

The judicial venue The ACA also had to survive potentially fatal attacks in a venue outside the legislature and the executive: the court system. On the day President Obama signed the Act into law, the Republican attorneys-general of

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thirteen states – four over the objections of their Democratic governors – launched challenges. They were subsequently joined by thirteen more states, all with Republican governors, and a small-business association, the National Federation of Independent Business. The court challenges were essentially twofold. First, the plaintiffs attacked the individual mandate, arguing that the federal government had no authority to compel the purchase of a good simply as a matter of citizenship or residency. Second, they attacked the provision that states which did not expand their Medicaid programs as specified in the ACA would lose all federal Medicaid funding, not just that segment of the funding to cover the expansion – 100 per cent of the additional cost in the first three years, 2014–16, then declining in steps to 90 per cent in 2020 and thereafter. This provision was alleged to be “coercive,” and hence an unconstitutional exercise of federal power. As conflicting rulings were issued in different district courts, uncertainty was heightened pending an ultimate resolution by the Supreme Court. The Supreme Court agreed to hear an appeal in one of these cases, National Federation of Independent Business v. Sebelius. The judges faced one of the most politically fraught cases in the history of the court to that date. The ACA was the signature legislation of the first AfricanAmerican president, and it had passed with a supermajority in the Senate (albeit amended by a simple majority), but had not attracted a single Republican vote. If the Supreme Court – five of its nine justices having been appointed by Republican presidents – overturned the legislation, it would inevitably be seen as having advanced a Republican agenda that could not be accomplished through legislative means. In an artful ruling issued in June 2012, the chief justice provided the vote and the reasoning that upheld the ACA: the federal government could not compel the purchase of private insurance, as the government had argued it could do under its authority to regulate interstate commerce, but it could tax those who did not purchase private insurance. Since that was exactly what the legislation provided, the ACA was upheld. The Court, however, did throw out another, arguably more materially significant aspect of the Act: the federal penalty for states that refused to expand their Medicaid programs. The Court held that the threatened loss of all Medicaid funding effectively “coerced” the states to expand – the first time the Court had held a federal requirement to be “coercive” – and struck it down. A second major challenge to the ACA arose from a drafting error. The frenetic pace of the compilation of separate pieces of draft legislation in

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both the House and the Senate in 2009, under the pressure of a rapidly closing window, had yielded a great deal of messiness in the language of the Act. More significantly the anticipated opportunity to tidy up the language at the conference committee stage never materialized, as the legislation followed a much less orthodox route to passage. Some of these errors were dealt with through subsequent amendments, as noted above, but opponents of the legislation seized upon one error as a way of attacking the cornerstone of the new model: the subsidies that would allow low-income individuals to purchase private insurance through exchanges. The problem arose because several of the sections in the Senate legislation relating to subsidies were drafted when it was expected that each state would establish an exchange. Over the course of the legislative process, it became increasingly clear that some states would resist, and the Senate therefore provided that the federal government could step in to operate the exchange in a state by default. In the process, however, not all sections referring to “an exchange established by the state” were tidied up. In particular, a section of the law amending the tax code to provide for the “advance premium tax credits [the mechanism for providing subsidies] twice refers to enrollment through an ‘exchange established by the State’ as a seeming condition of eligibility” (Jost 2015). In implementing the legislation, the Internal Revenue Service (IRS) interpreted the congressional intent to be that both federally facilitated and state-operated exchanges could grant tax credits. Opponents seized upon this oversight to argue that the legislation did not authorize the IRS to allow tax credits for insurance purchased through the federal exchange. Four separate challenges were launched, with disparate results in the lower courts. The Supreme Court agreed to hear an appeal in one of these cases, King v. Burwell, and issued its judgment on 25 June 2015. By a six to three majority the Court upheld the IRS interpretation as consistent with the overall intent of the legislation: to have determined otherwise would have destroyed the very insurance markets the law was designed to create. Importantly, however, the Court did not simply defer to the IRS’s interpretation, but decided that only legislation, not an administrative ruling, could alter this interpretation in the future. A second aspect of the Burwell suit was not resolved at this time, however, and was to prove highly contentious and consequential. The ACA required insurers to provide lower-income purchasers with reduced “cost-sharing” requirements (such as deductibles) in certain commonly

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chosen plans. To make it possible for insurers to comply, the administration provided subsidies. But whereas the ACA had made an explicit permanent appropriation to fund the tax credit subsidies for individuals by amending the tax code, it made no such explicit appropriation for the cost-sharing subsidies. The Republican-dominated House therefore challenged this exercise of administrative discretion, claiming that such spending required annual appropriations that the House had refused to provide. The circuit court judge initially deferred a decision on this point, but in May 2016 she ruled in favour of the House, staying the effect of her decision pending the administration’s appeal. In December 2016 the case was held pending the arrival of the new Republican administration and Congress.

The states The design of the Affordable Care Act meant that giving effect to many of its provisions required action by state governments. But opposition at that level, overwhelmingly fuelled by partisanship, imperilled the establishment of the ACA architecture from the outset. The political calculus was different for the three major streams of the legislation requiring state action – the establishment of health insurance exchanges, Medicaid expansion and insurance regulation. By and large the insurance regulation reforms were accomplished through administrative action characterized by what Béland, Rocco, and Waddan (2016) call “the quiet politics of bargaining and consent.” But for the exchanges and Medicaid, the intransigence of Republican governors and legislatures was a dominant motif. The most highly politicized of these streams related to the health insurance exchanges (Jones, Bradley, and Oberlander 2014). By the February 2013 deadline for the establishment of exchanges, sixteen states and the District of Columbia had established state-based exchanges (four of which used the federal enrolment website on a transitional basis) and twenty states had defaulted to an entirely federally run exchange (although one operated a state exchange for small business). The remaining fourteen states took on various functions ranging from merely certifying participating insurers according to federal standards up to and including in-person consumer assistance, but they continued to rely on the federal government to perform the remaining functions, including enrolment through the federal website (Lucia, Dash, and Monahan 2013). These decisions were heavily politically

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conditioned. Of the twenty-six states that either refused to establish exchanges or took on only minimal plan-management functions, twentyfour had a Republican governor and two had a Democratic governor but a Republican-controlled legislature. (Utah, the state that chose to operate only an exchange for small business, had both a Republican governor and legislature.) Of the sixteen states that established exchanges, only four had a Republican governor and in only one (Idaho) did Republicans control both the state house and the legislature. Of the seven states that took on a broader range of functions within federal-state partnerships, five had a Democratic governor and two had a Republican governor. Over time, various states would assume or shed certain exchange-related functions, but these decisions continued to be shaped by partisanship (Béland, Rocco, and Waddan 2016). A second major piece of the Act – the expansion of Medicaid – also encountered sharp resistance at the state level. After the Supreme Court ruling relieved states of the penalty of the loss of existing federal funding for failing to expand their Medicaid programs to include all households with income up to 133 per cent of the federal poverty line, a number of states refused to expand their programs even with the inducement of federal funding of 90 per cent of the additional cost. By October 2016 nineteen states had chosen not to expand their programs, and seven more had agreed to expansion under federal waivers that allowed them to experiment with various private elements, such as income-scaled premiums and subsidized coverage through private insurers (Kaiser Family Foundation 2016a). These decisions were also heavily influenced by partisanship: of twenty-six states under unified Republican control of the legislature and the governorship, nineteen refused to expand their programs, while all ten states under unified Democratic control chose to do so (one under a waiver to experiment with program modifications) (Béland, Rocco, and Waddan 2016, fig. 4.1). Nonetheless other factors, such as “fiscal pragmatism, administrative capacity and policy trajectories” (Jacobs and Callaghan 2013, 1041) were in play: seven states under unified Republican control expanded their programs (four of those under waivers), and the remaining states with mixed partisanship split nine-to-five in favour of expansion. Implementation: Phasing and Deferrals As would be the case in the mosaic strategy followed by the British Co­ alition government over the 2010–12 period, the multiple compromises

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required to build a winning coalition for US health care reform included the phasing in of the effective dates of various provisions. A number of regulatory changes affecting those with existing insurance coverage – including limiting “rescissions” of coverage, providing for coverage of dependants up to age twenty-six, and limiting what insurers could charge in premium revenue to cover administrative costs – applied almost immediately upon passage of the Affordable Care Act, although, because primary responsibility for the regulation of insurance rests with the states, most of these had to be given effect by state governments. State action on the “early market reforms” varied considerably, but because these measures were broadly politically popular, most states adopted one or more of “a variety of formal and informal approaches to require or encourage compliance” (Keith, Lucia, and Corlette 2012, 2). The ACA’s major provisions, however – the mandate for individuals to carry health insurance, subsidies for those below a given income level, state-based exchanges, and Medicaid expansion – were not to come into effect until January 2014. In part this delay was required to allow state governments time to set up the necessary infrastructure. (As we shall see in Chapter 10, the centrepiece of the reform – the establishment of health insurance exchanges – proved much more politically and technologically fraught than the framers of the legislation had imagined.) In the recessionary fiscal climate of 2009, moreover, delaying the costs of the program to a presumably post-recovery date was necessary to satisfy enough fiscal conservatives that the reforms did not unduly threaten progress towards fiscal consolidation. Delays in certain provisions – such as the excise tax on high-cost employer plans (delayed until 2018) and the wrapping of hospitals under the purview of the Independent Payment Advisory Board (delayed until 2019)25 – were inserted as a result of compromises reached with the affected interests. As it turned out, a phased implementation would have been necessary even in buoyant fiscal circumstances. The multiple provisions of the legislation, targeted as they were at numerous gaps and niches in a complex public/private mix, placed enormous information requirements on those charged with implementing and complying with the Act and the various regulations under it. For example, enforcing the complicated employer mandate, although it affected proportionately few employers in the relevant category,26 meant linking employer payroll, individual income, and exchange-related administrative data in constantly shifting workplaces and labour markets, placing substantial reporting requirements on both employers and individuals, not to

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mention the administrative burden on regulators. At the beginning of July 2013, six months before the employer mandate was to come into effect, the Obama administration announced a one-year delay in its enforcement. This was one of a series of deferred deadlines adopted to allow for the development of the necessary information infrastructure or to deal with complications arising from the interrelated effects of the legislation’s numerous provisions. From January to July 2013 the administration announced a one-year delay or grace period for certain provisions affecting compliance by insurers using multiple benefits administrators, providing funding for states establishing “basic health plans” for individuals who did not qualify for Medicaid but could not find affordable subsidized coverage through an exchange, and requiring small business owners to offer their employees a choice of plans through the exchanges. Even a feature most central to the reform package – Obama’s oft-repeated assurance during the legislative process and thereafter that those who wished to keep their current coverage could do so – proved challenging to deliver. This undertaking collided with the provisions of the ACA establishing basic minimums for insurance plans that would meet the requirements of the individual mandate – effectively excluding the inexpensive bare-bones coverage currently carried by several million people. As insurers began cancelling these substandard policies, thus requiring beneficiaries to take out more expensive coverage, charges that the president had “lied” to secure passage of the legislation were rampant.27 Accordingly, in November 2013, the administration announced a “transitional policy” that encouraged state insurance commissioners to allow insurers to renew non-compliant polices for 2014 while the administration developed a longer-term solution to the problem. In all, the Obama administration took administrative action on more than twenty occasions between January 2013 and March 2015 to provide “significant” delays, extensions, exemptions, provisions for retroactive payments, and other deviations from the strict provisions of the ACA in order to smooth its implementation (Redhead and Kinzer 2015). Much controversy and debate surrounded the question of whether at least some of these measures should have been accomplished through legislative, rather than executive, action, although there were precedents for considering them within the scope of administrative discretion (Jost and Lazarus 2014). It is precisely the need to provide for contingencies in the legislative phasing of a complex plan that makes “blueprint” strategies so attractive.

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A blueprint strategy does not shackle implementers to a pre-ordained schedule: rather, it allows them to shape and enact program elements as they develop. In Chapter 8 we shall see how the original timetable envisaged in the Dutch blueprint for introducing a new comprehensive framework was adapted to the pace at which the requisite information technology (IT) and regulatory apparatus was being developed. Even in the Netherlands, shifts in the political landscape also affected the timeline of reform, and these theoretical advantages of blueprint strategies were not fully realized. But such a strategy was impossible in the United States from the outset: in the toxic political atmosphere, the Democrats knew that any significant legislative reopening would risk allowing the opposition to try to undo the entire package. Even more politically damaging implementation than the delays, however, was the botched launch of healthcare.gov, the federal portal for enrolment in federally facilitated exchanges. The government’s responsibilities in this respect proved to be more extensive than originally anticipated. By the deadline of 15 February 2013, twenty states had refused to comply with the requirements to establish health insurance exchanges and others had committed to take responsibility for only some features of exchanges, such as certification of qualifying insurers, thus requiring the federal government to establish and manage an exchange by default. The Obama administration is reported to have delayed development on exchanges in a number of states in the hope that they eventually would agree to establish their own exchanges – especially if the president was re-elected in 2012 (Goldstein and Eilperin 2013). In the end the federal government was responsible for at least some aspects of exchanges, including enrolment of beneficiaries, in all but sixteen states. The federal one-stop portal thus had to accommodate a very broad range of variation in private health insurance markets across the states – a range that was unknown until late in the development process – as well as erect strong privacy protections, given the highly sensitive nature of the personal information involved. In addition to these technical issues, it is arguable that tactical decisions made by the White House in an atmosphere of siege by Republican opponents contributed to the disastrous launch of the federal website, which prevented many visitors from enrolling. Although the technical problems were largely solved over the next two months, only about 30 per cent of the enrolment level initially projected by the CBO had been attained by the end of December 2013 – roughly 45 per cent of those who selected a plan had done so

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through a state-run exchange and 55 per cent through a federally facilitated exchange (Collins 2014). In response to these problems, the Obama administration announced delays of a month or more in certain elements of the timeline for enrolment, essentially by refraining from enforcing penalties for non-coverage (Redhead and Kinzer 2015, 1). Moreover the federal site was not the only one with a troubled launch: state-based exchanges in several states, including Hawaii, Maryland, Massachusetts, Minnesota, and Oregon, were also plagued with implementation problems. It was particularly ironic that the Massachusetts Connector, the very model for the federal plan, should experience difficulty redesigning its software to interface with the federal data hub. Despite all these difficulties and delays, by the time the enrolment deadline of 31 March 2014 arrived, 7.1 million individuals had selected an insurance plan through a health exchange – surpassing the original 7 million first-year enrolment originally projected by the CBO. Two weeks later President Obama announced that the number had reached 8 million – 28 per cent of whom were between eighteen and thirty-four years of age.28 Although it was not clear whether all of these individuals had yet paid their premiums to trigger the beginning of coverage, or how many previously had been uninsured, the Obama administration welcomed this level of take-up as an indication that the rocky launch was over and that the Affordable Care Act model was vindicated (Landler and Shear 2014). By and large the exchanges gained their footing, but in some parts of some states they struggled. The tax penalty for going without insurance proved less successful than anticipated in enforcing the individual mandate. Then, in autumn 2016, as the 2017 enrolment period approached, several large insurers announced they were leaving certain of the exchanges or dramatically raising premiums, arguing that the risk pools had become too heavily weighted to high-risk enrollees. The median premium increase for the Centers for Medicare & Medicaid Services “benchmark” plan – defined as the second-lowest-cost “silver” (mid-range in terms of benefits) plan in a county – in exchanges using the federal platform (that is, those not including the purely state-based exchanges) was 16 per cent; the average was 25 per cent, reflecting a few cases of very large increases. Although subsidies moderated the real effects of these increases, the “sticker shock” was substantial. Moreover about 20 per cent of consumers in these marketplaces faced a “choice” of only one insurer in 2017, up from only 2 per cent in 2016 (United States 2016a, 38). Similar problems had plagued the introduction of

246  Remaking Policy

private insurance options in Medicare under the George W. Bush administration, and had been dealt with through increased subsidies for both insurers and insurees, which ultimately stabilized the markets to such an extent that they continued to function after the Affordable Care Act’s reduction of these subsidies (Corlette and Hoadley 2016). In the face of intransigent Republican opposition in Congress, no such fix was available for the exchanges. The Republicans in Power The presidential and congressional elections of 2016 gave the Repub­ licans control of both the House and the Senate as well as the White House, putting them in a position to carry out their long-avowed intention to repeal the legislation. That position satisfied the two conditions – capacity and motive – for creating an opportunity for major change of some sort. It also set the stage for strategic judgments as to the scale and pace of that change. Because, as of the time of writing, the history of this case was still in progress, I have not mapped it onto Figure 1.3. Were I to do so, it would fall, as of September 2017, as a failed case to the right of the location for the ACA in the mosaic quadrant: similar in scale and more rapid in pace. The Republican leadership was motivated to act quickly: in the wake of a turbulent election that had deepened divisions within as well as between the two major parties, the sustainability of Republican control was in no way assured, and the Senate could be lost as early as the congressional elections of 2018. Trump had promised to move on “Day One” of his presidency to ask Congress to commence the process of repealing the ACA. Even before Trump’s inauguration, congressional Republicans took the first legislative steps towards repeal. Immediately after his inauguration, Trump’s nomination for secretary of health and human services was Tom Price, the congressman with arguably the longest history of devising alternatives to the ACA, dating from before its passage. Within hours of his inauguration Trump issued an executive order directing the various agencies charged with administering the ACA to “take all actions consistent with law to minimize the unwarranted economic and regulatory burdens of the Act, and prepare to afford the States more flexibility and control to create a more free and open healthcare market” (United States 2017.) But the question of the pace of change intersected with that of scale. Would the Act simply be repealed in a single comprehensive sweep?

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Or would it be necessary simultaneously to put a replacement in place? And if the latter, what should the replacement(s) be? On these questions the Republicans were divided, especially in the Senate. The Republicans were not bereft of ideas, and the various proposals that had emerged from senior Republican members of Congress and conservative think tanks by 2017 were in most cases no more different from each other than the various Democratic proposals had been in 2008. The leading contenders were the draft bill advocated in various iterations by Representative Tom Price through the Obama years (the Patient Protection Act), House Speaker Paul Ryan’s “Better Way” 2016 white paper, a proposal from Senator Orrin Hatch, chair of the Senate finance committee, and various options set out by think tanks such as the American Enterprise Institute. All of these would eliminate the individual and employer mandates and much of the regulation of private insurance under the ACA, and substitute various provisions to partially buffer the adverse-selection and cream-skimming problems that would resurface. Most would retain some level of subsidy, but replace the ACA’s income-scaled “advance premium tax credit” with others based on either income or age. Other options included health savings accounts and high-risk pools, and changes to regulatory requirements. Some, such as the Hatch and American Enterprise Institute proposals, would establish a default public plan with auto-enrolment and an optout provision for those not covered in any other manner. But, like the Democrats before them who had built Medicare reform into the ACA, the Republicans could not resist the opportunity of the legislative repeal project to realize long-held goals for the reform of established “entitlement” programs – in this case Medicaid. Leading Republicans at both the federal and state level, including President Trump, Tom Price, House Speaker Paul Ryan, and the governor of Ryan’s home state of Wisconsin, proposed to convert federal funding from a cost-shared arrangement to an indexed block grant, subject to various conditions and indexation formulas. At the state level, however, Republicans were wary of the reductions in federal funding implicit or explicit in these proposals. The twin needs for speed and for accommodating a variety of positions within their own ranks – let alone the need to come to terms with a sufficient number of Democrats to repeal and replace all of the ACA’s provisions – augured for a fast-paced, cobbled-together mosaic strategy. With their unified control of government and their commitment to immediate action, the Republicans were to some extent in a

248  Remaking Policy

strategic domain similar to that of the Democrats in 2009. But there were critical dissimilarities, which would drive differences in both tactics and outcome. First and foremost, the fundamental agendas were different: whereas the Democrats had been establishing a new program structure, the Republicans were seeking to dismantle it – a type of project in which conservative parties have been more successful through stealth than through overt legislative action, given opposition from beneficiaries among both providers and recipients (Pal and Weaver 2003; Pierson 1994). In 2009 Democrats had had to navigate internal divisions over the shape of their new program, but all of their options would have added benefits. The Republicans in contrast were wrestling with various degrees of reduction in benefits, as well as whether an outright repeal should precede any attempt at replacement. The effect of any and all of their proposals would be to reduce both the extent and the quality of coverage,29 and raised the risk (soon realized) that the Republicans would encounter grassroots protest as millions of individuals faced reduction or loss of coverage – a mirror image of the Tea Party protest against the Democrats’ proposals in the summer of 2009. Although public opinion remained polarized on “Obamacare” as an overall construct, almost all of its major provisions – including not only the popular features banning most risk-related underwriting practices, but also the Medicaid expansion, the marketplaces, and even the increase in the Medicare payroll tax on upper-income individuals – attracted strong majority support among both Democratic and Republican identifiers. Only the most-loathed symbol of government overreach – the individual mandate – attracted less than a majority. The employer mandate was supported by only 45 per cent of Republicans, but by 60 per cent overall (Kaiser Family Foundation 2016c). Meanwhile insurers themselves, as well as hospitals, pointed to the intricate bargains that had underlain their acquiescence to the ACA, and warned that time and care would be necessary to renegotiate those arrangements (Abelson 2016). Unlike in the other cases reviewed in this book, the Republican repeal agenda of benefit removal and reduction thus thrust them into a politics of blame-avoidance. In addition to this fundamental difference in agendas, the Republi­ cans were in an institutional and electoral position much weaker than that of the 2009–10 Democrats. Having won the presidency with less than a majority (46 per cent) of the popular vote – indeed even less than his rival Hillary Clinton’s 48 per cent – Donald Trump had a much weaker electoral mandate than Obama had enjoyed. Compounding the

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problem, Trump’s public approval ratings over the course of the six months between his inauguration and the August congressional recess were at historically low levels for an early presidency (Bycoffe, Mehta, and Silver 2017). Even more significant was the Republicans’ weak institutional position. With a filibuster-proof Senate majority for a crucial period in 2009–10, the Democrats had been able to assemble most of the pieces of the ACA under regular legislative order, and many of those provisions could therefore be undone only through regular order as well. With fifty-two seats in the Senate, the Republicans in 2017 were nowhere close to the number required to overcome a Democratic filibuster. They would have to craft their repeal legislation in a way that would pass through the budget reconciliation process – to which the Democrats had to resort only to reconcile the House and Senate versions of the legislation. These requirements essentially limited the Republicans to dealing with those elements of the legislation with fiscal implications (including the tax penalties necessary to enforce the mandates), while leaving much of the regulatory infrastructure beyond their reach. Technically, however, the key features of the ACA were so interrelated that dismantling them piecemeal threatened to sow chaos in the individual and small-group insurance market. Leaving bans on risk-related underwriting (preventing insurers from charging more to those with “pre-existing conditions”) in place without the mandates and sub­sidies necessary to spread the risk across a broader pool could drive that market into a death spiral as healthier individuals dropped out and premiums rose inexorably. Discussions at the closed annual policy retreat of the Republican House and Senate caucuses in Philadelphia at the end of January – an audio recording of which was obtained by the Washington Post – revealed widespread unease about the implications of following through on their repeal promises. Some attendees expressed concerns about “pulling the rug out from under” those with coverage gained under the ACA, or pulling a “bait-and-switch” with the states that had expanded Medicaid with federal funding. Others warned about the destabilizing effects on insurance markets of a partial repeal. Yet others worried about proposals to use the repeal legislation as a vehicle for other pet objectives such as defunding Planned Parenthood clinics – which included abortion among their services, although federal funds could not be used for those purposes (Pear and Kaplan 2017). These fundamental differences in agenda and institutional and electoral resources yielded markedly different tactics. The Democrats in 2009 worked to create a bandwagon effect to galvanize their caucus and

250  Remaking Policy

bring affected interests (and, they hoped, a few Republicans) on board. The Republicans’ tactic can be better described, using Weaver’s (1986, 2013) concept, as a blame-avoidance exercise of “circling the wagons,” in which party leaders “negotiate behind closed doors to try to strike a grand deal … which they then sell jointly to the public and to rankand-file legislators (‘circling the wagons’) as the best deal that is achievable—and better than no deal at all” (Weaver 2013, 6) and which is both “necessary and inevitable” (Pal and Weaver 2003, 29). Bandwagon and circling-the-wagons tactics have in common the creation of a sense of inevitability and “security in numbers.” But bandwagons are essentially “offensive” tactics allowing supporters to claim credit for shaping an outcome, whereas circling the wagons is a defensive tactic aimed at diffusing blame by providing group protection for taking an unpopular position. Accordingly the Republicans tried immediately to establish a sense of necessity and inevitability. In so doing they raised the stakes markedly, by adopting a legislative strategy in which repeal of the ACA would have to be accomplished before the next major piece of the Republican agenda, tax reform, could be acted upon. (Because Republican-style tax reform very likely would not attract support from Democrats, it would have to pass through budget reconciliation as well. Technically, the deficit-control requirements of budget reconciliation meant that the savings from repealing the ACA would have to be booked before the revenue losses from tax cuts could be adopted.) Therefore, as one of their first legislative acts in the 115th Congress, and even before Trump’s inauguration, the Republican majorities in both chambers adopted – on a straight party-line vote in the Senate and with very few Republican defections and no Democrat support in the House30 – a budget resolution with reconciliation instructions establishing the parameters for a partial repeal of the ACA. The resolution set a tight deadline of 27 January 2017 for the development of draft budget legislation, expected to set effective repeal dates for various sections of the Act – the first of many deadlines that would come and go while the Republicans continued to argue internally. To craft the legislation, the Republican House and Senate leadership adopted closed-door processes aimed at producing take-it-or-leaveit packages, again in marked contrast to the process through which the Affordable Care Act had been developed. As described above, the course of developing the ACA included both open and closed elements, and was brought to completion through processes closely held

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by the congressional and White House leadership, but at the outset it made full use of the committee structure in both houses and allowed for extensive debate both among Democrats and between Democrats and Republicans. It involved five different committees, three in the House and two in the Senate, as well as a Senate floor debate stretching over almost a month in November–December 2009. In contrast the Republicans in 2017 adopted a closed process very tightly managed by the House and Senate leadership from the beginning.31 As seen in other cases in this book, such closed processes are more typical of big bang processes aimed at developing a comprehensive architecture without having to incorporate piecemeal concerns. The Republican leadership, however, was attempting to build a minimum winning coalition by incorporating the disparate desires of their legislators through anticipation, not consultation, and to allow amendments only at the stage of floor debate. This sprinting pace and exclusive process was to prove counterproductive. In the House, Speaker Paul Ryan worked through February with the administration and Senate leadership to craft a bill drawing heavily on the “Better Way” outline, and held a series of closed-door meetings in which he offered to meet with any Republican member of the House who wished to see the draft legislation and provide feedback.32 The American Health Care Act was introduced into the House Ways and Means, Energy and Commerce, and Budget committees in early March. It repealed all of the ACA’s taxes, including those instituted as penalties to enforce the individual and employer mandates, and those intended to generate revenue. In place of the mandates, it provided other incentives for individuals to maintain “continuous coverage,” by instituting a 30 per cent premium surcharge for taking out insurance after a lapse of more than sixty-three days, and by allowing insurers to risk-rate applicants who had failed to maintain coverage. It changed the nature of the subsidies for individual purchasers, which would be based on age and capped at higher income levels, without reference to the cost of insurance in a given region, thus greatly simplifying the subsidy process but eliminating much of its redistributive progressivity. The contested subsidies to enable insurers to reduce cost-sharing requirements for lowerincome insurees would be eliminated. The bill would retain most of the ACA’s insurance regulation provisions, but allow a greater spread in the premiums charged younger and older insurees, and provide subsidies for slimmer plans (those covering only “catastrophic costs”) not eligible under the ACA. To deal with the worst of the effects of these

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changes on the availability of coverage for high-risk insurees, the bill provided some federal funding for state-based, high-risk pooling arrangements. Federal funding in support of Medicaid expansion would be phased out after 2020 and, in a major shift, federal funding across the entire Medicaid program would be in a type of block grant based on a capped amount per enrollee, allowing much more flexibility for the states in spending, but also leaving them fully at risk for increases at the margin. Generally, the effective dates of these provisions would be spread over the 2016–20 period, front-loading the tax cuts (indeed making the elimination of the taxes enforcing the mandates retroactive to 31 December 2015) and back-loading the changes related to subsidies and Medicaid. Finally, the bill contained a number of provisions for Republican signature items such as anti-abortion measures and liberalizing constraints on the use of health savings accounts. In short, the American Health Care Act was a less onerous and less generous, purely Republican mosaic to replace the purely Democratic mosaic of the Affordable Care Act. But it failed to find an optimal mix that could span the conservative and moderate wings of the Republican caucus, For the most conservative members, the bill retained too much of “Obamacare,” while more moderate members were disquieted by its implications for removing benefits and reducing federal funding to their home states. These concerns were augmented by Congressional Budget Office estimates and public opinion polling. The CBO estimated that the legislation would reduce the federal deficit by $337 billion over the 2017–26 period, largely as a result of reduced spending on subsidies and Medicaid, but would also lead to fourteen billion fewer insured individuals in 2018, rising to twenty-one billion by 2020 and twenty-three billion by 2026. In a highly influential Quinnipiac University national poll released on 23 March, the day before a scheduled House vote, 56 per cent of respondents disapproved of the bill, while 17 per cent approved. Even among Republicans, only a plurality of 41 per cent approved, against 24 per cent disapproval. Forty-six per cent indicated they would be less likely to vote for a representative who voted in favour of the legislation, against 19 per cent who would be moved to vote for a supporter of the bill.33 The floor vote scheduled for 24 March was aborted when at least thirty-three Republicans, spanning the ideological spectrum of the caucus (Andrews, Bloch, and Park 2017), indicated that they would vote no. Ryan pulled the bill from consideration and embarked on a month-long process of closed negotiations with individuals and small groups within

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the Republican caucus to build support. The most substantive of the amendments added to secure ultimate passage were variously designed to appeal to the conservative and moderate wings of the Republican caucus. For the conservatives, provisions were added allowing a state to waive various insurance regulations – including the “continuous coverage” provisions and the requirement that all insurers offer packages covering a set of “essential benefits” – if the state could demonstrate that it had alternative ways of insuring high-risk insurees. For the moderates, funding for state pools for high-risk insurees was increased by $8 billion. Replicating the Democrats’ tactic of geographically targeting certain miscellaneous measures in order to build the legislative coalition for the original Affordable Care Act, Ryan included a provision aimed at winning the support of wavering Republican representatives from upstate New York, preventing the state government from requiring any localities other than New York City to contribute to Medicaid funding – a tactic quickly tagged the “Buffalo Bribe.” These amendments to the legislation barely succeeded in overcoming the unease of enough Republicans to achieve passage. Ryan brought the bill back to the House on 4 May, and it passed narrowly on the same day on a vote of 217–213, with no Democrat support and twenty Republicans opposed. The Senate process was even more streamlined than that in the House. Initial signals were that the Senate would draft its own legislation from scratch. Majority Leader Mitch McConnell bypassed the committee process entirely, instead writing the legislation in his own office advised by a working group of thirteen senators, including himself as chair, the three other senior members of the Republican Senate leadership, the chairs of the Health, Finance, and Budget committees, and six other members. The group’s ideological centre of gravity was similar to that of the Senate Republican caucus as a whole, but the inclusion of two of the most conservative senators (Ted Cruz and Mike Lee) and the exclusion of the most moderate (Susan Collins and Lisa Murkowski) suggested that McConnell was seeking to deal with the conservative and moderate wings of his caucus by co-opting the former and counting on the reluctance of the latter to oppose legislation presented as a “necessary and inevitable” step towards moving on with the rest of the Republican agenda. In response to criticisms of the closed process, McConnell announced that any senator who wished to drop in to a meeting of the group was welcome – rather similar to Ryan’s open invitation to House Republicans in February.

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On 22 June McConnell made public the text of his proposed legislation, the Better Care Reconciliation Act (BCRA), aiming to have it passed by 30 June, before the Senate recessed for ten days. The BCRA was broadly similar to the House bill – eliminating the tax penalties for the mandates and all other ACA taxes, allowing states more flexibility in insurance regulation, phasing out Medicaid expansion funding and establishing a per enrollee cap for federal funding across the entire program, and establishing various funds aimed at filling some of the gaps that these provisions would leave for high-risk insurees and Medicaid recipients. But there were a few differences. The Senate bill would retain the structure of premium tax credits in the ACA, basing the subsidies on income and local costs of plans, but also adding an age factor and reducing both the generosity of the subsidies and their span along the income scale. The Senate bill had no “continuous coverage” requirements, and would not allow risk-related underwriting, but would allow states to modify the list of “essential benefits” that insurers were required to cover. It also established effective dates for various provisions that differed from the timelines in the House bill. Not surprisingly, given the basic similarity of the two pieces of legislation, McConnell’s bill met with a response similar to that which had initially greeted Ryan’s bill in the House: conservatives opposed it as too close to the ACA model; moderates worried about its impact on coverage. The Congressional Budget Office assessed that it would increase the number of uninsured by twenty-two million by 2026, only one million fewer than the House bill. It would also reduce premiums, but for coverage so skimpy that it would not be worth purchasing for those at higher risk or lower income levels. Within days of the bill’s unveiling, at least eleven Republican senators expressed concerns about it, and the Senate recessed without acting on it. After the recess, McConnell brought back a revised discussion draft with two significant amendments. To respond to the concerns of moderates about the politically toxic implications of simultaneously cutting taxes for the wealthy and removing benefits from those on low incomes, one amendment left in place the ACA’s taxes on upper incomes. For conservatives, the other amendment, by Senator Ted Cruz, allowed insurers to operate outside the regulated and subsidized marketplaces to offer much slimmer plans. Even so, four senators – two moderates, one centrist, and one conservative – rejected that draft. These Senate defections illustrated a fundamental risk with circlingthe-wagons tactics: they will work, as noted by Weaver (1986, 389),

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“only if near-unanimity can be maintained.” Each defection erodes the sense of inevitability and therefore increases the risk that more defections will follow. But even with the growth in power of congressional party leadership, Congress – especially the Senate – lacks the party discipline necessary to enforce sanctions against defectors, which is much more characteristic of Westminster systems. Thus McConnell was facing a Catch-22: he needed to create a sense of inevitability to maintain unanimity, but unanimity was necessary in order to maintain a sense of inevitability. To break out of this dilemma, he had to rely on conveying the “necessity” of passing the legislation in order to move on to the rest of the Republican agenda. He strove to get to a floor vote that would yield enough support to pass some legislation that would serve as the basis for further negotiation with the House at the conference stage, which would then return to both houses for passage as “the best deal that [was] achievable – and better than no deal at all” (to recall Weaver’s [2013, 6] terms). He therefore announced that he would seek a vote on a motion to proceed with health care legislation, but for days it was unclear what that legislation would be. Matters were further complicated when the Senate parliamentarian ruled, as might have been expected, that thirteen provisions of the BCRA, including those relating to state waivers for insurance regulation, fell outside the rules of the reconciliation process and would require sixty votes for passage. In this context McConnell adopted one last desperate tactic resulting in a veritable caricature of a mosaic strategy of rapid pace and piecemeal cobbling. He would use the House-passed American Health Care Act as a legislative shell, its contents to be revised and replaced on the Senate floor over twenty hours of debate, with the express goal of creating a bill that could attract a bare minimum winning coalition of fifty Republican senators with the vice president casting the tie-breaking vote. That bill would then go to a conference with the House to create a final compromise that would return to each house for final passage, and clear the way for the rest of the Republican agenda. McConnell won the vote on the motion to proceed, but only by his bare minimum coalition. But that was the last victory. Three different pieces of legislation to amend the House bill went down to defeat. The BCRA failed 43–57 on a procedural vote, attracting not even a simple majority, let alone the sixty votes it required to proceed. The Obamacare Repeal and Reconciliation Act – which Obama had vetoed after its December 2015 passage – was introduced to give conservatives the opportunity to register their support for this option, but failed 45–55, thus

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demonstrating that without the shelter of a veto it could not attract sufficiently broad Republican support. Finally, the night before the final day of voting, McConnell presented a last-ditch eight-page Health Care Freedom Act. Dubbed a “skinny repeal,” it would have repealed only the penalties enforcing the mandates, and require, rather than permit, the relevant federal agencies to approve state waivers under the conditions specified in the Affordable Care Act. Other provisions included banning payments to Planned Parenthood clinics for a year and liberalizing health savings accounts. With the express purpose of getting to a conference negotiation with the House, the Republican leadership announced its willingness to include whatever other provisions were needed to get to fifty votes. Accordingly, as one Republican senator put it, they began to work “down the laundry list of things we can agree on” (Pat Roberts, quoted in Caldwell 2017). The fatal flaw with this tactic was that, in order to agree to pass the bill as a vehicle to get to conference but not to have it become law, senators had to trust that the House would cooperate and not seize the opportunity simply to pass the bill and declare victory with some version of “repeal.” The House leadership expressed its desire to go to conference, but could not offer a guarantee. The bill then failed in the Senate in a dramatic 51–49 vote. During the August recess and through September, efforts continued along two tracks. One track was bipartisan, as key Republican and Democratic senators began to express openness to finding a solution, and Lamar Alexander, chair of the Senate Health, Education, Labor, and Pensions Committee, held hearings and worked with the committee’s ranking Democrat, Patty Murray, on legislative measures to stabilize the ACA marketplaces. The other track was strictly partisan, as two Republican senators, Lindsay Graham and Bill Cassidy, promoted a plan to convert funding under the ACA to block grants to the states, to ramp that funding down sharply and eliminate it entirely by 2026, and to cap Medicaid funding as in earlier proposals. As the expiry of the reconciliation provisions loomed with the end of the fiscal year on September 30, the bipartisan effort was suppressed as McConnell threw his support behind the Graham-Cassidy bill, and the desperate flurry of behind-the-scenes activity intensified. The bill, initially somewhat more coherent than earlier proposals, was serially revised with changes designed to win the votes of particular senators. This effort too nonetheless foundered on the declared opposition of at least three senators, and the bill was not brought to a vote. While asserting that they had not

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given up on ACA repeal, Senate leaders announced their intention to move on to the next major legislative priority, tax reform. In the event, tax reform, passed in December 2017 under budget reconciliation with no Democratic support, provided the vehicle for achieving one element of the Republicans’ ACA repeal agenda – the elimination of the tax penalty enforcing the individual mandate. By tying this provision to a sweeping set of tax changes yet more central to their broader agenda, the Republican leadership secured the support of even the three Republican senators who had blocked the “skinny repeal” bill. Senator Susan Collins, however, extracted leadership commitments to support bipartisan legislation aimed at stabilizing ACA exchange markets, thus setting up the next congressional contest. In any event, the neutering of the mandate would now test the logic that deemed it essential to the functioning of the subsidized private market. Finally, no account of this episode can ignore the role of Donald Trump as president, providing a negative demonstration of the importance of presidential engagement to success in US health care reform. Trump adopted the Republican ACA repeal crusade as a signature campaign plank and his first legislative priority. But unlike the tax code, with which Trump had some experience as a property developer, health policy was unknown territory for him, and his engagement throughout was erratic and ill-informed. Obama made only one significant shift over the course of his campaign and early presidency: from opposing to supporting an individual mandate. Throughout the repeal attempt, Trump vacillated, often within days, in advocating at least four different strategies: outright repeal; repeal with simultaneous replacement; allowing the ACA exchanges to “implode” to drive Democrats to negotiate; or simply signing whatever legislation the Republican Congress could agree upon.34 The repeal effort was left essentially to the congressional leadership, with Trump alternately cajoling, criticizing, and threatening recalcitrant legislators. As the contested politics of health reform continued, much would depend on the fate of the turbulent Trump presidency. Conclusion: Process and Substance

Process: Multiple mosaics The Affordable Care Act was a product of its time, but also the product of determined leadership. In a polarized context in which they enjoyed

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extraordinary but precarious electoral and institutional advantages, Democratic leaders judged they had a short time in which to fashion a package that would satisfy enough marginal supporters to create a winning coalition. Accordingly the legislation was crafted through a strategy of multiple mosaics – made, remade, assembled, disassembled, and reassembled in the space of a year. In addition to the multiple consultations held by the Democratic leadership in Congress and the administration with affected interests, the legislative process comprised 79 hearings involving 181 witnesses in the House and “approximately 100 hearings, roundtables, walkthroughs and other meetings [as well as] after 25 consecutive days [of debate] in continuous session” in the Senate (Jost 2017b).35 The final result was a complex and ultimately entirely Democratic amalgam formally comprising a Patient Protection and Affordable Care Act with more than four hundred sections, a budget reconciliation act with thirty-eight sections relating to health care reform, and a four-section executive order. The single-party provenance of the legislation should not mask the challenges of building a Democratic coalition in a context in which the differences among Democrats regarding specific policy elements were greater than those among Republicans (Rigby et al. 2014). The process that led to its passage exemplifies the importance of individual agents occupying pivotal institutional positions – the president, the speaker of the House, and the Senate majority leader in particular – who separately and collectively made strategic judgments about the scale and pace of change that were feasible in the circumstances, and drove the reforms forward accordingly. Notwithstanding the sprawling nature of the legislative process, it was closely managed, especially towards the end, by the leadership (Cannan 2013). The comparison and contrast between Pelosi and Reid is especially illustrative. Pelosi was in a stronger position institutionally: House procedure gave her the levers of control of the debate, in contrast to the Senate’s empowerment of individual senators to bring forward amendments of their choosing. The Democrats’ seventy-five-vote margin in the House also gave Pelosi more leeway to manoeuvre: as Jacobs and Skocpol note, she could ensure the passage of bills while still losing a number of Democrats, whereas Reid had not a single vote in his caucus to spare in hitting the sixty-vote threshold (Jacobs and Skocpol 2010, 61). These differences in institutional resources might have been reinforced by personal characteristics: Pelosi’s passionate liberalism versus Reid’s pragmatic centrism. Pelosi’s unrelenting commitment throughout the

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process, and especially in the wake of the Scott Brown victory, has been a matter of much commentary; Reid’s will is reported to have flagged briefly along the way (Washington Post Staff 2010, 43). Yet it was the exercise of judgment and negotiating skill of both leaders that, within the institutional constraints of their respective chambers, navigated towards the ultimate passage of the legislation.36 Ultimately, however, it was the will of President Obama, determined to invest huge stocks of political capital so as not to let an historic opportunity slip by, that set and stayed the course of reform. Although he has been criticized for not taking a stronger hand during the March– December 2009 period of congressional deliberations, deferring too long to Congress, and in particular clinging too long to the doomed hope of bipartisanship, it was Obama who set the initial parameters of reform and who re-energized the final drive to enactment.

Substance: A new logic of complementarity Assessing the scale of the Affordable Care Act reforms within the analytic framework of this book yields the following appraisal. They amounted to a modest increase in the influence of the state in the health care arena: they left the employer-based system in place as the modal form of health care coverage, although the regulation of private insurance was tightened, and large employers now faced a form of mandate to cover their workers. The health insurance exchanges were the most significant institutional change, but they were far from the muscular regional health alliances that had been proposed in the doomed Clinton plan sixteen years earlier. In contrast to the mandatory Clintonian alliances covering all but the largest employers, participation in the exchanges was voluntary for employers as well as individuals, and they were targeted at only about 10 per cent of insurance coverage at any given time – those with neither employer-based nor government coverage. The Congressional Budget Office estimated that about 24 million people would be covered through the exchanges by 2019, 16 million of whom would previously have lacked insurance (United States 2010, table 4). (By 2017, in the context of the uncertainty generated by Republican attempts to repeal the legislation, exchange enrolment trends, at an estimated 10.3 million, lagged markedly the CBO projection of 23 million [Centers for Medicare and Medicaid Services 2017].) Indeed the different treatment of the health exchanges and the Clinton-era regional alliances by the CBO underscores the difference in authority between

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the two types of agency. Because the regional alliances would collect premium revenue and distribute it to insurers on a risk-adjusted basis, the CBO scored the revenues of the alliances as government receipts. Conversely the risk-adjustment mechanism under the ACA envisaged transfers between insurers with lower-risk pools to insurers with higher-risk pools, which would net to zero. Because insurers would collect their own premium revenue, while the federal government’s involvement was only at the margin to administer the risk-adjustment transfers among insurers, the CBO considered the premium revenue to be private (United States 1994, 2010).37 A similar-scale material increase in the presence of the state in the health care arena under the Affordable Care Act related to the expansion of a long-established program, Medicaid. Newly eligible beneficiaries numbered about 11.2 million, or 15 per cent of Medicaid coverage by March 2016 (Kaiser Family Foundation 2016d). (Another 3.3 million were newly enrolled, although they would have been eligible previously.) Again, these numbers lagged the original CBO projection of 16 million (United States 2010, table 4), given the refusal of nineteen states to participate. Although the expansion was the largest since the establishment of the program, it was part of an ongoing evolution whereby Medicaid was becoming a more and more significant part of what Colleen Grogan has called “America’s hidden national health system” (Grogan in progress). As John McDonough describes it, although Medicaid was a “policy afterthought” at the time of its enactment – covering principally recipients of the then Aid to Families with Dependent Children program – this “unheralded stepchild of the US health care system” had “become the nation’s biggest health program” even before the passage of the ACA (2011, 141, 152). Similarly the regulatory tightening under the ACA, as well as the individual and employer mandates, represented an increase in the weight of hierarchy in the US health care arena, but the material effect of these changes was relatively modest. Unlike the Clinton plan the ACA exempted employers with fewer than fifty full-time employees from the employer mandate, and almost all employers to whom the mandate applied already offered their employees coverage. As for the individual mandate, the tax penalty for not having health insurance proved inadequate to induce sufficient numbers of healthy individuals to comply in some states, at least by the time the 2016 elections reshaped the political landscape. As for the regulation of private insurance, the effect of the

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Act was to fill in existing gaps by universalizing existing provisions in state-level regulation and employer-based insurance contracts. With the important exception of the Medicaid expansion – itself dependent on state adoption – the thrust of the reforms was to work at the margins to channel private finance and harness the private market towards the public objectives of improving the security and extending the accessibility of private insurance. In this sense it exemplified the agenda of “reconstituting the submerged state” that Suzanne Mettler (2010) has described as characterizing the approach of the Obama administration to taxation and higher education policy, as well as to health care. Similarly the employer mandate continued a particular aspect of the submerged state: a pattern of “delegated governance” that has characterized much of US health care policy (Morgan and Campbell 2011a, 2011b). These various material effects of the Affordable Care Act touched almost every part of the health care system, but did so in most cases in marginal ways. Despite their multiplicity these changes filled gaps in the existing system without changing its broad institutional structure. Together they extended at the margins the security and the accessibility of health insurance. Even the “universal” individual mandate contained a number of exemptions. Taking these exemptions as well as previous experience in Massachusetts into account, the Congressional Budget Office estimated that the legislation would raise the level of coverage to 94 per cent of the population by 2019 from 83 per cent in 2010 (United States 2010, 9). By 2016 the number of uninsured people had declined by 20 million, somewhat less than the originally projected 23 million (United States 2017). Indeed the mandate appeared to have less effect on the nongroup market than anticipated by its designers (Frean, Gruber, and Sommers 2016). Because these changes were widespread throughout the system and required detailed specification in the statute and in the voluminous reg­ ulations that flowed and would continue to flow under it, the overall impression was of a massive reform. This complexity and bulk presented great challenges in winning public acceptance, even though particular provisions of the legislation were broadly popular in themselves. A similar dynamic had characterized the highly complex (and much more sweeping) Clinton legislation fifteen years earlier, with public support falling from almost 60 per cent to 43 per cent within seven months of Clinton’s unveiling the plan in September 1993 (Brodie et al. 2010). It

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was nonetheless hypothesized that, as individuals began to experience the benefits of the reforms, support would increase. This expectation was modestly borne out: as shown in Figure 6.1, the proportion of those favouring the legislation relative to those opposed declined from a peak immediately after its passage to a trough after the botched launch of the healthcare.gov website in October 2013, but then recovered as the benefits of the legislation were experienced. When the legislation came under its first serious threat with the Republican repeal effort after the 2016 election, support returned close to its earlier highs. Nonetheless, opinion remained sharply divided along partisan lines throughout: among Democrats, those favouring the ACA exceeded those opposed by almost 50 percentage points on average in monthly polls from April 2010 to July 2017; among Republicans, opponents outweighed supporters by 63 percentage points (calculated from data in Kaiser Family Foundation 2017). Related to this partisan division, attitudes to the legislation as a whole were driven even more by perceptions of its collective impact than by personal considerations (Richardson and Konisky 2013). And indeed it was in its implications for the understanding of the collectivity that the reform arguably had its greatest significance. Together the provisions of the Affordable Care Act increased the weight of influence of the state in the health care arena, elaborating the role of the shadow state and expanding the residual state. The material effect was to rechannel the allocation of resources in the marginal ways described above. It was on the ideational plane, however – in its impact on fundamental organizing principles – that the shift in logic brought about by the ACA was greatest. The change in organizing principles was twofold: one relating to the rights and obligations of citizenship, the other to the legitimate functions of government. Under the new logic of complementarity, health care coverage was based not only on individual decisions, but also on collective considerations enforced by the state. Health care insurance was no longer a good like any other that individuals might choose to forego with impunity and that employers of a certain size might or might not choose to provide their employees. To some extent the enforcing of an employer mandate is consistent with government’s traditional role as delegator in the US shadow state. But an individual mandate was a more significant change: it altered fundamental premises about the responsibility of individuals to the collective and about the function of the state. The individual mandate made having health care coverage not only a

The US Mosaic: 2009−10  263 Figure 6.1. Net Favourability of Affordable Care Act in Public Opinion, April 2010–July 2017 (per cent favourable minus per cent unfavourable)

Source: Author’s calculations using data from Kaiser Family Foundation 2017.

right, but also an obligation of membership in the polity, exercised not through the payment of taxes in support of a universal program but through the purchase of private insurance. The function of the state was also altered: not only was the state a regulator of private insurance, a delegator of responsibilities to various private actors, and a funder of public programs (including public subsidies for the purchase of private insurance); it was now also an enforcer of mandatory coverage and a major participant a market segment to facilitate the fulfilment of that mandate. It is not surprising that tests of the constitutionality and legitimacy of this shift in organizing principles formed the core of the existential challenges to the ACA. The centrality of the individual mandate to the legal challenge in National Federation of Independent Business v. Sebelius, and the fact that the fate of the ACA hung on a court interpretation of the mandate’s constitutionality, underscored the change in organizational principles involved. The legitimacy of the mandate never commanded majority support in public opinion. It was the only item on their repeal agenda for which the Republican Senate leadership could rally sufficient Republican votes, albeit through the vehicle of tax reform. In other nations that have adopted individual mandates, such as the Netherlands and Germany, the change essentially codified practices

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and expectations grounded in the solidaristic elements of political culture. In the United States such grounding was much less firm and the shift much more controversial. The idea of requiring individuals to hold health insurance coverage arose on the political right as a pragmatic response to problems of adverse selection in insurance markets, and tended to be associated with other elements favouring a more active role for individuals and households in the selection of their own coverage. As late as the passage of the Massachusetts legislation in 2006, conservative policy analysts continued to endorse the individual mandate as one option in the design of overall policy packages (Haislmaier and Owcharenko 2006). Even its early conservative advocates, however, made moral arguments about social responsibility as well. One of the earliest proponents, Stuart Butler of the Heritage Foundation, made the case for an individual mandate as a matter of individual responsibility in the context of an “an implicit contract between households and society” under which the moral obligation of society to ensure “insure that its citizens do not suffer from the unavailability of health care” is matched by an obligation of each household “to the extent it is able, to avoid placing demands on society by protecting itself” (Butler 1989, 6). No institution other than the state, of course, can enforce this social contract by penalizing individuals and households that do not acquire health insurance. Early conservative proposals, like the later Democratic versions, sought to minimize the need for negative sanctions by providing various inducements and subsidies. Nonetheless the mandate implied a new function for the state as enforcer of this requirement on individuals. In the polarized partisan context of the Obama reforms, Republicans increasingly seized upon this shift to treat it as exemplifying a Democratic agenda for an overreaching state, and most of the earlier conservative proponents of the idea began to recant. Butler and the Heritage Foundation filed amicus briefs opposing the mandate in the Supreme Court case, and Butler (2012) himself publicly set out his change of view. It was one of the many ironies of this episode that the ideational significance of the reforms was highlighted not by their champions but by their opponents. Some commentators have pointed to the alleged failure – which might or might not have been deliberate – of any of the leading Democrats, most especially Obama, to articulate a compelling, coherent, values-based, overarching rationale for the reforms, as opposed to the cogent justifications that were offered for each of the constitutive elements. Marmor argues that “one of the most striking

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features of [the American health care reform debate of 2008–10] is how little attention was paid to general philosophical principles and what particular conception of social justice the reform was meant to serve” (2011, 567). With regard to the Medicaid expansion, McDonough notes that “Congress has enacted the most thorough revamping of Medicaid in its history, and there was no Democratic senator who articulated a vision – or even just an explanation – of what was being done and why” (2011, 141). Ironically the bitter partisan clashes around the Affordable Care Act served to turn opinion not only against the legislation itself, as shown in Figure 6.1, but also to undermine the belief that government had a role in ensuring health care coverage. Prior to the introduction of the legislation, annual polls from September 2000 to November 2008 found majority support (58–64 per cent) for the view that “the federal government has a responsibility to make sure that all Americans have health care coverage.” From November 2009 to February 2014, the balance of opinion tipped towards opposition to this view (Pew Research Center 2017). Granted, the very complexity of the mosaic presented an enormous challenge of public communication – a problem we will see again in England in the next chapter. And yet it is arguably with regard to the changes in organizing principles that the ACA will have its deepest effect. As Larry Jacobs argues, “the ACA creates a new foundation and set of expectations that anchor insurance in the rights of citizenship” (Lawrence Jacobs 2011, 627). Over time it is public experience of the changed policy framework that would or would not embed this new logic in the US health care state. Marmor offers the following insight, drawing on observation of other nations: “While mass publics may not initially grasp the moral implications of reform, over time, experiential knowledge can often shift mass opinion in favour of the moral justifications originally offered by political leaders. That is the important lesson for the Obama administration. Having neglected a clear account of why universal health insurance was justified, the administration must now offer that account postenactment” (Marmor 2011, 570). In the absence of such post hoc justification and of experience with many of the legislation’s provisions, the complexity of the package continued to present great challenges of public acceptability over the protracted period of implementation. But once the health care exchanges and Medicaid expansion had been in effect for two years, opinion began to turn. Not only did support for the ACA increase; the belief in a federal government

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responsibility to ensure universal health coverage returned to the 60 per cent level it had enjoyed prior to 2009 (Pew Research Center 2017). (Again. however, this landscape of opinion was fractured by sharp partisan divisions.) Moreover, by the time the Republicans gained control of government in 2017, the practical interweaving of many strands of the reforms into the health care system meant that various elements were likely to survive. But the fundamental ideational shift towards grounding access to health care in citizenship obligations and responsibilities had not been fully accomplished. The effective elimination of the individual mandate shifted the formal structure of the system back to that of the residual/shadow state – albeit on considerably more generous terms than prior to the ACA. Whether a future government could re-institute an effective ethos of universality remained an open question.

Chapter Seven

The English Mosaic, 2010–12: Evolution in Revolutionary Clothing

The reform process that culminated in the passage of Britain’s Health and Social Care Act of 2012 presents a puzzle. Westminster government and the centralized structure of the National Health Service – albeit with new instruments of central control – would not seem to invite or to require the piece-by-piece assembling of support that characterizes a mosaic strategy of health care reform. And yet a mosaic strategy was just what unfolded as the Coalition government elected in 2010 set about putting its own stamp on the NHS. The leaders of this unexpected and unprecedented coalition found themselves in uncharted waters, and needed to craft a compromise between independent positions on key priorities within a very short time. We can thus understand this result as the product of strategic decisions within a domain of choice analogous to that of the Democrats in the United States a year earlier, even in a very different institutional context. The Window: A Historic Coalition After three decades of extraordinary political stability, divided between long stretches in office across successive mandates for the Con­ servatives (1979–97) and Labour (1997–2010), the general election of 2010 produced a widely anticipated distribution of votes but a highly atypical result. As anticipated, no single party won a majority of seats, resulting in what the British call a “hung” Parliament. What was not anticipated, however, was that a coalition between the Conservative and Liberal Democrat parties would result. Whether or not these developments marked the emergence of a more fragmented and volatile electorate for the longer term, there is no doubt that the election “pushed

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British politics on to uncharted terrain and raised fundamental questions about its future” (Geddes and Tonge 2010, 866; see also Cowley, Hay, and Heffernan 2011) and will have “a significant place in the history books” (Kavanaugh and Cowley 2010, 330).

Electoral and institutional resources: Coalition arithmetic, centrist ideology, and centralized leadership The Conservative Party won 305 seats, Labour 258, the Liberal Demo­ crats 57, and a mix of other very small parties a total of 23.1 These results yielded two possibilities. First, one of the two largest parties – presumably the party with the plurality of seats, the Conservatives – could seek to govern as a minority government, either cobbling together votes on an issue-by-issue basis or reaching agreement with another party or parties for support on matters of “confidence and supply” to keep the government from defeat. Minority governments are not uncommon in Westminster systems, and in some cases – such as Canada’s three minority governments at the federal level from 2004 to 2011 – they have lasted for two or more years. In the United Kingdom, however, minority governments are less common and less stable – the only example in the post–Second World War period was the brief Labour minority government in 1974. The second possibility was a formal coalition of two or more parties to form a majority government, which would be unprecedented in modern British history. In the first half of the twentieth century, coalition governments including members of all major parties had been formed in response to the national crises of war and economic depression.2 Several of these governments involved interparty electoral pacts and intra-party splits, in a period in which the British party system was in flux. Since the Second World War, however, there had been no example of coalition. Not since the mid-nineteenth century had a coalition been formed in the immediate aftermath of an election yielding a hung Parliament (Kavanaugh and Cowley 2010, 330). And at no time in history, at the UK level, had there been an example of two major parties combining in their entirety in a coalition to form a majority government against the opposition of a third major party. (There had, however, been Labour/Liberal Democrat Coalition governments in Wales and Scotland in the new legislative assemblies established after 1999, and coalitions, including of Conservatives and Liberal Democrats, were common at the municipal level.)

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Nonetheless, immediately after the election, both the Conservatives and Labour began courting the Liberal Democrats as potential coalition partners. Despite the expectations of many observers and the preferences of their rank-and-file members, it soon became clear that the Liberal Democrats would join with the Conservatives in a coalition. This result, though unexpected, is less surprising than it appeared to a number of observers at the time (Bale 2011). Two necessary conditions, together sufficient, were met. First, it was a “minimum winning coalition” in that it satisfied the parliamentary arithmetic, getting to a substantial majority of seats with the fewest parties (Bale 2011; Fox 2010; Lees 2011; Stuart 2011). The Liberal Democrats and the Conservatives together held 362 seats (later 363), far surpassing the majority threshold of 323.3 Without the Liberal Democrats, the Conservatives would have needed at least three of the small parties to form even a razor-thin majority. The Liberal Democrat/Labour total was 315, similarly requiring support from at least three other small parties to get to a majority.4 Ideological compatibility Beyond the numbers, however, an emerging ideological intersection between the Conservatives and the Liberal Democrats, at least at the elite level, met the further requirement that it be a “minimum connected coalition” – that the parties were sufficiently compatible ideologically that neither would form a competing alliance with a party outside the coalition.5 At first blush this could be seen as a surprising result: the Liberal Democrats were widely viewed, both within and outside the party itself, as on balance ideologically closer to Labour than to the Conservatives,6 and according to one survey the day before the election, Liberal Democrat supporters preferred “working together” with Labour as opposed to the Conservatives in the event of a hung Parliament by a margin of 40 per cent to 22 per cent (Duffy, Mortimore, and Coombs 2010, 45). After all the party itself was the result of a 1988 merger of Liberals and a group of Labour moderates who had split from their party in 1981 to form the Social Democratic Party. On a left-right economic dimension, the election manifesto of the Liberal Democrats remained closer to Labour’s than to the Conservatives’, and the 2010 manifesto was no exception. Nonetheless ideological shifts within each party had moved the Conservative and Liberal Democrat manifestos much closer to each other on economic issues in 2010 than they had ever been (Debus 2011).7 Furthermore, and more significant for what was to transpire on health care, the Conservatives’ embrace

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of decentralization in their 2010 manifesto positioned the party closer to the Liberal Democrats in that regard than was Labour’s stance. Taking both the economic and the centralization-decentralization dimensions into account, the Conservatives could be seen as closer to the Liberal Democrats in this two-dimensional ideological space in 2010 than was Labour. Both leaders, David Cameron of the Conservatives and Nick Clegg of the Liberal Democrats, represented a new generation in their respective parties, and both had won their position by advocating a fresh approach after a series of failed leaders drawn largely from an old guard. Each had championed a shift of his party towards the centre, or more accurately a turn from party orthodoxy towards a more pragmatic “modernization” (Beech 2009; Hayton 2012). Indeed the leadership victories of these two men represented “a growing political convergence between the elites of their two parties over the period since 2005” (Baldini 2012, 8). Cameron’s leadership win in 2005 represented a victory for the party’s “modernizing” wing (Kavanaugh and Cowley 2010, 69–72). He had positioned himself as a “liberal” Conservative, and made appeals to social justice a strong theme. Importantly, however, what he meant by “liberalism” was an emphasis on individual liberty, which he married with a Conservative embrace of social responsibility. In a widely noted speech in 2007, fifteen months after winning the leadership, Cameron laid out his vision of a “liberal Conservative consensus,” and explicitly appealed to “Liberal and Conservative supporters [to] rally together behind an alternative government-in-waiting” (Cameron 2007). He subsequently elaborated this vision through the concept of a “Big Society,” addressing social ills such as poverty and inequality not so much through direct state action as by “using the state to remake society,” by “empowering and enabling individuals, families and communities to take control of their lives so we create the avenues through which responsibility and opportunity can develop” (Cameron 2009). These themes resonated with the localist strain of Liberal Democrat ideology, with long historical roots tracing back to its Liberal progenitor. They also meshed with what Grayson calls the “centre-right, smallstate liberalism [that] for much of the history of the Liberal Party, and then the Liberal Democrats, … has been able to coexist happily with centre-left social liberalism” (2010b). That centre-right strain had been strengthened under the leadership of Nick Clegg, who had identified himself with the so-called Orange Book – a volume of essays by

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leading Liberal Democrats, including Clegg (then not yet leader) in 2004. Although, as Grayson notes, much of the Orange Book was “in line with party orthodoxy,” it did contain a number of market-oriented proposals – especially in the health care arena, as discussed below – and touched off a fierce intra-party debate (Lee 2011b, 8). A subsequent volume, Reinventing the State, was published in response in 2007, largely representing the left wing of the party, but also including contributions from two “Orange-bookers,” Clegg and Chris Huhne, both of whom contested for the party leadership that year. The principal common ground between these rival tomes was an emphasis on reforming the state to make public services “locally and democratically accountable” (Lee 2011b, 8). The mechanisms for doing so differed sharply, however, with the Orange Book emphasizing individual choice and Reinventing the State championing local authority. If arithmetic favoured a Conservative/Liberal Democrat coalition, and ideological convergence made it possible, the key to understanding the formation of the coalition is nonetheless the extent to which it was leadership-driven. As Baldini puts it: “The Tories and Lib Dems, who had often fiercely contested elections, formed an unprecedented alliance pushed by their respective leaders, after days of negotiations. David Cameron and Nick Clegg both dragged their respective parties closer together than in the recent past … and tied their fates to a new ‘liberal-conservative’ coalition” (2012, 1). Centralized leadership In addition to the ideological turns they represented within their parties, Cameron and Clegg significantly centralized their respective leadership structures. In the case of the Liberal Democrats, the famously decentralized structures of internal democracy, embodying the commitment to local authority that marked their policy positions more generally, had been becoming somewhat more centralized and “professionalized,” especially after Clegg’s accession to the leadership in 2007 (Evans and Sanderson-Nash 2011, 463–5; Morrissey 2013; Sanderson-Nash 2012). At the same time the ideological tensions that had always existed in the party were coalescing into identifiable factions, (although they rejected that characterization), with their rival publications, the Orange Book and Reinventing the State. A group of social liberals associated with the latter volume subsequently mobilized as the Social Liberal Forum (SLF), and succeeded in electing a number of members to the party’s Federal Policy Committee in 2008. A smaller countermobilization developed on

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the right as “Liberal Vision” and “Progressive Vision”: each, like the SLF, with a web presence (Sanderson-Nash 2012, 14). The semi-annual conference of the UK-wide party was marked by a tension between the mobilization of factions and an increasing degree of “leadership-loyalty” under Clegg (Grayson 2010a, 10).8 Both of these trends – centralization and factionalism – would have important consequences for the formation of the Coalition government and the health care reform process. A similar pattern of centralization prevailed on the Conservative side. Indeed Cameron was considerably less constrained by established internal party structures than was Clegg. Moreover his leadership win had been based on the perception that he had the electoral appeal to return the party to government after its extended exile, and he had been able to translate that personal asset into a fairly broad scope of discretion. In opposition Cameron, together with his shadow chancellor George Osborne, had run a “top-down party [in which] many key decisions were made in informal discussions among Cameron and his close colleagues” (Kavanaugh and Cowley 2010, 90–1). Nonetheless the Conservatives were not without their own factions. The Tory right, organized into various groups such as the ’92 Group, Cornerstone, and No Turning Back, remained uneasy with Cameron’s centrist thrust; and several of Cameron’s policies in opposition (on Europe and education, for example) represented attempts to accommodate these factions and the streams of thought they represented (Bale and Sanderson-Nash 2011, 240; Kavanaugh and Cowley 2010, 73–5). The process of entering into coalition allowed each leader to consolidate the centralizing trends of their respective leaderships. Empirical evidence suggests that, in coalition government settings, party discipline enhances the likelihood that a party will be among the participants in the coalition (Bäck 2009). Both Cameron and Clegg were able to use the prospect of entering government to bring into line the recalcitrant wings of their parties – the Tory right and the Liberal Democratic left. The prospect of participating in government for the first time ever as the Liberal Democratic party (and for the first time in 70 years for the “Liberal” strain within it) proved a powerful incentive for the party to allow Clegg and a small team of negotiators to craft a Coalition Agreement with their Conservative counterparts. In fact, unlike either the Conservatives or Labour, the Liberal Democrats had prepared for coalition negotiations well in advance of the election. In addition to their election preparation and manifesto teams, they established a team to plan for interparty negotiations after the election. A small group of

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key actors within the party leadership was central to the interlocking membership structure of this election-preparation apparatus. The negotiation-preparation group remained in place to conduct the negotiations with both Labour and the Conservatives after the election. Three of its members – Danny Alexander, Chris Huhne, and David Laws – were among the four Liberal Democrats who, in addition to Clegg, would take cabinet positions in the new Coalition government.9 For the Conservatives, the chance to form a government after a long period in opposition also provided a strong incentive for the party to defer to its leadership: the attainment of the long-sought goal required not only that the party afford Cameron and his close coterie the scope to negotiate with the Liberal Democrats, but also that it accept Cameron’s shift of the centre of political gravity to a position closer to that of the Liberal Democrats (Debus 2011). Although there were certainly contrary views among Conservatives as to the overall wisdom of a coalition with the Liberal Democrats (let alone regarding the content of a coalition agreement), those views were “excluded from the negotiating team and from [Cameron’s] thinking” (Kavanaugh and Cowley 2010, 223). As in the case of the Liberal Democrats, the Conservative negotiating team was composed of central players in the party leadership. Unlike the Liberal Democrat team, however, the Conservative team was formed after the election, comprising people who would play key roles in the ensuing government: Oliver Letwin, George Osborne, Edward Llewellyn, and William Hague. Letwin was to become minister of state in the Cabinet Office and to form, with Danny Alexander, one of the pivots around which the structure of the Coalition government would turn. Osborne, arguably the second-most-powerful figure in the Conservative Party, was to become chancellor. Llewellyn was Cameron’s chief of staff, and had the added advantage of a long-standing friendship with Nick Clegg (Kavanaugh and Cowley 2010, 207). Hague, though not part of this inner circle, was a former leader of the party and, as foreign secretary, would become the third-ranked member (after the prime minister and deputy prime minister) of the new cabinet. Putting it together: The Coalition Agreement and cabinet formation The Coalition Agreement reached by the two teams was an amalgam of the election manifestos of the parties. There has been much journalistic and scholarly parsing of the agreement to gauge the degree to which each party won or lost in this process. By and large the Conservatives

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were in the stronger negotiating position. Debus (2011) argues that the Conservatives would have had the upper hand in any coalition negotiation in 2010, not only because of their plurality of seats, but equally because of their centrist repositioning in ideological space under Cameron. This meant that the Conservatives plausibly could have attempted to govern as a minority, building “legislative coalitions” on an issue-by-issue basis and retaining the confidence of the House of Commons (Quinn, Bara, and Bartle 2011). To participate in government, then, the Liberal Democrats needed the Conservatives more than the Conservatives needed the Liberal Democrats. Nevertheless only a mutual agreement could give the Conservatives stability to pursue an agenda over several years. A key provision of the Coalition Agreement was an undertaking that the Coalition government would remain in place for five years. On the basis of a straightforward analysis of its contents, the Coali­ tion Agreement was closer to the Liberal Democrats’ manifesto than to the Conservatives’ on the balance of left-right issues, which took up about half the agreement (Quinn, Bara, and Bartle 2011). This surprising aggregate result, however, needs to be tempered by a more finely grained analysis. In fact the Coalition Agreement tilted sharply to the right on taxation and deficit reduction, and to the left on issues related to public services, such as the NHS, education, services for the elderly, and social care. Moreover an analysis that simply aggregates left-right scores of individual statements cannot take account of the weight or importance of each statement. Notably the Coalition Agreement can be seen as having met most of the demands of the Liberal Democrats, while subordinating the entire agreement to the overall goal of deficit reduction: “The deficit reduction programme takes precedence over any of the other measures in this agreement and the speed of implementation of any measures that have a cost to the public finances will depend on decisions to be made in the Comprehensive Spending Review” (United Kingdom 2010a, 35; also cited in Quinn, Bara, and Bartle 2011, 305). Once the agreement was reached, it still had to clear the hurdle of a “triple-lock” approval process established by the Liberal Democrats in 1998 for any proposal affecting the independence of the party. Any such proposal required a double supermajority of the parliamentary party caucus and the Federal Executive: three-quarters of each body had to approve. Failing that, the proposal required a two-thirds majority approval at a special conference – and failing that, it would have to secure the consent of a majority all party members (Fox 2010, 614). In

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the event the Coalition Agreement passed the test at the first stage, as negotiated and without amendment. A special conference of the party to approve the agreement nonetheless was called on 16 May 2012, five days after the fact – while negotiations to flesh out its provisions into a “Program for Government” were under way. Although the agreement secured near-unanimous approval, there were indications of ambivalence and omens of future problems: the conference also passed a number of resolutions reaffirming the party’s commitment to various planks in its manifesto that were at odds with the Conservative manifesto: on tuition fees, proportional representation, and human rights. A former leader, Charles Kennedy, abstained from the vote (Curtis 2010). On the Conservative side the Coalition Agreement had fewer institutional hurdles to clear, reflecting the party’s less formalized decisionmaking structures. As Kavanaugh and Cowley report, the process of negotiating the agreement had been “driven by a handful of Cameron’s close confidants … involving the Shadow Cabinet and the Parliamen­ tary Party only sporadically and only when the leadership needed it” (2010, 215). Both the shadow cabinet and the parliamentary party, for example, were consulted on whether to agree to the Liberal Democrats’ bottom-line demand to hold a referendum on electoral reform on an alternative vote model.10 The final Coalition Agreement was not even submitted to either the shadow cabinet or the parliamentary party for approval (221). The next step in the coalition negotiations was the allocation of ministerial portfolios. Following European practice, portfolios were allocated in rough proportion to the seats won by each party. The portfolio-­ allocation negotiations were even more closely held than had been the case for the Coalition Agreement. Cameron and Clegg were the key negotiators, advised on the Conservative side by three members of the Coalition Agreement negotiating team (Osborne, Hague, and Llewellyn) and on the Liberal Democrat side only by Danny Alexander. In the event the Liberal Democrats did slightly better than their 16 per cent share of seats would suggest, taking 22 per cent of the cabinet-level posts and 17 per cent of the junior posts (Debus 2011, 229–300; Yong 2012, 42–3). Again, however, it is necessary to get beyond these aggregate proportions to look at which portfolios each party managed to secure. Ten of the eleven classically important portfolios went to the Conservatives; the only exception was the deputy prime ministership, which went to Clegg – and Clegg also took control of political and constitutional reform matters, including the electoral reform issue

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so important to the Liberal Democrats (Debus 2011, 300; Yong 2012, 44–5). The Liberal Democrats also secured junior positions as ministers of state in most portfolios, laying the groundwork for Conservative/ Liberal Democrat working relationships across the government. Perhaps most notable of all was a fact little remarked upon at the time: the Conservatives needed a margin of seventeen votes to obtain a working majority in the House of Commons, so by putting twenty-two Liberal Democrats in ministerial positions, the likelihood that this threshold would be reached routinely was greatly enhanced (Fox 2010, 617–18). To understand the process of decision-making in the new government, which was so strongly to shape the course of health policy, it is necessary to appreciate both its formal and informal dimensions. The formal structure involved a resurrection of cabinet as a forum for “strategic and general policy discussions, as well as resolving the frequent differences which arise between Whitehall departments when addressing difficult policy problems” (Hazell 2012, 53–5). This revival was heavily influenced by a determination not to follow the practice of “sofa government” under Blair – the informal bilateral discussions between Blair and key secretaries of state that undermined the cabinet process (50, 59). This formal structure was not the venue for negotiations between the Coalition partners, however, which were dealt with instead through an informal structure that flowed from the process by which the Coalition itself was formed. The key Coalition negotiators – Cameron, Clegg, Osborne, Alexander, and Letwin, supported by the chiefs of staff and senior Cabinet Office officials dedicated to the two leaders – continued to form the central axis of strategy development. This informal structure, linking individuals who had developed a high degree of trust, obviated the need for the more formal structures for resolving Coalition disputes that had been established at the outset. A special Coalition Committee of cabinet – comprising five Conservative and five Liberal Democrat ministers, including the prime minister and the deputy prime minister – was established to deal with issues to be resolved between the Coalition partners. In fact the Coalition Committee rarely met, as the normal cabinet processes asserted themselves. Furthermore the integration of the Coalition partners in each department meant that few disagreements between the parties developed at that level (Hazell 2011, 6). Together these formal and informal structures meant that issues of overall strategic relevance to the Coalition were closely held at the central level, while policy in particular arenas was largely hammered out

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at the departmental level, subject only to the constraint of having to resolve issues that touched upon responsibilities in other departments through the cabinet process. As we shall see, this pattern was to yield unforeseen results in the development of health care reform. As in the case of the US mosaic, then, electoral and institutional developments gave the British party leaders the tools to drive their preferred strategies. Also like their US Democratic counterparts, however, the Coalition leaders would have to strike a number of agreements to accommodate recalcitrant factions within their respective parties as the process unfolded. An unprecedented Coalition was to yield an extraordinary result.

Political will: The unexpected emergence of health care reform There was nothing in the manifesto of either the Conservatives or the Liberal Democrats to suggest that health care reform would emerge as a major priority of the new Coalition government. As is typical of elections in mature health care states, health care ranked high among voters’ priorities, in this case second only to the management of the economy (Duffy, Mortimore, and Coombs 2010, 28). This high priority, however, did not reflect any sense of crisis. And although Labour was seen as having a better policy position on health care by a plurality of those for whom the issue was important (31), there was little to differentiate the manifestos of the three major parties on health care issues (Timmins 2012, 40–1). All parties sought to demonstrate their commitment to the NHS. Cameron, in particular, had worked hard to “detoxify” the Conservatives’ image on the NHS. The Conservative manifesto pledged that, “as the party of the NHS we will never change the idea at its heart, that health care is free at the point of use and available to everyone, regardless of ability to pay,” and went beyond either of the other two parties by pledging that a Conservative government would increase spending in real terms in each year of the new Parliament, while reducing “the cost of NHS administration” by a third (Conservative Party 2010, 45–6). The Liberal Democrats, without explicitly promising not to reduce spending on the NHS, similarly proposed to reallocate funding from administration to the “front line” and, like the Conservatives, to abolish Labour’s “centralized targets” (Liberal Democrats 2010, 40–4). Accordingly, as Timmins reports, in contrast to the 1997 election, “health barely featured [in the 2010 campaign], either from day to day or in the three great televised debates between the party leaders” (2012, 48).

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Nonetheless, lurking in the manifestos of both the Conservatives and the Liberal Democrats were proposals for the structure of the NHS that were to have far-reaching implications. The political will to take on NHS reform emerged not as part of an election strategy but as a central element of a strategy of government formation after the election. Each of the Coalition partners was determined to snatch victory from the jaws of a disappointing electoral result. Cameron had failed to win a majority government. Clegg, having soared in popularity after impressive performances in the leaders’ debates, had seen his party’s vote rise by only 1 per cent and its seat share actually fall from the 2005 election result (Cutts, Fieldhouse, and Russell 2010). Together the two leaders sought to change the perception of these dispiriting results by presenting their new government as a historic and bold venture with “the potential for era-changing, convention-challenging, radical reform” (United Kingdom 2010a, 7). The Coalition’s Programme for Government, in Lee’s apt words, “ventured a series of very bold and ambitious claims, which sought to demonstrate that their partnership was born of genuine political conviction rather than an expedient marriage of convenience” (2011b, 13; see also Fox 2010, 608; Stuart 2011, 48). Such an agenda could hardly remain silent on the crown jewel of the British welfare state, the NHS. So although the NHS rated only a brief mention in the Coalition Agreement, health care policy was swept up in the broader Coalition project, in the process becoming one of its central priorities (Lee 2011b, 14). In the leaders’ foreword to the Program for Government issued eight days later, NHS reform was accorded greater prominence and more specific treatment than any other single policy sector, occupying the full penultimate paragraph of the document as a leading example of how “a combination of our parties’ best ideas and attitudes has produced a programme for government that is more radical and comprehensive than our individual manifestos” (United Kingdom 2010a, 8). The Strategy of Pace and Scale: Boldness in Uncharted Waters Immediately after forming the government, the Coalition partners sought to present a public face that was simultaneously bold and reassuring. Their promise of “era-changing, convention-challenging, radical reform” signalled that the Coalition’s policies, at least as a matter of presentation, would be on a grand scale. At the same time the desire to

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offer public assurance of governmental stability and firmness of direction drove a rapid pace towards forming the government.

Pace: An electoral expiry date In European nations in which coalition governments are the norm, coalition negotiations typically proceed for weeks or even months before a government can be formed – the average in seventeen western European countries from 1945 to 1999 was twenty-three days (De Winter and Dumont 2008, 130).11 Such a European-style pace would have been highly unsettling, however, in the Westminster context in which normal practice is for the new government to be formed promptly after the election.12 Within four days of the 6 May election, therefore, media commentary was already growing restive. As Fox reports: By [the evening of 10 May], when it became clear that a deal had not been struck, there was some disquiet, particularly in the media, about the length of time it might take to reach an agreement … If the negotiations were protracted there was real concern that at some point an impatient media would turn against the negotiators. Conservative and Liberal Democrat party members – parliamentarians and activists alike – had also been remarkably disciplined and control of each party’s ‘message’ throughout the talks had been very tight. However, both sides recognised that this would not continue indefinitely. (2010, 613)

On 12 May the Conservatives and Liberal Democrats announced their interim Coalition Agreement, followed eight days later, on 20 May, by a more detailed Programme for Government. The Coalition Agreement established a key condition for the development of the government’s strategic approach to policy: both parties agreed to establish a fixed five-year term for the new Parliament, and for all Parliaments after that as a matter of course. The agreement provided that a motion would be laid before Parliament establishing the date of the next election in May 2015; and following that, legislation establishing a fixed five-year term for Parliament would be introduced. In the event the actual implementation of this agreement through the legislative process was contested, difficult, and protracted, and the final legislation was not in place until September 2011 (Hazell 2012, 162–4). But in the immediate aftermath of the election, the effect of this provision was to establish a five-year time horizon for Coalition strategy. In fact the effective horizon for joint

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action was closer: each party knew that, as the 2015 election approached, it would have to establish competitive distance from its Coalition partner. This sense of urgency was reinforced by “negative learning” from Tony Blair, who lamented that he had “wasted” his first mandate in not moving boldly enough on public sector reform (Timmins 2012, 43–4). With this framework in place, what Lee (2011b, 15) terms the “frenetic pace” of policy-making continued, with the publication on 22 June of an emergency budget setting out austerity targets; the launching of a full governmental spending review, which reported on 20 October; and the publication of White Papers on the reform of the NHS (on 12 July), welfare (on 30 July), and schools (on 24 November). As Timmins notes, the White Paper on NHS reform was “produced far faster than any previous health white paper, in a record sixty days after the Coalition government was formed” (2012, 12). In an assessment of this strategy at the time, Lees notes that the rapid pace reflected the need to get “early runs on the board” and to embark immediately upon policy changes that could be delivered within the Coalition’s agreed five-year mandate: [T]he scale and timing of the Chancellor’s budget savings do indicate a desire to hit the ground running, as does the speed (some might say haste) of reform in other areas such as education and health …. [W]hen the Cameron government’s policy programme is taken in the round and examined in the context of the coalition’s desire to introduce five-year fixed term parliaments, what becomes obvious is that it is based around a limited number of clear policy objectives that are achievable within one electoral cycle and where it is assumed that the benefits anticipated from them will become apparent before the government has to once again face the voters. (Lees 2011, 285)

Scale: Ambition in austerity The scale of change outlined by the Programme for Government was dramatic – in the words of Timmins, the “most ambitious programme for government since the Attlee administration of 1945” (2012, 43). It proposed to revamp each of the key pillars of the welfare state – the NHS, schools, and welfare – as well as make substantial changes in financial regulation and the fiscal footprint of the state. In some cases the proposals effectively accelerated the trajectory of policy change under Labour, especially in the Blair years. The education proposals built on

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Labour’s “academy school” model and, as we shall see, the proposals for NHS reform continued on a course established under Blair – who in turn had built on the internal market introduced by Thatcher. But in one important respect the massive scale of policy change was unambiguous: the Coalition’s austerity agenda launched “a fiscal retrenchment far more ambitious than anything attempted by any British government since 1945,” including the Thatcher governments of the 1980s (Lee 2011b, 20–1). Thatcher had reduced total government spending as a percentage of GDP from 45.1 per cent to 39.2 per cent over the eleven fiscal years from 1978/79 to 1989/90, but the Coalition intended to reduce government spending from 47.3 per cent to 41.0 per cent of GDP in just four years, from 2010/11 to 2014/15 (Lee 2011a, 63).13 With regard specifically to the health care arena, the spending review in October 2010 spared the NHS the deep cuts imposed on all other ­departments except International Development and Work and Pen­ sions (which administered social assistance benefits). Nonetheless NHS spending (on programs, administration, and capital) was set to increase in real terms by only 0.4 per cent over the full four-fiscal-year period from 2011/12 to 2014/15 – a drastic contraction after the average annual real growth rate of about 4 per cent in the five years prior (and the 8 per cent levels of the early 2000s) that had flowed from Blair’s 2001 pledge to bring public spending on health care to the “European average.” Even before the election, it had been widely anticipated that these levels would contract sharply after 2011, when commitments made by Labour would expire. In 2009, in what came to be known as the “Nicholson challenge,” the NHS chief executive, Sir David Nicholson, had estimated in his annual report that after 2011 the NHS should “plan on the assumption that we will need to release unprecedented levels of efficiency savings between 2011 and 2014 – between £15 billion and £20 billion across the service over the three years” (NHS Chief Executive 2009, 47). The spending review made it clear that this plan would have to be realized. If the ambitions of the Coalition leadership were comparable to those of Attlee and Thatcher, their circumstances were very different. Attlee and Thatcher commanded large single-party parliamentary majorities, but the Coalition’s proposals would have to be enacted by a majority comprising two mutually suspicious parties. Internal divisions within each party, moreover, were exacerbated by these mutual suspicions, with the Tory right and the Liberal Democratic left always alert to undue concessions. The two leaders may have centralized the

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processes whereby party policy was developed, but the actual enactment of legislation was to be a different matter. Both party caucuses remained factionalized. The first session of the new Parliament (the session in which health care reform was enacted) was to see more backbench “rebellions” against the government – when at least one backbench MP voted against a piece of government legislation – than had occurred in any other session in UK history, and “more than seven times what had until [2012] been the post-war peak for a first session after a change of government” (Cowley and Stuart 2012). Any proposed change had to  navigate this inter- and intra-party minefield. The circumstances were thus ripe for mosaic policy strategies: large packages built of multiple compromises. The Strategy Unfolds: Accelerated Incrementalism and Unintended Consequences Having signalled bold reform, and under the pressure of a rapid timeline, the Coalition partners needed policies that could be taken essentially off the shelf and forged into a comprehensive agenda. They adopted a two-track process. At the centre, Letwin and Alexander cobbled together the Programme for Government from the two party manifestos and from work each party had done in opposition. In specific policy areas the leader turned to the ministers of key portfolios, almost all of whom were Conservative, to press forward with the policy proposals they had developed. Andrew Lansley had been shadow health secretary for six years, and had been intimately engaged in the development of an opposition “White Paper” issued in 2007. Iain Duncan Smith, after stepping down as party leader in 2003, had established the Centre for Social Justice, which became the vehicle for developing Conservative policy on welfare after Cameron became leader in 2005, outlining proposed reforms in policy documents published in 2006 and 2007 (Driver 2011, 107). Michael Gove, as shadow education secretary from 2007 to 2010, had developed a “Green Paper” building on the “academy schools” initiative introduced under Blair. Given Cameron’s predilection for functioning as “chairman of the board,” rather than as CEO in the prime minister’s role (Timmins 2012, 46), each of these trusted colleagues was to be given broad discretion in developing policy in their respective areas, within the overall framework of the Programme for Government developed by Letwin and Alexander.

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The Programme for Government The Programme for Government marked the first of the multiple accommodations of different interests that were to result in the NHS reform mosaic, and it put the first pieces of the design into play. Both Letwin and Alexander were policy “gurus” within their respective parties, but neither had detailed knowledge of health care (Timmins 2012, 47). Their project in crafting the Programme for Government, in health care as in other policy areas, was to take positions already developed by their two parties and combine them to produce the scaffolding of a coherent design. In the process a framework began to take shape that was “neither quite of either party nor internally consistent” (Waller and Yong 2012, 178). The two parties had in common a decentralist ethos. Agreement on “decentralization,” however, masked differences over the appropriate roles of the market and of local democracy – a phenomenon we shall encounter again in the Netherlands in Chapter 8. The Liberal Democrat manifesto had proposed to replace Primary Care Trusts (PCTs) with locally elected health boards to commission services (Liberal Democrats 2010, 42–3); the Conservatives had emphasized the importance of choice for patients, of “strengthen[ing] the power of GPs as patients’ expert guides” (Conservative Party 2010, 46). Both parties had pledged to reduce administrative costs by eliminating unnecessary layers of bureaucracy, with the Liberal Democrats explicitly targeting Strategic Health Authorities for elimination (Liberal Democrats 2010, 41). Waller and Yong estimate that roughly two-thirds of the NHS section of the Programme for Government could be traced to the Conservatives – either the election manifesto or earlier policy documents – and onethird to the Liberal Democrats (2012, 178). From the Conservatives came an emphasis on strengthening the role of GPs as commissioners of service, the establishment of the NHS executive as an arm’s-length board independent of the Department of Health, and the commitment to “give every patient the power to choose any healthcare provider that meets NHS standards, within NHS prices” (United Kingdom 2010a, 26). From the Liberal Democrats came a restructuring of the PCTs, whose boards were to be a mix of directly elected members and appointees of the secretary of state. The Programme for Government’s thirty NHS-related proposals left considerable ambiguity, however, especially regarding the scope and mechanisms of GP commissioning,

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whether or not it was to be compulsory, and what the residual role of the PCTs was to be. (The Programme proposed that the trusts would be a patient “champion,” would “commission those residual services that are best undertaken at a wider level, rather than directly by GPs,” and would take increased responsibility for public health [United Kingdom 2010a, 25].) Although the framers of the Programme for Government might have found common ground, their product was to prove unworkable. Timmins’s assessment is colourful and blunt: “The result of their deliberations on the NHS … was, according to taste, ‘a spatchcocked mess’; a neat synthesis of the two parties’ opposing philosophies (markets versus democracy); or, as one Number 10 insider has put it ‘a cut and shut’ job (the process where the good back half of a crashed car is welded to the good front half of another wreck to produce a vehicle that may look roadworthy but is in fact potentially lethal). Or as another Number 10 insider describes the outcome, with the benefit of hindsight, a ‘half horse/half donkey’” (2012, 47). Those with close knowledge of the health care system, who would be charged with fleshing out and implementing the proposals, essentially had no input into the Programme for Government. Andrew Lansley had developed detailed plans during his six years as shadow health secretary, and had published them as an opposition “White Paper” in 2007. Immediately upon taking up the post of health secretary, he began to work with officials in the Department of Health to draft a true government White Paper incorporating his earlier ideas. In fact, as I discuss further below, these ideas were highly consistent with market-oriented policy directions developed under Blair and before that under Thatcher, which had gone dormant under Brown. Timmins quotes a senior official to the effect that his colleagues in the department saw “Lansley’s arrival and his determination to complete this agenda [as] ‘their moment in the sun. They had been waiting for this forever really’” (2012, 51). Lansley and the departmental officials were effectively excluded, however, from the Programme for Government process, as was Paul Burstow, the Liberal Democrat minister of state of health. Lansley was afforded only an opportunity to comment on a draft of the NHS section of the Programme, and even then his comments and proposed amendments were “studiously ignored” (Timmins 2012, 49). Departmental officials were not consulted at all (Waller and Yong 2012, 178). The rapid and closely held process allowed for only cursory review by other departments or even by the Treasury. David Laws, the Liberal Democrat

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who briefly served as chief secretary to the treasury during the process, reviewed the document only with an eye to spending commitments, not to broad policy directions (Timmins 2012, 49). Letwin and Alexander might have believed that their compromise was artful and innovative, but it contained the elements of its own undoing.

The White Paper and the Health and Social Care Bill The process of unravelling the Programme for Government’s commitments on the NHS and reknitting a set of proposals that would lead to legislation began as soon as the Programme was published. Its adoption marked a shift in the patterns of policy-making in the new government. From a phase of centralization in the innermost core of Coalition leadership – the “Quad” of Cameron, Clegg, Osborne, and Alexander, augmented by Letwin as the Conservative policy guru (Hazell 2012, 58; Timmins 2012, 43) – policy-making shifted to what was to become the Coalition norm: a return to processes of cabinet government in which detailed policy development was undertaken in the relevant departments under the leadership of the secretary, and the resulting proposal taken through the regular processes of discussion in the relevant cab­ inet committee(s) and then to full cabinet as necessary (Hazell 2012, 53–4, 58–9). It is remarkable that what was to become such a contentious piece of legislation as the Health and Social Care Act passed through these cabinet processes essentially as it was developed by Lansley and Department of Health officials, to encounter serious opposition only when it reached Parliament. This puzzle can be explained as the result of two characteristics of decision-making in the new government. First, consider the transition in process that occurred as the Coalition reform proposals for the NHS, schools, and welfare passed from the core leadership of the Quad to the next of the concentric circles of leadership: the individual secretaries of state. In this next phase, extraordinary deference was accorded to a few leading secretaries who had been developing detailed knowledge of particular policy areas while in opposition, and who arrived in government with fairly full-fledged policy proposals in mind. Michael Gove on education and Iain Duncan Smith on welfare reform were two such ministers, but no one fit the description more aptly than did Andrew Lansley, with his plans for the NHS. Lansley’s 2007 opposition “White Paper,” “NHS Autonomy and Accountability,” provided the working outline as he and his officials

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developed their reform proposals. This paper had signalled key policy directions: strengthening GP commissioning – giving GP commissioners hard budgets, as fundholders had once enjoyed; creating an independent board to govern the NHS; encouraging competition among providers under an independent economic regulator; and allowing NHS commissioners and patients to choose “any willing provider” – that is, any provider from either the public or private sector – of a service. In each of these respects “NHS Autonomy and Accountability” built on policies established under Blair and, in one instance, bruited under Brown. Under Blair, GP commissioning had been resurrected in the form of “practice-based commissioning” – albeit with notional, not real, budgets, continuing their status as advisory to their respective PCTs. Similarly under Blair, an independent regulator (Monitor) had been established to oversee the financial viability of independent Foundation Trust hospitals and first PCTs, and then patients had been granted the ability to choose “any willing provider” (public or private) of a growing range elective services. Even the concept of an independent governing board for the NHS had been floated by Brown. The 2007 Conservative document departed from Labour policy in at least one important respect, however: it would embed much more in legislation, beyond the discretion of any given health secretary, than had been the case under Labour. Indeed the subtitle of Lansley’s “White Paper” was “Proposals for Legislation.” Lansley had been frustrated by the pattern of policy cycling he had observed, and wanted to hardwire a coherent framework that would then run in “clockwork” fashion without political intervention (Timmins 2012, 34). Timmins quotes him at some length on the thinking behind this signal: What we were setting out to do was recognizing that while there had been many efforts at health service reform, many of which had the right components, they were partial. They were, in the literal sense half-baked. And they ended up never getting baked at all. For example, fundholding ended up where 50% were and 50% weren’t. You had Labour doing choice and competition and then Andy Burnham coming along and doing preferred provider. There was never a consistent programme of reform carried through over a period of time … [B]ecause of the nature of the [existing] legislation, you change the secretary of state and you can change the policy on virtually everything in the NHS … What I set out to do was entrench a consistent and coherent structure of reforms so that

The English Mosaic: 2010−12  287 the NHS would be able to take a more autonomous long-term view of their own role ... [knowing] that things would not change just at the behest of a change of secretary of state, or even more a change of government. (Timmins 2012, 34–5).

If “NHS Autonomy and Accountability” had signalled the direction of change the Conservatives sought, it nonetheless left some crucial questions unanswered. Notably, beyond giving GPs hard budgets, just what did strengthening the role of GPs as commissioners imply? What would be the scope of GP commissioning, and how would GP commissioners relate to Primary Care Trusts? And what would be the role of the secretary of state for health vis-à-vis the NHS in a world with an independent NHS governing board? The eventual answers to these questions were to take Lansley’s reform project from the realm of the unremarkable to the status of flashpoint for major controversy. Yet these very answers emerged not as points of principle, but as by-products of the attempt to fill in and make coherent a mosaic emerging from the pastiche of the Conservative and Liberal Democrat manifestos and the accommodation of multiple interests as the reform project proceeded. Lansley and his Department of Health officials produced, in rapid succession, a government White Paper, Equity and Excellence: Liberating the NHS, on 12 July 210, four consultation documents describing various aspects of the proposals in greater detail over the course of the following two weeks, three more consultation documents in September and October, a response to the consultations, including draft legislation, in December, and finally a Health and Social Care Bill introduced into Parliament in January 2011. And that was just regarding reforms to the NHS: Lansley and the department also produced a White Paper on public health and a “vision” document, billed as a first step towards a White Paper, on social care in November 2010. This frenzy of activity illustrates the second characteristic of the new government that accounted for the limited opposition to the reforms within cabinet: the sheer pace of decision-making and the attendant competing demands for the attention of senior members of government. The NHS reforms occasioned one of only two meetings of the Coalition Committee of cabinet in the first eighteen months of the new government (Seldon and Snowdon 2016, 183; Waller and Yong 2012, 179). The meeting, called in July 2010 to discuss Lansley’s draft White Paper, was brought about, at least ostensibly, by the fact that the abolition of PCTs

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had not been envisioned in the Programme for Government. Lansley presented the proposals in detail at that meeting, and was met by initial scepticism and misgivings on the part of the attendees. Nonetheless Cameron and Clegg supported the release of the White Paper, and by the time cabinet considered the issue, the proposals had gained broad endorsement. Clegg attributed his and his cabinet colleagues’ acquiescence to their insufficient attention to detail in the whirlwind of fastpaced decision-making that characterized the Coalition’s early months – a view also expressed by then cabinet secretary Gus O’Donnell (Seldon and Snowdon 2016, 24, 187). In that gale, ministers moored themselves to the belief that their agenda needed to represent a unique amalgam of the defining principles of their respective parties, and the reform proposals as they emerged from the Programme for Government process and were further shaped by Lansley met that test. As Clegg put it: “most ministers had persuaded themselves that the reforms might prove to be a useful synthesis of Conservative and Lib Dem thinking – ensuring greater responsiveness within the NHS by radically localising decision-making” (2016, lcn 840–2). The principal elements of the proposed reforms The framework for NHS reform presented in the July 2010 White Paper and the January 2011 Health and Social Care legislation arrived like a reverberating thunderclap on an unsuspecting health policy community. Because the White Paper represented the government’s intentions and thus set the context for the legislation itself, I treat both together here. Among their numerous provisions, touching every aspect of the health and social care universe, they made explicit for the first time several controversial features of the reform proposals that had been shrouded in ambiguity in the policy documents to date (Lansley’s opposition “White Paper,” the Conservative manifesto, and the Programme for Government): universal and mandatory GP commissioning; the abolition of PCTs and Strategic Health Authorities; the encouragement of choice, competition, and the involvement of the private sector; more independence for the NHS; and a reallocation of responsibilities for public health and social care at both the central and local levels. GP commissioning consortia. For the first time, GP commissioning was to be universal and mandatory. All general practices would be required to form consortia for the purposes of commissioning hospital

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and community services on behalf of their patients. The range of services for which these consortia would be responsible – amounting to about 80 per cent of the NHS budget for hospital and community services – was broader than had been the case for any previous model except the Total Purchasing Pilots of the mid-1990s; and unlike those pilots the new consortia would have hard budgets, not notional envelopes within the budgets held by other authorities. The decision to make GP participation in commissioning consortia compulsory had not been inherent in Lansley’s approach. Indeed it did not crystallize until “late May or early June” 2010 (Timmins 2012, 52) – after the publication of the Programme for Government and as Lansley and his officials were working on the White Paper. Although the decision was certainly consistent with Lansley’s preferences, those preferences were reinforced by the unfolding of a logic driven by the intersection of the Conservatives’ focus on GP commissioning and the Liberal Democrats’ focus on local democracy. One effect of those twin focuses was progressively to shrink the orbit of responsibility of the PCTs. On the one hand, the intention that GP consortia would ultimately take over all local commissioning meant that the trusts would be left with only a residual role during the transition. On the other hand, the non-commissioning functions of the PCTs were to be pared away and transferred to local authorities or independent trusts, as discussed below. Why not, therefore, simply accelerate the transition to GP commissioning through compulsion and do away with the increasingly unnecessary PCTs and the messiness of prolonged transition? The abolition of Primary Care Trusts and Strategic Health Authorities. In a provision that no previous document had suggested, both PCTs and Strategic Health Authorities were to be phased out of existence by 2013. The Programme for Government’s unwieldy proposal to democratize PCTs by requiring some members of their governing boards to be locally elected was quickly discarded. Rather, the localist thrust of the Liberal Democrats, strongly pressed by Minister of Health Paul Burstow, would be accommodated by transferring a number of the functions of PCTs, notably those related to public health, to local authorities – in effect reversing the transfer of authority for public health to the NHS in the major reorganization of 1974. Meanwhile the PCTs’ residual direct managerial responsibilities for some community services were being phased out under policies initiated under Labour. With GP consortia

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poised to take over all commissioning of hospital and community services at the local level, that meant that PCTs essentially had “nothing left to do” (Timmins 2012, 53). As this inexorable policy logic drove towards their elimination, it was reinforced by blunt political reality: the PCTs had “no friends” (Timmins 2012, 54). Like regional bodies constructed by central governments in other jurisdictions such as Canada (see Chapter 9), the PCTs had no natural political base or fiscal authority. Regional health authorities in Britain had been reorganized in 1974, 1982, 1991, and 1993, and the PCTs themselves, established in 2002, had already been reorganized once in 2006. Local MPs could be counted upon to spring to the defence of a constituency hospital threatened with merger or downsizing, but no such defenders were forthcoming for the PCTs. Similarly the Strategic Health Authorities, whose role was to oversee the commissioning role of the PCTs and the executive functioning of the remaining NHS Trusts, would be rendered redundant with the demise of the PCTs and the requirement for all hospitals to become Foundation Trusts overseen by Monitor (discussed below). With even fewer friends than the PCTs, the Strategic Health Authorities could be expected to disappear without a whisper of protest. The Health and Social Care Bill provided for the abolition of both PCTs and Strategic Health Authorities, effective on a date to be ordered by the secretary of state (and already announced in the White Paper as 1 April 2013). Choice, competition, and the private sector. The White Paper envisaged competition among both purchasers and providers. Practice boundaries for GPs would be abolished, allowing patients to register with a GP anywhere in the country. Similarly, extending a Labour-initiated policy, patients would have the choice of “any willing provider” (AWP) “wherever relevant.” As an illustration of where such choice would not be relevant, the White Paper gave the example of “emergency ambulance admissions to [hospital accident and emergency departments],” suggesting a wide scope indeed for the application of the AWP option. (The Health and Social Care Bill itself made no reference to the abolition of GP practice boundaries or to the extension of the scope of AWP requirements, leaving those issues to be dealt with in regulation, but it was widely assumed that those regulations would follow the intentions stated in the White Paper.) Although the practical effect of extending the AWP likely would be limited, the frontal challenge it represented to concepts of “public provision” was highly contentious.

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In other provisions of the bill, the economic regulator, Monitor, would be given a legislative duty to “promote competition where appropriate,” subject to its main duty to “to protect and promote the interests of people who use health care services.” Most controversially competition among providers once again would extend to price, as had been the case under the Conservatives for some services in the 1990s. (Under the subsequent legislation, the national tariff of prices established by Monitor could include “maximum” prices for some services, allowing for price competition below those levels.) A more level playing field for providers also would be established. The distinction between Foundation Trusts and regular NHS Trusts would be abolished: all hospital trusts would become Foundation Trusts within three years under the common regulatory purview of Monitor (on economic matters) and the Care Quality Commission (on quality standards). Indeed both Monitor and the Care Quality Commission would assume responsibility for regulating all providers of NHS care, whatever their ownership status. Foundation Trusts were to be given greater latitude in access to finance, including income from treating private patients. The ability of NHS hospitals to operate “pay beds” for private patients had been a key element of the founding bargain of the NHS. Under the 2003 legislation that established them, however, Foundation Trusts were limited to the proportion of income from private patients they had had prior to assuming Foundation Trust status. The new legislation would remove that cap – and there would continue to be no cap on private income for non-Foundation trusts – but its removal, like extending the AWP, was unlikely to have a significant impact. Although many Foundation Trusts directors viewed the cap as an arbitrary constraint on their discretion, it was a problem for only about half a dozen trusts and could have been dealt with by administrative waivers in those cases (Timmins 2012, 105). Moreover it appeared highly unlikely that Foundation Trusts’ private income would expand dramatically in the absence of a cap. Total income from private patients in NHS hospitals was £445 million in fiscal year 2010/11 – relative to total NHS hospital spending of almost £60 billion (LaingBuisson 2012; United Kingdom 2012c, 13). And with levels of private medical insurance below even their historic norm of about 11 per cent of the population, providers of private acute health care services were facing a static market (LaingBuisson 2012). The requirement that Monitor set an annual borrowing limit for each Foundation Trust was also removed, although Monitor would retain the authority

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to impose borrowing limits on individual trusts as part of its regulatory responsibility to ensure their financial stability. NHS independence and the role of the secretary of state. The relative independence of the NHS from the Department of Health had varied over time, with Conservative governments establishing greater institutional independence and Labour governments favouring greater integration. Integration reached its apogee under Labour from 2000 to 2006, when the positions of permanent secretary of the department and chief executive of the NHS were held by the same person, Sir Nigel Crisp. The White Paper took the structure to the other extreme: it would vest the executive functions of the NHS in an “autonomous NHS Commissioning Board,” described as “a lean and expert organisation, free from dayto-day political interference.” The board would allocate budgets to the commissioning consortia and be accountable for the expenditure of funds. It would establish commissioning guidelines and otherwise support the development of commissioning consortia, and would directly commission GP services – to avoid the conflict of having consortia commission the services of their members – as well as certain other services, such as dentistry, maternity services, and those that were specialized at the regional and national level. In this new context the responsibility of the secretary of state for health for the NHS was to be exercised at a fairly high level of generality: the White Paper envisaged legislative provisions that would “limit the ability of the Secretary of State to micromanage and intervene.” The secretary would establish a mandate annually for the Commissioning Board, and would hold the board to account for performance against the mandate. The secretary would retain overall responsibility for the “legislative and policy framework” governing the portfolio, including “determining the comprehensive service which the NHS provides” and establishing strategies for the coordination of NHS, public health and social care services. In turn the secretary would be held accountable to Parliament annually for “the overall performance of the NHS, public health and social care systems” (United Kingdom 2010d, 34). The draft legislation was rather less explicit than the White Paper in this respect, but it nonetheless distanced the secretary from the NHS in a way that had never been done before. The founding legislation of the NHS had established a duty for the secretary to “continue the promotion … of a comprehensive health service.” Subsequent versions of the legislation governing the NHS continued that duty, but varied in the

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language they used to elaborate upon it. The most recent provision, in the 2006 NHS Act, had required the secretary to “provide or secure the provision of services in accordance with this Act.” The proposed Health and Social Care Bill deleted that clause and divided the secretary’s responsibilities into two parts, one relating to public health and one to the “provision of services for the purposes of the health service.” Only regarding public health were the secretary’s functions to be exercised directly; with regard to health services the secretary was to “act with a view to securing the provision of services” indirectly through the NHS Commissioning Board, commissioning consortia, and local authorities. Notably the legislation added another duty for the secretary to promote the “autonomy” of providers and other exercising functions in relation to the health service. Public health and social care. Although their principal focus was very much on the NHS, the White Paper and the legislation also touched on the public health and social care sectors, where a reallocation of responsibilities at both the central and local levels was proposed.14 Losing responsibility for the NHS, the Department of Health would now focus on “improving public health, tackling health inequalities and reforming adult social care” (United Kingdom 2010d, 9). A new Public Health Service was to be established within the department, and the public health responsibilities of the Primary Care Trusts would be transferred to local authorities. The Public Health Service and the local authorities would jointly appoint local directors of public health. Similarly the department would set social care policy at the central level, while responsibility for social care provision would remain with local authorities. New “health and wellbeing boards” would be established locally to promote integration of the commissioning of NHS services by consortia with the public health and social care activities of the local authorities. Overall structure and logic The structure of the new system as outlined in the White Paper (see Figure 7.1) maintained the basic concept developed over the previous two decades: local commissioners, accountable to a central NHS authority, would contract with independently constituted providers regulated in turn by a central, arm’s-length body. But consortia of general practices would replace Primary Care Trusts as the local commissioners, and the NHS executive would be taken out of the Department of Health and established independently. Local authorities would regain

294  Remaking Policy Figure 7.1. Organizational Structure of the National Health Service, as Proposed in the 2010 White Paper

Source: United Kingdom 2010d, 39.

responsibilities they once exercised but lost in 1974. The untidiness of the previous regime, which included both extended pilots such as practice-based commissioning and remnants such as NHS [non-­ Foundation] trusts, was to be swept away as all pieces of the system were absorbed into the new model. In assessing the scale of this change, several observations are relevant. First, none of the elements of the reforms was new; most had been well under way under the previous Labour government. Labour had already established the principle that GP participation in commissioning should be universal, having required all GPs to be members of Primary Care Groups in the first iteration of their reforms after taking office in 1997. Primary Care Groups had been established as advisory bodies to their local health authorities, a relationship that continued in the next cycle as Primary Care Trusts took over from health authorities and Primary Care Groups gave way to Professional Executive Councils as advisory bodies to PCTs. The Coalition reforms essentially would invert this relationship between GPs and managers: in the new model,

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GPs would be “in charge,” but the expertise of the former PCT managers would still be required. Similarly Foundation Trusts were a Labour initiative that was also intended to be universal, although the timeline by which all hospitals were to be required to have Foundation Trust status had been progressively extended. The concept of independent regulators for hospitals for both quality and financial performance had also been established under Labour, as had the principle and practice of allowing private sector bodies to bid on NHS contracts and the right of patients as well as commissioners to choose “any willing provider” of elective services, although the process of putting in place the necessary conditions for effective competition had dragged on and then stalled under Brown (Ham 2009, 297). The internal market envisioned by both the White Paper and the Health and Social Care Bill was nonetheless purer and more coherent than anything that had existed to date. It essentially took the principles underlying the Thatcher and Blair reforms to their logical conclusion, and in many cases accelerated developments already under way. But the logic of the reforms also resulted from the attempt by Lansley and his officials to bring coherence to the piecemeal commitments in the Programme for Government’s “cut-and-shut job” of patching together the Conservatives’ emphasis on autonomy and competition with the Liberal Democrats’ insistence on local democracy. The best example of this tidying-up effect was the elimination of Primary Care Trusts. This element of the reforms initially had not been intended by either party, but it followed as a practical consequence of the parcelling out of functions to GP commissioners and local authorities in accordance with Conservative and Liberal Democrat preferences, respectively. Essentially, PCTs had become a loose end. Finally, even though the scale of the reforms could be seen as comprising incremental elaborations of various earlier changes, it was the proposed pace that pushed the package into the territory of major change. Unlike the drafters of the Affordable Care Act mosaic in the checks-and-balances US system, the Coalition’s reformers were unwilling to let the implementation period extend into the next election cycle. All needed to be in place well before the May 2015 election. The pace was comparable to that of the big bang founding of the internal market, when the severing of providers from health authorities to establish the purchaser/provider split essentially was accomplished in three years, from 1991 to 1995. The 2011 Health and Social Care Bill required the universalization of GP commissioning and Foundation

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Trust status for hospitals to be accomplished within a similar timeframe – by April 2013 for GP consortia and by April 2014 for Foundation Trusts. But even the establishment of the 1990s internal market, while instituting a “revolutionary” new set of organizing principles and practices, did not insist upon universality for all of its features (Timmins 2012, 72). Hospitals were encouraged to adopt trust status, but at their own pace. (More than 95 per cent had done so within three years, and the transition was complete within five.) Health authorities (and later PCTs) continued to operate a few small social service agencies as “directly managed units.” And, most notably, GP fundholding, while far more popular than originally anticipated, had remained voluntary. A substantial minority of GPs did not choose to become fundholders, although many of those sought other ways to be involved in commissioning in cooperation with their local health authorities. The initial response in the health care arena Apart from the predictable opposition of labour and the major public sector unions, initial reactions to the publication of the Programme for Government and the White Paper were cautious. For example, in June 2010 – that is, after the publication of the Programme, with its emphasis on GP commissioning, but before the release of the White Paper made it clear that participation in commissioning consortia was to be compulsory and PCTs were to be abolished – the British Medical Association (BMA) expressed its openness to working with the government to realize the model. In a widely reported speech to the annual conference of Local Medical Committees of the BMA, the chairman of the BMA’s General Practitioners’ Committee, Dr Laurence Buckman, pronounced the association “ready, willing and able” to work with Lansley and his team. (Less widely reported were the numerous cautions with which Buckman hedged his speech, and the qualifying statement that “what we are ready, willing and able to do depends on you” [Buckman 2010].) By October 2010 the BMA was already tempering its support, taking the stance in its formal response to the consultation on the White Paper that “[t]here are elements we broadly support, elements we support in part, elements we are unable to support and elements about which we require more detail before we can develop a fully considered position” (British Medical Association 2010, 1). The initial response of the Royal College of General Practitioners (RCGP) was ambivalent at best, reflecting the division among GPs themselves. The RCGP opened with the view that “the possibilities for more

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collaborative commissioning and integration of clinical care are welcome, and that “[m]embers, particularly those at the start of their careers, welcomed the opportunities for increased potential to influence services to patients and the wider community, and expect the reforms to allow more freedom for local provision of GP led services.” But it went on to raise a number of “worries” about the “proposed scale, pace and cost of change” and the potential for GPs to be at financial risk (Royal College of General Practitioners 2010, 4). After a November 2010 leadership succession the tone of the RCGP tilted strongly towards emphasizing the “worries” rather than the “welcomes” in this response (Pulse 2010). The major specialist colleges, the Royal College of Surgeons (2010) and the Royal College of Physicians (2010), both welcomed the White Paper’s focus on clinical leadership and supported the thrust of its recommendations, although the physicians argued for “the mandated involvement of hospital specialists in the new structures and mechanisms” (Royal College of Physicians 2010, 1). The NHS Confederation, whose membership spanned the full range of NHS organizations, including PCTs, GP commissioners, Foundation Trusts, and privately owned providers, was similarly cautious. Its initial response to the White Paper indicated that “our members support the Government’s objectives … However, analysing the proposed new system, we have identified significant risks, worrying uncertainties and unexploited opportunities” (NHS Confederation 2010, 1). The NHS Confederation never reached the level of outright opposition adopted by the BMA, continuing after the introduction of the legislation to maintain a constructive stance of identifying “concerns” and “possible responses” (NHS Confederation 2011). Other stakeholders were more enthusiastic. Not surprisingly these included organizations of GP commissioners. Since the advent of fundholding in the 1990s, some GPs who had been involved in various forms of GP commissioning had become fervent advocates of a more central role for GPs in the purchasing of NHS services. As I discuss more fully in Chapter 10, their political activity had coalesced into two rival but often cooperative associations, the NHS Alliance and the National Association of Primary Care (NAPC). As Timmins colourfully puts it, with the publication of the White Paper “the enthusiasts for GP commissioning thought all their Christmases had come” (2012, 69). Nonetheless only the NAPC was in full-throated support throughout. The association had begun life as one of fundholders, and it had

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consistently championed the role of GPs in commissioning and the importance of competition and choice in health care delivery. It welcomed the proposals as presenting “a unique opportunity to raise the bar in the commissioning and delivery of care for patients” (Powell and Gheera 2011, 57). The NHS Alliance, which had its roots in an association of GPs that had opposed fundholding as a “two-tier” model and had worked instead to establish universal modes of GP commissioning, was broadly supportive but somewhat more nuanced in its response, welcoming the focus on GP commissioning while tempering its support for elements of the reforms focused on competition. It sought to counter concerns about the risks entailed in the proposals and about the pace of change, arguing that both risks and opportunities were inherent in radical change; that, in this case, the White Paper’s proposals presented “significant opportunities … to harness the energy, invention and knowledge of primary care clinicians in commissioning”; and that, “if it were best it were done then it were best it were done as quickly as possible consistent with effective and successful implementation” (NHS Alliance 2010, 4). The NHS Alliance reported that its “listening exercise” among its membership had revealed 90 per cent in favour of GP commissioning consortia. But it was nonetheless transparent in including in its response the detailed verbatim responses it received, which revealed a great diversity of opinion along a spectrum from enthusiastic support through anxiety and scepticism to outright opposition regarding at least some aspects of the proposals. Chief executives and board members of Foundation Trusts were also broadly supportive in public, focusing their comments on the opportunities afforded by the greater latitude they would enjoy. In private, however, they were reported to express reservations about other aspects of the proposals, especially regarding the capacity and readiness of GPs to take on the purchasing function across the board (Timmins 2012, 70). Beyond the immediate stakeholders, responses from media and think tanks were also divided, but from the outset they were generally sceptical. Most welcomed at least some aspects of the reforms in principle while warning about the abruptness and rapidity with which they were being introduced. The Times and Financial Times supported the White Paper’s emphasis on competition, but warned about the risks involved. On the day of the White Paper’s release the Financial Times opined that “Mr. Lansley’s vision is the right one, but the scale of his ambitions could be his undoing” and that “[h]owever noble Mr. Lansley’s ambitions, this is an extraordinary programme to attempt within one parliament – and

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a high risk one, too”15 Three days later an editorialist in the Times, while similarly not opposing the substance of the reforms, protested that there had been no indication of changes of this magnitude during the election or even in the Programme for Government (Aaronovitch 2010). The left-leaning Guardian expressed at least implicit scepticism about Lansley’s “doctor worship” and faith in “market forces,” but reserved its most explicit criticism for the riskiness of the proposals, arguing that it was “a dangerous time to go through yet another great upheaval, which – for all their ambiguities – is the one thing that the Lansley plans will certainly produce.”16 Leaders of the two leading health policy think tanks also expressed concern. Speaking with the press, Professor Chris Ham, chief executive of the King’s Fund, said: “It is a very radical programme. We have never seen anything like this since the inception of the NHS in 1948” (Triggle 2010b). The King’s Fund’s formal response to the White Paper elaborated: “Many of the changes set out in the White Paper, such as involving GPs in commissioning and increasing the choices available to patients, have the potential to help to improve performance. However, there are significant risks in making these changes when financial pressures on the NHS are increasing. The case for reorganising the NHS needs to be clear and convincing to justify taking these risks, and this case has not been made” (Dixon and Ham 2010, 1). The Nuffield Trust used more alarmist language. While noting that “[t]he broad direction of travel of the Coalition Government’s NHS reforms is logical, given the reforms over the past 20 years,” Nuffield was sceptical that they could be accomplished in the current context. However logical the redoubled emphasis on “competition, patient choice, contracting and public reporting of outcomes,” Nuffield warned that pursuing this course “at the same time as the NHS faces a sustained financial challenge, upheaval and cuts in management, and arm’s-length bodies are merged or abolished” meant that “there is a huge risk that this level of reform cannot be implemented without major failure” (Nuffield Trust 2010). Even the generally right-leaning think tanks Reform and Civitas were uneasy. Reform greeted the White Paper’s publication with concerns about the willingness and ability of all GPs to participate in commissioning, and warned that “Andrew Lansley is taking a very big gamble with a very large amount of taxpayers’ money” (quoted in Timmins 2012, 68). Civitas welcomed the emphasis on competition, but warned about the costs of implementing the reforms (Boseley 2010). The think tank’s research suggested that, apart

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from the merits of the new model, the very process of reorganization likely would have a negative impact on NHS performance. It found that the 2006 reorganization of Primary Care Trusts – which had reduced the number from 302 to 152 by merging some and leaving others unchanged – had had a negative effect on both quality of service and efficiency in the use of resources in the merged PCTs relative to their unmerged counterparts, as measured by the ratings of each PCT by the then Healthcare Commission (Gubb 2010). For a government that wished to present itself as the agent of “erachanging, convention-challenging, radical reform,” however, warnings that it was being overly ambitious and taking too many risks were not likely to deter it from pursuing its chosen course. Indeed even after the external consultation process had alerted it to brewing concerns, the government’s response and the draft legislation made their way through the cabinet process with little dissent. Both the government’s formal response to the consultation and the introduction of the bill in Parliament nonetheless were delayed to allow for a review of the proposals and the feedback received (Timmins 2012, 72–4). Letwin and Alexander once again were called into service to conduct the review, which involved multiple meetings with Department of Health and Treasury officials, as well as with Stephen Dorrell, a former Conservative health secretary under John Major and the current chair of the Commons Select Committee on Health. Dorrell was in an unusually influential position. Not only did he have a long history on the health file, rivalling and arguably surpassing that of Lansley; he also had an independent power base. Institutional changes made by the Coalition had required that chairs of select committees be elected by all MPs, rather than appointed by the party leadership. Dorrell was concerned about the risks of attempting structural change in the NHS while dealing with what he considered to be the principal task: the need to deal with the “Nicholson challenge” of finding “efficiency savings” at an unprecedented rate as funding dropped below the rate of health care inflation. Supported by his officials, however, Lansley persuaded his cabinet colleagues that the savings were achievable through pay freezes and reduced management costs. In this he was dealing with a receptive audience in cabinet. In contrast to areas of genuine disagreement, such as tuition fee policy, that were consuming much of the leadership’s attention, the NHS reforms were seen as a welcome win-win – a combination of ideas from both partners – that

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was fully supported not only by the Conservative health secretary but also by the Liberal Democrat health minister. Moreover, although the warnings of the chair of the Select Committee on Health might have presaged future difficulties, the mechanisms that might have alerted the leadership to rumblings within their own caucuses had not yet been sufficiently well developed to do so. In previous Parliaments the Liberal Democrats had established “policy teams” in their caucus, and in 2010 they were in the process of converting that structure to one of Parliamentary Party Committees in specific policy areas. These were meant to function as “watchdogs” on the government – in particular, to ensure that Liberal Democrat distinctiveness was not sacrificed to the exigencies of coalition – but they struggled to establish ongoing lines of communication with Liberal Democrat ministers in the new governmental context (Yong 2012, 104–9). Concerns about the NHS reforms were expressed at the Liberal Democrats’ annual autumn conference in September 2010, but the party’s grassroots were focused more on differences with the Conservatives over tuition fees and the austerity agenda (Waller and Yong 2012, 179). The Conservatives had had much more experience establishing channels of communication between backbenchers and government ministers. But despite some tensions during the government’s early days, backbenchers appeared to be willing to go along with Coalition deals, viewing the Coalition itself as a “contingent, time-limited” arrangement (Yong 2012, 109). The government’s response to the worries being expressed in the external consultation process was to place greater emphasis on piloting and phasing various aspects of the reforms. The Department of Health immediately began a period of transition to the new structure by establishing “shadow” bodies, including a phased rollout of “pathfinder” consortia and “early implementer” health and wellbeing boards, that would operate on an advisory basis within the existing structure preparatory to taking on their full authority once the legislation was passed. The department also embarked on the “clustering” of Primary Care Trusts with a view to reducing their complements and thus realizing the efficiency savings so critical to the government’s austerity agenda. The government’s formal response to the consultation was released on 15 December 2010, the same day that the annual NHS Operating Framework was issued for fiscal year 2011/12. Together these two documents set out a rolling program of implementation somewhat more detailed than had been sketched in the White Paper, but essentially

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within the same timeframe – with the central executive and regulatory apparatus to be in place by April 2012, all GPs to be members of consortia with full authority for commissioning by April 2013, and all NHS trusts to become Foundation Trusts by April 2014. The legislation was introduced in Parliament on 19 January 2011, and easily passed second reading (approval in principle) 321–235. No Conservatives or Liberal Democrats voted against the bill, although one Liberal Democrat abstained and several did not attend (Waller and Yong 2012, 179). The first phase of the assembling of the Coalition mosaic thus passed without significant incident.

The Commons committee stage and the “pause” The passage of the bill through second reading occurred in the face of growing opposition among stakeholders, and served as a flashpoint in the health policy community. In particular, medical groups moved from their position of cautious willingness to work with the government to a stance of hardening opposition. Notably, on 17 January, two days before the introduction of the legislation, the BMA joined with three other associations of health care professionals (nurses, midwives, and physiotherapists) as well as the two major public sector unions, Unite and Unison, to publish a letter in the Times highly critical of the bill’s provisions for competition among providers and expressing alarm at a scale and pace of change deemed “extremely risky and potentially disastrous” (Royal College of Nurses 2011). As the bill moved to detailed consideration at the committee stage in February and March, the drumbeat of opposition that had been building over the course of the autumn intensified and the tenor of opposition sharpened further as observers absorbed its full implications. Their reactions revolved around four principal concerns: the potential disruptiveness of the reforms at a time of government austerity; whether all primary care providers should to belong to a commissioning consortium; the scope of the bill’s proposed competition and “privatization”; and the ambiguous nature of many of the proposed reforms. The principal issues Disruption and austerity. The initial response of many observers, as noted above, was to warn of the risk and cost of embarking on yet another NHS organization, regardless of the merits of the proposed structure itself. After the cycles of centralization versus decentralization and

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planning-based versus competition-based adjustments that had kept the structures of the NHS in flux over the previous two decades, and the promise in the Programme for Government to “stop the top-down reorganisations of the NHS that have got in the way of patient care” (United Kingdom 2010a, 24), the structural changes proposed by the White Paper and the legislation came as an unwelcome shock. Much of the testimony before the Public Bill Committee hearings on the Health and Social Care Bill in February 2011, including presentations from representatives of the BMA and the major public sector unions, focused on the potential disruptiveness of the reforms (United Kingdom 2011c, col. 30; United Kingdom 2011d, cols 71–2). The major think tanks, the King’s Fund and the Nuffield Trust, also argued for a more phased rollout of the changes (United Kingdom 2011c, cols 24, 30). Even the Foundation Trust Network, which was generally supportive of the reforms, noted the risk of instability among providers during the transition period (United Kingdom 2011e, col. 84). Some of this concern focused on the compound challenge of trying to implement significant structural reform at the same time that the NHS was charged with realizing the substantial efficiency savings implied by the “Nicholson challenge.” Even with the two-year wage freeze in fiscal years 2011/12 and 2012/13 mandated by the government’s October 2010 spending review, NHS costs driven by demographic and technological change could not be accommodated within essentially flat real budgets without cuts in personnel or services or both. In a briefing released publicly together with its written evidence to the Public Bill Committee, the Royal College of Physicians argued that “[a]chieving both £20 billion efficiency savings and mass-scale reorganisation simultaneously presents an unprecedented challenge for the NHS,” and that, therefore, “[g]overnment must be realistic in its assessment of the timescales for reform and the impact of reorganisation on costs and service delivery” (Royal College of Physicians 2011, 4). Similar concerns were expressed by the King’s Fund (United Kingdom 2011c, cols 29–30). But the spectre of the “Nicholson challenge” cut two ways, as supporters of the reforms argued that the challenge could be met only by structural reform and that, as the National Association of Primary Care put it, the greater risk was in maintaining the status quo (United Kingdom 2011d, col. 44). Others, such as the NHS Alliance and the NHS Confederation, were more nuanced, recognizing the risks in the reforms but also arguing that the status quo was untenable (cols 44, 66). Nicholson himself, who was widely quoted as having said on a number

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of occasions that the reform project was “so big it can be seen from space,” clarified his position to mean that it was the conjunction of the reforms with the need to realize efficiency savings that made the challenge so great, but also insisted that the status quo was not an option (United Kingdom 2011c, col. 6). Opinion was nonetheless divided as to just how big and disruptive the reforms would be. Against the criticisms of disruptiveness, other observers argued that the package simply built on past reforms – even one of the most contentious aspects of the reforms, the possibility of price competition, had been signalled, though not acted upon, under Labour. The Foundation Trust Network argued that the provisions regarding Foundation Trusts were a logical extension of past developments: the “completion of the journey … that was started seven years ago” (United Kingdom 2011e, col. 84). The NHS Alliance and the National Association of Primary Care saw the focus on GP commissioning as a welcome recovery of a key direction that had been eclipsed with the establishment of Primary Care Trusts. Julian Le Grand and Simon Stevens, two leading figures who had been key advisors to Blair, published opinion pieces also portraying the Coalition’s proposals as extensions of the actions of previous governments. Stevens, writing in response to the publication of the White Paper, noted that it came “10 years after Tony Blair, then prime minister, took the first steps down this path.” “What makes the coalition’s proposals so radical,” he argued, “is not that they tear up that earlier plan. It is that they move decisively towards fulfilling it – in a way that Mr. Blair was blocked from doing by internal opposition within his own ‘virtual coalition’ government” (Stevens 2010). Similarly Le Grand, upon the introduction of the Health and Social Care Bill in Parliament, presented the reforms as “evolutionary, not revolutionary: a logical, sensible extension of those put in place by Tony Blair, which in turn developed the internal market set up by John Major” (2011). Clinical involvement in commissioning. The one element of the bill that received virtually unanimous endorsement was the principle of involving clinicians more centrally in commissioning. Beyond that consensus, however, opinion divided on two fundamental questions: whether it should be compulsory for all primary care providers to belong to a commissioning consortium, as the bill mandated; and what should be the range of clinicians involved in the governance of the consortia, on which the bill was silent. On the question of the readiness and

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willingness of all GPs to take on a commissioning role, the BMA chair trod a careful line in his testimony before the Public Bill Committee: “There are some enthusiasts and some total rejectionists. There is also a very large group – probably about 70% or so – who are pretty sceptical and pretty pragmatic. They have now been through three or four NHS changes and realise that it is probably best to try and do what they can, rather than be left behind” (United Kingdom 2011c, col. 35). The chair of the Royal College of General Practitioners expressed concern about “the capability, capacity and competence of GPs across the board to undertake [the commissioning] role,” but, like the BMA representative, she argued: “If you ask me what my members say, all I can say is what they talk to me about, and 70% of the people who responded to the [Royal College of General Practitioners] survey either disagreed or strongly disagreed with the direction of travel of the reforms. However, that does not mean that they will not have to get involved. They will do this and they will do it well” (United Kingdom 2011d, col. 53). These concerns echoed the cautionary note struck in the immediate wake of the White Paper’s release by Chris Ham of the King’s Fund that, although GPs were “well-positioned to take decisions on the use of resources and improve patient care and patient outcomes … [t]he risk … is that not all GPs have the motivation to do so. Many don’t have the skills either. To implement this across the whole of England without some degree of testing and piloting could be a risky thing for the government to do.”17 Caution was sounded even among the champions of GP commissioning. The NHS Alliance once again sought to strike a balance, arguing in its initial response to the White Paper and throughout the process that some GPs were ready to take on commissioning immediately or in the very near future and should be allowed to do so, while others would require more time and support. Accordingly, “there should be sufficient flexibility … to accommodate both the fast movers and those who require a more considered timescale” (NHS Alliance 2010, 14). As for the involvement of a range of clinicians in commissioning, the  BMA (whose membership included both GPs and specialists) and the two major specialist bodies, the Royal College of Physicians and the Royal College of Surgeons, as well as the Nuffield Trust and the King’s Fund, argued strongly that there should be well-considered and formalized mechanisms to draw on specialist expertise in the making of commissioning decisions, such as including specialists on the governing bodies of consortia. The NHS Alliance (2010), while recognizing the need

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for professional expertise, argued that the mechanism of involvement should be up to the GP consortia, and that it should be incumbent upon each consortium to demonstrate that it had consulted appropriately. The scope of competition and “privatization.” Arguably the most contentious and ideologically fraught aspect of the reforms was the redoubled emphasis on competition, which many critics read as a stalking horse for the “privatization” – a label with unclear referents – of the NHS. As in other matters, physicians, especially GPs, were divided on the issue of the abolition of practice boundaries. The Royal College of General Practitioners was opposed, the National Association of Primary Care was in favour, and the NHS Alliance and the BMA trod a middle line, with the latter supporting the right of patients to choose but warning of “unintended consequences” such as widening health inequities (British Medical Association 2010, 18; United Kingdom 2011d, cols 45–7). “Any willing provider” requirements were supported by the National Association of Primary Care and the Association of Chief Executives of Voluntary Organizations (which saw opportunities for social enterprises), opposed by the Royal College of General Practitioners as representing a move away from the “NHS family,” and greeted with caution by the NHS Alliance (United Kingdom 2011d, cols 50–1). In the co-signed January letter to the Times noted above, the BMA and five other groups led with their concern about the provisions regarding “any willing provider” and about price competition (Royal College of Nurses 2011). Allowing for price competition, indeed, raised concerns not only for other stakeholders such as the Royal College of General Practitioners and the NHS Confederation (United Kingdom 2011d, cols 50, 66), but also by major figures in the health policy community, including Le Grand (2011), drawing on research suggesting a link between price competition and a deterioration in quality of service. More inchoate concerns about the general trend towards “privatization” inherent in the reforms were expressed by numerous interests in testimony before the Public Bill Committee, including the Royal College of General Practitioners and the public sector unions. In its response to the White Paper, the BMA led with a concern about the “direction of travel” represented by the proposals, which it saw as involving “the commercialisation and active promotion of a market approach in the NHS” (British Medical Association 2010, 1). In his testimony the BMA chair gave at least one aspect a sharper point, arguing that the greater independence for Foundation Trusts, and especially the lack of any cap

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on private income, made them essentially private entities and could open them up to regulation under European Union competition law (United Kingdom 2011c, col. 34). Uncertainty. Despite its length (281 clauses and 22 schedules) and despite Lansley’s desire for hard-wiring, the bill left many aspects of the reforms ambiguous, to be clarified in subsequent regulations. The government’s intentions in many of these areas of ambiguity had been signalled in the White Paper and in its response to the White Paper consultation, as noted above. The lack of clarity on key issues such as the scope and governance of commissioning consortia and the regulation of competition, however, fuelled anxiety around the reforms and reinforced concerns about their potential disruptiveness. Divided opinion without and within The formal positions of stakeholder groups need to be set in context. Notable throughout the consultative process for the White Paper and the committee hearings was the extent to which the leadership of professional organizations had to straddle divisions of opinion within their own memberships. As noted above, the position of the Royal College of General Practitioners hardened with a change in its leadership in November 2010. In testimony before the committee, the new chair of the college acknowledged the divisions within her membership, wryly noting that the representative of the National Association of Primary Care, highly supportive of the reforms and present at the same hearing, was also a member of the college (United Kingdom 2011d, col. 43). The positions of both the BMA and the NHS Confederation represented the attempts by their respective leaderships to navigate profound differences of opinion within the membership of each organization, differences that continued over the course of the reforms. The NHS Alliance, generally supportive of the reforms and with roots in GP commissioning, also had to navigate a membership that comprised Primary Care Trusts as well as GPs. And although the NHS Alliance and the National Association of Primary Care generally made common cause in support of the reforms (and later formed a Clinical Commissioning Coalition to advance them), the ideological divisions rooted in their fundholding and non-fundholding pasts continued to exist, as apparent in the distinctly cooler position of the NHS Alliance towards competition. As for the main specialist groups, the Royal College of Physicians and the Royal College of Surgeons, after their initial generally positive

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reception of the White Paper, each moved to a stance of “critical engagement,” neither endorsing nor opposing the legislation but seeking modifications to various aspects. The committee stage ran from 8 February to 31 March 2011, the longest for any bill since 2002 (Waller and Yong 2012, 179). Moreover, outside the committee, opposition was becoming more vociferous and the Liberal Democrats increasing nervous. Opposition within the Liberal Democrat membership, centred around the Social Liberal Forum, was emboldened, and discontent erupted at the party’s March 2011 spring conference. The conference passed a set of resolutions that, while “welcom[ing] much of the vision” set out in the White Paper and in particular endorsing a number of its provisions regarding local authorities, also called for amendments targeted at constraining the role of private entities – such as ruling out price competition, banning the contracting out of the commissioning function to private firms, and disallowing the entry of any new private providers into contexts where there was a risk of “cherry-picking.” Other resolutions called for increasing the role of local authorities by requiring, for example, that “about half” of the members of consortia governing bodies be local councillors, and that consortia boards construct their annual plans, and monitor them quarterly, jointly with local health and wellbeing boards (Liberal Democrats 2011, 13–16). Although the practicality of a number of these resolutions was questionable, together they constituted a strong signal of disaffection among the Liberal Democrat grassroots. In fact Liberal Democrat resistance was not unwelcome to a Coalition leadership growing increasingly uneasy about the level of opposition to the reforms. For a Liberal Democrat leadership facing declining electoral support, being seen to respond to grassroots opposition to the reforms would offer an opportunity for the party to post a win against its Coalition partner, especially in the runup to a May 2011 referendum on electoral reform in which the parties were campaigning on opposite sides. For the Conservatives, responding to Liberal Democrat concerns would allow for a “retreat on an unpopular platform without seeming divided internally” (Waller and Yong 2012, 181). The NHS Future Forum Accordingly, on 6 April 2011, less than a month after the Liberal Demo­ crat conference and a week after the Public Bill Committee had concluded its hearings, the government took the extraordinary step of announcing a “pause” in the legislative process to allow for further

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outside consultation, and established a panel, the NHS Future Forum, to conduct the process. The panel was headed by Dr Steven Field, former chair of the Royal College of General Practitioners, who had presided over the college’s initial ambivalent response to the White Paper. The pause allowed Liberal Democrat leader Nick Clegg to demonstrate responsiveness to his grassroots, and freed him to adopt a more critical public stance towards the reforms. Three days after the defeat of the Liberal Democrats’ desired electoral reforms in the 5 May referendum, Clegg made a speech demanding changes to the Health and Social Care Bill as the price of his party’s continued support. But his speech was in fact “choreographed, or at least signed off, by the Conservatives at the Centre” (Waller and Yong 2012, 181); Cameron’s own strategic communication staff was warning him that the reforms “were not working in professional and public opinion” (Walker 2012, 145). The NHS Future Forum provided yet another vehicle for the various interests to register the concerns they had presented during the White Paper consultation exercise and the Public Bill Committee hearings. The June 2011 report of the Forum was a masterpiece of diplomacy: it endorsed each of the principal directions of the reforms while tempering the driving themes of NHS independence and competition and the pace of change. It began with an emphasis on organizing principles – the “enduring values” of the NHS as reflected in its constitution – and recommended that there be a legislative duty upon all the key components of the new structure to “promote” the NHS constitution. Similarly, although the NHS should be “freed from day-to-day political interference,” there should be a legislative requirement for the secretary “ultimately” to be accountable for the NHS. Competition and an increased role for the private sector were means to improve service and were not to be seen as “ends in themselves.” Beyond these thematic issues, the Future Forum’s report made more specific recommendations for modifications to the proposed structure and the pace of change. Other health care professionals in addition to GPs should be involved in commissioning, and networks and “senates” of clinicians should be established to provide strategic advice. The role of local authorities, through health and wellbeing boards, should be strengthened. As for pace, the report recommended both speed in establishing the necessary support structure for the transition and a more attenuated approach to full implementation. On the one hand, “[t]o ensure focused leadership for quality, safety and the financial challenge, the NHS Commissioning Board should be established as soon as possible.” On the other, “[t]here

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should be a comprehensive system of commissioning consortia but they should only take on their full range of responsibilities when they can demonstrate that they have the right skills, capacity and capability to do so” (NHS Future Forum 2011, 10–12). The Future Forum process provided the occasion for the Coalition to develop a set of government amendments to the Health and Social Care Bill, as well as an accompanying response to the Future Forum’s report with undertakings for administrative action, which together were fully responsive to the report’s recommendations. The legislation was “recommitted” to the House of Commons on 21 June.

Recommittal and the Lords The first wave of government amendments: Extending the timeline and complicating the structure The government’s amendments, or undertakings in accompanying documents, responded to each of the areas of criticism noted above. Disruption. As with the Affordable Care Act in the United States, one line of response to criticism about the disruptiveness of the multiple changes proposed by the Health and Social Care Bill was to extend the implementation timelines for certain key features. The legislation itself had been silent on most of these timelines, simply providing that various clauses would come into effect on such dates “as the Secretary of State may by order appoint.” Only the effective date at which all NHS trusts must become Foundation Trusts (1 April 2014) had been specified in the bill. The government amendments removed this provision, making the effective deadline for Foundation Trust status subject, like other clauses, to the secretary’s order, and extending Monitor’s role in overseeing individual Foundation Trusts to 2016. In its written response to the Future Forum accompanying its amendments, the government also relaxed the timeline for the commissioning consortia: they were to be established in either full or shadow form by 1 April 2013, but no consortium would be required to take on full responsibility until it was willing and able to do so. Clusters of Primary Care Trusts would be converted into local arms of the NHS Commissioning Board after 2013 to support the consortia. Similarly a “Provider Development Authority” was to be established to support NHS Trusts in their transition to Foundation Trust status.

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Clinical involvement in commissioning The most substantive changes at this stage involved the commissioning consortia. Indeed the very conceptualization of the consortia shifted: they were now termed Clini­cal Commissioning Groups in recognition of the fact that, while still comprising GP practices as a consortium, each group was to have a governing body not exclusively composed of GPs. The government amendments provided for regulations establishing the membership of these governing bodies; and the accompanying response to the Future Forum undertook that these would require at least one nurse and one specialist doctor, as well as at least two lay members. In addition the government undertook that regional “clinical senates” would be established under the aegis of the NHS Commissioning Board to provide “multiprofessional advice on local commissioning plans,” and “clinical networks” would perform a similar role with regard to certain areas of service such as cancer (United Kingdom 2011a, 4). Amendments also strengthened the language regarding the participation of local authorities in commissioning. Whereas the initial legislation had required the commissioning consortia to “consult” with local health and wellbeing boards in preparing their commissioning plans, the revised version changed the wording to “involve.” Competition and “privatization.” The emphasis on competition and various dimensions of private finance and delivery was tempered in two principal, largely symbolic, respects. First, the duty imposed on Monitor in the original bill to “promote competition” was dropped; instead Monitor was to “prevent anti-competitive behaviour” that would be harmful to patient interests. Second, the provision that the national tariff of prices to be set by Monitor could include “maximum” prices was dropped, although, as in the original, prices could still be varied by local agreement subject to approval by Monitor. A third controversial feature, the controversial lifting of caps on private income for Foundation Trusts, was nonetheless retained. And outside the legislative arena the government was moving ahead with various aspects of the reforms under existing legislation – including the issuance of directives to local commissioners in July 2011 to select three areas from a list of eight in which they would make services available from “any qualified provider.”18 The practical effect of this directive was very modest: Timmins reports that the eight areas accounted in total for about £1 billion (2012, 103) in the context of a £105 billion NHS budget for England.19 But in

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the fraught atmosphere of the debate, it could be, and was, portrayed either as a demonstration of the marginal scope for private providers or as a wedge for greater privatization. The role of the secretary of state. An aspect of the reforms that was to become the cynosure of attention in the House of Lords – the symbolic distancing of the secretary of state from the health service – had been dwarfed in the Commons by the contention around commissioning and competition. Nonetheless the Future Forum process had indicated the degree to which this symbolic aspect of the reforms was burgeoning in significance. In response the government deleted the clauses distinguishing between the direct and indirect responsibilities of the secretary and replaced them with a rather tortuous clause requiring the secretary to “exercise the functions conferred by this Act so as to secure that services are provided in accordance with this Act.” The recommitted legislation was debated in committee from 28 June to 14 July, and then reported to the Commons on 6 September, passing the following day on a vote of 316–251, with four Liberal Democrats voting against. The principal effects of the changes to that point had been to lengthen the timeline and complicate the new structure with checks and balances and support mechanisms, at least for an extended transitional period. The “purity” of the underlying logic was becoming increasingly compromised. The second wave: Parsing organizing principles With the passage of the legislation in the Commons, the venue moved to the House of Lords, which presented a greater institutional challenge to the government. Most of the members of the Lords are appointed for life – the exceptions are the approximately two dozen “lords spiritual” who are members by virtue of their religious office and the fewer than 100 hereditary peers. There is no formal limit to the size of the chamber, which numbered close to 800 members in 2011 and consisted of 217 Conservatives, 92 Liberal Democrats, 242 Labour, and 228 independent “crossbenchers.” Ties of party are weaker in the Lords, which traditionally has a “courteous, non-partisan ethos” (Yong 2012, 93). A “sudden influx of new peers,” however, resulting from a bulge in appointments after the 2010 election (117 appointments between May 2010 and April 2011) created a large cohort who were not acculturated to the mores of the chamber and “led to a more fractious atmosphere in the Lords” (93). The Lords also provided a venue for medical opposition

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to the reforms: by tradition the Lords are expected to bring the expertise of various professions to bear in assessing legislation, and “medical peers” in particular have been an influential group. Unlike in the Commons, the Conservative and Liberal Democrat peers did not constitute a majority in the Lords. Not only would the Co­ alition government therefore have to rely on the support of crossbench peers; the greater independence of peers from their party leaderships meant that intra-party negotiations would be necessary. The Liberal Democrat peers in particular included some of the most influential members on the left of the party, including Baroness Shirley Williams, who had left Labour in 1980 to found the Social Democratic Party, which merged with the Liberals to form the Liberal Democrats in 1988. Another co-founder of the Social Democrats, Lord David Owen, who sat as a crossbencher, had published a pamphlet in March 2011 critiquing the reforms, under the title “Fatally Flawed.” Although the Liberal Democrat leadership made the case that the government’s amendments after the Future Forum had fully addressed the concerns of dissident members and that they could not keep coming back for a “second and third bite” (Timmins 2012, 104), the recalcitrant peers would continue to present a challenge. Notwithstanding the “pause,” the Future Forum, and the government’s amendments in response, almost all of the criticisms of the reforms that had played out in the Commons were resurrected in the Lords. But the centre of gravity of the debate shifted from details of design to organizing principles – in particular, the role of the secretary of state for health and the status of Foundation Trusts. Timmins puts it well: at the Lords stage, “the constitutionalists and the lawyers came into play” (2012, 102). The Constitution Committee of the House of Lords, chaired by the Labour peer Baroness Jay, reviewed the bill prior to the debate in the Lords, rendering a carefully argued legal critique in a report released on 30 September 2011. The committee focused not only on the first section of the bill, regarding the alteration in the secretary’s duty to promote a comprehensive health service and the additional duty to promote autonomy, but also on a subsequent section that transferred duties for the provision of specified services from the secretary to the Clinical Commis­ sioning Groups. The committee also drew attention to the Explanatory Notes to the amendments to the first section, which stated that the language “reflects the fact that the commissioning and provision of services will no longer be delegated by the Secretary of State, but will be directly

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conferred on the organisations responsible” (United Kingdom 2011f, 5). The committee expressed the opinion that together these changes meant “that the chain of duties and responsibilities that the [courts have] ruled must be read as a whole would be broken,” and asked the Lords “carefully to consider whether these changes pose an undue risk either that individual ministerial responsibility to Parliament will be diluted or that legal accountability to the courts will be fragmented” (6). This issue dominated the debate in the Lords committee stage to such a degree that the government called a “mini-pause” on the question of the secretary’s responsibility, from early November 2011 to January 2012, to allow for negotiations with disaffected Liberal Democrat peers and crossbenchers to craft a compromise to be considered by the full chamber at the report stage (Ramesh 2011; Waller and Yong 2012, 183). Meanwhile detailed consideration was given to multiple other clauses in the bill, and numerous amendments were considered regarding matters such as safeguards against conflicts of interests for GPs (who would function as both providers and commissioners of service), public engagement, and the roles of Monitor and of local government (Powell and Gheera 2011). The second principal area of contention, however, was the lifting of the cap on private income for Foundation Trusts, which stood as a leading symbol of the “privatization” of the NHS. Lansley was very reluctant to yield on this provision, as were a number of peers on the Conservative right who were losing patience with the number of concessions that had been made. Once again, what came to be defined as a matter of principle was shaped by pragmatic considerations. The ultimate resolution turned on the question of the application of EU competition law: unless the majority of their income came from public sources, Foundation Trusts would be legally vulnerable to being treated as “private undertakings” and hence subject to EU regulation. Accordingly government amendments were introduced and agreed to at the committee stage effectively restricting private income to 49 per cent of the total income of any Foundation Trust. Additional amendments required Foundation Trusts to report annually on the effect of private income on the provision of NHS services. As Timmins notes, however, these amendments just “pour[ed] petrol on the fire” outside the House of Lords as opponents portrayed the 49 per cent provision not as a limit, but as a signal that Foundation Trusts were losing their public character.

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Outside Parliament, indeed, opposition to the reforms continued. Although most opponents of various features of the legislation conceded that the government’s amendments had gone some distance towards meeting their concerns, many remained dissatisfied. Others, notably the BMA (in November) and the Royal College of General Practitioners (at the beginning of February), moved to a stance of outright opposition, calling for the bill’s withdrawal. Opposition crested in anticipation of the final stage of the legislative process: the Lords report stage in February and March 2012. Still, opinion among stakeholders, especially within the medical profession, remained deeply divided. An attempt in late December by a former Labour health secretary, Andy Burnham, to galvanize the royal colleges of the health professions and the major public service unions into a united front of opposition foundered on these divisions of opinion (Timmins 2012, 107–8). Although, as noted, the BMA and the Royal College of General Practitioners, joined by the Royal College of Nurses, called for the bill’s withdrawal, several other royal colleges, including the Royal College of Physicians and the Royal College of Surgeons, held “emergency” special meetings and/or surveyed their memberships. At a 24 January 2012 meeting of the academy of the twenty royal colleges of the medical profession, an attempt to forge a united front of opposition again failed, with some colleges (notably the Royal College of Surgeons) preferring to maintain a stance of “critical engagement,” seeking clarification of what was becoming a less and less coherent package. The report stage in the House of Lords began on 8 February 2012. The government tabled 137 amendments (Powell and Gheera 2011, 3), principal among which was a set of compromises regarding the secretary’s duties, passed in the first two days of the sitting. One amendment was a clause stating that “[t]he Secretary of State retains ministerial responsibility to Parliament for the provision of the health service in England.” Another required that, “[i]n exercising functions in relation to the health service, the Secretary of State must have regard to the NHS Constitution.” (Previous versions had imposed such a duty only on the NHS Commissioning Board and the commissioning groups.) A third made it clear that the secretary’s duty to promote a comprehensive health service had priority over the duty to promote autonomy. Other amendments – concerning patient involvement, education and training, health inequalities and service integration, local public health functions, and personal data protection – were added as advocates of

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particular policies opportunistically took advantage of the legislation to insert elements that had not been contemplated in the original, creating yet greater complexity and incoherence. (As we saw in Chapter 6, a similar pattern of opportunism contributed to the convoluted nature of the US Affordable Care Act.) At the end of February a set of amendments from Liberal Democrat peers was tabled with government support. A lengthy, one-thousandword letter to Liberal Democrat peers, co-signed by Nick Clegg and Baroness Williams, supported the amendments. The letter aimed at countering any remaining arguments that the legislation would privatize the NHS, and was clearly intended to put paid to the prospect of any further opposition. It drew attention to the multiple changes that had already been made in response to Liberal Democrat concerns, including the achievement of an “all-party consensus” regarding the accountability of the secretary of state. It claimed that, as a result of Lib­eral Democrat vigilance throughout the process, the legislative framework would now be less favourable to the private sector than had been the case under Labour. It presented the final set of amendments as an ultimate stamp, intended to “rule out beyond doubt any threat of a US-style market in the NHS.”20 The Liberal Democrat amendments reduced the purview of the Competition Commission, ensured that Monitor would have “enduring powers” over individual Foundation Trusts, established further safeguards against conflicts of interest in commissioning, and required that an increase of more than 5 per cent in private income for a Foundation Trust in any given year would require the approval of the trust’s governing body. Notwithstanding the note of finality in the Clegg-Williams letter, a few additional amendments were tabled by Liberal Democrats and passed with government support, as were several amendments from crossbench peers, two from Conservative peers, and three from Labour peers – all of which were passed with government support or at least without government opposition. Most of these in various ways elaborated on the duties of the secretary of state or the roles of the various bodies created or altered by the legislation. Only one amendment, from a crossbench peer, passed over government opposition, explicitly including mental illness in the definition of illness in a section relating to the secretary’s duties to secure improvements in prevention, diagnosis, and treatment (Powell and Gheera 2011, 4–6). As had been the case throughout the legislative process at committee and report stages in both houses, numerous Labour amendments were introduced and

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defeated. The bill passed the Lords on 19 March 2012 on a vote of 269– 174, but not before final attempts by crossbench and Labour peers to amend the legislation were debated and defeated. The amendments were then sent to the House of Commons, where they were approved 324–236. The Health and Social Care Act 2012, with its 309 clauses and 23 schedules, received Royal Assent on 27 March. The net effect of the law’s tortuous passage was to increase further the complexity of the web of roles and responsibilities of the multiple bodies that made up the new structure. Notwithstanding the law’s length, many aspects remained to be specified in regulations. With this complexity and murkiness, any sense of the elegant “clockwork” universe imagined by Lansley at the outset had been lost. By the time the legislation reached third reading in the Lords, most interests (some earlier than others) had bowed to the inevitability of its passage and were tailoring their advocacy to position themselves for the implementation stage. The Royal College of Physicians (2011), the Royal College of Surgeons (2011), and the NHS Confederation (2012) all focused their submissions to the Lords on seeking clarity on the roles, responsibilities, and interrelationships of the various pieces of the new regime. Even the bill’s most strident critics in the medical profession, the BMA and the Royal College of General Practitioners, while calling upon the Lords to defeat it, recognized the division of opinion within their membership as well as the writing on the wall, stopped short of calling for a boycott, and, in the event of the bill’s passage, pledged to assist their members and the government to make the new structures work (Buckman 2012).21 But in language reminiscent of that of the Republicans in the United States, Labour shadow health secretary Andy Burnham pledged on the day the legislation was passed that, “[w]hile on a day like today it’s hard for me to give any encouragement to people worried about what this government is doing, I can at least say this: that we will repeal this bill at the first opportunity and restore the N in NHS” (Jowit 2012). And indeed, again as in the United States, legislative skirmishes continued. When the regulations governing competitive tendering by commissioners were published in April 2013, Labour (with the support of the BMA) sought to have them annulled by the House of Lords. The regulations survived easily on a vote of 254–146, but the government had already tempered the regulations in response to the challenge. Commissioners were now required to act with a view “to improving quality and efficiency in the provision of the services,” not only by “enabling providers to compete” and “allowing patients a choice of

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provider,” but also “through … the services being provided in an in­ tegrated way (including with other health care services, health-related services, or social care services” (United Kingdom 2013b). Given that private providers typically are found in niche markets, they were less likely to qualify under this “integration” criterion. The tensions among these criteria did not go unnoticed (Ware 2013), and they contributed to the atmosphere of uncertainty and contention that pervaded the process of implementing the reforms. Implementation and Denouement: Anticipation, Reaction, and Constraint Adversarial Westminster-style political institutions favour rapid implementation strategies in order to hard-wire changes not only by enacting comprehensive legislation, which can be changed by a subsequent majority government, but also by embedding the new framework into the expectations of relevant actors and interests on the ground. The case of the Coalition’s NHS reforms is no exception. In a pattern with a long history in the NHS (Timmins 2012, 69), implementation began before the legislation was passed. As early as October 2010 the Department of Health issued a call for proposals for “pathfinder” GP consortia to function in shadow form under existing legislation as subcommittees of Primary Care Trusts. A target date of 1 April 2012 was set for all consortia to be established in shadow form, leading to their full authorization as of 1 April 2013. Also in the autumn of 2010 the Department of Health announced that the 10 Strategic Health Authorities and 152 PCTs would be grouped into 4 and 50 “clusters” of each, respectively, by October 2011. These clusters would facilitate the transition, primarily by supporting pathfinder consortia and NHS trusts moving to Foundation Trust status. The Strategic Health Authorities were to be abolished by 1 April 2012 and their support functions taken over by an NHS Trust Development Authority, whose establishment required only administrative action. The abolition of PCTs was to follow a year later, on 1 April 2013, as the Clinical Commissioning Groups came to full status. Meanwhile, at the centre, an elaborate transitional structure was erected with a proposed timeline. The NHS Commissioning Board (to be known as NHS England) was to be established in shadow form as a special health authority by April 2012, prior to assuming its full status as a quasi-independent “executive non-departmental public body” on

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1 April 2013. An NHS Executive Transition Forum was established to coordinate units overseeing nine elements of the transition, including the establishment of NHS England and the new roles for Monitor, as well as the reallocation of personnel, finance, and property,22 relations with local government, reforms in health education, and the reconfiguration of various central bodies. For its part the Department of Health was simultaneously managing the extensive reorganization of public health functions (United Kingdom 2013a, 19). Given the complexity of the changes and the volatile political context in which they had to be implemented, what is most remarkable about the implementation of the transition is how little slippage there was in the original implementation timeline. The National Audit Office, not a body given to easy accolades, concluded that “[t]he Department’s programme management demonstrated many elements of good practice” and commended the department for the “comprehensive governance structures to oversee the transition, supported by an integrated programme office,” and for the continuity of senior staff throughout the transition and the maintenance of ongoing monitoring mechanisms (United Kingdom 2013a, 7). The implementation program began strongly. Five waves of pathfinder consortia were announced at a pace of almost one per month from December 2010 to July 2011, yielding 257 consortia serving 97 per cent of the English population (United Kingdom 2011a). These consortia were poised to apply for authorization as Clinical Commissioning Groups, first on a shadow basis in fiscal year 2012/13 and then with full authority beginning in 2013/14. In the end 212 groups were authorized – more than the 152 Primary Care Trusts they replaced but fewer than the 303 that had existed prior to the 2006 reorganization. NHS England was established in shadow form as planned in October 2011, and the clusters of Strategic Health Authorities and Primary Care Trusts were formally established at that time. Political volatility – in particular, the delay in passing the authorizing legislation – made for some slippage in the transition timeline. The government had expected that the Royal Assent stage would be reached in October 2011; in the event that did not occur until March 2012. In the uncertain atmosphere the transition from clusters of Strategic Health Authorities to the NHS Trust Development Authority, initially scheduled for April 2012, was delayed by a year. More significantly the establishment of NHS England as a quasi-independent agency was delayed by six months, from April 2012 to October 2012, and even then it began with

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a limited set of functions (United Kingdom 2013a, 17). Nonetheless, all of the key elements were in place by the original target date of 1 April 2013, although half of the Clinical Commissioning Groups remained in shadow form or had only conditional authorization by then (8). This rapid transition was facilitated by the fact that most of the same people, with their established networks, remained in the system. Moreover, despite the high level of organizational churn across the entire system, only 9 per cent of the more than forty-five thousand positions in the new structure were unfilled by the start date and, according to the National Audit Office, “[a]ll the new organisations had enough staff to start operating” (8). This remarkable feat was possible only because much of the transition was accomplished by transferring personnel en masse from one organization to another. The National Audit Office found that “[n]early 40 per cent of staff were moved in bulk transfers to the new organisations in order to mitigate the risk of posts being left vacant due to delays in recruitment, and to provide stability,” while “[o]ther staff were transferred on the basis of a matching exercise where more than half of an existing post matched a new role” (8). In March 2012, more than a year before the implementation date for the legislation, a survey found that more than three-quarters of the shadow Clinical Commissioning Groups had appointed former Primary Care Trust managers to senior managerial positions and more than 60 per cent had named a former trust manager as their “accountable officer,” responsible for the group’s duties, functions, finances, and governance (West 2012). Most significant of all, the key positions in NHS England were filled by the civil servants who had been in analogous positions within the Department of Health (Greer, Jarman, and Azorsky 2014). This continuity would have important implications for the longer term, as the logic of the new system intersected with that of the past. The challenges of implementation were greatly exacerbated by the pressures of fiscal constraint. Actual annual increases in the NHS budget from fiscal years 2010/11 to 2015/16 averaged 0.2 per cent in real per capita terms, well below the rate of NHS-specific inflation, even before taking into account the pressures of demographic and technological change (Lafond, Charlesworth, and Roberts 2016, 10). The appointment of Simon Stevens as NHS Chief Executive in April 2014 launched a redoubled search for new ways to cope with these pressures. Stevens, who had worked in the NHS, had been a key policy advisor to Tony Blair and had then worked in the private sector in the US, and

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he believed that efficiencies could be found through a combination of organizational innovation and new investment. Within six months of his appointment, Stevens released a strategic report, Five Year Forward View. The report was the culmination of a broadbased consultation within the NHS and among stakeholders, and was presented as a consensus paper from the NHS, but it was very much Stevens’s document. As part of a strategy to secure additional public funding by committing to internal “efficiency” savings, it proposed to encourage a variety of models of health care delivery, to be developed through a mix of local initiative and central guidance. As I discuss further in Chapter 10, some of these new models, while promising, arguably strained the logic of the purchaser-provider split and the spirit of the Health and Social Care Act, and raised new implementation challenges for the central regulatory superstructure (Allen et al. 2017). In the meantime, the strains of austerity were showing. One year after the optimistic release of Five Year Forward View, a King’s Fund survey suggested that two-thirds of provider organizations had ended 2015/16 in deficit, and that 87 per cent of Foundation Trust executives and 79 per cent of Clinical Commissioning Group executives believed there was a “high” or “very high” risk that the efficiency targets of Five Year Forward View would not be met (Appleby, Thompson, and Jabbal 2016). As of May 2017, another King’s Fund review showed that, on the basis of actual and planned spending, “the Department of Health budget [would] grow by 1.1 per cent in real terms between 2009/10 and 2020/21 … far below the long-term average increases in health spending of approximately 4 per cent a year (in real terms) since the NHS was established” (King’s Fund 2017). Figure 5.1 in Chapter 5 depicted these long-term trends. Conclusion: Process and Substance

Process: Accommodation and adjustment The Conservative/Liberal Democrat Coalition’s NHS reforms began life as the accidental offspring of an unlikely and unexpected union. Needing to provide face validity for a marriage of convenience after mutually disappointing election results, the partners in the Coalition promised, and came to believe, that their partnership offered the opportunity for “era-changing, convention-challenging, radical reform.” Ironically, if the Conservatives had formed a single-party majority

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government, their health policy would probably have been less ambitious. They doubtless would have increased the role of GP commissioning, and pursued the relaxation of constraints on private delivery and finance that had begun or been signalled under the previous Labour government. It was the combination, however, of the Conservatives’ insistence on resurrecting real budgets for GP commissioners and the Liberal Democrats’ insistence on greater influence for local authorities that rendered the existing structure of Primary Care Trusts redundant. And it was the proposed abolition of the PCTs, reinforced by Andrew Lansley’s principled insistence on distancing the secretary of state for health from the day-to-day management of the NHS, that gave the impression of wholesale change. In the early stages the development of the NHS reforms, like that of the Affordable Care Act in the United States, was driven from the pinnacle of the Coalition leadership. Within the centralized leadership structures that David Cameron and Nick Clegg had established in their respective parties, the reforms were born within the tight circle that shaped the Coalition Agreement and the Programme for Government and then handed off to Andrew Lansley, the one person who had been preparing for that moment for six years as shadow health secretary. The genesis of the reforms cannot be understood without an appreciation of each of these steps. At the Programme for Government stage, Oliver Letwin and Danny Alexander – shrewd strategists but unschooled in health policy – drafted the mashup of incremental Conservative and Liberal Democrat proposals that sealed the fate of the PCTs by making them both redundant and unwieldy. It was also at the Programme for Government phase that the rapid pace of reform was set by a leadership determined to take joint action before the electoral pressure of a 2015 election would drive them to differentiate themselves from each other. At the next stage, Lansley’s single-minded vision reconstructed the reforms within the broad outline of the commitments in the Programme for Government. This reconstruction nonetheless included a key element that had not been part of, or at least not central to, his original plan: the abolition of PCTs. This aspect of the reform strategy bears comparison with the US experience. In the case of the 2009–10 US mosaic, a defining provision (the individual mandate) was adopted not for ideological but for pragmatic reasons, and it was further defined in the course of negotiations with affected interests. In England the PCTs simply became a casualty of other compromises involving the empowerment of GP commissioners

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and local authorities, but their elimination came to signify wholesale change and bureaucratic upheaval. As the proposals made their way through the uncharted waters of a legislative process marked by the ever-present threat of “rebellions” against the Coalition government, the centralization of the process began to fray. The Coalition leadership, especially the Liberal Democrats, had to navigate divisions not only between but also within their parties. Cameron and Clegg began to quail before the forces of internal dissent and external opposition from health care interests. As the government sought to incorporate language that would allay concerns without losing the principal thrust of the reforms, the legislation and provisions became more inchoate and the relationships they prescribed became more tangled. Duties were piled upon duties, constraints upon constraints, checks and balances upon checks and balances. Aside from the legislation, government undertakings extended the implementation timeline – ultimately indefinitely – and left in place vestiges of the previous regime that were to have been swept away. In what might be seen as a process of accelerated “layering,” structures slated for abolition instead were transformed or relabelled. PCTs did not entirely disappear; rather, clusters of them became regional arms of the NHS Commissioning Boards and then were transformed into “Commissioning Support Units.” Similarly, even the Strategic Health Authorities were grouped into clusters and morphed into a new NHS Trust Development Authority with a mandate to see remaining NHS trusts acquire Foundation Trust status – a mandate that became indefinite along with the implementation timeline.

Substance: Organizational incoherence and a shift towards a single-payer logic Despite the highly contested process of their passage, the Coalition reforms can be seen in many respects as simply the most recent cycle within the logic of the internal market begun by the Conservative government of the early 1990s and continued under Labour. Greer and his colleagues, among others noted elsewhere in this chapter, have remarked upon the continuity in the animating ideas behind this succession of policy changes: [T]he idea that commissioning by GPs would improve care and efficiency; the idea that the central government, in the shape of the Department of

324  Remaking Policy Health, was too big and dictatorial; the idea that intermediate territorial levels of management such as Strategic Health Authorities were bureaucratic and superfluous; the idea that provider competition produces improved quality and efficiency; the idea that management expertise rather than politics improves health services; and the idea that it would be possible to invent, for all time, a structure for the NHS that would be immune to politics. (Greer, Jarman, and Azorsky 2014, 3)

Throughout that two-decade history the relative emphases on these various ideas had ebbed and flowed, in tension with the inherited legacy of a centrally controlled system infused with professional influence. Within the framework of a purchaser/provider split, governments had cycled through various instruments for driving providers towards greater efficiency and quality of service. On the purchasing side, the quest for a sophisticated purchasing vehicle had variously located the commissioning function in Health Authorities, GP fundholding practices, Primary Care Groups, and Primary Care Trusts, with or without practice-based commissioning. The Clinical Commissioning Groups can be seen as the most recent issue of that line. The 212 such groups, with a median population of just over 250,000, were only slightly smaller than the 152 PCTs (with a median population 284,000) they replaced, but ranged widely in size from about 62,000 to over 863,000, a thirteen-fold difference. In contrast the PCTs ranged in population size from 91,000 to 1.3 million, a fourteen-fold difference (United Kingdom 2011b, 2013c). On the provider side, attempts to develop the appropriate incentive structure for providers while giving them greater financial and managerial flexibility had oscillated in the past between different balances and instruments of central control and local autonomy. Foundation Trust status for all providers had been a Labour goal; the Coalition reforms would have brought this goal to fruition, although in the end it remained as indefinite as it had been under Labour. As for the greater emphasis on “private” elements – non-NHS providers, price competition, and private income for Foundation Trusts – the practical effects of these provisions can be seen as shifts of degree, not of kind. The choice of “any qualified provider” requirements realistically could be exercised only within a relatively small range of services, and only in an unknown subset of those cases would the choice be a non-NHS provider. (I discuss the one major exception to this observation, the turning over of a failing NHS hospital trust to a hybrid social/private sector enterprise, in Chapter 10.) Regulations governing

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competitive tendering were fraught with internal tensions and ambiguities. Price competition was subject to onerous requirements for reporting and central approval. Although provision of NHS-funded services by non-NHS providers increased incrementally over time, it remained a small fraction of the overall NHS budget in England. On balance, and notwithstanding the concerns about “privatization” of the NHS, the reforms did little to shift the balance of power ordained by the policy framework among the state, private finance, and the medical profession. They nonetheless represented a shift within the medical profession towards the subset of GPs who would take active roles in commissioning, and they opened up opportunities for entrepreneurs to operate across the public/private boundary in ways that might yet have transformative effects on the system. In the ongoing tension between hierarchical and market-style instruments that had characterized the NHS since the institution of the internal market, the Coalition reforms represented, at least initially, a tilt towards the market. The multiple concessions and adjustments made over the course of the legislative passage, however, had so fettered those instruments with duties and central mechanisms of oversight and approval that a definitive slant was hard to discern. Indeed the resulting structure of multiple checks and balances was organizationally incoherent. Numerous commentators remarked upon the difficulty of tracing clear lines of responsibility and accountability. Various close observers inside and outside government sought to map the new structure, producing a variety of organization charts – including a lighthearted and widely disseminated animated version by the King’s Fund (2016). A simplified comparison of the new structure with the one it replaced is shown in Figure 7.2. The relative simplicity of this diagram provides a useful orientation, but it belies the complex variety of new and reconfigured agencies involved – the reader’s attention is drawn to the numerous bodies represented in each of the main boxes. Even so, this is a much more cluttered design than had been proposed in the White Paper (see Figure 7.1). Figure 7.2 also does not fully capture the complexity of the accountability relationships. In particular the various arm’s-length bodies and agencies depicted had different degrees of independence. The three most significant bodies – NHS England, Monitor, and the Care Quality Commission – were “executive non-departmental public bodies.” As Greer and colleagues note, this type of agency is “outside the formal structure of Whitehall, not bound by the Civil Service Code, appointed

326  Remaking Policy Figure 7.2. Simplified Organization Charts for the National Health Service, Before and After the Coalition Reforms

Source: Powell and Heath 2013, 3.

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through the statutory public appointments system with ministers taking final decisions, and with specific constitutions and functions set out in the laws that create them, or left to their boards to determine” (Greer, Jarman, and Azorsky 2014, 13). The accountability lines from these bodies to the Department of Health shown in Figure 7.2 should not be overestimated: they reflect only the fact that the department is the “sponsoring” body for these agencies and the secretary of state for health is ultimately accountable to Parliament for their “independence, effectiveness and efficiency” (United Kingdom 2007, 14–15). (This generic responsibility for these bodies is in addition to the specific responsibilities assigned to the secretary by specific legislation, notably the Health and Social Care Act 2012 and the National Health Service Act 2006). Similarly, what cannot be shown on an organization chart is the marbling of responsibilities among the various agencies and the Department of Health for matters of quality, price, financial integrity, capacity, and integration of service. For example, NHS England set the structure of the national tariff of prices, while Monitor established the price levels. More significantly, responsibility for ensuring an appropriate levels and mix of capacity in any given area was difficult to discern in a context in which the Clinical Commissioning Groups, under guidance from NHS England, decided on the providers with whom they would contract, Monitor was responsible for seeing that the configuration of the “sector” in any given area functioned in the interests of patients, and the Care Quality Commission was responsible for licensing providers. If there was an overall coherence to the structure, it is that the fundamental logic of the system shifted further away from a “national health service” model towards a “single-payer” ethos. By turning over the bulk of the purchasing function to consortia of independent practices – even if those consortia were established by statute with specified duties responsibilities and accountability – by reinforcing the independent status of NHS providers and opening the door further to non-NHS providers, and by diminishing one tier of the hierarchy (PCTs) through which the authority of the state was exercised, the reforms moved the system further away from a “national health service” model of public ownership and provision towards a Canadian-style “single-payer” model in which government funds providers who are independently constituted. The establishment of independent commissioners as purchasers does not vitiate this logic: those commissioners receive public budgets and are “single payers” within their jurisdictions. Note the flows of funding and

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accountability relating to providers in Figure 7.2: funding flowed from the Clinical Commissioning Groups; accountability flowed to Monitor and the Care Quality Commission.23 These flows served to underscore the independence of providers from their public funders and their accountability to their public regulators. This was still very much a public system, but its organizing principles had changed. The Coalition reforms did not initiate this change, which had begun in the 1990s, but they pushed it further and faster than previous governments had done. It was precisely the perception of this shift in logic that drove the battle over the definition of the duties of the secretary of state. Moving from a national health service to a single-payer model is essentially a shift from one public system to another, but in the British context it was read as a step towards privatization. What Lansley saw as taking the vagaries of politics out of the management of the NHS, opponents saw as an abdication of public responsibility for the provision of services. Even in a single-payer model, however, as Canadians are well aware, the minister cannot escape political responsibility for what happens in the health care system – a point to which I return below. The new policy framework contained the seeds of further developments, as all frameworks do. In this case a contest among three lines of development likely would determine the future evolution of the policy logic. First, the incoherence of the structure invited a reassertion of the traditional logic of the NHS – central control through local networks infused with professional influence – in order to get things done. The continuity of staff in key decision-making positions at the centre (especially in NHS England), in the Clinical Commissioning Groups, and in local authorities made this development likely. An analogous phenomenon is the internal market reforms of the 1990s, when the transactions costs of market mechanisms led actors to fall back on their established networks and modes of behaviour (Tuohy 1999). But the internal market framework nonetheless led, over time, through the pattern of policy cycling I described in Chapter 5, to the current structure. This raises the second possible line of development: the continuing infusion of the NHS with market mores in tension with hierarchy and professionalism. Greer, Jarman, and Azorsky (2014) draw attention to the important and interesting difference in the composition of the two most significant central bodies: NHS England and Monitor. While NHS England senior staff had come from the Department of Health, to which they had moved from long careers in the NHS itself, Monitor’s senior staff was drawn largely from the private sector, notably from

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private consulting firms. This suggests, if not a clash, then at least an uneasy coexistence of contrary cultures at the centre, with indeterminate implications for the future. The appointment of Simon Stevens, however, as chief executive of NHS England effective April 2014 broke this pattern. Stevens, a close adviser to Tony Blair and subsequently a senior executive at the US private sector United Health Group, brought a strong commitment to competitive instruments, an expertise in purchasing, and an understanding of the policy process at the most senior levels in Britain to his position – a skill set that aided him in navigating the various cultures involved. The likelihood of tensions at the centre brings us to the third potential line of development: the emergence of “institutional entrepreneurs” at the local level who seize opportunities within heterogeneous and inchoate structures to create new organizational hybrids. The institutional entrepreneurialism of the strategically placed minority of GPs who drove various models of GP commissioning in the 1990s and 2000s proved enormously influential in preparing the ground for the current reforms. The provisions of the 2012 reforms relating to commissioning from “any qualified provider,” although effectively limited in scope, nonetheless invited institutional entrepreneurialism – as did the greater flexibility provided to Foundation Trusts and even, on the demand side, to Clinical Commissioning Groups themselves. To the extent that such entrepreneurialism occurred, it would among other things drive considerable variation across local settings, in tension with the impetus towards a reassertion of hierarchy. However these seeds develop, one can confidently make two predictions: First, the contest among these lines of development as well as other unresolved tensions built in to the new structure will generate negative feedback and drive a quest for resolution – generating further rounds of policy cycling, as observed in the past. Second, if past history and experience in other nations are a guide, a move towards a single-payer design is unlikely to inoculate the system against political intervention. In response to concerns about quality of care, highlighted by the report of a commission of inquiry into scandalous failings at a Foundation Trust, and to the financial difficulties of certain hospitals, Lansley’s successor as health secretary, Jeremy Hunt, became directly and forcefully engaged in the inspection and hospital supervision regimes (Campbell 2014a). It is indeed an exquisite irony that Lansley’s immediate successor should prove to be one of the more interventionist secretaries in NHS history.

Chapter Eight

The Dutch Blueprint, 1987–2006

Our sole case of the adoption of a blueprint strategy comes from the Netherlands, where a policy framework first conceived in the late 1980s was enacted in phases, culminating two decades later in the adoption of a model of mandatory insurance under a comprehensive regulatory and fiscal umbrella. This new model represented a transformation of a previous tripartite regime, built up over the course of the twentieth century, comprising social insurance, private insurance, and universal public long-term care insurance. The reform process bore the marks of a unique political system marked by coalition, corporatism, and collaboration, even as that system itself was in the process of transformation. The characterization of the Dutch strategy as a “blueprint” should not be exaggerated. In using this term I do not wish to imply that the course of policy development was foreseen fully at the outset, or that the plan was consistently followed over time. What I wish to signify with this label is a strategy marked, first, by an initial widely grounded agreement regarding the broad schematic of a new regime; second, by a further agreement that the framework for the new regime would be enacted not all at once – and, crucially, not within the life of the current government – but rather in a series of steps as conditions allowed; and, third, by the establishment of a set of expectations that fundamentally shape the behaviour of actors along the way to an endpoint consistent with the original schematic. In the Dutch case many features of the overall framework had to be decided upon and filled in along the way. The particular sequence and timing of the steps as envisioned in advance was not followed, and the almost twenty-year timeframe for the realization of the new model was far longer than anyone had foreseen. Not every step along the way was fully consistent with the vision of

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the new regime, and periodically various observers thought that the comprehensive reform project had stalled beyond repair. Nonetheless legislation enacted in 1989, 1991, 1994, 2000, and 2005, as well as regu­ latory measures throughout, progressively put in place the pieces of the schematic announced in 1988, even as various vacillating departures from the path occurred along the way. In comparative context this relative consistency presents both a remarkable achievement and a puzzle to be explored. The Window: A Government “there to govern” Consolidates Its Power

Electoral and institutional resources: A boost in political capital The late 1970s and early 1980s was a period of turmoil in the Dutch political economy, as the depth of the economic crisis produced deadlock among the social partners and instability within political coalitions. The Netherlands experienced “one of the most severe employment crises in Western Europe” (Rhodes 2001, 181), as rising real labour costs in the face of declining productivity gains, together with higher interest rates driven by the macroeconomic policies of the major economies caused firms to shed employment or even to disappear through bankruptcy or relocation (Hemerijck, Unger, and Visser 2000, 214–15; Rhodes 2001, 181–2). Meanwhile the governing coalitions proved either too weak (in the case of that led by Joop den Uyl) or too internally conflicted (in the case of the successor coalition led by Dries van Agt) to produce anything more than fluctuating and ineffectual responses, including two temporary wage freezes. In 1980 a leading technocratic advisory body, the Scientific Council for Government Policy, “issued a devastating report on the state of Dutch manufacturing and industrial policy, with a biting rebuke of the ‘waiting for corporatism’ attitude” (Hemerijck, Unger, and Visser 2000, 215). In response the van Agt government appointed an ad hoc advisory committee, formally independent of corporatist interest associations, although “indirectly” representing business and labour interests, headed by Gerritt Wagner, chair of the board of directors of Royal Dutch Shell, and hence known as the Wagner Committee. The committee’s report, issued in 1982, recommended, among other things, a decentralization of the then highly centralized structures of collective bargaining to allow for greater wage differentiation depending on the circumstances

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of each industrial sector (Wolinetz 1989, 90–1). The van Agt government endorsed the report, but in a turbulent political context in which van Agt struggled to establish a durable coalition after the election of 1981, little progress could be made. In this context the advent after another election in November 1982 of a centre-right coalition government led by Ruud Lubbers marked a dramatic turning point. As head of the Christian Democratic Appeal (CDA) party, Lubbers was a forceful leader, whose impatience with corporatist processes captured the mood of the times. He, moreover, offered an alternative. Lubbers openly admired Margaret Thatcher’s strong leadership and neoliberal agenda in the United Kingdom, and announced that his was to be a “no-nonsense,” “business government” that was “there to govern” – with or without social partners (Hemerijck, Unger, and Visser 2000, 215; Klitgaard 2005, 26; Levy 1999, 259). The early signature of the Lubbers approach was established with the socalled Wassenaar Agreement, reached by employer and labour associations under the explicit threat of unilateral government action aimed at improving business profitability, lowering unemployment, lowering wage costs, restructuring industry, reducing regulation, and consolidating government finances (Hemerijck, Unger, and Visser 2000, 215; Levy 1999, 259; Merkel et al. 2008, 137). Under the agreement, generally regarded as a watershed in Dutch corporatism and broadly credited with arresting the country’s economic decline, labour committed to wage moderation in return for reduced hours of work and job-sharing arrangements, and, in line with the Wagner Committee’s recommendations, greater flexibility was created by decentralizing collective bargaining to the sector level, away from the central bodies. For its part the Lubbers government was committed to reducing public expenditure, which meant tackling social entitlements (Helderman 2007, 14–15; Hemerijck, Unger, and Visser 2000, 216). At first, comprehensive restructuring was not central to this agenda, which focused rather on what Hall (1993) would term “first-order” changes in “instrument settings”: freezes and reductions in public sector wages and social security benefit levels. But having jaw-boned the private sector parties and made other policy changes to reduce labour market rigidities and other obstacles to industrial restructuring, Lubbers and his coalition could not rest content with blunt measures in the public sector; they began to turn their attention to the potential for restructuring the provision of public benefits as well. The election of 1986, which returned the Lubbers coalition to power, marked the first time two successive governments of the same partisan

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complexion had been formed since the early 1960s. The results, moreover, strengthened the hand of Lubbers and that of his party. Indeed Lubbers’s political skill was widely credited for the CDA’s gain of nine seats, exactly offsetting the loss of nine seats by coalition partner People’s Party for Freedom and Democracy (Volkspartij voor Vrijheid en Democratie, VVD) to maintain the coalition’s majority of 81 in the 150-seat legislature. Of the votes gained by the CDA over the 1982 results, exit polls suggested that one-third came from the VVD and the remainder from Labour or from those who had not voted in 1982, turnout in 1986 having been considerably higher (Gladdish 1986, 335–6). If Lubbers had a mandate for change, it was not yet clear what those changes should be. As various government-commissioned reviews – and indeed other bodies in the social middle ground – fleshed out the parameters of potential change, however, it became clear that the scope of reform would require broad political consensus. Bringing that about would require leadership from across the political spectrum. Those conditions fully emerged when the CDA-VVD coalition fell in 1989 over an issue of tax policy. Although the subsequent election in September 1989 did not markedly change the complexion of the parliament, it offered Lubbers the opportunity to form a coalition with the Labour Party, thus embracing a fuller political span. Indeed some have argued that Lubbers deliberately engineered the fall of the centre-right CDA-VVD coalition in order to forge this new right-left partnership, recognizing that the magnitude of change he was seeking required nothing less (Levy 1999, 260).1 In any event, it was only with the formation of the CDA-Labour coalition that the government moved from blunt austerity measures to serious restructuring of the welfare state. Lubber’s partner in this endeavour, Labour leader Wim Kok, himself enjoyed considerable legitimacy and broad influence. As leader of the major union federation, Kok had been one of the two architects of the Wassenaar Agreement, and was broadly supportive of a restructuring agenda in both the private and public sectors. But as Levy notes, “Labour’s participation came at a price ... Henceforth, the harsh edges of Lubbers’s austerity would be counterbalanced by [Labour’s] concern for workers and the disadvantaged” (1999, 260).

Political will: Reform of the welfare state as the second phase of liberalization The will to find a new approach to health care reform had been forming among all the major state and society actors in the Netherlands

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over the course of the 1980s – especially as the disjointed attempts at comprehensive price regulation and facilities planning bogged down in implementation. In the mid-1980s most of the relevant institutional actors as well as each of the major political parties issued reports and recommendations on health care reform. The Social-Economic Council, the Sickness Fund Council, and the major health sector advisory board, the National Health Council, offered their reports at the invitation of the government. The major commonality among these various reports was what Paul Starr in the US context termed a “negative consensus” (1991, 16): the belief that “the various ad hoc cost-containment measures of the 1970s and 1980s did not offer a lasting solution to the more fundamental problems of the Dutch health care system,” and that the system was so flawed as to require thoroughgoing restructuring (Helderman 2007, 208–9; see also Schut 1995, 629–30). However, although there were some common themes – notably, the desire for some path to a universal system and in some cases an openness to greater competition – there was no agreement, especially within the health care sector itself, as to what the new approach should be. Helderman sees these developments has having opened a “‘window of opportunity’ for path-breaking reforms in health care” (2007, 209). But a consensus that “something must be done” is not sufficient to open such a window, especially when, to do so, government must take on the warring parties in the arena. As I have argued throughout this book, taking on those political risks requires government to mobilize authority on an extraordinary scale, and for reform to be central to its broader agenda. The Lubbers government accomplished the first of these requirements – the mobilization of authority – in two phases: first, through the validation of his leadership in the 1986 election; and, second, through the broadening of support by an alliance with Labour in 1989. Like the Thatcher Conservatives, the CDA under Lubbers did not extend its neoliberal agenda to health care until it had consolidated its authority over successive elections. The second condition for comprehensive reform – a central place for health care in its broader agenda – was fulfilled when the success of private sector restructuring allowed the government to turn its attention to a second tranche of neoliberalism: a more thoroughgoing sweep of market-oriented reforms in the public sector, beyond the blunt cuts and freezes imposed under the first Lubbers government (Hemerijck, Unger, and Visser 2000, 217–20; Levy 1999, 259). This movement began even before the CDA-VVD coalition was returned to power in the

The Dutch Blueprint, 1987−2006  335

1986 election, but it was fuelled by that victory. The reform agenda embraced the full scope of the Dutch welfare state: health care, housing, and social security. The health care and housing arenas consisted of both public and private suppliers, and each arena required increasing levels of public subsidy; hence each offered the opportunity to rethink the public/private boundary as well as to constrain public expenditure. Social security – especially disability pensions – had come to function as a sponge for workers made redundant by industrial restructuring. Requiring employers and unions to internalize the costs of restructuring in the collective bargaining process – rather than externalizing them onto publicly subsidized programs – and redrawing the public/private boundary in health care finance and housing ownership thus were seen as essential complements to the government’s promotion of market forces in the private sector. The Strategy of Scale and Pace: Designing the Future The failure of the major corporatist bodies in the health care sector to generate a consensus on the design of a new system contributed to a growing loss of confidence in the ability of corporatist structures to act as agents of major change. In this context the new CDA-VVD coalition adopted a strategy similar to that of the van Agt government in the face of corporatist immobility five years earlier: in August 1986 it appointed a panel of “experts” formally unaffiliated with any major interests, chaired by a businessman – Wisse Dekker, former president of Philips – and composed of six other members, four of whom were academics (Helderman et al. 2014, 26; Helderman and Stiller 2014, 824; Hemerijck, Unger, and Visser 2000, 215). The Committee on the Structure and Financing of Health Care – known colloquially as the Dekker Committee – released its report, entitled “Willingness to Change,” in March 1987. Although the committee was deliberately constructed outside the structures of corporatism, its membership was carefully balanced to provide a range of views and experience, and exercised “common sense” as to  what would work in the Dutch health care context (Bjorkman and Okma 1993, 94).

Scale: The turn to the market By 1986 the events of the previous decade had exhausted the range of corporatist and statist instruments available within the existing policy

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repertoire, and the failure of those instruments had discredited the repertoire itself. These developments, and the prevailing neoliberalism of the Lubbers government, rendered policy elites open to a rejection of both peer control and state authority in favour of a fundamentally different approach: “liberating” insurers from corporatist and regulatory constraints to function as market actors. Inspired by developments in the international climate of policy ideas and facilitated by academics actively involved in the policy debate, this consensus increasingly gravitated to the concept of “managed competition,” which seemed to offer the elusive optimal mix of subsidiarity and solidarity so important in the Dutch context (Schut 1995, 634–5). The Dekker Committee’s terms of reference were to advise on the possibilities for controlling the growth of the health care sector in terms of volume, for reforming health insurance, and for deregulating the health care system (Companje et al. 2009, 270). There is some dispute among observers about the extent to which the committee was explicitly directed to consider the Enthoven model.2 The essential components of the committee’s recommendations were as follows: • Universal, compulsory comprehensive coverage: The existing distinctions between the basic tier of coverage for long-term and chronic care under the Exceptional Medical Expenses Act (the AWBZ) and the packages of social and private insurance for acute care should be abolished. Henceforth all Dutch residents should be mandated to obtain a basic comprehensive package of coverage, the scope of which would amount to about 85 per cent of all health care costs. Voluntary supplementary coverage should be available for the ­remaining 15 per cent, which would include prescription drugs, dental care, and physiotherapy. The basic package should be defined in functional terms, not according to provider (Schut 1995, 638). • Financing through income-related and flat-rate premiums: The scheme should be financed through premiums with two components: an income-scaled premium, cost-shared between employers and workers, set at a level such that revenues would cover 75 per cent of insurers’ costs of providing the basic package, leaving insurers to charge flat-rate (community-rated) premiums (paid by individuals) to cover the remaining 25 per cent. • Regulated competition among insurers: All insurers should be placed on an equal footing, and the distinction between social and private insurance abolished. Retrospective reimbursement of insurers

The Dutch Blueprint, 1987−2006  337

based on their costs should be replaced by prospective risk-adjusted ­payments; hence insurers would bear the risks for costs over and above those implied by the health status of their insured populations. The income-related portion of the premium should flow to a central fund to be reallocated to insurers based on their respective risk profiles, to guard against risk-selection. Insurers should be required to open their enrolments every two years and to accept all applicants, and they should compete on the basis of their flat-rate premiums, which presumably would drive efficiencies as insurers sought to ­offer the basic package at lower rates than their competitors. • Selective contracting: Also in the service of finding efficiencies and value for money, insurers should be freed from the obligation to contract with all providers in their region, and enabled to contract selectively with providers. • Capacity and price regulation of providers should be reduced and quality regulation increased: In accordance with the principle of “regulation by incentives” versus “regulation by directives” (Bjorkman and Okma 1993, 93), insurers should no longer be bound by centrally negotiated model agreements or centrally regulated prices in contracting with providers (Companje et al. 2009, 271). The level of the income-related portion of the premiums should be recommended by the Social-Economic Council, but insurers should be able to compete on the flat-rate portion with no regulatory constraints (Helderman et al. 2014, 26). Corporatist regulatory bodies should be replaced by a new Health Care Insurance Board, comprising only government appointees, to oversee the system. There is no question that the framework outlined by the Dekker Committee amounted to a large-scale transformation of the Dutch health insurance system. It is important to note, however, that all of these elements required further elaboration. Most were scalable, and some admitted of various institutional designs. For example: • The scope of the basic package: The span of coverage (about 85 per cent of total costs) and the particular items the committee recommended for inclusion could be expanded, reduced, or substituted. • The mix of income-related versus flat-rate premiums: The proportion the committee recommended for the income-scaled component of the premium (75 per cent) could be scaled up or down. Scaling up would render the premium more progressive and leave less scope

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for competition; scaling down would have the opposite effects. At any given proportion, moreover, the degree of income-scaling could be made more or less progressive. • The status of insurers: All insurers were to be on an equal footing. The committee was silent, however, as to whether that footing should be formally private or public – that is, whether insurers should be established as private corporations or as public entities. One of the many issues to be considered in this respect was whether, as private corporations, all insurers would fall under the scope of EU competition law, hence constraining the government’s regulatory discretion. • The scope of competition: Should insurers be free to compete nationally, or should regional markets be retained, as had been the case for the sickness funds (which had operated as regional monopolies)? • The degree and kind of institutional change: Despite (or perhaps because of) the sweeping nature of its proposed transformation, the Dekker Committee aimed its recommendations at implementing the changes as much as possible through existing institutions (Bjorkman and Okma 1993, 94). But some substantial degree of institutional change could not be avoided. Notably, maintaining the existing corporatist self-regulatory bodies would have amounted to state-sanctioned cartelization of the new market; those bodies therefore would have to be replaced by quasi-independent state agencies. • The rate of transition: The committee recognized that the scale of its proposed transformation could not be accomplished overnight, and that various technical questions would need to be resolved and infrastructure developed. It estimated that this process would take five years. With its appeal to the left (universality) and the right (market competition and reduced regulation of capacity and price), as well as the scope it offered for further bargains around details yet to be specified, the Dekker Committee’s recommendations offered “not only a theoretically elegant blueprint of an equitable and efficient health care system but also an ingenious political compromise” (Schut 1995, 638). What was not fully recognized at the time, however, was that the reform package also contained the seeds of future conflict. Each of those future bargains would need to be as finely balanced as the overall blueprint if the coalition of support were to be maintained (van de Ven and Schut 1995, 108).

The Dutch Blueprint, 1987−2006  339

Pace: All deliberate speed The Dekker Committee process itself was remarkably quick: less than seven months from appointment to final report. Its recommendations on the speed of implementing its proposals were constrained only by technical and pragmatic considerations: principally the need to establish the new regulatory structures and tools, including the development of a risk-adjustment mechanism, to enable competition among insurers on a common platform. While recognizing the technical complexity of regulating competition in health care, the committee report also reflected confidence among the policy elite that the issues were amenable, within the estimated five-year implementation timeframe, to the application of expertise (Lieverdink 2001; van de Ven 1987). In responding to the report, the CDA-VVD coalition had to take into account not only these technical considerations, but also the political implications of the proposals. On the one hand, the general direction of the report captured the broad emerging consensus, and the initial response to it was broadly positive (Götze 2010, 11; Helderman 2007, 18; Lieverdink 2001, 1188; Schut 1995). On the other hand, as noted above, there were many political devils in the details. Some would have important and cross-cutting “wealth effects” on different segments of the population (Schut 1995). People in the wealthier third of the income distribution, accustomed to paying flat-rate premiums – which in recent years had become increasingly risk-related – would now face a premium structure primarily scaled to income. Meanwhile those in the lower two-thirds of the income distribution would see a portion of their income-scaled, employer-shared premiums converted to flat-rate premiums for which they were individually responsible. Employers, for their part, would now be responsible for sharing the income-related portion of the premiums for their higher-income as well as their middleand lower-income employees. Furthermore some services – for which the incidence of utilization varied across the population – would remain outside the basic universal package, to be covered by voluntary supplemental private insurance. How all of these wealth effects played out would depend exquisitely on decisions about the balance of income-scaled and flat-rate premium components, the progressivity of income-scaling, the definition of the basic package, and, most vexingly, the sophistication of risk-adjustment across insurers. The Lubbers coalition was eager to seize the moment to demonstrate its no-nonsense commitment to public sector reform, while leaving

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scope to resolve the technically and politically fraught issues of design. Moreover it could reasonably anticipate having the political breathing room to deal with these issues at a measured pace. The CDA or its predecessor Christian parties had been part of every coalition government since 1918 (Schut 1995, 622); the VVD, although not enjoying that degree of continuity, had formed part of the government for twenty-four of the forty years since the end of the Second World War. Such extraor­ dinary “electoral safety” (Alan Jacobs 2011) allowed the CDA to take the long view: to set a direction and then count on being in a position of influence to legislate the various components of the new regime as the design issues were resolved, both technically and politically. The CDA had no reason to anticipate the extraordinary shifts in Dutch politics that were to occur in the 1990s and 2000s, dramatically lengthening the timeline for putting the Dekker Committee’s blueprint in place. In 1988 the government issued its response to Dekker in the form of a letter to the parliament entitled “Change Assured” that endorsed the full sweep of the report’s proposals, including the ambitious 1992 target date to have the new system in place. A knowledgeable official in the health ministry at the time remarked upon the two defining features of the project outlined by the Dekker report and the government’s response taken together. The first was the “rational,” technocratic nature of the comprehensive and methodical approach to transforming the health insurance system as proposed by the Dekker Committee. The second was the set of political compromises that would inform the execution of that transformation: In fact, the Committee has made a blueprint for a completely new system of care. Despite criticism – in addition to appreciation – of the Dekker plan, many felt that it was in any event a comprehensive, integral plan characterized by a consistent structure based on a (predominantly) politicaleconomic analysis of health care. The Dekker report can therefore be characterized as highly rational in design. The definitive Cabinet standpoint with regard to the Dekker report, as defined in the policy paper ‘Change Assured’ and presented on March 7th, 1988, is to a large extent based on the ‘rational model’ of the Dekker report. However, an extensive plan for implementation has been added. The memorandum therefore provides on the one hand a final objective (to be reached in 1992) and on the other hand a schedule of the year-by-year measures required to achieve that objective. The bureaupolitical process has therefore ensured that the final objective is

The Dutch Blueprint, 1987−2006  341 defined, but also that a markedly incremental approach to implementation has been chosen. (Elsinga 1989, 253, emphasis in original)

Elsinga highlights the threefold nature of the political compromise embodied in the reform project. Two aspects of the compromise were substantive. First, the new regime would satisfy both those who sought a “national health insurance” scheme and those who favoured market-based instruments. Second, it would contain elements both of the liberalization of insurers on the demand side and of a continuing planning role for local bodies on the supply side. The third compromise was procedural: the strategy of stepwise introduction of the changes: “The arguments for [such an] approach are based in the first place, of course, on the size and complexity of the process of change and the need for painstaking care. However, another factor also played a role in this respect: implementation in phases would make it possible to introduce interim adjustments and to postpone difficult and politically controversial decisions” (252). A fundamental distinguishing feature of this stepwise strategy was that implementation would require legislative enactment, not just administrative action. And 1992, the target date envisaged for completion of the reforms, was recognized as extending beyond the life of the current coalition government (253). This was not a big bang under the spectre of a loss of power; it was a blueprint premised on assumptions about the stability of the coalition of support and its ability to continue to reach agreement on specific reform steps over time. The first wave of reforms was enacted in 1989. The process of integrating coverage into a basic package was begun with the transfer of psychiatric services and medical devices from social insurance to the AWBZ. This first wave also included the conversion of part of the sickness fund premium to a flat-rate charge, to be set at the discretion of each fund. On the supply side, GPs were freed to locate throughout the country, and the requirement that they obtain a municipal licence was abolished. Shortly thereafter the CDA-VVD coalition government fell, and was succeeded after elections by a CDA-Labour coalition, a shift that consolidated the platform for welfare-state reforms. The “politically ingenious compromise” of the Dekker package held as the reform framework was embraced by the new centre-left government. Labour also endorsed the stepwise approach to enactment, and the Labour health minister,

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Hans Simons, began developing legislation to enact the next wave of initiatives. The Strategy Unfolds: Two Steps Forward, One Step Back

The Simons plan Simons issued his proposals in 1990 in a document labelled “Working on the Innovation of Care,” in which he set out a target date of 1995 for the full realization of the reforms. (The five-year implementation window seemed to be a constant, albeit a moving one.) As would be the case for the Labour Party in Britain in 1997, the “Simons plan” continued the market-oriented thrust of the predecessor government while shifting to more solidaristic language. Minogiannis reproduces van de Ven’s apt summary: “Although the main lines of the 1988-government reform proposal were the same as the 1990 proposal, the vocabulary was different, reflecting Simons’s social-democratic background. Key words in the 1988-proposal of the then centre-right coalition cabinet are competition, market and incentives. In the 1990 proposal of the centre-left coalition cabinet these words are replaced by terms like shared responsibility between parties, consumer choice and decentralization” (quoted in Minogiannis 2003, 131). Simons’s proposals were substantively more solidaristic than those of the previous CDA-VVD coalition in two important respects: the basic universal package would be designed to cover 95 per cent of total health expenditure, not the 85 per cent previously proposed), leaving only 5 per cent to be covered through supplemental private insurance; and the income-scaled portion of the premium would be set to cover 85 per cent of the basic package, up from the 75 per cent proposed by the previous government. The emphasis on financing through incomescaled versus flat-rate vehicles was further heightened with the transfer of yet more services from social insurance to the AWBZ. Simons sought initially to transfer both GPs’ services and prescription drugs, but in the face of fierce opposition the plans to transfer GPs’ services were dropped. Simons planned a second and third wave of reforms to be presented in legislation introduced in 1991 and 1992. The 1991 legislation transferred prescription drug coverage to the AWBZ, and put in place the major pieces of the framework for competition among sickness funds (but not those that would affect private insurers). Sickness funds were

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freed from their regional boundaries – or, from another perspective, lost their regional monopolies – and permitted to compete nationally as of 1992, and released from the obligation to contract with all providers in their regions and hence were free to contract selectively. The legislation passed the lower chamber of the Dutch parliament, the House of Representatives, in June 1991. As a harbinger of future difficulties, however, the reform bill encountered strong opposition in the upper chamber. The Eerste Kamer, or Senate, is elected by the provincial legislatures; hence, not only may its political complexion be quite different than that of the lower chamber, but its members also have a more independent base vis-à-vis the government than do their colleagues in the lower chamber. Formally the Senate may only approve or reject legislation passed by the House, but there are informal modes of amendment.3 In this case, most tellingly, the greatest Senate opposition came from CDA members. Reinforcing the key principle of a blueprint strategy – enactment versus administrative implementation of successive steps – the CDA leader in the Senate demanded and won an amendment providing that any further expansions of the AWBZ would require legislative enactment and could not be brought about simply through ministerial decree (Götze 2010, 12; Minogiannis 2003, 132; Okma 1997, 129). In 1992 the price regulation regime was liberalized through legislation allowing insurers to negotiate prices below the national tariff. For reasons discussed in the next section, however, the legislation comprising the third wave of reforms as planned by Simons was never introduced. Alongside these legislative changes, incremental steps were taken to introduce a risk-adjustment mechanism for sickness funds. In 1991 transfers of funds to the sickness funds from the central pool were changed from a retrospective to a prospective basis. Capitation payments were initially adjusted only for each fund’s “historical expenditures” (expenditures in the prior year). In 1992 age and sex adjusters were applied to 20 per cent of the transfer, with the remaining 80 per cent still based on historical expenditures. After these two transition years, transfers were adjusted only for age and sex. But to cushion the sickness funds against the effects of these changes, especially given the crudeness of age and sex as risk adjusters, insurers were retrospectively reimbursed for actual expenditures more than 3 per cent above their prospective budgets (Douven 2004, 14–15). With these steps the process of following the Dekker blueprint appeared to be proceeding apace. In fact however, as is a danger with

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blueprint strategies, the first- and second-wave reforms had focused on the tempting low-hanging technical and political fruit. They had left private insurers largely untouched, and instead had buffered the sickness funds – collectively some of the strongest advocates of universalism and competition – against almost all risk. The only incursion into the private insurance market involved the transfer of some benefits – notably, prescription drugs – to the AWBZ. The use of the AWBZ was pragmatically attractive in that it provided a ready-made universal income-scaled vehicle for the basic package, and politically appealing in that it satisfied the solidaristic impulse of the Labour partner in the coalition after 1989. Nonetheless, opposition to the reforms was building, and having plucked the low-hanging fruit the government could anticipate that further steps would be more difficult.

The rise of political opposition The so-called Simons plan almost immediately met a wave of opposition that continued after the passage of the legislation. Despite the good pragmatic reasons for it, the decision to continue with the transfer of prescription drugs to the AWBZ before the harmonization of the premium structures of social and private insurance had been accomplished proved to be a strategic miscalculation. But, as Helderman and Stiller argue, Simons may have “in fact had no other choice, as the necessary institutional conditions that would lead to a merger of the two actuarial insurance schemes (e.g., a more sophisticated risk equalization scheme and the convergence of both type of insurers) were simply not available at that time” (2014, 824–5). Waiting until these conditions were in place would have held the entire reform package hostage to its most technically difficult components. But because the AWBZ was financed not only by income-scaled contributions, but also by a modest subsidy from general taxation, the immediate effect of the broadening of AWBZ coverage was a substantial increase in public spending, a decrease in the private share of health expenditure, and an increase in redistribution – all of which were worrisome to various elements of the CDA constituency (Helderman et al. 2005, 198). Furthermore, when private insurers refused to reduce their premiums commensurate with the transfer of benefits, upper-income beneficiaries found themselves paying increased income-related contributions to the AWBZ as well as unreduced private premiums (Schut 1995, 641).

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Meanwhile changed circumstances – notably the economic recession of the early 1990s – and the sheer passage of time were awakening dormant concerns among a variety of interests. In the economic downturn, employers, as well as some higher-income groups, became increasingly concerned about the higher payroll taxation implied by the expansion of the scope of income-scaled financing. Private insurers supported a convergence with social insurance only if it meant a privatization of the sickness funds. Some providers worried about the end of mandatory contracting by the sickness funds, and some, especially GPs, protested the functional as opposed to the provider-based definition of the services covered in the basic package. Even early strong supporters began to have qualms. Labour unions, though broadly supportive, worried about the regressive effects of the flat-rate portion of the premium structure. The sickness funds were concerned about the integration of long-term care into a package for which they would assume increased risk over time. A welter of conflicting reports and position papers was issued by interest groups, advisory bodies, and even working groups of the CDA and Labour parties themselves (Bjorkman and Okma 1997, 102–3; Lieverdink 2001, 1189; Minogiannis 2003, 132–5; Okma 1997, 99–100). In an unprecedented move, the peak associations of sickness funds and private insurers jointly commissioned a report that found common ground in supporting a continuing role for the state in costcontrol and capacity regulation, as well as increased flexibility for insurers by expanding the share of flat-rate versus income-related premiums and optional levels of deductibles (Okma 1997, 133). In autumn 1993 the CDA-Labour cabinet announced, via a letter to the parliament labelled “Modernizing Health Care: Carefully Ahead,” that it would pause the process of reform until the proposed next steps had been evaluated more fully. (This strategy of taking a hiatus in the face of gathering opposition would be adopted by a government in another time, 2010, and place, England, as described in Chapter 5.) The Ministry of Health, in consultation with the insurers, established yet another advisory committee, which concluded that the reforms should have begun with the integration of social and private insurance, rather than with the expansion of the AWBZ (Okma 1997, 133–5). The swirl of opposition also led to the establishment in December 1993 of a parliamentary committee of inquiry, the Willems Committee, to look into the decision-making process for health care reform. Its March 1994 report concluded that ambiguities in the original reform documents had

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allowed for the emergence of a consensus that was more apparent than real, and that a strong core of opposition to the reforms existed, especially among employers and private insurers (Bjorkman and Okma 1997, 101–2). Simons’s third-wave reforms would never be introduced, and Simons himself would resign as health minister in 1994. Opposition to the health care reforms was neither the only nor even the major problem facing the third Lubbers cabinet. After a promising start following the 1989 election, relationships between the government on the one hand and employer and labour peak associations on the other had begun to fray. An unusual tripartite agreement, the Com­ mon Policy Framework “promising growth, employment, tax relief, and wage moderation,” signed by the government and social partners in 1989, was subsequently ignored (Hemerijck, Unger, and Visser 2000, 220–1) Early in 1991 the employers withdrew their support from the tripartite framework, boycotted the regular spring meeting of the employer and labour federations with the government, and “stepped up their campaign for tax relief, lower non-wage labor costs, and a cap on government spending” (221). The government and social partners were also unable to reach agreement on social security reform, leading to unilateral government action and outright (though ultimately futile) rebellion on the part of the unions. Levy reports that, “[i]n 1991, Dutch trade unions mobilized one million protesters against proposed changes to the disability system, the largest demonstration in the postwar period” (1999, 261). In the general election of May 1994, both parties in the coalition would suffer for this breakdown.

The purple coalitions The May 1994 election brought about the one eventuality that Lubbers and the CDA had not foreseen in embarking on their blueprint strategy for health reform: the exclusion of the CDA from government for the first time since 1918. The government’s program of social security reform in the context of an economic recession had dramatically eroded the support of both coalition partners. The CDA was further weakened by the departure of its charismatic leader, Lubbers, to seek (unsuccessfully) the presidency of the European Commission. In the election the CDA was reduced from fifty-four to thirty-four seats, while Labour fell from forty-nine to thirty-seven. The main beneficiaries were the conservative VVD, which gained nine seats for a total of thirty-one, and the social-liberal D66, which doubled its representation from twelve

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to twenty-four. Labour, as the largest party in the new parliament, entered into complex coalition negotiations in which D66 played a pivotal role. The result was an unprecedented “purple” coalition comprising Labour, the VVD, and D66 but excluding the CDA. Wim Kok, the Labour leader and deputy prime minister in the previous Lubbers government, became prime minister. Kok, who, as noted above, had been one of the architects of the famed Wassenaar Agreement as head of the largest labour federation before becoming head of the Labour Party, was a strong and experienced leader, pragmatic in policy and deft in politics. In the words of one of his former ministers, he “radiated authority.”4 This combination of pragmatism, deftness, and authoritative leadership would be critical to the success of a coalition than spanned a broad ideological spectrum without the centrist ballast of the CDA. The coalition adopted a “no regret” policy in crafting its coalition agreement, meaning that no policy would be adopted that would require one of the partners to announce that it “regretted” the inclusion of that plank (Okma 1997, 139). Even so the government would experience a relatively large number of intra-party conflicts over policy – most of them on matters related to fiscal and economic policy (Timmermans and Moury 2006, 397). Kok was determined to continue the welfare-state reforms initiated by the previous government, but in a more incremental, less threatening way under the banner of an agenda whose overriding priority was employment creation. The architect of Wassenaar maintained his consistent commitment to wage moderation as key to this agenda, but softened its edges with tax cuts targeted at low-income workers (Levy 1999, 261–2). Aided by a rebounding economy, the Kok government was able by 1997 to institute the social security reforms begun under Lubbers (Hemerijck, Unger, and Visser 2000, 223). In 1998 the purple coalition was resoundingly re-elected. Reframing the reforms: Three compartments In the health care arena the 1994 change in government presented both the opportunity and the need for Kok to reset the course of reform. Taking lessons from the fate of the Simons plan, Kok abjured any “irreversible structural reform” (Götze 2010, 12). The Dekker-Simons comprehensive blueprint received no mention; instead, proposed changes were presented as incremental and pragmatic. Most important the Kok government backed away from the use of the AWBZ as the vehicle of reform; rather, that program was to be returned to its original purpose

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of covering uninsurable risks, principally long-term care, and marketoriented reforms were to focus on the curative sector. In place of the language of universalism, the government resurrected a tripartite view of health insurance coverage, comprising three “compartments.” The first compartment, the AWBZ, was conceived of as a government program, although the sickness funds and private insurers would continue to act as carriers. The second compartment would comprise a comprehensive range of curative services to be covered by the sickness funds and private insurers, on a competitive basis subject to government regulation. Competition would occur within but not between the social insurance and private insurance sectors. Services that had been transferred to the AWBZ under Simons, notably prescription drugs, would move back to this second compartment. The third compartment would include nonessential services that could be covered under supplemental private coverage in which the state had little interest. Some services, most notably much adult dental care, were moved from the second compartment to this fully private third compartment (Götze 2010, 28). This brilliant recasting of the reform project allowed market reforms to continue in the “second compartment” of social and private insurance. The continued bifurcation of the social and private insurance markets allowed regulators to continue to hone their tools in the social insurance sector, where the sickness funds were broadly supportive of reform – and where much of the expertise to manage the insurance system resided (Helderman et al. 2014, 23, 30) – without taking on the private sector opponents. In another deft move Kok gave the health portfolio to the socially liberal and market-friendly D66, thereby avoiding lodging the leadership of reform with either the left (Labour) or the right (the VVD).5 Developing the regulatory tools and structures The new D66 health minister, Els Borst-Eilers, was a respected academic physician with an appreciation of and respect for expertise in the development of policy. Her tenure was marked by the methodical but incremental development of the conditions for competition, notably the progressive refining of risk-adjustment. The sickness funds had strongly opposed the first attempts at risk-adjustment in 1992, which accounted only for the age and sex profile of beneficiaries, as far too crude to capture their full actuarial risk, and the government had agreed to buffer the effects of this calculation almost entirely through retrospective reimbursement, as discussed above (Lieverdink 2001,

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1189). Negotiations continued under Borst, informed by expertise within the health ministry, the Sickness Fund Council, and academe, and led to the inclusion of regional (urban/rural) and disability status in the risk-adjustment formula in 1995, the further refinement of disability status to include employment or social security status in 1999, and the addition of the first utilization measures (regarding drugs) in 2002. In 1998 the prospective payments of each insurer were divided into four categories according to type of service, and different weights were used for the risk adjusters in each category (Douven 2004, 15). Meanwhile the rate of retrospective buffering was progressively reduced: from less than 3 per cent in 1993 and 1994, the level of risk borne by the sickness funds had risen to 28 per cent by 1998 and to 38 per cent by the end of the second purple coalition in 2001 (17). The government was also laying the groundwork for competition on the supply side – that is, among providers. The existing quasi-­corporatist structures for the approval of contracts and prices would amount to cartelization in a new competitive market, and would have to be replaced. (Dekker had recommended that the Sickness Fund Council and the Central Agency for Health Care Tariffs [Centraal Orgaan Tarieven Gezondheidszorg, COTG] be supplanted by a new regulatory body comprising only government appointees.) These structures were also caught up in a broader wave of reform that had been building since the early 1980s and that swept away much of the corporatist architecture of advisory and administrative bodies in the mid-1990s and streamlined the government’s advisory apparatus (Okma 1997, 95–7). In 1995 an integrated Health Care Inspectorate responsible for quality regulation and inspection was formed from the merger of three pre-existing sectoral inspectorates (Ngo et al. 2008, 10–12). A more dramatic change, given that it involved the disbanding of a corporatist body with a fifty-year history, was the enactment of legislation in 1998 abolishing the Sickness Fund Council and transferring its functions to two new agencies effective January 2000. The new agencies, the Health Care Insurance Board (College voor Zorgverzekeringen, CVZ) and the Supervisory Board for Health Care Insurance (College Toezicht Zorgverzekeringen, CTZ), each comprised a government-appointed membership selected for “technical expertise and professional qualifications,” rather than interest-group affiliation (Maarse 2008, 135). The CVZ took over the administrative functions of the former Sickness Fund Council, including risk-pooling arrangements and the licensing of insurers in the social insurance sector, as well as recommending changes

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to the range of services in the social insurance basket, contribution rates, and allocations to health insurers subject to ministerial and parliamentary approval. The CTZ assumed the “supervisory” (inspection and audit) functions of its predecessor, overseeing the governance and financial probity of social insurers, as well as responsibility for oversight of the Sickness Fund Act and the Exceptional Medical Services Act (the AWBZ) (Helderman 2007, 188; Maarse 2008, 135–6). Private health insurers otherwise continued to fall outside the purview of either of these bodies and to be regulated instead under the regulatory regime for all private insurance. The price regulation regime also lost the last vestige of its corporatist history when the central regulatory body, the COTG, was reconstituted as the Board for Health Care Tariffs (College Tarieven Gezondheidszorg, CTG) in 2000 and the independence of its members from stakeholder groups was reinforced (Helderman 2007, 189). The stripping of corporatist elements from these bodies amounted to an institutional transformation of the regulatory regime. As Helderman et al. trenchantly put it, “[w]hen the [the Sickness Fund Council] was abolished on 4 January 1999, an icon of the Dutch welfare state disappeared from the political-administrative and societal stage.” Gone was the forty-four-member council representing “employers … employees, sickness funds, care-providers, ‘staff’, patient associations, members appointed by the Minister and the Ministerial representative and the observer on behalf of the [central price regulation agency]” (2014, 55), to be replaced by a slim, seven-member council of expert ministerial appointees. Nonetheless several sources of continuity remained. Much as would occur when the NHS Commissioning Board replaced the NHS Executive in England thirteen years later, the bulk of the substantial staff expertise of the Sickness Fund Council was simply transferred to the new CVZ. The former chairman and secretary of the Sickness Fund Council moved to the analogous positions at the CVZ. Helderman and Stiller (2014) see this change as an example of incremental institutional “conversion.” But in the context of the broader reform agenda in the Netherlands, the change needs to be seen as part of a fundamental shift of organizing principles from those of corporatist accommodation to those of competition. Informal mechanisms of corporatist consensus-building nonetheless continued to exist alongside the formal structure. Relationships between the minister of health and the national associations of insurers and providers, as well as among the national associations themselves, continued to be strong. On occasion these relationships resulted in

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“collective contracts” under which the associations agreed to take voluntary action in compliance with government objectives under the shadow of government intervention. Examples included productivity improvements in long-term care and price reductions in the pharmaceutical ­sector (Maarse 2008, 136–7). Coping with costs In the runup to the inauguration of the euro in 1999, the purple coalition government was determined to establish its credibility in matters of fiscal discipline, symbolizing Dutch leadership as a founding member not only of the EU but also of the new eurozone. Finance Minister Gerrit Zalm, a forceful member of the Kok cabinet, enforced an austerity agenda aimed at keeping the deficit below 3 per cent of the total budget –the limit set out in the Maastricht Treaty as a condition for entry into the common currency (Companje et al. 2009, 327). As part of this agenda, health costs were constrained, largely by employing instruments that periodically had been used or attempted for cost constraint in the past. Coverage of pharmaceuticals was shifted from the universal AWBZ back to the social and private insurance “compartment,” thus reversing the shift made in 1992. For a brief time (1997–99), user fees for GP visits and hospital admissions were instituted, but they were quickly abandoned as administratively unwieldy as well as politically controversial – thus reprising the course of the brief experiment with user fees for specialist visits and pharmaceuticals from 1983 to 1988. Most significant, in 1995 the government again reached for an instrument that had failed in the mid-1980s and early 1990s – namely, the establishment of a negotiated global cap on payments to medical specialists, this time in the form of lump-sum payments to hospital-based partnerships, which were then responsible for allocating the funds among their members. In 1996 this measure was followed by a freeze on the number of specialists in each hospital eligible for remuneration through social insurance (den Exter et al. 2004, 118; Götze 2010,11, 21; Schut and Varkevisser 2013, 187–8; Thewissen, Jeurissen, and van der Vlugt 2015, 246–8). This time the budget and capacity constraints held, at least in the short term. But opposition to the constraint measures built, focused on their alleged impact on wait times for services. As in the case of other countries, such as Canada and the United Kingdom, where wait times and lists became an issue in the 1990s, the absence of consistent data series from the Netherlands makes it impossible to know the extent to which these problems were growing or to which they were exacerbated by

352  Remaking Policy

budget measures. Nonetheless the constraints were effective in reducing the rate of increase in the volume of services provided. Furthermore, although wait times in the Netherlands remained modest in international perspective (Siciliani and Hurst 2003), there is some evidence that they increased, at least in a small sample of hospitals (Schut and Varkevisser 2013, 188). What is undeniable, moreover, is that wait times became a major source of public concern and political pressure. In response the government instituted a temporary (1997–99) “wait list fund” for expenditures targeted at the most problematic hospitals and specialties – a remedy seized upon in Britain and Canada under similar circumstances. The waiting list expenditures had no appreciable effect, however, in part because of associated increases in demand and in part because of “gaming” behaviour by hospitals. In 2000 and 2001 “waiting times for various hospital treatments substantially exceeded the acceptable waiting time limits formulated by hospitals, medical specialists and health insurers” (Schut and Varkevisser 2013, 189). By 2000 and 2001 the milestone of entry into the euro had been passed, and the Dutch fiscal balance had moved to surplus (Beck and Andreasson 2002). With this easing of fiscal pressure and the growing pressure of the waiting list “crisis,” the purple coalition government abandoned its budget and capacity constraints in the health care sector. It turned instead to new forms of payment aimed at increasing productivity, and renewed its interest in competition-based models. Although the fruits would not be realized during her tenure, Minister Borst set in motion the construction of what would become an important piece of the framework for competition on the supply side: the development of a set of Diagnostic Treatment Combinations (Diagnose Behandelingscombinatie, DBCs) for the classification of hospital services (Companje et al. 2009, 326–7). DBCs represented a Dutch-specific version of the case-mix-based Diagnostic Related Groups (DRGs) that had been developed in the United States in the 1980s and refined over the subsequent years, and they would be a crucial building block for any system of price competition by hospitals for insurer contracts. An attempt to import the DRG model into the Netherlands in the 1980s had foundered on provider opposition. Borst, however, now directed officials within her ministry to work with the peak associations of insurers and providers to develop case-mix groupings, building upon a draft set of DBCs that had already been developed by a working group of insurers and providers, notably medical specialists. This strategy ultimately allowed the resulting DBC framework to be portrayed as a “negotiated

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product,” not an “expertise product” (Götze 2010, 19; see also Schut and van de Ven 2005, S66), and indeed it was a uniquely Dutch creation (van Poucke 2007). Hence in this arena as well, interest-based structures continued to shape policy even as formal structures privileged expertise. But the strategy also had significant unintended consequences. Returning to the blueprint Throughout the purple coalition era, the ideas of the Dekker blueprint had remained only partially submerged, if politically toxic. It is worth noting that many of those working on the technical development of regulatory tools were the same policy entrepreneurs within and outside government who had consistently promoted a framework of comprehensive regulated competition since the mid-1980s and who kept the basic Dekker model alive (Lieverdink 2001). Dutch academic observers at the time saw the reforms in the social insurance sector as “part of a longer term vision and reform plan towards some sort of managed competition” (Schut and van Doorslaer 1999, 65). A senior health ministry official who had been involved with the Simons reforms as well as those under the two purple coalitions described the latter to me as a “silent revolution” in the ongoing process of realizing the ultimate goal of transforming the framework in the mould of managed competition among insurers. In his view the purple coalition reforms had allowed the public to become “used to” competitive insurers, even as continued problems such as wait times demonstrated the dangers of stopping short of the ultimate, more comprehensive reform.6 More broadly, although the consensus around Dekker had fractured during the Simons period, the appetite for reform had not dissipated, and the desire for a more comprehensive approach remained alive. After the 1998 election the will to undertake more comprehensive reform began to firm. The government had been emboldened by its definitive win. Pressure was building within the parties’ parliamentary caucuses for a coherent plan for health reform.7 Negative feedback in the form of the waiting list crisis was fuelling dissatisfaction with the available tools of budgetary controls and giving impetus to the desire for more comprehensive change (Thewissen, Jeurissen, and van der Vlugt 2015, 246). The 1998 coalition manifesto had signalled that the government would consider more far-reaching changes in health care financing and organization, and in 1999 Minister Borst was reported in the media to have resurrected the concept of integrating the AWBZ as well as social and private insurance into a single comprehensive package to be offered

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by competing insurers (Companje et al. 2009, 274, 281). Once again the balance of universality and competition proved appealing to the left and right partners in the coalition. But as had been the case in the CDALabour coalition ten years earlier, the ideological gulf between Labour and the VVD, even with the mediating influence of D66, could not be spanned when it came to concrete design issues with redistributive implications such as the balance of income-scaled contributions and flatrate premiums. In 2001 Borst finally issued a position paper, A Question of Demand, on comprehensive health insurance. Echoing the rationale of the Lubbers government in appointing the Dekker Committee fifteen years earlier, the purple coalition “again stressed the threat of diminishing solidarity in the still bifurcated system, which could no longer be tackled with ad hoc corrective measures” (Helderman and Stiller 2014, 828). But having learned from the Dekker-Simons experience, the government would approach the creation of a comprehensive system via a different route.8 Rather than building a common system on the platform of the AWBZ, the government “revived the original ideas of the Dekker Committee by starting with the integration of the sickness fund scheme and private health insurance into a national insurance scheme for curative health care” (828). To be fair, as noted earlier, this was not an option that had been available to Dekker and Simon in the absence of the necessary tools and infrastructure to regulate a competitive insurance market. But these conditions were now in place, having been honed in the social insurance market; all that remained was to extend them to encompass private insurance as well. Moreover both the social insurance and the private insurance sectors had morphed over the 1990s in ways that had brought them much closer together. It was estimated that the new comprehensive scheme could be in place by 2005, after which the AWBZ could be wrapped into it (Helderman 2007, 221). In preparing for her retirement after eight years as health minister, Els Borst stated that the realization of this comprehensive scheme would be her “political testament” (Sheldon 2001). Notwithstanding their agreement on this overall framework, the parties in the purple coalition remained divided on devilish details of the definition and scope of the basic package and the balance of incomescaled and flat-rate premiums. Over the course of the 1990s, flat-rate premiums had constituted 10–15 per cent of total revenue (Schut and Hassink 2002, 1013), and the Labour partners in the coalition were loath to see that portion increase. The VVD, at the other extreme, wanted

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income-scaled contributions to be replaced entirely by competitive flat-­ rate premiums, and proposed that subsidies from general taxation be used to compensate low-income beneficiaries. The Social-Economic Council recommended a compromise: a 50/50 split between the two revenue sources, but the parties remained divided. More important from a strategic perspective, both Labour and the VVD were in a strong position in public opinion in autumn 2001 – virtually tied at the top of the projections of likely numbers of seats in the next election (Pennings and Keman 2002, 3). Each could therefore wager that it would be in a stronger position in negotiations to resolve the remaining details of health reform after the election.9 Hence no legislation was introduced before the coalition government left office in May 2002, but a group of senior civil servants led by Borst produced an outline that laid the ground for action by the successor government.10 The stage for the next act in the unfolding of the Dutch blueprint had now been set. Before that curtain rises, however, it is important to appreciate how the terrain the new government faced had been shaped not only by the policy developments under the Lubbers and Kok governments, but also by the behaviour of civil society actors in the health care arena itself.

Adaptive and anticipatory behaviour: The shadow of the future The process of consensus-building around the Dekker report in the late 1980s had served, notwithstanding the setback of other missteps in the Simons plan, to establish what Groenewegen aptly and presciently termed “the shadow of the future.” He described a process in which “the shadow of the future, as outlined in … policy proposals, prompts responses from interest groups. These responses modify the institutional structure of the system before actual changes have even been attempted by government. As a result, the conditions for successful implementation of new policies are altered” (Groenewegen 1994, 137). Groenewegen rightly presented the Dutch reforms as an instance of just such a course of events. The Dekker process of the late 1980s and the steady if unspectacular process of liberalizing and reregulating the social insurance sector in accordance with the Dekker model in the 1990s changed the shared expectations governing the behaviour of various actors in the health care arena. Much of that behaviour can be understood as the activity of “institutional entrepreneurs” (see Chapter 10), and led to new corporate forms that bridged the public/private divide

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and created a new set of large corporate actors whose economic and political power rivalled that of the corporatist associations. The growing concentration of the industry limited the degree of “competition” in the rolling out of the “managed competition” model. Indeed, as we shall see, the “managed competition” label, at least as it is understood in the US context, fits ill with the Dutch case. Nonetheless the changes of the 1990s moved the Dutch system much closer to the basic model Dekker envisaged – one in which all insurers operated on a common, highly regulated platform offering a common package of mandatory coverage. And there is no doubt that the social insurance market became marginally more competitive, moving as it did from a system of regional monopolies to one in which “the average market share of these former regional sickness funds in their original home regions declined from 90% in 1994 (ranging from 70 to 98%) to 79% in 2000 (ranging from 51 to 90%)” (Schut and Hassink 2002, 1012). And if not competition, then increased risk-bearing could be expected to drive entrepreneurial behaviour: with the gradual refinement of the risk-­adjustment mechanism and the concomitant decline in retrospective buffering, the financial risk borne by social insurers had climbed steadily to almost 40 per cent of revenue by 2001. These changes in the climate of expectations in the health care arena amounted to a significant cultural shift that drew on broader societal changes. Lieverdink describes the prevalence of entrepreneurial behaviour and “thinking in terms of markets, products and consumer sovereignty” as linked to a broader ideological shift in the Netherlands favouring “individual responsibility, entrepreneurship and less governmental control,” and reflected in other welfare-state reforms, notably the privatization of disability and sickness insurance (2001, 1191). These “third-order” changes in the organizing principles of the Dutch health care state, embedded in the Dekker blueprint, slowly developed over time and moved towards fruition in the next stage of the process.

The 2002 election: A political earthquake Then, in 2002, as had been the case for the CDA in 1994, electoral fortunes shifted in unforeseen and dramatic ways. Dutch politics entered a phase of dramatic upheaval with the sudden and dramatic rise of Pim Fortuyn, a charismatic maverick politician with a right-wing populist agenda – a phenomenon occurring across Europe at the time. Fortuyn, a well-known media personality, was recruited in November 2001 to

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lead a small, new, locally based party called Livable Netherlands. Evicted from that party shortly thereafter over anti-Islamic comments, he quickly formed an ad hoc group of candidates for the parliament under the eponymous banner Pim Fortuyn’s List (Lijst Pim Fortuyn, LPF). The LPF rocketed in public opinion to a projected twenty seats in the lower house within less than a month. Support continued to build to a peak of twenty-nine seats projected in mid-March (representing about 19 per cent of the electorate) and settled at a projection of twentythree or twenty-four seats (about 15–16 per cent of the popular vote) by mid-April, a month before the election. Concurrently, support for the coalition parties, especially Labour and the VVD, plummeted by mid-March from a projection of about forty seats each in October 2001 to about thirty seats for Labour and twenty-five for the VVD. Two other dramatic events were to occur before the election: the release of a longawaited report on the failure of a Dutch peacekeeping force to protect a Muslim “safe haven” in the Bosnian conflict in 1994, and the assassination of Pim Fortuyn nine days before the May 15 election. Neither of these events changed the electoral prospects of the respective parties. Only the previous autumn the main parties in the coalition government had been confident of re-election; in the result, they saw their seat shares fall sharply. The LPF, even without Fortuyn, won more seats (twenty-six) than either Labour (which fell from forty-five to twentythree seats) or the VVD (which fell from thirty-eight to twenty-three). D66 saw its representation halved from fourteen to seven. A surprising beneficiary of Fortuyn’s rise was the CDA, which had not distanced itself from the populist politician as had the members of the purple coalition. The CDA gained fourteen seats for a plurality of forty-three in the parliament. These results were interpreted at the time as the marker of a sea change in Dutch politics: the high tide of a rejection of the tradition of consensus-oriented, centre-seeking politics and technocratic policymaking (Jones 2002; Pennings and Keman 2002).11 The popularity of two towering centrist politicians, Lubbers of the CDA and Kok of Labour, was thought in retrospect to have masked this underlying trend (Jones 2002).12 With the departure of Kok, who stepped down as party leader but not as prime minister in December 2001 and did not contest the election, the second of these two figures was gone. Another related interpretation saw even deeper currents of cultural change. In the passing of the pillarized framework of consociational democracy, Dutch politics had lost the intermediate structures that had

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allowed for the accommodation of a wide range of difference. A “liberal, white, secular majority culture” had emerged, with a majoritarian impulse that fit ill with the inclusive politics of consensualism (Vollaard 2010). To the extent that this interpretation is correct, the rise of outlier protest parties such as the LPF can be seen as a reaction against majoritarian centrism. These readings, however, can be overstated. Certainly the LubbersKok period stands out as one of relative stability in Dutch politics. Of thirty cabinets from 1946 to 2017, not including minority caretaker cabinets as a new government was being formed after an election, only thirteen served more than a thousand days of a normal four-year term. All five of the Lubbers and Kok cabinets did so. Similarly, multiple small parties were a feature of Dutch politics throughout the twentieth century, although the sudden bursts of popularity they variously enjoyed were a more recent phenomenon. What did change over this period, with fundamental implications for strategy-setting, was the expectation that the Christian Democrats and either Labour or the VVD would be part of the governing coalition. The waning of the formal structures of corporatism that followed the demise of pillarization also removed a number of vehicles through which intermediate associations had been brought together in consensus-building. Unlike the political party system, however, the web of relationships connecting these associations in the social middle ground proved resilient to these changes, with important implications for the policy process, as we shall see in the remainder of this chapter.

The culmination of reform: A big bang in microcosm The period immediately after the May 2002 electoral earthquake was undeniably an unstable one, as the CDA sought to put together a governing coalition including the unruly and inexperienced LPF. A CDAVVD-LPF cabinet, under CDA leader Jan Peter Balkenende as prime minister, took sixty-seven days to form and lasted only eighty-six days before falling and going into caretaker status as the nation returned to the polls in January 2003. That election represented something of a normalization or “reaffirmation of the centre” of Dutch politics after the turbulence of the previous year (Harmsen 2002). The LPF, volatile and incoherent without its charismatic founder, fell back to five seats. The CDA and a revivified Labour party, with forty-four and forty-two seats, respectively, were the largest parties in the new parliament, and tried

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for a time to form another Lubbers-Kok-style two-party coalition. This effort fell apart over the failure of the two parties to agree on a financial framework, after their first attempt was negatively reviewed by the Central Planning Bureau, an independent government advisory body and a key player in the development of fiscal and economic policy in the Netherlands. The CDA then turned to other partners. The twentyeight seats of the third-largest party, the VVD, were insufficient to make a majority, and the CDA therefore also brought D66 into the process to form the second Balkenende cabinet in less than a year, taking office in May 2003. A renewed push to reform The health portfolio in the second Balkenende cabinet went to the VVD.13 Hans Hoogervorst, the new minister of health, had served in the second purple coalition government as a junior minister in the Min­ istry of Social Affairs and Employment and as minister of finance in the short-lived CDA-VVD-LPF government – and would go on to a career in financial regulation at the national and international level after leaving political office. He had begun his career in banking, and had broad networks within the financial (including insurance) and political communities (Helderman et al. 2014, 38). Hoogervorst, like Lubbers twenty years earlier, took a business-oriented, no-nonsense approach to policy, and was determined to bring the process of health care reform to a conclusion. In his view “all the arguments had been had” and it was time to act.14 These views were generally shared within the coalition. Although some internal division between the left and right wings of the governing CDA remained, there was a growing sense that the earlier debates seemed stale. One of the two issues that had most divided the purple coalition – the balance of income-scaled contributions and flat-rate premiums – was largely resolved when the new cabinet decided to accept the “compromise” of a 50/50 split recommended by the Social-Economic Council, with the proviso that the flat-rate premiums would be subsidized publicly on an income-scaled basis.15 The other – the question of whether insurers would be public or private entities, remained to be resolved. Under Hoogervorst a campaign of health care reform was relaunched, with a tight timeframe for completion. Hoogervorst wanted legislation enacted by 2005, to be effective in 2006 before the next election in 2007. No longer was there an assumption, as there had been fifteen years earlier, that negotiations could continue after the next election.

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Hoogervorst was determined to create a bandwagon effect – a sense that this time the blueprint would be completed – to ensure that the legislation was in place before the next election in 2007. As Dutch politics became more volatile, political strategists such as Hoogervorst were beginning to think like those in more adversarial systems – the United Kingdom, for instance, where the world beyond the next election was unpredictable; recall Thatcher’s determination in 1990 to have the internal market reforms in place before the 1992 elections. These calculations drove what in effect was a big bang in microcosm, within the overall course that had been charted by a blueprint strategy.16 Hoogervorst embarked upon an intensive process of engagement with private insurers, drawing on their specialized expertise and information. With the demise or delegitimation of many of the previous corporatist mechanisms of consultation, Hoogervorst was free to develop more ad hoc mechanisms (Helderman et al. 2014, 38–9). He established a steering committee with insurer associations to address the technical design details of the final legislation. This intense consultation continued while the bill was before the House of Representatives from September to December 2004. Although the insurers remained sceptical for a time, the passage of the reform legislation by that chamber in December 2004 persuaded them, as well as other stakeholders, including providers and patient organizations, that a bandwagon was indeed under way. When the bill moved to the Senate stage (January–June 2005), consultations with insurers, providers, and patient groups intensified – both within the ministry and in the legislative arena.17 The parties in the coalition held a majority in the Senate, but intra-party negotiations, especially between the left and right wings of the CDA, played an important role. A highly regarded elder statesperson of the CDA, seventy-nineyear-old Senator Hannie van Leeuwen, led the internal negotiations. The principal issue dividing the CDA was private status for insurers, as provided in the legislation, but those favouring public status were fighting a losing cause. The VVD dismissed the dispute about whether the new system amounted to the privatization of social insurance, as opposed to its universalization, as amounting to a concern about whether the result was “bluish-grey or “greyish-blue.”18 But many on the left of the CDA remained uneasy. They found support for their oppositional stance in the argument that the degree of government regulation and subsidy envisaged in the Dutch model would contravene EU competition law if applied to insurers as private entities. This concern had indeed been voiced since the days of Dekker (Hermans and

The Dutch Blueprint, 1987−2006  361

Tiems 1997). Hoogervorst managed to lay this argument to rest, however, by seeking a resolution from his VVD colleague on the European Commission. In a 2003 letter European Commissioner Frits Bolkestein assured Hoogervorst that a decision by a member state “to entirely assign the cover of statutory social security health insurance to private insurance undertakings” would be permissible under a proviso of the relevant EU directive (Helderman et al. 2014, 207–8). (This ruling was formally confirmed after the legislation was in place in 2006 [Companje et al. 2009, 372].) With this issue resolved, and in the face of support for the private option from both private and social insurers, now that they had become so interlinked, and no significant allies on the opposing side, the CDA sceptics finally acquiesced. The legislation passed the Senate in June 2005. The positions of interests The positions of the various interests in this episode can be summarized as follows:19 • Insurers: In this final stage of the blueprint process, insurers constituted the most influential interest. Once the contentious issue of private versus public status was resolved, much of the discussion revolved around technical issues such as the IT infrastructure and reporting requirements implied by the reforms, as insurers sought to minimize the new investments they would need to make. Another question concerned whether beneficiaries would have to opt actively for an insurer once enrolment was opened, or whether there would be a default provision favouring the existing insurer. Because technical capacity and market position still differed across insurers, these discussions often pitted insurers against each other as well as against the government. • Providers: Because the reforms touched little on the supply side of health care delivery, and because insurers had yet to develop an aggressive and sophisticated purchasing capability in contracting that would countervail the power of providers, the attitudes of providers ranged from indifference to moderate support for the reforms. Hospitals were, on balance, strongly supportive of the relaxation of central control of capacity, although there were potential losers as well as winners from this liberalization. The efforts of hospitals and medical specialist groups were focused rather on the parallel changes in

362  Remaking Policy

their payment mechanisms, with the ongoing development of DBCs as initiated by Borst, where they were highly influential. • Patient groups: The involvement of patient groups, rather late in the process, was largely for purposes of legitimation, and was recognized as such without rancour by the patient groups themselves, notably the Federation of Patients and Consumer Organisations (Helderman et al. 2014, 38).20 The developments of the 1990s had accustomed patients to a quasi-competitive insurance market, and patient associations did not take strong positions for or against the reforms. Rather, they took the opportunity of the consultation process to seek to ensure that the new arrangements protected consumer rights – highlighting in broad terms the rights classically enunciated by US president John F. Kennedy in a message to Congress in 1962: the right to safety, the right to be informed, the right to choose, and the right to be heard.21 A second concern was to facilitate the negotiation of group insurance contracts for particular disease-specific patient groups. The patient groups were most active at the Senate stage. • Employer associations and unions: The classical social partners were generally less supportive of the reforms, which they saw as akin to the earlier privatization of disability insurance that transferred risk and cost to the workplace parties. Their influence had waned, however, with the decline or disappearance of the formal structures of corporatism, and they were much less involved in the consultation process than were interests in the health care arena itself. Features of the new regime The new statutory regime for health care financing and delivery comprised four complementary pieces of legislation: the Health Care In­ surance Act, the Health Care Allowance Act, the Health Care Market Regulation Act, and the Health Care Institutions Admission Act, all of which came into force in 2006. Together these acts brought to fruition the basic framework of universal health insurance first proposed by the Dekker Committee twenty years earlier. The reforms in essence universalized, with some modification, the arrangements that had been developed in the social insurance sector over the previous two decades. As Schut and van de Ven succinctly describe it, the new regime was created “by transforming the legal status of the sickness funds from non-public administrative entities into private health insurers and by applying much of the regulation of the former sickness fund scheme

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(e.g. open enrolment, community rating and risk equalisation) to private health insurers” (2011, 110–11). The essential features of the new regime, and the extent of their consistency with the Dekker framework, can be summarized as follows: • Universality: The Health Care Insurance Act mandated all Dutch residents to have health insurance coverage. Unlike the individual mandate in the United States, this requirement was not enforced through the tax system; rather, it required specific administrative tracking and penalties. Failure to purchase insurance or defaulting on payment of premiums did not prevent an individual from receiving care, but it did trigger premium increases and administrative action on the part of insurers and/or government to compel payment of the premium. Because almost all Dutch residents had health insurance coverage under the previous regime, the tangible effect of the mandate was minuscule: the number of uninsured dropped slightly from 1.4 per cent to 0.8 per cent of the population immediately after the reforms (Mosca 2012, 9). The number of defaulters rose somewhat, however, to about 2 per cent of the population and continued to be a matter of some administrative concern (van Ginneken and Rice 2015, 502–3). The more significant dimension of universality was the erasure of the distinction between social and private insurers so as to put all insurers on a common footing and bring them under a common regulatory umbrella – the central feature of the original blueprint. Formally all insurers were incorporated under private law. • Comprehensiveness: The key difference of the 2006 regime from the Dekker blueprint was the retention of the “compartmentalized” definition of coverage established under the purple coalition. Regulated competition would apply only to the basic mandatory package of coverage for “curative” services in the second compartment, amounting to about 60 per cent of expenditure on all compulsorily covered services22 (Schäfer et al. 2010, 53). The AWBZ, accounting for the remaining 40 per cent, continued to be operated as a government program. By 2015, however, the AWBZ would be replaced by a narrower core of institutional care as part of a rationalization of longterm care within the new regime. As in other nations the definition of the boundaries of the basic compulsory package, and its adjustment at the margins, would be an ongoing project and increasingly would involve cost-effectiveness judgments, as discussed below.

364  Remaking Policy

• Financing: The basic compulsory insurance package was to be ­financed in roughly equal shares by income-scaled contributions to a central fund and premiums paid to insurers. For employed ­persons the income-scaled contributions were made by employers (and counted as taxable income to employees). There was also a government subsidy to the central fund and income-scaled subsidies to individuals for the payment of premiums. Almost 70 per cent of households qualified for these subsidies (Götze 2010, 14). As can be seen, this financing structure was meant to maintain the financing triangle of employers, households, and governments that had existed prior to 2006, although the weights borne by the respective parties shifted somewhat, while making the size of the flat-rate ­premium sufficiently large as to provide a platform for price competition among insurers. • Private law status: All insurers were henceforth to be private firms, notwithstanding the fact that about half their revenue would flow from a central government–administered fund. The 2006 legislation lifted the ban on for-profit status that had previously existed for sickness funds: insurers were now allowed to make and distribute profits. In order to retain the reserves that had been accumulated under the previous “public” system, however, the former sickness funds had to adopt not-for-profit status to comply with EU law (Companje et al. 2009, 331). Accordingly, as I discuss further in Chapter 10, three of the four large insurers that came to dominate the market were not-for-profits, while the fourth was part of a complex corporate structure combining for-profit and ­not-for-profit elements. • Regulated competition: The essential terms of competition, as enforced through the structure discussed below, were straightforward. In the insurance market, the basic package of coverage was centrally defined, premiums were community-rated, and enrolment had to be open annually. The scope for differentiation of the basic product, therefore, was very limited, although insurers could offer modest voluntary deductibles (up to a prescribed maximum) and either “in-kind” (preferred provider) or reimbursement-based contracts. If the terms were straightforward, however, the regulatory means of ensuring compliance were anything but. The central condition for non-perverse competition under these circumstances – that is, for avoiding risk-selection by insurers and adverse selection by insurees – was an effective risk-adjustment formula. As discussed

The Dutch Blueprint, 1987−2006  365

above, this complex mechanism had been in development in the social insurance sector for over a decade by 2006, and had been significantly enhanced with the addition of further adjustments for the utilization patterns of the insurees by DBCs in 2004. Competition in the provider market remained limited. Under new regulatory structures, central regulation of capacity was relaxed, quality regulation increased, and the scope of price regulation in the hospital sector gradually reduced. • Regulatory structure: The 2006 legislation created a powerful new regulatory body, the Dutch Health Care Authority (Nederlandse Zorgautoriteit, NZa) building upon and further streamlining the structural changes of the previous decade. The NZa integrated the functions (and much of the infrastructure) of the CTG and the CTZ. It took on the CTG’s tariff-regulation function and the CTZ’s oversight responsibilities as now applied to all insurers under the new Health Care Insurance Act as well as the established AWBZ legislation (Maarse 2008, 137–8). The mandate of the NZa also explicitly included the promotion of conditions for effective competition, including policing risk-selection activity. Even more than its predecessors, the NZa was charged with overseeing the progressive liberalization of the price regime (Ngo et al. 2008, 14–15).23 In addition to the NZa, the regulatory structure included the Health Care Inspectorate, established in 1995, and the CVZ, which had replaced the Sickness Fund Council in 2000. Although the principal task of the CVZ was to administer the central fund for the compulsory insurance package, including the risk-adjusted allocations to insurers – it also played an increasingly important advisory role in the regulatory process for determining the content of the compulsory package. This responsibility involved a growing sophistication in the use of cost-effectiveness and other health technology assessment techniques. In 2014 the CVZ became the National Care Institute (Helderman et al. 2014). • Providers: The reforms, which focused largely on the insurance market, had fewer implications for providers. Established structures of self-regulation remained in place, as did arrangements of collective negotiation with insurers. Nonetheless the reforms changed the modes of provider remuneration and opened up much greater scope for negotiations at the individual insurer-provider level. In 2005, even before the new legislation came into force and concomitant with the introduction of DBCs as the basis for hospital

366  Remaking Policy

payment, the market for hospital services was divided into two segments: an A-segment subject to tariff-setting and a B-segment in which ­services could be negotiated freely. At first the B-segment was limited to 10 per cent of services – largely elective services for which the DBCs had been best developed – but that proportion was steadily expanded over time, and stood at 70 per cent by 2013 ­(Helderman et al. 2014, 38). In 2008 DBCs were adopted as the basis for all specialist remuneration as well (Mosca 2012, 8). The remuneration of general practitioners shifted from the bifurcated scheme of capitation under social insurance and fee-for-service under private insurance to a common mixed model combining the two forms of payment. Although GP rates were open to negotiation at the individual level, this was exceedingly rare. The reforms were premised on the assumption that competitive insurers would drive efficiency and quality improvements through selective contracting with providers. As I show in Chapter 10, this behaviour was very slow to develop. Nonetheless the reforms accelerated a trend towards increased availability of quality indicators to facilitate both selective contracting and consumer choice, with longer-term implications for provider-insurer relations (Helderman et al. 2014, 14, 20; Mosca 2012; Ngo et al. 2008, 14–16). After two decades in which “successive governments (both centreright and centre-left coalitions) ha[d] consistently worked on the realisation of the preconditions for managed competition” (van de Ven and Schut 2007, 15), the final pieces of the framework envisaged by the Dekker Committee and the second Lubbers coalition government thus finally fell into place. The key steps in this process are summarized in Table 8.1. Denouement: “Still poldering” By the time the health reform legislation passed in 2006, the political context had shifted yet again, as Dutch politics continued to be destabilized by the rise of new or revived parties of the left and right. In July 2006 D66 exited the governing coalition, and the CDA and VVD formed a minority caretaker cabinet until a general election was held in November. That election resulted in a dispersion of seats across the major parties and a number of strengthened small parties, such that any majority government had to include at least three parties. After

The Dutch Blueprint, 1987−2006  367 Table 8.1. Key Steps in the Enactment of Dutch Health Care Reforms, 1987–2006 Lubbers CDA-VVD (centre-right) coalition 1987

• Dekker Committee report: “Willingness to Change”

1988

• Government paper: “Change Assured”

1989

• First phase amendments act (flat-rate premium in sickness fund insurance and Exceptional Medical Expenses Act; shift of ambulatory psychiatric care and other services to Exceptional Medical Expenses Act) • End of municipal planning of GPs

Lubbers CDA-Labour (centre-left) coalition 1991

• Second phase amendments act (further expansion of the Exceptional Medical Expenses Act; deregulation planning and tariff legislation) • Maximum Tariff Act: end of mandatory contracting of self-employed health professionals by sickness funds • Regulation ending regional monopolies of sickness funds

1992

• Government paper: Modernizing health care (pause announced)

1994

• Willems Committee report (calling initial consensus into question) • Van Otterloo Act (extending access to the Sickness Fund Act scheme for low income elderly)

Kok Labour-VVD-D66 (purple) coalition 1995–2000

• Measures reversing most transfers of services to Exceptional Medical Expenses Act, tightening and loosening constraints on payments to providers, instituting and removing user fees • Progressive development of risk-adjustment formulas for insurers • Pharmaceuticals Pricing Act (1995) – price regulation of prescription drugs • Restructuring Sickness Fund Act (1997) – reversing some provisions of the Van Otterloo Act

2000

• Act establishing the Supervisory Board for Health Care Insurance, an independent board for supervising health insurance and reforming the supervisory framework related to the implementation of the Sickness Fund Act and the Exceptional Medical Expenses Act

2001

• Government report “A Question of Demand”

Balkenende CDA-VVD-D66 (centre-right) coalition 2001–5

• Development of activity-based hospital funding; deregulation of some hospital prices

2005–6

• Health Insurance Act, Health Care Allowance Act, Health Care Market Regulations Act, and Health Care Institutions Admission Act (health care reform package instituting universal mandatory insurance under common regulatory framework)

Source: Author’s compilation from den Exter et al. (2004, 121) and Schäfer et al. (2010, 169) with additions.

368  Remaking Policy

three months of attempts to find a viable combination, the CDA and Labour formed a majority coalition by including the small Christian Union party. The health portfolio went to the CDA, and was held by Minister Ab Klink, who inherited the process of implementing the newly passed legislation. The 2006 legislation consolidated, refined, and completed the pieces of the framework for regulated competition under a universal mandate that had been assembled over the previous two decades. Pol­icy developments in the subsequent years would be incremental and pragmatic. Most of these developments simply carried through with processes already in train – such as the progressive extension of risk-bearing by insurers and the expansion of the scope of hospital services subject to price negotiation at the provider-insurer level. Others were largely reactive to unresolved or emerging problems in the operation of the market. Most of the latter had to do with cost control, as the government’s budget limit for health care, as approved by the parliament, was regularly exceeded (Schut, Sorbe, and Høj 2013, 10). Concerns about quality regulation also increased in political salience. Some unanticipated results fed concerns about rising costs. The effect of moving roughly half of the financing burden to flat-rate premiums meant that those who had been in the social insurance system saw their premiums rise from about €300 per year to over €1,000. Even though this shift was largely compensated by a reduction in the income-scaled portion paid by employees, and even though most households received a subsidy for the purchase of health insurance, the sticker shock of the premium increase was controversial, especially on the political left. A different shock came in 2008 when the mode of payment of medical specialists was changed. Since the days of the purple coalition, specialist remuneration, including that for “self-employed” specialists working within hospital-based groups as well as for those drawing a hospital salary, had been negotiated as part of hospital budgets. With the development of DBCs, some medical specialist services had been included in the B-segment of hospital services in which price negotiation was allowed. Beginning in 2008 payment for all specialist services was made on the basis of DBCs. The immediate result was a dramatic rise in specialist incomes – attributed to technical problems with the DBC calculation by some, but sceptically viewed by others.24 The culmination of the blueprint process in the 2006 legislation, after such a long period of gestation, had established high expectations. Change continued at a rather measured pace, however, as both market

The Dutch Blueprint, 1987−2006  369

actors and government regulators adjusted to the new system, and led to considerable political frustration. In 2010 a government commission issued a critique of the system as being “stuck in the middle” between a centrally planned and a market-oriented system, preventing the government from controlling costs and health insurers from being cost-­ effective purchasers of care (Schut, Sorbe, and Høj 2013, 21). In 2010, however, came yet another upheaval in Dutch politics. The CDA-Labour-CU coalition fell over differences around the war in Afghanistan, and in the subsequent election the small right-wing populist Party for Freedom (Partij voor de Vrijheid, PVV), under flamboyant leader Geert Wilders, rocketed from nine to twenty-four seats to become the third-largest party in the lower chamber. The CDA fell dramatically from forty-one to twenty-one seats, and the VVD just surpassed Labour to become the largest party with thirty-one seats to Labour’s thirty. Once again no two parties had enough seats to form a coalition, and most viewed the inclusion of the PVV as anathema. After lengthy negotiations, a minority coalition of the VVD and the CDA was formed, with an agreement with the PVV that it would provide support in the parliament without being included in the cabinet. As head of the largest party, the VVD’s Mark Rutte became prime minister – the first time a Dutch government had been headed by other than a Christian Democrat or Labour politician for ninety-two years. This unlikely and unstable arrangement lasted for a year and a half until Wilders withdrew the PVV’s support over the government’s austerity agenda in April 2012. In the following election in November, the CDA was dramatically reduced to fifth-party status, falling from twenty-one to thirteen seats. The two largest parties, the VVD and Labour, then formed a right-left purple coalition, again headed by Rutte. The health minister in both the first and second Rutte cabinets, the VVD’s Edith Schippers, had a long history in and considerable knowledge of the health sector. In 2011 Schippers announced a set of policy changes, most relating to the hospital sector and to the oversight of quality of care. In what might presage a return to cycling in Dutch health policy, the minister abjured market instruments in favour either of outright state regulation (in the realm of quality measurement and enforcement) or of a “polder-model” approach of seeking negotiated agreements among actors under the shadow of unilateral government action (in the hospital sector). In the hospital sector Schippers announced that “macro budgets” – at the sector level, not that of individual hospitals – would be derived

370  Remaking Policy

from the government’s global budget limit. If expenditures exceeded these macro budgets, all hospitals would have to repay the excess revenue in proportion to their respective market share (Schut, Sorbe, and Høj 2013, 21). The DBC system would be radically streamlined, and the payment systems for specialists and hospitals fully integrated. These changes were brought about through agreements with hospital and provider associations. The new payment system was based on an agreement reached with the peak associations of medical specialists and hospitals, linking progressive price liberalization and the wrapping of specialist remuneration into hospital budgets to cost-­ containment ­targets (Helderman et al. 2014, 46–7; Sauter 2014, 9; Schut, Sorbe, and Høj 2013, 21–2). A broader “administrative outline agreement” was reached with the peak associations of hospital providers and insurers, through which the parties involved accepted joint responsibility for controlled cost development in hospital care amounting to 2.5% per year. In addition agreements were made about: improving the quality and efficiency of health care, reducing variations in practice, the spread and specialisation of hospital functions and improving the provision of information. Other agreements related to advance funding by insurers and the further abolition of ex post compensation of risk equalisation. If expenditure did rise more than the agreed 2.5%, then the Minister could deploy the macro controlling instrument. (Helderman et al. 2014, 47)

As Helderman and his colleagues colourfully put it, in a context of policy complexity and political instability, “the Cabinet could use all the cooperation from the sector that it could get. In order to realise agreements, [Schippers] reverted to a tried-and-trusted model for policyforming in the Netherlands: she started ‘poldering’ again” (46). As for quality regulation, Schippers turned to an arm’s-length government agency, albeit one with its roots deep in corporatist history. After considerable deliberation on the most appropriate institutional fit, it was decided to lodge expanded quality-control functions with the CVZ, successor to the Sickness Fund Council. The CVZ’s growing expertise in the assessment of “appropriate use,” as part of its responsibility for defining the basic coverage package, recommended it in this regard. Under amendments to the Health Care Insurance Act and the Health Care Market Regulation Act in 2012, the CVZ, as noted above, was reorganized and augmented to form the National Care Institute.

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In addition to the established functions of the CVZ, the new institute took on responsibility for “promoting the realization of professional standards, which will encompass indications for the appropriate use of health care; encouraging and supporting the implementation of standards and innovations thus generated; and ensuring that the outcomes of health care are visible” (Helderman et al. 2014, 70). In Dutch technocratic tradition, the institute was to be advised by a council of independent experts (71). The major focus of change in health care in the second Rutte cabinet, however, was on mental health and long-term care (Kroneman et al. 2016, 174–83). The continuation of the AWBZ arrangements for such care represented a vestige of the previous regime, albeit a large one, amounting to 40 per cent of health care expenditure. Rationalizing arrangements for mental health and long-term care within the new framework therefore remained unfinished business after passage of the 2006 legislation. A series of changes from 2007 to 2014, through both statute and regulation, brought about a reallocation of responsibilities for various dimensions of mental health and long-term care. A substantial portion of mental health services – involving courses of treatment of one year or less – was taken over by insurers. As for long-term care, the premise of the reforms was that individuals should stay in their home if at all possible. The scope of long-term-care insurance was narrowed significantly and the AWBZ legislation itself was repealed and replaced by a new Long Term Care Act effective January 2015. Terms of eligibility for admission to residential long-term care were tightened considerably to include only those for whom “tailor-made” packages of support in the home – taking account of the patient’s own resources and social network – would be inadequate to need. Responsibility for support services in the home other than health care was assigned fully to municipalities. Home health care services became part of the basic package offered by insurers, and there was some expectation that long-term health care insurance as a whole (including residential care) would become a responsibility of health insurers in the future (Kroneman and Maarse 2014). This series of changes in long-term care was consistent with the logic of the blueprint originating with Dekker after the rejection of Simon’s attempt to use the AWBZ as the platform for the universal model. How­ ever, it must been seen as a coda to, not a continuation of, the blueprint strategy itself. The world of the AWBZ was eclipsed from the mid-1990s to the mid-2000s by the project of achieving a comprehensive regulatory

372  Remaking Policy

framework for the curative sector. When the long-term care agenda was picked up again after 2006, it was in changed political circumstances less amenable to a blueprint strategy. Progress on long-term care reform was therefore accomplished through a series of incremental deals. Some of these deals were struck through a “poldering” process, such as the tripartite 2013 agreement among the government, employers, and unions – but not including AbvaKabo, the largest public sector union – on expenditure reduction and wage restraint in the sector (Otjes and Voerman 2014, 233). Other negotiations left insurers and patient associations uneasy, and various groups pressed for delay (Kroneman and Maarse 2014). The Long Term Care Act passed by a wide majority, including all major parties in the Senate (van Jaarsveldt 2014) – notwithstanding the fact that the Rutte coalition government itself lacked a Senate majority. But residual concerns among stakeholders, as well as fiscal constraint, made for a rocky start to implementation (Kroneman et al. 2016, 181–2). Conclusion: Process and Substance

Process: A stuttering blueprint strategy The Dutch health care reform process bears the hallmarks of a blueprint strategy. A comprehensive schematic for a new regime of universal mandatory insurance was broadly agreed to across political parties and socio-economic interests in the late 1980s. Included in that agreement was an undertaking to enact the new model in a series of steps that would extend beyond the mandate of the current government. That undertaking survived its first partisan transition when a centre-left coalition government replaced the centre-right coalition that had been the progenitor of the reforms and sweeping reforms to the social insurance sector were introduced. The process stalled when other tactical decisions under the centre-left government failed to maintain the fine balance of the initial compromise, and gave way to a process of cycling under successive governments in the latter half of the 1990s. Even during that latter period, the logic of the early-phase reforms in the social insurance sector maintained sufficient momentum to carry the process forward, as regulators developed and honed risk-adjustment formulas to enable competition among insurers, and insurers themselves sought to position themselves in anticipation of an eventual transition to a universal scheme.

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The conditions for the adoption of a blueprint strategy, let alone for seeing it through to conclusion, are exceedingly rare. The Dutch blueprint was a product of its time. Blueprints require relative political stability and a shared commitment to consensus-building, such that the parties to a winning coalition at any given time have a reasonable expectation that they will continue to enjoy positions of influence. In other words they require a degree of predictability such as that once afforded by the Dutch centrist coalition-government tradition, consensual political culture, and cooperative networks of intermediary associations. These conditions were sufficiently strong in the Netherlands in the late 1980s to allow the blueprint for universal health insurance to be put in place. But changes in Dutch politics, civil society, and state-society relations were already under way that not only complicated the unfolding of the blueprint, but also made it unlikely that such a strategy could be reproduced under the much more unpredictable conditions of contemporary Dutch politics. That said, the lessened stability of the Dutch policy process is much more apparent in historical perspective in the Netherlands than when the Dutch case is set into a broader comparative international context. Cast into relief by the experience of other nations, the Dutch case still stands out for the web of shared understandings that forms the ground of policy-making, even in the midst of political volatility. Helderman et al. summarize it well: A lot has changed in Dutch health care during recent years; formal corporatist relationships have been dismantled and replaced by new collaborative relationships and governance arrangements. At the same time, a lot of ‘poldering’ is still going on health care in the Netherlands. The introduction of regulated market forces has resulted in a growing need to make agreements with all sorts of parties: insurers and health care liaison offices, care-providers, professional groups, the government (ministries, local governments, various implementing organisations) and citizens who have organised themselves into patients’ associations. (2014, 7)

The “relative predictability of the strategic behaviour of the actors involved in the exchange and mutual confidence that they will take one another’s particular interests into account” (Helderman et al. 2014, 13–14) that characterized the corporatist relations of the past was still strong enough in the Dutch social middle ground to facilitate these agreements in the early years of the twenty-first century.

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Substance: A public/private hybrid These unique Dutch circumstances produced a unique model by transforming a bifurcated social/private Bismarckian system into a hybrid whose “public” and “private” elements were difficult to identify and disentangle. The reforms produced a universal system of coverage offered through private insurers under a common regulatory framework. Can the reforms, therefore, be said to have increased the weight of private finance? The answer is somewhat ambiguous. The fact that about half of the revenues of insurers flow from a central pool of incomescaled contributions, administered by the state through the risk adjustment mechanism, clouds the characterization of insurers as “private.” Furthermore transitional mechanisms to buffer insurers against risk were in place on a diminishing scale throughout the reforms, and were not to be wound down fully until 2015 (Schut, Sorbe, and Høj 2013). Indeed the OECD counts all funding for compulsory coverage as “public” spending. As Okma (2009, 4) notes, however, the question of the public or private status of insurers is not only a matter of framing or “semantics”; it also has important implications for the policy instruments that can been employed under EU competition law. As of this writing (January 2017) the Dutch approach has been confirmed or at least tolerated at the EU level, but future challenges remain a possibility. The weight of provider influence, always strong in the Dutch system, did not appear to have been diminished in the immediate wake of the reforms. Notwithstanding a high degree of concentration in the insurance market, insurers were slow to take advantage of the opportunities that selective contracting with providers afforded them – in large part because they feared that they lacked the legitimacy to intervene in the agency relationship between providers and patients (Boonen and Schut 2011). This field is dynamic, however, as I discuss further in Chapter 10. As for the instrumental mix of hierarchy, exchange, and peer control, the reforms indisputably involved an increase in the role of market mechanisms and forces. The dismantling of the corporatist structures of the previous system meant a decrease in the role of peer control and an increase in the weight of hierarchical mechanisms lodged with the state, albeit exercised through arm’s-length bodies. Informal mechanisms of consultation, negotiation, and agreement in the “social middle ground” of intermediate associations remained strong, however – indeed the effective functioning of the system was premised upon them.

The Dutch Blueprint, 1987−2006  375

Finally, the organizing principles of the system changed, although the fundamental insistence on retaining a balance of solidarity and subsidiarity remained. The citizenship basis of entitlement shifted: the state, not the subnational group, now became the guarantor and enforcer of health care coverage. Health insurance coverage was now, as it would be in the United States eight years later, both a right and an obligation of residency in the Netherlands. The functional role of the state as regulator was noticeably augmented, and its fiscal role was expanded through the central pooling and subsidy mechanisms. Through all of these changes, the inherent tension arising from the agency relationship between providers and patients remained, and could be expected to drive a resumed pattern of cycling through the policy instruments provided by the new framework in the future.

Chapter Nine

Canadian Incrementalism Reinforced, 2003–04

The political and economic climate in Canada in the early 2000s bore some remarkable similarities to that of the 1960s, when the Canadian medicare model was born. It was a time of relative economic and fiscal buoyancy. After more than three decades during which the single-­payer system had become an untouchable public icon, health care emerged again as a matter of political debate. As in the 1960s the agenda was defined by a contest for control of the Liberal Party in a time of broader political realignment. Health care therefore was wielded as a political wedge not only between parties, but also among the governing Liberals. Also as in the 1960s the emergence of a new cohort of premiers generated a new dynamic in which the assertiveness of provincial governments was channelled into constructive interaction. Again, strategic decisions were made in two phases: a preliminary “warm-up” and then a major engagement. In both the 1960s and the 2000s, major reports at arm’s-length from the Liberal government set out a menu of policy options. Then, in 2004 as in 1965, an election resulted in a Liberal minority government, deeply discouraging the governing Liberals but reinforcing the strategy of reform. Despite these similarities the results were quite different. The big bang of 1966, which introduced a nationwide model of universal physician services insurance to parallel the recently established hospital insurance program, had no echo in the 2000s despite the opening of a window for major change. Instead only very modest, transitional, and, in fact, unenforceable changes to the conditions for federal transfers to the provinces were adopted. Exploring the puzzle of why a greater policy shift did not occur in this moment sheds light on the dynamics of incremental change at critical junctures.

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The Legacy of the 1990s: Fiscal Swings and Constitutional Fatigue

Fiscal swings In the mid-1990s Canadian governments at both the federal and provincial level and of varying partisan stripes were seized with agendas of deficit reduction as their overriding priority. The 1989–91 economic recession had been particularly deep in Canada and the recovery particularly slow. After years of deficit financing at both levels of government, worsened by the recession, ratios of public debt to GDP (both gross and net) stood at a post–Second World War highs. Net general government debt rose from about 13 per cent of GDP in 1980 to 67 per cent in 1995 – twenty-five percentage points higher than the OECD average and the second highest (behind Italy) among the G7 nations (OECD 1999, 50–1). Even as the recovery took hold, the costs of servicing this debt, exacerbated by the vicious cycle of rising bond yields, threatened to crowd out program expenditure, and was viewed with increasing alarm in both Canadian and international circles (Lynch 2005, 65; United Kingdom 2009c, 12). A sense of urgency built in public opinion. At the federal level attempts to respond to the growing crisis through programs of privatization, across-the-board cuts, and public sector wage freezes under the Progressive Conservative (PC) government of Prime Minister Brian Mulroney failed to achieve fiscal balance. Together with the government’s neoliberal rhetoric and the failed attempts to reach a constitutional accord, these measures bred public cynicism and contributed to the fracturing of the Mulroney coalition, the collapse of the PCs in the 1993 election, and the rise of regionally based protest parties: Reform in the West and the Bloc Québécois in Quebec. The 1993 election ushered in a Liberal majority government under Jean Chrétien. Chrétien was a classical brokerage politician, pragmatic and politically canny (Whitaker 2006). Together with Paul Martin, his finance minister and once-and-future rival for the leadership of the Liberal Party, Chrétien embarked upon a strict regime of fiscal consolidation, presented not with sweeping rhetoric about the role of the state, but as a matter of fiscal and economic practicality (Mendelson 2011, 4–5; Whitaker 2006, 8). The strategy focused almost entirely on spending constraint, with two principal components: a 20 per cent overall reduction in spending on federal programs, differentially assigned through a program review that yielded budget cuts ranging from 5 to 60 per cent over four years; and reductions in federal transfers to the provinces.

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In the 1995 budget, federal transfers to the provinces for health care, post-secondary education, and social assistance were consolidated into a single Canada Health and Social Transfer (CHST). The consolidated cash transfer was reduced by 20 per cent in 1996 and by a further 15 per cent in 1997 (Madore 2003). The consolidation also reduced the conditions attached to the transfer in two ways. First, funding was completely fungible across the health care, social assistance, and post-­secondary education sectors. Second, although the conditions of the Canada Health Act would continue to apply, those on provincial spending on social assistance were reduced to one: the prohibition of residency requirements (Prince 2006, 215). Together with restraint programs undertaken independently at the provincial level, these drastic measures had their intended effect. In 1993  combined federal and provincial deficits had peaked at over ­­$65 billion; by 2000 the combined total of provincial and federal budgets was back in the black, with a surplus of over $16 billion. The federal budget itself was balanced by 1998, and the government then embarked upon a regime of tax cuts and targeted reinvestment – with health care as one of the principal targets. The fiscal effect of these measures in the health care arena was dramatic. Between 1992 and 1996 real per capita public health care spending declined by about 8 per cent, but between 1996 and 2000 spending rebounded, increasing by almost 18 per cent (Figure 9.3). The depression in public spending on health care yielded a fiscal saving of about $30 billion collectively for Canadian governments over the 1992–2000 period, compared with what would have been spent had spending followed a pattern of steady secular increase to the point it reached in 2000 (Tuohy 2002, 33–4). This fiscal swing, the most dramatic in the history of Canadian health care, thus came about not as a result of any focus on health care per se, but entirely as a result of a broader agenda of fiscal consolidation. It nonetheless severely tested the stability of the health care system and the resiliency of the accommodations within it. The unilateralism of the federal actions infuriated the provinces. The reductions in expenditure fuelled conflict between provincial governments and health care providers over resources, placed provider organizations, especially medical and hospital associations, under extreme pressure to manage internal conflicts, and laid the ground for demands for “catch-up” increases as the first call on any new investment.1 Reduced funding shrank any redundancy in the system, an essential condition for phasing in reform of health care delivery. And although the limited evidence available suggests that restraint measures such as the restructuring of

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hospitals did not have a negative effect on health outcomes (see, for example, Brownell, Roos, and Burchill (1999), they created an atmosphere of crisis that shook public confidence in the health care system and in the ability of governments to manage it. In particular, concerns about growing waiting lists for elective procedures dominated the media, although in the absence of data it is impossible to know whether waiting times were in fact lengthening. Polls in the late 1990s and early 2000s consistently demonstrated this erosion of confidence. The proportion of Canadians in a cross-national survey reporting the view that the health care system needed “only minor change” plunged from 56 per cent to 29 per cent between 1988 and 1994, and declined further to 20 per cent by 1998. Perhaps even more significant, public confidence did not rebound with increased public investment after 1997: by 2001 the proportion viewing “only minor change” as necessary still stood at 21 per cent, and it remained lodged there in 2004 despite the continuing upward trajectory of public funding (Blendon et al. 2002; Schoen et al. 2004). The proportion believing that the system needed to be “rebuilt completely” subsided somewhat, however, from 23 per cent in 1998 to 14 per cent in 2004, but still remained well above the negligible level of 5 per cent in the late 1980s. While these developments seemed to militate against the reaching of agreements, either between federal and provincial governments or between government and health care providers, they also began to prepare the ground for policy change. Health care was driven to the centre of the federal-provincial agenda, as further discussed below. At the provincial level, fissures that deepened within both the physician and hospital communities under the pressure of constraint created some footholds of  support for reform, especially in primary care. The turn towards “reinvestment” allowed, at least in theory, for some redundancy in periods of transition to new models. And growing public anxiety raised the political risk of inaction on health care above the risk of action.

Constitutional crisis and catharsis: The emergence of collaborative federalism In 1995 a second referendum was held in Quebec on the issue of sovereignty for the province. As in 1980 the referendum question was hedged about with qualifications, and in fact incorporated two other documents by reference. Nonetheless, by a harrowingly slim margin, the sovereignty initiative was rejected. With that cathartic event, constitutional matters essentially disappeared from the federal-provincial

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agenda: none of the six conferences of first ministers held from 1996 to 2004 dealt with constitutional matters.2 Through a combination of legislative action and judicial reference, the federal government put in place various measures aimed at removing issues of constitutional change from further debate by establishing a very high bar for the de facto consensus necessary for any major constitutional change (Russell 2004, 239–48). Given the existence of these hurdles and the general sense of constitutional fatigue, neither federal nor provincial governments had any enthusiasm for major constitutional change – although amendments affecting only single provinces, including Quebec, continued to be adopted (248–9). On the federal-provincial axis, constitutional instruments were eschewed in favour of informal mechanisms. Cameron and Simeon describe this development as the emergence of a new model of “collaborative federalism,” premised on the autonomy and co-equal status of governments at both federal and provincial levels: In recent years … [e]xecutive federalism has been increasingly informed by a set of practices that we call “collaborative federalism,” characterized more by the principle of co-determination of broad national policies than by either the Ottawa-led cooperative federalism of the post-World War II period or the more competitive federalism of later periods. While codetermination in the Canadian context generally involves the two orders of government working together as equals, it can also entail provincial and territorial governments taking the initiative on their own - acting collectively in the absence of the federal government - to formulate national policy. Adherents of collaborative federalism (mostly provincial governments and their supporters) view the governance of Canada as a partnership between two equal, autonomous, and interdependent orders of government that jointly decide national policy. Although Ottawa does not generally share this view of the nature of the national policymaking process, in several of the cases cited below [including health care], the federal government has been drawn into a process that is premised on this assumption. (2002, 49–50)

When Cameron and Simeon were penning this description in 2002, it could nonetheless have been argued that the term “collaborative” implied a rather more congenial climate of federal-provincial relations than that which actually prevailed in the late 1990s and early 2000s. Certain premiers, notably Mike Harris of Ontario, Ralph Klein

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of Alberta, and Lucien Bouchard of Quebec, were fiercely protective of provincial jurisdiction and combative in style (Bakvis and Tanguay 2012, 107). Prime Minister Chrétien, for his part, also adopted a tough negotiating stance and limited his engagement in first ministers’ conferences. He was well aware of the potential for social policy issues to be used as weapons in intergovernmental conflict. “No social problem will fester long,” he wrote in a mid-career memoir, “without one government moving to deal with it or, at least, to use it to club the other government” (quoted in Prince 2006, 214). In his view the fiscally driven cutbacks in health transfers had given the provinces a “club” to use against his government, and he was determined to pry that club back in an era of reinvestment. The first step was to address the provinces’ bitterness, long in the making and heightened by the cuts of the mid-1990s, about federal unilateralism in the exercise of the spending power. One of the first fruits of collaborative federalism was a Social Union Framework Agreement (SUFA) signed by the federal government and all provinces except Quebec in 1999. SUFA explicitly endorsed the federal power to spend in areas of provincial jurisdiction but placed a variety of procedural constraints on the government’s authority to act unilaterally in doing so (Cameron and Simeon 2002, 56–7). At the same time, the federal government, continuing its practice of incremental increases in the CHST, agreed to increase the annual amount of the transfer to at least $11.5 billion. Using Banting’s (2012) terms, SUFA in effect introduced an element of “joint decision federalism” into the shared-cost model on which health care and several other social programs were premised. Even as early as 2002, however, Cameron and Simeon pointed out that the proof of the loosely worded document “will be found in the commitment and follow-through the participating governments bring to its implementation” and that “the early indications are not encouraging” (2002, 57). By 2012 Banting could conclude that SUFA “had little longterm impact” and that, “[a]s a result, the role of shared-cost federalism remains contested (2012, 157).

The politicization of health care: Partisan and federal-provincial contests Partisan imperatives at the federal level After decades of political “untouchability,” health care emerged in the early 2000s as a matter of political contest. For politicians at both levels of government, the changing public mood made it increasingly risky

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not to take action. Moreover, for the federal Liberals – Prime Minister Chrétien, in particular – political realignment created both the need and the opportunity to present themselves as the saviours of medicare. The fracturing of the Progressive Conservative Party into the populist western protest Reform Party and a remaining PC rump presented the Liberals with a foil (Pal 2001, 4–12). The small-government agenda of Reform (rebranded in 2000 as the Canadian Alliance), and its links to the right-wing government of Alberta at the time raised suspicions about the intentions of Reform/Alliance on health care policy. These suspicions were reinforced in 2000 by a dispute between the federal and Alberta governments over Alberta legislation allowing certain publicly funded physician and hospital services to be performed in private forprofit clinics under specified conditions. The Liberals exploited these concerns in the runup to the November 2000 federal election. The embrace of the defence of medicare served the Liberals vis-à-vis both the right and the left of the political spectrum. As in the early 1960s, the Liberals under Chrétien sought to incorporate key planks of the platform of the New Democratic Party. In this case, however, it was not a formal merger that was being considered, even privately. Rather, in the face of a divided right, Chrétien wanted to unite the left by having the Liberals occupy most of that ideological space, crowding out the NDP.3 In the runup to the 2000 election, the federal health minister continually responded to questions from the NDP in the House of Commons by emphasizing how the Liberal government had met and surpassed all the proposals the NDP had made in the 1997 election campaign.4 Presenting the Liberals as defenders of medicare was accordingly “a major plank in each of the three election campaigns [1997, 2000, and 2003] waged by the Chrétien Liberals” (Boychuk 2006, 236). Early in his first mandate in 1994, even as his government was preparing to cut federal transfers, Chrétien girded that vulnerability by appointing a regionally and functionally representative National Forum on Health, which he personally chaired. The Forum’s report, issued in 1997, would lay out a set of recommendations for reinvestment: a mix of efficiency enhancements to the delivery system and expansions of first-dollar coverage to include pharmaceuticals and home care (Canada 1997; Tuohy 1999, 95–7). The Forum’s report strongly informed the Liberal “Red Book,” the party’s 1997 election manifesto. Presaging future themes, the Red Book promised that a new Liberal government would “establish a Medicare Transition Fund encouraging provinces to test approaches to reforming primary care, to support the shift to home care,

Canadian Incrementalism Reinforced, 2003−04  383

and, more significantly, to develop a ‘a timetable and fiscal framework for the implementation of universal public coverage for medically necessary prescription drugs’” (Boychuk 2006, 238). Health care measures (the appointment of the National Forum on Health, the 1995 cuts and establishment of the CHST, and the federalprovincial “accords” of 2000 and 2003 (discussed below) constituted most of the “handful” of social policy matters in which the Prime Minister’s Office was directly involved (Prince 2006, 215).5 Beyond positioning themselves as defenders of medicare, however, and despite the National Forum on Health exercise, the Liberals had neither a broad vision nor specific proposals for health care reform – or, indeed, for social policy more generally (Boychuk 2006; Prince 2006; Whitaker 2006). Rather, the agenda was marked by general long-term objectives and short-term proposals amounting to incrementalism and experimentation. As Pal describes it: “The vision and purpose that had guided the Liberals in the 1993-8 period was slowly dissipating. Once the fiscal targets had been reached, once the government had been downsized, once the federal presence had been reduced to give the provinces more room, once the retreat from heavy-handed regulation and high taxes had been achieved, it turned out that the Liberals did not have a broad vision of where they might like to take the country” (2000, 7–8). Moreover, the Liberals were internally divided on two axes. One was “the usual division in Liberal ranks between ‘social liberals’ (interested in spending on new programs) and ‘business liberals’ (interested in economic growth and lower taxes)” (Pal 2000, 7). The other, more divisive cleavage was between supporters of Chrétien and those of his arch-rival Finance Minister Paul Martin. Martin had contested the Liberal leadership in the 1990 leadership election that brought Chrétien to power and still, quite openly and increasingly impatiently, harboured ambitions to take over from Chrétien. In a striking similarity to the rivalry between Blair and Brown in the same period in the United Kingdom, the division between Chrétien and Martin turned, as we shall see, not on ideological difference, but on political positioning. The federal-provincial axis: A cycle of reinvestment begins In Chapter 4 I described a pattern of cycling that characterized federalprovincial fiscal arrangements for health care during the long period of policy “normalcy” from the 1970s through the 1990s. On each of the dimensions I noted there – the rate of increase or decrease in federal

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transfers and the specificity or generality of the conditions attached to the transfers – that pattern of cycling continued into the early 2000s. The decade-long downward cycle in the rate of change in federal transfers, beginning in the mid-1980s and deepened with the 1995 cuts, was reversed beginning with the 1997 budget.6 Each federal budget thereafter until 2003 contained incremental funding for increased health transfers. Unlike previous arrangements, however, these increases were not formulaic; rather, they were specific sums committed over specific multiyear periods. Effectively, however, each incremental addition became part of the base onto which future increments were added. In nominal terms these increases brought the federal cash transfer to roughly its pre-1995 level. But on a real per capita basis, and even more so as a share of total public health financing, the federal transfer continued to fall short of pre-1995 levels, let alone those of the 1970s (Boychuk 2006, 245; Maslove 2005, 28) – and accordingly the increases did little to assuage provincial bitterness. Meanwhile, at the provincial level, fiscal consolidation brought increased pressures within the government–medical profession monopolies. As the profession sought reversals of the cycle of constraint on remuneration and hospital funding that had begun in the early 1990s, provincial governments sought to exploit the potential of reinvestment to negotiate changes in health care delivery. The nature of the profession-state relationship and the terms and content of these negotiations varied across provinces, and these differences reinforced the provinces’ institutional bias to resist federal conditions on the marginally increased transfers. Within the federal government, however, there was pressure, especially from social liberals, to use funding increases to boost federal leverage over the design of health care delivery. In early 2000 Health Minister Allan Rock proposed a “plan to save medicare” centred around a federal-provincial shared-cost program for home care, and including greater federal engagement in the shaping of primary care reform and the establishment of national standards for health care delivery. The proposal was very generally phrased, and invited provincial health ministers to join in discussions to further develop the plan – an invitation that was caustically rejected. Provincial premiers insisted that the first order of business was outright restoration of the 1995 cuts in federal transfers, and they showed no appetite for negotiating the terms of reinvestment (Boychuk 2006, 238; Iglehart 2000, 2011).

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As in 1960s the contrapuntal rhythm of federal and provincial elections and intergovernmental conferences shaped the strategies of political actors at both levels. Chrétien, indeed, sought to orchestrate that rhythm. As Prince notes, “Chrétien managed the intergovernmental dimension of social policy by … holding First Ministers’ Conferences rather infrequently and often timing them around his own election and budget cycles” (2006, 214). A key example was the first ministers’ conference in September 2000, which was aimed directly at positioning the Liberals well in an upcoming election, subsequently called for November that year (Boychuk 2006, 238–40). That meeting resulted in a communiqué styled as a “Health Accord” in the spirit of collaborative federalism. Under the terms of the accord, the federal government agreed to a further incremental increase in the CHST and allocated a total of $2.3 billion to three “trust funds” on which provinces could draw on a per capita basis over three years for diagnostic equipment, primary care reform, and information technology. The accord also contained a potentially important innovation: the provinces agreed to report publicly on various dimensions of their health system on the basis of “comparable indicators” (Table 9.1). There was, however, no mechanism to enforce these commitments. Indeed, for greater surety, the accord was prefaced with the statement that “[n]othing in this document shall be construed to derogate from the respective governments’ jurisdictions” and that its provisions “shall be interpreted in full respect of each government’s jurisdiction” (Canadian Intergovern­ mental Confer­ence Secretariat 2000). In the absence of any mechanism of enforcement, these commitments simply lapsed. The September 2000 accord served its short-term purpose of positioning the Liberals for the November 2000 election. Their election manifesto, the “Red Book 2000,” promised that a Liberal government would ensure that “two-tier” health care would not emerge, and would implement the 2000 accord, presented as the “Health Action Plan 2000” (Boychuk 2006, 240; see also Gibbins 2001). These stances had the intended effect of putting the Canadian Alliance party on the defensive, to such a degree that its leader, Stockwell Day, creating an image that was to become infamous, was driven during a debate to hold up a handwritten sign declaring “No 2-tier Healthcare.” The Liberals were returned with a second majority, and subsequent analysis of voter choice showed that the party’s successful framing of “the debate about the health care issue so as to undermine the credibility of the

386  Remaking Policy Table 9.1. Provisions of the 2000, 2003, and 2004 Health Accords Date of Accord

Structure of Additional Federal Funding

Provincial Undertakings

2000

• annual increases to Canada Health and Social Transfer (CHST) committed for five years

• statement of support for the principles of the Canada Health Act (CHA)

• part of CHST earmarked for early childhood development • targeted per capita transfers for diagnostic equipment and primary care reform • funding to establish Canada Health Infoway, a federalprovincial body, to help accelerate the adoption of health information technology

• work on health care reform in every province, including access (waiting times), health promotion, primary care, supply of health care personnel, home and community care, and pharmaceuticals management • by September 2002, each province to begin public reporting on jointly agreed comparable indicators on population health status, health outcomes, and quality of service • collaborate on health information technology through Canada Health Infoway

2003

• division of CHST into separate Canada Health Transfer (CHT) and Canada Social Transfer (CST) • incremental increases to CHT and CST committed over 5 years • Health Reform Transfer targeted to primary health care, home care, and catastrophic drug coverage, to be incorporated into CHT after 5 years, subject to review of progress • Additional funding for Diagnostic Equipment Fund, to be drawn down by provinces on per capita basis

• reaffirmation of principles of CHA • covenant with Canadians re: timely access, high-quality, effective, patient-centred, and safe services, and sustainable, affordable health system • accelerate primary care reform • improve coverage to minimum basket of home care services on first-dollar basis • take measures to ensure reasonable access to coverage of catastrophic drug cost by 2005–06 • beginning 2004, report progress on primary care, home care, and catastrophic drug coverage • work on other reforms in areas of patient safety, health human resources, technology assessment, innovation and research, population health

Canadian Incrementalism Reinforced, 2003−04  387 Table 9.1. Provisions of the 2000, 2003, and 2004 Health Accords (cont.) Date of Accord

Structure of Additional Federal Funding

Provincial Undertakings • build on 2000 accord to develop additional comparable indicators of quality, access, system efficiency, and effectiveness, with detailed examples set out in annex; to be reported by September 2003 • work together to address gap in health status between Aboriginal and non-Aboriginal Canadians and consult with Aboriginal peoples on development of comparable Aboriginal Health Reporting Framework • participation in federal-provincial Health Council of Canada to monitor and report publicly implementation of accord, particularly accountability provisions (Quebec and Alberta refused)

2004

• new CHT base of $19 billion in fiscal year 2005/06 with 6% annual escalator effective 2006/07 • additional Wait Times Reduction Transfer over 10 years • Territorial Health Access Fund, targeted at long-term health reforms

• reaffirmation of principles of CHA • by 31 December 2005, development of evidence-based benchmarks for medically acceptable waiting times in priority areas such as cancer, heart, diagnostic imaging, joint replacements, and sight restoration, and comparable indicators of access, to be established through intergovernmental process • by 31 December 2005, jurisdictional public reporting on targets to increase supply of health professionals through training, recruitment, and retention, and annual reporting on progress thereafter

388  Remaking Policy Table 9.1. Provisions of the 2000, 2003, and 2004 Health Accords (cont.) Date of Accord

Structure of Additional Federal Funding

Provincial Undertakings

 

• by 2006, first-dollar coverage to be provided for certain home care services: short-term (two-week) post-hospital acute care and acute community mental health home care, end-of-life care • by 30 June 2006, report progress on development and implementation of national pharmaceuticals strategy • by March 31, 2007: meaningful reductions in wait times in priority areas • by 31 December 2007, multiyear targets to achieve priority benchmarks to be established by each province, annual reporting of progress towards those targets thereafter • recommitment to primary care reform, agreement to share best practices • accelerate progress in health information technology, working with Canada Health Infoway • separate communiqué between federal and Quebec governments with similar provisions to above • federal/territorial working group to support the management of Territorial Health Access Fund • separate communiqué on inter­ governmental agreement to work together on Aboriginal health • incorporation by reference and formalization of April 2002 agreement on process of dispute avoidance and resolution under CHA

Sources: Canada 2003, 2004a, 2008a; Canadian Intergovernmental Conference Secretariat 2000.

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official opposition … had a significant impact on the election outcome” (Nadeau, Pétry, and Bélanger 2010, 367). In the federal-provincial realm, however, the September 2000 accord did little to improve relations (Tuohy 2002). Provincial take-up of and accounting for the federal funding for medical equipment was uneven and controversial. The Canadian Association of Radiologists charged that provinces had used funding to pay for equipment purchases already in the pipeline, rather than for additional equipment, or had not followed through on promised purchases (McCarthy 2001). Nor did the increases to the CHST lay to rest provincial demands. Led by Ontario premier Mike Harris and Alberta premier Ralph Klein, the provinces continued to draw attention to the gap between the rate of increase in federal transfers and the rate of increase in provincial health care costs (Tuohy 2002). Harris and Klein threatened that, unless the federal share were increased, their provinces would have no alternative but to consider private supplements such as co-payments. Premiers’ conferences in September 2001 and January 2002 could agree only on demands for further increases in federal funding to restore the transfers to their pre-1995 level. All provincial governments continued to profess allegiance to the five principles of the Canada Health Act, but those that wished to test the limits of the interpretation of the Act insisted upon a deadline for the establishment of a federal-provincial dispute-resolution mechanism. The premiers agreed that Alberta would take the lead on this issue in negotiations with the federal government, which culminated in an exchange of correspondence in April 2002 in which all provinces except Quebec agree to a process involving a series of steps up to and including third-party fact-finding and advice if necessary, but subject to the ultimate authority of the federal minister of health for the administration of the Act.7 The provinces also took limited actions to cooperate among themselves without federal involvement. In particular they agreed to establish a “common review” process for drugs to be added to provincial formularies, subject to overriding provincial discretion.

Shaping the agenda: Competing system reviews From 2000 to 2002 government commissions in Alberta, Quebec, and Saskatchewan and two inquiries at the federal level explored a greater range of options than had been in play since the inception of medicare in the 1960s. The system seemed poised for significant change. The key

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question was whether change would occur within the parameters of the universal single-payer model or whether the model itself would be changed. More specifically, increased roles for market instruments (by opening up the possibility of competition between private clinics and public hospitals for the provision of publicly funded services) and for private finance (by allowing for privately purchased alternatives to publicly funded services) were actively debated. Overarching these debates was the question of the relative weight to be put on more public funding or better organization and management to address the needs of the health care sector (Detsky and Naylor 2003). Nonetheless, although the rhetoric varied considerably, all of these reports in their substance made recommendations that would maintain and enhance the essential features of the Canadian model. In Alberta an option that would open the door to a greater degree of private finance as a matter of policy design – namely, the possibility of establishing Medical Savings Accounts – was seriously considered. But even there, such accounts were presented as an option that “warrant[s] further study” (Alberta 2002, 61). The Alberta report also advocated greater competition in a Canadian publicly financed “internal market” through more explicit contracting between public authorities and a range of not-for-profit and for-profit providers. The impact of these recommendations was amplified by the context in which they were issued: a contest between the Alberta and federal governments over Alberta legislation regulating private clinics, as noted above, and by the musings of Premier Klein about the merits of a “third way” combining public and private finance for health care. Ultimately, the federalprovincial conflict was resolved through agreement on the process of dispute resolution. Klein’s “third way” was abandoned in the face of opposition within the government’s own caucus from rural members concerned that physicians would be drawn to urban areas. Other provincial reports, after canvassing a range of possibilities, rejected those that would enhance the role of private finance. At the federal level the reports of two separately established inquiries were issued with weeks of each other in autumn 2002 and set the terms of health policy discourse for the next several years. One was the report of the Standing Senate Committee on Social Affairs, Science and Technology (Canada 2002b), resulting from an inquiry that had been instituted in December 1999 at the initiative of the committee’s chair, Senator Michael Kirby. The second was the Commission on the Future

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of Health Care in Canada (Canada 2002a), chaired by the immediate past-premier of Saskatchewan, Roy Romanow, and appointed by the Chrétien government in early 2001 to set the agenda for further federalprovincial negotiations. Both reports re-endorsed single-payer finance for physician and hospital services, and ruled out co-payments and parallel private insurance, although Kirby saw the current model as sustainable only if key changes were made to improve performance. Both reports recommended increased federal funding and a stronger federal role: Kirby recommended an annual increase of $5 billion in federal transfers; Romanow recommended $6.5 billion (Canada 2002a, 69; 2002b, 10). (Romanow’s calculations were based on the amount needed to fill the “gap” between the current cash transfer and the original federal share when physician and hospital insurance were established, taking account of the fact that half of that share had been converted to “tax points” for the provinces in 1977, as discussed in Chapter 4.) Both reports recommended mechanisms that would more clearly identify federal funding for health care and make it more predictable, Kirby by earmarking a portion of the federal sales tax for federal health transfers and Romanow by separating out the health portion of the CHST to create a new Canada Health Transfer, with an annual escalator to be negotiated every five years. Both reports also recommended primary care reform that would bring providers together in groups to give fulltime care to defined populations, with population-based budgets. Both recommended building upon provincial drug plans to provide uniform “catastrophic” coverage across the country through federal cost-­sharing of qualifying provincial programs – though they differed somewhat on the threshold for catastrophic costs and the federal share of the costs of the program – and both recommended more comprehensive and uniform coverage of home care by bringing some home care services under the umbrella of the Canada Health Act. Beyond these fundamental similarities, however, the two reports diverged in tenor in some significant ways. Underlying the Romanow report was the implicit premise that the single-payer model with firstdollar coverage was the ideal for all necessary health services and the long-term goal for pharmaceuticals and a substantial swathe of home care (Marchildon 2004). Kirby was open to models that would integrate public and private finance – seeing a public drug plan as complementary to existing employer-based coverage and allowing for income-scaled co-payments for both drugs and home care. Kirby was also open to

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increased involvement of privately capitalized providers in the delivery of publicly funded services. Like the Alberta commission, Kirby advocated a Canadian-style “internal market,” with competition to be encouraged through more explicit contracting between public authorities and a range of not-for-profit and for-profit providers, although he saw this as a “second stage” of reform. (Romanow argued against for-profit delivery.) And in a highly controversial but prescient stance, Kirby argued that long waiting times would drive court challenges, and recommended the establishment of guaranteed maximums for waiting times, beyond which individuals could seek care in other jurisdictions or in the private sector and be publicly reimbursed. These differences were greatly exaggerated in the public debate that followed the release of the two reports, with Romanow cast as the defender of medicare while Kirby was an agent of “privatization.” Given the similarities in their actual recommendations, this depiction of the two reports would seem disingenuous. But as Courchene (2003) pointed out in a trenchant analysis, the reports embodied different “operating principles.” For Romanow the single-payer system was grounded in the principle that “medicare is a moral enterprise, not a business venture,” and all of his recommendations flowed from that premise. Kirby, on the other hand, was more agnostic about the role of the public and private sectors, and was open to various ways of integrating the two in the interests of equity and efficiency. The tension between these two orientations would characterize public debate about health care in Canada for the rest of the decade and beyond.

The 2003 Health Accord: Legacy unfulfilled In early 2003 one of the conditions for major change in Canadian health care policy was emerging. Health care renewal had been established as central to the Liberal agenda and as a key feature of Chrétien’s “legacy” mandate (Boychuk 2003); the establishment of the Romanow Commission had been a marker of that commitment. The table had now been set with the publication of the Romanow and Kirby reports. At the very least the assertion of a stronger role for the federal government in exchange for restoration of federal transfers might have been expected. More broadly, both Romanow and Kirby advocated an extension of the role of the state in areas other than physician services – notably, pharmaceuticals and home care – and Kirby had opened

Canadian Incrementalism Reinforced, 2003−04  393

the door to an increased use of market mechanisms in some form of internal market. The institutional conditions for a major shift, however, were still not in place. Although the federal Liberals were in a strong position, with a majority government in its third mandate and a divided opposition, the intergovernmental climate continued to be inimical to reaching an accommodation. The destabilizing effect of non-coincident electoral cycles was particularly strong: seven of the ten provincial government faced elections in 2003. Furthermore the premiers of three provinces – Ernie Eves of Ontario, Bernard Landry of Quebec, and Lorne Calvert of Saskatchewan – were recent replacements for retiring leaders and had yet to win an electoral mandate of their own. Yet further, Eves and Landry had each acceded to their role on the basis of a platform that was not conducive to comprehensive federal-provincial agreement. Eves’s strength was as a former finance minister, with an institutional bias to approach federal-provincial relations in solely fiscal terms. Landry was a hard-line Quebec separatist, in contrast to his predecessor Lucien Bouchard, who, while highly defensive of Quebec’s jurisdiction, was also a pragmatic politician. Neither premier had an incentive to compromise, even if he had been able to lay claim to a mandate to do so. In this context the meeting of first ministers convened by Chrétien at the end of January 2003 had two focuses. For the provinces the issue was addressing the “Romanow gap” in federal transfers; for its part, the federal government sought to address the provincial shortfall in fulfilling the commitments in the 2000 accord, limited as they were, and to strengthen accountability provisions in return for increased transfers. Neither side achieved its objective. Table 9.1 and Figure 9.1 summarize the content of the “accord” reached at the 2003 meeting. The key features were the split of the CHST into two components as recommended by Romanow: a Canada Health Transfer (CHT) and a Canada Social Transfer (CST). Annual fis­ cal enhancements, committed for five years, were skewed to the CHT. In an attempt to “buy change” as recommended by both Romanow and Kirby, the federal government established a separate Health Reform Transfer (HRT) targeted to primary health care, home care, and catastrophic drug coverage. In a nod to provincial desires for flexibility, it was agreed that the HRT would be incorporated into the CHT after five years, following a review of progress on reform priorities. Commitments in the 2000 accord to develop “comparable indicators”

394  Remaking Policy Figure 9.1. The Structure of Federal Health and Social Transfers, Canada, 1957–2014

Source: Canada n.d.

for public reporting by provinces were reiterated and given sharper point with a detailed list of potential indicators. A Health Council of Canada was established to coordinate reporting and to compile the information into comprehensive public reports on implementation of the accord. The accompanying communiqué said that the council was to comprise “representatives of both orders of government, experts and the public.” Quebec refused to participate in the council, but agreed that its existing Council on Health and Welfare would collaborate with the new council. Alberta also refused to participate, but agreed to send observers. Even hedged about with protections for provincial autonomy as these commitments were, they were once again qualified using the language of the 2000 accord: “Nothing in this document shall be construed to derogate from the respective governments’ jurisdictions. This Accord shall be interpreted in full respect of each government’s jurisdiction.” Yet even these relatively weak provisions could not attract full consensus. Although all premiers agreed to attend the press conference announcing the meeting’s communiqué, none signed the so-called accord.8 The tenor of the meeting was extremely sour. The episode was widely viewed as a lost opportunity and “yet another temporizing compromise’ (Detsky and Naylor 2003; see also Boychuk 2006; Coutts 2003, 20).

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The Window: Contest and Transition at the Federal and Provincial Levels

Electoral and institutional resources: New alignments Beginning in April 2003 the second necessary condition for the opening of a window of opportunity for health care reform – a propitious climate of federal-provincial relations, backed by electoral resources at both levels of government – finally emerged. Three elections dramatically reshaped the landscape. Two were at the provincial level. In an echo of the 1958–60 period, elections brought to power a new cohort of premiers more open to collaboration than their predecessors had been. In April 2003 the Quebec Liberal Party defeated the Parti Québécois to form a majority government in that province under Premier Jean Charest. Charest, who had left the leadership of the federal Progressive Conservative Party to take on the Quebec Liberal leadership in 1998,9 was a staunch federalist with broad political networks within Quebec and across Canada. In October the Liberals under Dalton McGuinty replaced the Progressive Conservatives with a majority government in Ontario. McGuinty’s Liberals embraced an agenda of social policy reform, in stark contrast to the right-wing rhetoric and small-government policies of the previous PC governments of Mike Harris and (briefly) Ernie Eves. With these two elections the two largest provinces were now led by premiers and governments much more open to collaboration in the interest of social policy reform – although Charest could maintain support in Quebec only by continuing to insist on Quebec’s autonomy in areas of its jurisdiction. For both Charest and McGuinty, reaching a sustained agreement on federal funding for health care at the outset of their respective mandates would provide not only welcome resources, but also the stability they sought in order to pursue their agendas. The third-largest province, British Columbia, was in the hands of the Liberals under Gordon Campbell, elected in 2001 – a premier with a strong interest in policy innovation who had found few partners at the federal-provincial table to date. Although Alberta’s Ralph Klein continued to take a combative stance, the presence of Campbell, Charest, and McGuinty established an important critical mass of premiers with electoral and institutional interests in reaching accommodation. In December 2003 the premiers established a Council of the Federa­ tion (COF) comprising all premiers, including Quebec’s, but excluding

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the federal government, to respond to the “need to institute a new era of intergovernmental collaboration by promoting a constructive dialogue between the partners of the federation” (Council of the Federation 2003, 1). Decisions of the council were to be taken by “consensus.” The council subsumed the Premiers’ Council on Canadian Health Awareness, which had been established in January 2002 largely as a vehicle for conducting an Alberta-based advertising campaign aimed at pressuring the federal government to increase transfers.10 The contrast between the two approaches was stark. The third election to transform the landscape occurred at the federal level, when a Liberal leadership convention chose Paul Martin to succeed Jean Chrétien as party leader (and therefore effectively as prime minister) in November 2003. Martin’s accession to the Liberal leadership was widely seen at first as marking a regime change within a hegemonic Liberal Party facing a weak opposition (Doern 2003). The political right was still hobbled by fragmentation: in December 2003 the Canadian Alliance and the rump PC Party merged to form a new Conservative Party of Canada, despite a recent pledge by the PC leader that he would not do so. This merger removed the last vestige of the PC Party from the federal scene, although provincial parties continued to operate under that label. The new federal party would not elect a leader until March 2004, however, and it was not at all clear that the wounds of previous political warfare on the right could be thus healed. The Economist magazine, for example, noted the expectation that Martin would have at least one full mandate after the next election, citing among other things an Ipsos-Reid poll showing 21 per cent support for the new Conservative Party as against 48 per cent for the Liberals,11 and questioned only “whether his premiership [would be] merely a bland coda to Mr. Chrétien’s decade of dominance, or [would open] a vigorous new era of Liberal-led reform.”12 Clearly Martin wished to establish the latter scenario. As Prince observes, “[u]nlike Chrétien, Martin’s style was characterized by expansive rhetoric, bold concepts, and earnest pronouncements” (2006, 232). One key dimension in which Martin sought to distinguish himself from Chrétien was in the relationship with the premiers, where he wished to establish a warmer climate as a hallmark of his government. As finance minister in the 1990s, Martin had established a network of personal relationships with provincial finance ministers that had provided a platform for a reform of the Canada Pension Plan that successfully addressed a looming problem of unfunded liability. That climate

Canadian Incrementalism Reinforced, 2003−04  397

of interpersonal trust provided a motif for him in his approach to the provincial premiers once he became prime minister.13 One of his first acts after assuming the leadership was to travel to meet the premiers at one of their regular meetings and to use the occasion to invite them to join him at one of Canada’s most iconic sporting events, the Grey Cup football game.

Political will: An intra-party wedge Several political imperatives drove health care to the centre of Martin’s agenda. Given the centrality of health care to the intergovernmental agenda, Martin’s focus on improving federal-provincial relations inevitably made achieving agreement on health care a key priority for his government. Even before assuming the leadership, moreover, Martin’s advisers had seen health care as a key “wedge” issue with which to distinguish him from Chrétien and build a sense of urgency to accelerate Martin’s accession. In particular the “Martinites” emphasized the importance of addressing waiting times for elective surgery and some diagnostic services – an increasingly salient issue in public opinion and media commentary.14 After becoming prime minister Martin’s continuing need to distinguish himself from his predecessor reinforced the importance of this wedge – to avoid the danger, as flagged by the Economist commentary cited above, as being seen to preside over “a bland coda.” Martin also had deep personal reasons for taking up health care as a defining issue.15 His father, Paul Martin Sr, for whom Martin Jr had deep and great regard, had been minister of national health and welfare in the 1950s, and in that capacity had championed the cause of national health insurance. Martin Sr had successfully driven the negotiation of the shared-cost federal hospital insurance program with the provinces, but had been unable to prevail against opposition from the then-dominant business Liberals in the federal cabinet to achieve his broader goal of comprehensive physician and hospital insurance (Boothe 2012: 793–4; Donaghy 2015, 109–10, 117–18, 153–5, 159–60). Health insurance thus formed part of a family legacy for the junior Martin. Moreover a focus on health care offered a potential antidote to a poisoned chalice left by Chrétien: a brewing scandal over the misappropriation of public funds for partisan Liberal purposes in Quebec. (Because the funds involved related to a federal program of “sponsorship” of various events in Quebec, it became known as the “sponsorship scandal.”)

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Accordingly, achieving a deal with the provinces on health care became more and more definitive of Martin’s agenda. In a major speech in March 2004, presaging what would become the Liberal platform in an upcoming election, Martin emphasized this key priority and established high political stakes for failure. Promising to end years of “feuding and bickering,” he declared: “As far as I’m concerned, we’re going into the meeting and we’re not coming out until we have a long-term agreement ... We’re looking at a ten-year agreement to essentially deal with the whole question of sustainability and the protection of our universal health-care system” (quoted in Campion-Smith 2004). A month later this commitment became the centerpiece of the Liberal platform when Martin called an election for 28 June, which he claimed would give him the mandate he needed to negotiate with the premiers. In fact Martin’s decision on the timing of the election was much more likely to have been driven by the need to pre-empt the forthcoming release of a parliamentary committee report on the sponsorship scandal. As Boychuk wryly notes, “[t]he timing of the election was not bent to the imperatives of health care reform but, rather, health care reform would be bent to the dictates of political expediency” (2005, 43). The stars had finally aligned to open a window of opportunity for major change in Canadian health policy. As noted at the beginning of this chapter, the 2003–4 period bears some limited comparison with the era in which the last window had opened: the 1960s. Both were rare moments when a critical mass of provincial premiers was willing to engage in intergovernmental collaboration on matters other than constitutional jurisdiction. Both were also times of transition in the federal Liberal Party as a new group consolidated its power. In the 1960s it was the “social Liberals” who gained advantage over a discredited group of “business Liberals” to pursue an agenda of social policy reform during a period of party rebuilding. In the 2000s it was the Martin Liberals, having staged a long and ultimately successful insurgency, who sought to consolidate their position and place their stamp on the party at a time of intra-party change. The fault line in the 2000s did not divide “social” and “business” Liberals, however, despite Martin’s long tenure as finance minister. Rather, as in the case of the Blair-Brown conflict in the United Kingdom, this had been a contest between personalitybased factions with relatively similar ideologies for control of the party, and health care was seized as an available tool in that contest. Finally, both were periods in which the federal government had both the fiscal room and the will to invest in social policy. In the 1960s fiscal buoyancy

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was provided by “a sustained period of robust growth in per capita output, stronger on average than that of the United States,” as well as by productivity growth and low rates of unemployment (Nicholson 2003, 4). In the 2000s the fiscal room was a result of Martin’s own success as finance minister in the Chrétien government. As one close observer put it, the Martin Liberals “were in a position to soak-up the surplus which in very real terms had been the legacy of Paul Martin as Canada’s minister of Finance from 1993 to 2002 when deficits were slain, and fiscal vicious cycles became virtuous cycles” (Doern 2005, 3). The Strategy: “Buying change and buying time” Bruce Doern (2005) has perceptively described the leitmotif of much of Martin’s prime ministership as one of “buying change and buying time.” Doern applies this characterization to the period following the 2004 election, which reduced the Liberal government to minority status. But in fact that mindset predated the election, and ironically arose in the context of the anticipation of an extended Liberal regime.

Scale: Buying change The broad outlines of the Liberal approach to health care reform were set out in Martin’s March speech and the party’s platform for the June election. The rhetoric was bold; the actual ingredients were much more modest. Martin’s speech committed the Liberals to “deep, transformative change” within the five principles of the Canada Health Act. Those organizing principles were indeed general enough to accommodate a substantial scale of change. For example, the weight of state influence could have been extended by expanding and harmonizing existing provincial programs of public coverage for services such as prescription drugs and home care – either by bringing those services under the CHA umbrella or by establishing new federal-provincial programs outside the CHA. It would also have been possible to increase the weight of market mechanisms through some form of “internal market,” as suggested by the Alberta commission and the Kirby report discussed above and as had occurred in another tax-based universal system, the British NHS. The measures outlined by Martin and the Liberal platform, however, were much less ambitious. Even in his March speech Martin immediately segued from his call for deep, transformative change to a focus on

400  Remaking Policy

reducing waiting times. The Liberal plan itself, as signalled in Martin’s speech and subsequently fleshed out in the party’s election platform, itself rested on four premises. First, the “Romanow gap” should be closed by raising the federal cash transfer to the level at which it would cover 25 per cent of provincial expenditure on physician and hospital services. Martin had moved well beyond the successful deficit-­reduction agenda of the 1990s: he was persuaded that the provinces needed more revenue for health care and that the federal government was the appropriate source. Second, waiting times were “the fundamental measuring tool that all Canadians use” (quoted in Campion-Smith 2004) to assess the performance of the system, and therefore needed to be specifically targeted for action. Third, improvements in system performance should be achieved over a ten-year period. Fourth, that improvement process should be driven by the establishment of agreed-upon and publicly reported performance metrics and milestones. This latter embrace of indicator-driven improvement was strongly promoted at the senior levels of the federal bureaucracy at the time, both in the Department of Health and in the cabinet office, as involving an important new public policy experiment.16 Such metrics would go well beyond the provisions in the 2000 and 2003 accords for which provincial premiers had undertaken, and failed, to develop “comparable indicators”; rather, they would involve benchmarks and targets based on expert advice and evidence. This evolution in thinking was shared and embraced by some of Martin’s political advisers as a way of further distinguishing his approach from the ineffectual initiatives under Chrétien.17 Accordingly, as Boychuk (2005, 43–4) summarizes, the health care plank of the Liberal platform committed a new Liberal government to work with the provinces to achieve the following: • a national waiting times reduction strategy to establish evidence-based benchmarks for acceptable waiting times for specific procedures, province-by-province timelines for meeting these targets, and a dedicated multiyear fund to support the achievement of the targets; • a health human resource strategy for increasing the number of primary care practitioners through funding for domestic training programs and improved credential recognition for immigrant professionals; • a national home care program of per capita funding to provinces for a minimum agreed-upon set of home care services;

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• a national pharmaceuticals strategy that by 2006 would develop a “nationwide approach to provide all Canadians with a basic level of coverage, including catastrophic protection”; and • a formalized and improved dispute resolution-mechanism for disputes arising under the Canada Health Act, including provision for arbitration by an independent, expert panel. Underlying all of these proposals was a commitment to close the “Romanow gap” with new federal funding and a fixed annual escalator. By and large these promises comprised a miscellany of enhancements to established programs – all requiring negotiation with the provinces. The national pharmaceuticals strategy and the National Home Care Program held the potential for a substantial expansion of state influence (and for the role of the federal government), depending on the outcome of negotiations. The Liberals’ attempt to depict themselves as defenders of medicare against Conservative “privatizers” met resistance. Although the Liberal narrative was given credence by Alberta PC premier Klein’s musings in the days before the election that a forthcoming plan by his government might contravene the CHA, the federal Conservatives distanced themselves and “refused to be baited” (Boychuk 2005, 44). Their platform embraced the principles of the CHA, committed to closing the “Romanow gap,” fully endorsed the 2003 health accord, criticized the Liberals for not implementing it, and went beyond any Liberal commitment in undertaking to negotiate with the provinces for the federal government to assume “direct responsibility” for a program of catastrophic coverage for prescription drugs (Conservative Party of Canada 2004, 25–7). As for the New Democratic Party, it also pledged federal funding to close the “Romanow gap,” while arguing that neither the Liberals nor (especially) the Conservatives would defend against the threat of privatization. This left only the indépendantiste Bloc Québécois, which rejected any conditions on federal transfers, outside the broad consensus (Boychuk 2005, 45). Given the degree of correspondence among the platforms, the election seemed likely to determine only which federal party would be in a position to take credit (or assume blame) for the execution of a health care strategy. With the important exception of a potential opening for a national program of pharmaceuticals coverage, this cross-party consensus­ amounted to an embrace of a set of marginal adjustments to the existing

402  Remaking Policy

framework of single-payer coverage for physician and hospital services and a mix of public and private finance for all other services. Essen­ tially these adjustments would expand somewhat the fiscal footprint of the state in health care – though likely not back to its size in the late­ 1970s – harmonize coverage for certain non-physician and non-hospital services across Canada, and effect some changes in the delivery system, especially in primary care, driven by performance metrics. The remaining question was the pace at which these marginal adjustments would be attempted: rapidly as a mosaic or incrementally over time.

Pace: Buying time As noted above, there was widespread expectation in early 2004 that Paul Martin’s assumption of the Liberal leadership and the prime ministership marked the beginning of the next phase of Liberal dominance at the federal level. The Martin government therefore could take the long view. Martin himself was open to a range of policy options on health care reform, including many of the changes to the delivery system the Kirby report had recommended. Given the multiparty makeup of Kirby’s Senate committee, Martin also believed that pursuing these options would attract cross-party support. But he believed that his government would be in a better position to pursue these options once the rankling issue of the “Romanow gap” was removed from the federal-provincial table.18 Accordingly he and his advisers conceived the strategy of seizing the opportunity of the Martin honeymoon and the new climate of federal-provincial relations to “buy change” by securing provincial commitment to a “work plan” in return for the restoration of the federal transfer. The plan, as laid out in the Liberal election platform, identified areas of priority – reducing waiting times, home care, pharmaceutical coverage, and so on – but apart from the immediate priority of reducing waiting times through benchmarks and targets, it did not specify the policy options to be pursued. This strategy aimed at change neither on the scale of a blueprint for reconstituting the policy framework nor at the pace of a mosaic of multiple rapidly assembled adjustments. Rather, it was an incremental approach, deliberately chosen in a moment of opportunity, to make a “political investment” (Teles 2009) to lever an existing advantage into a yet more advantageous position in the future.

Canadian Incrementalism Reinforced, 2003−04  403

The strategy unfolds: The 2004 health accord In the 2004 election campaign the Liberals’ attempt to make health care the central focus and to paint the Conservatives as a threat to medicare failed. Instead the pall of the sponsorship scandal could not be dispelled, and it dominated the campaign. The Liberals lost 33 seats and were reduced to a minority government. The NDP held the balance of power: its 19 seats together with the Liberals’ 135 constituted a bare majority in the 308-member House of Commons. The impact on the Liberal Party was one of shock and distress: in a brief nine months the party had been reduced from an apparent hegemon to a chastened minority-holder. This unexpected result did not lead, however, to a shift in political strategy towards health care. For one thing the strong emphasis in the election campaign on reinvestment plus a “work plan” gave the Liberals’ incremental strategy a momentum that was difficult to reverse. Even more tellingly the Liberals now needed an agreement with the provinces more than ever, and the high-stakes gamble of calling a September meeting with the premiers had already been placed (Boychuk 2005). In a context in which the Liberal government likely would be returning to the electorate in the near future, and possibly at a time not of its choosing, it needed some immediate gains to establish an early record of success.19 Martin himself saw achieving an intergovernmental agreement with the signature of the premiers as central to the credibility of his government.20 One might argue that the Liberals’ fall to minority status meant that the window of opportunity for major change in health care had closed precipitously. But that was not the case. The conditions, as noted, were very similar to those prevailing when Canada’s only big bang in health care occurred in the 1960s: a Liberal minority government, largely undifferentiated positions on health care across parties, a relatively propitious warming of the federal-provincial climate after a period of substantial hostility, and not one but two federal inquiries tabling a set of recommendations for policy change. One might well imagine the pursuit of at least a “mosaic” strategy in this context – for example, a rapid assembling of various policy recommendations on marginal extensions of coverage and a federal-provincial agreement on an interpretation of the CHA to allow experimentation with some form of internal market. Moreover, in July 2004, the prospect of a larger change suddenly appeared.

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The premiers’ pharmacare proposal At a meeting of the Council of the Federation one month after the federal election, the premiers, building on the Conservative campaign proposal that the federal government assume direct responsibility for a program covering catastrophic drug costs, went further to propose that the federal government assume “full responsibility” for the financing and delivery of all pharmacare programs across the country through the establishment of a “national pharmacare program” of comprehensive coverage (Council of the Federation 2004, 1–2). Following established practice, the premiers also acknowledged the need for a special provision for Quebec, which operated the only universal comprehensive framework of drug coverage in the country, noting that, “[i]t is understood that Quebec will maintain its own program and will receive a comparable compensation for the program put in place by the federal government” (2). The premiers’ proposal was sketched only very briefly, and it was not clear how it would intersect with their ongoing demands for increases in the CHT. But they did not exaggerate when they claimed that establishing a federal pharmacare program would constitute “the first major innovation to health care in a generation” (1). This remarkable proposal – a unanimous invitation from the provinces for the federal government to assume responsibility in an area of provincial jurisdiction – was extraordinary along at least two dimensions. First, it was a rare example of agreement among the provinces to “upload” full responsibility for a social program area to the federal government – akin to the mid-twentieth-century constitutional amendments allowing the federal government to assume control over unemployment insurance and non-contributory old age assistance. And unlike those examples, provincial programs of drug coverage were already well established. Second, from the perspective of the health care arena, a federal program of comprehensive pharmaceutical coverage would amount to major change. It would require at least a levellingup of coverage across provinces, and thus would represent an expansion of the influence and fiscal footprint of the state in the health care sector. Furthermore, depending on the design of the federal program, it might also require some change in the organizing principles of the Canadian health care state. For example, the programs of coverage for “catastrophic” drug costs recommended by both Romanow and Kirby would establish a new pan-Canadian model of universal coverage in the health care arena that would not be based on first-dollar coverage and that would allow for the continuation of existing employer-based

Canadian Incrementalism Reinforced, 2003−04  405

plans. Taking together both its federal-provincial and its health-policy implications, the proposal constituted major change on either a big bang or a blueprint model, depending on the pace of enactment. Surprising though it was, the premiers’ proposal can be seen to contain the ingredients of a potential deal. The provincial interest was in maximizing the federal fiscal contribution to health care while preserving provincial discretion. Negotiating separate jurisdictions within health care for the federal and provincial governments might serve that goal. The federal government, for its part, could have gained visibility through direct relationships with recipients of care, as well as control over drug costs. All of this assumes the outcome of what very likely would have proved to be complex and difficult negotiations, but the possibility of coincident interests was there. The premiers’ proposal came as a surprise for which neither Martin’s advisers nor the senior levels of the federal bureaucracy were prepared. But federal bureaucrats in the Department of Health and in the cabinet office quickly saw the potential in the offer. The federal government already had responsibility for the regulation of drug safety and the market prices of prescription drugs, and it already provided drug coverage for Aboriginal people, the military, and penitentiary inmates. A federal program would reap great economies of scale over multiple diverse provincial programs, and would give the federal government substantial purchasing power, enabling it to drive down drug prices. The health and cabinet officials also believed that this moment of provincial unanimity offered a rare opportunity to address issues of drugcost escalation and interprovincial harmonization that would not go away. Echoing the premiers, they advised Martin that establishing a direct federal pharmacare program would be the twenty-first-century equivalent of the mid-twentieth-century establishment of physician and hospital services insurance.21 Nonetheless there were voices of caution among senior officials as well. The provincial proposal had been developed quickly, and there was very little time before the scheduled September meeting to assess and flesh out its implications.22 Moreover drug costs at the time were growing the fastest of any sector, and officials in the Department of Finance were extremely wary of assuming the fiscal risk that a federal program would imply – notwithstanding the potential for economies of scale and increased purchasing power.23 Even some health officials shared that fiscal concern, and worried about the administrative capacity required to operate a federal program.24 They were also concerned

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that dividing responsibility for areas of health care delivery across jurisdictions could exacerbate problems of integration and accountability and create the potential for cross-jurisdictional cost-shifting.25 The design of the program would also present thorny issues of equalization across provinces with programs at very different levels of drug coverage, to ensure that the federal takeover did not simply reward laggards at the expense of those who had established more full-fledged programs (or vice versa).26 Among Martin’s political staff, moreover, the reaction to the premiers’ proposal was broadly dismissive. Martin had retained the same staff who had served him during his period of insurgency, and most remained keenly tuned to political advantage, with little interest in policy design.27 They believed that Martin should stay fixed on the issue driving public opinion – waiting times – and not be distracted by a provincially driven agenda. The few Martin staff members who were engaged with policy design issues were those who had served him as finance minister during the period of fiscal consolidation, and they cast a wary eye on the fiscal implications of a federal pharmacare program. Martin himself saw the merits of the proposal, although he was sceptical as to how committed the premiers actually were. He was prepared to make a substantial contribution to health care financing. He recognized that a national pharmacare program would involve significant up-front costs for the federal government, but believed that a comprehensive framework would allow costs to be brought down over time. He did not accept that the federal government should take over the field entirely, but was open to some sort of shared-cost model. He believed, however, that arriving at such an arrangement would require long and complex negotiations for which, in the new context of the minority government, there simply was not time.28 This was, in fact, the key difference between 2004 and 1966. By the time of the passage of the Medical Care Act in December 1966, the intergovernmental negotiations that underlay it had been under way for eighteen months, during which the minority Liberal government had survived an election, albeit with another minority. In September 2004 the premiers’ offer to negotiate an uploading of pharmacare was less than two months old. An electorally chastened federal Liberal government now needed an immediate deal. Accordingly Martin temporized. The Liberals’ election platform had called for the development of a “national pharmaceuticals strategy,” and this could provide the vehicle for future negotiations about the

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degree of federal involvement. This approach was consistent with Martin’s persistence in following a strategy of incrementalism to provide a platform for future advantage: he continued to believe that closing the “Romanow gap” would strengthen his government’s hand in subsequent dealings with the provinces. Indeed he struck a “handshake deal” with the premiers that, if he were returned with a majority government, they would proceed to negotiate a pharmacare program.29 But that eventuality did not transpire, and the federal rejection of the pharmacare proposal would be bewailed, privately by some officials30 and publicly in the Canadian health policy community, as a huge lost opportunity (Boychuk 2005; Maslove 2005, 37). “A 10-year plan to strengthen health care” The process for the first ministers’ meeting in September 2004 was designed to create an image and an atmosphere of high significance. Meet­ ings in a grand, flag-bedecked conference centre were televised, and various members of the health policy community were invited to attend as observers. In fact the key negotiations occurred behind closed doors. Reportedly, despite the generosity of the federal offer and the relatively mild conditions attached, the negotiations came close to falling apart over issues of the level of the federal transfer, a separate arrangement for Quebec, and provisions for equalization across provinces (Clark 2004). Certain premiers, notably Quebec’s Charest and Ontario’s McGuinty, played important roles in securing agreement, despite (or perhaps aided by) the fact that Alberta premier Klein departed the negotiations and left the representation of Alberta in the hands of his “more low-key and collegial” health minister (Campbell 2004; see also Clark 2004; Urquhart 2004). Charest’s networks, including his back channels to Conservative leader Stephen Harper, were especially valuable (Clark 2004). Martin himself was credited with managing the premiers in a way that Chrétien could not (Ibbitson 2004; Urquhart 2004). The resulting accord, which also comprised separate agreements for Quebec and for Aboriginal people, attracted the signatures of all premiers, unlike its 2003 predecessor. The content of the agreement, summarized in Table 9.1, hewed closely to the outline set out in the Liberals’ 2004 election platform. The centrepieces were increases to the Canada Health Transfer, an additional federal transfer to reduce waiting times, and a provincial commitment to develop benchmarks and targets for reducing waiting times. The CHT would be increased over two years to a base level corresponding to 25 per cent of

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provincial costs for services covered by the Canada Health Act – thus formally closing the “Romanow gap.” Thereafter an annual escalator of 6 per cent would be applied to the per capita transfer, roughly in line with the nominal rate of increase in provincial health spending in the previous five years. Benchmarks for waiting times in five clinical areas were to be developed through a common process developed by federal and provincial health ministers by December 2005. By December 2007 each provincial government would then announce targets for the proportion of patients to be served within those benchmark times, and would report annually on progress towards those targets. (Although this process was said to “build” on provisions of the 2003 accord regarding the development of performance indicators, it was ominous that the September 2003 deadline for announcing these indicators had quietly lapsed.) In addition premiers agreed to provide first-dollar coverage for certain home care services. The premiers’ pharmacare proposal having fallen off the table in the face of federal resistance, the first ministers agreed to establish a task force of health ministers to develop and implement a national pharmaceuticals strategy to, among other things, “develop, assess and cost options for catastrophic pharmaceutical coverage,” develop a common formulary for “participating jurisdictions,” and “pursue purchasing strategies to obtain best prices … for drugs and vaccines” (Conference of First Ministers 2004, 7) – and to report progress by 30 June 2006.31 Not only did this aspect of the accord fall far short of the premiers’ bold proposal, but it even marked a retreat from the provision in the 2003 accord that all provinces would have in place programs of catastrophic drug coverage by 2006. Jurisdictional sensitivities were respected in several ways. First, the principle of “asymmetrical federalism” was formally recognized through special arrangements for Quebec, whereby that province would not participate in the common processes established by the accord, but would take comparable measures and report publicly on progress. Although a similar arrangement was open to other provinces, none took it up. Second, it was made clear that all reporting requirements entailed governments reporting to their own respective populaces, not to the federal government or to any intergovernmental structure. Unlike previous documents, however, the 2004 accord contained no qualifying statement that its provisions did not derogate from provincial jurisdiction. Further, it also appeared to underline the conditionality

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of the federal transfer, to the extent that “[a]ll funding arrangements require that jurisdictions comply with the reporting provisions of this communiqué.” But those reporting provisions related only to reports on progress. Nothing in the accord, or in the March 2005 implementing legislation governing transfers, provided the federal government with a mechanism with which to sanction provinces for not actually making progress on any on the commitments. The underlying assumption was that public reporting itself, not federal authority, would create sufficient pressure on governments to deliver on the plans. That assumption would prove to be misplaced. An incremental strategy conceived in more optimistic times was thus foreshortened by events. The increment that was to have provided the platform for further negotiations became the end in itself, and the potential future negotiations became hostages to fortune.

Reaction and assessment The initial reaction to the accord, in the media and within the health care arena and the health policy community, was mixed (Boychuk 2005; Maslove 2005). The highly respected chair of the recently established Health Council of Canada – a former deputy minister in both the Manitoba and Ontario governments – hailed the agreement as “the best deal I’ve seen since the 1960s” (quoted in Priest 2004). Roy Romanow pronounced himself generally pleased, but warned of the need for vigilance in ensuring that the commitments in the accord were actually met (Laghi and Tuck 2004). Media commentary ranged from highly laudatory to witheringly critical (Boychuk 2005, 41). Significantly the leaders of both the Conservative and New Democratic parties wrote op-eds welcoming the deal, while variously criticizing its shortcomings (Harper 2004; Layton 2004). The Liberal strategy made for problerms in public presentation. On the funding front, the restoration of the federal transfer was touted as finally resolving a long-standing issue and providing a definitive “fix for a generation.” But with regard to reform of the health care system, the strategy was presented as an in-progress “work plan,” implying that future gains could be realized as work proceeded. This was indeed the intention. In the absence of any mechanism of enforcement beyond public reporting, however, the work plan amounted to giving hostages to fortune, and fortune was about to turn against the Liberals.

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Denouement: Unravelling Accords and Continued Cycling Even at the time, the likelihood that the newly agreed federal-provincial work plan would lead to any substantial change in the coverage or delivery of health care services was viewed with some scepticism. As the ten-year period of the agreement unfolded, this scepticism was increasingly borne out. The Health Council of Canada, established pursuant to the 2003 accord, emerged not as the arm’s-length body envisioned in the Romanow report, but as part of the federal-provincial machinery, with all appointees nominated by the respective governments and without the formal participation of Quebec and Alberta. Even so neutered, the council expressed growing disillusion in a series of annual reports with the implementation of the accountability provisions of the 2004 accord. A Conservative government with little appetite for engagement with the provinces on matters of social policy replaced the Liberals at the federal level in 2006, and remained in power through two successive minority governments and one majority government until 2015. As provincial governments delayed in developing and reporting indicators of performance that could be meaningfully compared across jurisdictions, the council issued a critical report in 2008 (Health Council of Canada 2008). It noted success in some areas, such as the acquisition of medical equipment and the establishment of evidence-based benchmarks for waiting times in five clinical areas, as agreed in the accord. But progress towards actually meeting those benchmarks varied widely across provinces. Even the December 2007 deadline for provincial governments to set timelines for meeting the benchmarks had “passed with only a few provinces setting timetables to achieve the wait time benchmarks” (Health Council of Canada 2008, 15). With regard to the commitment to provide firstdollar coverage for most short-term home care by 2006, the council reported that, “[i]n January 2007, provincial and territorial health ministers reported that they had taken steps toward fulfilling their commitments on home care, but no specifics were provided” (18). Regarding the proposed national pharmaceuticals strategy, progress had stalled, and the consensus in support of such a strategy appeared to be eroding (19). And with regard to the accountability provisions of the accord, while provinces reported an array of information, little progress had been made on developing indicators allowing for comparisons across jurisdictions.

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A parliamentary review in 2008 – as required under the federal legislation enacting the changes to the federal transfer required under the 2004 accord – was even less positive, variously noting that “jurisdictions have not reported to their citizens in a systematic and timely manner as initially agreed,” that “the lack of consistent, comparable data creates significant challenges in evaluating reform and in reporting on progress,” and that “the National Pharmaceuticals Strategy … has been established as a pan-Canadian framework to address pharmaceutical issues in a collaborative manner, but there has been little, if any, activity since 2006.” Meanwhile, the review noted, other pan-Canadian processes for collaboration, such as a Best Practices Network for primary health care reform, had been disbanded (Canada 2008, 19–21). Although the negative tone of the parliamentary review was attributable in part to the fact that it was conducted in the context of a minority government by a standing committee on which opposition parties held a seven-to-five majority, its findings were consistent with those of the Health Council of Canada and with subsequent reviews. A 2012 review by a Senate committee with a Conservative majority came to similar conclusions. It noted that considerable progress had been made in reducing waiting times in the priority areas, but that there continued to be significant variation across provinces in this regard and that crossjurisdictional comparisons were hobbled by a lack of reported data (Canada 2012a, viii). Similar concerns were expressed regarding home care: although progress had been made on a province-by-province basis, “governments did not meet their reporting requirements relating to home care due to a lack of agreement regarding developing indicators and targets for progress in this area” (xii). Finally, a progress report issued by the Health Council of Canada in 2013, just before it was disbanded, indicated that progress on meeting waiting-time benchmarks had continued through 2010 but had stalled thereafter (Health Council of Canada 2013, 6–10). With regard to primary care reform, “Canadians have not received the promised 24/7 access to primary health care services. Many jurisdictions are tackling primary health care reform through investments, innovation, and policy change, but the absence of specific targets and performance measures makes it hard to measure progress against this goal” (16). With regard to pharmaceuticals, the report noted the cross-provincial initiative to negotiate common prices for some drugs, as discussed below, as well as the fact that most provinces had by then established some form of catastrophic coverage,

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but that “variability among legislation, drug plans, and provincial resources has resulted in inequitable access across Canada” (24). In sum, apart from some focusing of attention and resources on reducing waiting times in certain priority areas, the 2004 accord, like its predecessors, simply became a vehicle for increasing the federal transfer and a gloss on provincial-level activity that likely would have occurred in the absence of any of its other provisions. In that sense the cuts of the mid-1990s and the accords of 2000, 2003, and 2004 represented a continuation of the pattern of cycling in the level, structure, and conditionality of the federal transfer that had characterized the 1970s and 1980s.

The federal transfer for health care: Level, structure, conditionality Across the full arc of Canadian health care policy since the establishment of medicare, it is now possible to observe a broad series of cycles in the federal transfer for health in each of structure, conditionality, and level, as the government wrestled with the trade-offs between visibility, control, and fiscal commitment implied by different designs and sums. The level of the federal transfer The overarching consideration for successive federal governments was their fiscal exposure, as health care costs climbed at rates generally exceeding GDP growth. Figure 9.2 shows the swings in the value of the federal cash transfer as a share of provincial health expenditure. There were two ways of thinking about the federal share. On the one hand, the original cost-sharing arrangements and then the Canada Health Act with its associated conditions applied only to provincial insurance of physician and hospital services. It would make sense therefore to measure the federal contribution as a share of provincial expenditures on physician and hospital services only. On the other hand, after the shift from shared-cost to block funding in 1977, the federal government never tied the funding to particular areas of expenditure. Moreover it was in the interest of neither level of government to portray the transfer as for physician and hospital services only. The provinces wanted a large denominator in order to minimize the portrayal of the federal share. The federal government wanted to establish a broad presence in health care while offering the provinces greater “flexibility” in exchange for decreased funding. Whichever way the federal share is calculated, however, the pattern is the same. The sharp decline in the cash transfer

Canadian Incrementalism Reinforced, 2003−04  413 Figure 9.2. Federal Health Transfers (Cash) as a Share of Provincial Health Spending, Canada, 1975–2014

Notes: Health share of CHST for fiscal years 2001/01 to 2003/04 calculated at 57%, the notional health share of Established Programs Financing + Canada Assistance Plan in last three years of operation (1993/94 to 1995/96); data for 2002/03 and 2003/04 include Health Reform Transfer of $1.0 million and $1.5 million, respectively. Sources: Author’s calculations from Canada 2012b, 2014; and Canadian Institute for Health Information 2014.

in 1977 reflects the division of the transfer into a tax-point component and a cash component. After a brief transitional period in which the federal share increased, a long downward cycle began in the mid-1980s and continued through the mid-1990s until the sharp drop associated with the introduction of the CHST. After that nadir an upward cycle brought the federal share to a peak in the immediate wake of the 2004 accord and to a plateau thereafter. The fiscal arrangements the federal government unilaterally adopted for the 2014–24 period essentially tied the growth of the federal transfer to the growth of population and GDP. The structure and conditionality of the transfer In addition to these fiscal cycles, we can also observe oscillations in the structure and conditionality of the transfer, moving from differentiated transfers for health care, social assistance, and post-secondary

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education through various permutations and combinations of the three fields. After completely collapsing the transfers in 1996, the federal government returned almost full circle to a differentiated transfer in 2004 – the only difference from the pre-1995 period being that postsecondary education was now combined with social assistance, rather than with health. These different structures, as well as other changes in federal policy, had different implications for the associated conditions on provincial spending. In Chapter 4 I outlined the course of development from detailed reporting requirements prior to 1977, through the reduction in the share of the transfer subject to conditions in 1997, to the sharpening but narrowing of the focus of conditions under the Canada Health Act of 1984, which provided for dollar-for-dollar penalties for provinces that allowed “extra-billing,” or user charges for physician and hospital services. The creation of the CHST in 1995 marked a loosening of conditions, as the Liberal government made a point of indicating that the new combined transfer would give the provinces greater flexibility in the use of the funds. Almost all conditions on provincial programs of social assistance were removed, and the allocation of the new transfer between social assistance and health care was left entirely to the provinces’ discretion. The CHA’s prohibitions and penalties on extra-billing remained, however. The accords of 2000, 2003, and 2004 represented yet another turn in this process by tightening certain conditions. For the first time, funding was targeted, at least on a transitional basis, to particular areas of health care, and reporting requirements were considerably elaborated. Actual enforcement of these various provisions was another matter. The CHA’s penalties against extra-billing were not enforced under the Progressive Conservative federal government that replaced the Liberals in 1984. When the Liberals returned to power in 1993, they began to levy modest penalties, including retrospective penalties for extra-billing occasioned by a fee dispute in British Columbia in the early 1990s. In 1995 the federal Liberal health minister raised concerns about “facility fees” charged to patients receiving publicly insured services at private clinics – largely related to cataract removal, abortion, and some elective surgical procedures – in Alberta, Manitoba, Nova Scotia, and Newfoundland and Labrador, and began to levy penalties accordingly. All four provinces eventually eliminated facility fees. In 2000 Alberta introduced legislation allowing private clinics to charge for “enhanced” services – defined as services that “exceed what would normally be used in a particular case in accordance with generally

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accepted medical practice,” and subject to further definition in regulations – in association with the provision of publicly insured services. After public protests and both public and private altercations between federal and provincial officials, the legislation was amended to add explicit safeguards against the use of such charges as a mode of queuejumping (Caulfield, Flood, and von Tigerstrom 2000). In February 2006 the Alberta government issued a proposed health policy framework advocating a “third way” that would permit physicians to offer a range of services on both a publicly and privately financed basis (including faster access to privately financed services) and allow private insurance to cover such private charges. Within two months, however, the government retreated from these proposals in the face of widespread opposition – not from the newly elected Conservative federal government, but from the Alberta populace (Boychuk 2008). After a Conservative government took office at the federal level in 2006, indeed, high-profile disputes between federal and provincial officials over “privatization” did not recur. In the mid-2000s two specialty clinics – largely focused on elective orthopaedic procedures – in Vancouver increasingly and publicly charged fees in excess of the public benefit in a deliberate flouting of the restrictions imposed by the CHA. Both the federal and British Columbia provincial governments downplayed these infractions, and between 2003 and 2012 the provincial government reported, and was penalized for, extra-billing in amounts averaging $64,000 per year. In 2012, in response to sustained pressure from the media and the opposition party, the BC Liberal government conducted an audit of the two surgical facilities that revealed extra-billing in two sample periods in 2008 and 2011 of more than $400,000 – far in excess of the reported amounts. Accordingly the then Conservative federal government quietly levied additional retrospective penalties of about $200,000 on the basis of calculations not made public. The audit itself then occasioned a court challenge by the physician owner of the two speciality clinics, as discussed below. In total, under either Liberal or Conservative governments, penalties under the CHA were minuscule as a proportion of the full transfer, amounting to about $10.2 million in total in nominal terms from fiscal years 1984/85 to 2015/16 – while annual nominal cash transfers for health rose from about $6 billion to $32 billion.32 Notably, throughout this period, the political sensitivity of the exercise of federal jurisdiction in Quebec meant that, despite periodic allegations of extra-billing, the province was never penalized. In 2014 a

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class action suit was filed against the Quebec government on this issue.33 On at least one occasion, these allegations were acknowledged by the federal government itself (Canada 2007, 11), but in the face of Quebec’s steadfast refusal to submit the information required under the CHA, the federal government treated this as a matter of ongoing dispute resolution, without triggering any arbitration process (Galloway 2008). As for the extension of reporting requirements to areas other than extra-billing under the accords of 2000, 2003, and 2004, provincial compliance was varied and spotty. Then, as the ten-year span of the 2004 accord approached and the provinces began preparations for renegotiation, the Conservative federal government unilaterally announced another ten-year funding cycle, to be in effect from 2014 to 2024, and another cycle of the loosening of even de jure federal conditions. The federal announcement, in November 2011, was simple and straightforward: it concerned only the escalator to the Canada Health Transfer. The 6 per cent annual increase to the transfer would continue for three additional years, to fiscal year 2017–18, after which the transfer would be escalated on a straight per capita basis by the rate of growth in GDP or 3 per cent, whichever was greater, annually to fiscal year 2024/25. As consistent with its general approach to federal-provincial relations, which was as much as possible to confine the two levels of government to their respective spheres of jurisdiction, the Conservative government did not seek to influence provincial expenditures through the establishment of targeted funds, as the accords of the predecessor Liberal governments had done, although federal spokespersons indicated that violations of the Canada Health Act would continue to be penalized. Two years later the federal government announced the winding-up of the Health Council of Canada, on the argument that the council’s mandate had been tied to the expiring 2004 accord. (In fact the council had been created under the 2003 accord, and had not been tied to any particular time horizon.) The election of a Liberal majority government in October 2015 led to a reopening of the previously imposed arrangements. Provincial hopes that the new government would reinstate the 6 per cent escalator to the CHT were dashed, however, by the Liberal government’s insistence on making only a marginal adjustment to the Conservative formula while offering targeted funds for certain priorities such as home care – in effect resurrecting the model employed by previous Liberal governments under Chrétien and Martin. In December 2016 the provinces balked at adopting a new overarching federal-provincial arrangement

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on these terms, and the federal government embarked on a project of reaching province-by-province bilateral agreements in which each province agreed to the federal terms for the basic transfer and also received funding targeted to priority areas as negotiated. By August 2017 all provinces had reached agreements. The federal government’s reluctance to continue the annual 6 per cent increase in the transfer was understandable in context. As in other OECD nations, the rate of increase in both public and private health care spending declined in Canada after the 2008–9 recession. The result was a decline in real per capita public spending as governments at all levels adopted austerity agendas, mirroring developments in the 1990s (Figure 9.3). In this context, although the provinces continued to argue that the federal share of health care expenditure should increase, they could no longer claim that federal funding was failing to match the rate of increase in provincial spending. Nonetheless health care spending continued to account for a substantial share of budgets at both the federal and provincial levels, and as governments at both levels continued to operate in deficit in the context of a slow recovery from the recession, it is not surprising that each should have attempted to shift costs to the other.

Cycling at the provincial Level: Provider payment, scope of coverage, (de)centralization The generality of the terms of the Canada Health Act allows broad scope for cross-provincial variation in virtually all areas of physician and hospital services other than direct charges to patients. That provincial governments have not actually exercised the full scope of their discretion is one of the puzzles of Canadian health policy. The key to understanding this puzzle lies in the founding bargain between the state and the medical profession that underlies the single-payer system. In return for accepting the state as its sole payer, the profession secured broad autonomy over the exercise of clinical judgment and the organization of medical practice. This bargain left provincial governments with relatively few levers with which to control their fiscal exposure in health care. Essentially they were limited to relatively blunt instruments such as the overall rate of change in medical remuneration and the supply of health care facilities and personnel. The exercise of those blunt instruments at various times, however, in turn confronted the profession itself with trade-offs. These tensions within the profession-state accommodation

418  Remaking Policy Figure 9.3. Real per capita Public Health Spending, All Levels of Government, Canada, 1975–2016

Note: Figures are in constant 1997 dollars. Data for 2015 and 2016 are provisional. Source: Canadian Institute for Health Information 2016b, table B.3.5.

have played out somewhat differently across provinces. In general these provincial-level accommodations have been marked by cycles of largesse and constraint in medical remuneration and of centralization and decentralization of state-provider relationships, and by very gradual changes in the organization of medical practice. Meanwhile, in areas of health care less constrained by the terms of either the CHA or the profession-state bargain, provinces have experimented with various expansions and contractions of coverage and terms of eligibility. Cycles of medical remuneration In Chapter 4 we saw how overall levels of physicians’ remuneration fluctuated after the establishment of universal medical services insurance, rising as the provincial programs were established, declining in the 1970s as provincial governments moved from passive acceptance to more aggressive negotiation of the medical fee schedule, and rising again as medical associations and individual physicians became more sophisticated in negotiating and billing. Increases in utilization combined with fee schedule increases to drive expenditures on physician services upward. This cycling pattern, driven by the feedback effects of fee schedule negotiations on both governments and physicians, continued in the 1990s and 2000s, as shown in Figure 9.4. In the 1980s various provinces

Canadian Incrementalism Reinforced, 2003−04  419 Figure 9.4. Average Physicians’ Income Relative to Average Workers’ Income, Canada, 1950–2010

Source: Grant and Hurley 2013.

had begun to address their open-ended exposure to rising expenditures by factoring projected utilization increases into fee schedule negotiations and by establishing limits (of varying degrees of firmness) on the physician services budget (Tuohy 2003c). Quebec, with a physician population rendered relatively less mobile by a language barrier, moved earliest and furthest in this regard, introducing global limits and individual billing thresholds for GPs in the late 1970s. In the 1990s, however, as all provincial governments as well as the federal government adopted deficit-reduction austerity agendas, they reduced their health care expenditures, as shown in Figure 9.3 – largely by constraining provider supply and remuneration. All moved to cap their physician services budgets, and in most cases to cap them more firmly than in the past. A variety of mechanisms for recapturing excess expenditures were adopted, including “clawbacks” (fee adjustments in the year following the overrun to recover the excess), “holdbacks” (holding back a portion of payments to be released after a year-end reconciliation), and “paybacks” (repayment of excesses determined by a year-end reconciliation through some mechanism other than fee adjustments) (Hurley and Card 1996). In addition, five provinces negotiated (or at times unilaterally imposed) individual billing thresholds above which payments were prorated, usually on a sliding scale.34

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The adoption of these expenditure limits generated powerful negative feedback – on the profession-state accommodation and within the profession and the state themselves (Grant and Hurley 2013, 8–9). These policies in effect represented an elaboration of the second-level agency relationship on which the profession-state relationship was premised, by requiring medical associations to manage unprecedented internal tensions. Global caps created “common-resource” problems: individual physicians had no incentive to restrain their billings, since the penalty for exceeding the budget cap would be shared equally by all (Hurley and Card 1996). Individual caps might help resolve these common-resource problems, but because they needed to be set differently for different specialties, they generated other internal rivalries. As medical associations and governments sought ways to ease the pressure of fee-for-service billings against the budget cap, the policy agenda expanded to include issues that had long simmered in the background of profession-state relations: supply control, the scope of coverage under the public plan, alternative payment mechanisms, and clinical protocols. To deal with this expanding agenda, the structures of the profession-state accommodation were elaborated. By the mid-1990s bipartite joint management committees with equal representation from government – including in most cases a representative of finance ministries – and the medical association had been established in seven provinces. (A functionally equivalent arrangement had existed in Quebec since the early 1980s.) These arrangements formalized and arguably increased the influence of the medical profession, but they also involved the medical associations in controversial decisions that exacerbated the divisive tendencies within their memberships (Katz et al. 1997). In the late 1990s various groups of physicians in different provinces engaged in various forms of protest and withdrawal of services independent of the provincial medical associations (Grant and Hurley 2013, 10). Even intergovernmental relations suffered as provinces sought to shift blame for restraint measures to the federal government, and some provincial governments adopted protectionist policies such as (briefly) restricting new registrations with their insurance plans to graduates of their own medical schools (9). Not surprisingly these waves of negative feedback led to an abandonment of expenditure caps and related policies as soon as the era of reinvestment began in the late 1990s. In the early 2000s dramatic “catch-up” increases were awarded to physicians in several provinces, mirrored in some cases by similar rates of increase for nurses and other

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health care workers (Tuohy 2003c, 95). By 2001 average medical income had returned to the point implied by the long-term trend established since 1975, and after that increases proceeded to exceed that trend dramatically (Grant and Hurley 2013, 9, 11). These increases in turn generated negative feedback, fuelling concerns, especially within the federal government, that increased funding was simply going to increases in remuneration rather than to the system reforms notionally agreed to at the time of the 2000 accord. More consequentially these developments also began to firm the will of provincial governments to tie future increases to changes in the organization of health care delivery. The restraint period of the 1990s had brought about considerable restructuring in the hospital sector, but had left the organization of medical practice largely untouched, in keeping with the profession-state bargain. Attention now turned to the restructuring of medical practice itself, especially primary care. Gradually and to different degrees across provinces, changes in primary care delivery were adopted, variously involving community clinics, group practices, networks, and teams, including family physicians and nurses. As I discuss further in Chapter 10, these moves involved intensive negotiations with provincial medical associations and proceeded on a voluntary basis, in contrast to the horizontal and vertical restructuring that occurred in the areas of hospital and community care. Most of these primary care models required patients to enrol with the providing practice, clinic, or network, and were funded on a composite basis that blended capitation with other modes of remuneration, taking account of population served and other factors. In general these agreements were constrained by the profession’s insistence on the maintenance of the fee-for-service “pot” – an unintended legacy of the period of global budgets –and over time they generated different trade-offs between fee-for-service and alternative modes of remuneration (Tuohy 2009). These trade-offs were idiosyncratic to the profession-state relationship in each province. There appears to be no overarching explanation for these differences, apart from provincial idiosyncracies. In Alberta, for example, with its wealth and growing population, physicians have struck the most individualistically oriented bargain: the highest levels of remuneration and the lowest rates of non-fee-for-service practice in the country. At the other end of the scale, Quebec’s less mobile physician population has the lowest levels of remuneration in Canada, but has also maintained relatively low rates of non-fee-for-service practice. In Ontario, the relatively high rates of

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alternative modes of remuneration and low fee-for-service payments for GPs reflect a determined thrust to make new primary care models financially attractive with relatively rich contracts.35 Centralization and decentralization in the hospital sector If provincial governments were more willing to exercise their monopsony power vis-à-vis physicians under the pressure of austerity in the 1990s, this was even more the case in the hospital sector.36 In the 1970s governments had adopted global budgeting strategies for individual hospitals, replacing the earlier system of per diem payments. The global budgets were essentially historically based, with across-the board percentage increases each year, based ostensibly on some consideration of economic factors but effectively on the fiscal considerations of provincial governments. This strategy had proved effective in containing hospital expenditures, relative to other sectors of the health care system, in the 1970s and 1980s. In the 1990s constraints on hospital budgets increased dramatically. Global budgets were reduced in real terms, and some provinces, notably Ontario and Alberta, began to experiment with case-based funding formulas in establishing hospital budgets (Bhatia, West, and Giacomini 1996; Haazen 1992). These formulas, developed with the collaboration and support of provincial hospital associations, sought to reward hospitals for efficiency. These experiments, however, were overshadowed in the mid-1990s by the wave of hospital restructuring that swept through all provinces, aimed at increasing horizontal integration, reducing the number of acute care beds, and to some extent building up capacity for community-based care. The mechanisms through which these changes were accomplished varied across provinces. All provinces except Ontario established regional structures for the management of the hospital sector, although the organization and mandate of regional boards varied widely. All the boards had the authority to allocate budgets across institutions and agencies in their region. No province, however, granted the boards revenue-raising authority: all received global budgets from the province. These global budgets were determined initially on a historical basis, and progress towards developing needs-based allocation formulas varied substantially across provinces (McIntosh et al. 2010). In two provinces the scope of the boards’ authority was restricted to institutional services; others embraced some community-based services as well. In some cases the mandate of regional boards extended to

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the direct management and operation of the institutions under their purview. In British Columbia, Alberta, and Saskatchewan, the regional boards replaced the boards of individual institutions, and the assets of the institutions were transferred to the regional boards. In no case, significantly, did the mandate of regional boards extend to physician services, although some maintained various types of medical liaison committees. In all provinces – except Ontario, as I discuss below – these regional structures were part of a broader strategy of hospital restructuring through horizontal integration, although the respective roles of the regional boards and provincial governments in this process varied across jurisdictions. Each province followed a somewhat different model of regionalization. From all of the provincial diversity, three distinct models of regionalization could be abstracted. The most prevalent model – in place in all provinces except Quebec, Ontario, and Alberta – was one in which regional health authorities structured as not-for-profit corporations owned and operated hospital and community facilities. In some provinces the boards contracted with independently owned and operated facilities as well. Quebec and Ontario each exhibited a distinct model. In both provinces regional authorities had responsibilities for planning and allocation but not for direct ownership and management. The difference between the Quebec and Ontario models lay in the degree of horizontal and vertical integration at the subregional level. In Quebec, Centres locaux de services communautaires (local health and social service centres) progressively took over the ownership and management of hospitals and community agencies, under the planning auspices of regional authorities. Ontario remained the sole province in which individual hospital boards continued in existence, although the province, representing about 37 per cent of all public health care expenditure in Canada, nonetheless constituted a large exception. After establishing an arm’s-length commission to restructure selected hospitals in the late 1990s, Ontario established a framework of “Local Health Integration Networks” (LHINs) in 2007 as not-for-profit bodies with global budgets to be allocated across the hospitals and community agencies in their respective regions. Given the continuing political strength and managerial capacity of individual hospitals, however, the LHINs struggled to function as more than conduits for the provincial government, and their effectiveness varied considerably across regions. In December 2016 Ontario passed legislation giving the LHINs an expanded mandate for primary care planning, but given that the negotiation of physicians’

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remuneration remained with the provincial government, this model was likely to encounter the same turbulence and instability that had plagued regional planning authorities elsewhere. What is most noticeable about the entire experience with regionalization in Canada, indeed, is the degree of fluctuation and organizational “churn” it involved – a classic example of continuous cycling in response to unresolved tensions. Despite often sophisticated epidemiological analysis to determine regional boundaries, incompatibilities among the natural catchment areas for different services emerged. Political frictions among localities, public concerns about “post-code lotteries,” and the continuing political strength of the pre-existing – or, in the case of Ontario, the still-existing – hospital boards and managements exacerbated these tensions. In response provincial governments cycled through various permutations and combinations of institutional designs: varying the number of regional authorities, their functional scope, the size of population served, and the mechanism of appointment or election to their boards. Every province except Ontario, which came late to the game, reorganized its regional structure at least once in the course of the 1990s and 2000s, some up to three times (Tuohy 2009, 479–81). Three provinces – Prince Edward Island, Alberta, and Nova Scotia – abandoned regionalization altogether, in 2005, 2008, and 2015 respectively, collapsing their regional boards into a single, provinciallevel authority; another province (New Brunswick) collapsed its eight boards to two in 2008.37 This experience of fluctuation among regional models is not unique to Canada. Lacking either consistent natural catchment areas, revenue sources, or independent political bases, artificially constructed regional authorities are particularly vulnerable to ongoing reconfiguration by central governments. We observed a similar pattern in the United King­ dom, and others have drawn attention to the phenomenon in other nations (see, for example, Saltman 2008). The scope of coverage A third area in which provincial policies fluctuated concerned the scope of benefits covered under provincial insurance plans and the grounds of eligibility for such coverage. Most of this fluctuation occurred outside the physician and hospital sectors, although some limited “delisting” of medical services was undertaken during the austerity of the 1990s. Most provinces began, in the 1970s or even earlier, by using income as the basis for eligibility for coverage for drugs and some other

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services, targeting these programs at social assistance recipients. In the 1970s and 1980s a few provinces expanded coverage of non-medical and non-hospital services and goods such as vision care, dental care, rehabilitation, home care, speech therapy, and assistive devices, either on a universal basis or with some restrictions by age (relating to the elderly and/or children). By the mid-1990s coverage of these services, which were not encompassed by the Canada Health Act, varied widely across provinces (Stabile and Ward 2006, 110). The largest sector evincing wide cross-provincial variation, however, was that of prescription drugs (Canada 2002b, 130–7; Demers et al. 2008; Grootendorst 2002; (Morgan, Daw, and Law 2013). In all but one province, drug coverage for social assistance recipients either predated the adoption of hospital and medical services insurance or was introduced at about the same time, although some required co-payments and/or deductibles.38 In the 1970s and 1980s all provinces introduced coverage for those ages sixty-five or older, although one added an income restriction. The four westernmost provinces added universal programs of coverage of catastrophic drug costs exceeding a given percentage of household income in the 1970s; Ontario followed in the mid-1990s. Alterations in the scope of coverage at the provincial level went through periods of liberality and constraint. The 1970s and 1980s were a period of expansion of coverage, although on balance this was on a “residual” model targeted at the elderly and the poor. In the mid1990s this pattern of progressive extension of benefits reversed as provinces sought to reduce their health care expenditures. Three provinces – British Columbia, Saskatchewan, and Manitoba – shifted from agebased to income-based drug coverage for the entire population. Those provinces with more generous coverage of non-medical services either delisted those services or placed restrictions on coverage (Stabile and Ward 2006). Most provinces delisted some medical services as well, although, under the terms of the CHA, such services had to be deemed not “medically necessary.” The identification of services for delisting therefore proceeded through negotiations with the medical profession, and not surprisingly tended to concentrate on cosmetic and reproductive procedures. The impact of these measures on government budgets was marginal. Profession-state negotiations nonetheless slowly began to incorporate considerations of clinical efficacy into the terms of coverage. As for drugs, coverage for seniors converged between the late 1980s and the mid-1990s on a model requiring income-related co-payments up to an annual maximum. Such conditions were introduced in five provinces

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– three on an income-scaled basis – that previously had had first-dollar coverage, and existing provisions for co-payment were increased in four other provinces (Grootendorst 2002). The only exceptions to this overall pattern of tightening occurred in Ontario, which introduced universal coverage for catastrophic drug costs in 1995, as noted above, and especially Quebec, which became the only province to adopt universal drug coverage. In 1996 an indépendantiste Part Québécois government, seeking to pre-empt federal action after Chrétien’s Na­tional Forum on Health recommended a national pharmacare program (Pomey, Martin, and Forest 2013, 122), passed legislation establishing an individual mandate to have prescription drug coverage and establishing an income-scaled contributory public program for those without employer-based insurance. Even in Quebec, however, this change was accompanied by increases in co-payments for the elderly and social assistance recipients. This pattern of contraction of coverage might have been expected to reverse again in the “reinvestment” era of the 2000s. But with the exception of expansions of home care services, that upturn generally did not occur. Provincial commitments under the accords of the early 2000s to work towards the adoption of catastrophic drug coverage did not come to fruition, as noted above. In Ontario, moreover, the pattern of delisting of non-medical services continued, as the province announced restrictions on the coverage of physiotherapy, chiropractic, and vision care at the same time as it expanded coverage for childhood immunizations in 2004 (Stabile and Ward 2006). Seeds of the Future? Court Challenges, New Institutions, and Technology Although a political strategy of incrementalism left in place the singlepayer-plus, mixed-market design of the Canadian system, other factors might yet bring about change in this model.

A new venue: The courts In June 2005 the health policy arena was shaken by a major exogenous shock from a source outside the usual federal-provincial and provider-state axes. The Supreme Court of Canada, having unexpectedly agreed more than a year earlier to hear an appeal of a case challenging Quebec’s ban on private insurance for publicly covered services as contrary to both the Quebec and Canadian Charter of Rights and

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Freedoms, issued an even more unexpected ruling. In Chaoulli v. Quebec, in a four-to-three decision – there were at the time two vacancies on the nine-member Court – the Supreme Court reversed the decisions of lower courts in Quebec and struck down the legislation. Three of the four judges in the majority found that the provisions violated section 7 of the Canadian Charter (guaranteeing a right to “security of the person”); the fourth ruled that it violated the Quebec Charter. The question of whether similar cases in other provinces would succeed with a full nine-member Court and under the Canadian Charter alone remained open, but such challenges inevitably would emerge. The Chaoulli decision did not prescribe a particular policy outcome – the Quebec government could come into compliance either by ensuring that patients did not experience an undue wait in the public sector or by removing the ban on private insurance for publicly covered services. In the event the Quebec Liberal government adopted a limited but ingenious response, establishing clinically based waiting time guarantees in a small number of areas of elective surgery, and allowing individuals to insure themselves privately against the risk that they would wish to be treated sooner than possible in the public system. No private market for such insurance arose. In other provinces the policy implications remained even more unclear until the Supreme Court were to decide a case under the Canadian Charter alone. One broad challenge to all legislative restrictions on private charges for physician and hospital services was brought before the British Columbia Supreme Court in 2012. The plaintiff, the owner of two private clinics, had engaged in an extended battle for the right to charge such fees. At time of writing (July 2017) the case had not been decided, and inevitably would be appealed in any event. Nonetheless the Chaoulli case and the others that began to arise sent a shockwave through the policy-making arena and reopened the debate about the fundamental structure of the Canadian system.

Institutional change on the intergovernmental plane The accords of the early 2000s left the federal-provincial balance intact. The role of the federal government continued to be that of the relatively passive payer of a portion of provincial health costs. Although more assertive rhetoric was used by Liberal than by Conservative governments, provincial accountability mechanisms were so weak that attempts at increased federal influence amounted to pushing on a string. The federal government did play a central role in developing and funding a

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cross-provincial focus on reducing waiting times in a few clinical areas in the 2004 negotiations, but even there the provinces implemented waiting-time reduction strategies selectively. Conservative governments after 2006 continued to enforce the minuscule penalties against extra-billing (without strengthening accountability mechanisms) and abandoned even the pretence of steering provincial priorities when the 2004 accord expired in 2014. The extreme decentralization of health care policy outside the physician and hospital sectors continued, moreover, as each provincial government developed its own policies in areas of drug coverage, home care, and so on. This decentralization arguably allowed provinces to function as policy “laboratories” within the federal system, but, in fact, the degree of policy diffusion was limited. In the drug sector, provinces were more likely to take negative, rather than positive, lessons from one another in the design of their coverage plans – avoiding what they saw as mistakes in other jurisdictions (Pomey et al. 2010, 733). Nonetheless another mode of pan-Canadian action, exclusive of the federal government, slowly began to emerge with the incremental development of interprovincial mechanisms of cooperation with a patchy record of success and failure. In 2002 the premiers established a Common Drug Review process to make recommendations on the listing of new drugs on provincial formularies. Provincial governments retained final decision-making authority, however, and in most cases retained their own drug review processes; despite some commonality regarding the most commonly prescribed drug classes, the provincial formularies continued to be “distinct, conflicting, and inconsistent.” (Pomey et al. 2010, 735). The national pharmaceutical strategy fizzled (MacKinnon and Ip 2009; Morgan, Daw, and Law 2014; Picard 2013), but the premiers began to take collective action on drug purchasing. In 2012 the Council of the Federation, the premiers’ collaborative body, established a Health-Care Innovation Working Group, which turned its attention to drugs as the first area for concrete action. Initially some provinces agreed to a common pricing strategy for the six most commonly prescribed generic drugs, and in 2013 all provinces agreed to bulk purchasing of twenty-seven brand-name drugs. Together these initiatives were expected to yield savings of about $170 million – of the total of more than $12 billion collectively spent by provinces on their drug plans (Picard 2013). Success in these modest undertakings nonetheless could spur further action: the provincial working group also identified long-term care and health human resources – where

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provinces operate separate accrediting, licensing, and planning arrangements – as areas of priority. Conclusion: Process and Substance

Process: A missed opportunity I return now to the comparison with which I began this chapter: between the period of the mid-1960s, when universal physician services insurance was adopted, transforming the Canadian health care state, and the period of the mid-2000s, when similar political and institutional circumstances yielded only incremental change. These different outcomes can be understood by teasing out the differences between the two sets of circumstances, which led political actors to very different strategic judgments. In 1965–6, the governing Liberals had been daunted by five successive elections over almost a decade in which they had failed to gain a majority. They accordingly had a strong incentive to accomplish all they could, lest the next election, which could occur at a time not of their choosing, removed them from power altogether. In contrast, at the beginning of 2004, the governing Liberals had been in power through three successive majority mandates spanning more than a decade, and had successfully navigated a transition in leadership to inaugurate what they thought would be the next era of Liberal dominance. Unlike their predecessors in the 1960s, they did not at first fear an imminent loss of power. Rather, they judged that the honeymoon period of Paul Martin’s prime ministership, together with the warming of the climate of intergovernmental relations after changes in government at the provincial level, presented an opportunity to create a platform of goodwill with the provinces that would be a hallmark of Martin’s leadership. It would distinguish Martin from his immediate predecessor, and provide a basis for future influence and credit-claiming. Given its centrality to the federal-provincial agenda, health care was clearly the first area in which to deploy this strategy of using federal funding to ratchet up federal influence at the intergovernmental table. This strategic focus on health care intensified in the early months of 2004, as a counter to the ongoing media attention to the Chrétien government’s “sponsorship scandal,” which was inexorably eroding support for the Liberals. It sharpened even further in the wake of the June 2004 election that tipped the Liberals into minority status – a result that had not been

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imagined months before. In the first shock of loss, the Liberals persisted in an incremental strategy that now at least offered the hope of securing some quick if small wins with which they could return to the electorate. As we have seen, this was not the only strategy available to the Liberals in this moment. They could have seized an offer by the provinces to make the first major change in the policy framework for health care since the founding of Canadian medicare in the 1960s – namely, the establishment of a federal pharmacare program. This would have captured a multiparty consensus and allowed the Liberals to claim credit for the twenty-first-century equivalent of their triumph in the mid-1960s. Ironically, had the Liberals been in a minority position for longer, this result might have come about. Instead a strategy fashioned by a confident majority government persisted in the bouleversement of demotion to minority.

Substance: Stability and stress Thus did Canada’s unique combination of single-payer and residual models survive intact through the only window of opportunity for major change that had opened since the founding of the modern health care state. This sectorally based design nonetheless proved sticky in response to technological and demographic change, and the relative scope of the single-payer model in the health care system steadily shrank as a result. For many indications, pharmaceutical treatments replaced surgery, day surgery replaced hospital admissions, and spending on areas such as prescription drugs grew faster than spending on physician and hospital services. The single-payer system accordingly contracted from about 60 per cent to about 45 per cent of total health spending between 1975 and 2014 (Figure 9.5). The shrinking of the scope of the single-payer model, however, did not mean a commensurate shrinkage of the footprint of the state. Figure 9.6 demonstrates the remarkable stability of the public share of health expenditure in all major health care categories and the increased weight of the state in the prescription drug category. While the scope of the single-payer system was contracting, provincial governments were expanding their role in the health care sector beyond physician and hospital services – notably, with respect to prescription drugs. Most provinces established programs of public drug coverage – variously for social assistance recipients, those ages sixty-five and older, and those whose drug expenditures exceeded a certain percentage of household

Canadian Incrementalism Reinforced, 2003−04  431 Figure 9.5. Total Health Spending Shares by Use of Funds, Canada, 1975 and 2014

Notes: Drug expenditure refers to spending on both prescription and non-prescription drugs; prescription drugs account for approximately 85% of the total. Source: Canadian Institute for Health Information 2016b, table C.1.1..

income. Population aging compounded the fiscal effects of these incremental policy changes, as the number of the elderly eligible for coverage increased. The public share of total drug spending more than doubled, from 15 per cent in 1975 to 36 per cent in 2014. On balance, however, the overall public share of health care expenditures decreased only from 76 per cent to 70 per cent over the same period (Canadian Institute for Health Information 2016). Hacker (2004), among others, has characterized the shrinking scope of the single-payer model as an example of transformation through policy drift. But along the measures of scale of policy change of interest in this book – the balance of influence, the mix of instruments, and the legitimating of ideas – what is most striking is the persistence of the Canadian model. The central political axes of the system remained in place, the federal-provincial relationship changed only marginally, and the guarantors of the single-payer system remained professionstate accommodation at the provincial level and public consensus. Physicians, the principal decision-makers in the health care system, continued to be embedded in the defining accommodation with the state: as Figure 9.6 shows, more than 98 per cent of physician incomes and more than 90 per cent of hospital revenue came from public sources

432  Remaking Policy Figure 9.6. Public Share of Total Health Expenditure, by Use of Funds, Canada, 19752014

Notes: Drug expenditure refers to spending on both prescription and non-prescription drugs; prescription drugs account for approximately 85% of the total. Source: Canadian Institute for Health Information 2016b, tables C.3.4.

throughout the entire period under review. The terms of the founding bargain between the profession and the state evolved only slowly to encompass forms of delivery other than disconnected, autonomous, fee-for-service practices. Even though the single-payer model implied a purchaser/provider split from its inception, contracting with a plurality of providers on an “internal market” model did not develop outside a few subregions. The legitimating principles of the system continued to be those of the single-payer model: universal, first-dollar coverage for a comprehensive range of services. Universality continued to be cited by huge majorities as a core strength of the Canadian system (Nanos 2009), even as concerns about the future rose (Soroka, Maioni and Martin. 2013). A public dialogue conducted by the Canadian Medical Association in 2011 through a combination of web-based interaction and town hall meetings found that “[t]he participants strongly supported the need to preserve the existing foundation of the CHA and there was a strong

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support for expanding its ambit, particularly in the area of prescription drugs” (Canadian Medical Association 2012, A1–13). Support for privately financed options as expressed in public opinion polls showed a pattern of fluctuation and ambivalence, and tended to be dependent on the framing of the question. Although agreement that “individuals should be allowed to pay extra to get quicker access to health care services” spiked around the time of media coverage of the Chaoulli decision in 2005 and plateaued thereafter, that view at its peak attracted only minority support (915–16). Nonetheless, in the first decade of the twenty-first century, the functioning of the Canadian health care system was manifesting significant stress, most strongly apparent in lengthy waiting times for elective surgery and high utilization of hospital emergency rooms, relative to comparator nations (Davis et al. 2014). For the Canadian policy framework to yield resilience and adaptability, rather than stagnation, the terms of the founding bargain between the medical profession and the state would have to be renegotiated to allow for new modes of delivery – effectively a renegotiation of the second-level agency relationship between the profession and the state. The gradual adoption and mixed performance of new models of primary care suggested that any such a renegotiation would be a tortuous process.

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PART IV Institutional Entrepreneurs and the Course of Market-Oriented Reform

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Chapter Ten

Institutional Entrepreneurs and Market-Oriented Reform: Theory and Experience in Britain, the Netherlands, and the United States The principal focus of this book has been on episodes in which major change in health policy frameworks became possible in four nations, and the strategic choices made by political actors at those moments. Those dynamics occurred in the broad political sphere, and were largely driven by forces and actors outside the health care arena. But the new policy regimes for health care did not unfold automatically: they were mediated by human agents within the health care arena itself. In some respects this process had a tempering effect on reforms, as actors were slow to shed the expectations associated with the logic of the previous regime. But the process and the content of reform, by creating new incentives, opportunities, and constraints, also spawned new sets of actors who played key roles in how the policy changes subsequently unfolded. The story of market-oriented reforms in the millennial period would not be complete, therefore, without further considering the role of agents who emerged in the health care arena to shape the course of reform. In particular these developments were marked by the appearance of actors who bridged the public/private boundary. In various ways, they availed themselves of new public mandates, in combination with private resources, to develop new institutional forms. Following Crouch (2005) and others, I term these actors “institutional entrepreneurs.” The Role of Institutional Entrepreneurs Entrepreneurship means more than the capacity to affect the course of change – a capacity that does not distinguish entrepreneurship from other forms of agency. An entrepreneur is a particular type of agent

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who takes risks in conditions of uncertainty and who gambles that certain resources can be combined now to yield greater value at some uncertain future state than they do in their current use (Foss, Foss, and Klein 2007; Knight 1921). In the private sector such behaviour yields economic profit (or loss). Political scientists have sought to import the concept into the worlds of politics and policy-making, seeing “political entrepreneurs” or “policy entrepreneurs” as risking their political “capital” – that mix of credibility, reputation, public support, and markers for past benefits conferred – to develop and “market” policies aimed at increasing value for some set of interests. The success or failure of those policies might either augment or diminish the policy entrepreneur’s capital, and with it entrepreneur’s career prospects and ability to achieve desired ends in the future (Kingdon 1995; Mintrom 1997; Oliver and Paul-Shaheen 1997; Ostrom 2005; Price 1971; Salisbury 1969; Walker 1974). These are illuminating and provocative treatments of the motivations and strategies of policy innovators, but the concept of the policy entrepreneur remains loosely defined and employed. The core of the concept of entrepreneurialism – the recombination of resources to yield greater value – is missing. With its focus on resource mobilization across the public and private sectors, the concept of institutional entrepreneurialism has the potential to be an extension of the concept of entrepreneurialism in private markets, rather than simply a metaphor. Various scholars have pointed to this combinatorial function of entrepreneurs in both the public and private sectors (Mintrom and Vergari 1996; Morris and Jones 1999; Ostrom 2005). Colin Crouch (2005) uses the concept of the “institutional entrepreneur,” who innovates by recombining different governance mechanisms to develop new modes of public/private interaction. Un­ derstanding institutions as systems of shared expectations, Garud et al. see institutional entrepreneurship as a form of “embedded agency” – agency within an institutional context that “create[s] a whole new system of meaning that ties the functioning of disparate sets of institutions together” (Garud, Jain, and Kumaraswamy 2002; see also Garud, Hardy, and Maguire 2007). Building on these insights, one can draw on the episodes reviewed in this book to show how institutional changes wrought by institutional entrepreneurs reconfigured control over key political and economic resources – including human and financial capital, but also including the authority of the state. The concept of entrepreneurialism can be useful in understanding these phenomena – but only if the concept is

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further developed by wedding its economic elements to considerations of power. Control of a particular resource is a form of power; hence combining resources across the public and private sectors means, in effect, combining key bases of power – such as state authority, capital, and skill – in new institutional arrangements. Entrepreneurial agents typically operate from a principal power base in one of these types of resources to gain some measure of control of one or more of the others; and their activity has dynamic effects on the institutional context in which subsequent policy is developed. Entrepreneurs differ from other types of agents of change in public policy, such as “stewards” and “brokers.” Entrepreneurs differ from stewards in the degree and type of uncertainty under which they invest: whereas stewards forgo current consumption in order to yield greater returns in the future, based on a probabilistic assessment of risk, entrepreneurs profit or lose according to their success in a world of “true” uncertainty by “anticipating an uncertain future more accurately than others” (Klein et al. 2009, 8). Entrepreneurs differ from brokers in their orientation to the future: whereas brokers realize value by facilitating gains from exchange among various interests – and by appropriating some of those gains in the form of “commissions” – entrepreneurs engage in arbitrage across time, benefiting (or losing) from the difference between the value of the resources they invest at time T and the value of the product of those resources at time T + n. Of course, agents of change in public policy typically engage in some mix of entrepreneurship, stewardship, and brokerage. Most efforts to bring about policy change involve coalition-building and brokerage across interests. Many decisions involve trade-offs between future gains and present forgone consumption, in circumstances of varying degrees and types of uncertainty (Alan Jacobs 2011, 50–3). My focus here, however, is on the entrepreneurial role. Entrepreneurialism across Power Bases Institutional entrepreneurialism consists of combining control over key resources – authority, capital, and expertise – across the public and private sectors in innovative arrangements. The entrepreneur operates from a principal power base in one of these types of resources, beginning with a certain “endowment” of authority, capital, or expertise that establishes the entrepreneur’s operating parameters. For those operating from a position of public authority, the opportunity and scope for

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entrepreneurial activity is established by the bounds of that authority. For entrepreneurs with a base in private capital, the parameters are established by the availability of capital. And those whose power is based in knowledge and skill must operate within the norms of the knowledge-based community. The possible payoffs to an entrepreneur also vary depending on the base of power from which the entrepreneur operates. Essentially the potential payoffs and penalties can be thought of as the prospects of augmenting or eroding the entrepreneur’s power base. The classic entrepreneur who operates from a base of private capital stands to augment or deplete that capital by taking either financial profit or loss. The entrepreneur who operates from a position of public authority stands to advance or retard her career and reputation, and hence to enhance or hinder her ability to undertake future entrepreneurial initiatives. And the entrepreneur who operates from a base within a community of shared knowledge, such as a profession or the academy, can gain or lose standing and influence within the professional community. As entrepreneurs move beyond their “home” base to draw upon other types of resources, the possibilities for gain and loss become more complicated. Private sector capitalists might seek a public mandate that allows them to expand their market share, but that benefit must be weighed against the limits on profit that might be imposed by public sponsors or partners. Similarly investors of private capital might invest in corporate forms of professional practices and facilities; but they must also confront the prospect that the return on their investment will be determined largely by professional decisions over which investors themselves might have limited control. Entrepreneurs operating from a base in public authority might establish new institutional arrangements to bring private capital to bear on public objectives, but they need to provide a return on that capital. Similarly public sector entrepreneurs might devise new mandates for professional providers in order to enlist them in the achievement of public objectives, but, like their private sector counterparts, they might find they are reliant on professional judgment in the pursuit of those mandates. Finally, institutional entrepreneurs acting from a base in professional knowledge might strengthen their position vis-à-vis other actors by acquiring a public mandate and/or private capital, but they must accordingly exercise their professional discretion in tension with the objectives of public authorities and/or private investors. In short, for all institutional entrepreneurs, regardless of their “home base,” compiling different

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resources means negotiating across different bases of power. The base from which, and the scope across which, these agents operate will have different implications for the dynamics of the arena. The Conditions for Institutional Entrepreneurialism The economic literature suggests that at least four types of conditions are necessary for entrepreneurs to emerge and flourish: • Heterogeneity: Control of resources must not be locked into existing institutional formats. Rather, resources need to be “loosely coupled” enough that they are available for reconfiguration by entrepreneurs, in order to yield greater value for some set of interests than they do in their current configuration. • Autonomy: Just as resources must be available for reconfiguration, individual agents must not be so constrained by institutional relationships that they cannot take independent initiatives. • Incentives: Entrepreneurs must have a “stake”: something to invest in the expectation that the stake can be augmented and that this benefit, once realized, can be retained by the entrepreneur and/or his clients. • Risk and uncertainty: Entrepreneurs succeed (or fail) by taking risks, in effect wagering that they can predict future demand for their “product” better than their competitors. We can think of these types of conditions as complementary pairs, beginning with heterogeneity and autonomy. In her work on public entrepreneurship, Ostrom (2005) develops a normative argument for a greater “polycentricity” in the design of local institutions in order to allow for public entrepreneurs to emerge. Similarly, Crouch sees “institutional” entrepreneurs as “embedded path creators,” innovating within path-dependent systems by finding “some ‘mongrel’, even incongruent elements in [the] environment” (2005, 90). In a somewhat related way, Kingdon (1995, 123) points to the key role of policy entrepreneurs in bringing together, or “coupling,” elements from three independent processes – problem recognition, policy ideas, and politics – at the rare moments when a confluence of these three streams opens a window of opportunity for agenda change. These entrepreneurs will be able to act effectively, however, only if the heterogeneity of the environment extends to power bases as well as to other forms of resources

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– providing independent platforms from which relatively autonomous actors can operate. A second pair of conditions has to do with incentives and risk. Entrepreneurs must see opportunities for profit – that is, for reaping and appropriating returns on the deployment of a particular set of resources that they can manipulate. Furthermore they seek to realize these returns by gaining a first-mover advantage: by taking the risk that their reading of uncertain future payoffs from some combination of resources is more accurate than that of others. In this regard entrepreneurialism requires a degree of uncertainty in the environment. The greater the degree of uncertainty – defined in Knightian terms as the condition in which “range of possible future outcomes, rather than the likelihood of particular individual outcomes, is unknown” (Klein et al. 2009, 7; see also Knight 1921) – the greater the risk for the entrepreneur, but also the lesser the likelihood that rivals will have made similar bets on the future. Absent uncertainty the entrepreneur would have no competitive advantage in this regard. In the private sector entrepreneurs need to make judgments about factors that will affect the price of inputs and the level of demand for their product. To some extent this might be true as well for sector-spanning institutional entrepreneurs. But a critical type of uncertainty for institutional entrepreneurs is political uncertainty: the inability to predict political shifts that could change the landscape of support for new institutional arrangements. Making judgments about the likelihood of such shifts requires entrepreneurs to stay closely attuned to power relations and to act strategically to build alliances. Political uncertainty also means that entrepreneurs are vulnerable to the loss of their investments as a result of changes in the rules of the game, a type of risk that entrepreneurs with property rights in the purely private sector typically do not face. Examining variation across policy arenas in these dimensions of heterogeneity/autonomy and uncertainty/risk helps us to understand the variation in the degree and kind of institutional entrepreneurialism that has occurred in policy arenas over time and across nations. Policy frameworks vary in the extent to which they provide conditions of heterogeneity and autonomy – what I call the structural sites or platforms in which resources are loosely coupled enough to allow for reconfiguration. Those sites, in turn, differ in the power bases from which they make it possible for entrepreneurs to emerge: state authority, private capital, professional expertise, and so on. Policy contexts also vary in

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the degree of uncertainty and risk – in particular, uncertainty is likely to be heightened in relatively rare episodes of major, discontinuous policy change.

Policy design: Heterogeneity and the structural sites for entrepreneurialism Throughout this book I have shown the “normal” policy process in health care to be one of continual cycling through an established repertoire of instruments in response to irresolvable tensions inherent in health care delivery and finance. These normal times can be thought of as representing the more or less stable “institutionally induced equilibri[a]” to which Schneider and Teske refer in conceptualizing the role of the political entrepreneur (1995, 739; see also Ostrom 1990; Shepsle 1979). It is the entrepreneur’s function to be alert to the “disequilibrium of tastes” – the intransitivities that underlie any given policy equilibrium and that open up possibilities for entrepreneurs to introduce new options (Riker 1986). Typically the range within which such entrepreneurial experimentation occurs is constrained by the prevailing policy equilibrium. Some policy frameworks establish repertoires that are more heterogeneous, and some institutional contexts are more fragmented, than others. They vary, that is, in the structural sites they provide for entrepreneurialism. Where such heterogeneity exists, institutional entrepreneurs can exploit latent or underdeveloped opportunities afforded by the established repertoire to develop new and innovative organizational structures. This process can soften the ground for broader reform by gradually building alliances in support of a scaling-up or other development of these institutional innovations (Kingdon 1995, 127–31). Positive feedback from established structures is likely to keep such experimentation within relatively narrow bounds until a window of opportunity for change is opened by broader forces.

Strategies of policy change, uncertainty, and the impact of institutional entrepreneurs Entrepreneurs typically do not trigger major episodes of change, which, as I have argued throughout this book, require a confluence of broad political forces well beyond the scope of individual entrepreneurs or

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even sets of entrepreneurs. But institutional entrepreneurs nonetheless can play key roles during such episodes and in their immediate wake, depending on the strategy of scale and pace political actors adopt. The opening of windows of opportunity for major change temporarily puts the pieces of the policy framework into play, rendering the environment not only more heterogeneous but also more uncertain. Even where the broad parameters of a new policy framework are announced, there is typically considerable scope for design and negotiation. The range of possible design options simply might not be known until those designs are worked out in the political fray and in practice. In Kingdon’s terms, the “policy primaeval soup” contains heterogeneous elements, some of which float to the top over time to form a “short list of ideas,” which nonetheless remain to be extracted and refined in application (1995, 182). The opening (or apparent opening) of windows of opportunity is also marked by political uncertainty. Even when enough authority has been mobilized and sufficient will has been formed to make a major policy change, events might conspire to drive political attention elsewhere, robbing the change initiative of the necessary momentum to proceed. Put differently, the duration of windows of opportunity is uncertain. Even while the window is open, political shifts might steer policy design in a different direction. Windows of opportunity for policy change, then, create the kind of uncertainty and heterogeneity in which entrepreneurs can identify and act upon new opportunities – and can benefit from their ability to do so better than others. Moreover different strategic political judgments about the scale and pace of reform create different degrees and kinds of political uncertainty, and different opportunities, roles, and stakes for entrepreneurs. In the remainder of this chapter, we shall see how the founding frameworks of our four nations were more or less inimical to the emergence of institutional entrepreneurs, how episodes of reform did or did not open up new opportunities, and how entrepreneurs exploited the opportunities afforded by different strategies of scale and pace to shape the course of reform.

Institutional entrepreneurialism in health care reform The health care arena, with its entrenched structures of interest and welfare-state institutions, would seem in general to be an inhospitable environment for institutional entrepreneurialism, although these

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conditions and prospects vary considerably across nations. In other senses, however, the health care arena provides fertile ground for exploring changes in the institutional arrangements governing the control of public and private resources. The principal political and economic pillars of health care systems – the state, private finance, and the medical profession – are grounded in the fundamental bases of authority, capital, and skill, respectively. All advanced health care states accord a large role to public authority, all provide at least footholds (and some provide substantial platforms) for private capital, and all give medical professionals a pivotal role in resource allocation at the micro- and in some cases the meso- and macro-levels. Various actors find themselves in a grey area in which the boundary between the public and private sectors is blurred. In many systems, for example, medical practices are established on a proprietary basis: practitioners invest their own human and financial capital while drawing almost all of their revenue from the state. One can find idiosyncratic and isolated instances of institutional entrepreneurialism in most nations. But there has been considerable variation across nations in the existence of structural sites for institutional entrepreneurialism and the impact of such activity on the policy process. First, the potential for combining public and private resources has been either facilitated or constrained by the way in which the public/private boundary has been drawn and where the “centre of gravity” of the system lies between the two sectors. Second, the degree of centralization in both the public and private sectors affects the number and location of platforms for individual entrepreneurs or groups of entrepreneurs. The founding frameworks of the four health care states treated in this book differ considerably in these respects. Later, marketoriented designs of health care reform in England, the Netherlands, and the United States created new and different sites for entrepreneurialism, as governments sought to harness market forces to the public objective of optimizing across the key performance dimensions of equity, cost control, and quality. The market-oriented reforms provided new platforms for combining public and private resources by creating new public mandates for private sector actors of various types. For example, GPs in England gained a public mandate to purchase services from other providers on behalf of the state. In the Netherlands, a public mandate maintained the obligation for consumers below a certain income threshold to have social insurance, while now freeing recognized social insurers to form a variety of

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alliances with private insurers and other private sector actors. The subsequent extension of the individual mandate to the entire population aligned the incentives of social and private insurers, and abolished the distinction between them. In the United States, an individual mandate plus public subsidies gave private insurers an expanded market, but also required them to standardize their products in order to access the subsidized markets through health insurance exchanges (later known as marketplaces). The exchange model itself amounted to the creation of a new type of market player, with the capacity to operate a technologically mediated brokerage and also the mandate to award state certification to qualifying private insurers and to administer public subsidies. As actors availed themselves of these various opportunities, the models originally established in reform legislation were extended and reshaped. All of the resulting models straddled the public/private boundary, creating hybrid organizations whose status was ambiguous. Entrepreneurs as Products and Agents of Reform In the market-oriented reforms of England, the Netherlands, and the United States, institutional entrepreneurs emerged at the intersection of new and old policy logics. In each case the reform process destabilized the previous regime and created some uncertainty as to what the end result of the reform process would be. The loosely coupled and uncertain conditions that could allow entrepreneurs to take risks with the prospect of reward for some new combination of resources were thus in place. Beyond this generic effect, the emergence and activity of institutional entrepreneurs depended upon specific features of the reform framework and the pre-existing regime, and upon the strategy type through which the reforms were carried out. By design each of the market-oriented reform frameworks created some opportunities for entrepreneurs to act in various ways as agents of public authority. In each case, actors with footholds in the previous regime emerged in response to these opportunities. In so doing they mediated not only the impact of the new policy logic, but also the subsequent course of policy development. This general pattern played out in quite different ways in England, the United States, and the Netherlands, as summarized in Table 10.1. In each case the design of the reform created some new foothold for entrepreneurs, by providing a degree of autonomy that had not previously existed and by establishing incentives for entrepreneurs to appropriate gains – either for themselves or for group of beneficiaries they wished to serve – from

Nature and timing of impact

Between reform episodes: demonstration effect and advocacy – GP fundholding to Clinical Commis­ sioning Groups

Commissioning support services

Proprietary skill; patient membership

Primary resource base

Private

GPs

Entrepreneurial actors

Public purchasing mandate

Various models of GP control over budget for hospital and community services

Form of innovation

Public

GP Purchasing

Site of innovation

Mandatory insurance - provision

Netherlands

Between reform episodes: demonstration effect and advocacy – NHS Trusts to Foundation Trusts

Private capital

Ownership of assets under Treasury agreement

Employee (esp. consultant) expertise community base;

Hospital executives and board members

Mandated market (post-2006)

Private capital; marketing and technological expertise

Private insurers

Regulatory (certification) mandate; subsidy enrolment

Statutory constitution

Developers of statebased public exchanges

Regulatory (certification) mandate; subsidy enrolment (potential)

Private capital; marketing and technological expertise

Owners of private web brokers and exchanges

Health insurance exchanges as portals of access to private insurance market and public subsidy – various models

Mandatory insurance – purchasing

United States

During reform episode: industry restructuring and capacity-building enabled execution of policy blueprint; increased industry concentration

During reform episode: industry restructuring and capacity-building enabled execution of policy blueprint; increased industry concentration

After reform episode: elaboration of range of variation within reform model after enactment

After reform episode: potential expansion of scope of reforms after enactment

Private capital; client Private capital; client Client revenue Client revenue; base; client revenue base; client revenue client base

Mandatory contri­ butions; mandated market (post-2006)

Regional client base; technological expertise

Sickness Fund executives (pre-2006)

New governance Not-for-profit/ For-profit hybrid corporate linkages and forms access to private capital for NHS hospitals

Provider trust status

England

Table 10.1. Base, Scope. and Impact of Institutional Entrepreneurs under Market-oriented Reforms, England, the Netherlands, and the United States, 1990–2015

Resource scope – other factors

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some new combination of resources. And in each case the particular reform strategy followed – big bang, blueprint, or mosaic – facilitated and constrained this activity in distinctive ways. (As I also briefly discuss below, in Canada neither the design of the single-payer system nor the incrementalism of the policy process favoured the emergence of institutional entrepreneurs.)

England In England entrepreneurial GPs and hospital executives, typically in alliance with their powerful consultant staffs, seized the opportunities offered by the 1990 reforms. Under the National Health Service, GPs maintained their own practices as private “independent contractors” with the state. Consultants, while under salaried contracts with the NHS for practices based in state-owned hospitals, nonetheless retained the right also to engage in private practice. Both GPs and consultants, however, functioned under standard, centrally negotiated contracts. Their career paths lay within the NHS, and the overwhelming share of their income came from that source. As part of the founding settlement with consultants that allowed them to maintain private practices, NHS hospitals were also permitted to operate private “pay beds” for the private patients of consultants. Before 1991, however, prices for these beds were centrally fixed by the NHS at cost-recovery rates designed to prevent hospitals from generating profits (Levitt, Wall, and Appleby 1995, 112). The large-scale, fast-paced, big bang strategy employed for Britain’s internal market reforms of reforms in the early 1990s offered little opportunity for institutional entrepreneurs to shape the design of the reforms. The internal market framework nonetheless created certain niches for entrepreneurs whose activity expanded the scope of certain features – namely, GP fundholding and NHS Trust status – well beyond what had originally been anticipated. The rapid implementation process established early platforms for these entrepreneurs to build the ideas, organizational models, and alliances that would shape the long, “normal” course of policy cycling that lay ahead, and that would prepare the ground for change in future reform episodes. GP fundholders The creation of the new, voluntary “fundholding” option gave participating GPs a dedicated portion of the public budget to purchase a

Institutional Entrepreneurs and Market-Oriented Reform  449

range of hospital and community services on behalf of their patients (by writing specific contracts with providers), as well as some resources to support practice infrastructure. GP fundholders were allowed to refer patients to whomever they wished, while other GPs were restricted to providers with whom their host purchasing authority had a contract. With their smaller scale, fundholders had more flexibility to exit contract relationships than could purchasing authorities, and thus could gain financial leverage in their dealings with consultants. As well, they could build up their practice by investing any surpluses from purchasing budgets. On the other hand, fundholding status required GPs to take on more risk – up to a guaranteed limit1 – and to assume more transaction costs than was the case under the standard GP contract in the NHS. GPs who considered converting their practices to an untried model, at a time when the NHS reforms were highly contested politically, also faced a substantial degree of uncertainty about the option’s durability. The big bang strategy of reform presented the GP fundholding option to the profession as a fait accompli. Nonetheless it galvanized institutional entrepreneurialism to a surprising degree as GPs seized first-­mover advantage. When surveyed, the most common reason fundholders gave for participating in the scheme – more common even than acquiring increased flexibility in referrals or increased leverage on providers – was the belief that fundholding was the way of the future. Indeed this belief, and the desire to shape the structure of a new professional role for GPs, might have led some to take up the option regardless of their views on the merits of the idea itself – a “jump before being pushed” attitude (United Kingdom 1996, 44) – especially when GPs assumed relatively little financial risk in making this bet on the future. The option diffused and expanded well beyond original expectations, involving over half of all GPs by 1997. In 1994, in response to proposals from some fundholding GPs, the government piloted a new “total purchasing” model in which consortia of general practices were given indicative (not real) budgets by their respective Health Authorities to manage the purchasing of virtually all hospital and community services. Fundholding practices (and total purchasing pilots) exhibited great variety in their structures, processes, and performance (Goodwin et al. 1998; United Kingdom 1996). Overall, fundholding appeared to yield benefits in the form of reduced emergency admissions, lower prescription drug costs, and reducing waiting times, but at the expense of higher transaction costs.2 It also provoked a countervailing movement

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among entrepreneurial GPs who sought the increased influence and resources afforded by the fundholding model, but objected on ideological grounds to its non-universal application. A subset of this group formed self-organizing cooperatives of practices, which they called “Locality Commissioning Groups,” to work with local Health Authorities in purchasing services. Both fundholding practices and non-fundholding commissioning groups soon formed professional associations – the fundholders as the National Association of Fundholding Practices and the Association of Independent Multifunds, which later merged to form the National Association of Primary Care, and the non-fundholders as National Association of Commissioning General Practitioners, which later became the NHS Alliance. The leaders of these associations became politically active in support of their respective models, sparking a pattern of engagement with sympathetic policy entrepreneurs within government that was to continue for the next two decades. This political activity, which was to contribute to the emergence of the clinical commissioning model of the Coalition government, would prove to be the most lasting effect of fundholding. Alan Milburn, the Labour health minister from 1997 to 1999, health secretary from 1999 to 2003, and architect of the principal reforms of the Labour period, was supportive of a strong role for GPs in purchasing, but was more sympathetic to the non-fundholding than to the fundholding model. As I described in Chapter 5, Milburn drew upon the non-fundholding alternative to introduce universal Primary Care Trusts to purchase (or “commission”) almost all hospital and community services, each with a professional executive committee made up largely of GPs with an ill-defined mandate to provide clinical direction and strategic advice. On balance, however, this model represented a reemphasis on the hierarchical dimensions of the NHS. The goal of developing a sophisticated purchasing role for a broad range of services remained elusive (Smith et al. 2010; Smith and Curry 2011). Indeed this lack of capacity opened up further market opportunities for both private and public sector entrepreneurs to advise purchasers or even to take over the purchasing function. The vast majority of Primary Care Trusts used such consultants, with mixed results (Naylor and Goodwin 2011). In 2004 disillusionment with the PCTs led to another round of policy cycling, with a re-emphasis on the importance of clinical expertise and the introduction of a “practice-based commissioning” option, based on indicative commissioning budgets from the respective Primary Care Trust as promoted by the NHS Alliance.

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Although the limited mandate afforded by an indicative budget ultimately proved too weak to have much effect (Curry et al. 2008; Smith et al. 2010), some practice-based commissioning consortia nonetheless would become the sites for more entrepreneurial activity when a new model of clinical commissioning emerged after 2010. Meanwhile GP leaders in both the former fundholding and nonfundholding camps continued to be politically active on the opposition side of the aisle as well. In particular, they formed close alliances with Andrew Lansley, the Conservative shadow health secretary from 2004 to 2010, who would go on in government to introduce the Coalition health reforms in 2010, centred on consortia of general practices as the principal purchasers in the system. The institutional entrepreneurship and political advocacy of GPs thus would play a key role in transforming a relatively minor element of the internal market reforms of the 1990s into the centerpiece of the episode of reforms that began in 2010. NHS and Foundation Trusts The story of GP commissioning was the most dramatic but not the only example of institutional entrepreneurship spawned by the internal market reforms of the 1990s: a somewhat parallel set of developments occurred on the hospital side. As a central aspect of the reforms, hospitals were given the option of moving out from under direct management by the NHS to become an independent NHS Trust, a “corporatized public enterprise” governed by a board of directors appointed by the health secretary. The ownership of all hospital assets would be transferred to the trust, which then owed to the Treasury an amount equivalent to the value of the assets. The trust hospitals operated almost entirely within the public sector, albeit with more managerial freedom than was the case for hospitals directly managed by the NHS. Their financial discretion, however, was highly constrained: they could retain surpluses and/or acquire private capital only within tight limits set by the Department of Health, and they could not distribute surpluses. They also had little flexibility in setting prices, which were to be set at average costs, including a prescribed return on assets (Bartlett and LeGrand 1993). It was possible to compete on price, however, by reducing average costs, and since average costs were measured in the aggregate at the hospital level, there was greater flexibility with regard to specialty subunits (Propper, Burgess, and Green 2002, 6–7). If the trusts’ range of action was limited, so was the risk they faced – essentially to the reputations of their executive and non-executive directors, and, in the

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case of the executive directors, their career prospects accordingly. As with the fundholding option, there was considerable uncertainty about future political directions, heightened in this case by the prospect of intervention by elected politicians to defend local hospitals threatened by competition or other elements of the reforms. Notwithstanding these various constraints, risks, and uncertainties, the NHS Trust model offered senior executives broader scope than the alternative of remaining directly under NHS management – and, as in the case of fundholding, it proved popular beyond initial expectations. Though more central to the initial concept of the internal market than fundholding had been, NHS Trusts were not originally conceived as having universal applicability; it was envisaged that some hospitals would remain as “directly managed units,” while still separate from the purchaser arm of the NHS. The first wave of fifty-seven trusts came into existence in April 1991, accounting for 12 per cent of total NHS beds and 13.5 per cent of NHS hospital expenditure; within three years 95 per cent of NHS hospital expenditure was in the hands of trusts (Bartlett and LeGrand 1993, 56–7). The impact of the internal market reforms was tempered by absorption into established networks. Relationships between Health Author­ ity purchasers and NHS Trust providers established in the days when they had been bound together in the NHS hierarchy carried over into the new era of contracting (Tuohy 1999, 169–202). Nonetheless, as in the case of fundholding, hospital executives began to take up opportunities for institutional entrepreneurialism. Conversion to trust status was associated with productivity gains (Soderlund et al. 1997), but where trusts competed with each other, the death rate after treatment following a heart attack was higher, suggesting that hospitals attempted to compete on price through lower costs by compromising quality (Propper, Burgess, and Green 2002). The NHS Trust model allowed hospital executives to operate from a base of authority within the state, not only to acquire greater autonomy within the state itself, but also to gain greater access to and flexibility in the use of private capital, subject to centrally imposed limits. Executives of a top tier of well-performing hospitals were able to use this new flexibility to enhance their own reputation and that of their hospital. The entrepreneurial appetite thus whetted was able to survive through a cycle of centralization under Labour following the 1997 election, and these entrepreneurial executives were key participants in the design of a new, still more autonomous Foundation Trust model when

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the cycle turned again to an emphasis on market-oriented approaches under Labour in 2002. Although Labour retained the essence of the internal market – the purchaser/provider split – it cycled through various emphases in structuring that relationship – in particular, the balance between central direction and local autonomy. On the hospital side, the trust model was retained, but several significant powers were recentralized – especially those relating to remuneration and working conditions, and appointment and removal of chief executives – while greater limits were placed on the ability to retain surpluses and to make decisions about capital at the hospital level (Edwards 2011, 115). Autonomy was not simply to be granted to hospitals, but to be “earned” by favourable performance against central standards, as measured by a “star-rating” system scoring hospital performance on a scale from zero to three stars. After 2001, however, Health Secretary Milburn undertook a series of consultations with the objective of pursuing a more decentralist, market-­oriented direction. Into this opening stepped some key trust executives who were restive under the increased constraints and wished to recover and build upon their earlier degree of autonomy. As Milburn’s special adviser later recalled, the idea of “Foundation Trusts” was born in meetings with the chief executives of “three-star” hospital trusts (according to the first round of the star-rating system in 2001). “They wanted to be more independent,” he reported to an interviewer, “but did not want to become private companies” (Carvel 2005). Like the entrepreneurial GPs discussed above, they used their experience of the 1990s to press for new institutional forms in the 2000s. Foundation Trusts were described as “independent public interest organisations, modelled on co-operative societies and mutual organisations” (United Kingdom 2002, 3). They would no longer report to the secretary of state for health; rather, they would be accountable to their members, who would elect their board, and would be regulated by an independent body (Monitor) that would oversee their financial viability. The leadership role of the chief executives of the three-star trusts was clear in the policy statement announcing the trust model: “The first generation of NHS Foundation Trusts will be led by the best performers – existing 3-star Trusts … The freedoms that NHS Foundation Trusts will enjoy will provide an incentive for others to improve” (4). They were part of a policy mix of disjointed incremental measures that was intended to create sufficient “constructive discomfort” sufficient to overcome inertia (Stevens 2004, 42) – in our terms, they created the

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conditions for institutional entrepreneurialism. Added to this rather Schumpeterian intention was a considerable degree of political uncertainty, as the legislation establishing the Foundation Trust framework was buffeted by strong headwinds of opposition within the Labour Party on its way to passage. Foundation Trusts emerged from this maelstrom as new entities that combined a public mandate with the resources of an independent membership base grounded in local elites, control of assets and capital (retained surpluses), and access to private finance in the form of borrowing within limits, opening up a range of opportunities for entrepreneurialism within this mix. As had been the case for GP fundholders, FT status proved popular with hospital executives and their boards. The 20 first-generation FTs were joined by subsequent waves, such that, by March 2009, 115 of about 250 acute hospital trusts had gained FT status. Although there was substantial variation, FTs began to have a demonstration effect, especially through clearly acknowledged leaders such as University College London Hospital. Aggregate analyses also began to show some more modest results. Foundation Trust status was found to be associated with higher management competence (as measured by the adoption of various generally acknowledged best practices), which in turn was correlated with better hospital performance on NHS standard measures (Bloom et al. 2010). A highly publicized case in which severe quality problems emerged at a trust shortly after it had been approved as an FT, however, drew attention to the fact that acquiring FT status was based on assessments of financial and managerial capacity, not quality of care. Broader empirical analyses found no difference between FTs and non-FTs on a variety of quality measures (Farrar et al. 2009) – although a number of studies found that competition among hospital trusts under the fixed-price Diagnostic Related Groups–type regime introduced in 2002 was associated with improved health outcomes (Cooper et al. 2010; Gaynor, Moreno-Serra, and Propper 2010). Variation across hospitals was also apparent in the openness of their internal cultures to competitive strategies. The significance of these differences was emphasized to me by most interviewees with knowledge of the hospital sector, and has also been investigated empirically. Mannion et al. (2009), who surveyed cross-sectional samples of senior hospital executives at three points in time from 2001 to 2008, found a shift over that period from a dominant “clan” culture (emphasizing loyalty, integration, and participation) towards a “rational” culture (emphasizing competition, goal attainment, and success). These two types

Institutional Entrepreneurs and Market-Oriented Reform  455

of self-reported culture together described about 80 per cent of NHS trusts in both 2001 and 2008. But whereas the balance was 50/30 in favour of the “clan” culture in 2001, the two types were evenly balanced at about 40 per cent each by 2008. Most of the entrepreneurial energy of FT executives was initially focused within the hospital sector itself, aimed at horizontal integration. The drive for horizontal integration indeed predated the establishment of Foundation Trusts, under explicit policy mandates directed at problems of clinical or financial failure (Gaynor, Laudicella, and Propper 2011), and the resulting organizations “tended to operate fairly traditional organizational structures (Crump and Edwards 2014, 5). Various FTs also acted to leverage their real estate holdings by building new facilities under Private Finance Initiative (PFI) undertakings, and/or entering into co-location arrangements with other providers, thus gaining some synergies even where separate budgetary envelops militated against formal clinical integration. Some FTs in favourable locations also entered into broader real estate deals with commercial entities. A National Audit Office evaluation of hospital PFI projects in terms of value for money as of April 2009 was broadly positive (United Kingdom 2010c). With the constraint on NHS expenditure after 2009, however, several trusts struggled to meet their payments under PFI schemes. One trust (not an FT) in South London failed entirely in 2012, in part under the burden of PFI obligations, and was dissolved, with its assets distributed among neighbouring trusts. Seven other trusts received central funding to meet PFI obligations in 2012, and in a 2014 development believed to be a bellwether, one FT borrowed funds from the local municipal government to buy out its contract with a PFI developer (Plimmer and Neville 2014). Another form of institutional innovation occurred under Labour in the form of new entities that did not span, but travelled across, the public-private boundary as various units were deliberately spun out from public sector ownership. This activity occurred largely outside the physician-hospital nexus, where for-profit and not-for-profit providers had been long established. Primary Care Trusts spun off some of their directly managed delivery units providing community and social services. Meanwhile the Labour government was pursuing a policy – which would be continued under the Coalition government – of encouraging the formation of “public service mutuals” and cooperatives across the public services. The distinguishing feature of these entities was their membership-based ownership.3 The Cabinet Office defined

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a public service mutual as “an organisation that has left the public sector (also known as ‘spinning out’); which continues to deliver public services; and has staff control embedded within the running of the organisation” (United Kingdom n.d.). On this definition there were more than one hundred such enterprises in 2015, about 40 per cent of which were health sector entities engaged in providing long-term and community health and social care.4 Entrepreneurialism under the Coalition reforms The alignment of interests that emerged around the proposals released by the Conservative/Liberal Democrat Coalition in 2010 dramatically illustrated the division between those who wished to press the entrepreneurial advantages they had found in previous reforms and those who had found those reforms disruptive and threatening. The National Association of Primary Care (originally established by fundholders) and the NHS Alliance (the non-fundholders’ counterpart) formed a Clinical Commissioning Coalition in support of the reforms, and worked with Lansley on matters of design. Similarly the Foundation Trust Network supported and promoted the reforms, which would provide yet greater freedom for FTs. The interests of GPs and FT executives were not necessarily aligned. Some leading FT chief executives, for example, advised Lansley against the consortium model, arguing that the development of a sophisticated purchasing function would be much better served by collapsing the existing 152 PCTs into fewer, larger bodies, which then could attract the necessary expertise, than by multiplying the number of purchasers by creating a much larger number of consortia.5 Nonetheless the GPs and FT chiefs generally focused on building support for the reforms and dealing with the many design issues to be worked out in their own bailiwicks, rather than contesting dimensions of which they were less supportive. The fast-paced mosaic strategy the Coalition followed to enact its reforms meant, however, that institutional entrepreneurs had few opportunities to shape the reforms before the draft legislation was introduced. An accelerated implementation process, begun even before the legislation was introduced into Parliament, further reduced these opportunities at the outset. Essentially, as in the case of the internal market reforms twenty years earlier, entrepreneurs sought early advantage through first-mover status within models that had already been designed.

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In October 2010, three months before the Health and Social Care Bill was introduced into Parliament, the health secretary issued a call for interested groups of general practices to apply to form “pathfinder” consortia (the shells of the organizations that were to become commissioning consortia), and the first wave of fifty-two pathfinders was approved in December 2010. Existing “practice-based commissioning” consortia provided the base for a number of these applications. Five more waves followed in rapid succession, and by October 2011 – well before the legislation passed in March 2012 – 266 pathfinder groups covering essentially the entire English population had been announced. A survey of a sample of the first two waves suggested that, like fundholders before them, the leaders of pathfinder consortia sought to shape the commissioning model as the way of the future, whether or not they were actually supportive of the direction of government policy (Norridge 2011). As successive waves of pathfinders were rapidly rolled out, concern appeared to grow that this potential for professional leadership was being lost. This growing concern can be traced, for example, in the press releases and policy documents of the NHS Alliance and the Clinical Commissioning Coalition, which move from initial warm congratulations of the first-wave pathfinder groups to repeated expressions of opposition to “top-down” and “bullying” tactics being employed by PCTs in defining the size and structure of pathfinders in the later waves. During the unexpectedly protracted legislative process that led to the passage of the Health and Social Care Act in March 2012, the advocates of GP commissioning consortia and greater freedom for Foundation Trusts lost more battles than they won. The provisions regarding consortia were amended to require representation of specialists and other health professionals, and were accordingly renamed Clinical Commissioning Groups (CCGs). The implementation timeline was extended: PCTs were to remain in existence in regional “clusters” for an indefinite period to support the transition to the new model, and the deadline for the conversion of remaining hospital trusts to Foundation Trust status was postponed indefinitely. A cap on income from private patients in FTs was reinstated. Arguably, however, it was the institutional entrepreneurs who won the war: GP-dominated consortia would be the principal purchasers in the system, under the authority of a quasi-independent NHS Commissioning Board that would replace the NHS Executive. Foundation Trusts would have more latitude, under a more independent regulator entirely outside the NHS structure.

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The extended implementation timeline, moreover, provided breathing room for entrepreneurial activity – although it also allowed for stalling by opponents. As established under the Coalition reforms, CCGs combined professional power (through their membership base in clinical practices) with state authority (as statutory bodies with delegated purchasing roles). The principal gain they promised for entrepreneurial GPs was the ability to extend their professional mandates to control a swathe of health care beyond their own labour. Because of concerns about conflicts of interest, the consortia initially did not hold the budget for GP services themselves, which remained with the central Commissioning Board. Some GPs also had a financial stake in various private provider organi­ zations such as walk-in clinics, physiotherapy, psychological therapies, and screening (Limb 2012), and legitimate arm’s-length arrangements had to be developed in such cases. These various safeguards against self-dealing constrained GPs from profiting financially from their commissioning decisions, but in so doing the safeguards erected budgetary and other barriers to combining resources that had not confronted the predecessor PCTs. In April 2015, partly to overcome these barriers and develop more integrated models of delivery, NHS England began to delegate or share commissioning responsibilities for primary care with CCGs. Thirty per cent of the latter took on full responsibility, while another 40 per cent entered into “co-commissioning” arrangements with the central Commissioning Board. Like the PCTs – and analogous to the situation in the other nations under review in this volume – CCGs also faced budgetary hurdles in combining health care and social services to arrange for continuing care, because social care budgets were held by local authorities. The 2012 legislation establishing the groups also mandated the establishment of “Health and Well-being Boards” at the local level to coordinate planning by local authorities and the respective CCGs. Further, in autumn 2013, the government announced a central pooled “Better Care Fund” through a reallocation of £3.2 billion from the NHS and local authority budgets, to be allocated as of fiscal year 2015/16 on the basis of plans jointly developed and submitted by CCGs and local authorities through local Health and Well-being Boards. The implementation of the first round of proposals in 2014 was rocky, marked by the issuing of revised guidance for the centre, reduced expectations of resulting savings in hospital budgets, and some erosion of local goodwill (United Kingdom 2014). The centralized process of approval resulted in the

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plans only 6 of the 151 Health and Well-being Boards receiving outright approval, 91 being approved with some outstanding conditions expected to be quickly resolved, 49 subject to various conditions involving a range of central support, and 5 rejected (NHS England 2014a). Notwithstanding the constraints of budget silos and central approval processes, CCGs could have been a principal structural site for institutional entrepreneurialism in the new architecture. Following the appointment of Simon Stevens as chief executive of NHS England in April 2014, there was “a clear signal of support from both the Secretary of State and NHS England for promoting more innovative and flexible approaches to commissioning and contracting to drive transformation” (Addicott 2014, 6). This “signal” was transmitted, however, in an environment of centrally prescribed constraints that had to be adapted to allow for various forms of collaboration and risk-sharing among providers and commissioners. For example, the bundling of services under collaborative arrangements might require the economic regulator Monitor to exercise its discretion in particular cases to allow divergence from the structure and/or level of its national tariff of prices, as well as from various market-enhancing regulations. As such adaptations were made, the result was a fluid milieu that created both opportunity and risk for entrepreneurial CCGs and providers. As Addicott puts it, “[t] he challenge for the CCGs [was] to understand how they can use the available commissioning and contracting tools innovatively and effectively, particularly in the face of relentless commissioning cycles, the sheer number of fragmented and complex contracts, and a continually changing regulatory environment” (6–7). In this context some CCGs began to experiment with different contracting mechanisms to structure institutional arrangements among providers, focusing primarily on areas of post-acute and chronic care and varying widely in the range and type of providers involved and in the location of risk-bearing. Addicott describes the emergence of two broad patterns in such contracting by 2014. Under the “prime contractor” model, one agent took responsibility for subcontracting to other providers – and in some cases for providing services directly as well. Under the “alliance” model, CCGs continued to contract with multiple providers for the delivery of a specified set of services while establishing an “alliance agreement” under which providers (and in some cases commissioners as well) shared the associated risks and rewards (Addicott 2014). Each of these models represented extensions of the scope of influence of the CCGs, using their public mandates and resources to shape

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relations among providers. The prime contractor model and, to a lesser extent, the alliance model in turn represented an extension of the influence of certain providers as well. The providers came from different institutional bases: of the five illustrative cases Addicott investigates, three involved a charity, a public/private hybrid, and a Foundation Trust, respectively, as prime contractor, and two drew local authorities into an alliance network. Indeed these new contracting models blurred the purchaser/provider distinction, as prime contractors and alliance leads played both roles. Meanwhile another institutional innovation in commissioning – the “Commissioning Support Unit” – was being fostered by central NHS England. These units initially were incubated within the vestigial PCT clusters retained under the aegis of NHS England after the establishment of the CCGs, to provide expertise and logistical support on a regional basis to groups that lacked capacity themselves. The Commissioning Support Units essentially regrouped former PCT staff as the nuclei of entities that would be spun off as independent agencies by April 2016 to provide back-office and consulting support for all or a subset of CCG contracts. The first set of organizations to be approved as members of the “Commissioning Support Lead Provider Framework” was announced in February 2015, and included a mix of spun-off Commissioning Support Units and established private sector organizations, both for-profit and not-for-profit. The prospects for NHS-based institutional entrepreneurialism rose considerably with the October 2014 publication of Stevens’s report, Five Year Forward View, proposing organizational innovations for productivity gains contingent on new public investment in the NHS. The report gave as examples (not prescriptions) seven possible types of new arrangements, varying in the scope and degree of vertical and horizontal integration. One of these, the vertically integrated Primary and Acute Care System (PACS) model, would combine a broad range of primary and acute care providers within a given community. In the limit, “PACS would take accountability for the whole health needs of a registered list of patients, under a delegated capitated budget” (NHS England 2014b, 20) – a concept similar to that behind the Health Maintenance Organization and Accountable Care Organization models in the United States. Like the “prime contractor” model of some CCG, the PAC model straddled the purchaser/provider boundary. These new organizations could emerge from a base in either primary or acute care. In the former case, groups of GPs and other providers might take over a local

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hospital; in the latter case, hospital Foundation Trusts might “open their own GP surgeries with registered lists [thus allowing] the accumulated surpluses and investment powers of NHS Foundation Trusts to kickstart the expansion of new style primary care” (20). Five Year Forward View also encouraged entrepreneurship on the commissioning side. It applauded the CCGs for “harnessing clinical insight and energy to drive change in their local health systems in a way that frankly has not been achievable before now.” It promised “progressively to offer [CCGs] more influence over the total NHS budget for their local populations, ranging from primary to specialised care” (NHS England 2014b, 28) – a move begun with the delegation and sharing of commissioning responsibilities for primary care noted above. The initiative constituted a clear invitation to institutional entrepreneurs. It offered expanded public mandates for entrepreneurial providers to enlarge their scope of influence from various bases. Physicians could build out from their bases in proprietary professional practice; hospital executives could leverage their control of corporate assets and capital and/or access to private as well as public finance; and community agencies and social enterprises could draw upon their local networks. The range of potential experimental was broad but not open-ended: the process envisaged a continuing strong role for the central bodies in working with local organizations to develop prototypes within each of the seven categories, share information and methodologies and “help pump-prime and ‘fast track’ a cross-section of the new care models” (26). Following through with the Five Year Forward View framework would require meeting a number of challenges, some of which rested with the government. One was the need to coordinate and reconcile the rules and practices of the powerful central bodies to whom CCGs, Founda­ tion Trusts, and others variously reported, including NHS England, Monitor, the Care Quality Commission, and the Department of Health. Could diversity in local delivery models be contained within a coherent regulatory framework, or would a proliferation of convoluted public/ private hybrids tangle the lines of accountability and generate a spiral of regulatory complexity? A second major challenge would be to allow for a broad range of regional variation in the face of political pressures for interregional equity. The announcement in February 2015 of the devolution of the NHS budget for the region of Greater Manchester to a local governance structure represented a dramatic move to link local variation to local accountability, and could presage other such

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developments. Third, how would the state balance the need to be “brave” enough to allow local entrepreneurs to experiment and some to fail against the need for stability in the provision of health care? Professionals – especially the GP community, which confronted the tensions between its commissioning and its clinical functions – faced another challenge. An annual survey over the period from 2013 to 2016 of six CCGs involving some 200 GP respondents found that a minority (36 per cent in 2016) of their GP leadership felt their commissioning role was having a negative impact on their clinical role. A considerable gulf existed between GPs with and without a formal role in the group as to their perceived level of influence on its decisions. More than 80 per cent of those with a formal role saw GP members of governing bodies of CCGs as influential, although group managers were more likely to be seen as “very” influential. In contrast a declining proportion (less than a third) of GPs without a formal role believed that group decisions “reflect the views of me and my colleagues,” or that the group “feels like ‘our’ organization,” or that “I can influence the work of the [group] if I want to.” Overall GPs tended to see the positive effects of CCGs as encouraging interpractice and interprofessional collaboration; a substantially smaller proportion saw them as having had a positive impact on quality of care – a substantial majority saw them as neutral in that regard (Holder et al. 2016). The overarching challenge in addressing these tensions would be to avoid the pattern of cycling that had been the norm in health policy between episodes of major change. History suggested that the pendulum of centralization/decentralization would continue to swing. Stevens himself had recognized and described the inherent tensions underlying such cycling when he was policy adviser to Blair (see Chapter 5), and he was determined not to repeat it: “[T]he tendency over many decades for government repeatedly to tinker with the number and functions of the health authority/primary care trust/clinical commissioning group tier of the NHS needs to stop. There is no ‘right’ answer as to how these functions are arranged – but there is a wrong answer, and that is to keep changing your mind” (NHS England 2014b, 28) In the event, the dynamics that might have been fuelled by Five Year Forward View were forestalled, at least initially, by the pressures of the government’s austerity agenda. Even in an era when the rate of increase in health care costs had moderated cross-nationally, the essentially flat NHS budgets gave actors very little flexibility. Rather than seeking innovative approaches to efficiency, providers reached for stop-gap

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measures such as reducing permanent staff and relying on temporary staff supplied by private agencies as required. Many drew upon temporary central funding to avoid or reduce deficits, and that funding in turn came with central prescriptions that limited local discretion. Entrepreneurialism on traditional contracting models Fundholders, locality commissioning groups, practice-based commissioning consortia, CCGs, NHS Trusts, and Foundation Trusts were new institutional entities, based in the state but drawing on private professional and community resources. In addition to these entities, the market-oriented reforms of the millennial period also encouraged entrepreneurialism on more traditional models – namely, contracting between the state and private suppliers. Until 2000 the proportion of NHS spending that went to purchase care from private providers was almost infinitesimally small, amounting to less than 1 per cent of the total NHS budget. From 2000 onward, Labour began to experiment in marginal ways to involve non-NHS entities in the provision of NHS-funded services. Under a 2000 “concordat,” local commissioners could negotiate with private providers for a range of services, including some elective surgery and primary care. After the shift to a more explicitly market-oriented approach in 2002, the government encouraged a multiplicity of models of local provision, including for-profit, not-for-profit, and third-sector organizations. Centrally the NHS contracted with specialty clinics under the Independent Sector Treatment Centre model to provide “high-volume, low-risk elective surgery” to NHS patients at a premium above normal NHS rates, and also awarded GP contracts to for-profit firms and social enterprises in some underserviced areas (Allen et al. 2011, 16–17). Social enterprises were particularly fostered under a Social Enterprise Unit established within the Department of Health in 2006 with a £100 million investment fund to be allocated over four years and a mandate to foster demonstration projects – including the transformation of existing NHS organizations into social enterprises (24). These initiatives had a substantial impact within the small private sector. The share of income for private hospital facilities derived from public sources increased from 14 per cent in 2005 to 25 per cent in 2010 (LaingBuisson 2012). But it represented a marginal change in the much larger public sector. By fiscal year 2009/10 PCTs were allocating less than 12 per cent of their spending on secondary care to nonNHS providers (Arora et al. 2013, 15) – amounting to about 9 per cent

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of total PCT spending and less than 8 per cent of total NHS spending.6 Slightly more than half of this amount went to independent sector providers, with the remainder going to voluntary sector agencies or other providers such as local authorities. Most of this spending was on non–­hospital-based services such as treatment for learning disabilities, mental health, and community services; less than one-fifth went to general and acute hospital services (15–16). More significantly for the purposes of this analysis, non-NHS providers tended to function within their established niches and models, whether for-profit, not-forprofit, or voluntary. Other than the few NHS-bred “social enterprises” fostered under Labour, there was little “institutional entrepreneurialism” across sector boundaries. The role of these private providers, moreover, needs to be understood in the context in which the large bulk of services continued to be provided by entities still based within the NHS, and in which private sector providers accounted for a substantial number of contracts but a small volume of service (Iacobucci 2014). Total funding awarded to private sector providers amounted to about 6 per cent of NHS spending in 2014, according to the Department of Health and NHS England, and the chief executive of NHS England indicated that he did not expect that proportion to increase substantially (Campbell 2014b; Iacobucci 2014). In short, if market-oriented reforms increased the influence of GPs, other clinicians, and hospital executives, they also channelled the exercise of that influence within a continuing hierarchical relationship that subsumed purchasers under a central NHS Commissioning Board, the successor to the NHS Executive. It is therefore perhaps not surprising that most of the new institutional forms emerged from bases with roots in the traditional NHS – Clinical Commissioning Groups and Foundation Trusts – whose leadership understood the constraints of the public sector. Private providers continued to function in traditional ways as bidders on public contracts. One high-profile exception seemed to prove this rule. A significant example of institutional entrepreneurship from a private sector base was that of Circle Health, a hybrid public/private entity that took over the operation of a failing NHS hospital under contract with the NHS. Under a complex and opaque corporate structure, Circle Health was a limited-share company, 49 per cent owned by an employee-owned partnership (Circle Partnership) and 51 per cent owned by a publicly listed holding company (Circle Holdings) whose major investors were

Institutional Entrepreneurs and Market-Oriented Reform  465

venture capitalists and hedge funds.7 This structure was further complicated by a separate entity to finance real estate acquisitions, and by financial arrangements involving loans within the broad corporate family. (We will see a somewhat analogous hybrid arrangement in the case of a large Dutch insurer, Achmea, below.) Essentially these structures and processes allowed Circle Partnership access to a deep pool of private capital, while providing a guaranteed revenue stream to the holding company in the form of interest payments. Any losses incurred by Circle Partnerships would be contained to that one entity. After winning a number of NHS contracts under the Independent Sector Treatment Centres program, Circle Partnership took over the operation of a failing NHS hospital (Hinchingbrooke), under a ten-year contract commencing in 2011. This was the first time the operation of an entire NHS hospital had been placed in private hands, and the initiative gained close attention across the health policy community and the broad political spectrum. It was greeted with alarm on the left (NHS Support Federation 2012) and heralded on the right (Levy 2014; Moore 2013). The contracting process leading to the deal was criticized by the National Audit Office (United Kingdom 2012b). Once in operation, the arrangement was generally favourably assessed from impartial perspectives (Hodgson 2014; King’s Fund 2014). In May 2014 a long-standing annual hospital rating survey by CHKS Ltd. awarded Hinchingbrooke first place in its quality-of-care ranking.8 Progress towards eliminating the hospital’s operating deficit, however, lagged well behind plan. Then, in a startling turn of events in January 2015, the quality regulator, the Care Quality Commission, issued a starkly negative assessment, triggering a decision by Circle to exit its contract. The experience of Circle Health at Hinchingbrooke provided fodder for both left and right critiques. The broad regulatory architecture and operational culture of NHS hospitals, including Hinchingbrooke, presented a complex and largely unfamiliar environment for equity investors. The hospital sector offered the potential for neither growth nor profitability in the short term. Although Circle’s complex structure guaranteed a stream of interest payments to its for-profit arm, it required “patient capital” if it were to turn around a failing entity. Furthermore, although Circle had been able to demonstrate growth in recent years by expanding the number of its other niche-based NHS contracts, there was little prospect that it would take on another full-range hospital, at least until the Hinchingbrooke experiment had been assessed. Finally, instances of failures in the quality of care in publicly financed

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NHS hospitals had triggered extensive central intervention, and private investors had no appetite for seeing through such a process. Thus both left and right appeared to be correct: private sector providers had no inherent advantage, and some inherent disadvantages, over NHS-based providers of hospital services, at least within the existing structure of the NHS. Institutional entrepreneurialism across the broad range of health services was more likely to emerge from NHS providers and commissioners themselves.

The Netherlands Even before the reforms that began in the late 1980s, the policy framework in the Netherlands placed a mix of public and private resources in the hands of insurers and providers of health care. Sickness funds were hybrid entities grounded in industrial relations but backed by state mandates granting each fund a regional monopoly to compulsorily ensure about two-thirds of the population through contributions from employers and workers. In addition, all insurers (social and private) were mandated to act as carriers of the universal long-term care insurance plan – although they functioned as mere conduits for a program for which they bore no risk – and the administration of the plan (including contracting with providers) was delegated to a “care office” operated by the regionally dominant sickness fund. On the provider side, GPs owned their own practices, specialists functioned within selfgoverning hospital-based groups, and hospitals were owned by notfor-profit entities, and all providers dealt with the mix of public and private payers. Despite this co-mingling of public and private resources, there were historically few opportunities for entrepreneurialism in the Dutch health care system, given its strong emphasis on collective modes of decision-making within established norms and structures. But the health care reforms initiated in the late 1980s, and the broader disruption of corporatist arrangements to which those reforms were linked, contributed in both substance and process to creating conditions for institutional entrepreneurialism. The design of the new policy framework created structural sites, and the blueprint reform strategy created both the opportunity and the incentive for actors to engage in entrepreneurial innovation that shaped the course of reform. In contrast to the United Kingdom, where the fundholding and NHS trust models were conceived and rapidly introduced without input from providers, the

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step-by-step enactment of the Dutch reforms, and even the slowing of the reform process from 1992 to 2002, allowed the elements of the Dutch model to be fleshed out over time by institutional entrepreneurs as the politics of the blueprint strategy played out. Once the reforms were in place as of 2006, however, institutional entrepreneurialism complicated the implementation process, fuelled the ongoing tension between competition and regulation and leading to unintended results. Insurers The principal focus of the Dutch reforms after 1987 was on the insurance market; hence that was where the opportunities for institutional entrepreneurialism emerged. (A shift of policy focus to the provider side would come after insurance reform had been accomplished.) Abolition of regional monopolies meant that sickness funds were no longer guaranteed a specific local market. But they continued to enjoy what was effectively a licence to offer compulsory social insurance, and they were liberated to leverage that advantage to attract additional resources and to market their plans across the country. In the expectation of a future in which former sickness funds and private insurers would compete on a  level playing field and under a common regulatory umbrella, both sickness funds and private insurers began to jockey for position. Even the stalling of reform in the 1990s did not blunt this activity. On the contrary, it created a degree of political uncertainty about the future pace and direction of the reforms, adding to the technical uncertainty about the development of the tools necessary for the reforms to work – especially the development of a risk-adjustment mechanism and the building of managerial capacity by insurers. In those circumstances a market shakeout was further fuelled – a number of smaller private insurers chose to capitalize their reserves and exit the health insurance market. All the existing sickness funds, however, moved to compete at the national level (Schut and Hassink 2002, 1011) and nine new sickness funds were licensed to enter the market, most of them offshoots of private insurers. To varying degrees insurers in this new mix used the time lag created by the slowing pace to work on improving their competitive positions. The long history of regional monopoly and corporatist-style decision-­ making meant that there were few wells of entrepreneurial talent in the sickness fund organizations, but the pace of the reforms throughout much of the 1990s gave time for entrepreneurial managers to be developed or recruited. Institutional innovation largely took the form

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of corporate restructuring of insurance funds, as entrepreneurs took advantage of unique mixes of public resources (including the publicly mandated social insurance contributions) and private capital. A spate of merger activity and complex corporate restructuring ensued, within and across the social and private insurance sectors. Sickness funds had begun a process of regional consolidation even prior to the reforms, in part because smaller funds struggled to deal with the mandate that all insurers carry the public long-term care insurance plan (Companje et al. 2009, 277). When the sickness funds were allowed to compete with each other nationally after 1992, the process of industry concentration was given another boost. The total number of insurers declined from 118 in 1990 to 79 in 1999 (Companje et al. 2009, 277; Groenewegen 1994, 144). Moreover the new larger entities had strong incentives to maintain their regional bases: their dominance in covering local populations gave them powerful leverage in negotiating with inherently locally based providers. In general they were successful in doing so, and the degree of concentration at the regional level was therefore even higher than the national market shares would imply. Much of this restructuring combined legally separate social and private insurance entities under some sort of common corporate umbrella, including holding companies, alliances, and other more complex arrangements, under which former sickness funds adopted the same brand name as their private partners (Schut and Hassink 2002, 1011–12). These new corporate forms also allowed the social and private insurance sides of the corporate structure to devise integrated contracts with employers offering coverage for their entire workforce (Companje et al. 2009, 276) and to operate entrepreneurially to develop and market products combining compulsory and supplementary coverage (Lieverdink 2001, 1191). Politically as well, social and private insurers began to join forces, at least to the extent of merging their industry associations in 1995 to form a single Netherlands Association of Health Insurers. This merger activity largely involved a quest for market share. Several factors drove this quest. First, the prospect of an end to mandatory contracting with providers drove both social and private insurers to strengthen their bargaining positions. Although they would not immediately compete for subscribers, the two types of insurers would compete for provider contracts as soon as mandatory contracting in the sickness fund sector was abolished. Furthermore, as corporatist structures were progressively dismantled, it was anticipated that the

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principal site of insurer/provider negotiations would move to the level of individual insurance firms and provider organizations at the regional level (Helderman et al. 2005, 200). Second and more important, the significant regulatory role of government buffered insurers against risk, as further discussed below, but it also meant that opportunities for profit were very limited. In these circumstances insurers sought to build (and protect) their organizations instead through growth. In the case of private insurers and private arms of social insurers, increased market share also increased opportunities to market supplemental health insurance and other insurance lines. As we shall see, a similar dynamic would play out in the United States. The largest funds, with the most to gain or lose in market share, were the most active. As a result the new industry structure became more and more concentrated as both sickness funds and private insurers were absorbed under large corporate umbrellas. By 2001 the five largest holding companies together accounted for more than 60 per cent of total health insurance premiums – representing a shift in the locus of concentration not only of economic but also of political power, as “[t]hese large holding companies [became] powerful actors in the policy arena and [pursued] their own interests independent of their interest organizations” (Helderman et al. 2005, 200; see also Okma 1997, 162–3). By 2014 further consolidation had resulted in the emergence of four large insurers accounting for 90 per cent of the market, with the remaining 10 per cent accounted for by a set of smaller insurers who acted collectively as a fifth market player (Sauter 2014, 2). The degree of concentration was even more pronounced at the regional level, as the large funds retained strongholds in the regional homes of their sickness-fund predecessors. With the 2006 reform all health insurers were constituted as corporations under private law, although they drew half of their revenue for the basic insurance package through the public treasury in the form of centrally collected and risk-adjusted premium payments. Three of the four large insurance entities functioned on a not-for-profit basis. The fourth and largest, Achmea BV, was embedded within a complicated corporate structure combining mutual and for-profit structures in a continually evolving configuration.9 Achmea presents yet another example of an attempt to wed a profit objective to a public mandate in the health care arena, and bears some comparison in that respect with the case of Circle Health in the United Kingdom. With its multipartite and periodically shifting corporate structure, multiple business lines, international reach, multiple lines of accountability,

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and dominant position in the domestic market, Achmea presented challenges of governance within the Dutch public/private mix. Given its corporate strategy and behaviour, however, it did not evoke controversy. Like other Dutch insurers, Achmea wrestled with the problem of establishing its trustworthiness in the new competitive environment (Boonen and Schut 2011). It explicitly stated its corporate ambition to be the “most trusted” insurance company in the country (Achmea 2014). Furthermore, notwithstanding their status as multinational players, components of Achmea’s corporate mix had long historic roots in the Netherlands, some leading back to various mutual societies. The corporate ethos was more likely to provide “patient capital” than was the case for Circle Health (controlled by a publicly listed holding company). Achmea’s annual reports emphasized its long time horizon: “As a nonlisted insurance company, Achmea’s key focus is ensuring long-term services for its customers. We want to create profit in order to remain financially sound and be able to continue investing in new products and services. However, short-term shareholder profit is never our aim ... We aim to earn a socially-responsible and accepted return on our health insurance activities” (Achmea 2014, 6, 16). Providers One premise of the managed competition model had been that insurers  facing competitive pressure would drive quality and efficiency improvements on the supply side through their negotiations with providers. But entrepreneurialism among providers was constrained by the corporatist legacy of collective bargaining and formal and informal structures of professional governance, and by public policy itself. Negotiations between insurers and providers historically had been conducted on a “pattern bargaining” basis. While most GPs functioned as independent practitioners, negotiations between GPs and insurers were conducted by local GP committees and the regionally dominant insurer, under nationally negotiated prices (Schäfer et al. 2010, 85). Most GPs and most insurers accepted the results of these negotiations as the basis for their contracts. Similarly individual hospitals negotiated with the largest insurer in their region, and other insurers “conform[ed] to that contract” (Maarse and Paulus 2011, 127). Professional structures and processes acted as a further brake on entrepreneurialism. Professional norms and networks were important determinants of GPs’ behaviour (Groenewegen, Dixon, and Boerma 2002, 209–10). Within hospitals, physicians exercised substantial power: specialists were hospital-based

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and were organized into medical staff associations, which, in turn, elected the members of a medical staff board who functioned in a de facto co-governance arrangement with the hospital executive (Maarse and Lodewick 2011, 187–8). Increasingly, however, individual physicians and hospitals began to strike their own contracts with insurers, supplementing the regionally negotiated models. GPs entered into individual contracts directed mainly at “modernization and innovation” initiatives, such as utilization of nurses and other non-physician personnel and the provision of some minor surgery and diagnostic tests (Schäfer et al. 2010, 85). Before 2005 hospitals were funded through a system of historically based global budgeting for both operating and capital costs. In 2005, however, a Diagnostic Related Group–type budgeting system was introduced, opening up the possibility of creating internal revenue centres through realizing efficiencies. Capital costs were to be included in prices, putting hospitals at risk for the capital financing through the volume and mix of services provided over time. A progressive deregulation of the sector was also begun, with the establishment of a set of elective services (“Segment B”) for which prices could be negotiated freely between individual insurers and individual hospitals. Each step in this deregulation process required a directive from the minister of health, and thus had to be negotiated within the coalition government of the day (Maarse and Paulus 2011, 130; Sauter 2014, 8, 9). Segment B grew from about 10 per cent of hospital expenditure in 2005 to 34 per cent in 2009, and to 70 per cent by 2012 (Sauter 2014, 8). The remainder (“Segment A”), comprising highly complex tertiary and quaternary services and certain expensive drugs, continued to be subject to fixed prices negotiated on a “pattern bargaining” basis. Segment B services were also offered by day surgery clinics, which, unlike hospitals, could be constituted on a for-profit basis. The number of such clinics grew rapidly after a policy change allowing for “independent treatment centres” in the late 1990s, reaching almost two hundred a decade later – many established by hospitals themselves. As in England and Canada, however, these clinics functioned in niche areas and offered relatively uncomplicated, high-volume elective procedures such as surgery for cataracts and varicose veins; they accounted for a tiny portion, estimated in 2013 at about 2.3 per cent, of all medical specialist care (Schut and Varkevisser 2013, 185). In contrast to England, where Independent Sector Treatment Centres were paid a premium above the fee for hospitals, Dutch clinics provided care on average

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about 20 per cent more cheaply than hospitals – although, without adjusting for case mix, it is impossible to know whether this difference resulted from greater efficiency or less complicated cases (Schäfer et al. 2010, 178). As for hospitals themselves, although market competition might be expected to drive towards common prices for services within Segment B, a considerable range of price variation developed and persisted, at least in the early years of price liberalization (National Institute for Public Health and the Environment 2010, 180–1; 2014, 361–2). These continuing price variations were symptoms of the concentration of regional markets. Negotiations between insurers and hospital providers focused heavily on price, and early evidence suggested that insurers in more concentrated markets were able to negotiate more favourable prices with hospitals (Halbersma et al. 2011). Dutch regional hospital markets, already relatively concentrated in international perspective, became more so as hospitals sought to improve their negotiating positions. Insurers themselves initially did not resist the increasing concentration, seeing it as a route to increase quality through volume (Sauter 2014, 3–4), and, as discussed below, regulators generally took a “relaxed” approach to the phenomenon. The 2006 reform lifted the ban on vertical integration between insurers and hospitals that had existed to that date, but this change had little immediate effect. To the extent that vertical integration occurred, it was at the initiative of insurers seeking to increase or sustain supply, often on a temporary basis (Boonen and Schut 2011, 226). An exception, which might or might not prove to be a bellwether, was the takeover of a failing hospital in Schiedam by a cooperative comprising local providers (GPs, specialists, and long-term care providers) and the largest regional insurer (which held a 40 per cent share). Despite strong opposition in the national parliament on the grounds that it was rife with conflicts of interest, the cooperative was allowed to proceed (Maarse and Paulus 2011, 132–3; van der Zwart, de Jonge, and van der Voordt 2009, 4). Hospital capital financing provided another route of entry for private finance. With the shift to DBC pricing, capital costs were to be included in the DBC price. Prior to 2008 hospital capital projects required central approval, and funding was guaranteed either through loan guarantees and incremental additions to hospital budgets over long amortization periods. After 2008 these guarantees were progressively withdrawn (Schäfer et al. 2010, 120), providing yet another reason for hospitals to seek increased scale in order to reassure potential private investors.

Institutional Entrepreneurs and Market-Oriented Reform  473

The 2006 reforms retained the long-standing ban on for-profit hospitals. Some private sector entrepreneurs nonetheless sought to invest in hospitals, especially after the adoption of the DBC pricing regime for hospital services noted above. The ban on for-profit hospitals meant that surplus revenues could not be distributed but had to be added to hospital budgets. Private entrepreneurs, however, began to consider complex corporate structures to include for-profit arms in non-clinical areas such as real estate and ancillary services.10 The political climate also created uncertainty as to how long the forprofit ban would remain in place, and gave private entrepreneurs the incentive to establish footholds, gambling that the regulations would be loosened further (Bouddiouan 2008, 10). Different models that would permit for-profit hospitals under various constraints were proposed and extensively debated without resolution from 2008 onward (Maarse and Paulus 2011, 131). In 2014 the lower house of the parliament passed legislation lifting the ban on for-profit hospital care in the “curative” segment, subject to a number of restrictions on the distribution of profits. (These restrictions did not apply to non-hospital services such as specialty clinics and long-term care providers, which remained free to earn profits. The ban on for-profit care was kept for teaching hospitals.) The legislation stalled in the Senate, however, where the VVD-Labour coalition lacked a majority and where internal party divisions were more likely to come to the fore in any event. Nonetheless the Netherlands Hospital Association continued to press for the ban to be lifted in order to facilitate hospitals’ access to private equity. Meanwhile, in two cases, private entrepreneurs stepped in to invest in hospitals facing bankruptcy, and in both cases significant public funding was also provided (van der Zwart, de Jonge, and van der Voordt 2009, 4). A regulatory pas de deux : Developing a risk-adjustment mechanism Throughout the long process of Dutch health care reform, would-be institutional entrepreneurs and regulators were engaged in a pas de deux as the inherent tension between competition and regulation played out. The reforms began with the social insurance sector, in which neither individual quasi-public insurers nor regulators had experience in assessing and pricing risk. In some respects the mutual learning of both parties generated synergies in shaping the regulatory tools that would create the level playing field necessary for system-wide competition. The need for a risk-adjustment mechanism to reduce the incentive for

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insurers to “cream skim” low-risk insurees called forth the ingenuity of innovators in the regulatory community, including the health ministry, academe, and the corporatist Sickness Fund Council. To give time for the development of these tools, insurers initially were buffered against risk through retrospective payments from the state – which initially left insurers at risk for only 3 per cent of revenue – while the level of risk was gradually increased. An innovative risk-adjustment mechanism was designed and refined with strong input from a group of academics centred at Erasmus University. Investments in information technology by insurers initially created an enhanced potential for risk selection on the basis of morbidity. But the development of this capacity also allowed regulators to respond by incorporating measures of morbidity into their risk-adjustment formulas (den Exter et al. 2004, 103–5, 126–8). By the time the blueprint process was accelerated under the CDAVVD coalition government in 2002, social and private insurers had come more and more to resemble one another and had developed a much more sophisticated IT capacity than had been the case a decade earlier. Entrepreneurial firms had had important demonstration effects as to the opportunities afforded by a competitive framework. Together these conditions enabled the Liberal health minister with the new CDA-led coalition government to embark upon an intensive process of engagement with private insurers, drawing upon their specialized expertise and information in the technical design details of the final legislation passed in June 2005, to come into effect six months later. The transitional buffering of insurers against risk on a declining basis was also carried over, but such retrospective compensation declined from 97 per cent of total expenditure by insurers in 1993 to 25 per cent in 2010 (Schut and van de Ven 2011, 111). Ex post compensation was phased out completely in 2015. In that same year, however, when insurers took over coverage for a number of mental health and long-term care services under new legislation, a transitional ex post risk compensation for those services was put in place.11 But if the regulatory dance between regulators and providers eased the way for some aspects of reform, it also had unintended effects – especially regarding the increasing concentration of economic and political power. As “undertakings” under EU law, insurers and providers fell within the scope of EU and Dutch competition law and policy. Neither the EU nor the domestic judicial and regulatory apparatus, however, acted as a brake on concentration. Sauter reports that there were “no notable EU antitrust or merger cases involving Dutch undertakings active

Institutional Entrepreneurs and Market-Oriented Reform  475

in healthcare” (2014, 3). And although the Dutch competition authority reviewed some 140 mergers in the health care sector from 2004 to 2015, only one, involving a long-term care provider, was disallowed. Sauter somewhat ironically attributes this rather “relaxed” regulatory stance to the expectation that concentrations of power on both the supply and demand side of the market would countervail each other. Indeed the concentration of power in industry associations and large market players facilitated the striking of the politically mediated sector-wide public/­private agreements discussed in Chapter 8, and those agreements effectively trumped competition law and policy (Sauter 2014, 3). The ongoing mix of symbiosis and tension between peak-level collaboration and competition led a government commission in 2010 to warn that the Netherlands risked getting “stuck in the middle” between a centrally planned and a market-oriented system, preventing the government from controlling costs and health insurers from being costeffective purchasers of care (Schut, Sorbe, and Høj 2013, 21). In fact, however, these tensions were the particular Dutch manifestation of a dynamic inherent in market-oriented reforms in the health care sector, and were likely to drive continuous policy cycling, as I discuss in the concluding chapter.

The United States The dynamic underlying the evolution of the US mixed market since the 1960s is a logic of entrepreneurialism that led, as I have noted elsewhere, to “volatile and turbulent change in decision-making structures as public policy and market responses have generated a mutually reinforcing cycle of complexity” (Tuohy 1999, 161). The political analogue of this complexity was a “hyper-pluralism” in the structure of interests (Schick 1995). Each of these heterogeneous contexts was ripe for the emergence of entrepreneurs. Whereas English GPs and Dutch social insurers played their entrepreneurial roles from principal bases in the public sector and the “social middle ground,” respectively, in the United States it was private capital, given its sheer magnitude in the health care sector, that provided the principal base for entrepreneurial activity.12 Much of that activity was confined to the private commercial sector itself, albeit either aided or constrained by tax and regulatory provisions that required entrepreneurs to engage in classic lobbying. The best treatment of these developments is Joe White’s perceptive tracing of the rise and fall of various

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types of initiatives, all enabled by the relatively “free flow of capital” in the United States (2007, 431). In very brief outline, the story is one of shifts in market power between providers of health care, insurers, and the ultimate payers, employers and governments. The adoption of Medicare and Medicaid in 1965 yielded a mixed market of employer-based private insurance buffered by the two large public programs. Attempts by the public plans to constrain payments to providers in the early 1980s had several important effects. First, the shift from a cost basis of hospital remuneration to a model based on set payments for episodes of care replaced incentives that encouraged the passive pass-through of costs with those favouring active management of internal revenue centres. Second, public constraint exacerbated the practice of price discrimination in the mixed market as providers raised charges to private payers in response. This rate-shifting, in turn, roused private payers from their passivity, and the notion of “managing care” to reduce costs gained increasing currency. Essentially, various entrepreneurs among insurers came to believe in a market for managed care, and raced to establish market share and concomitant market power vis-à-vis providers and insurers. For a time they were able to succeed, not by managing care but by exercising their market power to demand price discounts from providers. In response providers began to join forces in local markets to countervail the power of insurers. The drive for size on both sides of the market led insurers and providers to accept prices – premiums and remuneration, respectively – that were below their costs and to create complex and managerially unwieldy organizations. Many of these enterprises failed, some spectacularly, or exited the market. In the process the market was transformed: As White describes it: “The amount of organizational innovation was immense. Much of this innovation was enabled by the free flow of capital. Investors, however, turned out to have little understanding of what would work in the market, much less for decent health care. Instead, capital followed stories that were self-fulfilling only for a while, as in the cases of Physician Practice Management Plans and insurance companies that pursued market share above all” (2007, 431). This innovation was driven by entrepreneurial behaviour from bases in private capital and to a lesser extent by professional expertise. By and large it did not involve “institutional entrepreneurialism” in the sense used here: the entrepreneurs did not seek to cross sectoral ­boundaries to build public resources in the form of mandates or funding into the new organizations they created. (Some providers nonetheless

Institutional Entrepreneurs and Market-Oriented Reform  477

did seek legislative action to defend themselves against these developments, generating what has been termed the “managed care backlash” of the late 1990s and early 2000s; see Brown and Eagan [2004].) An early example of institutional entrepreneurialism: Health Maintenance Organizations There is one limited but important qualification to be made to this generalization. The initial model for “managed care,” the Health Maintenance Organization (HMO), was the brainchild of Paul Ellwood, an institutional entrepreneur in the 1960s and 1970s, whose entrepreneurial skill has been much noted (Kingdon 1995; Oliver, Lee, and Lipton 2004; Starr 1982). Oliver’s insightful and comprehensive analysis in particular illustrates Ellwood’s ability to build on and “creative[ly] repackag[e]” models of prepaid group practice such as Kaiser Permanente and to promote this model under the HMO banner (Oliver, Lee, and Lipton 2004, 704). The culmination of his success was the passage of the Health Maintenance Organizations Act of 1973, which created a new foothold for entrepreneurialism by introducing a mandate for employers (with twenty-five or more employees) who provided health insurance benefits to offer at least one HMO plan to their employees, where available. Federal funding for HMOs was also made available. The Act set out the criteria necessary for an organization to qualify as an HMO for these purposes, and required employers to make equal contributions to the HMO and non-HMO options. This legislation ignited the process leading to the explosion of managed care plans, of both HMO and non-HMO varieties. But that process in turned triggered political activity leading to the progressive watering down of the legislation – first a dramatic loosening of the eligibility criteria, then the creation of broad latitude around the interpretation of the “equal contribution” required by employers, and finally, in 1995, the repeal of the requirement for employers to offer an HMO option. Essentially this process amounted to a crowding-out of the institutionally hybrid HMO type, as created by the initial federal mandate and criteria, by the plethora of managed care and other insurance options created by the private sector. These various enterprises sought access to public resources, but did so on a classic model simply by seeking to enter the “market” for payment under the federal Medicare program – not by seeking public mandates or otherwise adopting hybrid public/private forms. For a time, true HMOs were also granted preferential access to Medicare contracts

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on a capitation (prepaid fixed amount per enrollee) basis, but on terms sufficiently unattractive that by 1979 only one plan had entered into a contract. In 1982 the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) provided more favourable terms for HMO contracts, comparable to those for private sector enrollees. The proliferating non–HMOtype managed care organizations were precluded from these contracts, with the result that enrolment in managed care options under Medicare was much lower than was the case in the private sector (Oberlander 1997). As consistent with the progressive erosion of the status of HMOs in public programs, however, the range of managed care organizations with which Medicare contracted was progressively broadened by the Balanced Budget Act of 1997 and the Medicare Modernization Act of 2003. Medicare payments to managed care organizations were enhanced, amounting on average to an estimated 110 per cent of rates paid to traditional fee-for-service providers by 2011. (Robert Wood Johnson Foundation 2011, 3). The Affordable Care Act of 2010 authorized the freezing and then progressive lowering of these rates to match fee-for-service levels. The precursors of the Affordable Care Act: Purchasing cooperatives and health insurance exchanges With the exception of the adoption of the HMO legislation in the 1970s, then, the proliferating organizational diversity of insurers and providers in the United States was a matter of classic commercial entrepreneurialism, not the institutional entrepreneurialism of public/private hybrids. Nonetheless a leading example of just such a hybrid form lay at the heart of both the failed Clinton reform initiative of 1993 and the Affordable Care Act of 2010: the health insurance purchasing exchange, or cooperative. A common pattern emerged in the various processes in which this model was proposed and developed – namely, the building of a consensus of support for a broadly defined model within a group of business leaders under the aegis of a think tank or foundation, followed by a fleshing out of the multiple design features by champions within the government leadership. The idea of the purchasing cooperative bubbled to the top of the policy soup in the context of the broader enthusiasm for “managed competition” that characterized the late 1980s and early 1990s. The cooperative would bring employers, especially small ones, together to enhance their market power vis-à-vis insurers, and ensure that competition took place under a common set of rules. Although there were

Institutional Entrepreneurs and Market-Oriented Reform  479

various pooled purchasing arrangements among groups of employers in the private sector, few if any gave small employers the ability to offer their employees a choice among competing insurance options (Wicks, Hall, and Meyer 2000, 9).13 Some measure of public authority was apparently necessary, at least initially, in order to meet these objectives. None of the private initiatives sought to form the nucleus of such a broader undertaking. Nonetheless the early 1990s marked the beginning of a series of proposals, generated from the private sector, to develop new hybrid purchasing entities bridging the public and private sectors. Principal among these proposals was the concept of “regional health alliances” that formed the centrepiece of Clinton’s 1993 Health Security Act. The legislation would have required states to establish such bodies as purchasing cooperatives that included all employers except those with more than five thousand employees. The legislation would have allowed states to choose among various corporate forms for such alliances, including executive agencies, quasi-independent agencies, and not-for-profit private corporations. The Clinton initiative failed, but the concept of the purchasing alliance or cooperative did not die with it. Various states established versions of such cooperatives both before and after the federal reform episode. Unlike the Clinton proposal, however, these cooperatives were established on a voluntary basis, and most struggled to overcome problems of adverse selection, to establish the enrolment levels and market shares necessary to negotiate effectively with insurers, to offer a choice of plans to enrollees, and to realize economies of scale (Wicks 2002; Wicks, Hall, and Meyer 2000). The largest of these was established in 1993 as the Health Insurance Plan of California, which was privatized in 1996 and ultimately closed in 2006. One lesson to be drawn from the failure of these initiatives is that achieving the public objectives of comprehensiveness, choice, and affordability requires greater public resources to be brought to the mix than the originators of the various cooperatives were able to mobilize. Specifically it requires a degree of compulsion in the form of a public mandate. The Clinton proposal’s inclusion of an employer mandate led to the loss of key business support and arguably doomed the initiative. But in the absence of such a requirement, the various state-level initiatives could not achieve critical mass. In the mid-2000s these issues came to the fore in Massachusetts, where a Republican governor facing a liberal Democratic legislature sought a bipartisan course to health care reform. Again the notion of purchasing

480  Remaking Policy

cooperatives was promoted by private sector groups, but in this case the proponents were more open to the importance of individual and/ or employer mandates as necessary for the cooperatives to work. The Blue Cross Blue Shield Foundation of Massachusetts and the Urban Institute collaborated to produce in 2005 a “Roadmap to Coverage” that included a “purchasing pool” coupled with an individual mandate, with or without an employer mandate as well. In 2006 Massachusetts launched a major health reform initiative based on a state-wide purchasing cooperative for small employers and individuals, buttressed by a mandate that all individuals carry health insurance, public subsidies for those below a certain income level, and an expansion of the state’s Medicaid program. The Massachusetts Health Connector was established as a “quasi-public agency, outside the supervision or control of the Executive branch,” but “as a practical matter the Connector works very closely with the Executive branch to meet the goals established under the 2006 reform law” (Corlette et al. 2011, 5). The eleven-member board of directors included four government officials, among them the chair. Initially established with startup funding of US$25 million from the state, it had a budget of approximately US$30 million and forty-six staff in 2011, entirely funded from surcharges on health plan premiums. A counterpoint to the Massachusetts model was developed in Utah. Again the impetus came from a community-based organization with strong links to business interests. In 2006 the United Way of Salt Lake City launched a process of consultation with business and community leaders that generated consensus around an “exchange” model, broadly defined. In a political context in which Republicans held the governorship and both houses of the legislature with supermajorities, the governor and the legislative leadership built upon this consensus to develop a “a conservative, market-driven framework” (Summerhays 2008, 2; see also Lord 2011). Although the Utah Health exchange was launched as a public agency within a branch of the Governor’s Office, not a “quasi-public” body as in Massachusetts, in all other respects it brought a lesser weight of public authority to bear. It involved neither mandated coverage nor public subsidies. Rather the Utah exchange was designed on a defined-contribution model in which employers would commit to a given contribution and their employees could then select among competing plans, bearing any cost above the employer’s contribution. The public agency itself essentially functioned as a clearinghouse open to all insurers – in contrast to the Massachusetts model that required the Connector to certify qualifying plans meeting established

Institutional Entrepreneurs and Market-Oriented Reform  481

requirements. Four or the five major insurance carriers in Utah agreed to participate in the exchange and, moreover, to establish a risk-pooling mechanism under the state commissioner of insurance (Silow-Carroll et al. 2011). Launched as a pilot project with an innovative web portal in 2009, the exchange struggled to attract and retain participants. In 2011 it was rolled out under somewhat strengthened rules, and by June 2012 it involved about three hundred employers with about sixty-five hundred covered lives. By that point the exchange’s impact in extending coverage to the previously uninsured would have to be considered marginal: there were more than three hundred thousand individuals without health insurance in Utah in 2009, prior to the establishment of the exchange, and insurance rates remained essentially unchanged (Lord 2011). Along the way, however, the Utah model became a rallying counterpoint for Republican opposition to the Massachusettsinspired model adopted by Democrats in the runup to the passage of the Affordable Care Act in 2010. The Affordable Care Act In the political circumstances that favoured a fast-paced but relatively small-scale “mosaic” strategy of reform, the Massachusetts model provided a compelling focus. Scaled up to the national level, it would leave essentially intact the key pillars of the existing system – employerbased insurance, Medicare, and Medicaid – which collectively covered more than 80 per cent of the American population. Rather, the focus of reform would be on an expansion of the Medicaid safety net and on reforming the small-group and individual markets. Its central pillar and most important policy innovation would be the health insurance exchange for small employers and individuals – a much smaller-scale approach to pooling than had been attempted in the Clinton reforms fifteen years earlier. The concept of the exchange allowed for a variety of institutional design features and complementary initiatives, and opened the door to a spate of proposals in the intense negotiations in which the administration and the Democratic congressional leadership engaged. This process unfolded in an atmosphere of high political uncertainty in a context in which the Democrats’ sixty-vote hold on the Senate could be lost at any time, and the prospect that they might reach some agreement with a subset of Republicans flickered on and off. The administration’s strategy of outlining broad principles and leaving the details to Congress created uncertainty in itself, as various parties attempted to

482  Remaking Policy

determine what the president ultimately would fight for and what he was prepared to negotiate. Finally the timeline of negotiations was uncertain, as deadlines for agreement passed without consequence. This atmosphere encouraged actors to develop a multiplicity of policy innovations. Some related to the design of the proposed exchange: would it be created at the national, multistate, or individual state level? what corporate form would it take? would a publicly owned insurer compete alongside private insurers through the exchange(s) – the so-called public option? Other proposals would encourage innovations in health care financing and delivery, such as “Accountable Care Organizations,” which would be paid under Medicare on a basis that would have them bear the risks of over- or underperforming against benchmarks. The mosaic strategy through which the Affordable Care Act was legislated aimed at “hard-wiring” a multiplicity of provisions into law on the date of enactment – in the sense that opponents would have to run a similar legislative gauntlet to repeal it – while accepting compromises that included delays in the effective dates of various provisions. The passage of the ACA thus created a heterogeneous platform for reform and an extended timeframe for implementation. Notwithstanding its multiple provisions, it provided considerable latitude around some of its central pillars. Many would require further elaboration in federal regulations. Two of the central pillars of the ACA – the establishment of health insurance exchanges and Medicaid expansion – required compliance by state governments. One central compromise reached in the development of the legislation was to include an explicit “waiver for state innovation,” allowing states, on application to and approval by the federal health secretary, to adopt approaches equivalent to the package of individual-mandate-plus-subsidies–plus-exchanges.14 Moreover, uncertainty as to the future direction of reform remained despite the legislative achievement of the ACA, as opposition continued in Congress, the courts, and among many state governments. Various states, most with Republican governors and/or Republicancontrolled legislatures, threatened not to comply with the requirements to establish exchanges, and expressed concerns about expanding their Medicaid funding, even though not doing so meant inviting federal action to establish the exchanges and the loss of federal Medicaid funding. The ACA established a potential mix of public and private resources that could be drawn upon to establish new institutional platforms. The individual mandate expanded the market for health insurance by creating a compulsory pool of demand. The exchanges would compete with

Institutional Entrepreneurs and Market-Oriented Reform  483

existing brokers – especially web-based brokers, who had been developing since the late 1990s – but they also had a unique public resource, the mandate to administer subsidies, known as Advance Premium Tax Credits, and cost-sharing reductions to applicants whose income level qualified them for such support. The framework also left open a number of design options, and a variety of models would be generated in a regulatory dance between decision-makers at the state and federal levels even more complex than that which defined the relations between insurers and regulators in the Netherlands. This dance played out in a highly politically charged and turbulent environment, in which Democrats at the state level acted quickly to be early movers, seeking, among other things, to continue the momentum of the fast-paced mosaic strategy into the implementation period.15 Effectively they aimed to reinforce the hard-wiring process by solidifying expectations that exchanges would form a key part of the landscape, notwithstanding continuing opposition from Republicans. By the time of the November 2012 congressional and state elections, twelve states16 – eleven of them under solid Democratic control – had enacted legislation to establish exchanges. (In the eleventh state, Nevada, a Democratic legislature passed the legislation and the Republican governor, though having stated his opposition as a candidate, did not veto it pending the outcome of the court challenge to which Nevada was a party.) In two more states Democratic or Independent governors issued executive orders to establish exchanges after legislation failed.17 At the other end of the partisan divide, Republican governors in five states informed the Department of Health and Human Services that they would not take up federal grants in support of the establishment of exchanges, and two Republican governors vetoed exchange legislation passed by Democratic legislatures. Between these two extremes were twenty-eight states in which legislation was pending or yet to be signed into law, executive orders to establish or plan for exchanges had been issued, legislation had failed to pass or had died upon the legislature’s adjournment, or the administration had struck advisory mechanisms or taken no significant action. No state had yet indicated its intention to seek an innovation waiver under the Act (Collins and Garber 2012; National Conference of State Legislatures 2012). The reaction at the state level, and the atmosphere of political conflict in which these state-level decisions were made, had important implications for the development of the exchanges. First, the federal government would play a much larger role than originally envisioned in

484  Remaking Policy

operating the exchanges, requiring that an unanticipated level of infrastructure that had to be rapidly constructed. Second, the tidy distinction between state-based exchanges and the default federally run model dissolved into a continuum of federal support for state activities. The extremes of the continuum were still defined by the pure state and pure federal models, but between these was a range of options for the sharing of functions between state and federal governments. The existence of this continuum also made for a very fluid environment in which states could, and did, transition from one model to another. As states wrestled with the economies of scale involved in setting up and maintaining a “complex web site and customer service operation from scratch” (Sanger-Katz 2015, A15), a number negotiated varying degrees of reliance on the federal government’s capacity. Most centrally, by relying on the federal IT capacity for enrolling consumers, states were freed to develop a variety of other aspects of their local exchanges, including not only the range of functions they performed but also their governance structures. Three broad categories of exchanges emerged, and some states moved within and between categories over time. Going into the third year of operation of the exchanges (2017), sixteen states plus the District of Columbia operated a state-based marketplace in which the state was responsible for performing all functions – five of these chose to use the federal IT platform while continuing to manage their own marketplace; twenty-eight states had a federally facilitated marketplace in which the federal government was responsible for all functions – in some of these states, plan management functions were performed by the state; and six states had a federal-state partnership with various forms of federal-state division of responsibility (Kaiser Family Foundation 2016b; Polsky et al. 2014). The diversity of governance arrangements defied ready classification. Of the sixteen state-based exchanges plus the District of Columbia exchange, twelve could be described roughly as independent or quasipublic agencies of various types, one as a not-for-profit corporation, and four as state agencies (Polsky et al. 2014). Great variety was also apparent in other design dimensions, such as the involvement of private sector and community actors – some states, for example, banned insurers from sitting on the board of the exchange, others required insurer representation. The exchanges took more or less active roles in the private insurance market – some would act as active purchasers; others would be open to all insurers who qualified under federal regulations.

Institutional Entrepreneurs and Market-Oriented Reform  485

This diversity of design at the state level continually fed back to the federal level, where the Department of Health and Human Services issued annual revisions of the “models” that would be approved under the ACA. It also generated numerous channels of information-sharing across states, through established organizations such as the National Association of Insurance Commissioners, the National Academy of State Health Policy, and the National Conference of State Legislatures, through think tanks such as the Commonwealth Fund, the Kaiser Fam­ ily Foundation, and the Robert Wood Johnson Foundation, and also on a bilateral basis as states with well-functioning models and technology offered consulting services to states experiencing great difficulty. Connecticut, for example, provided both software and consulting services to Maryland on a pro bono basis – thus reaping considerable reputational reward for the Connecticut administrators and IT professionals involved as well as for the governor and lieutenant-governor, and also positioning the state to market further applications for financial gain (Johnson 2014). The design of risk-adjustment mechanisms also offered potential scope for state-level innovation, although early experience suggested that such experimentation would be limited. The ACA required all insurers offering plans qualifying as fulfilling the mandatory insurance requirement in the individual and small-group market, whether inside or outside the exchanges, to participate in a risk-adjustment scheme based on an actuarial assessment of their enrolled populations, considering age, sex, and health status as measured by diagnoses and other claims data. Insurers with low-risk pools then would make payments to insurers with high-risk pools. The federal government would regulate and administer these transfers unless a state government chose to do so as part of operating its own exchange. States exercising this option could either use the federal risk-adjustment methodology or develop their own, subject to federal approval.18 As of 2015 all state-operated exchanges but one (Massachusetts) had defaulted to federal regulation of risk adjustment. Private exchanges The public exchanges were not the only sites where institutional entrepreneurs emerged; the private sector offered especially fertile ground. Indeed Aneesh Chopra, former chief technology officer in the Obama administration, offered the prescient view that “the real story [behind healthcare.gov], likely to play out over the coming months, will be its

486  Remaking Policy

rise as a new platform for innovation – one that will lead to the creation of new private sector services” (Chopra 2013). Some of these private sector services were engaged through standard grant-funding arrangements. Principal among these were the “navigator” grants awarded to various private sector organizations to provide consumer outreach and assistance services for federal and state-based exchanges. Unlike private web-based brokers, navigator organizations could not enrol consumers in plans, nor could they charge a commission to insurers (Kirchhoff 2014). Almost all of the organizations receiving navigator grants were not-for-profits such as health centres, community action groups, Native American councils, and advocacy organizations, although some proprietary consulting firms were also included (Centers for Medicare and Medicaid Services n.d.). Navigator status allowed such organizations to offer additional benefits to their members, while the use of navigators enabled exchanges to reach certain target groups that they otherwise would have struggled to enrol. The potential for such mutual gains suggested opportunities for institutional entrepreneurialism, but at least in the first two years of operation (2013 and 2014) these arrangements operated within traditional models of delegation and funding, and any empirical evidence of the emergence of new hybrid entities was slow to emerge. The commercial sector, however, was the site of more potentially disruptive change. In a very fluid environment, various types of web-based entities proliferated. Styled as “web-based brokers,” aimed primarily at the individual market, and “private exchanges,” aimed primarily at the employer market,19 and operating under a variety of auspices, including ownership by retailers, other third parties, and insurers themselves (PWC Health Research Institute 2012, 12–13), such entities had been developing since the late 1990s. They offered consumers the ability “to shop from among a wide-variety of major medical health plans and supplemental insurance products … through the use of creative, interactive technology,” and provided “end-to-end transactional services (e.g., collection of enrollment information on an electronic form and transmission of enrollment information to the insurance carrier electronically)” (Cohen and Condeluci 2012, 1–2). These private entities effectively competed with the new state and federal exchanges for unsubsidized applicants. In 2012, moreover, the Department of Health and Human Services issued policy guidance under which private web-based brokers could access a new market segment – subsidized

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applicants – by entering into agreements with federal or state-based exchanges to perform various enrolment-related functions. There were significant potential gains to be had in partnerships between the federal and state-based exchanges and private web-based entities. Each could benefit from access to the other’s clientele, and the public exchanges would benefit from access to the private brokers’ clientele to diversify their risk pools. The danger of unbalanced risk pools arose from certain provisions of the Affordable Care Act. All insurers were required to offer the basic mandatory package of benefits, to cover at least 60 per cent of actuarial costs20 whether or not they offered plans through an exchange. (Insurers participating in the exchanges were also required to offer a range of plans covering higher levels of actuarial costs.) Each insurer was also required to maintain a single statewide risk pool for all its plans and thus to cross-subsidize among its own policy-holders. Under these circumstances insurers could choose to stay out of the exchanges and to market low-cost, high-deductible plans to a relatively healthy risk pool – potentially creaming off the better risks and triggering a “death spiral” of rising costs and premiums within the public exchanges. To guard against this risk, public exchanges had to be able to reach and market to relatively healthy demographic groups. Particularly with regard to these groups, but also more generally, the private entities offered established channels, marketing expertise, and infrastructure. Meanwhile the public exchanges, which held the key to the subsidy process, could offer a significant benefit to private entities. Being able to offer their customers access to that process would open up a substantial new market segment for private brokers: the formerly uninsured who could now afford insurance. The private entities could not themselves register consumers as eligible for subsidies, however, as doing so required access to the federal data hub linking the various datasets necessary to verify the identity and determine the income and other relevant characteristics of the applicant. The interface necessary to allow private entities access to the federal data hub while satisfying privacy protection requirements was slow to be developed, necessitating a “double redirect” process whereby the applicant was sent to the federal site for the subsidy phase of the enrolment process and then redirected back to the private broker. The process of resolving these problems was slowed by the need to address a range of other privacy-related technological concerns regarding the federal data hub (United States 2014), but the

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Centers for Medicare and Medicaid Services continued to hold out the prospect. Finally, in May 2017, the agency announced a new “proxy direct enrollment pathway” to be available for certain enrolments beginning in 2018, through which consumers would be able to complete the full process, including application for subsidy, through web -brokers under agreements with federally facilitated exchanges or state-based exchanges, provided that the web brokers complied with a set of regulatory conditions (Jost 2017a). Nonetheless, even while the cumbersome redirect procedure was still in place, the mutual benefits to be had from public/private partnerships had led to the signing of eightyfive agreements between federally facilitated exchanges and private web-based entities by March 2016 (Centers for Medicare and Medicaid Services 2016b). As web brokers and the insurers with whom they dealt sought opportunities for profit in this publicly bounded context, private and public objectives collided. In particular the commission-based model of remuneration for web brokers meant that the objectives of insurers were imported into the functioning of the exchange. Insurers could, and did, vary commissions to encourage brokers to steer consumers to high-deductible plans and/or supplemental coverage. Several large insurers also eliminated commissions for enrolling consumers outside the annual enrolment period (Hancock 2016).21 Meanwhile, other factors – some linked to the ACA, others driven by private market developments – were spurring the growth of private exchanges. The shift to defined-contribution plans that marked the realm of employee benefits more generally was reflected in the health insurance arena as employers essentially provided their employees with vouchers and contracted with private exchanges to offer a range of options for purchase. Furthermore the ACA’s “pay or play” mandate on employers with more than fifty employees – requiring them to pay an assessment for any of their workers who received subsidized private insurance through an exchange – expanded the areas of potential competition between public and private exchanges. Once private exchanges were able to administer subsidies, employers might well contract with them to cover their entire workforce, subsidized and non-subsidized. In turn public exchanges had an incentive to attract non-subsidized clients through various customer-service and related strategies. These developments also had implications for the politics of the arena, as an important new set of actors – health insurance exchanges – proved more heterogeneous than had been imagined. In December

Institutional Entrepreneurs and Market-Oriented Reform  489

2014, for example, the four largest web-based brokers formed a trade association, initially to advocate for the removal of technological barriers to their access to the federal subsidy process, but also having as their broader objective “to collaborate with consumers, insurers, regulators, lawmakers and other industry groups to continually develop technologies and inform policy that provide Americans with the greatest access to health insurance products and services” (Association of Web-Based Health Insurance Brokers 2014). What seemed to be emerging was a model in which the federal apparatus for enrolling and subsidizing consumers of private health insurance became a significant public resource available to institutional entrepreneurs in both the private and public sectors to build into innovative brokerage entities. As David Blumenthal has mused: “Perhaps the only thing certain about private exchanges is that they demonstrate once again that the private sector is endlessly ingenious at turning new public programs into business opportunities” (2014). Further turbulence was added to both the market and the political arena by the Republican repeal crusade of 2017, culminating in the ending of tax enforcement of the individual mandate. But to the extent that competing exchanges of various stripes were to become the norm for the purchase of health insurance in the United States, the ACA would prove to have set in train a logic that, as driven forward by institutional entrepreneurs, had much more far-reaching implications than the initial focus on the uninsured would have suggested. Medicare innovation and beyond: Accountable care organizations Among the ACA’s many provisions were sections establishing pilot projects or demonstration programs aimed at improving the quality of care and the efficiency of delivery systems. Principal among these provisions was the creation, under the Centers for Medicare and Medicaid Services, of a Center for Medicare and Medicaid Innovation with a mandate to test “innovative payment and service delivery models to reduce program expenditures … while preserving or enhancing the quality of care” for beneficiaries of Medicare, Medicaid, or the Children’s Health Insurance Program. On its face, the CMS Innovation Center, as it came to be known, might be seen to have provided a site for institutional entrepreneurialism. In fact, however, it focused on changing incentives through new payment modalities without institutional change – that is, without shifting the public/private boundary or the respective

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roles and influence of payers and providers. The leading example of the innovations pursued by the Innovation Center was the concept of “accountable care organizations” (ACOs), to be deemed eligible for participation in a “shared savings program” under Medicare. The ACO concept was a policy innovation developed by Elliott Fisher, director of the Center for the Evaluative Clinical Sciences at Dartmouth Medical School. The policy outline for ACOs was set out in the ACA itself: ACOs were to be voluntary legal frameworks for providers receiving Medicare payments, under which participating providers would be accountable for specified quality outcomes and would be eligible to share in any “savings” they achieved below a benchmark aggregate cost for the patient population they served. As was the case for shared-risk arrangements in other nations, such as England’s fundholders and the Netherlands’ insurers, the initial rules issued for ACOs provided for a buffer against the financial risk of exceeding the benchmark, at least for an initial period. The launch of the project, however, also included striking contracts with thirty-two “pioneer” ACOs that accepted a broader band of risks and that were to serve as demonstration models. Experience with the pioneer cohort was mixed – a result to be expected in implementing a risk-based model. Thirteen of the thirtytwo participating organizations exited in the first two years, some of them switching to the standard “shared-savings program” stream with a greater risk buffer. Fewer than half generated shared savings in the first two years of the program. On average, however, quality of care improved on twenty-eight of thirty-three tracked measures (Centers for Medicare and Medicaid Services 2014, 13–15). Overall about threequarters of early-generation ACOs (including pioneers and others) continued in the shared-savings program as of January 2016 (Muhlestein and McClellan 2016). The birth of the ACO concept bears some comparison to that of the HMO concept in the 1970s, but there was an important difference in institutional terms. HMOs were initially reinforced by a legislative mandate requiring employers to include at least one HMO option if they offered health insurance to their employees. ACOs were accorded no additional mandate or status beyond a contractual relationship with the CMS. Like the HMO concept, however, ACOs were a mutable notion that admitted a plethora of organizational forms. A proliferation of entities bearing the ACO label – many with no formal relationship to the CMS program – soon ensued. A consulting firm tracking the growth and dispersion of ACOs reported the existence of 838 entities bearing

Institutional Entrepreneurs and Market-Oriented Reform  491

the ACO label as of January 2016, covering about 28 million people (about 9 per cent of the American population). Three-fifths of this coverage was under private commercial contracts, with the remainder under Medicare or Medicaid (Muhlestein and McClellan 2016). These developments might have some impact on the balance of influence among providers. For example, physicians’ groups surpassed hospital systems as the largest type of ACO base in 2013 (Muhlestein 2013) – potentially bearing out the intention of some of the original designers of the concept to use the countervailing power of physicians to reduce hospital expenditures. But although they are yet another example of the “endless ingenuity” of private sector actors in the United States, the spread of ACOs occurred through normal contracting mech­ anisms, and did not constitute an institutional shift in the broader balance of influence, the mix of instruments, or the organizing principles of US health care.

Entrepreneurialism without market-oriented reform: Ad hoc instances in Canada In Canada the prevailing policy framework was inimical to institutional entrepreneurialism, and no episode of market-oriented reform occurred to disturb the status quo. At one level this observation might appear surprising. After all, the single-payer system by design left the ownership of hospitals and medical practices in private hands, even while funding those areas almost exclusively from general taxation. Moreover private finance accounted for 25 to 30 per cent of total health expenditure – one of the highest levels in the OECD – and covered services such as prescription drugs and home care that were closely bound to physician and hospital services and that themselves were subsidized publicly to various degrees. In such circumstances one might have expected considerable institutional experimentation with innovative combinations of public and private resources. The design of Canada’s single-payer system limited the potential for innovations spanning public and private resource bases, however, in two fundamental ways. First, the system drew a sharp boundary around its publicly financed core, physician and hospital services, and every province erected high barriers of various types to private finance as a source of payment for such services (Boychuk 2008; Flood and Archibald 2001). Second, within those two sectors the bilateral monopoly between governments and medical associations provided few

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footholds for individual or small groups of entrepreneurs. To an even greater degree than in the United Kingdom, the nature of the founding bargain between the profession and the state in Canada preserved existing modes of professional practice, leaving the state with access only to blunt measures of supply and budget control. Essentially any new institutional models involving physicians had to be centrally negotiated. In Britain it took the major disruption of the internal market reforms – introduced with essentially no consultation with the profession – to shake loose the resources that might be recombined in new institutional forms. And it took a policy design creating new public mandates in both the GP and hospital sectors – fundholding and trusts, respectively – to provide the platforms on which entrepreneurs could work these recombinations. The Canadian arena yielded no such disruption and no such new framework. Indeed incremental policy change in Canada, if anything, removed some discretion from the level of individual physicians’ practices and hospitals by developing centrally negotiated models of primary care and regional tiers for the coordination of hospital and community services. Public and private purchase: The demand side The Canadian single-payer system’s most binding constraints on blending public and private finance operated on the demand side. Phy­ sicians’ income from private sources consistently amounted to less than 2 per cent of total expenditure on their services. In the case of hospitals, private sources of expenditure on health services – largely derived from donations, investments, and some private borrowing – amounted to less than 10 per cent of the total. No market for private insurance for physician and hospital services emerged in any province, including those in which it was not explicitly banned, although private insurance was widespread in other health care sectors. Private insurance, covering areas such as prescription drugs, vision, and dental care accounted for about 13 per cent of total health care expenditure in 2010 (Marchildon 2013, 68). Pressures for change in this system had little effect. A very few physicians who wished to build practices combining public and private sources of payment sought to challenge the restrictions against doing so by launching court challenges. One such challenge in Quebec in 2005 led to modest changes in policy of little practical effect; at the time of writing (July 2017), no other challenge had succeeded. Alberta on two occasions considered legislation that would open the door to

Institutional Entrepreneurs and Market-Oriented Reform  493

combining public and private payment within single practices or clinics, but in both cases the government either withdrew or modified the proposals in the face of protest from the public and within the governing party itself. In this context models blending public and private finance for physician and hospital services were rare and marginal. Most involved “bundling” publicly and privately financed services in the same practice or facility. For example, clinics might offer private cosmetic laser eye surgery as well as publicly financed cataract surgery. A few “boutique” practices combined auxiliary services such as screening or counselling in “executive” packages, usually for a flat fee, in addition to providing a full suite of publicly covered primary care services. So as not to contravene the Canada Health Act and relevant provincial legislation, physicians had to ensure that patients were not charged privately for services covered by the public plan, and that private payments for some services did not become a condition of access to associated public services.22 Despite their very small financial footprint in the context of the overall system, some of these clinics became flashpoints of political dispute (Mehra 2008). On the supply side the Canada Health Act is silent on the question of the ownership of physician practices and hospitals, and thus established no constraint on the private capitalization of such entities, as opposed to private payment for their services. Investor-owned chains of laboratories and imaging facilities providing various diagnostic tests under contract with provincial governments are common in some provinces. Specialist clinics, as noted, entered into contracts with provincial governments or regional authorities to provide services such as cataract surgery or joint replacement on a publicly funded basis, and many of these clinics attracted the private capital necessary for the acquisition of facilities and equipment. As for hospitals themselves, legislation in all provinces essentially requires them to be operated on a not-for-profit basis to be eligible for funding under the public physician and hospital insurance plan. The few exceptions include private specialty hospitals grandfathered upon the introduction of government insurance, and specialty clinics approved in some provinces to receive public funding under contract with regional or central government authorities. In law, for-profit clinics and hospitals could operate on a purely private basis, but patients had to pay out-of-pocket for any physician and hospital charges for services covered under a public plan, given the constraints on private

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insurance for such services.23 This means there was essentially no parallel private sector for hospitals, and only a few specialty clinics. Public hospitals are constrained from acquiring private capital. In all but two provinces, hospitals may retain realized surpluses, subject to various constraints on the use of such funds (McKillop, Pink, and Johnson 2001, 63–4), but they may not acquire or dispose of assets without ministerial approval. They are effectively barred from accessing equity markets, and most provinces also restrict hospitals’ access to debt financing (Klein et al. 2013, 21). They may generate private revenue from non–patient-care sources, such as upgraded accommodation, parking fees, and concessions. In the 2000s three teaching hospitals, two in Toronto and one in Montreal, were permitted to issue long-term bonds to finance capital projects, but these experiments were not more broadly diffused. Provincial governments also employed public/private partnerships on a “design-build-finance-maintain” model in the hospital sector in the 2000s (23). As in Britain, some hospitals in favourable locations entered into revenue-generating real estate arrangements with commercial entities. Services ancillary to physician and hospital services but provided outside hospital by non-physician personnel fell into a somewhat grey area within the Canadian policy framework. A principal example is ambulance and mobile emergency services. There is no formal bar to private finance or for-profit ownership of such services under the Canada Health Act or provincial legislation, but because of their intimate connection to the core of the system, experimentation with hybrid models of financing carries considerable political risk. A policy disaster followed an attempt in Ontario to consolidate air ambulance services in a quasi-public entity when the physician-entrepreneur sought to use the new organization as a platform from which to launch other ventures involving private capital, and established a convoluted corporate structure involving for-profit and not-for-profit components allegedly designed to siphon public funds. In a more successful case, a physician-entrepreneur used a private, not-for-profit health insurer (Medavie Blue Cross) as the corporate vehicle to structure a public/­ private arrangement to operate public emergency medical services in the Atlantic provinces, later expanded to others. Another positive case of combining a public mandate with both professional expertise and private finance was that of the Ontario Telemedicine Network. Founded by an emergency-room physician concerned with serving remote areas, the network was incorporated as a private, not-for-profit entity largely

Institutional Entrepreneurs and Market-Oriented Reform  495

funded by the provincial government and reliant on the IT backbone provided by a government agency, to provide videoconferencing and other applications to support remote consultations, as well as training, support, and consulting services. The network eventually included all hospitals in the province, as well as other clients both within and outside Ontario (the latter accounting for about 6 per cent of revenue). Blending provider resources and public mandates: Hospitals and physicians Within the constraints on access to private capital described above, Canadian hospitals historically had a range of financial discretion not available to their British counterparts until the establishment of the NHS Trust and Foundation Trust models in the 1990s and 2000s. Despite their limited access to private capital, hospitals as community-based, not-for-profit institutions had another important resource base for potential entrepreneurship: the community linkages of their locally based boards. Policy in Canada, however, moved incrementally in the opposite direction from that pursued in England by transferring authority from individual hospitals to regional agencies. As discussed in Chapter 9, these regionalization policies were marked by continuous cycling through various geographical and governance configurations. Like the hospital boards they replaced, the regional bodies were notfor-profit entities with public mandates. Unlike the hospitals, however, the new regional structures were artificial creations of the provincial governments, based in most cases on the pre-existing catchment areas of the hospitals under their purview. They thus had few resources independent of the centre. By drawing hospitals into artificial configurations without natural local political and social bases and replacing their membership-based boards with government appointees,24 the new structures removed the community resource bases that might have been available to support new mandates (Lewis and Kouri 2004, 23). The global budgets that constituted the norm for hospital funding, moreover, offered few opportunities to generate surpluses by altering the mix of services provided. Activity-based models of hospital funding remain marginal, albeit of increasing interest to provincial funders (Sutherland et al. 2013). Community agencies and long-term care facilities typically retained their own corporate structures and ownership within the new regional arrangements, and entered into contractual relationships with the regional body (Lewis and Kouri 2004, 20). One might therefore have

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expected to see, on the part of regional bodies or community agencies or both, some version of the entrepreneurial activity that characterized the post-acute and community care sectors in England. But the sorts of innovative contracting for integrated care described by Addicott in the English case, or other integrative governance arrangements, did not emerge in Canada. Indeed in some cases the creation of a regional tier, without responsibility for physician services, appears to have added to the fragmentation of loci of responsibility (Sutherland and Crump 2011, 9). In two provinces, Ontario and Quebec, individual hospital boards continued to exist below the regional tier. In some cases, especially in urban areas and in teaching hospitals, executives used innovative financing arrangements and real estate strategies to co-locate related activities, such as research institutes and primary care practices, within their precincts – a strategy also pursued by some large urban regional authorities elsewhere in the country. But the ability to develop institutional linkages among these activities, beyond those afforded by university affiliation in the case of teaching hospitals, continued to be hobbled by the budgetary segregation of primary, secondary, and continuing care. Some leading hospital executives chafed against these constraints – in particular, the lack of access to the physician services budget. But as the product of the central political accommodation of the health care arena, those constraints proved durable. In 2012 a comprehensive Ontario government commission reviewing the potential for reform of public services heard arguments that large hospitals, rather than regional authorities, should become the vehicles for “integrating services and institutions across the full continuum of care for geographic area,” including all physician services (Ontario 2012, 176–8). While recognizing that “the advantage of the large hospitals is that this is where the managerial and organizational expertise now resides,” the commission also noted the danger that such expertise could be focused too narrowly on acute care and that the catchment areas of some hospitals could be too small to capture economies of scale. The commission also frankly observed that “there is also a history of trepidation among other stakeholders towards large hospitals and their capacity to dominate the system” (177). In the end, while noting that the large hospital locus “could be made to work,” the commission opted for strengthening and expanding the mandates of Ontario’s existing regional planning and resource allocation bodies, the Local Health Integration Networks (178).

Institutional Entrepreneurs and Market-Oriented Reform  497

As for physicians, opportunities to combine the human capital they had invested in their own proprietary practices with public resources of various kinds were limited by the constraints of the profession-state accommodation. A plethora of organizational models for the delivery of primary care, varying province by province, developed as the result of a nationwide emphasis on primary care reform in the 2000s. But these were initiatives of the respective provincial governments, and in each case the model had to be negotiated with provincial medical associations (Levesque et al. 2012, 32). The principal institutional innovations were modest: the creation of collective mechanisms linking primary care physicians, and to varying degrees other health care practitioners, at both regional and practice levels to coordinate and enhance the provision of primary care services. In several provinces the Canadian College of Family Physicians played a catalytic role through its provincial chapters. For the medical associations the sine qua non in these negotiations was the protection of the ability of individual physicians to choose their mode of practice and the preservation of private, fee-for-service practice as an option. All the resulting new models were voluntary and, with few exceptions, physician-controlled. All involved payment incentives, and all were introduced and taken up gradually, although the process was accelerated in Ontario, where incentives were particularly generous. Reforms advanced furthest in Ontario, Quebec, Alberta, and, to a lesser extent, British Columbia (Hutchison et al. 2011; Levesque et al. 2012; Sweetman and Buckley 2014). Together Alberta’s Primary Care Networks, British Columbia’s Divisions of Family Medicine, Ontario’s Family Health Teams, and Quebec’s Family Medical Groups expanded modestly the mandate of family physicians by creating intermediate coordinating structures with relatively small budgets25 between the practice level and the provincial government. In theory these bodies could provide platforms for institutional entrepreneurialism analogous to the role played by the fundholding option in the United Kingdom, but as of 2017 no evidence of such an impact had emerged. Institutional innovation in the world of specialized medicine was even more limited than for family practice. Specialists remained independent practitioners affiliated with, but not employed by, hospitals. Fee-forservice remained the dominant mode of remuneration, although some groups of specialists adopted alternative modes to varying degrees. In some provinces these alternative arrangements occurred at the initiative of groups of specialists themselves. In all cases, however, the arrangements were incorporated in the negotiation process between provincial

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governments and medical associations, and were addressed to specific circumstances in which fee-for-service remuneration presented problems for physicians: hospital-based academic specialists who combined teaching, research, and clinical functions; emergency-room physicians for whom volumes were unpredictable; and hospital-based specialties such as anaesthesiology and physicians in remote hospitals. They typically involved single-specialty groups, but could embrace all specialists in a given hospital. The key point is that these arrangements did not involve institutional innovation; they were administered by selfgoverning groups of specialists and involved no other change in the mandate of those groups or in the employment status of their members (Blomqvist and Busby 2013). A rare example of entrepreneurialism combining professional and public resources occurred in Ontario. There, a group of specialists developed an institutional response to the perennial problem of waiting times for care – in this case, cardiac surgery – and established a Cardiac Care Network (CCN) in 1995 as an umbrella organization linking all hospitals in the province that provide cardiac procedures – initially twelve, later eighteen (Pagiamtzis 2010). The CCN maintains a database of patients, rated by urgency, to facilitate referrals to and among participating hospitals. It receives provincial funding for coordinators in each hospital and to maintain a small administrative staff, but relies heavily upon the volunteer activity of cardiac specialists, researchers, and administrators. The network also provides strategic planning advice to the Ministry of Health and Long-Term Care and to participating hospitals. It is not a funding or commissioning agency, and in 2005 it was incorporated as a not-for-profit entity. Although Ontario’s CCN is viewed as a model in other Canadian jurisdictions (Monaghan et al. 2001, 36; Noseworthy 2012, 24) and internationally (Martin and Singer 2003), the particular circumstances of its creation suggest that its broader applicability might be limited. It was initiated within a well-defined community of specialists in a dozen hospitals as a targeted response to a perceived crisis. At the time the field was heavily concentrated on one high-volume, high-cost procedure – coronary artery bypass graft surgery – which accounted for more than 75 per cent of cardiac surgeries (Monaghan et al. 2001, 37). Other, more diverse clinical areas would struggle to mimic the model; and indeed it has not been replicated elsewhere in Canada, although it has influenced the development of other clinical networks. For example, all but two provinces have developed regionalized strategies for cancer care, and

Institutional Entrepreneurs and Market-Oriented Reform  499

in 2011 the Alberta government established a set of Strategic Clinical Networks (SCNs) – at first six, later twelve – in areas including cancer, cardiovascular health, and orthopaedics (Noseworthy 2012). The SCNs, largely made up of clinical specialists, are charged with developing clinical guidelines and other recommendations for health care service delivery improvements. None of these developments, however, represents an institutional innovation; unlike the CCN, which created a new institutional space within which independent specialist physicians are empowered and provided with state support to coordinate the allocation and deployment of resources across hospitals, the other provincial initiatives operate through more standard organizational formats such as government agencies and advisory bodies. None enables state or professional actors to do what they could not within their existing mandates and bases of power. Another high-profile instance of institutional entrepreneurialism by a specialist physician in Ontario – indeed, originating in the same large teaching hospital as the CCN – serves not as a model, but rather as a cautionary tale discouraging governments from further experimentation along such lines. The occasion was the need to address long waiting times for radiation oncology that had resulted in the “re-referral” of patients to nearby treatment centres in the United States as a stopgap measure. In 2001 a radiation oncologist resigned from his position as a member of the executive of the government cancer management agency, Cancer Care Ontario, to establish a for-profit entity, Canadian Radiation Oncology Services (CROS), that would use hospital-based equipment off-hours, contracting with radiation therapists and oncologists on terms outside the normal employment contracts and fee schedules of the public sector, on condition that staff would not be “poached” from their normal employment within the Ontario system. The initiative succeeded in ending the need to transport patients to the United States. The cost of treatment was lower than the US option, but higher than under the normal provisions of the provincial plan. The CROS arrangement nonetheless aroused great political controversy (McGowan 2003; Mehra 2008), although it was also lauded for its development of an innovative managerial model (Golden and Martin 2004). After two years the experiment was terminated by the Progressive Conservative provincial government under which it had been established. If the design of Canada’s single-payer system created a political and economic accommodation and budgetary framework that inhibited the emergence of new institutional forms, it nonetheless erected very few

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legal barriers to such developments. A 2014 report by the leading ex­ perts on hospital finance in Canada concluded that the emergence of new, vertically integrated arrangements analogous to some types of accountable care organizations in the United States was possible with little, if any, legislative change (Huynh et al. 2014). It would even be possible for a for-profit entity to function as an ACO as long as it did not own, but rather contracted with, not-for-profit entities such as hospitals in its network. Some statutory amendments would be required, however, for a for-profit ACO to be constituted on an ownership or membership model, or for a for-profit provider to be a member of a not-for-profit or charitable ACO. It is possible, therefore, that developments such as specialist clinical networks and primary care groups could provide platforms for institutional entrepreneurialism and begin to soften the ground for more comprehensive change in the Canadian health care system, but it nonetheless would take a major episode of policy change to reinterpret the terms of the profession-state accommodation to bring about change on a broader scale. In any event, private capital is likely to remain fairly peripheral to institutional entrepreneurialism in Canada, as in England. A comparison of experience in the two countries reveals a number of Catch-22 dilemmas in adapting systems built around a core profession-state accommodation to allow for competition from providers backed by private sector investors. On the one hand, the elaboration of central regulatory mechanisms establishing tight bounds for such competition – as in England and, to a lesser extent, in Quebec and Alberta – creates an environment that is unattractive to private investors outside certain niche areas. On the other hand, in the absence of such mechanisms, the ad hoc involvement of private sector investors could lead to maverick behaviour that called such initiatives into question and discouraged governments from pursuing them further, as in the Ontario air ambulance case. Public and Private Objectives In combining resources across the public and private sectors, institutional entrepreneurs somehow must reconcile the objective functions of the holders of those resources. As I argued in Chapter 2, the particular balance among public authority, private finance, and professional expertise matters because it means that decision-makers will be

Institutional Entrepreneurs and Market-Oriented Reform  501

accountable for different objectives. The tension between public and private objectives characterizes all of the instances of institutional entrepreneurialism reviewed here. The way in which those tensions have been reconciled depends largely upon the principal base from which the entrepreneurs emerged.

Risk As noted at the beginning of this chapter, entrepreneurship implies that actors have both the autonomy and the incentive to take risk. Entrepreneurs need sufficient freedom from established institutional constraints that they can pursue independent courses of action. They must also be able to expect to appropriate the gains of their activity, either for themselves or for their clients. In each of these respects, however, certain inherent characteristics of public policy environments, including health care, are ill-suited to entrepreneurial behaviour. The first of these characteristics relates to attitudes towards risk. Al­ most all public policy frameworks, and especially those in which public finance plays a large role, are heavily conditioned by political imperatives to promote (or be seen to promote) values of probity, stewardship, and equity. The high-risk/high-potential-profit model of the private sector fits ill with these norms (Edwards et al. 2002). The potential for failure is an inherent aspect of entrepreneurialism in the private sector: only through failures of less successful enterprises can resources be freed up for reinvestment in more successful enterprises. But as Peter Smith has provocatively commented, it takes a “brave state” to allow organizations delivering public services to fail.26 Market-oriented reforms are predicated in part on the assumption that if those who make decisions about the allocation of resources are required to bear the risk of the costs of those decisions, the resulting allocation will be more efficient than if the costs are spread across the tax base (see, for example, Cheng, Lianos, and Sokol 2014, 62–3). But if the costs of failure will also be borne by the clients of those decision-­ makers, questions of equity might arise. These questions are exacerbated in an arena such as health care, where the very public programs at issue were established in the first instance to socialize risk. Governments accordingly have a number of motivations to buffer decision-makers against risk under market-oriented reforms. Some are technical considerations: it might take time to develop the necessary regulatory infrastructure to underpin risk-bearing. Some are political

502  Remaking Policy

pressures: buffering might be necessary to dampen opposition from decision-makers accustomed to operating in an environment of socialized risk. It also might be necessary to protect clients against the possibility that requiring insurers or providers to bear new risks will cause them to fail, exit the market, or compromise the quality of their offerings, leading to a reduction in the quality and availability of necessary insurance or care in at least some localities or market segments. There are, in general, several ways to deal with such risks. One is to adopt redistributive policies at the macro-level to allow the disadvantaged to bear increased costs without interfering with market incentives at the micro-level (Landry and Levin 2007). Introducing a refundable tax credit, unrelated to consumption, to buffer the effect of a carbon tax is an example of such a strategy. Such macro-level fixes through income transfers are much harder to design, however, when the risks to clients are related to the potential removal of in-kind services such as health care. Other approaches relate to the micro-level: the newly created structure of incentives in the arena in question. Transitional risk-­buffering mechanisms might smooth the shift to the new regime, although withdrawing the buffer might prove politically difficult. Alternatively the framework could be designed to require the actors charged with the management and governance of an entity to bear the risk of failure without putting the entity itself at risk – for example, the managers and directors of a financially failing or poorly performing health care facility might be replaced by other incumbents. Finally, some ongoing risk-sharing between the state and the entrepreneur might be tolerated simply as the price of introducing some sharpening of incentives through market mechanisms. In health care, as in some other parts of the welfare state, governments have sought to encourage entrepreneurialism in areas where they are not willing to tolerate the social costs of failure. As governments have wrestled with this contradiction and policy-makers variously have sought to expand and to circumscribe the potential for risk-taking, the very conditions for entrepreneurialism have been continually in flux. We have observed risk-buffering mechanisms of various types in each case of market-oriented reform. Some were aimed at limiting the exposure of various entities to risk as a matter of ongoing design – as, for example, in the case of the risk ceilings established for GP fundholders and provider trusts under the internal market reforms in England. Fundholding GPs were allowed to retain surpluses, while financial risk for each practice was limited to £5,000 and borrowing by hospital and

Institutional Entrepreneurs and Market-Oriented Reform  503

community trusts was held to regulatory limits. The Labour Party’s Foundation Trust version of the trust model continued to impose regulated limits on borrowing, while allowing some greater flexibility. Foundation Trusts were not required to balance year-over-year, and were allowed to retain surpluses. Other mechanisms were transitional – as, for example, in the gradual increase over twenty years in the risk exposure of insurers in the Netherlands. Between 1993 and 2015, retrospective payments from the centre designed to buffer insurers were gradually reduced, raising the proportion of revenue for which insurers were at risk from 3 per cent to 100 per cent. The Dutch process began in a context in which both social insurers and regulators were entering a new world of risk, although the buffering period was arguably far longer than necessary to allow for the development of a risk-adjustment mechanism. In the United States, in contrast, reforms focused on established individual and small-group markets in which private insurers had long experience and in which regulators could benefit not only from experience in other jurisdictions, but also from the risk-adjustment formulas developed under the Part D Medicare program after 2003. Nonetheless the new segment of the market created by the Affordable Care Act was distinct both in its customer base – “a less educated, racially-­ diverse population that is more likely to cycle on and off government support” (PWC Health Research Institute 2012, 3) – and in the conditions of mandatory acceptance of enrolees and community-rating of premiums to which insurers were held. Accordingly, transitional riskbuffering mechanisms of reinsurance and “risk corridors” for insurers were necessary, but were designed to be in effect over three years, from 2014 through 2016 – a much shorter period than in the Dutch case. With respect to the health insurance exchanges established to regulate, facilitate, and subsidize access to health insurance, the risk was that they would fail to generate sufficient revenue to become self-­sustaining. Competition from private exchanges in the non-subsidized market heightened that risk. The Affordable Care Act authorized federal startup funding for the exchanges through to 1 January 2015, but after that buffer was exhausted numerous exchanges struggled to establish a path to self-sustainability (Sun and Chokshi 2015). In that context, deficits were tolerated de facto. Ad hoc support for deficit spending, in fact, has been a common fea­ ture of market-oriented reforms. In England, notwithstanding the generous funding increases that accompanied the Labour reforms from

504  Remaking Policy

2001 to 2009, the proportion of NHS organizations running deficits rose steadily between fiscal years 2001/02 and 2005/06, although this was in part an artefact of new constraints on transfers between capital and operating budgets that had masked operating deficits in the past (Curry et al. 2013, 8–9). To some extent, deficits of Primary Care Trusts, which were statutorily required to balance, were covered by cash transfers or loans between Primary Care Trusts in a given region. No similar arrangement was available for transfers between the financially independent Foundation Trusts, where deficits could lead to managerial sanctions but generally not to financial repercussions, while substantial surpluses retained by some Foundation Trusts caused the Audit Commission to express concern about fallow funds (Allen and Jones 2011, 26). The Coalition reforms of 2012 continued to impose a balanced-budget requirement on Clinical Commissioning Groups, the successors to the Primary Care Trusts, and only about 10 per cent of them operated in deficit on average, even under the much tighter funding constraints after 2009. The regime established by the Coalition government also lifted the limits on borrowing by Foundation Trusts except where specifically imposed by Monitor. Financial performance continued to vary considerably year-over-year and across all trusts, with more than half in 2014 and two-thirds in 2015 reporting deficits (Appleby, Thompson, and Jabbal 2015, 2016). These deficits were tolerated through ad hoc funding from the centre, although in 2015 the government signalled a likely shift to loans, rather than cash, as the mechanism of support. Throughout, central regulators wrestled with the development of a “failure regime” for trusts that would establish consistent rules of the game, rather than ad hoc interventions. A process of “special administration” involving a centrally appointed Trust Special Administrator (TSA) was prescribed in legislation in 2009, extended to Foundation Trusts by 2012 legislation, and revised again in 2014. As of 2014 it had been invoked on two occasions, and in each case the recommendations of the TSA became mired in political and legal wrangling. Apart from the formal “failure regime,” it was much more common for trusts in financial difficulty to receive ad hoc support on a variety of conditions. Such rescues have been justified on the grounds that the practice “has ensured that patients continue to receive essential services and that the NHS has not needed to carry significant excess capacity just in case a provider closes or downsizes” (Murray, Imison, and Jabbal 2014, 31).

Institutional Entrepreneurs and Market-Oriented Reform  505

From our perspective, such rescues might be seen to reduce the potential for differential rewards to entrepreneurialism and to dampen the incentives for entrepreneurs to invest time, effort, and other resources in institutional innovations. Differential reputational rewards, however, continued to exist. Executives of well-performing trusts could look forward to high regard and career advancement, and were also more likely to attract private capital and professional talent. Executives of poorly performing trusts ran the risk that regulators would judge their performance as inadequate and recommend their replacement by another management or governance team. More generally these observations underline a central point: because public mandates are a key resource upon which institutional entrepreneurs draw in creating new entities, the ultimate source of both risk and risk-buffering lies in the political arena. In addition to the measures just described, decision-makers might change the basic platform upon which entrepreneurial activity is carried out by modifying public mandates in ways that are more or less favourable to the incumbents in those entities. For example, they might alter the conditions attached to mandates, as in the case of the various models of federal-state amalgams approved for health insurance exchanges in the United States. They might replace the management of underperforming new entities, as in some NHS trusts in the United Kingdom. They might open the field to new entrants, as in the licensing of private health exchanges, again in the United States. They might extend significantly the timeframe for realizing the framework on which new entities are premised, as in the Netherlands when the merger of the social and private insurance sectors took twenty years instead of the originally projected five. Conversely, in the extreme, a new government might replace one regime of mandates with another – as when the new Labour government in the United Kingdom abolished fundholding in 1997 and established Primary Care Trusts advised by Professional Executive Councils – or might even threaten the entire framework upon which public mandates are based, as occurred in the United States as the Republicans struggled to fulfil their promise to repeal the Affordable Care Act. In short, institutional entrepreneurs confront risks of a different degree and kind than those commercial entrepreneurs face. In all our cases, emergent institutional entrepreneurs faced the political risk that the new public mandates on which they relied would be modified in response to changing political circumstances. The need to be attentive

506  Remaking Policy

to circumstances means that institutional entrepreneurialism is as much a political as an economic activity: entrepreneurs need not only to mobilize resources, but also to build coalitions of political support. Of course, commercial entrepreneurs in regulated industries also must pay attention to politics, but on a spectrum from purely political activity to purely economic activity, institutional entrepreneurs lie closer to the former pole than do their commercial counterparts.

Profit Allowing private actors to profit financially from public mandates and/or public investment attracts the criticism that it privatizes gains while socializing costs. Accordingly policy frameworks that offer platforms for entrepreneurs to deliver public services include regulations aimed not only at cushioning failure, but also at limiting profit. But such regulations can be counterproductive: they can render the arena unattractive to private investors outside certain niche areas; they can drive entrepreneurs to adopt convoluted strategies to preserve areas of profit; and they can fail to achieve the very public objectives of innovation that prompted their adoption in the first place. This contradictory dynamic has characterized some aspects of market-oriented reforms in the health care arena in each of the nations reviewed here. This dynamic varies considerably, however, according to the design of national systems and policy reforms. In particular it varies according to the location of the financial centre of gravity in the system: public or private. The expenditure of public funds establishes a more visible presence for the state, through the public budgeting and accounting process, than does the use of regulatory tools. Accordingly the more firmly the centre of gravity rests in the public fisc, the more public sector norms of probity and equity will inform the expectations shaping and constraining the behaviour of entrepreneurs. This defining feature determines whether entrepreneurs arise from within the public or the private sector, how they behave once they do, and how public authorities respond to their behaviour. Whatever their financial centre of gravity, however, market-oriented reforms created complex new incentive structures for institutional entrepreneurs. The various platforms for entrepreneurialism embedded in the reforms were intended by their designers to harness private resources and energies to public purposes. In so doing they imported the incentives of private actors into publicly mandated entities. As

Institutional Entrepreneurs and Market-Oriented Reform  507

entrepreneurs sought to pursue their private motives within public mandates, they generated both complexity and conflict. Complexity took the form of intricate corporate structures with more or less permeable boundaries between for-profit and not-for-profit components, as in the Netherlands insurance and hospital sectors and providers such as Circle Health in England. Conflict occurred over corporate practices, such as the “steering” of consumers towards particular plans by web brokers in US exchanges in response to differential commissions offered by insurers. In England the leadership of Clinical Commissioning Groups wrestled with the development of safeguards against conflicts of interest. Even where issues of profit did not arise, Clinical Commissioning Groups also had to deal with the tensions between their commissioning and their clinical roles, and GPs without a formal role in the groups remained largely disengaged. Reform Strategy and the Impact of Entrepreneurs In England the scale and pace of the big bang strategy for the enactment and implementation of internal market reforms of the 1990s left little opportunity for institutional entrepreneurs to shape the legislation or the initial implementation steps. But early adopters of the GP fundholding model had a demonstration effect that led to a much more expansive implementation of the model than initially had been anticipated. Yet more fundamentally the ultimate policy impact of GP fundholding was to open various streams of professional and political activity among GPs between reform episodes, culminating in the adoption of a universal model of purchasing by GP consortia by the Conservative/ Liberal Democrat Coalition with the enactment of the Health and Social Care Act of 2012. The fast-paced cobbling together of the Coalition’s mosaic reform again left little scope for entrepreneurs to influence the outcome before enactment, even given the unexpectedly protracted nature of the legislative process. Moreover the government’s decision to proceed with rapid-paced implementation of the reforms in “shadow” form prior to the enactment of the legislation meant there was little opportunity for entrepreneurial early adopters to shape the model on the ground. (Successive waves of fundholders had been rolled out over the five-year period from 1991 to 1996, but the rolling out of five waves of shadow “pathfinder” GP consortia occurred over a matter of seven months from December 2010 to July 2011.) Most entrepreneurial activity therefore occurred after the basic models were in place, within the

508  Remaking Policy

framework established by the Health and Social Care Act. Five Year Forward View, issued by NHS England in October 2014, both responded to and further encouraged the diversity of forms of purchasing and provision that was occurring in practice. In the Netherlands, in contrast, the extended timeframe of the reforms allowed ample scope for institutional entrepreneurs to shape their outcome while the legislative components were being put in place. Sickness funds, which had been at the heart of the Dutch social insurance system since the Second World War, had time to develop both the technological infrastructure and the entrepreneurial capacity to reshape the insurance industry through mergers, acquisitions, and corporate reorganizations. This restructuring created new hybrid organizations embracing for-profit and not-for-profit components, offering a variety of products in addition to publicly mandated social insurance and generally blurring the distinction between the public and private sectors. This activity occurred under the “shadow of the future” established by the adoption of the Dekker blueprint for universal mandatory insurance in the late 1980s. By further reinforcing the normality of public/private hybrids that the blueprint implied, entrepreneurs prepared the ground for the final legislative steps in the execution of the blueprint to be taken in 2005. In the United States the rapid pace of enactment of the Affordable Care Act gave no opportunity for institutional entrepreneurs to affect either the course or the design of the reform package before passage. But in the course of implementation, a more protracted pace allowed entrepreneurs to play a significant role in shaping the major institutional innovation of the reforms: state-based health insurance exchanges. In contrast to the Netherlands, the design of the US reform of the insurance market meant that the site of institutional entrepreneurialism was on the demand side, not the supply side. Different variations of not-for-profit and public models were developed in those states that chose to establish exchanges. Even in states where the federal government operated the exchange by default, considerable variety emerged as some states took on certain aspects of the operation of the exchange while leaving others to the federal government. Possibly the most significant development, however, was one not explicitly envisaged by the ACA: the role of private sector exchanges as competitors with public exchanges in the non-subsidized market, and the related emergence of hybrid forms as federal regulators opened up the possibility that private exchanges could be mandated to serve as portals of access

Institutional Entrepreneurs and Market-Oriented Reform  509

to federal subsidies as well. The spread of the exchange model, and the wide range of variation within it, raised the possibility that the impact of the ACA on the structure of the private insurance market would be far broader than the original focus of the reforms would have suggested. Conclusion By seeking to harness market forces to public purpose in the delivery of publicly mandated and (at least partially) publicly funded services, the market-oriented reform agenda of the millennial period in the United Kingdom, the Netherlands, and the United States created platforms for entrepreneurs to develop new institutional forms combining public mandates with private resources. These entrepreneurs emerged from bases within the central nexus of the established health care state in each nation: the NHS in Britain, social insurance in the Netherlands, and both the public and private sectors in the US mixed market. Because they understood the norms of the previous regime while seeing opportunities generated by the reforms, they were positioned to mediate between the logics of the old and new regimes. Their roles were variously facilitated and constrained by the broad strategies of scale and pace adopted for the reforms. In Britain they operated in the wake of a big bang reform to broaden certain of its elements and to prepare the ground for the next major episode; in the Netherlands they shaped the long course of a blueprint reform; and in the United States they added further complexity to a rapidly enacted but more slowly implemented mosaic. In Chapter 11 I return to an assessment of the impact of these actors to consider whether such institutional entrepreneurialism constitutes a new phenomenon in the policy process.

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PART V Conclusion

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Chapter Eleven

Understanding Policy Change

In the normal course of events, policy-making flows along channels set by established policy frameworks, which in turn are embedded in broader institutional settings and political settlements. Swirls and eddies in policy development can develop as various cross-currents collide, and those currents can alter the direction of flow gradually over time, but left alone these processes do not generate discontinuous changes of course. Occasionally, however, the broader contextual conditions shift, allowing policy-makers to breach the normal constraints on policy choice and to embark upon major change. This book has explored the factors that created such opportunities for major policy change in health care in four nations over the last half of the twentieth century and the first decades of the twenty-first. More important it has looked at what happened during those moments of opportunity, as political actors read and responded to the changed circumstances in deciding upon the scale and pace of change they would attempt. In this concluding chapter I draw lessons from the comparative review of these cases in health care, first to throw light on the dynamics of strategic choice in policy development in general, and second to assess the nature of policy shifts in the health care arena. I begin by reviewing the strategies of scale and pace adopted at different times in different nations and summarizing what they tell us about the impact of strategic context on policy choice. I then summarize the resulting shifts in the policy framework in each nation in terms of the implications for the logic comprising the balance of influence across the state, private finance, and the medical profession; for the mix of hierarchy, exchange, and peer control in governing the relationships among those interests; and for the organizing principles regarding access to health care and

514  Remaking Policy

the functional role of the state. I also consider the ways in which policy shifts created opportunities for institutional entrepreneurialism, with unanticipated consequences. I draw some common themes regarding the impact of “market-oriented” reforms, and close by addressing the broader applicability of the findings in this book, first by briefly reviewing related developments in health policy in other national cases, and then by considering how well the analytic framework I have presented here might explain developments in other policy sectors. The Conditions for Discontinuous Change: Windows and Strategic Decision

Policy cycling in normal times To appreciate the circumstances in which discontinuous change is possible, it is necessary to cast those circumstances into relief against the politics of “normal” times of incremental change. In Chapter 2 I set out a theory of policy cycling as one variant of incrementalism in policy development, driven by an ongoing collision of forces of positive and negative feedback. Negative feedback emanates from interests upon whom the prevailing feedback imposes costs and/or from the failure of the prevailing framework to cope with changing demands (Jacobs and Weaver 2015; Mahoney and Thelen 2010; Streeck and Thelen 2005b). For negative feedback to lead to change, however, it has to prevail over positive feedback – the self-reinforcing process of “increasing returns” as actors become invested in the prevailing framework (Pierson 2000). The foundational political settlement for any policy framework implies a mix of benefits and costs that impinges differently on different interests. Similarly any framework inherently has both capabilities and limitations in responding to the functional requirements of a policy arena. As successive “generations”1 of policy-makers are buffeted by the competing forces of positive and negative feedback from these design features, they adjust and readjust aspects of the framework, insofar as they can, within prevailing political and institutional constraints. While granting the theoretical possibility that a surge of negative feedback could lead to a sharp “tipping-point” change in the fundamental logic of a policy regime, it must be said that no empirical example of such an effect can be observed in the cases covered in this book. Rather, what we observe in the “normal” times between realignments of the external

Understanding Policy Change  515

context, at least in the health care arena, is a process of cycling among the options available within the existing framework. We can observe this phenomenon in each of our national cases. The founding policy framework of the modern health care state in each case inevitably contained unresolved tensions deriving from its particular mix of hierarchical, market-oriented, and peer-control instruments and its particular balance of state, private finance, and provider power. Ac­ cordingly, in the wake of these founding moments, governments sought ongoing adjustments – moving through alternating periods of relative centralization or decentralization of the state apparatus, expansions and contractions of public funding, and relatively tighter or looser regulation of behaviour – all without substantially changing the overall balance of influence, the relative weight of the different instruments of social control, or the legitimating principles of access to service or government function inherent in the founding model. The British National Health Service cycled through successive periods of alteration between centralization and decentralization of its hierarchy, including the integration of the three founding branches of hospitals, family practice, and community health into a unified structure in 1974 and the continual reorganization of regional tiers of the hierarchy. Related reorganizations alternately integrated or separated the management of the NHS hierarchy from the Department of Health. This flux was mirrored at the hospital level, where various attempts were undertaken to bridge the professional-managerial divide established in the founding bargain of the NHS, resulting in pendulum swings between more or less integrated decision-making hierarchies. All of these policy swings were driven by ongoing tensions between the political imperatives of affording ministers control versus avoiding blame, and between the administrative imperatives of seeking efficiency versus managing complexity in a budget-constrained system. And because these imperatives did not change even after the major discontinuity of the adoption of the internal market reforms of the 1990s, the swings between centralization and decentralization and the periodic reorganization of the regional tier continued apace in the new structure. Similarly, in the United States, the founding of Medicare and Medicaid in the 1960s was followed by alternating emphases of tighter or looser regulatory control of hospital capacity and other forms of health care delivery, and augmentation or restriction of payments to providers under the public programs. As in the United Kingdom these fluctuations

516  Remaking Policy

were driven in part by unresolved tensions between bureaucratic and professional mechanisms of decision-making – further complicated in the United States by tensions between the competing logics of the two principal components of the mixed-market system: a private market of multiple payers and public single-payer programs for subsectors of the population. After a failed attempt to establish universal insurance on a managed-competition model in the 1990s, the pattern of cycling resumed with a series of smaller-scale changes involving successive expansions and contractions of provider payments and incremental extensions of coverage, the latter including expanded coverage for children under Medicaid – countervailing the contraction of coverage as a result of welfare reform – and the significant extension of Medicare to cover prescription drugs through voluntary subsidized private insurance. These changes, together with economic and demographic developments, led to cyclic swings in Medicaid enrolment and in Medicare spending per enrollee and to incremental expansions of both programs. In the Netherlands the corporatist model established by the German occupying government during the Second World War and subsequently patriated relied upon negotiations among the principal social partners – the state, employers, and labour – to resolve the tensions inherent in a bipartite public/private system of social and private insurance. When these negotiations proved incapable of maintaining a balance between the solidaristic and subsidiaristic elements of the founding framework in the context of rising health costs and fiscal crisis in the 1970s and 1980s, the system pressed the boundaries of its founding bargain by oscillating between a more and a less explicit fiscal and regulatory role for the state. The failure of a big bang attempt in the mid-1970s by a leftist minority government coalition to introduce complementary structures of national health insurance, central capacity planning, and price regulation gave way to protracted attempts to move forward on planning and price regulation alone. These attempts in turn wobbled in the absence of the complementary financing regime that national insurance would have provided. Successive governments adopted a more or less muscular stance, thus moving out of and back into the “shadow” under which corporatist negotiation occurred. Various attempts at controlling public spending in this period also showed this to-and-fro pattern. They included the introduction of co-payments for drugs and specialist visits, and the imposition of cross-subsidization and risk-pooling arrangements on private insurers. Co-payments were quickly abolished in 1989 as the government embarked on its blueprint

Understanding Policy Change  517

strategy towards more comprehensive change. The mandates on private insurers, although intended to be transitional, were not abolished until the blueprint came to fruition in 2006. In Canada the parameters of the policy framework for universal governmental hospital and physician insurance were established through federal-provincial negotiations in the late 1950s and 1960s during a rare cooperative era. Soon thereafter, however, federal-provincial relations entered an extended period of policy stalemate dominated by disputes over jurisdiction and potential constitutional remedies. In health care, both in the federal-provincial arena and at the level of individual provinces, policy change was marked by a pattern of alternating emphases on centralization versus decentralization and largesse versus constraint. In the federal-provincial arena these cycles manifested themselves as fluctuations in the level and conditionality of federal transfers to the provinces. At the provincial level governments cycled through periods of liberality and constraint in medical remuneration and of centralization and decentralization of state-provider relationships. What is most notable about this cross-national pattern of policy cycling is that it occurred in nations with markedly different legislative and executive systems – the Westminster parliamentary systems of Britain and Canada, the congressional system of the United States, the coalition parliamentary system of the Netherlands; and with different vertical arrangements of power – the decentralized Canadian federal system, the somewhat more centralized US system, and the unitary systems of the United Kingdom (until 1999) and the Netherlands. This suggests that a dynamic of policy cycling is a generic aspect of the policy process deserving of broad attention. It also suggests a line of explanation for why incremental change might not cumulate over time. However, even if policy cycling is generic across political systems, it can vary across policy sectors – a dynamic to which health care might be particularly susceptible.

The opening of windows: Agenda formation In this book I have sought to demonstrate the conditions necessary to break into policy cycles and incremental change more generally to allow the introduction of a new policy framework with a new logic. Such windows of opportunity are opened by the confluence of electoral, institutional, and partisan forces. Institutional and electoral conditions must allow the government of the day to mobilize sufficient authority

United Kingdom, 1945–46

Big bang

United Kingdom, 1989–90

Canada, 1965–66

Case

Strategy

Favourable: third successive mandate

majority government in Westminster system

majority then minority government; cross-party consensus at federal level in Westminster system

emergence of era of “cooperative federalism” in decentralized federation

Favourable:

Potentially favourable:

unexpected landslide Labour mandate in 1946 election

Favourable:

Favourable:

majority government in Westminster system

Electoral Strength

Favourable:

Institutional Consolidation

Capacity

Yes:

defensive: health care as central to opponents’ attack agenda

Yes:

broad use of federal spending power to create central pillars of federalprovincial welfare-state framework

Yes:

party discipline before and after 1990 leadership coup

Yes:

minority federal government in latter part of period (but cross-party consensus)

No:

Beveridge party discipline report embraced by Labour within sweeping social policy agenda

Yes:

seeking extraordinary fourth mandate in 1992 election; (loss not realized)

Potential loss:

successive minority governments and different federal and provincial electoral cycles

Uncertainty:

unexpected magnitude of 1946 win (loss was realized in 1950 election)

Potential loss:

Expectation of Future Position of Influence

introduction of contractual logic of “internal market” across NHS

Big Bang:

establishment of universal bilateral monopoly for hospital and physician services

Big Bang:

establishment of NHS, universal centralized regional hierarchy

Big Bang:

Conditions for Choice of Strategy Outcome (Strategic Domain)

Health Care Control of Central to Reform Policy Agenda? Coalition Centralized?

Will

Conditions for Window Opening

Table 11.1. Institutional and Political Conditions Favouring Four Strategies of Policy Change

Mosaic

Blueprint

Democratic control of presidency and Congress (without supermajority in Senate)

Potentially favourable:

United States, 2009–10

United States, 1965

Favourable: symbolically important presidential win with clear majority

Democratic control of presidency and Congress (with supermajority in Senate)

landslide Democratic mandate in 1964 election

Democratic control of presidency and Congress (with supermajority in Senate)

Favourable:

Favourable:

Favourable: second mandate for CDAVVD coalition in 1986 election

Unfavourable: less than majority popular vote mandate for president

Favourable:

coalition government

Netherlands, Potentially 1987–88 favourable:

United States, 1993–94

health care as culmination of Democratic project and central to economic agenda

Yes:

“Great Society” motif; unfinished business of assassinated predecessor

Yes:

highly polarized Congress, factions among Democrats

No:

factionalized Democratic Party, but strong presidentialcongressional leadership alliance

No:

poor economic prospects, Republican hostility

Potential loss:

realized in 1968 elections; 1964 landslide win attributable to extraordinary conditions

Potential loss:

gaps filled by expansion of Medicaid, regulation, and subsidization of individual and small-group markets

Mosaic:

Medicare/Medicaid established as addenda to Social Security in employer-based system

Mosaic:

Blueprint:

two-party coali- CDA had formed social/ private tion, but strong part of governinsurance replaced leadership ment since 1918 with universal mandatory insurance

Stability:

No:

in 1994 mid-term failure to introduce elections (realuniversal “managed ized) and 1996 competition” model presidential election (not realized)

Big Bang attempt:

Welfare-state reform as second phase of neoliberalism

party disunity and presidential – congressional leadership divisions

central to 1992 electoral strategy and “New Democrat” agenda

Potential loss:

Yes:

No:

Yes:

England, 2010–12

Mosaic (cont)

Canada, 2004

Incremental England, 2002–05

Case

Strategy

Favourable: Federal Liberal hegemony in third successive majority mandate at outset; minority as of June 2004 but cross-party consensus

intergovernmental consensus on reinvestment after fiscal consolidation of 1990s

second landslide Labour electoral win

Favourable:

Favourable:

majority government in Westminster system

neither party in coalition could claim electoral endorsement

majority government in Westminster system (through coalition)

Favourable:

Potentially unfavourable:

Electoral Strength

Potentially favourable:

Institutional Consolidation

Capacity

No:

health care central to 2004 Liberal platform; key priority for reinvestment on federalprovincial agenda

Yes:

health care key platform plank and vulnerable to opposition attacks

Yes:

decentralized federation

No:

factional BlairBrown rivalry within Labour government

No:

health care need for intercentral to porand intra-party traying coalition negotiation as radical new endeavour

Yes:

possible return to federal Liberal majority

Potential improvement for at least some actors:

Brown anticipated becoming prime minister

Potential improvement for at least some actors:

mixed prospects for unprecedented coalition, but fixed five-year term

Potential loss:

Expectation of Future Position of Influence

federal-provincial ten-year “work plan” introduced

Incremental:

regulatory changes introduced favouring controlled competition

Incremental:

changes under previous governments adapted and accelerated

Mosaic:

Conditions for Choice of Strategy Outcome (Strategic Domain)

Health Care Control of Central to Reform Policy Agenda? Coalition Centralized?

Will

Conditions for Window Opening

Table 11.1. Institutional and Political Conditions Favouring Four Strategies of Policy Change (cont.)

Understanding Policy Change  521

to overcome vetoes and to build a coalition of support for comprehensive change. Governments need to form the political will to take on the substantial risks entailed in changing the established political settlement. Health care thus must serve a broader partisan imperative for parties or factions: it must be a central component of a politically driven agenda of change, or provide a wedge issue with which political actors distinguish themselves from their rivals, or represent a critical vulnerability that needs to be shored up. The first panel of Table 11.1 illustrates the presence or absence of these conditions in each of the cases discussed in this book. The first observation to be taken from the table concerns the degree to which health care reform served a broader partisan objective in every case of the opening of a window of opportunity. It is of course a given that politicians formed the will to attempt major change in health care in each of these cases. What this book has demonstrated is the importance of overarching partisan imperatives in this process of agenda formation. In some cases, as in the United Kingdom in 1945 and the United States in 1965, 1993, and again in 2009, health care was central to what might be called the “meta-agenda” of change championed by the government of the day, as reflected in the election platform on which its mandate was won. In other cases, such as the United Kingdom in 1988 and the Netherlands in 1987, health care moved up the agenda as long-serving governments worked through the logic of their approach to welfarestate reform more broadly and used the opportunity afforded by electoral re-endorsement to take action. In the United Kingdom in 1988, the need to address health care was given further impetus because the opposition Labour party had made health care central to its attack on the incumbent Conservatives in the previous election, firming the will of the victorious incumbents to shore up their defences by taking decisive action before the next election. (The mirror image occurred in 2002, when Labour found itself on the defensive after the 2001 election.) In the case of the Conservative/Liberal Democrat Coalition government in 2010, comprehensive changes to the NHS emerged as central to the agenda only after the election, as part of the Coalition’s branding itself as representing a radical break from the past. In Canada the imperative was internal to the governing Liberal Party: in both the 1960s and the 2000s health care provided a means for an insurgent faction to distinguish itself from co-partisan rivals. Even in cases where electoral and institutional factors were only potentially favourable, the firming of political will by partisan imperatives

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converted that potential to action. In Canada in the 1960s, insurgent “social Liberals” within the federal Liberal Party saw universal physician insurance as central to an agenda that would reclaim the party from the “business Liberal” faction and rebuild it after a series of defeats, and pressed reform forward with the support of Prime Minister Lester Pearson, even in the context of a minority government. In the United States in the 1990s, national health insurance held pride of place in President Bill Clinton’s “New Democrat” agenda, leading him to attempt to introduce that major change even with a slim popular mandate and without a Senate supermajority. In the United Kingdom in 2010, health care reform formed part of a bold agenda that served the Coalition partners’ need to present their coming together as an ambitious new endeavour, rather than an alliance of electoral losers. The other necessary condition for creating the opportunity for major change, in addition to political will, is the consolidation of a base of authority sufficient to overcome vetoes. Table 11.1 demonstrates the importance of the interaction among institutional and electoral conditions in producing such a capacity. In most cases a highly favourable election result provided the victors with both the institutional position and the electoral strength to mobilize the authority necessary to create a winning coalition, and health care reform served a broader agenda. But in other cases strength in one area compensated for weakness in another. Sometimes electoral strength compensated for the lack of a firm institutional base. In the Netherlands in the late 1980s, institutional conditions were only potentially favourable for comprehensive reform, but electoral outcomes provided the ingredient necessary to realize that potential. The success of the CDA-VVD coalition in securing a second mandate in the 1986 election after a period of political instability enabled Prime Minister Ruud Lubbers to overcome the typically tempering effects of coalition Dutch governments and take decisive action. The continuing endorsement of the CDA under Lubbers in the subsequent 1988 election allowed him to span a broader ideological range through coalition with Labour, and thus to consolidate his authority and move forward with reform. In other cases propitious institutional circumstances compensated for electoral weakness. In Canada in the 1960s, a provincial-level agenda of state-building created a rare climate of “cooperative federalism” in intergovernmental relations, creating an institutional opening that allowed the federal Liberal minority government, in informal alliance with the social democratic NDP, to embark upon on major social policy reforms as part of an agenda to rebuild the party.

Understanding Policy Change  523

What happens in windows of opportunity: Choice within strategic domains Broad electoral, institutional, and partisan forces opened windows of opportunity for policy change and established the conditions within which political actors decided on the scale and pace of reform they would attempt. But there was nothing inevitable about these decisions. Although “hypothetical counterfactuals” can never be proved, it is possible to argue, as I have done in the respective chapters, that different options were available in a number of the cases discussed in this book. For example, Lyndon Johnson could have capitalized on his extraordinary electoral and institutional advantage in 1965 to adopt national health insurance in a big bang – as he did in the case of civil rights legislation – rather than pulling his punches with a mosaic strategy aimed at covering the elderly and the poor. Conversely, as I argued at some length in Chapter 5, Bill Clinton might have pursued a mosaic strategy to build a bandwagon for a bipartisan coalition in 1993–4 by dealing with Republican interlocutors such as Robert Dole and John Chafee, with a quite different policy result than his failed big bang. Sixteen years on, Barack Obama might have launched a big bang strategy by using the budget reconciliation process to pass health care legislation with a simple Democratic majority in 2009, rather than resorting to reconciliation only when a mosaic strategy was on the brink of failure a year later.2 In the United Kingdom in 1989, within the closed process that led to the internal market reforms, Margaret Thatcher might have followed advice from close colleagues to use her third successive majority mandate to pursue an even larger big bang by transforming the NHS into a subsidized private insurance system. Two decades later David Cameron and Nick Clegg could have followed their respective election manifestos to continue the pattern of incremental change that had characterized the Labour years, rather than embarking on a rapid mosaic strategy of multiple simultaneous change. In Canada Paul Martin might have taken up the 2004 proposal from the premiers that the federal government introduce a comprehensive prescription drug insurance program in a big bang change, rather than continuing along an incremental path. These decisions were not dictated by circumstances; rather, they were the result of judgments key actors made as they responded to their circumstances. I began with the hypothesis that, given the institutional and political conditions for making major change in health care policy,

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political actors adopt strategies driven by their assessment of their current and future position of influence as implied by those conditions. More specifically, the strategies they adopt depend on their assessment of the degree of centralized control over the winning coalition and the likelihood that the coalition members could lose, maintain, or improve their position of influence over time. These readings permeate decision-making, placing decision-makers within particular strategic domains favouring big bang, blueprint, mosaic, and incremental strategies, respectively. The pattern we observe across the national cases covered in this book, as summarized in the second panel of Table 11.1, broadly bears out that hypothesis and its implications. Big bangs Our theoretical model suggests that politicians adopt big bang strategies when leaders of the winning coalition enjoy centralized control but must act within a short timeframe (typically a single electoral mandate), after which they risk the loss of power. Our three cases of successfully enacted big bang change broadly support that hypothesis. In the case of the United Kingdom in 1945, the size of Labour’s electoral landslide had been unanticipated, and the opposition Conservatives were still led by a popular war hero. The Labour government, reasonably assuming – rightly, as it turned out – that the next election might not go in its favour, strove to implement a sweeping agenda to establish the foundations of the modern British welfare state by an “appointed date” only three years after the election. Through a process that was highly centralized (within the Labour Party) and adversarial (Labour versus Conservatives and the medical profession), the NHS Act was passed in 1946 and implemented within two years, establishing a major new institution of universal coverage and nationalizing the hospital system. In the case of Thatcher’s Conservatives, a third successive majority win in 1987 provided both reinforcement but also concern that the party’s electoral appeal might be nearing its expiry date. Thatcher’s determination to move forward with NHS reform was very much driven with an eye to the next election in 1992. A centralized process that nonetheless included the major wings of the party led to the passage in 1990 of the NHS and Community Care Act in a classically adversarial parliamentary process, with the government making few concessions to opposition parties and insisting that the legislation “had to be swallowed whole and at a gulp” (Klein 2010b, 157). Thatcher’s “internal market” reforms, while not quite as “big” a “bang” as the initial establishment of

Understanding Policy Change  525

the NHS, in that they did not alter the principles of universal eligibility and first-dollar coverage, nonetheless constituted institutional change of major degree and scope. They cut across the full sweep of the NHS to create new institutional forms based on “purchaser” and “provider” status, and instituted a transactional logic of contract to replace the prevailing logic of command. At first blush the adoption of national universal physician services insurance in a big bang in 1966 under a minority national government within a federal system seems less explicable within our theoretical model. However, a rare set of circumstances placed the federal government in an unusually favourable position to accomplish a big bang. Changes in the arena of federal-provincial relations in the late 1950s and 1960s meant that the interests of federal and provincial governments were aligned to an unusual degree. At the federal level itself, the Liberal government’s minority status created an incentive to act quickly lest it lose power. Meanwhile the government’s effective control was greatly increased by a partisan opposition that was either neutralized or supportive. The largest opposition party, the Progressive Conservatives, had appointed the commission on whose recommendations the government’s legislation was based, and the third-party New Democrats were strongly in favour of the universal thrust of the new framework. Such big bang strategies require very unusual circumstances to succeed even in a Westminster system: they had essentially no chance of success in the circumstances that faced Democratic president Bill Clinton in 1993 in the US checks-and-balances congressional system. Institutional and electoral factors combined with a partisan imperative to open a window of opportunity for major change, but these conditions were no guarantee of success, which would depend on the choice of strategy. The Democrats held control of both the House and the Senate, but crucially lacked the institutional lock of a filibuster-proof supermajority in the Senate. Clinton himself lacked a majority popular electoral mandate. Nonetheless the Clinton administration, emboldened by the electoral success of the health care plank of its 1992 election platform, attempted to restructure the broad sweep of the health care arena around new institutions: regional health alliances for the purchase of all health insurance other than that provided by the largest employers, and incorporating Medicaid and Medicare recipients on a compulsory or voluntary basis respectively. The administration’s big bang strategy for comprehensive reform failed spectacularly,

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however, in the electoral and institutional circumstances: once the plan reached Congress, not only could it not be “swallowed whole and at a gulp”; it could not even be reported out of committee. As I argued in Chapter 5, it is conceivable that Clinton could have been successful with a smaller-scale mosaic strategy had he been able to create a bandwagon “politics of legislative certainty” – analogous to the legislative context for Medicare and Medicaid in 1965 – to draw opponents to a table of compromise. Instead the desire for scale trumped the need for a fast pace, and momentum was lost as the secluded experts drafting the new plan tried to anticipate and cover off potential objections, and Clinton’s limited political capital was spent on other issues. Mosaics The US political system with its multiple veto points is especially prone to mosaic strategies in health care: rapidly assembled packages of modifications to existing institutions. The founding of the modern US health care state was brought about by such a strategy under Lyndon Johnson in 1965, when disparate proposals for physician and hospital services for the elderly and health care services for low-income families were cobbled together in a “three-layer cake” in order to attract a winning coalition within the nominally dominant Democratic caucuses in Congress. Although a foundational moment for the US health care state, these changes focused on only a minority of health care recipients not in the workforce, and left largely intact the bulk of the arena premised on employer-based coverage. In 2009 Barack Obama faced conditions that, while arguably more favourable than those confronting any of his predecessors, including Johnson (Peterson 2011), were still unsuited to a big bang. Obama had won a solid majority of the popular vote in the 2008 election, and for a brief period the Democratic Senate caucus, which included two independents, had a razor-thin nominal supermajority. Nevertheless, although the Democratic congressional caucuses were more united than they had been since the beginning of the twentieth century, the leadership still could not count on commanding its nominal supermajority in the Senate, needed to overcome a united Republican front of opposition by invoking “cloture.” In a context in which every vote counted, the window of opportunity was seen to be very tight – indeed, the Democrats gained and lost the critical cloture threshold within nine months. Their reading of these conditions placed the Democrats in a mosaic domain, generating a pastiche of changes and additions to the existing

Understanding Policy Change  527

employer-based system, These included the expansion of Medicaid and the establishment of health insurance exchanges much more limited in scope than the Clinton regional alliances, which were targeted at the insurance market as a whole, not just at the individual and smallgroup markets. Rapidly assembled through multiple compromises in the Democratic caucuses in both houses – and after attempts to lure moderate Republicans failed – the reforms were enacted as a piece. The compromises also entailed a lengthy implementation period of fixed stages over eight years. Surprisingly the conditions for a mosaic strategy also developed at about the same time in the radically different political system of the United Kingdom, with the unprecedented formation of a Conservative/ Liberal Democrat Coalition after the 2010 election, an extraordinary result that created a window of opportunity for major policy change. The partners in the Coalition saw the projection of a radical stance as a partisan imperative: they were eager to put a strong and positive face on what otherwise would be seen as a dispiriting election outcome for both parties, and to present their partnership as capitalizing on a historic opportunity to embark in new directions. Developing a common agenda, however, required negotiating myriad differences of opinion both between and within the parties. And it would need to be done rapidly: the electoral horizon was even shorter for the two parties in the Coalition than is normal for a Westminster majority government. The parties had agreed to a fixed date for the next election five years hence, but they knew they would have to distance themselves from each other increasingly as that deadline approached. The result was a convoluted piece of legislation that maintained the logic of the purchaser/provider split while reconfiguring the “purchasers” essentially to invert the formal relationship between physicians and managers. What began as a centrally driven amalgam of Conservative and Liberal Democrat positions on reform of the English NHS became even less coherent through a series of amendments and concessions in a tortuous legislative process almost as unusual in the Westminster context as was the historic coalition that had generated it. Blueprints In theory a blueprint strategy is the antithesis of mosaic messiness: a technocrat’s dream that allows for a rational comprehensive framework and for both policy learning and infrastructure development in order to create the necessary conditions for success in implementation, without

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being shackled to the prescriptions of a detailed design up front or a predetermined timeline. That we observe so few real-life examples of successful policy blueprints thus is attributable not to any lack of appeal to policy-makers, but rather to the great rarity of the political conditions necessary for the success of such strategies in democratic systems. In practice blueprint strategies involve securing consensus on a broad schematic, and agreement to enact the elements over a period beyond the life of any government. The power of such strategies lies in their impact on the expectations of all key actors, in both the broad political realm and the targeted policy arena itself. Such strategies are most likely to emerge in systems with established traditions of cross-party collaboration – most notably in the form of coalition governments, such as existed in the Netherlands in the 1980s. In the Dutch case, indeed, the conditions were further enhanced by the existence of a quasi-hegemonic Christian Democratic party that had been part of every government since 1918, often as the lead party, and by norms and structures of consensual corporatist decision-making in a “social middle ground” of shared political space linking state and civil society. The re-election of a CDA-VVD coalition government to a second mandate in 1986 provided the endorsement necessary for the Lubbers government to extend its neoliberal agenda to the reform of the Dutch welfare state. It also reinforced the CDA’s sense of electoral safety after a period of instability and realignment on the right – a sense that was strengthened with Lubbers’s extension of the ideological range of his government by forming a coalition with Labour three years later. The Labour partners, for their part, could look to the conventions of consensual decision-making within networks linking the state and civil society to maintain the balance of the blueprint over time, even if Labour itself were not in government. With a growing consensus around the neoliberal reforms establishing the scale of reform, and a coalition government comprising the two largest parties providing a broad electoral base, the conditions were ripe for the pursuit of a blueprint strategy. A coalition of support was consolidated for a comprehensive new schematic, which would be put in place through waves of legislation as the necessary technical conditions were established – a process that was projected to be concluded within five years, but beyond the government’s current mandate. In the event the process was much more protracted, as political conditions shifted and the policy process diffused into a pattern of cycling for a time. In this case, however, the instances of cycling might better be seen as “spiralling,” in that they formed part

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of a process in which the blueprint strategy was still being advanced, and thus the cycle moved the system to a new plane. The consensual adoption of the blueprint strategy in the late 1980s had established a set of expectations that formed the “shadow of the future,” and in that context the reversal of some aspects of the reforms was part of a change in tactics, not strategy, as the sequence of steps towards the ultimate goal was modified. No other case of a blueprint strategy at the national level appears in this book, although I note some other attempts later in this chapter. There are, however, the puzzling cases of the absence of a blueprint strategy in circumstances that, on their face, would seem to have favoured it. One is the Blair government’s decision to pursue incremental change, rather than a more comprehensive strategy, in 2002 and thereafter. Indeed if Bill Clinton overplayed his hand in 1993, Tony Blair appears to have underplayed his in 2002. Blair had led Labour to a historic landslide victory in 1997, consolidated that success in a second landslide in 2001, and faced a divided and dispirited opposition. In such circumstances of relative electoral safety, Labour’s incremental strategy appears surprising. However puzzling, this case of incrementalism in a context that appeared to offer the opportunity for comprehensive change is not unique: another example occurred in Canada between 2000 and 2004. A comparison of these two cases can illuminate an underappreciated dynamic of incrementalism. Incrementalism One of the most intriguing observations to be taken from the cases reviewed in this book (and summarized in Table 11.1 is that, given a window of opportunity for major change, incrementalism can be a deliberate strategic choice, not just a default position in the absence of such a window. This sort of incrementalism is distinguished from the “normal” kind of incremental change in that it is neither driven by increasing returns to the prevailing policy framework nor is it a by-product of what Howlett and Mukherjee (2014) term “non-design” processes such as log-rolling or electoral opportunism. Instead it occurs when there is a coalition of support for change, all of whose members would prefer to reach an agreement rather than retain the status quo. But in contrast to the other types of coalitions discussed so far, the sort of coalition that generates deliberate incremental reforms is one whose leaders differ in their expectations of future influence – and in which at least some anticipate an improved position in the future.

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One such change occurred during the second Blair Labour government’s term in office. In its first mandate Labour had moved incrementally to reverse some aspects of the earlier Conservative reforms while retaining their core – the purchaser/provider split – and had reinforced the centralization of the NHS as a hierarchy based on the central prescription of targets and standards of performance. The consolidation of authority afforded by a second consecutive landslide victory at the polls in 2001, together with the rise of health care to prominence within a governmental agenda of public service reform, clearly provided the conditions for major change had the Blair government chosen to do so, but it continued with a pattern of incrementalism. The regime of targets was replaced by one of self-reporting and increased consumer choice, introduced component-by-component without an overarching framework. The most significant of these components was the creation of a Foundation Trust model offering hospitals even greater financial and managerial freedom than had been promised, though never fully realized, in the original internal market reforms. Had it not been for resistance within the government itself, spearheaded by Chancellor Gordon Brown, the latitude accorded to Foundation Trusts would have been still greater. The adoption of the Foundation Trust model can be seen as another example of a spiralling cycle – not only a return to, but an augmentation of, the logic of earlier reforms. In this regard a contrast with the Dutch experience is instructive. In the Netherlands an analogous spiral occurred in the context of a faltering blueprint strategy. But there, the up-front agreement on the overall schematic for the endpoint of the reform process had embedded a “shadow of the future” in the expectations of the relevant actors – principally the social insurers – who took independent actions that reshaped the industry and laid the groundwork for further steps when political conditions allowed the blueprint process to be accelerated. But in England no comprehensive plan existed to establish such a “shadow,” despite a government that saw major change in the delivery model for health care as a distinguishing mark of its brand and had the electoral safety to pursue it. Accordingly ad hoc actions by government merely provided platforms for affected interests to press for further ad hoc changes. In Canada in the early 2000s, the federal Liberal government enjoyed a particularly wide margin of electoral safety as a result of the splintering of the political right after 1993. Health care moved to the centre of the federal-provincial agenda with the fading of competing agenda items

Understanding Policy Change  531

such as constitutional reform and with the potential for federal reinvestment after a period of deep austerity. The transition of leadership from Jean Chrétien to Paul Martin in 2003 was widely seen to herald a continued extended period of Liberal government. The government had fiscal room as the result of the successful deficit-reduction strategy of the 1990s. Martin, for his part, chose to emphasize reaching a new health care agreement with the provinces as a key way of distinguishing his government from the more confrontational stance of his predecessor. The provinces saw the potential for substantial gains in federal funding – and, in an extraordinary gesture, proposed to negotiate the federal takeover, consolidation, and enhancement of provincial drug insurance plans. A more favourable set of circumstances for a major change to the health policy framework had not existed since the 1960s. Yet the result was a federal-provincial “accord” that provided for a substantial increase in federal transfers and accomplished little else. Unravelling these two cases allows us to see the choice of an incremental strategy as a type of “political investment” (Teles 2009). Although in both the United Kingdom and Canada all members of the winning coalition saw reaching an agreement on change as preferable to the status quo, and broadly agreed on the direction of change, at least some key actors saw the potential for seizing the moment to create platforms on which they could build and/or claim credit in the future. Hence the interest of those actors – Chancellor Brown in the British case, Prime Minister Martin in the Canadian case – was in positioning themselves well for the next phase. Brown foresaw a future in which he would be prime minister; hence his interest as a member of the current government was to ensure the government’s success but also to preserve discretion for himself in the future. Brown’s agreement to go so far but not farther acted as a brake on the scale and pace of reform. Martin sought to inaugurate his prime ministership by establishing a platform for future activity. He immediately sought to symbolize a sharp break from his predecessor by developing a working relationship with the premiers, beginning with the removal of the thorn of federal “underfunding” of health care. So positioned, he would then embark on a broader reform agenda from an improved stance vis-àvis the provinces. The expectation of continuity was radically upended, however, when voters in the 2004 federal election punished the Liberals for a misappropriation scandal under the previous government, reducing the Martin government to minority status. This reversal of fortune dramatically foreshortened Martin’s time horizon. Rather than driving

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a shift in strategy to lock in more up-front change, however, securing an immediate agreement within the terms of its existing offer became the federal government’s key priority; and a larger-scale offer from the premiers to negotiate a federal pharmacare program became a hostage to electoral fortune. Competing readings The theory of strategic domains I have presented in this book distinguishes between actual political and economic conditions, and the reading or representation of those conditions in the shared mental models of political actors as they assess their current and future positions. That means that actions taken can depart from what an objective observer might have expected in the circumstances, without probing the “assumptive worlds” of the political actors involved. It also means that there might be more than one way that the actors themselves read those conditions, that there might be internal disputes about those readings, and that some readings might yield strategic choices that end in failure. Given that parties in power have, by winning office, demonstrated success in reading their political contexts, we would expect such failures to be rare. Nonetheless a few examples of failure appear among the cases reviewed here. Sometimes governments overestimated their ability to overcome vetoes, as in the case of the Clinton administration in 1993–94. Another such case, not included in Table 10.1 but treated in Chapter 4, is that of the government of Joop den Uyl in the Netherlands in the mid-1970s. In 1974, a destabilizing process of political realignment on the right enabled left and centre-left parties to form a minority government that was “the farthest left administration in Dutch history” (Götze 2010, 4). The den Uyl cabinet seized the opportunity to launch an unsuccessful attempt to reform the policy framework in a root-and-branch shift to a model of universal coverage through a single, regionally administered social insurance scheme and a strong regulatory role for the central state over supply and prices. In other cases governments tempered their ambitions when they arguably could have extended their reach. In the United States, in the wake of a historic electoral landslide in 1964, the Democrats under Lyndon Johnson arguably might have striven for universal insurance through a big bang, rather than through the Medicare-Medicaid “threelayer-cake” mosaic. The Martin government in Canada in 2004 might have seized the rare opportunity of a unanimous provincial overture

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for big bang change in pharmaceutical coverage, rather proceeding with an incremental health accord. Assessing cases in which actual strategic judgments departed from what an objective assessment might suggest presents methodological difficulties. It requires one to posit hypothetical counterfactuals – what would have happened had government acted differently. “Errors” of overreach can be observed from failure, although one can only speculate as to whether another strategy would have succeeded; “errors” of underreach must remain a matter of conjecture. And even where one can observe the failure of the initiative – as in the 1974 Dutch and 1994 US cases – can this be attributed to strategic error or to some shift in context unforeseeable at the time? Sometimes participants themselves recognize their error in hindsight. Examples are the statement of a member of Clinton’s senior team that he and his colleagues mistook a shift in political weather for political climate change, and Clinton’s own expressed regret that he did not follow a mosaic strategy by pursuing a Republican overture (Johnson and Broder 1996, 127). Other instances, such as the Johnson and Martin cases, must await the judgment of history. It is also possible that what appears to be an error from the perspective of one policy arena in fact fits into a broader strategy. Johnson might have resisted a big bang approach in health care precisely because he was pressing forward with such a strategy on voting rights and did not wish to confront recalcitrant Southern Democrats in Congress with two big bangs simultaneously.3 In the wake of the 2004 election, Martin might have been propelled towards a big bang strategy to lock in change. But he believed that the overall credibility of his government was at stake in coming to an agreement with the premiers on health care. He therefore judged that he could not risk entering into the complex negotiations implied by the premiers’ quickly conceived pharmacare proposal, and seized upon incremental but readily available change. One also needs to acknowledge cases in which the strategy succeeded despite internal disagreements over the course of action. There were strong differences of view within the Obama administration, for example, at the outset of the legislative process in 2009 as to whether to follow a slower-paced incremental strategy or a fast-paced mosaic. After losing their position of institutional advantage with the loss of a supermajority in the Senate in February 2010, the Democratic leadership was again divided on whether to persist with a fast-paced mosaic

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strategy or to shift to an incremental path – and Obama chose to stay the course. Taking the incremental route would have yielded more limited change than that which ultimately proved possible.4 One can also speculate on the circumstances in which multiple strategic readings are more or less likely. Highly complex systems such as that in the United States might admit of multiple readings, even within a close group of strategists such as we saw in the case of the Obama administration.5 Other circumstances that might generate multiple readings include being in the midst of ongoing political realignment, such as the Netherlands in the 1970s, or in the wake of an unexpected reversal, such as the Martin government experienced in Canada in the 2004 election. Alternative explanations As I noted in Chapter 2 the argument that strategic domains are fundamentally defined by political actors’ reading of political and institutional circumstances in order to assess their current and likely future influence is open to methodological challenge. In explaining different patterns of policy change, does one risk reading back from observed patterns to infer that political actors strategically chose them, when those actors in fact were simply “muddling through” to address issues as they arose? To address this challenge I have supported my inferences in this book with primary and secondary accounts, but the full response lies in the power of the comparative method. Alternative explanations that might hold for a single case might be less compelling when applied across a range of cases. The strength of an argument that focuses on strategic domains lies in its ability to explain similarities and differences across an array of cases within a common framework. It has been suggested to me, for example, that the particular cases of incrementalism in England in 2002 and Canada in 2004 can be understood differently than I suggest. This critique suggests that, presented with a window of opportunity to make major change in health care policy, the Blair and Martin governments, respectively, were simply uncertain as to what to do, or that they believed that the technical capability to implement major policy change was not in place.6 Hence they chose instead to embark on a strategy of small-scale changes over several years. Indeed the choice of incrementalism in a window of opportunity might be “puzzling” only when viewed from either pluralist or historical institutionalist perspectives, which typically treat incremental

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strategies as the outcome of bargaining processes in veto-ridden political processes. Seen differently, incrementalism might be not only a recognition of the de facto reality of policy-making, but also an alternative legitimate normative guide – a deliberate, rational strategy of trial and error in the face of limited information – regardless of political constraints. Lindblom’s (1959) classic presentation of “the science of muddling through” and Klein and O’Higgins’s (1985) advocacy of “purposeful opportunism” are leading examples. Howlett and Mukherjee (2014) distinguish two types of incrementalism: “designed” – through “a knowledge-based process in which the choice of means or mechanisms … follows a logical process of inference from known or learned relationships between means and outcomes” – and “nondesigned” – “driven by situational logics, bargaining or opportunism” (2014, 1). My response to this challenge is to point out that other sets of political actors, also confronting the complexity and uncertainty of making change in health care policy, chose non-incremental routes to change. Some, such as the Lubbers coalition in 1986, the Thatcher Conservatives in 1989, and the Clinton administration in 1993 – chose to brook the inherent caution of bureaucratic actors and to tackle complexity head on through a rapid assembly of expert opinion to design a comprehensive change. In the case of the Obama administration in 2009, Democratic leaders launched a highly complex mosaic strategy, judging that the relevant policy work had been done and approaching reform as a matter less of policy design than of political brokerage. In one highly unusual case, the health secretary in the Conservative/Liberal Democrat Coalition in the United Kingdom in 2010 (Andrew Lansley) came to the office with a fully fledged plan, honed over years in opposition, which became the centrepiece around which a mosaic was assembled. In other words what distinguishes the choice of strategy in each of these cases is not whether political actors believed they had sufficient information and capability to act, nor even their “mental maps” of the complexity of the health care arena, but in how they chose to acquire that information and develop that capability. And those judgments in turn were shaped by the strategic domain in which they found themselves – that is, by a collective political calculus of current and potential future influence. Lubbers was in a strong leadership position, and could reasonably judge that his party would be in any government coalition in the intermediate future, as it had been for seven decades. He was in a blueprint domain, in which securing agreement up front but still being

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able to learn and adapt over time appeared not only prudent but politically possible. Both Thatcher and Clinton judged themselves to be in a position to drive change from the centre, but also believed their tenure could be short. They were each in a big bang domain, leading them to take the risk that their advisors – Thatcher’s Policy Unit and Clinton’s task force – were astute and talented enough to anticipate the interrelated implications of various policy designs. In 2009 Obama, in the honeymoon of his historic presidential victory and with a tenuous Senate supermajority, had learned from the disastrous effects of delay and exclusion in the case of the Clinton task force. Judging it necessary to move quickly and collaboratively placed him in a mosaic domain in which he chose to count on the knowledge of the relevant actors, accumulated through decades of failed attempts, and to embark immediately upon political brokerage. Similarly the two parties in the UK Coalition government in 2010, facing a tight timeframe in which to implement a bold agenda before re-entering electoral competition with each other towards the end of their agreed-upon fiveyear mandate, were in a mosaic domain that led them to cobble new elements onto an available option on which they could agree: Lansley’s ready-made plan. Finally, leaders of reform coalitions in the UK Labour government from 2002 to 2005 and Canada’s first ministers in 2004 had differing perceptions of their future positions of influence. Those who saw the potential for improvement in the future – notably, Gordon Brown and (for a time) Paul Martin, respectively – had strong incentives to delay the achievement of a comprehensive package in the name of prudence and hence to adopt an incremental strategy. The assumptive worlds of decision-makers, in which policy and politics are intermingled, are much richer than any single focus on the political calculus of current and future influence would imply. But that political calculus strongly conditions those worlds and colours judgments. On the evidence of the cases reviewed in this book, it appears that an understanding of this calculus is as good a single predictor of strategic choice as one is likely to find.

Strategic advantages and vulnerabilities In Chapter 1 I suggested several hypothetical consequences of the choice of scale and pace of policy change. We are now in a position to assess those hypotheses. One hypothesis was that the greater degree and scope of large-scale policy redesign allows for a greater complementarity

Understanding Policy Change  537 Figure 11.1: Substantive and Procedural Consequences of Four Strategy types

among the elements of the resultant framework, and thus would prove more durable than more piecemeal reforms that could be attacked and dismantled by opponents one by one. (On the other hand, some elements of piecemeal reforms might survive precisely because of being decoupled from more controversial elements.) A second hypothesis was that a fast pace, by collapsing in time the veto points to be navigated, yields a greater degree of conflict. I hypothesized, however, that these effects depend on the intersection of scale and pace in distinctive policy dynamics. Figure 11.1 summarizes my findings. Broadly speaking the hypothesized effects of scale and pace are borne out, and I return to these effects below. More important, however, we observe distinctive dynamics for each strategy type. Big bang strategies trade off the incorporation into the policy process of affected interests against the desire to make comprehensive change.

538  Remaking Policy

They are likely to be characterized by exclusionary processes as a minimum winning coalition is assembled within government and as losers – typically established interests in the policy arena in question – are excluded. Common to all of our big bang cases, indeed, was a tightly held process to design the comprehensive new plan. To break the mould the designers of the new model chose to exclude those who were invested in the previous framework – including not only providers and beneficiaries of service, but also their own civil servants. The strategy also reflected the leadership’s confidence that it could drive a centralized process through to enactment. In the two British cases, the process was closely held by the health secretary (in 1945–46) and the prime minister (in 1989–90). In the Canadian case, the elements of a new framework initially developed by a federally appointed commission strongly driven by its chair and without the formal involvement of interests in the health care arena were then negotiated at the heights of the federal and provincial governments through closed processes of “executive federalism.” In the failed Clinton case, the development of the plan was entrusted to an executive task force chaired by the first lady and excluding the various relevant administrative units and affected interests. Such strategies also place heavy demands on the policy capacity and political commitment of actors at the centre of government. The rapid implementation timelines associated with a big bang strategy provide little opportunity for adjusting the policy to circumstances post-­enactment. Nonetheless each of our examples of big bang change has proved remarkably durable. Notwithstanding the exclusion of the medical profession during the enactment phase, the creation of both the NHS and the Canadian single-payer model established new frameworks whose comprehensive logics drew the medical profession and the state into enduring accommodations that form the central axis of the respective systems. The British internal market reforms of the 1990s maintained this accommodation even while establishing a new logic of contracting between institutionally independent purchasers and providers. As incorporated into established networks, the new logic in turn persisted over the next two decades through partisan shifts to Labour governments and then to a Conservative/Liberal Democrat Coalition. (It is notable that the one element of the internal market reforms that was formally undone by the successor Labour government was the one least well integrated into the purchaser/provider framework – namely, GP Fundholding, which had been included as a marginal addition to the model.) Big bang strategies, for good or ill, thus tend to be effective

Understanding Policy Change  539

in bringing about changes in policy logics as broadly intended by their designers. Their principal disadvantage lies in the rarity of the conditions under which they are likely to be successful: the failed Clinton initiative stands as a cautionary tale. Blueprint strategies offer a less conflictual path to comprehensive change, by incorporating all key partisan and interest-based actors in the initial settlement that sets the broad schematic of reform. The complementarity of the reforms establishes an interdependence among key actors, and the agreed-upon schematic for the future regime establishes a powerful logic of expectations to keep the reforms broadly on course. Because policy-makers are not tied to a legislated timetable of prescribed steps, the design and the phasing of the steps can be adapted to prevailing circumstances. Nonetheless this type has its own vulnerabilities. The successful execution of a blueprint strategy requires that the coalition of support be maintained at the various stages of enactment, which in turn means that the essential right-left balance of the overall compromise has to be maintained at each step. This presents both political and technical challenges, which were not always met. In the Netherlands, the second wave of reforms, under the Labour health minister in the centre-left coalition government formed in 1989, swung the strategy too far to the left, triggering strong resistance from conservative and business interests and even from the powerful Ministry of Finance itself. The successor “purple” left-right coalition reframed the next steps in the blueprint and, among others things, reversed some of the actions of the previous government before a centre-right coalition resumed progress towards the original goal. As we shall see below, attempts at blueprint reforms in US states proved much more vulnerable to shifting partisan fortunes. The breadth of the initial coalition of societal and state actors that forms the ongoing community of shared expectations is thus a key determinant of the fate of blueprint strategies. The Dutch reforms, in large part because they were rooted in agreement among societal interests as well as political parties, survived such unanticipated partisan shifts. The behaviour of actors in the health care arena, however, also highlights another vulnerability of blueprint strat­ egies. As they seek to position themselves for the emerging future health care state, societal actors might generate consequences unintended by the early designers – as when the strategic behaviour of Dutch insurers to secure market share in the future universal scheme led to an increasing concentration of the industry.

540  Remaking Policy

Yet more vulnerable to such unanticipated developments are incremental strategies of platform-building for subsequent stages, as both Paul Martin in Canada and Gordon Brown in England could attest. Martin found himself unable to conclude his “handshake” agreement with the premiers to return to the issue of a national pharmacare program if he returned to government with a majority, when instead the defeat of his Liberal government in 2006 ushered in almost a decade of Conservative federal governments. Brown, having sought to position himself for his own prime ministership by resisting comprehensive change as chancellor in the Blair government, found himself bereft of strategy for health care and diverted to other priorities once he assumed the leadership. If blueprint strategies seem to offer the best of both worlds – relatively low levels of political conflict and high levels of policy coherence – mosaic strategies seem to present the worst in both respects. Such strategies, followed in the United States in 2009–10 and in the United Kingdom in 2010–12, yielded incoherent pieces of legislation. In both cases provisions inserted before and during passage through the legislature added features that had relatively little to do with the goals of the reforms. Although the “three-layer cake” generated by the Johnson Medicare/Medicaid mosaic was a relatively more elegant result, even it was “a model of unintended consequences [that] … incorporated features that no one had fully foreseen” (Marmor 2000, 58–9). In their attempts to incorporate numerous partisan and/or interest-­ based actors into a set of multiple piecemeal agreements, mosaic processes typically involve the sort of sprawling consultations exemplified by the committee processes through which the Affordable Care Act was developed in the United States. The Medicare/Medicaid mosaic, though largely negotiated within the Democratic leadership, had to run the full legislative gamut (Marmor 2000, 45–61). Even in a Westminster system, the UK Coalition government was forced into an extraordinarily extended and open legislative process, including a “pause” midway for further public consultation, in order to pursue its mosaic strategy, sacrificing some speed as a result. And in an exception that proves the rule, the US Republican leadership’s attempt to rapidly cobble together a consensus sufficient to repeal the ACA through a closed and tightly managed process ended in failure. Furthermore, even while trading off policy coherence mosaic strategies appear to yield high levels of political conflict, as quintessentially demonstrated by the Obama reforms in the United States and the

Understanding Policy Change  541

Coalition reforms in Britain. Johnson’s Medicare/Medicaid mosaic strategy, while yielding a relatively more orderly result, was nonetheless also highly conflictual. Unlike the ACA mosaic, the Medicare/ Medicaid process deeply divided the Democratic Party, even as it attracted some Republican support. And although congressional negotiators incorporated a version of a proposal from the American Medical Association into the final design – as the Medicare Part B program of voluntary coverage for physician services –they treated the AMA itself as a “nuisance” to be excluded from behind-the scenes negotiations (Jacobs 1993, 200). Finally, the vulnerability of mosaic strategies might depend in part on the pace of implementation. Both the 2010 Affordable Care Act in the United States and the 2012 Health and Social Care Act in the United Kingdom allowed for phased implementation – in the former case extending beyond the life of the enacting Congress and the president’s first term. In theory such an attenuated implementation timetable could allow for the development of technological and other capacity before reforms come on-stream. But because the implementation dates were specified in the legislation, implementers were tied to a fixed timeline whether or not capacity development proceeded as anticipated, thus providing opportunities for opponents to seize upon and exacerbate administrative difficulties – a problem that particularly plagued the implementation of the Affordable Care Act. In contrast, Lyndon Johnson had a general strategic aversion to allowing time for opponents to mobilize. He insisted on rapid implementation of the 1965 Medicare and Medicaid legislation – especially Medicare, which, as a federal program, did not require action at the state level – while making other compromises to ensure rapid implementation, including a very generous settlement regarding physicians’ remuneration. As for durability the cases of mosaic strategies reviewed in this book present a study in contrasts. The Obama and Coalition reforms both encountered turbulence in the implementation phase and virulent opposition from opposition parties who vowed to repeal the legislation if elected. As of this writing (September 2017) the Coalition reforms in the United Kingdom had not been through a partisan change in government.7 In the case of the Obama reforms, the 2016 election put the Republican opponents of Obamacare in place to carry out their threat to repeal and replace the legislation, at least in part. As predicted, however, the very institutional structures that so complicated the passage of the Affordable Care Act and resulted in a dizzyingly complex package

542  Remaking Policy

of both interrelated and extraneous elements also made it fiendishly difficult to undo. Despite a concerted effort at their own mosaic strategy, after a year of unified control of government the Republicans had not mustered an internal consensus sufficient to pass any of a number of compendiums of changes to the act, and had accomplished only the defanging of individual mandate. The contested politics of the ACA would nonetheless continue. The Medicare and Medicaid mosaic, however, has stood the test of time. These two programs did not encounter the turbulence and policy adjustments in the immediate implementation period that characterized the Obama and Coalition mosaics. And they have not only persisted but expanded over time, in part because of demographic change, but also as a matter of deliberate policy choices. These observations suggest some nuances for the hypotheses in Chap­ ter 1 about the implications of different strategies of policy change for the level of political conflict and the durability of policy frameworks. First, it appears that the level of conflict over the legislative politics of reform is driven less by the scale of changes than by their pace. A shorter timeframe exacerbates conflict by compressing veto points in time, and this is the case whether the scale of change involves sweeping institutional replacement or multiple, smaller-scale adjustments. In each case the reform touches most aspects of the system and can trigger opposition at any point. A compressed timeframe also means that changes in organizing principles implied by reforms, whether initially explicit in the case of large-scale reforms or implicit in the case of multiple, smallscale reforms, become clear early on, raising the ideational stakes. The British experience provides a dramatic illustration. Throughout the various phases of the unfolding of the logic of the internal mar­ ket, initiated by the big bang of the Thatcher reforms, incrementally extended under Labour, and then accelerated by the Coalition mosaic, the principles underlying the functional role of the state moved progressively from those of an owner-operator to those of a single payer of independent providers. But these phases were marked by very different politics. The two fast-paced phases were highly conflictual, whereas the incremental Labour phase was a “gradual, step by step process … providing little opportunity for a confrontation on the principles underlying the model that finally emerged” (Klein 2013, lcn 7143). One can draw another example by comparing the ways in which a “individual mandate” to have health insurance – involving a shift in organizing principle from group-based to citizenship-based grounds of eligibility – was instituted in the Netherlands and the United States. In

Understanding Policy Change  543

the relatively non-conflictual Dutch case, the move was signalled well before it was made, and the ground was gradually prepared. Within the ACA’s rapid mosaic, the mandate was an immediate flashpoint and target of (failed) legal challenge and ultimate repeal. It must be granted, however, that this latter comparison is confounded by profound differences in the starting points for these processes.8 Furthermore not all fastpaced change is highly conflictual: Canada’s Parliament unanimously adopted physician services insurance at a time when both jurisdictional and partisan vetoes were muted. And although implementation encountered some resistance at the provincial level, within five years all provinces were participating in the federal framework, which became a settled feature of the policy landscape. A second nuance concerns our hypotheses about the durability of policy frameworks adopted through mosaic strategies. The contrast between the Johnson and Obama cases in this respect is telling. Both focused on a relatively small segment of the private insurance market and on the medically indigent. Medicare focused on coverage after age sixty-four – about 7 per cent of the private insurance market at the time. Medicaid targeted certain social assistance recipients who either had no coverage or relied on widely variable state plans. Both programs thus focused on those not in the workforce, leaving intact employer-based coverage and the norms and commercial reach of the private insurance industry. And while Medicare imposed an obligation on most employers and workers to contribute to Part A of the program, those contributions built on the well-accepted Social Security program. It is true that Medicare and Medicaid potentially affected all physicians and hospitals, but the two programs essentially added another (public) payer to the mix of private payers to which those providers were accustomed, and those relationships with other payers were left alone. No grand accommodation, such as that binding the medical profession and the state into exclusive or near-exclusive relationships as in Canada and the United Kingdom, was brought about. In contrast to this segmented mosaic, the Obama reforms made small adjustments that touched almost all actors in the health arena. Those reforms, too, were aimed at covering a relatively small population segment: those uninsured or underinsured under either public programs or private insurance. But in so doing the reformers made multiple changes in three streams, each with different implementation dynamics (Béland, Rocco, and Waddan 2016). They sought to regulate and structure the individual and small-group insurance market, to expand Medicaid, and

544  Remaking Policy

to regulate the underwriting practices and profit margins of private insurers more broadly – in addition to many other provisions added to the legislation as the price of passage. The changes thus affected, at the margins, not only all providers of covered services, but all insurers and many employers. In this respect the Obama reforms were more similar to the Coalition reforms in England. Although the latter effectively accelerated changes already under way under the previous Labour government, the organizational changes required affected all purchasers and providers of NHS services. In both the Obama and Coalition cases, the inevitable collisions of unanticipated consequences of these multiple changes – including implicit shifts in organizing principles that had not been recognized or acknowledged at the outset – fuelled opposition in both the health care arena and the broader political system. And in each case the complexity, incoherence, and pervasiveness of the changes made it difficult for proponents to build support by communicating the overall purpose and intended benefits of the reforms. The contrasts among these cases suggest some further hypotheses about the relationship between the complementarity of the elements of a policy framework and its durability. It might be that reforms will prove more durable either if they are products of large-scale big bang or blueprint strategies resulting in internally coherent policy designs or if they result from smaller-scale mosaic or incremental processes that yield segmented designs whose effects are relatively insulated from the broader arena. Policy frameworks resulting from mosaic strategies that involve multiple small adjustments across the policy arena are more vulnerable to unintended effects and deliberate unpicking. Our few cases are not sufficient to explore these hypotheses further, but they raise questions for further research. These observations also suggest the need to explore further the relationship between the enactment and the implementation phases of major reforms. The former typically involves the dynamics of the broad political arena in windows of opportunity; the latter involves the subsequent dynamics of the targeted policy arena itself. Nonetheless the enactment phase has important implications for implementation. First, as I have just argued, the design of the policy framework as determined in the enactment period has important implications for durability. Sec­ ond, the broad politics of the enactment period can persist after enactment, especially if the process was marked by a high level of political conflict. In such circumstances opponents might continue the battle by forming venue-seeking blocking coalitions, as experience with the Affordable Care Act quintessentially demonstrated. Third, the different

Understanding Policy Change  545

strategic types offer different opportunities for, and establish different constraints on, the emergence of new actors who might take the reforms in unanticipated directions. I return to this third effect below. Policy Outcomes: Shifts in Policy Logics in Four Nations Having considered the strategic decisions that led to policy change, I now turn to the impact of those decisions on policy logics. In Chapter 1 I set out in brief outline the transformation in policy logics that occurred  (or did not occur) in the United States, England, the Netherlands, and Canada over the “millennial” period from the mid-1980s through the first seventeen years of the twenty-first century, and I summarized each case in the concluding sections of Chapters 5, 6, 7, 8, and 9. These cases can now be pulled together in broad comparative perspective, to throw into relief the distinctive aspects of these shifts in each nation and to identify some common themes and trends. I began, in Chapters 1 and 2, by defining one of two dependent variables as the scale of change in the policy framework – defined in turn as an institutional regime with an inner logic of shared expectations about the allocation of resources for which the mechanism of collective enforcement is the coercive power of the state. This perspective requires one to trace changes in policy frameworks in terms of three respective questions: Who decides on the ongoing allocation of resources (the balance of influence)? What incentives, sanctions, and information do they have (the mix of instruments)? How is this distribution of power legitimated (the organizing principles)? Table 11.2 summarizes the changes in the policy logics in the four nations, and Table 11.3 is a stylized attempt to represent changes in each of the constituent dimensions of influence, instruments, and organizing principles. Table 11.4 presents some of these developments in quantitative terms, with the proviso that because of breaks in the data series it has not been possible to extend the comparison in the first two panels beyond 2012.

England In England the logic shifted from that of a state-run “national health service” to that of a state-funded and regulated system closer to a single-payer model. Changes in the 1990s, intended by a Conservative government to replace hierarchical superior-subordinate relationships with market-type contracting between purchasers and providers within the publicly financed system, were absorbed and mediated by

546  Remaking Policy Table 11.2. Shifts in Dominant Policy Logics, Four Nations, 1987–2017 Country  

Founding Model (as of 1980s)

Post-Reform Model (as of 2017)

United Kingdom (England after 1999)

Modified classic bureaucracy

Internal market

• compliance with rules and budgets within NHS state hierarchy, tempered by clinical autonomy and professional influence for physicians (especially hospitalbased specialists)

• negotiations between independently organized purchasers and providers, tempered by pre-existing networks

 

• universal coverage

• decision-making latitude within centrally determined budgets, process/outcome targets and regulatory requirements

 

• increased influence for some GPs

 

• formal distancing of state on singlepayer model

 

 

• universal coverage

Netherlands

Corporatism

Regulated oligopoly

 

• corporatist accommodation between state, social partners, social and private insurers, physicians

• mandatory insurance (comprehensive model)

 

• group-based coverage: social + private insurance, government programs

• aggressive pursuit of market share by privately organized insurers under universal mandate; market concentration; more active regulatory role for state

United States

Residual-shadow state/ individualism

Residual-shadow state/collective responsibility

 

• entrepreneurialism by private actors within mixed market of private and public payers

• mandatory insurance (complementary model)

 

• tax-subsidized employer-based private insurance as norm plus public programs for elderly and poor

• entrepreneurialism by private and public actors within mixed market of private and public payers; increased regulatory and fiscal role for the state

Canada

Self-regulation within public budgets

Self-regulation within public budgets

(incremental)

• accommodation between medical profession and state as core axis of single-payer plus mixed-market amalgam

• accommodation between medical profession and state as core axis of single-payer plus mixed-market amalgam

 

 

• increased cross-provincial variation in mixed market; some changes in eligibility, especially regarding drugs

Understanding Policy Change  547 Table 11.3. Scale Shifts in Policy Logic, Four Nations, 1987–2017 Country

England

Policy Shift

Scale Change (most significant changes in bold) Balance of Influence

Instruments of Control

Eligibility

Organizing Principles Function of State

National Health Service → internal market

S

H↔

C↔

Prov ↓

PF↑

M↑

N↔

Reg ↑

Pr ↔

PC↑

social/private insurance → mandatory private insurance

S↑

H↑

C↑

Reg ↑

PF ↔

M↑

G↓

Pay ↑

Pr ↔

PC↓

N↔

Del ↓

residual/shadow → complementary state

S↑

H↑

C↑

Reg ↑

PF ↔

M↔

G↔

Pay ↑

Pr ↔

PC ↔

N↑

Del ↑

S↔

H↑

C↔

Pay ↔

PF ↑

M↑

G↔

Pr ↔

PC ↔

N↔

S = state

H = hierarchy

PF = private finance

M = market

C= citizenship

Pay ↔ Del↑

Netherlands

United States

Canada

Key

single-payer plus mixed market (unchanged)

Pr = medical profession

PC = peer control

Prov = provider

G = group N = need

Reg = regulator

SP = specialist

Pay = payer

GP = general practitioner

Del = delegator

established networks, appropriated and reshaped by a successor Labour government in the 2000s, and further developed by a Conservative/ Liberal Democrat Coalition government after 2010. Through this process the split between public purchasers and independently constituted providers became entrenched. As a result the system took on some of the features of a single-payer model. The “single payer” in this model remained the central state, although actual purchasing decisions were increasingly made at the local level – after 2013 by consortia comprising

548  Remaking Policy Table 11.4. Health Sector Share of Economy and Public Finance, Public Share of Total Health Expenditure, Four Nations. 1985–2013 Country

Total Health Expenditure as % of GDP

Public Share of Total Health Expenditure

1985

2012

1985

8.0

10.9

75.5

Netherlands

7.1

11.8

United Kingdom

5.8

9.3

10.0

16.9

2012

Health Share of Total Government Expenditure 1985

2013

70.1

12.6

17.6

73.3

85.8

10.3*

16.9

85.8

84.0

10.8**

16.0

39.6

47.6

10.6

20.5

(per cent) Canada

United States * 1995 ** 1990.

Sources: Total health expenditure and public share of total health expenditure from Organisation for Economic Co-operation and Development, OECD Health Database 2014, accessed 1 October 2014; health share of total government expenditure: from OECD, OECD SocX Social Expenditure Database, accessed 6 August 2017.

private general practices and governed by boards that include representation from clinical specialists, nurses, and local authorities. This shift represented a significant alteration in ideas about the functional role of the state from owner and employer to regulator and delegator, even as the state’s role as payer remained constant. And even as exchange-based “commissioning” replaced hierarchical relationships at the local level, new hierarchical lines of accountability for both purchasers and providers were established. The mechanisms of hierarchy shifted from centralized line-item approval of budgets and employment of personnel to the setting and enforcement of standards of behaviour. As shown in Table 11.3 and further discussed below, these changes made for an increase in the weight of exchange-based instruments with little if any diminution in the weight of hierarchy – together they resulted in a quantum increase in the generation of information about performance as a tool of social control. At the same time the autonomy of individual medical practitioners was increasingly constrained on two fronts. First, the rise of commissioning consortia made for increased peer control over general practice. Second, in response to  several high-profile instances of scandalously poor care, mechanisms of medical self-governance were strengthened and infused with lay representation.

Understanding Policy Change  549

Although these changes amounted to a substantial upheaval of the system, there was very little change in the overall balance of influence across the state, private finance, and the medical profession in decisionmaking about the allocation of resources. The public and private shares of health care finance remained relatively constant (see Table 11.4), although the scope for provision by privately capitalized providers within the public system marginally increased. Nonetheless there were some significant shifts of influence among health care providers (such as strengthening the role of some GPs and the instruments of collective professional control) and within the structures of the state hierarchy (enhancing the influence of some entrepreneurial managers and central evaluation and monitoring bodies). Overall, the increased significance of market-oriented instruments – including not only the changes related to Clinical Commissioning Groups and private capital, but also greater financial latitude for hospitals and greater choice among specialists and hospitals for patients – made for ongoing turbulence in addition to the vestigial pattern of periodic ad hoc political interventions characteristic of the previous hierarchical system.

The Netherlands One of the most interesting and highly watched examples of health care reform internationally took place in the Netherlands, involving a fundamental shift in logic from a public/private split between monopolistic social insurers and competing private insurers to mandatory universal coverage among private insurers free to compete within a common regulatory framework. This unique comprehensive model can be seen, depending upon one’s perspective, as universalizing either social insurance or private insurance. The formal constitution of insurers as private entities, and the fact that for-profit status was not prohibited for insurers (as it continued to be for providers) suggested a tilting of the model in a private direction. The mandatory nature and tight regulation of insurance, however, suggested a social insurance model, and the increased concentration of the insurance industry meant that competition was limited. Moreover the reforms were tempered by the underlying logic of the distinctively Dutch “social middle ground” blending public and private purpose, even as the formal institutional structure of corporatism faded. Hence the implications of the reforms for the influence of private finance, shown in Table 11.3, cancel out to neutral.

550  Remaking Policy

Clearly, however, these “market-oriented” reforms made for a substantial increase in the role of the state. Corporatist regulatory institutions were transformed formally into quasi-independent state agencies, meaning that the state became less an authoritative “shadow” under which self-regulatory organizations of civil society reached agreement, and more an explicit regulator in itself – thus also reducing the weight of peer control mechanisms in the instrumental mix. These new institutions took over from their corporatist predecessors the role of managing substantial stocks and flows of information – at first to administer the risk-adjustment mechanism so central to the functioning of the multiinsurer framework and later to oversee the quality of care provided. (This shift is represented in Table 11.3 as a decrease in the “delegator” role of the state for comparative purposes. Historically, however, the concept of delegation fits ill with the Dutch understanding of civil society, in which organizations exercise inherent, rather than delegated, authority, as discussed in Chapter 4.) Fiscally the role of the state expanded to embrace the collection and risk-adjusted redistribution of about half of premium revenues in the mandatory system. Finally, the Dutch reforms represent a subtle but profound ideational shift in the basis of entitlement to health care, as part of an ongoing evolution of concepts of citizenship. The obligation and entitlement to have comprehensive health insurance coverage was no longer restricted to those whose occupational status tied them to a social insurance system. The enactment of a universal mandate extended the ambit of compulsory coverage to the entire population as a condition of membership in the polity. Such a concept was not entirely new, given that a universal tier of coverage for long-term and chronic care, accounting for about 40 per cent of health expenditure, had existed since the 1960s. But the universal mandate to have comprehensive insurance also for acute care marked the end of the group-based definition of eligibility.

The United States Although it touched on almost all aspects of health-care finance and delivery, the focus of the mosaic Affordable Care Act of 2010 was largely on two of the four worlds of coverage I described at the beginning of Chapter 6: the uninsured population and the individual insurance market (also including small employers), together amounting to about 20 per cent of the population at any given time. In these areas the legislation increased the weight of state influence in both regulatory

Understanding Policy Change  551

and fiscal terms by establishing a universal requirement (with some exceptions) for individuals to hold health insurance; creating government-sanctioned health insurance exchanges to regulate the individual private insurance market, facilitate the purchase of insurance by individuals, and administer federal subsidies; and expanding Medicaid to become an income-tested program, rather than one aimed at only some low-income groups, in those states that agreed to the expansion. The ACA also made multiple but marginal changes in the worlds of Medicare (related largely to measures to control costs and encourage innovation in delivery) and employer-based insurance (by increasing security of coverage through regulation). Private insurers lost some discretion in underwriting, and were subject to some constraint on their profit margins. These various changes are represented in Table 11.3 as increases in the weight of the state in the balance of influence across interests and in the weight of hierarchy in the instrumental mix. But because the reforms actually expanded the market for private insurance by mandating and further subsidizing it, this augmentation of the state occurred with little diminution of the weight of private finance and market instruments. Private insurance, especially employer-based insurance, continued to be the modal form of coverage. Again it is on the ideational dimension that the reforms might prove to have their greatest impact. The existing basis of legitimate eligibility for health care as grounded in relationship to the market – either through employment status, consumership, or disengagement on legitimate grounds, principally age, disability, or dependent children – in order to qualify for government programs was complemented by a new and more fundamental ground in the relationship to the state. As in the Netherlands, access to health care became not only a right, but a responsibility of membership in the polity: the so-called individual mandate. Exemptions to this principle robbed it of some of its force, but the principle itself represented a fundamental ideational shift – as evidenced by the facts that the first and most existential legal challenge to the ACA, ultimately unsuccessful, targeted the individual mandate as an unconstitutional exercise of federal power, and the Republicans’ repeal attempt, when distilled to its essence, focused on the mandate as well. Three years of experience with the mandate had embedded its logic only unevenly in the expectations of consumers, insurers, and providers. The repeal of its formal sanctions would test the momentum of this shift. Much would depend on whether a political settlement could

552  Remaking Policy

be reached to recognize citizenship rights and obligations, through mandate or some functional equivalent.

Canada The Canadian case can be described simply: very little change occurred in the founding model of the health care state that was established in the 1960s. The model, which bound physicians and provincial governments into bilateral monopolies and established the relationship between the medical profession and government as the central political axis of the system, remained essentially intact for more than four decades. Under Canada’s unique single-payer model, physician and hospital services are funded almost exclusively – more than 98 per cent for physicians and more than 90 per cent for hospitals – from the public purse; other sectors are financed by a mix of public and private sources. Countervailing trends – changes in health care technology that moved services away from in-patient hospital care, and policy changes that expanded the role of the state in providing coverage for prescription drugs outside hospitals – yielded on balance a contraction of the scope of the single-payer system but a much more modest shrinkage of the fiscal footprint of the state. These trends left the profession-state relationship at the political core of the system. These effects are shown in Table 11.3 as the persistence of established patterns of influence, instrument, and organizing principles. Even among the three pillars of the health care arena – the state, the profession, and the structure of private finance – there was little change. After moving from a shared-cost to a block-grant model of funding in the late 1970s, the federal government exercised very little financial leverage over provincial health insurance plans, notwithstanding periodic rhetorical contests between federal health ministers and one or more of their provincial counterparts. The federal contribution to provincial health care spending declined fairly steadily throughout the 1970s and 1980s, but even with the restoration of the federal transfer in the mid-2000s the federal government formed neither the capacity nor the will to hold provinces to account. The persistence of the single-payer model was attributable not to federal enforcement, but to the embedding of the model in the profession-state relationship and in public support. Within the medical profession, nothing comparable to the empowerment of general practitioners vis-à-vis specialists in England can be observed in Canada. Nor was there a counterpart

Understanding Policy Change  553

to the restructuring of the insurance industries that occurred in the United States and the Netherlands.

Policy logics and unintended change As I have argued throughout this book, policy logics are the result of the intersection of key elements of the policy framework – relating to the balance of influence it ordains, the mix of instruments of social control it establishes, and the organizing principles it embeds. As we have seen, alterations to one or more of the intricately interrelated elements can generate unintended changes as each alteration reverberates through the framework. In particular, we have observed how shifts in the balance of influence and/or instruments can trigger unintended shifts in legitimating principles. This is true even in the case of the landmark “internal market” reforms of 1989–90 under the Thatcher government in the United Kingdom. The concept of the transformation of the hierarchy of the National Health Service into an internal market became a defining feature of the reforms in British policy discourse and a magnet for international attention. But the designers of the reforms did not begin with a broad intention to create a “market” as a matter of principle; rather, that concept “emerged as the by-product of policies designed to change the NHS’s dynamics, by giving more autonomy to the providers and introducing more incentives to efficiency” (Klein 2010b, 150). Despite the Conservatives’ own subsequent growing reluctance to use “internal market,” the label stuck. In part this was because the Labour opposition repeated it incessantly as a term of opprobrium, and because it summed up the transactional logic that was being introduced. The label mattered. It fed a different way of thinking about the role of the state: not as provider of health care, but as funder and regulator of autonomous providers. It connoted a fundamental shift from a “national health service” model to a “single-payer” model – a shift that would continue, and continue to be contested, over the next two decades. Similarly in the case of the Obama reforms in the United States in 2009–10, what came to be a synecdoche of the reforms – the individual mandate – was adopted in the minds of the designers not as a defining matter of principle, but as a practicality. The individual mandate was seen as a technical condition for the extension of coverage through regulated private insurance with open enrolment at community-rated premiums, and thus a political condition for the participation of insurers. Only a mandate could prevent the adverse-selection problem, whereby

554  Remaking Policy

healthier individuals forgo health insurance at community rates, leaving insurers with pools of high-risk individuals and yielding a rising spiral of premium rates. Obama himself, indeed, originally had opposed the notion of a mandate, coming to accept it in the spring of 2009 on technical grounds and only with a hardship exemption (Lizza 2012). Even the definition of a 95 per cent target as approximating “universal” coverage was generated in the course of negotiations with the hospital industry regarding volume-based cost reductions. Despite this practical genesis, the adoption of the individual mandate fundamentally shifted the ideational premise of eligibility from one of membership in “deserving” groups, employment, and consumerism to one of obligation and citizenship. As framed by opponents, conversely, the mandate came to symbolize an overreaching government. In the United Kingdom, practical considerations during the negotiation of the mosaic of reforms that became the Health and Social Care Act of 2012 also had profound ideational consequences regarding the role of the state. The elimination of Primary Care Trusts and Strategic Health Authorities came about not as a matter of initial design, but in the course of negotiations between the two parties in the Coalition government. As various functions were assigned to “consortia” of private practices on the Conservative model and to local authorities on the Liberal Democrat model, PCTs and Strategic Health Authorities simply became redundant. Again, practical considerations yielded broader implications for organizing principles: the removal of these two recognizable tiers of the NHS hierarchy cemented a perceived shift away from a national health service and towards a single-payer model. Drawing Lessons: Market Reforms and the Hybridization of Health Care States The shifts in policy logic described above essentially represent a hybridization, not a wholesale change, of the founding model of the health care state in each nation: the centre of gravity – the state hierarchy in England, the private market in the United States, the “social middle ground” in the Netherlands, and the profession-state accommodation in Canada – remained. Ideational shifts put in motion by the English, US, and Dutch reforms might still exert a gravitational pull of their own, but those processes are slower-moving and their full effects are yet to be seen. Much commentary has focused on the hybridization of Bismarckian welfare states, which are seen as moving to incorporate market-like

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elements of choice and competition (from the residual model) as well as universal coverage and a greater reliance on general taxation (from the NHS and single-payer models); see, for example, Hassenteufel and Palier (2008) and Steffen (2010). Others, such as Rothgang et al. (2005, 2010), have extended this argument across all types of welfare states. The cases in this book reinforce this perception of hybridization, and shed light on the underlying dynamics. The “market-oriented” reforms pursued in England, the United States, and the Netherlands were particularly amenable to this process of hybridization. The basic concepts on which the reforms in each nation drew, as most notably outlined by Alain Enthoven (1978, 1985, 1987), were protean enough to appeal to British Conservatives eager to import market discipline into the public sector, Dutch coalitions of both centre-right and centre-left seeking to reconcile deeply held values of solidarity and subsidiarity within a universal framework, and US Democrats who sought to appeal to both conservative Democrats and Republican moderates in an increasingly polarized political setting. Many permutations and combinations of elements thus could be accommodated under a “market reform” umbrella as various coalitions were built. As the logics of these new frameworks intersected with those of the pre-existing systems, further hybridization occurred, aided by the activity of institutional entrepreneurs. In all of this diversity, however, two common phenomena stand out: the continuing weight of state influence and the overall increase in social control.

The role of institutional entrepreneurs The changes in the legislative architecture of the British, Dutch, and US health care states came about as the result of conditions and actions in the broad political realm, well beyond the health care arena itself. But the impact of these changes was mediated by actors within the health care arena, and a full story of those shifts therefore requires attention to their behaviour as well. Of particular note are “institutional entrepreneurs,” whose emergence was a by-product of the market-oriented logic of the reforms. Like all entrepreneurs, these actors saw and availed themselves of opportunities to recombine resources in ways that would yield new value for some set of beneficiaries. I call them “institutional entrepreneurs” because the new products they generated took the form of hybrid institutional forms to govern health care decision-making. They did so by availing themselves of public mandates inherent in the

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new legislative architecture in order to mobilize novel configurations of public and private resources. The reader is referred to Chapter 10 for an elaboration of these cases and the theoretical basis of my argument; here I draw some observations from the cases and tease out some broader implications. In England entrepreneurial GPs and hospital executives seized the opportunities offered by fundholding and trust status, respectively, to expand the scope of these models within the provider populations beyond what originally had been contemplated. The activity of fundholders, moreover, triggered other forms of institutional innovation among GPs. In the Netherlands it was primarily social insurers who responded to the elimination of their monopoly status to drive a wave of restructuring in the health insurance industry, and thus to prepare the ground for the unfolding of the universal regime to come. In the United States the requirement that health insurance exchanges be established in each state spurred some state actors to develop such exchanges on a variety of models. Even the decisions of a majority of states to default wholly or in part to the federally administered exchange made for a wide range of variation in the division of functions between federal and state levels and in governance structures. As well, the decision of the federal government to contract with pre-existing, private, web-based brokers to develop more locally tailored alternatives introduced yet another dimension of complexity and institutional variation into the mix. Other examples of entrepreneurialism led to organizational change in each nation, but they involved changes in the public or private sector, or transfers between sectors, rather than the creation of new, sectorspanning entities. England saw the proliferation of “mutuals,” or social enterprises owned by employees and/or beneficiaries, most of them spun off from public sector organizations such as PCTs, as the latter divested themselves of responsibility for direct provision of services. In the United States the Accountable Care Organization model established in the Affordable Care Act as an option for the remuneration of providers under Medicare generated a miscellany of organizational forms. In both England and the United States, however, these mutuals and Accountable Care Organizations were private sector provider organizations that contracted with public payers on fairly traditional grounds, not boundary-spanning organizations that exercised authority under a public mandate. Because institutional entrepreneurs emerged from existing power centres – publicly funded providers in England, social insurers in the

Understanding Policy Change  557

Netherlands, and a combination of public and private sector actors in the mixed health care economy of the United States – their activity did not shift the centre of gravity within the balance of influence. Rather, their effect was to create new institutional intersections across sectors – which variously facilitated or modified the course of reform, depending on the opportunities afforded by the political strategy of reform. The impact of entrepreneurs in Britain occurred after the big bang of the internal market reforms, broadening the scope of some elements of the reforms beyond what had been intended and creating new centres of political influence for GPs and hospital executives that would have profound implications for subsequent reform episodes. The slow pace of reform in the Netherlands, in contrast, meant that entrepreneurs played key roles as co-creators of the changes as they were adopted, by progressively blurring the distinction between social and private insurance even before the final adoption of the universal framework. In the United States a fast-paced adoption of the Obama mosaic, followed by a protracted implementation period, gave entrepreneurs footholds with which to increase the variety of institutional forms within the framework of health insurance exchanges as originally conceived. One might well ask whether these new institutional intersections constituted a new phenomenon. After all, organizations at the intersection of the public and private sectors – “delegated governance” – have long been a feature of health care and other policy arenas in advanced nations. What, if anything, is distinctive about the institutional entrepreneurialism we observe as a feature of market-oriented reform of publicly funded services? In the transition to an industrial society, governments in both liberal and coordinated market economies turned to pre-existing occupational groups to enforce standards of practice among their membership. These “private governments” of the major professions – law, medicine, and others – exercised public authority in an agency relationship with the state on the basis of their (private) command of the relevant expertise (Gilb 1966; Streeck 1992, 131–2; Streeck and Schmitter 1985). A related example is the use of the infrastructure and expertise of industry-based sickness funds as the carriers of compulsory social insurance in the Netherlands, Germany, and other Bismarckian systems. The incorporation of these funds into the structures of the welfare state meant that they became “institutions subject to public law; from that moment on, they were private parties allocated with a public status” (Helderman et al. 2014, 13). A somewhat analogous phenomenon in liberal market

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economies is the creation of public utilities by awarding monopolies to private firms, rather than to state enterprises. What marks all of these examples, indeed, is the establishment of a monopoly – over professional practice, or compulsory insurance within a given region, or provision of necessary infrastructure – by “ordaining” an existing private entity as an agent of the state. Although the private entity might accept some regulatory constraints as a condition of its acquisition of a public mandate – such as lay representation in the governance of professional self-regulation and subjection to price and product regulation in the case of utilities – these grants of authority did not create new, sector-spanning entities. Another, non-monopolistic practice that has been held up as an example of delegated authority in the United States is the tax subsidization of health insurance offered by private employers, which is said to incorporate the private sector into America’s “divided welfare state” (Hacker 2002). But this practice amounts to flowing funds in support of an activity already within the power of private entities, not the granting of a public mandate empowering private actors to do something they could not have done otherwise. The sites for institutional entrepreneurialism created by market-­ oriented reforms in England, the Netherlands, and the United States differed from all the above examples in at least two ways. First, these sites were multiple and decentralized, although the reforms also entailed the creation of central regulatory bodies. In the Dutch and US cases, the new sites were non-monopolistic. Under the Dutch reforms social insurers lost their regional monopolies and entered into a struggle to build from their respective regional bases to capture market share. Under the US version of mandatory insurance, state-sponsored exchanges provided an exclusive route of access to subsidized private health insurance; they nonetheless faced competition from private exchanges in the market for non-subsidized insurance, as well as the prospect that private exchanges might also be designated as routes of access to subsidized coverage. Under the British internal market reforms, GP fundholders and provider trusts offered, at least in principle, rival sources of service for patients and commissioners, respectively. The degree of actual competition varied widely across localities in all of these cases, and in many areas it was almost non-existent. But if not competitive, these local markets were at least contestable, and local monopolists or oligopolists risked being displaced by rival entities or management teams. In short the circumstances were heterogeneous enough to allow for the

Understanding Policy Change  559

development and diffusion of institutional innovation and for the demonstration effects of success and failure in a way not possible under centralized and monopolistic self-regulatory and public utility models. In one case the reforms did create hybrid public/private local monopolies. Under the Coalition reforms in England, Clinical Commissioning Groups, once established in their respective localities, faced no competition for GP practices as members: GPs were required to join their local consortium. But because they were decentralized to the local level, the CCGs created 152 separate platforms for experimentation and demonstration within the parameters of central regulation. The publication of the Five Year Forward View planning document by NHS England in 2014 invited and encouraged such experimentation. Second, the reforms went beyond simply ordaining the established functions of private bodies by backing them with state authority and/ or funding. In some cases they created new platforms for the exercise of public mandates, and allowed for some variation in the institutional structure of these new entities. CCGs in England and health insurance exchanges in the United States had some scope to structure their own governance and constitutions within parameters established by the centre. In cases in which existing bodies were endowed with new public mandates, those mandates expanded the scope of those bodies, rather than simply offering public resources to reinforce their existing functions. In England GPs acquired new power to purchase non-GP services, and Foundation Trusts gained increased access to private capital and freedom to enter into joint ventures. In the Netherlands social insurers acquired access to national markets. In short, by expanding public mandates and creating multiple sites for their exercise, the platforms established by market-oriented reforms in the health care arena promoted the development and diffusion of institutional innovation in ways not possible under earlier public/private hybrids (and not observed in the “control” case of Canada). Together with the overarching regulatory architecture also put in place by these reforms, institutional entrepreneurialism resulted in a range of complexity in governance that created monumental challenges of accountability.

The continuing weight of the state In all four nations reviewed in this book, as elsewhere, proposals for the greater use of exchange-based or “market-oriented” instruments triggered heated political debate about the concomitant “privatization”

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of health care. As Table 11.4 shows, however, the fiscal presence of the state in the health care sector – and conversely the share of health care expenditure in the fisc – grew in the Netherlands and the United States from 1985 to 2012. In the United Kingdom the public share of health expenditure remained relatively constant, and health continued to consume a large proportion of public expenditure. Ironically, only in Canada, where market-oriented reforms in the physician and hospital sectors were explicitly resisted, did the fiscal share of the state contract as the design of the single-payer system failed to keep pace with technological change. Even so this contraction was marginal: the public share shrank from 76 per cent to 70 per cent from the 1970s to the 1990s. The Canadian state actually expanded its presence in the prescription drug and long-term care sectors, even as these areas of mixed finance grew more rapidly than did the physician and hospital sectors covered by the single-payer model. In short, market reforms did not diminish the influence of the state in fiscal terms.9 Rather, what changed were the organizing principles underlying state influence. The state’s legitimate functional role was increasingly understood to be one of regulation and contracting, rather than direct management, even where, as in the Netherlands and the United States, the scope of public authority expanded. This aspect of market-oriented shifts in policy frameworks has been broadly remarked upon, not only in health care but also in other policy arenas. To understand the evolution of the role of the state under market-oriented reforms, we need to understand the market as a type of institution – in the sense used here as a collectively enforced set of expectations governing behaviour. The principal market mechanism for enforcing expectations is the contract. Contracts are enforceable because violations will incur economic sanctions such as removal of custom from the offender, but also because they are grounded in a legal framework enforced by the state. In other words markets are social and legal as well as economic constructs (Vogel 2007; Zuiderent-Jerak, Grit, and van der Grinten 2010). Changes to the market as an institution therefore inherently touch upon the role of the state. And when those changes are driven by a process of policy change in which the government of the day is pursuing multiple social objectives, as in the case of health care reform, the role of the state is likely to change as well. As Vogel argues in reviewing “liberalizing” market reforms in Japan and elsewhere, “if markets are institutions, market reform should consist of building institutions more than of removing constraints” (2007, 25). Accordingly,

Understanding Policy Change  561

simple regulation-versus-competition and government-versus-market dichotomies do not capture the complexity of these reform processes. Vogel describes these liberalizing reforms as a creative, not a destructive, project, which entails “a complex process of building new market institutions” and which also needs to take account of societal responses (29, 39). In areas involving public services and utilities, as noted in my earlier discussion of risk-buffering, liberalization typically is hedged by provisions aimed at protecting recipients who might otherwise be disadvantaged by the reforms. In both the English and Dutch cases, regulators struggled to balance sector-specific requirements with the demands of broader competition regimes – often accommodating the former through informal modes of resolution (Sanderson, Allen, and Osipovic 2017; Sauter 2014). As Landry and Levin (2007, 16) note with considerable understatement, this simultaneous pursuit of both competition-inducing and competition-constraining objectives places a heavy “cognitive burden” on regulators. The simultaneous pursuit of contradictory objectives in a framework of competition – or at least of voluntary contracting – within constraints is also likely to yield an ongoing process of cycling among policy options in an effort to find the optimal balance in any given policy framework.

From trust/status to contract/regulation: The growth of social control What is even more notable about the shifts described in Table 11.3 than the continuing weight of the state is the overall increase in the level of social control of various types over the financing and provision of health care. Rothgang and colleagues have argued that the hybridization of advanced health care states occurred as new modes of social control were grafted onto existing systems that once corresponded to distinct types. In their words, hybridization results from “the introduction or strengthening of those coordination mechanisms (hierarchy, markets and self-regulation) which were traditionally weak in the respective type of healthcare system” (Rothgang et al. 2005, 187). Various scholars have seen this layering of sources and instruments of social control as an increase in regulation common to advanced capitalist systems, and have sought to capture it through concepts of “regulatory capitalism” (Levi-Faur 2005), “regulatory space” (Hancher and Moran 1998), or the “post-regulatory state” (Scott 2004). The essential insight of these contributions is the recognition of the increasing interconnectedness of forms of social control as governments seek to act through

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what has been called “meta-regulation”: stimulating, steering, guaranteeing, and auditing private mechanisms of market governance and professional self-regulation (Scott 2006, 664). The open question left by these concepts is whether the weight of state influence is increased by this extension of its scope over other instruments, or weakened in competition with them. Any definitive answer to this question must await further experience, investigation, and analysis. On the evidence presented in this book, one can make three observations, at least for the case of health care. First, the increased use of contracting in the health care sector has been associated with the elaboration and empowerment of governmental regulatory structures at both the central and subnational levels to govern a wide variety of private and public private entities engaged in the collective oversight of their members. Second, the overall weight of social control bears ever more heavily on decision-making by individuals in the health care arena, and especially in the agency relationships between providers and recipients of health care that lie at the heart of the health care delivery. Third, the incentives facing private sector entrepreneurs in systems of distributed finance such as those in the Netherlands and the United States have driven a further concentration of power. Because regulatory constraints limit the potential for profit, insurers and providers sought to expand their customer/patient base – both to realize economies of scale and to buttress their positions in negotiating contracts in which the currency was “enrolled lives” and catchment areas. In both the Netherlands and the United States, this dynamic propelled a series of mergers on both the demand and, to a somewhat lesser extent, the supply sides of the market (Götze 2015; Halbersma et al. 2011; Sorkin 2015). In addition to the sheer weight of social control and concentration of power, the associated complex structures of “regulation” established tangled lines of accountability that placed both complementary and contradictory pressures on health care decision-makers. These complementary and contradictory forces have created currents of positive and negative feedback that are likely to drive all of these systems through continual cycles of adjustment within their respective policy frameworks. Filling Out the Picture: Experience in Other Nations The theoretical framework I have presented in this book appears to work well in explaining the political dynamics of policy shifts in the

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cases reviewed. The wide range of governmental institutional structures and health care states embraced by our set of cases gives some confidence in the reliability of the framework. Although a full examination of other national cases is beyond the scope of this already lengthy book, a brief treatment of other cases can begin to test the broader applicability of the framework and suggest lines of future enquiry.

Germany One case in particular recommends itself in this regard. Germany presents an interesting puzzle: it is another example of incrementalism in the face of an opportunity for more comprehensive change, and its similarities and differences with one of our full cases, the Netherlands, present rich ground for comparative inquiry. In a number of respects, the political systems, health care states, and policy choices of Germany and the Netherlands present some striking parallels. Both had a long history of corporatism and neo-corporatism, in which status- and group-based relations between employers and employees absorbed and incorporated the shift to contractual relations under industrialization (Streeck 1992, 58–64). In each country, intermediary organizations and the state occupied a shared political space (Crouch 1993, 50–63), although the state played a stronger role in tripartite corporatist structures in the Netherlands than was the case in Germany’s more decentralized (to the level of industries and firms) and bipartite model for much of the post–Second World War period (297–301 passim). Reform in a Bismarckian health care state In the health care arena, these corporatist relationships were manifested in both countries as a bifurcated system of Bismarckian social insurance for the bulk of the population and private insurance for higher-income individuals and some categories of workers such as civil servants. The German model dated from the late nineteenth century; the Dutch model was founded by the German occupying government during the Second World War. Both systems centred around largely self-regulatory employer- and employee-managed sickness funds, which negotiated with self-regulatory associations of physicians. Indeed, even more than in the Netherlands, “the [German] state delegated far-reaching powers to corporatist management bodies made up of equal numbers of representatives of the sickness funds and the doctors or hospitals (‘collective self-government’) to negotiate the details of implementation and

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regulate price, quantity and quality of services in binding collective agreements … The state maintained oversight over these associations and institutions, but allowed them a great deal of latitude” (Gerlinger and Schmucker 2009, 6). The two systems differed, however, in the relative size of the private sector. In the Netherlands it comprised about one-third of the population, who were ineligible for social insurance; in Germany, where private insurance was an optional alternative to social insurance for individuals above a given income level, the private share was considerably less, at one-tenth of the population. In both countries these arrangements came under increasing stress with the escalation of health care costs in the 1980s. The problem manifested itself, however, in different ways. In the Netherlands, where government-imposed budget caps and co-payments were successful in moderating the rate of cost increase in the social insurance sector, the principal issue was the erosion of solidarity as private insurers increasingly abandoned their self-regulatory commitment to community rating. In Germany, where cost-containment measures in the proportionately larger social insurance sector were less successful, the problem was one of increased pressure on the payroll base, further eroding the international competitiveness of German industry (Helderman and Stiller 2014). In response to these stresses, policy-makers in both nations embarked upon reform of the system of financing health care. In both cases the reforms were begun by coalition governments led by Christian Democratic parties in alliance with smaller liberal parties, with renewed mandates under strong leaders – Helmut Kohl in Germany, Ruud Lubbers in the Netherlands – who would go on to serve as the longestserving heads of their respective governments in modern history. In both cases health care reform complemented economic and labour market reform as part of a broader agenda. And in both cases the reforms effectively were initiated through negotiations with a social democratic party – in Germany through negotiations between a centre-right coalition government and the social democratic opposition (Altenstetter and Busse 2005, 128; Stiller 2010, 81–3), and in the Netherlands through the formation of a right-left coalition government very shortly after the first wave of reform. In both cases the substance of reform centred on a system of regulated competition among insurers, in the belief that such competition would lodge the responsibility and incentives for better managing costs where the necessary expertise and bargaining power resided: with insurers

Understanding Policy Change  565

and physicians. In both cases the process of reform was driven by a “programmatic coalition” comprising politicians and experts (principally economists) who were independent of the major social partners and health system actors, who believed strongly in the greater efficacy of market-type, contractual instruments, as opposed to corporatist peer control, in driving efficiency in health care, and who advocated a regime of regulated competition. (For the German version of this phenomenon, see Hassenteufel et al. 2010; for the Dutch case, see Lieverdink 2001.) In both cases an expert commission in the late 1980s (in the Netherlands the government-appointed Dekker Committee, reporting in 1987, and in Germany a parliamentary commission comprising members of the federal legislature and independent experts, reporting in 1990) provided the vehicle for this programmatic coalition and the crucible of reform ideas. Finally, both nations adopted a series of measures – with some cycling in the form of repeals by successive governments – over the course of the 1990s, until each engaged in a legislative spurt in the mid2000s (2005 in the Dutch case, 2007 in the German case) to bring about a regime of universal coverage, with regulated competition among insurers. And in both cases reform brought about a strengthening of the state in its regulatory and its fiscal roles and an erosion of formal corporatist structures. So much for the remarkable similarities between the two cases. Now for the important differences, which involve both the strategy followed and the end result. Whereas the Dutch reform process culminated in the transformation of the bifurcated arrangements for social and private insurance into an all-encompassing universal scheme, the German reforms dealt almost entirely with social insurance, and left the private insurance sector intact, with only an additional layer of regulation. There is no German parallel to the consensus around a universal framework abolishing the distinction between social and private insurers that emerged in the Netherlands in the latter half of the 1980s and that provided both a schematic for reforms and a “shadow of the future,” shaping the expectations and behaviour of actors in the health care arena. Instead the German reforms were negotiated, largely between the Christian Democrats and the Social Democrats, on a periodic basis as agreements could be struck. As in the Dutch case, this process transformed the social insurance sector and added a new organizing principle – health insurance coverage as both a right and an obligation of membership in the polity – to the system as a whole.10 But because it retained the bifurcated nature of social and private insurance

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and left private insurers with the freedom to risk-select their clients subject to only modest constraints, it was much less transformative of the overall system than was the case in the Netherlands (Helderman and Stiller 2014). The persistent incrementalism of German health policy development – variously described as a “patchwork” (Altenstetter and Busse 2005), “not the big-bang,” (Lisac 2006), or simply as “incremental” (Gerlinger and Schmucker 2009) – has been the subject of considerable commentary. On one level this pattern is not surprising: the institutional barriers to reaching a comprehensive agreement were considerably higher than in the Dutch case. The upper house (the Bundesrat), composed of representatives of the state governments, was in a much stronger position in practice than was the Dutch Senate, despite the formal similarities in the structures and powers of the two upper chambers (Broeksteeg and Knippenberg 2006). Furthermore the more decentralized structures of German corporatism complicated the process of reaching and maintaining consensus at the national level (Crouch 1993; Katzenstein 1987). These structures have notoriously been credited with yielding persistent incrementalism and “institutional gridlock” in the policy process (Crouch 1993; Katzenstein 1987; Schweiger 2010). Nonetheless even these grid-locked institutional structures yielded windows of opportunity for major change in health care policy in both the 1990s and the 2000s. The Seehofer reforms: Picking the low-hanging fruit It is difficult to conclude that a window of opportunity for major change, albeit on a negotiated basis, did not exist in Germany in the early 1990s. The Kohl government was in its third mandate. The economic stress of the historic process of German reunification compounded the urgent need to reduce pressure on payroll-based contributions and placed health care centrally on the agenda. Neither major party could afford to be seen to stand in the way of reform, giving both the incentive to reach an agreement. In the context of such an opportunity, the absence of comprehensive change can be understood, yet again, only by looking at the decisions made by strategic actors in that moment. Several features of the Dutch context that enabled political actors to adopt a blueprint strategy were lacking in Germany. First, the Chris­ tian Democratic Union (CDU) in Germany did not enjoy the quasi-­ hegemonic status of its counterpart CDA in the Netherlands. Whereas the CDA or its predecessors had been part of every elected government

Understanding Policy Change  567

in the Netherlands since 1918, the CDU had experienced a relatively recent thirteen-year hiatus in opposition from 1969 to 1982. Second, the German process was marked by the exclusion of interest groups – not only those in the health care arena, but also the social partners (employers and unions) themselves – in contrast to the de facto informal incorporation of interests in the Netherlands (Altenstetter and Busse 2005, 128–9; Hassenteufel et al. 2010, 533; Stiller 2010, 82–4). Hence German partisan actors could not count on having their proxy interests in positions of influence over the subsequent course of reform. Furthermore the Social Democratic Party (Sozialdemokratische Partei Deutschlands, SPD), unlike Labour in the Netherlands after 1989, was not a coalition partner; rather, it held vetoes in opposition within the German federal bicameral legislature. Although its strength in the Bundesrat gave the SPD considerable power, it also placed the party in the unenviable position of potentially being blamed if negotiations failed to produce reform, yet with little incentive to agree to sweeping reform for which the government could claim credit. Moreover, as the stress of reunification did not abate, the increasing unpopularity of the Kohl government meant that the SPD reasonably could gamble that it would return to power in the near future.11 (In the event, intra-party disputes weakened the SPD, which did not return to power until 1998.) The 1993 reform in Germany thus resulted from a process in which both major parties wanted a deal, the CDU government did not have the consolidated authority to impose a big bang, and at least some members of the coalition of support for reform anticipated that they would be in a better position in the future. As in Canada in 2004 and England in 2002–05, these circumstances generated changes that were just large enough to allow all actors to claim credit (or avoid blame) in the short term, while laying the foundation for at least some actors to make further gains should their political position improve. Accordingly the time horizon the German reformers adopted was foreshortened compared to that the Netherlands, and the health minister driving the reforms, Horst Seehofer, focused on securing a CDU-SPD agreement on what could be enacted immediately, rather than on a broader framework to be enacted in steps. The result was, as in the Netherlands, the “liberation” of sickness funds to compete with each other under a regulated framework, including a risk-equalization mechanism (Busse and Riesberg 2004, 61–2). Sickness funds continued to set their own contribution rates and to collect all their own revenues – in contrast to the Dutch combination of pooled,

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income-scaled contributions set and collected by the state and variable flat-rate premiums set by insurers. Rough risk-equalization was accomplished by a government-administered transfer mechanism whereby, at the margin, each sickness fund either contributed or received funding depending on the demographic characteristics of its clientele – similar to the model that would be adopted in the United States in 2010. The reforms also strengthened the role of the state in setting the budgetary parameters of the system. Some observers of German health policy have characterized the Seehofer reforms as marking a “turning point” in the power relations among the state, sickness funds, and providers in favour of the state (Altenstetter and Busse 2005, 129) and as a “paradigm shift” to managed competition (Gerlinger and Schmucker 2009, 7). But even these characterizations are made in the context of commentary on the incremental nature of change in the policy framework. In comparative perspective, and especially in comparison to the Netherlands, both the scale and the strategic frame within which these changes occurred appears limited – the private sector was left entirely alone, central pooling mechanisms were kept small, and no expectations about future developments were established. During the period of the “Red-Green” coalition governments comprising the Social Democrats and the Green Party from 1998 to 2005, change in health care policy was strongly constrained by political deadlock. The CDU-SPD agreement of the early 1990s could not be replicated a decade later, and the CDU used its power in the Bundesrat – the chamber representing the German states – to block reforms initiated by the Red-Green government. The modest policy changes made during this period included the repeal of co-payment legislation introduced under the CDU-led coalition, the refinement of the risk-adjustment mechanism for social insurers by adding some measures of morbidity (as occurred in the Netherlands at the same time), and the provision of additional competitive tools to social insurers (allowing them to contract selectively with providers, as the Dutch sickness funds had been doing for a decade, and to offer differentiated packages of coverage). The grand coalition: Keeping all options open Then, in 2005, another window opened with the formation of a grand coalition government comprising the CDU and the SPD. German health care policy then indeed underwent an acceleration of change analogous to that which had occurred in the Netherlands after 2002. But whereas

Understanding Policy Change  569

in the Netherlands this process brought a pre-existing blueprint to conclusion with the adoption of a universal system, in Germany it led to the layering of elements separately onto the social and private insurance sectors. This is the real puzzle of the German-Dutch comparison. Why did the German process, with so many parallels to the Dutch and with the Dutch example so close at hand, not yield a similar scale of change? The answer lies not within the health care sector itself – where, if anything, one might have expected the proportionately smaller German private sector to be less capable of resisting encroachment – but in the relationships among political actors within German political institutions (Leiber, Greß, and Manouguian 2010, 561). The formation of the grand coalition was an extraordinary event, with only one precedent in post-war Germany. The coalition had a difficult birth, after more than two months in which the various parties struggled to form a government. After years of stalemate between the Red-Green coalition government and the CDU opposition, the coming together of the parties in government raised high hopes that deadlock could be broken (Stiller 2010, 69). But because of its tortuous genesis, and because it was essentially “an arithmetic necessity that both partners would have preferred to avoid” (Zohlnhöfer 2010, 15–16), scepticism also ran high. As was the case for the UK Coalition government in 2010, both parties had a strong interest in demonstrating that the coalition was more than “arithmetic,” to present itself as “a coalition of new possibilities” (16), and to find compromises that would prove it was capable of acting (Leiber, Greß, and Manouguian 2010, 561). The SPD was in a strong bargaining position in negotiating the coalition agreement. Given its more central location in ideological space in the German context – especially since adopting a Neue Mitte (new middle) agenda under Gerhard Schröder – Germany’s version of the New Labour agenda in the United Kingdom (Alan Jacobs 2011, 227–8) – it could credibly threaten to withdraw from negotiations and form a minority government, building ad hoc issueby-issue support. Moreover CDU leader Angela Merkel was bent on having the chancellorship, and paid a “high price” to secure that end by agreeing to the allocation of the bulk of the spending portfolios, including health, to the SPD (Proksch and Slapin 2006, 553). Health featured prominently in the ambitious agenda of the new government, along with reforms in the constitutional, labour market, educational, and pension fields, all while achieving the government’s top priority of fiscal consolidation. But the coalition’s ability to deliver

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on this agenda varied across policy areas – in fact, it simply imported into government the divisions between the parties that had existed when they faced each other as government and opposition. Thus the task of mobilizing a winning coalition varied in difficulty by policy arena, depending on the distance between the parties’ positions and on the tactical skills of the responsible ministers. In the pensions arena, for example, the parties were able to use the cover of coalition to enact changes that each recognized as necessary but that were politically unpopular. The coalition also provided the impetus to conclude negotiations on constitutional reform that had been under way under the previous Red-Green government. In other areas, such as privatization initiatives and labour market policy, the distance between the parties could not be bridged (Zohlnhöfer 2010, 22–9). Health policy fell into a middle ground: deadlock was avoided, but reforms were chosen so as to “keep all options open.” As in the 1993 Seehofer negotiations, each party sought to use the opportunity afforded by the grand coalition to find the common ground on which it could build in the future: The “keeping-all-options-open” kind of reforms, such as health care, must also be understood as a result of the coalition constellation. In this case, both partners believed that something had to be done, but at the same time they fundamentally disagreed on what that should be. Therefore, it was hard to find a shared concept to start with, and it was of paramount importance for the coalition partners to preserve as much future leeway as possible, in order to adopt the most favoured idea in case the next election provided them with a Bundestag majority. (Zohlnhöfer 2010, 26–7, emphasis added)

In this context the Dutch model played a role analogous to that of the Massachusetts model in the US Affordable Care Act reforms. Its blend of hierarchy and market and state and private finance had the demonstrated potential to appeal to left and right, and its implementation was well under way as a demonstration project in a familiar jurisdiction. Interestingly, however, this was the first time serious attention had been given to the Dutch model in Germany, despite the numerous parallels between the two systems, and its appeal can be understood only in terms of its fit with the political exigencies of the grand coalition (Leiber, Greß, and Manouguian 2010). Accordingly the coalition adopted only those elements of the Dutch model that suited its need for a “keeping-all-options-open” compromise.

Understanding Policy Change  571

The health care reforms enacted in 2007 maintained the distinction between social and private insurance, marking them as fundamentally different from the Dutch. In other respects a number of elements similar to the Dutch model were adopted. No longer could social insurers set their own rates for income-scaled contributions; rather, the state set a common rate, and collected all resulting revenues in a central fund, to be distributed to sickness funds on a risk-adjusted basis. As well, the price discretion of the German sickness funds would be much less than that of their Dutch counterparts: whereas in the Netherlands incomescaled contributions were set to cover about 50 per cent of the insurer’s expenditures, with the rest made up through community-rated premiums, in Germany the proportion covered by centrally pooled incomescaled contributions would be 95 per cent or more, leaving little scope for price competition among sickness funds to cover the remainder. A universal mandate to carry health insurance was also established, and reforms in the private sector were introduced to make this feasible. In the private sector, insurers could continue to charge risk-rated premiums, but were required to offer basic contracts at a community rate to individuals (such as the self-employed) who were required to have private insurance but could not afford risk-rated premiums. (A riskpooling mechanism similar to that which existed for private insurers in the Netherlands from 1986 to 2006 was established to accommodate this requirement.) In short, despite the parallelism of their timing and the similarity of their starting points, the Dutch and German reforms were marked by different strategies of scale and pace. The blueprint of a universal model that set the objectives and created the complementarities of the incremental Dutch reforms had no counterpart in Germany. In the absence of a blueprint to establish a “shadow of the future,” there was no German parallel to the on-the-ground convergence of social and private insurers that laid the groundwork for the final realization of the universal model in the Netherlands. As Helderman and Stiller (2014) put it, the “institutional complementarities” that characterized the Dutch reforms were absent in the German case. The role of federalism and expertise Two further puzzles arise in the German case. First, Germany’s “interlocking” federal and corporatist structures would seem to have put all members of a cross-party coalition in a position in which they could expect to be able to influence the steps of a blueprint strategy over time.

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These structures thus might appear to have created the conditions for an ongoing de facto grand coalition by giving both major parties an institutional foothold through its strength at the national or regional levels or both. Germany’s electoral institutions, however, kept the system in greater flux than was the case in the Netherlands. In contrast to the fixed four-year electoral cycle for simultaneous provincial elections in the Netherlands, which determined as well the makeup of the upper chamber of the parliament, electoral cycles in Germany were ­idiosyncratic to the individual states. Accordingly, as one observer put it, “[t]he ability of minimum winning federal government coalitions to implement a decisive policy-agenda … is therefore severely restricted by an institutional culture in which regional interests and short-term electoral prospects dominate” (Schweiger 2010, 3). In the case of the grand coalition from 2005 to 2009 alone, sixteen different elections were held at the state level, where “idiosyncratic electoral results that were mainly determined by regional issues” resulted first in gains in the Bundesrat for the member parties of the grand coalition and then in progressive losses (Bolgherini and Grotz 2010, 59–64). In this regard the German case bears comparison not with the Nether­ lands but with Canada. In Canada the impact of electoral politics at the provincial level is mediated not through the federal Senate – a weak, centrally appointed body – but in the venues of intergovernmental relations, where the provinces, which have constitutional jurisdiction over health care, hold effective vetoes. As in Germany’s states, provincial electoral cycles in Canada are specific to the individual provinces. Thus the partisan mix around the federal-provincial table was continually mutating, acting as in Germany as a brake on the scale and pace of change. Only rarely did a shared agenda – such as the province-­ building agenda of the 1960s – cut across partisan differences sufficiently that a winning coalition of provinces was willing to negotiate changes in federal-provincial policy frameworks. An additional puzzle in the German case concerns the role of experts. Facing gridlock in the 1980s, Dutch politicians increasingly turned to technocratic mechanisms outside the established corporatist decisionmaking structures – though they remained sensitive to the views of the social partners and other major interests (Crouch 1993, 263, 266). The principal example in the health care arena was, of course, the Dekker Committee, established by the Lubbers government in 1986, the source of the Dutch blueprint. Why did the German grand coalition not adopt a similar strategy? The answer might lie in the fate of the one

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recent precedent for such an approach: the Hartz commission on labour market policy established by the “Red-Green” coalition under SPD chancellor Schröder in 2002. The eponymous “Hartz IV” reforms recommended by the commission involved the integration of the administration of unemployment insurance and social assistance at the federal and local authority levels. Schröder initially embraced the commission’s report, which proved in fact to be only the precursor to a protracted and contentious set of negotiations between parties and levels of government (Stiller 2010, 145–79. Enacted in 2004, the reforms were politically unpopular. When they were subsequently invalidated, in part on constitutional grounds by the Federal Constitutional Court, no constitutional rescue could be agreed upon between the SPD and the CDU (von Blumenthal 2010, 38–9). In light of this experience, it is not surprising that a similar reliance on an expert commission on health care would have held little attraction for the grand coalition. Institutional entrepreneurs A final point of both similarity and difference between Germany and the Netherlands concerns the role of institutional entrepreneurs. The design of the German reforms, and of the pre-existing regime, meant there were fewer opportunities and incentives for cross-sectoral entrepreneurialism. As in the Netherlands the “liberation” of social insurers in Germany to compete with one another drove a quest for market share and the adoption of marketing strategies, selective contracting with providers, and other practices modelled on private business (Bode 2006). A period of considerable industry restructuring ensued. Market concentration initially decreased after the introduction of competition among sickness funds in 1993 – in part as smaller funds were able to attract members through adverse selection – and then rose after the 2007 reforms introduced a more effective risk-adjustment mechanism (Götze 2015). Overall the number of sickness funds shrank dramatically from more than 1,200 in 1993 to fewer than 150 in 2012 (Hassenteufel and Klenk 2013, 131), but the sickness fund market remained considerably less concentrated than was the case in the Netherlands (Thomson et al. 2013, 214). Because the design of the reforms maintained the separate regulation of sickness funds (under public law) and private insurers (under private law), and established no “shadow” of regulation under a common umbrella in the future, Germany did not see the emergence of complex corporate structures that combined elements from both sectors, paving

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the way for consolidation as occurred in the Netherlands. Public/­ private hybrids nonetheless did emerge in the hospital sector, where, unlike in the Netherlands, private for-profit hospitals had long been a feature of the system. The shift to a Diagnostic Related Groups–type basis for contracting between insurers and hospitals, together with more aggressive selective contracting by insurers, led a number of municipalities to adopt more flexible managerial arrangements by reconstituting their hospitals under private law while retaining majority ownership: by 2010 almost 60 per cent of German public hospitals were operating under private law (Hassenteufel and Klenk 2013, 133). This process was highly localized and idiosyncratic. Maarse and Normand have commented on the “local or ‘bottom-up’ character” of this privatization process, which was “not the result of an explicit federal policy to shift ownership from the public to the private sector,” and which varied according to “contextual factors in each state” (2009, 109). In general this pattern is consistent with the historic and continuing importance of self-governance and local discretion in the German hospital sector (Vrangbæk et al. 2014). Nonetheless the emergence of these local entrepreneurs altered the political landscape on which any future episode of major change would play out.

Other examples Numerous other cases of change in health care policy could benefit from comparative investigation within the framework offered here. A partial list would include: • In France the contrasting strategies followed by centre-right coalition governments during windows of opportunity after the 1995 and 2002 elections: on the one hand, the only partially implemented big bang of the reforms introduced by the Alain Juppé government from 1995 to 1997, shifting the financial base for health care from social insurance contributions to income tax and providing a much more active role for the state in setting overall budget limits as well as regional targets (Hassenteufel and Palier 2008, 51); and on the other hand, the incremental reforms under a centre-right coalition after 2002, aimed at strengthening the role of the state in the governance of sickness funds and the hospital sector (Cases 2006; Hassenteufel et al. 2010).

Understanding Policy Change  575

• In New Zealand the big bang introduction of “internal market” reforms after a landslide victory for the rightist National party in 1990, and the unwinding or redirection of most of those reforms by a Labour-led coalition government after 1999 (Brown 1996; Gauld 2000, 2008; Starke 2010; Thorlby et al. 2012). • In the US states the unsuccessful attempts to follow blueprint strategies towards universal health insurance through inter- or intra-­ party coalition-building in Minnesota, Oregon, and Washington in the early-to-mid-1990s, which foundered as a result of partisan changes in government and the fraying of political support over time (Leichter 1997; Sparer 1996; Tuohy 1996). • In Ireland the 2014 adoption of a blueprint strategy by a right-left coalition government, comprising reforms in the hospital sector,­ first-dollar coverage for GP services, and universal mandatory health insurance under a common regulatory framework for private health insurers. The strategy was presented explicitly as extending beyond the mandate of the then current government – with completion initially targeted for 2019. This is another case of the attractiveness of the blueprint strategy type to broad right-left coalitions, but its history also demonstrates the vulnerability of the strategy to political and economic shifts. In 2015 the health minister announced an extension of the timeframe, reiterated the need for various conditions to be put in place before the model could be realized, and postponed a decision on the financial framework amid growing concerns about the fiscal implications. Even this revised strategy was called into question with the chastening of the coalition partners in the 2016 election and the reduction of the lead party, Fine Gael, to minority government status. The new government called a pause, if not an effective reset of the strategy, negotiating the ­establishment of a new all-party parliamentary committee to develop “a single long term vision plan for healthcare over a 10 year period” (Ireland2016, 63). On initial examination, in each of these cases institutional, electoral, and partisan factors seem to have opened windows of opportunity for health care reform, and in each case the scale and pace of change adopted can be understood as having been shaped within a strategic domain of a type explored in this book. These cases, and others, thus constitute a promising agenda for further research.

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Is Health Care Different? Applications to Other Policy Arenas Having briefly considered how the theoretical framework presented in this book might illuminate other cases of health policy development, one can now conclude with an envoie that considers how applicable this framework is to other policy sectors. In the health care arena, established political settlements are especially difficult to disrupt. The presence of powerful provider interests who become heavily invested in the existing regime and the high political salience of a field in which the stakes have life-or-death connotations make radical change fraught with conflict and political risk. The complexity and interconnectedness of a highly professionalized, technologically dense, and substantially decentralized delivery system greatly complicate the quest for optimal solutions to policy problems. The health care arena, therefore, might be especially susceptible to the countervailing forces of positive and negative feedback that drive policy cycling. Similarly the twin conditions for the opening of a window of opportunity for major change are likely to be even rarer in health care than in most other areas: health care might be atypical in the degree of authority that must be mobilized to overcome vetoes and in the strength of the partisan imperatives necessary to impel action even in the face of high political risk. But our framework for understanding the strategies chosen once windows of opportunity have opened should be more relevant to other policy arenas – with one caveat: from a technocratic perspective and all other things being equal, a blueprint strategy might well be more advisable in health care than in other arenas. A blueprint makes it possible to deal comprehensively with interconnected elements while allowing for the comprehensive framework to be adjusted as the interconnections play out. Such a strategy thus is ideally suited to the health care arena, with its highly professionalized workforce, decentralized modes of delivery, and multiple interrelationships. In other words, forces endogenous to the health care arena itself might tend to press policy-makers towards a blueprint strategy. This characteristic makes health care a useful “hard case” for testing the importance of forces exogenous to health care – namely, politicians’ assessment of current and future influence – that I have emphasized in this book’s theoretical framework.12 The very fact that blueprint strategies are so rare points to the powerful role of these exogenous factors. In the only case among those we have examined where exogenous forces allowed for a blueprint strategy, the centre-right and centre-left

Understanding Policy Change  577

coalition governments led by Ruud Lubbers in the Netherlands in the late 1980s had the (perceived) luxury of the political stability necessary to follow a blueprint, and did in fact choose such a strategy in health care even when they followed other approaches in other arenas. In other areas of social and economic policy – notably, tax reform and the restructuring of sickness and disability benefits – the Lubbers governments pursued reform at a pace closer to that of a big bang, while related reforms to labour market policy were swamped in the shifting currents of Dutch corporatism. It was these fast-paced changes, indeed, that contributed to the downfall of the third Lubbers government in the “political earthquake” that evicted the CDA from government for the first time since 1918 (Hemerijck, Unger, and Visser 2000, 221–3). In our other nations, strategies adopted in health care were similar to those undertaken in other areas of priority on the political agendas of the time. Indeed if the framework presented here – emphasizing the importance of government-wide political and institutional circumstances in the choice of strategies of scale and pace – is applicable to other sectors, we would expect to find that strategies followed in other priority areas are similar to those followed in health care. A cursory review of our cases lends support to this hypothesis. Clement Attlee’s Labour government took a big bang approach to its entire social policy agenda, including health care, after its historic landslide victory in 1945 – to the extent of timing all the major pieces of legislation to come into effect on the same “appointed day”: 1 July 1948 (Webster 1998, 28–30). Lyndon Johnson’s sense of the ephemeral nature of opportunities for major change, together with his consummate skill in negotiating with legislators, made mosaic strategies a hallmark of his early exploitation of his landmark electoral victory in 1964. In addition to Medicare and Medicaid, a blizzard of legislation in 1965 – none separately amounting to major institutional change and some, such as the Omnibus Housing Act, merely compilations of relatively small changes in themselves – enacted much of Johnson’s Great Society agenda. (The strategy for the major “constitutional” piece of legislation – the Voting Rights Act of 1965 – must be considered a big bang, not a mosaic, but it was a companion piece to the Civil Rights Act of 1964 and a product of “crusade” politics apart from the norm.) Similarly Lester Pearson’s two minority governments from 1963 to 1968 marked one of the most productive parliamentary eras – paralleling one of the most fruitful sets of federal-provincial conferences – in Canadian history. In Pearson’s

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case a rapid series of big bangs under the Damoclean sword of minority government status established the pillars of the modern Canadian welfare state. Margaret Thatcher’s big bang strategy for the internal market reform legislation of 1990 mirrored the approach she took to the other major policy initiatives of her third mandate, both enacted in 1988: the Education Reform Act and the ill-fated flat per capita “community charge” – better known as the “poll tax” – to replace the progressively scaled property tax. Like the NHS and Community Care Act of 1990, each of these policies was developed through a centralized, closed process that excluded the relevant line department and the professionalized providers of the service in question. Also like the decision to take on health care, the education and poll tax decisions reflected the Thatcher government’s confidence in having achieved a third electoral mandate. The latter two decisions, however, were taken early in the third mandate, in the first flush of post-electoral confidence and after having been publicly trailed in previous mandates and in the Conservatives’ 1987 manifesto. Reflecting the greater reluctance of governments generally to tackle health care reform, the internal market reforms were attempted somewhat later, more defensively, and against the more immediate prospect of a rapidly closing window. The poll tax indeed risked the biggest bang of all. In education and health care, the Thatcher government backed away from earlier more radical proposals, but in the case of the poll tax the government became bolder. The flat per-capita poll tax originally was meant to replace the progressively scaled property tax gradually, although there were some doubts about the administrative feasibility of running two parallel forms of taxation during the phase-in period. In the wake of the 1987 election, however, and with the enthusiastic endorsement of activists at the Conservative Party’s October convention, it was decided to adopt a big bang strategy. The only concession to phasing would be to introduce the tax first in Scotland, one year before its extension to England and Wales. King and Crewe (2014, chap. 17) attribute this decision to certain aspects of the assumptive worlds of the key decision-makers. In this case a climate of “group think” among a small set of culturally similar ministers, under a dominant prime minister confident in her own political instincts, led the group to underestimate drastically the political risks of a big bang approach and to cast further doubt on the administrative feasibility of incrementally phasing in the changes. Indeed the decision appears to have been driven less by a

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sense that a window was rapidly closing than by sheer political hubris. It would prove to be the “blunder to end all blunders” that arguably was the principal proximate cause of Thatcher’s downfall (King and Crewe 2014, chap. 4). Bill Clinton’s big bang strategy for his 1993 Health Security Act was consistent with the “principled centrist” style of leadership that characterized the first two years of his presidency. Like the health care reforms, the other two major initiatives of his first year in office – the economic package and the North American Free Trade Agreement – both sought to marry redistributive and market-friendly elements. But in both cases Clinton worked closely and effectively with congressional Democrats and Republicans to build legislative coalitions – a strategy that required him to add some “mosaic” elements to win the support of particular legislators (Cloud 1993a, 1993b; Quirk and Cunion 2000, 206; Sinclair 2000, 79). It is at least arguable that, had Clinton followed a bipartisan mosaic strategy for health care reform as well, he might have succeeded, but the very rarity of an open window for health care reform raised the stakes, and Clinton and his advisors aimed for largerscale change. Despite a mandate that was much stronger than that enjoyed by Clinton, Barack Obama adopted mosaic strategies for the two signature initiatives of his first year: the stimulus package to deal with the 2009 recession, and health care reform. The American Recovery and Reinvestment Act was a massive mosaic comprising “five landmark pieces of legislation in one” (Alter 2010, 132), dealing with tax cuts, infrastructure, education, scientific and medical research, and clean energy. Its passage by a nearly exclusive Democratic coalition in a polarized Congress presaged the exclusively Democratic accomplishment of the Affordable Care Act. In the two cases of incrementalism within a window of opportunity for major change in the mid-2000s – the Blair government in England and the Martin government in Canada – we find that this pattern characterized other areas of priority for those governments as well. The incrementalism of New Labour and the bipolarity of the Blair-Brown duumvirate have been much remarked upon, although relatively few commentators have drawn an explicit a link between these two phenomena, as appears to have been the case in health care policy (see Chapter 5; for other commentaries drawing this link, see Diamond 2011, 156–7; Heffernan 2011, 164). As for the Martin government, the strategy of creating goodwill through fiscal commitments and establishing

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a “work plan” as a platform for further policy development was not unique to health care; it also characterized the other two major undertakings of Martin’s brief government: the “Kelowna Accord” on Indigenous issues and a federal-provincial agreement on child care. In both cases the Martin government negotiated non-legislative agreements-in-principle and committed to future funding streams, to flow as detailed plans were struck. The Kelowna Accord was the culmination of an eighteen-month consultation process with provincial governments and Indigenous leaders. It set broad goals and targets over a ten-year period and the allocation of the promised resources for the first five years by theme. As one analyst put it, the Accord identified a mutually desired destination and “outlined a new approach, but it did not chart a clear course to that destination” (Patterson 2006, 16). In the case of child care, the Martin government negotiated not an overall “accord,” but bilateral agreements-in-principle with each provincial government to develop universal programs, and it committed funding, to flow over five years as detailed plans were developed. But Martin’s strategy of buying goodwill and time was radically upended when his government was defeated in Parliament and gave way to a Conservative minority government after the subsequent election. The new government cancelled both the Kelowna Accord and the bilateral child care agreements with the provinces, and substituted its own, more modest budgetary commitments. Finally, in Britain, political strategies for policy change by the Conservative/Liberal Democrat Coalition government varied by policy area. The common elements of strategy were to drive change forward within the government’s agreed-upon five-year life and to accord strong (Conservative) secretaries of state wide discretion within broad policy parameters agreed to by the Coalition partners. There were essentially two routes to agreement on these parameters. One was the mosaic route, followed in health care and education reform, which led to the creation of amalgams combining the market-type mechanisms and consumer choice desired by the Conservatives with localist features desired by the Liberal Democrats. In health care, as we have seen, this led not only to the embrace of Andrew Lansley’s plan for what became Clinical Commissioning Groups, but also to an expanded role for local authorities and the unanticipated squeezing out of the NHS Primary Care Trusts. In education reform, driven by Education Secretary Michael Gove, an analogous dynamic led to the shrinking of the scope of school boards. Gove’s reform not only accelerated the process, already under

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way under previous governments, whereby schools opted to exit from the aegis of school boards to become “academy schools”; it also created an additional element, “free schools,” as new institutions outside the purview of school boards. A second route to Coalition agreement on the parameters of change, however, was to identify centrist principles to which both parties could subscribe, rather than to cobble together their respective positions.13 This was the route followed in the case of income security policy, allowing Work and Pensions Secretary Iain Duncan Smith to take a big bang approach to the introduction of two major new programs: a universal flat-rate public pension and a “universal credit” combining seven distinct benefits in a version of a negative income tax. As Timmins (2015, 330, 342) notes, arguably neither of these reforms would have been produced by a purely Conservative government. The search for redistributive policies designed to reward work and saving reflected principles to which both Conservatives and Liberal Democrats could agree. Such pragmatism, however, nonetheless demanded phased implementation – necessary in any case with respect to pension reforms, while the universal credit required complex information technology, which Duncan Smith and his advisers chose to pilot in select areas.14 In summary, certain features of the health care arena make it a special case. But it is not so distinct that it cannot offer lessons, or at least suggest research questions, for scholars and policy-makers in other sectors who seek to understand the drivers of strategic decisions about the scale and pace of policy change. The thumbnail sketch of other decisions taken coterminously with the cases analysed in this book is far from definitive in demonstrating the broader applicability of the explanatory framework offered here. It is my hope that this book might inspire some of that broader work and shed further light on the puzzles and politics of remaking policy.

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Notes

Chapter 1 1 As I discuss later, my distinction here is related to that between the “mode” and the “tempo” of change as translated from the biological to the policy literature by Durant and Diehl (1989), and further refined as a distinction between “cumulative directionality” and “tempo” by Howlett and Cashore (2009). 2 Although Streeck and Thelen (2005b) emphasize the “obligatory” character of institutions as they define them, they allow for various social mechanisms of “third party enforcement” of compliance with expected norms of behaviour other than the state. 3 These two elements of scale – the balance of influence and the mix of ­instruments – are those that defined the dependent variable in my earlier study of the dynamics of change in the health care arena (Tuohy 1999), I continue that definition here but also add a third dimension – the organizing principles through which the policy framework is legitimized. 4 See, for example, Jackson and Deeg (2008, 81), who argue that “national economies are characterized by distinct institutional configurations that generate a particular systemic ‘logic’ of economic action,” which they ­define as “the typical strategies, routine approaches to problems and shared decision rules that produce predictable patterns of behavior by actors within the system.” 5 Indeed the principal effect of spending changes in the absence of major changes in the decision-making process is typically to change the level of remuneration of providers. 6 My use of different terminology from that of Howlett and Cashore hence reflects not only the independent genesis of the two formulations (Tuohy

584  Notes to pages 21–7 2000, 2003a, 2004, 2010), but also a preference for somewhat more colloquial language appropriate to a context of strategic decision-making. 7 An example can be drawn from the cases in this book. As I discuss in Chapter 7, in Alberta, a province with a history of one-party dominance, the Progressive Conservative government of Premier Ralph Klein, in the face of internal dissent within the party, was forced to back away from changes that would have introduced a broader role for private finance. 8 Again, rare systems of single-party dominance in democratic states allow for the expectation of continuing influence, but such systems are marked by intra-party competition, requiring party leaders to negotiate among factions with relatively independent power bases. 9 See Boothe (2012, 2015) on the importance of the lack of such a set of “principled ideas” about the endpoint of reform in understanding the limits that incremental strategies place on the scope of change. 10 Not including Iceland and Luxembourg, which should not be included in calculations of means because of their very small size. 11 Data reported in this paragraph are based on author’s calculations from the ISSP database. 12 The five were Australia, West Germany, Italy, the United Kingdom, and the United States. Data from eastern Germany for 1996 were excluded from this calculation for consistency. 13 The question was not asked in ISSP waves after 2006, but was included in the 2016 wave, the results of which were not available as of this writing. 14 The exceptions were declines in Japan, New Zealand, and the United Kingdom. Nonetheless strong majorities in each of these nations (65, 84, and 82 per cent, respectively) continued to support increased spending in 2006. 15 Again, Japan and the United Kingdom showed modest declines, but support remained high at 56 and 75 per cent, respectively. 16 In all these countries except the United States, the omnibus category of “social protection,” comprising various income support and social benefit programs, ranked first; the other category typically ranking in the top three was “general government services.” 17 David Cutler (2002) has identified three “waves” of health care reform, concerned with access, cost, and incentives/competition, respectively. I prefer to distinguish between the agenda as it relates to objectives (access, cost, and quality) and the agenda as it relates to tools or instruments (including incentives and competition).

Notes to pages 29–44 585 18 These categories parallel the classic trinity of welfare states – social democratic, corporatist, and liberal – developed by Esping-Andersen (1990), which have themselves been subject to much current debate as to their continued relevance. Of a vast literature, see, for example Esping-Andersen’s own compilation of revisitations of the framework (Esping-Andersen 1996), and Arts and Gelissen (2002). 19 The merit of classification is to provide a basis for comparing systems, by understanding the common internal logic exhibited by systems within a given type. The danger of classification is the risk of oversimplification or distortion: the real world is messy, and assuming a correspondence to type can blind the observer to idiosyncratic inconsistencies in any given system that have important dynamic effects (Arts and Gelissen 2002; Crouch et al. 2005). On balance a sophisticated use of typologies can be productive in generating hypotheses, while the investigation of those ­hypotheses needs to be alert to the particularities of national contexts. 20 See, for example, Jérôme-Forget, White, and Wiener (1995); Morgan and Campbell (2011a, 2011b); Peterson (1998); Ranade (1998); Rice et al. (2000); and Saltman and von Otter (1995). Chapter 2 1 One might query the omission of recipients of care from this description of the structure of interests. But, as I have argued elsewhere (Tuohy 1999, 10), it is the balance among the state, private finance, and the medical profession that mediates the influence of other interests, including those of recipients and potential recipients of care. Depending on that balance, the route of influence by recipients might lie through the state, through relationships with medical providers, or through economic dealings with privately capitalized entities. Similarly, labour, other than the highly skilled labour represented by the professions, must find its route of ­influence through one or more of the three structural pillars. 2 In 2013 private insurance accounted for 5 per cent or less of total health expenditure in twenty-one of thirty-five member countries of the Organisation for Economic Co-operation and Development (derived from OECD 2015b). 3 For example, in the health care arena, a key component of any coalition is the medical profession itself (Tuohy 1999, 258). 4 In most advanced health care states, private finance also takes the form of out-of-pocket payments by large numbers of atomized individuals. These payments, however, typically have only a marginal impact on resource

586  Notes to pages 48–87 allocation decisions: they generally take the form of co-payments or deductibles tied to public or private insurance, or the independent purchase of services not covered under public or private plans. 5 To this trilogy, following David Ronfeldt (1996), Stein adds the category of “tribes” – which she notes are still dominant in some societies and “continue to exist in even the most advanced societies through their social and cultural ties” (2006, 39). 6 I explore the implications of these developments for the health care arena in Tuohy (2003a). 7 The phrase is from Ignatieff (1984). The argument is most fully developed in the classic work of Titmuss ([1970] 1997), and in Reisman’s exposition and elaboration of Titmuss’s thought, which explores more fully the question of why the altruism underlying the “stranger-gift” needs to be institutionalized through the welfare state (Reisman 2002, 2004). 8 On this point, see Bönker (2005) and Stiller (2010) on the rise of “multipillar” approaches to pension policy. 9 Initially based on labour market status and occupational group, eligibility in most social insurance systems had evolved by the mid-twentieth century to include other population groups, such as the self-employed, students, and retirees. 10 I have dealt with the pros and cons of these instruments in considerably more depth in earlier work (Tuohy 1999, 9–15), drawing in particular on the work of Williamson, Granovetter, Simon, and others. My brief treatment here summarizes this discussion. 11 Keeler also identifies the Reagan administration in the 1980s as a reform government. I do not include it here, however, because none of the conditions that created the Reagan reform agenda made health care a central component. Keeler also adds a fourth condition for a more complete explanation: a broad sense of “crisis” to lend urgency to the agenda. His own data and cases, however, suggest that a sense of crisis is neither a necessary nor a sufficient condition for the opening of a reform window, although it might lend impetus to a reform agenda within such a window. 12 The concept of the “fog of war” to describe the context of deep uncertainty in which military decisions must be made originated with the nineteenthcentury Prussian military strategist Carl von Clausewitz (1873). Chapter 3 1 As noted in Chapter 1, I use this term broadly to include all residents of the jurisdiction.

Notes to pages 89–104 587 2 “NOMINATE and Related Data,” K7MOA.com, available online at http:// polarizedamerica.com/dwnl.htm, accessed 4 August 2017. I am very grateful to Mark Peterson for first drawing my attention to this means of discounting nominal representation to account for the level of party unity in assessing the effective strength of parties in Congress. 3 A similar dynamic would play out more than forty years later, when advisers to President Barack Obama took “negative lessons” from their experience with the failure of the big bang Clinton proposals. 4 Papers and tapes released in 2008 reveal that Johnson was much more intimately involved in the legislative process surrounding Medicare, especially through his relationship with Mills, than had previously been assumed (Blumenthal and Morone 2010, 163–95). 5 See Blumenthal and Morone (2010, 185–95); Marmor (2000, 58–61); Oberlander (2003, 81–3); and Patashnik and Zelizer (2001). 6 About 70 per cent of Americans, roughly 126 million people, were covered by private hospital insurance in the early 1960s, including about 9 million elderly (Rice 1964, 9; Stevens 1996:, 11). Coverage for primary and out-of-hospital care was much less prevalent among the elderly. Most were no longer employed, and hence not eligible for employerbased insurance, although some employer-based policies allowed individuals to convert their coverage to an individual plan upon retirement (Rice 1964, 9). 7 The phrase was a reference to advice from Sam Rayburn, a former Democratic speaker of the House whom Johnson considered a mentor (Blumenthal and Morone 2010, 14). 8 In Canada, as I discuss in Chapter 4, hospital insurance preceded physician services insurance by a decade. This did not amount to a blueprint strategy, however: there was no agreement on comprehensive hospital and physician insurance up front. 9 This transformation was nonetheless incomplete in the early period of Medicare’s operation. Marmor reports that “it was certain that there were hospitals in the South receiving program payments benefits whose facilities were still substantially segregated during Medicare’s initial operations” (2000, 88). 10 As Jonathan Cohn (2010) has observed astutely, “[p]recisely because Medicare Catastrophic was a bipartisan act, passed by a Democratic Congress and signed by a Republican president, neither party really took political ownership of it. Neither Reagan nor congressional Democrats had made it a defining issue of their previous campaigns and after enactment, neither was going to expend huge political resources defending it.”

588  Notes to pages 104–18 11 Including patients with end-stage renal disease as a specifically identified category. 12 I have discussed these policy cycles in greater detail in Tuohy (1999, 129– 33; 2003b). 13 Medicaid rates were determined at the state level, although a number of states established Medicaid reimbursement as a percentage of the prevailing Medicare rates. Chapter 4 1 Most sociologists of industrial relations distinguish between pre-industrial “corporatism” and the “neocorporatism” of the industrial and postindustrial era; see, for example, Crouch (1993). Others distinguish between the “proto-corporatism” of the pre-industrial era and a modern “corporatist” model involving a strong role for the state (Cusack, Iversen, and Soskice 2010; Iversen and Soskice 2010). In the literature of comparative political economy and welfare-state analysis more broadly, the term “corporatism” is often used to refer to both eras; see, for example, EspingAndersen 1990; Schmitter and Lehmbruch 1979). For simplicity I subsequently follow the latter practice here. 2 I am grateful to Jan-Kees Helderman for this insight. 3 The involvement of groups in shared governance arrangements, of course, had pragmatic as well as normative rationales. But ongoing engagement in these processes reinforced the recognition of groups as bases of identity and mutual obligation. A contemporary example of this phenomenon is given by Korteweg and Triadafilopoulos (2015), who describe how the involvement of ethnic and religious groups in the governance arrangements for the integration of immigrants in the Netherlands fostered the recognition of such groups as authoritative representatives of their members even without an explicit embrace of “multiculturalism.” 4 Because the explanatory framework of this book is directed at advanced democratic political systems, I do not address this action of an occupation government as a relevant case. 5 Private insurers also offered supplementary insurance for services not covered the social insurance. 6 Helderman (2007, 208) points to the effects of increasing risk-selection by private insurers as an example of one of the types of incremental drivers of system change identified by Streeck and Thelen (2005b) – namely, “institutional exhaustion par excellence.” The voluntary compliance upon which the maintenance of a solidaristic system depended simply could not be

Notes to pages 120–47 589 maintained as private insurers rationally responded to the increase in the costs of health care beyond their ability to recover through communityrated premiums. Had a window of opportunity for major change not opened in the late 1980s, it is possible that this dynamic itself could have had transformative effects on the system in the long term. 7 The formation of the CDA had been a polarizing move. Whereas the predecessor Protestant and Catholic parties had tempered their conservatism with social values amenable to Labour, “the merged CDA acted as a clear antagonist of the Labour Party” (Götze 2010, 3). 8 Such are the jurisdictional sensitivities in Canada that the use of the term “level” of government, which might imply a hierarchy, is eschewed in favour of “order” of government. In this book, however, I adopt the usage more common internationally and refer to levels of government. 9 In addition to the ten provinces, there are three northern territories heavily dependent upon the federal government but gradually assuming devolved powers. The territories are represented at the federal-provincialterritorial table, although in the period covered by this book they did not have formal constitutional responsibility for health care, and operated their plans under agreements with the federal government. Federal transfers accounted for about 75 per cent of the total revenue of each of the Yukon and the Northwest Territories and 85 per cent of the revenue of Nunavut. Each territory accounted for only about 0.08 per cent or less of total spending by the provinces and territories – less than half the amount spent by the smallest province, Prince Edward Island. The discussion in this book accordingly deals with policy development at the federal and provincial levels only. 10 Even the labelling of the parties can be confusing: the “Liberal” party in British Columbia often has had more in common – in terms of outlook and, to a lesser degree, political staff – with the federal conservative party than with its federal namesake. 11 The exception is the NDP, which adopted a federal structure. 12 The term was criticized at the time as a “vague Pearsonian concept” and “woolly catch-all” (Newman 1968, 300, 301). But it captured the climate of the times, and subsequently became a textbook description of the era (Bakvis and Skogstad 2012). 13 This definition mirrored that of insured services under the Hospital and Diagnostic Services Act, which covered all “medically required” hospital and diagnostic services. 14 Under the Hospital and Diagnostic Services Insurance Act, the federal transfer to each province was calculated as 25 per cent of the national

590  Notes to pages 147–58 average per capita cost of providing covered services plus 25 per cent of the actual per capita cost in that province. Under the Medical Care Act, the per capita federal transfer was 50 per cent of the national average. Each of these modes of calculation, and especially the latter, meant that the federal government covered a proportionately larger share of the costs in lower-spending provinces (Tuohy 1992, 155–6). 15 Under a special arrangement, Quebec received the full transfer as tax points on the understanding that it would operate programs compatible with the federal principles. 16 Estimates based on Statistics Canada data on the rate of increase in total expenditures on physician and hospital services, available online at http://www.statcan.gc.ca/pub/11-516-x/sectionb/B504_513-eng.csv; and on population growth, available online at http://www.statcan.gc.ca/ pub/98-187-x/4151287-eng.htm. Data on general inflation from IndexMundi, “Canada – Inflation,” available online at http://www .indexmundi.com/facts/canada/inflation. 17 I discuss the technical adjustments to the transfer formula in the early 1980s that generated this result in Tuohy (1999, 91). 18 The following discussion of the Canada Health Act episode is drawn largely from Tuohy 1999, 93–5). 19 Although penalties were levied during the three-year grace period allowed for all provinces to come into compliance, these penalties were refunded when all provinces passed the relevant legislation. Chapter 5 1 The label “internal market” has fallen progressively out of favour in the United Kingdom, even in England, where the attachment to the use of exchange-based mechanisms in the public system remains strongest. Even one of the leading progenitors of the reforms, then health secretary Kenneth Clarke, favoured the ideologically more neutral if less elegant descriptor “purchaser-provider divide” (Ham 2000, 7–8). The latter phrase, recast as “purchaser-provider split,” has gained greater currency over the years. Given the slow and localized development of anything resembling market-like competition among providers, let alone the development of sophisticated purchasers, the purchaser-provider split is doubtless the more apt phrase. Given the broad international currency of the “internal market” label, however, I use both terms in this book. 2 The phrase is taken from Harold Macmillan’s 1938 book of that title. In its obituary of Macmillan, the Guardian summarized the core concept of

Notes to pages 161–70 591











the “middle way” as “a form of society neither socialist nor classically capitalist, but combining freedom of enterprise with public control so as to secure the benefits of both” (Bogdanor 1986). 3 Dissatisfaction with “the NHS” rose from 25 per cent in 1983 to 46 per cent in 1989, while comparable figures were 13 and 12 per cent for GPs, and 7 and 15 per cent for hospital in-patient services. Negative views of local health authorities rose from 10 to 16 per cent from 1985 to 1989 (Judge et al. 1992, 892–3). 4 According to Thatcher’s own account, she was “less convinced about … whether Ken Clarke and the Department of Health had really thought through the detailed implementation of what we were doing and foreseen the transitional difficulties which might arise as we moved from one system of finance and organization to another,” especially in the highly complex environment of London. Nonetheless, although clearly concerned about the political risks of a botched implementation, she ultimately “decided against slowing down the reforms, while urging that the closest attention should be paid to what was happening in London” (Thatcher 1993, 617). 5 Paul Starr, a leading scholar of health policy and one of the numerous Democratic-oriented academics who advised Clinton, calculated that in 1989 the cost of employer-sponsored health benefits was equivalent to more than half of corporate profits (Starr 1991, 16; see also Quirk and Cunion 2000, 216). Health expenditures as a proportion of total federal government expenditures had risen from 8.5 per cent in 1970 to 15.2 per cent in 1990, and were continuing to climb (National Center for Health Statistics 1998, 341). 6 As Johnson and Broder (1996, 301) put it: “Theoretically there were two ways to [build a winning coalition]: Start from the centre, writing a bill that would appeal to conservative Democrats and moderate Republicans, and tell the liberals that was the best they could get. Or start from the left and move as far to the centre as needed to reach a majority.” 7 Nonetheless, if enacted, the legislation would also have required a large volume of detailed regulations in the implementation process. 8 As Jacobs and Shapiro (2000, 364) point out, the task force itself was a small group of twelve, composed of the members of the National Economic Council (a notable indication of the centrality of the issue to the president’s economic agenda) and the secretary of health and human services. The broader advisory process led by Magaziner was organized into thirtyfour working groups. Despite this sprawling structure, the process was closed, centralized, and tightly controlled.

592  Notes to pages 175–90 9 See also the special issues of the Journal of Health Politics, Policy and Law 28, nos. 2 and 3 (1993). 10 Johnson and Broder attribute this quote to “a key Gingrich strategist.” It foreshadowed the threat of Republican Senator Jim DeMint to make health care reform Obama’s “Waterloo” fifteen years later. 11 “NOMINATE and Related Data,” K7MOA.com, available online at http:// polarizedamerica.com/dwnl.htm, accessed 4 August 2017. 12 Though little remarked-upon at the time, the “Third Way” attempt to bridge market and state also echoed the “middle way” adopted by the Conservatives under Harold Macmillan in the 1960s. 13 Even in this respect, however, Labour’s muting of the language of the market echoed a shift in tone that had already begun under the Conservatives (Ham 2009, 49–50). 14 For Blair this consolidation was essential to wrest from the Conservatives the mantle of the “natural governing party” that it had acquired with its “habitual” ability to win lengthy terms in office (Blair 2010, 95). For Chancellor of the Exchequer Gordon Brown, the motivation also included his own desire to succeed to the prime ministership (Rawnsley 2010, 3). 15 In fact, what Blair told interviewer David Frost on 16 January 2000 was that, “[i]f this July when we work out the next three-year [spending] ­period we can carry on getting real terms rises in the health service of about 5 per cent, then at the end of that five years we will be in a position when our health service spending comes up to the average of the European Union” (quoted in Rivett, n.d., chap. 6). This projection was nonetheless treated as a commitment both in the media and by Blair and the government itself. 16 Blair also knew, however, that, at some point he would have to make good on his promise to relinquish the party leadership to Brown, but he notoriously vacillated on the timing of that move (Rawnsley 2010, 262). 17 This depiction has so broadly pervaded the British political lexicon that it is difficult to attribute a source. It might have begun with Rawnsley (2003). 18 Indeed one of the several Brown biographies is entitled The Prudence of Mr. Gordon Brown (Keegan 2003). 19 In the end Bupa operated several Independent Sector Treatment Centres, but not a full NHS hospital. The first case of the operation of an NHS hospital by a private entity would not occur until Circle Partnership was contracted by the Conservative/Liberal-Democrat government to do so in 2010, as discussed in Chapter 10. 20 Rudolf Klein, personal communication, 22 July 2014.

Notes to pages 191–204 593 21 From Blair’s perspective, Brown “always worried that anything difficult would undermine the inheritance” (Blair 2010, 301). 22 In fact the legislation passed only with the support of Labour MPs from Wales and Scotland – where it did not apply. 23 “NOMINATE and Related Data,” K7MOA.com, available online at http:// polarizedamerica.com/dwnl.htm, accessed 4 August 2017. 24 S-CHIP was in fact a hybrid of a block grant and matching program. As Grogan and Rigby describe it, “Federal funding for SCHIP is allocated among states based on a formula (which takes into account the state’s uninsurance rate and health care wages), but states must provide matching funds for expenditures from their federal allotments” (2009, 52). 25 By 2005, the eighth year of the program’s operation, enrolment under S-CHIP had reached 6.2 million (Rosenbach et al. 2007, ES.2). Contrast this with the only other significant federal expansion of public coverage after the establishment of Medicare and Medicaid, the 1973 extension of Medicare coverage to those in receipt of Social Security disability payments, which, in its eighth year of operation, had added 2.9 million to Medicare’s enrolment. The longer-term effects of these two expansions of eligibility cannot be compared, however, since S-CHIP was overtaken by the Obama reforms, but it is known that the disabled came to account for an increasing share of Medicare enrolment – from about 7 per cent in 1973 to about 17 per cent in 2008 (Centers for Medicare and Medicaid Services 2008). 26 It nonetheless did contain a provision for a “controversial experiment with medical savings accounts” to shore up Republican support (Atchinson and Fox 1997, 146). 27 The Republicans briefly held nominal control of the Senate after the 2000 elections, with fifty seats and the Republican vice-president as the deciding vote. With the defection in May 2001 of Republican Jim Jeffords to sit as an independent and to caucus with the Democrats, even that nominal control was lost. 28 Nominal annual changes taken from United States (2012, 9), adjusted for general inflation. Chapter 6 1 Because Americans did navigate these worlds both sequentially and simultaneously, depending on their circumstances, it is difficult to draw clear lines dividing them to give a sense of their respective shares of the population. In particular, many Medicare beneficiaries also had supplementary

594  Notes to pages 207–13











insurance either individually purchased or provided as employer-based retirement benefits. At the time of the passage of the Affordable Care Act, employer-based insurance was estimated to cover about 55 per cent of the population and Medicare and Medicaid together about a third of the population; about 17 per cent of the population had no coverage at all (Janicki 2013; Kaiser Family Foundation 2008; United States 2010, 9). (Because of some overlap in public and employer-based coverage, these figures total to more than 100 per cent.) 2 Barack Obama, in “New Leadership on Health Care: A Presidential Forum” (Las Vegas, NV, 24 March 2007), available online at http://2008election .procon.org/pdf/Dem20070324.pdf. 3 See Beaussier (2012, 742–3; Brown (2011, 420); McDonough (2011, 73); Oberlander (2010); Washington Post Staff (2010, 15–16). 4 It could be hypothesized that, like Gordon Brown in the United Kingdom, Biden advocated an incremental approach in the Democrats’ window of opportunity in order to provide a platform for his own initiatives should he succeed Obama as president. There is no indication, however, that Biden saw advantage in such a strategy, and his loyalty to the administration has been a matter of much media commentary (see, for example, Benedetto 2013; Leibovich 2012; Memoli 2012). 5 This narrative was powerfully presented, for example, in Obama’s speech in Baltimore on 17 January 2009, three days before his inauguration, and in his 24 February 2009 State of the Union address. 6 From 28 April to 7 July 2009, the Democratic caucus comprised 57 Democrats and 2 Independents, out of a total of 99 while a Minnesota seat remained contested. The resolution of the latter contest in favour of the Democrats gave them sixty of one hundred votes. After the death of Senator Kennedy on 25 August the proportion reverted again to fifty-nine of ninety-nine until the Kennedy seat was filled by appointment with a Democrat on 25 September, returning the total to sixty of one hundred. 7 On the DW-NOMINATE scale of conservatism, as measured by positions taken on roll call votes – ranging from 1.0 at the most conservative end to −1.0 at the most liberal end – the Democratic Senate mean had been steadily moving since the mid-twentieth century from −0.028 in 1943 to −0.363 in 2009. A similar pattern held in the House, where the Democratic mean shifted in a secular trend from −0.151 in 1941 to −0.343 in 2009 (drawn from “NOMINATE and Related Data,” K7MOA.com, available online at http://polarizedamerica.com/dwnl.htm, accessed 4 August 2017). Note that the DW-NOMINATE methodology allows for comparisons over time for a single chamber, but not for comparisons between chambers.

Notes to pages 213–24 595 8 The DW-NOMINATE means moved from –0.330 to –0.343 in the House and from –0.328 to –0.363 in the Senate from 1993–94 to 2009–10 (drawn from “NOMINATE and Related Data,” K7MOA.com, available online at http://polarizedamerica.com/dwnl.htm, accessed 4 August 2017). The mean for the most conservative 10 per cent of Democrats in the Senate barely shifted, although regional representation was less southern (Oppenheimer 2009). 9 Note that this principle as enunciated in the budget referred to employerbased coverage. Obama was later to state repeatedly, however, that, under the new legislation, those who liked their current plan (unmodified by reference to employer plans) could keep them – a promise that proved ­incompatible with the design of the new framework. 10 This number emerged from a plan prepared in the White House and incorporated in draft legislation as a fallback to be available if negotiations in the Senate dragged on. The cost of the president’s plan was less than US$900 billion and, to provide some “breathing room,” the president announced a ceiling of that amount for any plan emerging from Congress (McDonough 2011, 87). 11 “NOMINATE and Related Data,” K7MOA.com, available online at http:// polarizedamerica.com/dwnl.htm, accessed 4 August 2017. 12 Grunwald (2012, 139) reports statements from the Democratic drafters of the legislation that Republicans refused to participate in the drafting. Woodward (2012, 16) reports that Republicans tried to make changes but were rebuffed by Obama’s chief of staff, Rahm Emanuel. Both report a comment by Obama to Republican House Minority Whip Eric Cantor in the initial meeting on the stimulus: “Elections have consequences. And Eric, I won.” In Grunwald’s account, this comment is made in jest; Woodward, however, reports that, to Cantor, the president’s “tone seemed to change” in making this comment after a bantering exchange (Woodward 2012, 14). Woodward also reports uncritically Cantor’s view that Obama had misplayed his hand, and had “unified and energized the losers” because there was “no sincere contact, no inclusiveness, no listening” (22). Grunwald, on the other hand, is more sympathetic to the Democrats’ view that “Republican leaders did not really want to work together” (2012, 189). 13 Premium rate increases of up to 39 per cent by the for-profit insurer Anthem Blue Cross in California in February 2012 gave new impetus to the case for reform during the crucial legislative end game (McDonough 2011, 96). 14 An observer unfamiliar with the arcana of congressional procedure might be bemused by the mechanism by which this blockage occurred.

596  Notes to pages 230–40 In February 2010 the Senate passed the House legislation, the Medical Physician Payment Reform Act of 2009, but simply used it as a vehicle for other legislation, with an amendment that replaced the entire text of the bill with provisions pertaining to the extension and reauthorization of unrelated legislation, and renamed it “An Act to extend expiring provisions of the USA PATRIOT Improvement and Reauthorization Act of 2005 and Intelligence Reform and Terrorism Prevention Act of 2004 until February 28, 2011.” 15 Dodd and Harkin ranked twenty-sixth and twenty-first most liberal senators, respectively, of the 111th Congress; Baucus, the Finance chair, ranked fiftieth (drawn from “NOMINATE and Related Data,” K7MOA.com, available online at http://polarizedamerica.com/dwnl.htm, accessed 4 August 2017; the NOMINATE database includes Barack Obama in this ranking for reference, but I have excluded him to yield this ranking). 16 Moscardelli (2010, 7) reports that the average DW-NOMINATE ideological score for the thirteen Finance Committee Democrats (–0.37) was significantly (p < .01) more conservative than their twelve HELP Committee counterparts (–0.49). 17 The name was drawn from a comment by a right-wing radio commentator calling for a new American Tea Party (referring to protesters who had dumped tea in Boston harbour rather than pay tax to the British government in the run-up to the American Revolution). 18 Snowe, however, made clear that her vote was a procedural one, to allow the process to move to the next stage, not an indication of support for the substance of the bill. 19 Reid ranked thirty-ninth most liberal of the sixty members of the caucus (drawn from “NOMINATE and Related Data,” K7MOA.com, available online at http://polarizedamerica.com/dwnl.htm, accessed 4 August 2017). 20 One Republican, Jim Bunning of Kentucky, did not vote, although he had voted against cloture and had spoken strongly against the legislation. 21 The language of the legislation referred to “exchanges,” in keeping with usage at the time. Subsequently the term “marketplace” came to be used to refer to these entities. To respect both historical usage and legislative language, I use “exchange” throughout, although Chapter 10 again ­acknowledges the “marketplace” terminology. 22 The authors are careful to note that, because of the design of the survey and their analytic methodology, they cannot attribute causality in these results. Nonetheless the association is highly suggestive. 23 Richardson and Konisky caution, however, that these two variables are correlated, so multicollinearity might be a problem in these results.

Notes to pages 241–52 597 24 The role of the Republican House leadership in this episode deserves some comment in light of the substantial powers of congressional party leadership discussed earlier. The Republican caucus was in fact very divided over the use of the shutdown tactic, and there were sufficient Republican votes all along to pass the budget resolution together with the Democrats. A majority of the caucus could not be found in support of passage, however, and the leadership practice was to refuse to bring forward any bill that did not command majority Republican support. Much of the support for the hard-line stance of the majority of the caucus has been attributed to the disproportionate influence of Tea Party activists. Although self-declared members of the Tea Party constituted only a minority of the Republican caucus, the influence of the movement on a broader range of incumbents was multifaceted and strongly related to the presence of Tea Party activists in home districts and the threat they posed to incumbents in electoral primaries (Bailey, Mummolo, and Noel 2012). 25 The Independent Payment Advisory Board itself was overtaken by events – namely, the dramatic slowing of the rate of increase in Medicare costs after 2009, reflecting a general phenomenon I discuss in Chapter 11. In the face of Republican opposition, including threats to filibuster any appointments to the board, Obama did not recommend any appointments, apparently choosing not to expend political capital on a mechanism that would yield no immediate payoff. At the time of writing (July 2017), the board remained an unpopulated shell. 26 The mandate applied to employers with more than fifty full-time workers, defined as those working more than thirty hours a week. In 2013, the last year before the mandate was to come into effect only 9 per cent of employers with 50–199 employees and only 1 per cent of employers with more than 200 employees did not offer health insurance (Kaiser Family Foundation 2013, 7). 27 Indeed the non-partisan fact-checking website politifact.com dubbed Obama’s statements the “lie of the year” for 2013 (Holand 2013). 28 The proportion of enrollees in this age category was critical to establishing the risk pool necessary for a viable insurance program at feasible levels of premiums and subsidies. The Kaiser Family Foundation had estimated the optimal proportion to be in the range of 40 per cent (Landler and Shear 2014). 29 The Congressional Budget Office estimated that the effect of the Republican repeal legislation, which did not include a replacement, would have been to increase the number of uninsured people by 32 million by 2026 and to double premiums relative to projections under the Act (United States 2017,

598  Notes to pages 254–72 1). Given that Republican replacement options, which the CBO did not assess, would offer less generous subsidies, it can be assumed that they would narrow but not close this gap. 30 The resolution passed 52–48 in the Senate. The vote in the House was 227–198, with no Democrats in support and 9 Republicans against (most of them to the left of the median House Republican); 5 Democrats and 5 Republicans did not vote. 31 Excellent short summaries of the relevant legislative activity can be found at Drexel University (2017) and Health Reform Tracker (2017). 32 Ryan himself described this process in an 8 March 2017 media interview posted on his website, justifying the closed and truncated process on the grounds that the “Better Way” white paper itself had been developed through a process open to all members of the House Republican caucus and had formed part of the Republican 2016 election platform; see http:// www.speaker.gov/general/regular-order-speaker-ryan-hugh-hewitt. 33 Quinnipiac University Poll, 23 March 2017, available online at https:// poll.qu.edu/images/polling/us/us03232017_Ukqbwg46.pdf/. 34 For a simplified timeline of these vacillating positions, see Graham (2017). 35 For an exquisitely detailed accounting of the legislative history of the Affordable Care Act, see Cannan (2013). 36 In this context it is worth noting that George Mitchell, the Democratic Senate majority leader during the Clinton reform attempt, regretted failures of his leadership in that episode (McDonough 2011, 57). 37 Governmental involvement with premium revenue in the US model of mandatory insurance differed from that in the Netherlands, where about half of premium revenue was collected by the state and distributed to insurers on a risk-adjusted basis. Chapter 7 1 These numbers exclude five seats won in Northern Ireland by Sinn Fein, which does not take up its seats to indicate that it does not recognize the authority of the UK Parliament. They also exclude the speaker, who must be non-aligned. The Conservatives’ 305 seats did not include a seat won on 28 May (after the Coalition negotiations were concluded) in a delayed election brought about by the death of one of the minor-party candidates during the campaign. 2 This history led Lees to remark that the formation of the Coalition government of 2010 marked “a return to a long-standing British tradition of forming coalition governments during periods of austerity” (2011, 3).

Notes to pages 273–9 599 3 Given that the total number of seats in the House of Commons at the time was 650, the threshold for majority was technically 326. Because the Sinn Fein members did not take up their seats, however, a working majority was 323. 4 Arithmetically an alliance with the Democratic Unionist Party of Northern Ireland would have yielded a majority of one, but such an arrangement would be ideologically inconceivable. 5 Various commentators have drawn on Axelrod’s (1973) concepts of minimum coalitions to analyse the 2010 UK result. See, for example, Bale 2011; Debus 2011; Lees 2011; Stuart 2011. 6 In a YouGov poll on the eve of the election for the Sun newspaper, no longer available but reported in Fox (2010), 43 per cent of Lib Dem voters described themselves as centre-left or left compared with just 29 per cent who described themselves as centrist and 9 per cent as centre-right or right. 7 The manifesto of the alliance of the Social Democratic Party and the Liberals in 1987 was relatively close to that of the Conservatives at the time, but after their formal merger to become the Liberal Democrats in 1988, and especially after the Conservatives entered opposition in 1992, the positions of the two parties had increasingly diverged. 8 Richard Grayson, one of the intellectual leaders of the Liberal Democrats, nonetheless argued that the party was “under-factionalized,” although he was part of the successful mobilization of the factional Social Liberal Forum in 2008–09. He also decried the growing “leadership-loyalty” in the party, especially in the runup to the 2010 election and thereafter. Grayson subsequently left the party in 2013. 9 Laws’s tenure in cabinet was very brief. In what was widely seen as a blow to the Liberal Democrat contingent in the new government, Laws was forced to resign as chief secretary to the treasury within a month in May 2010 as the result of an expense scandal. Laws was replaced by Danny Alexander, who had been appointed initially as secretary of state for Scotland, a role which typically is combined with another cabinet portfolio and which in Alexander’s case had enabled him to continue in his de facto role as chief Coalition broker and Clegg’s “right-hand man.” Despite the greater demands of the chief secretary’s position, Alexander was able to continue in his de facto roles as well (Hazell 2012, 59). Alexander was replaced as Scottish secretary by another Liberal Democrat, Michael Moore. 10 This consultation was to prove highly controversial after the fact. Cameron informed both the shadow cabinet and the parliamentary party that Labour had put an offer to bring in alternative voting without a referendum on the table in their negotiations with the Liberal Democrats.

600  Notes to pages 283–315 This statement, later proved to be incorrect, was critical in gaining the acquiescence of both Conservative Party organs. It is entirely plausible that this was an honest error made in the fog of swirling post-election developments, conversations, and rumours, but it fed an accusation that the Coalition had been founded on a lie (Kavanaugh and Cowley 2010, 221). 11 Among those seventeen countries during that period, all except Spain and the United Kingdom experienced at least one coalition government (Muller, Bergman, and Strom 2008, 7). 12 De Winter and Dumont (2008, 130) show that the average time for cabinet formation following elections in the United Kingdom from 1945 to 1999 was 6.5 days. 13 In the event, government spending stood at 42.7 per cent of GDP by 2012/13; see UK Public Spending, online at http://www.ukpublicspending .co.uk/, accessed 9 December 2013. 14 As the government itself noted, “[t]he [Health and Social Care] Bill will deal primarily with health rather than social care; the Government intends to introduce legislation on social care reform in the second session of Parliament. However, this Bill is titled a Health and Social Care Bill because some of its changes (in particular those relating to Monitor, the Care Quality Commission and the creation of health and wellbeing boards in local authorities) apply also to social care” (United Kingdom 2010d, 178–9). 15 “Lansley bets it all on swift reforms,” Editorial, Financial Times, 12 July 2010. 16 “NHS faces biggest shake-up in decades,” Guardian, 12 July 2010, available online at http://www.theguardian.com/society/2010/jul/12/nhs-whitepaper-shake-up. 17 Quoted in “NHS faces biggest shake-up in decades,” Guardian, 12 July 2010. 18 The shift in language from “willing” to “qualified” was meant to signal some restrictiveness in the range of providers that would be entertained, as consistent with the broader theme of emphasizing that competition was to be in the service of patients’ interests, and was not to be promoted per se. 19 The eight areas were subsequently expanded to include hearing tests, community dermatology, community eye services, continence, diagnostics, musculoskeletal (carpal tunnel and back and neck pain), podiatry, primary care psychological therapies, venous leg ulcers, and wheelchairs. Commissioners could also choose to contract with any qualified provider in other areas, but were required to choose at least three from this list.

Notes to pages 320–40 601 20 “Full text: Nick Clegg & Baroness Williams letter on NHS,” BBC News, 27 February 2012, available online at http://www.bbc.co.uk/news/ uk-politics-17184196. 21 See also “NHS bill: GPs offer to help with health changes,” BBC, 13 March 2012, available online at http://www.bbc.co.uk/news/health-17348616. 22 As examples of the magnitude of the task, redundancy costs estimated at £810 million in constant fiscal year 2010/11 terms would have to be managed over five years from 2010/11 to 2014/15. Real estate occupied by Strategic Health Authority and Primary Care Trust administrations totalled more than five hundred separate buildings with annual operating costs of more than £150 million. These properties, and the budgets and personnel involved in managing them, had to be reallocated within the new structure or otherwise disposed of (United Kingdom 2013a, 36–7). 23 Providers were accountable to Clinical Commissioning Groups for results under their particular commissioning contracts, as set out in Figure 7.2, but the existential accountability of providers ran to Monitor and the Care Quality Commission. Chapter 8 1 Moury (2012, 82–3), however, reports that the CDA-Labour coalition was formed only after extensive negotiations in which the liberal D66 party played a pivotal but ultimately unsuccessful role. In her account, the CDA and VVD were reluctant to form another coalition without the mediating influence of D66. D66, however, preferred a CDA-Labour-D66 grouping, but that attempt foundered on the inability of the parties to reach agreement. The CDA-Labour coalition was then formed, over the objections of some CDA members of parliament. 2 Enthoven’s explicit role in the Dutch process is a matter of some dispute. His highly influential (1978) paper on managed competition was widely read by policy-makers and other key actors in the Netherlands, and Enthoven visited the country shortly after the publication of the Dekker Committee report in 1987 to discuss the managed competition model and to deliver a public lecture (Enthoven 1987). Helderman et al. (2014, 26) report that the committee was directly mandated to consider Enthoven’s work, and two scholars closely associated with the reforms, Wynand van de Ven and Frederik Schut, have argued consistently (1995, 2007, 2008) that the Dutch reforms were based on the Enthoven model. As for the Dekker Committee itself, they argue that “the Dekker report was inspired by the apparent micro-level success of health maintenance organizations

602  Notes to pages 347–61 in the U. S. health care system” to which Enthoven’s work was intimately related (Schut 1995, 635) and that the government’s response to Dekker was inspired by Enthoven’s work (van de Ven and Schut 1995, 95). Bjorkman and Okma (1993, 94) maintain, however, that “there is no evidence that the Dekker Committee based its recommendations on the economic theories of Alain Enthoven,” and that “[t]he report rather reflects the experience and common sense of its members.” 3 Formally the Senate cannot amend legislation; its powers are limited to the right of veto. Under the shadow of a potential veto, however, a rarely used but potentially important practice has developed (termed novelle) under which a majority of the Senate may ask the government to amend legislation. If the government agrees, amending legislation then proceeds through the full legislative process and is passed together with the original legislation by the Senate (Broeksteeg and Knippenberg 2006, 222–3; Prodemos 2013, 48). 4 Author’s interview with a senior member of the purple coalition cabinet, 15 June 2010. 5 Author’s interview with a senior official in the Ministry of Health, Welfare and Sport, 17 June 2010. 6 Author’s interview with a senior official in the Ministry of Health, Welfare and Sport, 17 June 2010. 7 Author’s interview with Professor Tom van der Grinten, 15 June 2010. 8 The continuing relevance of the Dekker framework in government thinking, as well as the deliberate decision to approach it through the “curative,” rather than the “care,” sector, was confirmed to me in an interview with a senior member of the purple coalition cabinet, 15 June 2010. 9 Author’s interview with a senior member of the purple coalition cabinet, 15 June 2010. 10 Author’s interview with a senior official in the Ministry of Health, Welfare and Sport, 17 June 2010. 11 See also “The Dutch general election: A wind of change in the Netherlands – and across Europe” Economist, 16 May 2002, available online at http:// www.economist.com/node/1136775/print. 12 Studying only the thirteen-year period spanning the third (CDA-Labour) Lubbers cabinet and the two Kok purple coalition cabinets, Timmermans and Moury (2006) were struck by the “paradox” of stable coalitions in the context of increasing political volatility, which they attribute to internal coalition dynamics without explicitly crediting the influence of the leaders.

Notes to pages 363–72 603 13 With the retirement of Els Borst before the 2002 election, the D66 lost its major actor in health care. Furthermore the ideological space between the CDA and the VVD was much less than that between the VVD and Labour in the purple cabinet, and the mediating influence of D66 on matters of health policy was less necessary in this case. 14 Author’s interview with a former senior ministry official under Hoogervorst, 14 June 2010. 15 This compromise expanded the share of insurer revenue that would derive from competitive activity, while preserving much of the redistributive nature of the system. 16 As Roland Bal has pointed out to me, this might reflect a sort of “fractalization” of the analytic schema used in this book and set out in Chapter 1, at least in the blueprint quadrant. This suggests that, over the extended timeframe implied by a blueprint strategy, secondary periods of big bang, mosaic, and incremental strategies can occur. 17 The account in this paragraph and the remainder of this section is based on interviews with current and former officials in the Ministry of Health Welfare and Sport, as well as current and former staff of insurer and patient associations, June 14–17, 2010. 18 Author interview with former senior Ministry official under Hoogervorst, June 14, 2010. Or, as another interviewee put it to me, the Liberal view was that “it doesn’t matter if the cat is black or white as long as it catches mice.” Author interview with senior official 1 in Ministry of Health Welfare and Sport, June 17, 2010. 19 Assessments of the relative degree of support for the reforms from various interests are taken from Maarse (2009). 20 This point was confirmed to me in an interview with a former official of the Federation of Patients and Consumer Organisations, 15 June 2010. 21 Author’s interview with a former official of the Federation of Patients and Consumer Organisations, 15 June 2010. 22 That is, excluding services in the third, totally private compartment which accounted for about three percent of total health care expenditure. 23 Author’s interview with a senior official of the NZa, 17 June 2010. 24 The DBCs provided estimates of specialist hours necessary to provide the relevant care. In assigning a dollar value to each DBC, the NZa calculation multiplied this estimate by an hourly rate that had been negotiated under the tariff-setting process. For certain services, the measure of time required, as relied upon by the NZa, was overestimated (Schut, Sorbe, and Høj 2013, 18; author’s interview with Professor W.M.M. van de Ven, 14 July 2010).

604  Notes to pages 382–99 Chapter 9 1 These demands related not only to income, but also to numbers of personnel. As an OECD study noted: “In 2000, Canada had 2.1 practising physicians per 1 000 population, well below the OECD average of 2.9. Between 1990 and 2000, the number of doctors per capita remained stable in Canada, while it continued to increase (at least slightly) in most OECD countries … There were 9.9 nurses per 1 000 population in Canada in 2000, a higher figure than the average of 8.1 in OECD countries. However, the number of nurses per capita started to decline in Canada … during the 1990s, while it increased in most other countries” (Lafortune and Morgan 2003, 2). 2 This does not include a perfunctory discussion of the amending formula in 1996. The Constitution Act 1982 required that the amending formula be reviewed by first ministers within fifteen years. After a brief discussion at the first ministers’ conference in June 1996, no consensus on change was reached, and by default the existing formula was retained. The federal government considered this discussion to have met the constitutional requirement. 3 Author’s interview with former Liberal political staff member, 10 November 2014. 4 See, for example, the exchange between Allan Rock and Lorne Nystrom, 29 March 2000, available online at http://openparliament.ca/debates/ 2000/3/29/allan-rock-1/. 5 The other areas were pension reform, restructuring the tax-and-transfer package for children, and funding for university research. 6 Presaging future developments, the 1997 budget included a Health Transition Fund “to support pilot and evaluation projects in areas identified collaboratively by both levels of government” (Boychuk 2006, 240). 7 Letter from Anne McLellan, federal minister of health, to Gary Mar, Alberta minister of health, 2 April 2002, available online at http://www .hc-sc.gc.ca/hcs-sss/pubs/cha-lcs/2011-cha-lcs-ar-ra/index-eng.php#appc. 8 One close observer attributed this refusal to the provincial premiers’ expression of solidarity with the territorial leaders, who were dissatisfied with the treatment of Aboriginal issues in the accord, rather than to any disagreement with the substance of the accord as it applied to the provinces (author’s interview with a former senior member of the political staff in the federal Liberal government, 6 November 2014). Nonetheless the refusal reflects the testy atmosphere. 9 This move from the federal PCs to the Quebec Liberals was not as surprising as the party labels might imply. Quebec politics was divided

Notes to pages 400–10 605 along indépendantiste-federalist lines, and the Liberals were the provincial standard-bearers for the federalist cause, drawing support from supporters of various federal parties. The PCs had virtually no presence at the provincial level in Quebec. 10 “Premiers use ads to negotiate health care,” Canada News, 28 September 2002, available online at http://canadaonline.about.com/library/weekly/ aa092802a.htm. 11 “Canada’s new government: Paul Martin’s balancing act,” Economist, 18 December 2003, available online at http://www.economist.com/node/ 2303353?zid=309&ah=80dcf288b8561b012f603b9fd9577f0e. 12 “Canada’s political transition: Martin’s turn, at last,” Economist, 20 Novem­ ber 2003, available online at http://www.economist.com/node/2235238? zid=309&ah=80dcf288b8561b012f603b9fd9577f0e. 13 Author’s interview with Paul Martin, 13 March 2016. 14 Author’s interview with a former member of the federal Liberals’ political staff, 10 November 2004. 15 Author’s interview with Paul Martin, 13 March 2016. 16 Author’s interviews with a former Health Canada senior civil servant, 31 October 2014, and a former senior member of the political staff in the federal Liberal government, 6 November 2014. 17 Author’s interview with a former member of the federal Liberals’ political staff, 10 November 2004. 18 Author’s interview with a senior health policy advocate and former adviser to Paul Martin, 26 March 2014. 19 Author’s interview with a former member of the federal Liberals’ political staff, 10 November 2004. 20 Martin saw these credibility stakes as similar to those in the reform of the Canada Pension Plan in 1997 (author’s interview with Paul Martin, 13 March 2016). 21 Author’s interviews with a former Health Canada senior civil servant, 31 October 2014, and a former senior member of the political staff in the federal Liberal government, 6 November 2014. 22 Author’s interview with a former Health Canada senior civil servant, 13 July 2013. 23 Author’s interview with a senior health policy advocate and former adviser to Paul Martin, 26 March 2014. 24 Author’s interview with a former Health Canada senior civil servant, 13 July 2013; see also Boychuk (2005, 47). 25 Author’s interview with a former Health Canada senior civil servant, 13 July 2013; see also St-Hilaire and Lazar (2004).

606  Notes to pages 410–29 26 Author’s interview with a senior health policy advocate and former adviser to Paul Martin, 26 March 2014. 27 Author’s interview with a former member of the federal Liberals’ political staff, 10 November 2004; see also Delacourt (2003, 256, 337–8). 28 Author’s interview with Paul Martin, 13 March 2016. 29 Ibid. 30 Author’s interviews with a former Health Canada senior civil servant, 31 October 2014, and a former senior member of the political staff in the federal Liberal government, 6 November 2014. 31 As noted, however, Martin had a “handshake agreement” that the issue of a national pharmacare plan would be reopened if the federal Liberals regained a majority. 32 Author’s calculations from Canada 2004b and Canada 2017. 33 “Class action suit targets extra medical fees,” CTV (Montreal), 16 May 2014, available online at http://montreal.ctvnews.ca/ class-action-suit-targets-extra-medical-fees-1.1825791. 34 These thresholds were established at relatively generous levels. In Ontario, for example, thresholds imposed during a stalemate in negotiations in 1996 were calculated at 40 per cent above the median billings in each of thirty-two groups. This yielded thresholds roughly comparable to those that were previously and subsequently negotiated in Ontario and other provinces. In provinces with individual billing thresholds in the mid1990s, payments to GPs began to be prorated at about $250,000–$300,000 and payments to specialists at about $350,000–$400,000. See Hurley, Card, and Goldsmith (1997, table 2). 35 Full data can be found in Canadian Institute for Health Information (2016a). 36 The following paragraphs in this section are taken largely from Tuohy (2003c, 87–91; 2009, 477–82). 37 In Prince Edward Island, with seven hospitals for a total population of about 136,000, the case for regionalization in the first place was particularly weak. Alberta, however, had developed the most mature regional structure and the strongest regional authorities of any province, and the decision to abandon the model, arguable because the two strongest boards had come to rival not only each other but also the power of the provincial health ministry, has been the subject of considerable commentary (Collier 2010; Donaldson 2010; Duckett 2011, 2014; Marchildon 2008). 38 The final province, Nova Scotia, added coverage for disabled beneficiaries in 1981 and non-disabled beneficiaries in 1996, although some municipalities had provided coverage on varying terms and conditions prior to those dates (Grootendorst 2002, 96).

Notes to pages 453–79 607 Chapter 10 1 The fundholder’s liability for expenditure on any given patient was limited to £5,000. 2 Smith et al. (2010, 10) summarize the relevant research on the costs and benefits of fundholding. 3 A parliamentary report defined mutuals and cooperatives as being “owned by a defined group of members such as employees, service users, customers or others with an interest in the business,” as having “a governance structure which gives members a say in how the organisation is run,” and as typically being “run for the benefit of [their] members with profits retained within the business or distributed to [their] members.” Cooperatives were further distinguished as having “statements of identity” setting out “a set of values and principles, beyond the organizational concept that defines a mutual” (United Kingdom 2012a, 7). 4 Author’s assessment based on enterprise name and web presence. 5 Author’s interview with a Foundation Trust chief executive, 10 April 2011. 6 Author’s calculations from Arora et al. (2013, 15–16); and United Kingdom (2010b). 7 See also “Circle health – the ‘social enterprise’ run by the world’s hardest hedge fund managers,” Observer, 13 November 2011, available online at http://www.theguardian.com/business/2011/nov/13/circle-healthsocial-enterprise-hedge-fund-manager?INTCMP=SRCH. 8 In light of subsequent developments, CHKS issued an explanation that its award had been based on 2012–13 data and that, “as in all other walks of life success and good performance can often be transitory” see Harries (2015). 9 As of 2015, Achmea was structured as a private company offering a range of insurance lines and brands, based in the Netherlands and also operating in six other countries. Its majority shareholder (about 65 per cent) was Vereniging Achmea, a mutual of all Achmea policyholders. Thirty per cent ownership was held by the large Dutch multinational financial institution Rabobank, itself part of a complex corporate web. The remaining 5 per cent was held by a number of smaller financial institutions. 10 Author’s interview with a Dutch entrepreneur and consultant, 15 June 2010. 11 See Health Systems and Policy Monitor, “Online HIT: Netherlands,” available online at http://www.hspm.org/countries/netherlands25062012/ livinghit.aspx?, accessed 23 July 2017. 12 Private health insurance expenditure in the United States amounted to about US$1.1 trillion in 2015; another US$338 billion was spent

608  Notes to pages 483–9 out-of-pocket (Centers for Medicare and Medicaid Services 2016a). The private insurance industry alone, by expenditure, is far larger than the total health care economy of any other OECD nation, and is more than twice as large as the second-largest health economy – that of Japan. 13 On a broad definition, 33 per cent of employers with fewer than ten employees and 28 per cent of employers with between ten and forty-nine employees were in some form of pooled purchasing arrangement by the late 1990s (Long and Marquis 1999). A 2000 General Accounting Office report noted estimates of between fifteen and twenty-one purchasing cooperatives then in existence (United States 2000, 5). 14 Authorship of this section is claimed by Oregon Democratic senator Ron Wyden, who had been active in health policy for more than a decade and who had cosponsored an earlier bill built around individual mandates and state-based exchanges, but also replacing the favourable tax treatment of employer-based insurance with new tax arrangements, including payroll taxes, standard tax deductions for families, and subsidies. Subsequent to the passage of the legislation, Wyden advised the governor of Oregon to seek the waiver. Oregon nonetheless proceeded to establish its exchange under the terms of the ACA. 15 For example, the Democratic governors of Connecticut and Maryland were portrayed as “rushing to implement President Obama’s health-care vision. This was not just an opportunity to help constituents; it was a chance to partner with the White House on a landmark initiative and perhaps set themselves apart on the national stage” (Johnson 2014). 16 Including Massachusetts, whose legislation was grandfathered under the Affordable Care Act. 17 In New York a Democratic governor acted in the face of the failure of a split legislature to enact legislation. In Rhode Island an Independent governor (whose candidacy nonetheless had been tacitly endorsed by President Obama) acted after exchange legislation bogged down in disputes in the Democrat-controlled legislature over federal rules on abortion. 18 For a transitional three-year period while insurers and regulators were gaining experience assessing and pricing risk at community rates in the newly expanded individual and small-group insurance markets for mandatory insurance in which claims data for many new applicants were limited or non-existent, the federal government also operated two risk buffers on a non-actuarial ex post basis: reinsurance and risk corridors. Under a reinsurance mechanism funded through levies on all insurers, the federal

Notes to pages 490–527 609 government reimbursed insurers for the medical expenses of enrollees that exceeded a given threshold. Reinsurance was capped at another threshold, above which insurers were again liable. Under the risk-corridor provision, insurers were either taxed or refunded if their actual revenues fell outside a band of plus-or-minus 3 per cent around a target based on “allowable costs” – namely, claims plus specified allowances for quality improvement and administrative costs (Boothe and La Couture 2015; Kaiser Family Foundation 2014). 19 This distinction between “brokers” and “exchanges” was not consistently made, and rather quickly eroded in common usage; see, for example, Cohen and Condeluci (2012). 20 At this level, insurees could expect to have to cover 40 per cent of their health care expenses through deductibles and co-payments. 21 Rules under the Centers for Medicare and Medicaid Services allowed for such enrolment in a number of “special” circumstances such as loss of coverage under an employer-based or government plan, marriage or divorce, loss of income, and so on. Insurers argued, however, that these provisions were open to abuse by those taking out coverage only when they became ill. 22 The most explicit statement of this requirement is in legislation enacted in Alberta in 2001. Somewhat ironically, this provision was inserted in response to opposition to legislation initially intended to regularize models of blended public and private finance for medical services. 23 Indeed, in Ontario since 2004, hospital services covered under the public plan cannot be offered on a private basis at all. 24 Five provinces experimented with fully or partially elected boards, but two reverted to appointed boards and two collapsed the boards into a single entity, leaving only one small province – New Brunswick, with two boards – with an elected model (Tuohy 2009, 479–81). 25 For example, the budget assigned to Primary Care Networks in Alberta was less than one-fifth the size of the physician services budget (Alberta 2012, 31). 26 Personal communication, 19 September 2012. Chapter 11 1 The term is from de Vries (1999), but I do not mean to import here all the characteristics of a policy “generation” as defined by de Vries. 2 Unlike Clinton, Obama was able to win support for including health care in the reconciliation instructions in the 2009 budget. It is nonetheless

610  Notes to pages 537–80 arguable that the actual execution of those instructions was politically possible only because the first stage of the mosaic strategy – passage of legislation in both houses of Congress – had been accomplished. 3 The passage of the Civil Rights Act in 1964 not only represented a major loss for the powerful groups of Southerners in the congressional Demo­ cratic caucuses; it also “raised the stakes” of other reforms by requiring that no program receiving federal funding could discriminate on grounds of race, colour, or national origin (Blumenthal and Morone 2010, 195–6). Hence governmental health insurance raised the spectre – and, in the event, the reality – of desegregated hospitals. 4 It must also be noted that a stream of opinion developed at the senior levels of the Democratic Party that the very focus on major health reform was a strategic error; see, for example, Bolton (2014). 5 I am grateful to an anonymous reviewer for this suggestion. 6 Rudolf Klein, personal communication; author’s interview with a former Health Canada senior civil servant, 13 July 2013. 7 The election of May 2015 returned the Conservatives to power without their erstwhile junior Coalition partners, the Liberal Democrats. An election in June 2017 reduced the Conservative government to a minority, supported by a “confidence and supply” agreement with the Democratic Unionist Party of Northern Ireland. 8 As I described in Chapters 6 and 8, although the Dutch had achieved near-universality in the absence of a mandate, the rate of uninsured in the United States stood at about 15 per cent of the population prior to the reforms. Furthermore, although both systems were largely employer-based, the boundary between employer-based group membership and citizenship in the Netherlands was blurred in a political culture in which social partners and the state occupy a “shared political space” (Crouch 1993, 50–63). 9 This observation seems to hold for the welfare state more generally; see, for example, Castles (2004). 10 As in the Netherlands, however, the tangible effect of this provision was negligible, given that de facto coverage had been essentially universal prior to the reform. 11 By the end of 1993 polls put the CDU twenty points behind the SPD; the increasingly shaky ground of the Kohl government was captured by a headline in Die Zeit: “Kanzlerdammerung” (twilight of the chancellor) (Shanker 1993). 12 I am very grateful to Alan Jacobs and Paul Quirk for suggesting these points.

Notes to page 585 611 13 These two different routes recall the difference between “opportunistic centrism” and “principled centrism” described by Quirk and Cunion above in the case of Bill Clinton. 14 Substantial problems encountered during the piloting led to a slowing of the implementation timetable.

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Index

Page numbers with (t) refer to tables; pages with (f) refer to figures. Aberbach, Joel D., 12 ACA. See entries beginning with US, 2010, Affordable Care Act accountability: about, 9; hierarchies, 64, 548; medical profession, 38, 42–3; political actors, 38, 64; private finance, 38, 40; public vs. private objectives, 500–1; single-payer systems, 328; social control, 562. See also instruments of control Achmea (NL), 469–70, 607n9 ACOs (accountable care organizations) (US), 489–91, 556 actors, political. See political actors Addicott, Rachael, 459–60 Affordable Care Act. See entries beginning with US, 2010, Affordable Care Act agency relationship, 37, 62–4, 183, 374–5, 420, 433, 557, 562. See also medical profession; patients Alber, Jens, 47 Alberta: clinical networks (SCNs), 499; conservative base, 123, 377, 382; drugs, 425–6; “facility fees” dispute (1990s), 414–15; Health Accords (2000), 389; health commissions and reports, 389, 390, 392, 399; Health Council nonparticipation, 394, 410, 416; hospitals, 422–4, 606n37; medical remuneration,

421; primary care, 497, 499, 609n25; private clinics, 382, 390, 414–15; private finance proposals, 390, 399, 492–3, 584n7; regional authorities, 606n37; “third way” proposal (2006), 415. See also Canada Alexander, Danny, 273, 275, 276, 282–3, 285, 300, 322, 599n9 Alexander, Lamar, 256 Allison, Graham, 38, 39 American Health Care Act (US, 2017, failed), 251–2, 255. See also US, 2010 and after, Affordable Care Act, Republican repeal attempts American Medical Association (AMA), 91, 94, 219–20, 541 American Recovery and Reinvestment Act (ARRA) (US, 2009), 208, 213–15, 221, 227, 236, 579 America’s Health Insurance Plans (AHIP), 218 Appleby, John, 162 ARRA. See American Recovery and Reinvestment Act (ARRA) (US, 2009) Attlee, Clement, government, 66, 80–1, 82(t), 170, 577, 586n11. See also UK, 1945–6, big bang strategy austerity agendas: in Canada, 377–9, 417, 419–20, 422–5, 531; in the Netherlands,

682 Index 333, 351, 369; in the UK, 157(f), 274, 280–2, 301, 302–7, 320–1, 462–3, 598n2, 600n13 AWBZ. See Netherlands, Exceptional Medical Expenses Act (AWBZ) (1966) Azorsky, Andrew, 328 Balanced Budget Act (US, 1997, 1999), 194, 195, 219 balance of influence: about, 37–44, 547(t), 583n3, 585n1; institutional entrepreneurs, 557; medical profession, 37–44, 547(t); patients, 585n1; policy logics, 51–3, 52(t); policy logics in four countries, 545–54, 547(t); political actors, 38–9; private finance, 37–44, 547(t); scale of policy change, 8, 36; the state, 37–44, 547(t). See also medical profession; policy frameworks; policy logics; private finance; the state Baldwin, Robert, 74 Balkenende, Jan Peter, government, 357–9, 362–6, 367(t), 603n13. See also Netherlands, 2002–2010, reforms under Balkenende Bal, Roland, 603n16 Banting, Keith, 124, 125–6, 381 bases of influence. See balance of influence Baucus, Max, 197, 207–8, 210, 217, 218, 227–8 Baumgartner, Frank R., 5–6, 61, 65 Beaussier, Anne-Laure, 224, 253–7 Béland, Daniel, 10–11, 240–1 belief systems. See organizing principles Bemelmens-Videc, M.L., 44 Better Care Reconciliation Act (US, BCRA, 2017, failed), 253–5, 598n32 Bevan, Aneurin, 83–4, 158 Beveridge report (UK, 1942), 81, 518(t). See also UK, 1945–6, foundational NHS model adopted Biden, Joe, 207, 594n4 big bang strategy: about, 14(f), 15–17, 16(f), 72, 73(f), 518(t)–519(t), 524–6, 537(f); closed/open processes, 250–1, 523, 538–40, 578, 591n8, 598n32;

coalition of support, 16(f), 72, 73(f), 524; coherence of policy, 10–12, 17, 537(f), 544; complementarity, 537(f), 544; conditions for, 15–17, 16(f), 518(t)–520(t), 524–6; conflict levels, 537(f), 542–3; consequences, 17, 537(f); current and future influence, 72–3, 73(f), 518(t)–519(t), 524, 535–6; durability, 537(f), 538, 544; enactment, 17, 18, 544–5; implementation, 17, 18, 74, 537(f), 538, 544–5; institutional entrepreneurs, 35, 507–9; institutional resources, 15–17; pace and scale, 16(f), 17, 524; pace, scale, and four types of strategies, 4–5, 12–15, 14(f), 16(f); rarity of, 15–17, 24, 539; strategic decisions, 72–6, 73(f), 524–6; use for non-health public policy, 577–9, 581; veto points, 17; windows of opportunity, 518(t)– 20(t). See also strategic domain theory big bang strategy, countries: France, Juppé reforms, 58–9, 574; New Zealand, internal market reforms, 575. See also Canada, 1965–6, big bang strategy; UK, 1945–6, big bang strategy; UK, 1989–90, big bang strategy; US, 1993–4, big bang strategy (failed) Bismarckian model, 25, 53–5, 374, 554–5, 563–4. See also Germany, incrementalism; Netherlands; social insurance systems Bjorkman, James Warner, 601–2n2 Blair, Tony, government: Blair/Brown policy differences, 179–81, 186–7; Blair/Brown rivalry, 33, 154, 177, 179– 81, 190–2, 530–1, 579, 592n14, 592nn16, 17; elections (1997, 2001, 2005), 82(t), 154, 172, 173, 178–9; incrementalism of, 154, 174, 181, 187–91, 280, 529–30; influence on Coalition reforms (2010), 304, 520(t); political will, 174–80, 276; social policies, 173, 176, 190; strategic decisions, 32–5, 174–5, 183–91, 520(t), 530–1. See also entries beginning with UK, 1997–2010 blueprint strategy: about, 16(f), 17–19, 72, 73(f), 519(t), 527–9, 537(f), 539;

Index 683 advantages, 576; coalition of support, 16(f), 17, 72, 73(f), 528, 539; coherence of policy, 10–12, 537(f), 544; complementarity, 537(f), 539, 544; conditions for, 16(f), 17–18, 73(f), 519(t), 527–9; consequences, 18, 536–7, 537(f); current and future influence, 16(f), 17–18, 72–3, 73(f), 373, 518(t), 527–9, 535–6; durability, 544; enactment and implementation, 16(f), 18, 74, 243–4, 343, 537(f), 539, 544–5; institutional entrepreneurs, 35, 508–9; learning-based adjustment, 18, 537(f), 539; microcosm blueprints, 360, 603n16; pace, scale, and four types of strategies, 4–5, 12–15, 14(f), 16(f); political stability needed, 373, 576–7; rarity of, 528, 576; “shadow of the future,” 18, 354–6, 529, 537(f), 539; strategic decisions, 72–6, 73(f), 527–9; use for non-health public policy, 576–7; vulnerabilities, 18–19, 537(f), 539, 575; Washington (state), 575; windows of opportunity, 17, 29(f), 519(t), 528. See also strategic domain theory blueprint strategy, countries: Ireland, 575; US states (Minnesota, Oregon, and Washington), 575. See also Netherlands, 1987–8, blueprint strategy adopted Blumenthal, David, 92, 94, 257, 489 Boehner, John, 237 Boothe, Katherine, 59–60, 584n9 Borst-Eilers, Els, 348–9, 352–5, 362, 603n13 Bottomley, Virginia, 159 Bouchard, Lucien, 381, 393 Boulding, Kenneth, 44 Boychuk, Gerard, 398, 400–1 Britain. See UK (United Kingdom) British Columbia: drugs, 425–6; extrabilling penalties, 415; “facility fees” dispute (1990s), 414; hospitals, 423; Liberal government (2003), 395, 589n10; primary care delivery, 497; private clinics, 146, 427. See also Canada British Medical Association (BMA): response to White Paper (2010), 296–7, 302–3, 305–7, 315, 317

Broder, David, 591n6 Brown, Gordon: Blair/Brown rivalry, 33, 154, 177, 179–81, 190–2, 530–1, 579, 592n14, 592nn16, 17; Foundation Trusts (FTs), 188–90, 192–3, 452–5, 530; government (2007), 191–3; incrementalism, 520(t), 530–1; market-based policies, 185–6, 192–3; Milburn/Brown rivalry, 188, 191. See also entries beginning with UK, 1997–2010 Brown, Scott, 208, 231, 259 Buckman, Laurence, 296 Bupa private health (UK), 185–6, 592n19 Burnham, Andy, 193, 315, 317 Burstow, Paul, 284, 289 Burwell, King v. (US, 2015), 238–40 Bush, George W., government: partisan incrementalism, 196–8; TARP program, 213; veto of S-CHIP, 195, 215. See also US, 1994–2009, incrementalism Butler, Stuart, 264 Byrd, Robert, 169, 207, 232 CA. See Canada Calvert, Lorne, 393 Cameron, David, 380–1 Cameron, David, government: austerity, 274, 280–2, 302–7, 600n13; Big Society, 270; centralized leadership, 268–9, 271–3, 322; Coalition Agreement, 272–7, 279–80, 322, 580–1; Coalition election (2010), 31–2, 267–71, 277–8, 520(t); Conservative/Liberal Democrat majority (2010), 82(t); decision-making, 276–7, 285; education reforms, 280–1, 580–1; liberal Conservative consensus, 270; political will, 321–2; response to opposition to bill, 309; social policy, 580–1; welfare state reforms, 280–2. See also UK, 2013 and after; and entries beginning with UK, 2010–12 Canada: about, 118–19, 148–50; Aboriginal health, 387(t), 388(t), 405, 407; institutionalized ambivalence, 120–1, 150; regional differences and identities, 105, 118–25, 141; sharing community,

684 Index 124–5; terminology, levels of government, 589n8. See also specific provinces Canada, foundational model of health care (single-payer): about, 25, 27–8, 547(t), 552–3; accountability, 328; balance of influence, 547(t), 552–3; citizenship rights and obligations, 136, 149, 547(t); drugs, 552, 560; hospitals, 25, 54, 552; long-term care, 560; medical profession, 25, 54, 135, 547(t), 552– 3; mixed market for other services, 25, 27(t), 55, 150; policy logics, 53–5, 546(t)–547(t), 552–3; popularity, 124, 141–2; provincial variation, 55; shrinkage of, 28, 552, 560; state functions, 54, 547(t), 552; statistics on spending (1985–2013), 548(t), 560, 590n16; technological change, 28, 59, 430, 552, 560; universal coverage, 25, 54. See also entries beginning with Canada, 1965–6 Canada, government (federal): centrist brokerage parties, 119, 122–3; Charter rights, 426–7, 433; constitutional change, 127, 140–1, 379–81, 604n2; constitutional responsibilities, 120–1; decentralized federation, 105, 121; federal spending on provincial areas, 121; jurisdiction for health, 120–1, 126–8, 405, 407; jurisdiction for social policy, 133, 404; parliamentary government, 105, 119, 120–2, 538. See also Conservative Party of Canada (CA); Liberal Party of Canada (CA); New Democratic Party (NDP) (CA); Reform Party (CA) Canada, government (intergovernmental relations): about, 120–2, 125–6, 393–4; before big bang (1966), 126–34; collaborative federalism, 379–81; cooperative federalism, 106; decentralized federation, 105, 121; executive federalism, 120–2, 538; historical background, 125–6, 128–30; incrementalism, 59, 125–6; legislative framework for cost-sharing, 138–9; natural resources revenue, 121, 141; negotiations as constant feature, 126–7, 572; policy

cycling, 142–6, 412–17, 517; sharedcost federalism, 125–6, 129–30, 381; types of relations, 125–6 Canada, government (provinces/ territories): brokerage parties, 122–3; Council of the Federation, 395–6; electoral cycles, 122, 393, 572; health care jurisdiction, 121; jurisdiction for health, 120–2; parliamentary systems, 121–2; policy cycling, 146–8, 417–26, 517; political parties, 122–3, 589n10; province-building and social policy reform, 132, 134–5; regional differences and identities, 105, 118–25, 141; revenue sources, 121; single-payer legislation and implementation, 138–9; territories, 387(t), 388(t), 589n9. See also specific provinces Canada, institutional entrepreneurs: about, 448, 491–500; ambulance services, 494, 500; barriers in single-payer, 491, 495–500; cancer care, 498–9; cardiac surgery, 498–9; cautionary tales, 499; clinical networks, 498–9; court challenges, 492–3; drugs and home care, 491; hospitals, 41, 493–6; lack of legal barriers, 500; market mechanisms, 149, 390; medical profession-state accommodation, 59, 491–2, 497–500, 546(t); mixed market for other services, 27(t), 150; policy logics, 547(t); primary care delivery, 497, 500; private finance, 491–5, 547(t); public/private boundary, 493–4; specialty clinics, 493–4; telemedicine networks, 494–5; waiting times, 498–9. See also institutional entrepreneurs Canada, before 1965: about, 128–34; costsharing framework, 129–30, 144; elite accommodations, 128, 148; federalprovincial relations, 106, 126–34; federal transfers, 120–1, 132, 137, 144, 394(f), 412–14, 589n14–15; hospitals, 128–30, 148–50, 587n8; medical remuneration, 147, 418, 419(f); not-for-profit and private insurance, 129–30, 149;

Index 685 social policy reform (CAP, CPP, GIC), 127, 131–5, 394(f) Canada, 1965–6, big bang strategy: about, 29–30, 29(f), 106, 130–2, 148–50, 518(t), 521–2, 525; big bang classification, 16(f), 29–30, 29(f); closing the deal, 137–9; coalition of support, 135, 518(t), 522, 525; compared with mid-2000s incremental, 376, 429–30; conditions for, 136, 149, 403, 518(t), 525; conflict levels, 542–3; cooperative federalism, 30, 106, 132, 518(t), 522; Hall Commission report, 135–7; minority government, 130–2, 518(t), 522; pace of change, 134–5; political agenda, 130–2, 429, 521–2; scale and Saskatchewan catalyst, 135–7; scale of change, 135–7; skilled political leadership, 137–8; strategic decisions, 134–9, 518(t), 525; uncertainty, 139, 518(t). See also big bang strategy Canada, 1965–6, foundational model adopted (single-payer + mixed market): about, 27–8, 27(t), 53–5, 148–50, 518(t), 546(t); compared with US system, 149–50; cost-sharing framework, 138–9; drugs excluded, 137; enactment and implementation, 27–8, 138–9, 543; extra-billing by physicians, 139, 144–5; federal transfers, 27–8, 137–9; hospitals and physicians, 27(t), 105, 139; “medically necessary,” 139; medical profession-state axis, 59, 142, 146–9, 546(t); medical remuneration, 147–8, 148(t), 418, 419(f); mixed market for other services, 27(t), 149, 150; popularity, 124, 141–2; portability, 138; private insurance, 149–50; public administration, 138; public vs. private finance issues, 142; Quebec accommodation, 137; schedule of fees, 146, 147–8; sharing community, 124–5; universality, 138, 149 Canada, 1966–95, incrementalism: collaborative federalism, 379–81; drugs, 424–6, 431(f); enforcement of conditions, 414–16; fiscal swings,

378–9; hospitals, 422–4, 431(f); medical remuneration, 147–8, 148(t), 418–20, 419(f); non-medical services, 425; policy cycling, 65, 142–8, 383–4, 517; public confidence, 379; spending, 378, 418(f), 430–3, 431(f), 432(f) Canada, 1966–95, incrementalism, federal transfers: about, 27–8, 137–9, 142–6, 590n16; calculation of amounts, 589n14–15; cash component, 143; CHA (Canada Health Act), 27–8, 145–6; change to block funding (1977), 142–4; comingling of health and education funds, 144; conditionality of transfers, 144–6, 413–14; cost-sharing arrangement, 144; cutbacks and freezes, 144; enforcement of conditions, 145–6; EPF (Established Programs Financing) (1977–1995), 143–4, 394(f); extra-billing prohibition, 144–5; history of federal transfers, 142, 394(f), 412–13; penalties, 146, 590n19; provincial policy cycling, 146–8, 148(t); provincial reporting, 146; structure of, 394(f); tax points, 143, 590n16 Canada, 1984, Canada Health Act (CHA): about, 145–6; ambulance services, 494; dispute resolution, 388(t), 401, 416; drugs and home care excluded, 133, 399; enforcement of, 145–6, 414–16, 590n19; extra-billing ban, 145–6, 147, 414–16; federal transfers, 27–8, 145–6; “medically necessary,” 135, 425; medical remuneration, 147; principles (universality, accessibility, comprehensiveness, public administration, portability), 145–6, 386(t)–387(t), 399; private capitalization of facilities, 493; provincial innovation, 418; Quebec’s disputes, 416 Canada, 1995–2004, incrementalism: about, 140–8, 376, 386(t)–388(t), 517; collaborative federalism, 379–81, 395, 398; constitutional change, 127, 140–1, 379–81, 604n2; drugs, 383, 391, 392, 393, 404, 424–6; enforcement of CHA, 145–6, 408–9, 414–16, 590n19; federal

686 Index funding, 381, 383–92, 386(t)–388(t), 418(f); first ministers’ conferences, 381, 393; fiscal swings, 141, 377–9, 383–4, 419; home care, 382–3, 384, 391, 392; hospitals, 422–4; intergovernmental relations, 378–9; Liberal elections (1997, 2000, 2003), 382, 385; Liberal internal divisions, 377, 383, 398–9; market instruments, 390; medical profession-state axis, 59, 419–20; medical remuneration, 147–8, 148(t), 418–22, 419(f), 606n34; policy cycling, 65, 142–8, 383–4, 517; private finance, 390; provincial austerity, 419–20, 424–5; provincial electoral cycles, 122, 393; provincial reporting, 385, 386(t), 393–4, 400, 408, 414–16; provincial variation, 425; public confidence, 379, 381–2; reports and commissions (Kirby, Romanow), 376, 382, 389–93; spending (1975–2016), 418(f); 10-year plan, 407–9, 416, 520(t); windows of opportunity, 376 Canada, 1995–2004, incrementalism, federal transfers: about, 376, 383–4, 394(f); cash components, 378, 384, 413, 413(f); CHST, division into CHT and CST (2003), 386(t), 391, 393; CHST, establishment (1996), 378, 383, 413–14; CHST, levels and structure, 381, 385, 386(t), 394(f), 413, 413(f); CST and CHT structure, 386(t)–387(t), 393, 394(f); cutbacks, 377–8, 381, 383–4, 413, 413(f); enforcement of CHA, 142, 378, 384, 412, 413–17; history of federal transfers, 142, 384, 394(f), 412–13; HRT (Health Reform Transfer), 386(t), 393; increases (after 1997), 384, 385; Kirby report, 376, 390–3; “Romanow gap,” 391, 393, 400–2, 407–8; Romanow report, 376, 391–3; structure of, 386(t)– 388(t), 394(f); tax points, 391, 413 Canada, 2000–2004, Health Accords (federal/provincial): about, 385–9, 386(t)–388(t), 392–4, 403–9; Aboriginal health, 387(t), 388(t), 405, 407; CHA principles, 386(t)–387(t), 389; CHST

increases, 386(t), 389; dispute resolution, 388(t), 389, 390; drugs, 386(t), 388(t), 389; enforcement of CHA, 408– 9; Health Council (2003), 387(t), 394, 409–11, 416; home care opportunities, 386(t), 388(t), 408; intergovernmental relations, 393–4; medical equipment, 386(t), 389; provincial reporting, 385, 387(t), 393–4, 400, 408–9, 415–16; provincial undertakings, 386(t)–388(t), 407; reports (Kirby and Romanow), 392–3; “Romanow gap,” 408; supply of medical professionals, 387(t), 400, 604n1; technological change, 386(t), 388(t); territories, 387(t), 388(t), 589n9; waiting times, 387(t), 388(t), 407–8 Canada, 2004, incremental strategy in window of opportunity: about, 16(f), 29(f), 32, 376, 395–402, 520(t), 530–2, 535–6; alternative strategies not chosen, 399–400, 407, 531–2; coalition of support, 401–2, 409, 520(t), 530–1; compared with 1960s big bang, 403, 406, 429–30; conditions for, 520(t), 530–2; current and future influence, 32, 399–410, 520(t), 530–2, 535–6; dispute resolution opportunities, 401; divided political opposition, 32, 396, 401; election (2004), 32, 376, 398–401, 403, 429–30, 520(t); electoral resources, new alignments, 395–7; first ministers, 395–6, 404, 407; incremental classification, 16(f), 29(f), 32, 402–9; intergovernmental relations, 32, 393–4, 429–30, 520(t), 530–1; Martin’s political leadership, 396–9, 531; pace of change, 402; public confidence after cutbacks, 379, 381–2; scale of change, 399–402 Canada, 2004, reforms to single-payer + mixed market model: about, 27–8, 27(t), 55, 520(t), 530–2, 546(t); drug coverage opportunities, 399, 402, 404–8; drugs, 27(t), 399, 546(t); eligibility changes, 546(t); Health Accord (2004), 387(t)–388(t), 407–11; home care opportunities, 399–401, 402, 408; hospitals, 28, 422–4; indicator-driven

Index 687 improvements, 400, 408; medical profession-state axis, 59, 419–20, 546(t); medical remuneration, 418–22; policy cycling, 65, 410–26, 517; policy logics, 546(t)–547(t); policy shift (unchanged), 547(t); provincial reporting, 408–9, 410–11, 415–16; provincial variation in mixed market, 27(t), 546(t); “Romanow gap,” 400–1; scope of coverage, 424–6; single-payer plus mixed market, 546(t); statistics on spending, 418(f); technological change, 28, 59; 10-year plan, 398, 400, 407–9, 416, 520(t); two phases (warm-up and major engagement), 376; waiting times opportunities, 400, 402, 406, 407–8 Canada, 2004 and after: about, 426–33, 517; accountability mechanisms, 427–8; CHA principles, 432–3; community agencies, 495–6; conditionality, 410, 412–17; Conservative government (2006–15), 410; court challenges, 392, 426–7, 433; decentralization/ centralization, 422–4, 428, 495–6; drugs, 410–11, 428–9, 430–3, 431(f); extra-billing, 428; Health Council, 410–11, 416; home care, 410–11, 416; hospitals, 59, 422–4; interprovincial cooperation, 428–9; long-term care, 428–9, 495–6; parliamentary review (2008), 411; policy cycling, 65, 412–26, 517; policy drift, 59, 431; provincial bilateral agreements, 417; provincial reporting, 410–11, 415–16; provincial variation, 428; public support for single-payer, 432–3; scope of coverage, 430–3; services moved out of hospitals, 59, 430; single-payer system, 430–3; technological change, 28, 59, 430; Trudeau, Justin, government, 416–17; waiting times, 410–12, 428 Canada, 2004 and after, federal transfers: about, 142–3, 376, 412–17; austerity (after 2008), 417, 419; block funding, 412; CHT (Canada Health Transfer), 387(t), 389, 393, 394(f), 404, 407–8, 416; CST (Canada Social Transfer),

386(t), 393, 394(f), 414; enforcement of conditions, 412–17; history of, 142, 394(f), 412–13, 413(f); levels (1975–2014), 412–13, 413(f); provincial bilateral agreements, 417; spending (1975–2014), 430–3, 431(f), 432(f); tax points and cash components, 143, 413; 10-year plan (to 2024), 416, 428; unilateral change under Harper government, 416 Canada, 2004 and after, provinces: about, 417–24, 431(f), 517; centralization/decentralization, 422–4, 495–6; delisted services, 424–6; drugs, 424–6, 428–33, 431(f); federal bilateral agreements, 417; home care, 426; hospitals, 422–4, 431–3, 431(f), 494; medical professionstate axis, 59, 417–22, 431–3, 546(t); medical remuneration, 418–22, 419(f), 431–2, 431(f); organization of delivery, 421; per capita spending (1975–2016), 418(f); primary care models, 421; provincial variation, 410–12, 417–18, 421–4, 428 Canada Health Act. See Canada, 1984, Canada Health Act (CHA) Canadian Alliance Party, 382, 385, 396 Cantor, Eric, 595n12 capital. See private finance Carter, Jimmy, government, 99 Cashore, Benjamin, 13, 583–4n6, 583n1 Cassidy, Bill, 256 CBO (Congressional Budget Office, US), 212, 259–60 CDA. See Christian Democratic party (CDA) (NL) CDU/CSU. See Christian Democratic party (CDU/CSU) (Germany) Central Agency for Health Care Tariffs (COTG) (UK), 116–17, 349, 350 CHA. See Canada, 1984, Canada Health Act (CHA) Chafee, John, 171–2, 211, 523 change agents, 439. See also institutional entrepreneurs “Change Assured” (UK), 340–1, 367(t) Chaoulli v. Quebec, 426–7, 433

688 Index Charest, Jean, 395, 407, 604–5n9 Chile: reform governments, 66, 586n11 Chopra, Aneesh, 485–6 Chrétien, Jean, government: Chrétien/ Martin rivalry, 377, 383, 398; elections (1997, 2000, 2003), 382; first ministers’ conferences, 381, 393; legacy mandate (2003), 392; political style, 377, 381, 396; sponsorship scandal, 397, 398, 403, 429–30. See also Canada, 1995– 2004, incrementalism Christensen, Tom, 12 Christian Democratic party (CDA) (NL): about, 115, 589n7; continuing role in government (1918–94), 109–10, 528; election loss (1994), 110, 346; election loss (2012), 369; internal divisions, 343, 360; majoritarian centrism, 358; return to government (2002–12), 358–9. See also Lubbers, Ruud, government; Netherlands, party system; Nether­ lands, 1987–8, blueprint strategy adopted; Netherlands, 1987–94, reforms under Lubbers; Netherlands, 2002–2010, reforms under Balkenende Christian Democratic party (CDU/CSU) (Germany): about, 566–7; “grand coalition” with SPD, 568–9. See also Germany, incrementalism Circle Health (UK), 464–5, 469–70 citizenship rights and obligations: about, 8, 46–9, 547(t); implication of universal programs, 50–1; inferred from frameworks, 50; option of citizenship, group membership, or consumership, 8, 547(t); as organizing principle, 8, 547(t), 553–4; policy frameworks, 51–3, 52(t), 547(t); policy shifts in four countries, 547(t). See also organizing principles Civil Rights Act (US, 1964), 89–90, 94, 577, 610n3 Civitas (UK), 299–300 Clarke, Kenneth, 159, 160, 590n1, 591n4 Clegg, Nick, government: austerity, 274, 280–2, 302–7, 600n13; centralized leadership, 268–9, 271–3, 322; centre-right,

small state liberalism, 270–1; CleggWilliams letter on reforms, 316; Coalition Agreement, 272–7, 279–80, 322, 580–1; Coalition election (2010), 31–2, 267–71, 277–8, 520(t); decision-making, 276–7, 285; Orange Book, 270–1; political will, 321–2; social policy, 280–2, 580–1. See also UK, 2013 and after; and entries beginning with UK, 2010–12 Clinton, Bill, government: bipartisanship, 194–5; coalition of support, 30, 163, 165; compared with Obama’s window, 202–3, 209, 210, 211, 217, 235–6; economic agenda, 164–8, 204, 579; failed big bang as lesson for Obama, 205–6, 536; impeachment crisis (1998), 194; managed competition, 164–5, 210; NAFTA, 579; New Democrat agenda, 163–4, 171, 519(t), 522; opportunistic centrism, 165, 194; popular vote, 202; principled centrism, 164–5, 194, 579; task force, 166–7, 206, 591n8; welfare reform (1996), 195, 198, 516. See also US, 1993–4, big bang strategy (failed) Clinton, Hillary: campaign platform (2008), 211; election vote (2016), 248; task force, 166–9, 170, 206, 538, 591n8 CMS Innovation Center, 489–90 coalitions of support: about, 7, 72–4, 73(f), 523–4; big bangs, 524–6; blocking coalitions, 544; blueprints, 16(f), 17, 527–9, 537(f), 539; incrementalism, 529–32; medical profession, 585n3; mosaics, 16(f), 18, 19, 526–7; pace of change, 67–8, 70; political actors, 38–9; programmatic coalitions (experts and politicians), 565; strategic decisions, 67–8, 72–5, 73(f), 518(t)–520(t); strategic domains, 15–19, 16(f), 537(f), 538; veto points, 15, 521. See also current and future influence; political actors Cohn, Jonathan, 587n10 Collins, Susan, 213, 214, 253, 257 Companje, K.P., 111 complementarity in policy: about, 10–11, 536–44, 537(f); ACA reforms, 259, 262–3, 543–4; big bang, 537–9, 544;

Index 689 blueprint, 539, 544; and durability, 10, 537, 544; incrementalism, 20, 540, 544; mosaic, 540–2, 544 Congressional Budget Office (CBO, US), 212, 259–60 Conservative/Liberal-Democrat Coalition government (UK): austerity agenda, 280–1, 301, 598n2; decisionmaking structures and processes, 276; formation after 2010 election, 369–76; ideological compatibility of leaders, 269–71. See also UK, 2013 and after; and entries beginning with UK, 2010–12 Conservative Party of Canada (CA): about, 123, 396; support for 2003 and 2004 Health Accords, 401, 409. See also Canada, government (federal); Harper, Stephen, government Conservative Party (UK): internal disarray after 1997 election, 178–9; “modernization”under Cameron, 270; opposition to Labour reforms (1945– 48), 83; parliamentary majorities, 82(t); support for centralization and NHS independence, 97–8. See also Cameron, David, government; Thatcher, Margaret, government; UK, parliamentary government; UK, 1950–89, incrementalism; UK, 1989–90, big bang strategy; UK, 2010–12, mosaic strategy Constitution Act (CA, 1982), 120–1, 127, 140–1, 379–80, 426–7, 433, 604n2 consumers of health care. See patients control, social, 561–2. See also instruments of control Courchene, Thomas, 392 Cowley, Philip, 275 Crewe, Ivor, 578 Crisp, Sir Nigel, 292 Crouch, Colin, 437, 438, 441 Cruz, Ted, 253, 254 Cunion, William, 165, 611n13 current and future influence: about, 7, 15, 73(f), 518(t)–520(t), 523–4, 535–6; big bang, 72–3, 73(f), 524–6; blueprint, 16(f), 17–18, 72–3, 73(f), 373, 527–9; incrementalism, 16(f), 19–20, 72–4,

73(f), 529–32, 535–6; mosaic, 16(f), 19, 72–4, 73(f), 526–7; pace of policy change, 7, 67–74, 73(f), 518(t)–520(t); political actors, 7, 15, 67–75, 73(f), 518(t)–520(t), 535–6; power relations, 67–74, 73(f), 518(t)–520(t); strategic decisions, 7, 67–74, 73(f), 518(t)–520(t), 535–6; strategic domains, 518(t)–520(t). See also coalitions of support; political actors; strategic decisions; windows of opportunity Cutler, David, 584n17 cycling, policy, 60–5, 443, 514–17, 528–9 D66 (NL): about, 109; election gains (1994), 346–7; election losses (2002, 2006), 357, 366; mediating role in coalition governments, 110, 115, 346–7, 348, 354, 359, 601n1. See also Borst-Eilers, Els; Netherlands, party system Darzi, Lord Ara, 192 Daschle, Tom, 197, 207, 215 Day, Stockwell, 385 Debus, Marc, 274 decisions, strategic. See strategic decisions Deeg, Richard, 583n4 de Jong, Piet, government, 115 Dekker report (“Willingness to Change”) (NL, 1987), 335–40, 343–4, 367(t), 565, 572, 601–2n2, 602n8 DeMint, Jim, 227–8, 592n10 Democratic Party (US): effective strength in Congress, 86(f); election (1964), 89; election (1992), 163, 168; election (2008), 202; health care reform as “unfinished business,” 89, 163, 200, 203, 205; and party polarization, 172, 193–4, 212–13. See also Clinton, Bill, government; Johnson, Lyndon B., government; Obama, Barack, government; Roosevelt, Franklin D., government; Truman, Harry, government; and entries beginning with US den Uyl, Joop, government: strategic miscalculation, 115–17, 532 de Vries, Michiel S., 61, 609n1 De Winter, Lieven, 600n12

690 Index Diagnostic Related Groups (DRGs) (US), 352, 454, 471, 476 Diagnostic Treatment Combinations (DBCs) (NL), 352–3, 362, 365–6, 368, 370, 372–3, 471, 574, 603n24 Diefenbaker, John, 130 Dixon, Anna, 181, 184 Dodd, Chris, 226, 596n15 Doern, Bruce, 399 Dole, Robert, 172, 523 domains, strategic. See strategic domain theory Dorrell, Stephen, 159, 300 Downs, Anthony, 61 Drew, George, 128 Dumont, Patrick, 600n12 Duplessis, Maurice, 128, 130 Dutch Health Care Authority (NZa), 365, 603n24 Easton, David, 8 Eden, Anthony, government, 82(t), 95 Edwards, John, 211 elected politicians. See political actors Ellwood, Paul, 477 Emanuel, Rahm, 206, 207, 215, 595n12 employer mandate under ACA. See US, 2010, Affordable Care Act, employer mandate England. See UK (United Kingdom) Enthoven, Alain, 160, 164, 166, 336, 555, 601–2n2 entrepreneurialism, 437–9. See also institutional entrepreneurs Equity and Excellence (UK, 2010), 287–99, 294(f), 301 Equity and Excellence (UK, 2010), response to, 296–309, 325 Esping-Andersen, Gosta, 585n18 European Union: austerity, 351; competition law and NL, 360–1, 374, 474–5; competition law and UK, 307, 314, 338; policy style differences, 74–5; UK spending to match EU (2000), 177, 592n15. See also France; Germany, incrementalism; Netherlands Eves, Ernie, 393, 395

Exceptional Medical Expenses Act. See Netherlands, Exceptional Medical Expenses Act (AWBZ) (1966) expertise: balance of influence in policy frameworks, 37–44, 51–3, 52(t), 547(t); base for institutional entrepreneurialism, 34, 439-40, 447(t); power from knowledge, 37–8; public trust, 48, 63–4; technocratic expertise, 74, 108–9, 535-6. See also balance of influence; medical profession feedback, 56–8, 60–4, 514, 562. See also policy cycling Fielding, Steven, 81 Field, Steven, 309 finance, private. See private finance Fisher, Elliott, 490 Five Year Forward View (UK), 321, 460–2, 559 Fortuyn, Pim, 356–7 Foundation Trusts (FTs). See UK, institutional entrepreneurs Fox, Ruth, 279, 599n6 France: Juppé reforms, 58–9, 574; reform governments, 66, 586n11 Frank, Barney, 223–4 Frost, Leslie, 128–9 Fuchs, Victor, 44 functions, state. See state functions Garud, Raghu, 438 Germany, incrementalism: about, 563–75; compared with Netherlands, 563–5, 570; corporatism, 563, 566; cost control, 41, 564; expert advisory bodies, 565, 572–3; founding model, 563–4; grand coalition (2005–9), 568–70; hospitals, 41, 574; incrementalism, 563, 566–8; individual mandate, 263–4, 565, 571; institutional entrepreneurs, 573–4; Kohl government, 564, 566–7; political system, 566–7, 569, 571–3; private insurance, 563–4, 571, 573–4; public option, 223; reforms (1993, 2007), 567–71; regulated competition, 564–5, 567–8, 573–4; risk pools, 223, 571;

Index 691 Seehofer reforms, 566–8, 570; sickness funds, 563–4, 567–8, 571, 573–4; social insurance, 563–6, 571, 573–4; windows of opportunity, 566, 568–9. See also Christian Democratic party (CDU/ CSU) (Germany); Social Democratic party (SPD) (Germany) Gidden, Anthony, 175 Gingrich, Newt, 171–2, 194, 228 Goldwater, Barry, 89 Gore, Al, 203 Götze, Ralf, 589n7 Gove, Michael, 282, 285, 580–1 government officials, 38–9. See also the state gradual policy change. See incrementalism, as deliberate strategy; incrementalism, as “normal” policy process Graham, Lindsay, 256 Grassley, Charles, 197, 215, 227–8 Grayson, Richard, 270, 599n8 Greer, Scott L., 323–4, 325–7, 328 Gregg, Judd, 224 Groenewegen, Peter P., 355 Grogan, Colleen, 59, 260, 593n24 Grunwald, Michael, 214, 595n12 Hacker, Jacob, 59, 80, 201, 211, 217, 222–4, 431 Hague, William, 273, 275 Hall, Emmett, 135–7 Hall, Peter, 9, 60, 332 Ham, Christopher, 175, 188, 299, 305 Harkin, Tom, 226, 596n15 Harper, Stephen, government, 407. See also entries beginning with Canada, 2004 and after Harris, Mike, 380–1, 389, 395 Harrison, Stephen, 85 Hatch, Orrin, 194–5, 215, 247 Health and Social Care Act (UK, 2012). See UK, 2010–12, Health and Social Care Act (2012) Health Care Allowance Act (NL, 2006), 362–3, 366–9, 367(t) Health Care and Education Reconciliation Act (US, 2010), 233–4

Health Care Freedom Act (US, 2017, failed), 256 Health Care Institutions Admission Act (NL, 2006), 362–3, 366–9, 367(t) Health Care Insurance Act (NL, 2006), 362–3, 365, 366–70, 367(t) Health Care Insurance Board (CVZ) (NL), 349–50, 365, 367(t), 370–1 Health Care Market Regulations Act (NL, 2006), 362–3, 366–70, 367(t) health care policy. See policy change; policy frameworks; policy logics; strategic domain theory health care systems: about, 23–6, 37–8; collectivization of risk, 37–8; GDP percentage (1985–2013), 548(t), 560; as government responsibility, 24; incentives, 38–43, 51, 505; information asymmetries, 62; national health systems, 25–6; pillars (state, private finance, medical profession), 37, 445; political phases, 21–4, 26; power bases (authority, capital, knowledge), 37, 42, 63, 439–42, 445; private insurance, 24–6; public mandates, 505–7; public opinion, 24; statistics on spending, 22–4; technological change, 37–8; values of probity, stewardship, and equity, 501; “wicked” problems, 62–3. See also accountability; institutional entrepreneurs; medical profession; patients; policy change; policy frameworks; policy logics; the state health care systems, models: about, 25–7, 27(t). See also national health service systems; residual health system; single-payer systems; social insurance systems health insurance exchanges under ACA. See US, 2010, Affordable Care Act, health insurance exchanges Health Insurance Portability and Accountability Act (US, 1996), 195 Health Maintenance Organization (HMO) Act (US, 1973), 102, 477–8, 490 Health Security Act (US, 1993, failed), 479

692 Index Helderman, Jan-Kees, 334, 344, 350, 370, 373, 571, 588–9n6 Hewitt, Patricia, 184 hierarchies, 44–6, 51–3, 52(t), 63–4, 547(t). See also instruments of control HMOs (health maintenance organizations) (US), 102, 163, 476–7, 477–8, 490 Hood, Christopher, 74 Hoogervorst, Hans: leadership role in final phase of blueprint strategy, 359–61 Hospital Insurance and Diagnostic Services Act (CA, 1957), 129, 143, 145, 146, 589–90n14, 589n13. See also Canada, 1984, Canada Health Act (CHA) Howlett, Michael, 13, 529, 535, 583–4n6, 583n1 Huhne, Chris, 271, 273 Huntington, Samuel P., 60 Hunt, Jeremy, 329 ideational dimensions of policy change, 7, 36. See also organizing principles Ignatieff, Michael, 49 incrementalism, as deliberate strategy: about, 16(f), 19–20, 73(f), 520(t), 529–35, 537(f); Anglo-American tradition, 74; coalition of support, 520(t), 529; complementarity and coherence, 10–12, 537(f), 544; conditions for, 16(f), 19–20, 520(t), 529–32; current and future influence, 16(f), 19–20, 72–4, 73(f), 520(t), 529, 535–6; durability, 544; enactment and implementation, 537(f), 544–5; no new organizing principles, 16(f); “normal” vs. deliberate choice, 529–35; pace of change, 56–60; pace, scale, and four types of strategies, 4–5, 12–15, 14(f), 16(f); political investments, 402, 531; strategic decisions, 20, 72–6, 73(f), 520(t), 529, 534–5; use for non-health public policy, 579–80; vulnerabilities, 20, 61–3, 537(f), 540; windows of opportunity, 28–30, 29(f), 520(t), 529. See also strategic domain theory incrementalism, as deliberate strategy, countries. See Canada, 2004, incremen-

tal strategy in window of opportunity; Germany, incrementalism; UK, 1997–2010, incremental strategy incrementalism, as “normal” policy process: about, 4, 6–7, 20, 56–60, 443; Anglo-American tradition, 74; displacement (rival structure to attract defectors), 58; feedback, 56–8, 60–4, 514, 562; layering (new elements on existing policies), 11–12, 58; path dependency, 56–7; policy cycling, 60–5, 514–17, 537(f), 562; policy drift, 58–9; policy spiralling, 530; potential for policy transformation, 11–12, 57–60 individual mandate under ACA. See US, 2010, Affordable Care Act, individual mandate influences on frameworks. See balance of influence; medical profession; private finance; the state institutional entrepreneurs: about, 33–5, 437–9, 446–8, 447(t), 509, 555–9; autonomy as condition, 34, 441–2, 446–8, 501; balance of influence, 557; brokerage, stewardship, and entrepreneurship, 439; centralization/decentralization, 445, 558–9; distinguished from delegation by state to private entity, 557–8; heterogeneity as condition, 33–4, 441–4; hybridization of states, 27, 34, 554–4, 561; incentives as condition, 34, 440, 441–2, 446–8, 505; innovation, 559; market-oriented reforms, 33–4, 445–6, 554–5; policy entrepreneurs, 438, 441, 443–4; political capital, 438, 440; power bases (state authority, capital, expertise), 34, 37, 42, 439–42, 445; profit, 506–7; public mandates, 505–7; public/ private boundary, 34, 437, 445–6, 557–8; public vs. private objectives, 500–1; risk and uncertainty, 34–5, 439, 441–4, 501–6; strategic domains, 35; structural sites, 442–3, 445, 447(t); terminology, 438, 555; values, 501; windows of opportunity, 33–4, 441–4. See also specific countries

Index 693 institutionalized ambivalence, 120–1, 150 instruments of control: about, 51–3, 52(t), 547(t); citizenship rights and obligations, 47–9; hierarchy, 8, 44–6, 51–3, 52(t), 63–4; incremental changes within, 64; information needs, 45–6, 63–4; markets, 8, 44–6, 51–3, 52(t), 63–4, 547(t); peer control, 8, 51–3, 52(t), 63–4, 547(t), 557; policy logics, 547(t), 553–4; policy shifts in four countries, 545–54, 547(t); unintended change, 553–4. See also accountability; markets; policy logics; power relations Ireland: blueprint reforms, 575 Jackson, Gregory, 583n4 Jacobs, Alan (2011, 2015), 7, 13, 39, 57, 68–70 Jacobs, Lawrence, 89, 166, 206, 258, 265, 591n8 Jarman, Holly, 328 Jensen, Carsten, 65 Johnson, A.W., 137–8 Johnson, Daniel, 134–5 Johnson, Haynes, 591n6 Johnson, Lyndon B., government: Civil Rights Act, 89–90, 94, 577, 610n3; coalition of support, 90, 92–3; Democratic landslide (1964), 88–90, 519(t); mosaics and social policy, 89, 577; reform government, 66, 586n11; southern conservative bloc, 89, 202, 533; unfinished agenda of JFK, 89, 519(t); Voting Rights Act, 577. See also US, 1965, mosaic strategy Jones, Brian D., 5–6, 61, 65 Jones, Lorelei, 181, 184 Juppé, Alain, 58–9, 574 Kassebaum, Nancy, 195 Kavanaugh, Dennis, 275 Keeler, John T.S., 66, 586n11 Kennedy, John F., government: coalition of business and labour, 68; Johnson’s inheritance of agenda, 89, 90; rights of patients, 362

Kennedy, Ted: ACA support, 197, 205, 207–8, 210, 217, 226; bipartisanship, 195, 227; death (2008), 205, 208, 230–1, 594n6; S–CHIP support, 194–5 Kent, Tom, 131 Kerry, John, 203 King, Anthony, 578 King, Ronald, 68 King, William Lyon Mackenzie, 127 Kingdon, John, 5–6, 441, 444 King’s Fund (UK), 299, 303, 305, 329 King v. Burwell (US, 2015), 238–40 Kirby report (CA, 2002), 390–3, 399, 402, 404–5 Klein, Ralph, 380–1, 389, 390, 395, 407, 584n7 Klein, Rudolf, 13, 159–60, 181, 183, 535 Klink, Ab, 368 Kohl, Helmut, government, 564, 566–7 Kok, Wim, government: about, 346–7, 357–8, 367(t); coalition, 1st (1994–1998) Labour-VVD-D66, 346–7, 367(t), 602n12; coalition, 2nd (1998–2002) Labour-VVD-D66, 347, 353, 356–7, 367(t), 602n12; election (2002), 356–7; leadership style, 333, 347; pause, 367(t); political will and stability, 353, 358; welfare-state reforms, 333, 347. See also Netherlands, 1995–2002, reforms under Kok Konisky, David, 236, 596n23 Labour Party (PvdA) (NL): about, 109–10; election and CDA coalition (1989), 333; elections and purple coalition (1994, 1998), 346, 353; electoral fortunes (2002–12), 355, 357, 358–9, 366–8, 369; guidance of regulated competition blueprint support, 333–4, 341–2; ideological distance from VVD in purple coalition, 354, 603n13; majoritarian centrism, 358; oppositional stance (early 1980s), 116, 589n7. See also den Uyl, Joop, government; Kok, Wim, government; Netherlands, party system; Netherlands, 1995–2002, reforms under Kok;

694 Index Netherlands, 2002–2010, reforms under Balkenende; Netherlands, 2010 and after, reforms under Rutte Labour Party (UK): attempt at Labour/ Liberal-Democrat coalition (after 2010), 269–70; electoral reinforcement in elections (2001, 2005), 178–9; electoral weakness (1980s and 1990s), 173; landslide election (1945), 80–1; landslide election, parliamentary majorities (1997), 82(t); “New Labour” agenda, 173, 175, 179, 184–6; NHS as attack on Conservatives in elections (1987, 1997), 157, 173; opposition to Coalition reforms (2010–12 and after), 315–17; support for decentralization and NHS integration, 97–8, 292. See also Attlee, Clement, government; Blair, Tony, government; UK, parliamentary government Landry, Bernard, 393 Landry, Mark K., 561 Lansley, Andrew, 282, 284–300, 307, 314, 317, 322, 328, 329, 456, 580. See also “NHS Autonomy and Accountability” (UK, 2007) and response Laws, David, 273, 284–5, 599n9 Lee, Mike, 253 Lee, Simon, 278, 279, 280 Lees, Charles, 280, 598n2 Le Grand, Julian, 304, 306 Lesage, Jean, 130–1, 134, 137 Letwin, Oliver, 273, 276, 282–5, 300, 322 Levin, Martin A., 561 Levy, Jonah, 333, 346 Liberal Democrat party (UK): ideological tensions, 270–1, 308; internal democracy, 271, 274–5; localist orientation, 283, 289, 295; origin, 313. See also UK, parliamentary government; and entries beginning with UK, 2010–12 Liberal Party of Canada (CA): as brokerage party, 122–3; hegemonic status, 396, 403, 520(t); tensions between “business liberals” and “social liberals,” 131, 383, 397, 398. See also Chrétien, Jean, government; Martin,

Paul, government; Pearson, Lester, government; Trudeau, Pierre, government; Trudeau, Justin, government. Lieberman, Joseph, 230 Lieverdink, Harm, 356 Lindblom, Charles E., 44, 535 Llewellyn, Edward, 273, 275 logics of policy frameworks. See policy logics Lubbers, Ruud, government: about, 116, 332, 357–8, 367(t), 576–7; coalition (1982–6) CDA-VVD, 116; coalition (1986–9) CDA-VVD, 332–3, 334–5, 340, 367(t); coalition (1989–94) CDALabour, 333, 334, 346–7, 367(t), 577, 602n12; economic recession, 332, 333, 334, 346; leadership style, 332–4; neoliberalism, 334–6, 519(t), 528; political stability, 334, 358; welfare-state reforms, 333–5, 347. See also Netherlands, 1987–8, blueprint strategy adopted; Netherlands, 1987–94, reforms under Lubbers Magaziner, Ira, 166–7 Major, John, government, 82(t), 159, 161 Manitoba: drugs, 425–6; “facility fees” dispute (1990s), 414. See also Canada Mannion, Russell, 454 Marchand, Jean, 134 markets: about, 23–8, 40–2, 44–6, 52(t), 559–61; accountability, 64; contracts, 44–5, 560–1, 562; convergence of for-profit and not-for-profit forms, 40–1; heterogeneity of interests, 34; hybridization of states, 27, 34, 554–5, 561; implementation, 34; incremental changes within, 64; information needs, 45–6, 63–4; institutional entrepreneurs, 33–5, 445–6; instruments of control, 44–6, 52(t), 63–4, 547(t); market instruments, defined, 390; not-for-profits, 40–1; policy frameworks, 40–2, 44–6, 51–3, 52(t); privatization debates, 559–60; profit, 506–7; risk, 501–6; shifts in classic models, 27(t), 33–4; state functions, 50, 559–61; values, 501–2;

Index 695 welfare state reforms, 23–5, 554–5; windows of opportunity, 33–4. See also institutional entrepreneurs; instruments of control; private finance; state functions Marmor, Theodore R., 13, 90–3, 264–5, 587n9 Martin, Paul, government: Chrétien/ Martin rivalry, 377, 383, 397, 398; current and future influence, 399–402, 535–6; election as Liberal leader (2003), 396–9; election of minority government (2004), 376, 398–400, 403, 429–30, 520(t); Kelowna Accord, 580; Liberal sponsorship scandal, 397, 398, 403, 429–30; political style, 396–7, 407, 580; rejection of premiers’ pharmacare proposal, 407, 532; social policy, 579–80. See also Canada, 2004, reforms to single-payer + mixed market model Martin, Paul, Sr., 397 Maryland, ACA health insurance exchange, 245, 485, 608n15 Massachusetts: ACA health exchange, 245, 608n16; health exchange model, 210–11, 218, 227, 479–80; Senate election of Brown, 230–1 Mays, Nicholas, 181 McConnell, Mitch, 253–7 McCutcheon, Wallace, 136 McDonough, John, 170, 197–8, 228, 260, 265 McFarland, Andrew, 60 McGuinty, Dalton, 395, 407 Medicaid/Medicare, 1965 mosaic (US): about, 89–93, 103–4, 260, 519(t), 543; durability, 543; limited scope, 8–9, 543; medical remuneration, 41, 94, 476, 543, 588n13; mosaic classification, 28–30, 29(f); private insurance norms, 92, 543; private supplementary insurance, 92; shadow state, 26, 200; SSA amendments, 90–3, 103, 519(t); unintended change, 540–1; window of opportunity, 89–91, 171, 519(t). See also US, 1965, mosaic strategy

Medicaid, 1966–2008 (US): about, 59, 515–16; centralization/decentralization, 101–2; children, 59, 516; Clinton’s failed big bang (1993), 167; enrolment, 195, 198, 516, 593–4n1, 593n25; implementation, 93–4, 195, 541; longterm care, 59; medical remuneration, 41, 476; policy cycling, 59, 195, 198, 515–16; S–CHIP (children), 25, 194–5, 198, 210, 215, 221, 593n24; statistics on spending (1970–2010), 59, 198; variation, 195; welfare reform (1996), 195, 198, 516 Medicaid, 2009 and after (US): ARRA funding, 213 Medicaid, 2009 and after (US), ACA expansion: about, 234, 241, 260, 519(t); ACA dismantling attempts (2017), 249–50, 252; budget reconciliation, 232; communication of political rationale, 264–6; eligibility (per cent of poverty line), 234, 241; enrolment, 260; innovation waivers, 235, 241, 483; partisanship, 241; penalty for refusal of expansion, 238, 241; public opinion, 261–6; Republican repeal attempts (2017), 252, 254; scope of change, 265; Senate bills, 228; state implementation, 234, 240–1, 260, 482; Supreme Court decision (National Federation of Independent Business v. Sebelius), 238, 263 medical care. See entries beginning with health care Medical Care Act (CA, 1966), 139, 143, 145, 146, 589–90n14. See also Canada, 1984, Canada Health Act (CHA) medical profession: about, 42–4; accountability, 38, 42–3; agency relationship, 37, 62–4, 183, 374–5, 420, 433, 557, 562; balance of influence in frameworks, 37–44, 547(t); cost- vs diagnosis-based payments, 41; decision-makers for patients and society, 42–3; hierarchies, 52(t), 63–4; information asymmetries, 37, 62; information needs, 45–6, 63–4; instruments of control, 44–6, 52(t), 63–4, 547(t); markets, 63–4; peer

696 Index control, 44–6, 63–4, 548, 557; policy frameworks, 42–4, 44–6, 52(t); policy logics, 547(t); policy shifts in four countries, 547(t); power relations, 37, 42–3, 62–4; public trust, 37, 64; social control of patient relationships, 562; supplier-induced demand, 43; variation in services, 43–4. See also patients; policy frameworks medical profession, profession-state accommodation: in Canada, 54, 128, 142, 147, 149, 378, 417–18, 420, 431–2, 496–7, 500, 538, 546(t), 554; in the UK, 84, 95, 103, 538, 546(t); in the US, 102–4, 543 Medicare/Medicaid, 1965 mosaic (US): about, 89–93, 103–4, 260, 519(t), 543; durability, 543; limited scope, 8–9, 543; medical remuneration, 41, 94, 476, 543, 588n13; mosaic classification, 28–30, 29(f); private insurance norms, 92, 543; private supplementary insurance, 92; and shadow state, 26, 200; as SSA amendments, 90–3, 103, 519(t); unintended change, 540–1; window of opportunity, 89–91, 171, 519(t). See also US, 1965, mosaic strategy Medicare, 1966–2008 (US): about, 103–4, 515–16; “administrative clarification,” 100; budgetary politics, 100–4; catastrophic coverage (MCCA, 1988), 99–100, 103, 587n10; centralization/ decentralization, 101–2; Clinton failed big bang (1993), 167; cost control, 101–3; disabled expansion (1973), 100, 197, 593n25; drugs (MMA, Part D), 196–8, 217, 246, 503, 516; enrolment, 593–4n1; HMO contracts, 477–8; home care (1989), 100; hospitals, 41; implementation, 93–4, 541; managed care, 477–8; medical remuneration, 194, 195, 219–20, 476, 478; medical review (PSROs and PROs), 101–2; nursing homes (1989), 100; payroll tax, 248, 543; policy cycling, 98–103, 194–8, 515–16; statistics on spending

(1970–2010), 59, 198; voucher-style model (“Part C”), 194 Medicare, 2009 and after (US): ACA negotiations, 217; ACOs (accountable care organizations), 489–91, 556; cost control, 232, 234–5, 597n25; Independent Payment Advisory Board, 232, 234–5, 242; innovation waivers, 235, 241, 483; medical remuneration, 217, 218–19, 476, 478; pilot projects, 489–91; subsidies, 217, 246 Medicare Catastrophic Coverage Act (MCCA) (US, 1988), 99–100, 103 Medicare Prescription Drug, Improvement, and Modernization Act (US, MMA, 2003), 196–8, 478 Mendelsohn, Matthew, 124 Merkel, Angela, 569 Mettler, Suzanne, 26, 261 Milburn, Alan, 178, 183, 185–6, 188–9, 191, 450, 453 Mills, Wilbur, 91, 92, 98–9, 587n4 Minnesota: ACA health exchange, 245; blueprint attempts, 575 Minogiannis, Panos, 342 Mitchell, George, 598n36 mix of instruments of social control: about, 36, 44–6, 583n3; exchange (markets), 8, 44–6, 51–3, 52(t), 63–4, 547(t); hierarchies, 44–6, 51–3, 52(t), 63–4, 547(t); peer control, 8, 44–6, 51–3, 52(t), 547(t), 557; policy logics, 553. See also instruments of control; policy frameworks; policy logics Moore, John, 158, 159, 160 Moran, Michael, 42 Morone, James A., 92, 94, 102, 257 mosaic strategy: about, 16(f), 19, 519(t)– 520(t), 526–7, 537(f), 540–2; coalitions, 16(f), 18, 19, 72–3, 519(t)–520(t); complementarity and coherence, 10–12, 19, 537(f), 540–2, 544; conditions for, 519(t)–520(t), 526–7; consequences, 16(f), 19, 537(f), 540–2; current and future influence, 16(f), 19, 72–4, 73(f), 519(t)–520(t), 535–6; durability, 537(f), 541–2, 544; enactment, 18, 19, 537(f),

Index 697 544–5; implementation, 18, 19, 537(f), 541, 544–5; institutional entrepreneurs, 35, 507–9; layering (new elements on existing policies), 11–12, 16(f), 19, 282; organizing principles, 16(f), 537(f); pace, scale, and four types of strategies, 4–5, 12–15, 14(f), 16(f); strategic decisions, 19, 72–6, 73(f), 526–7; use for non-health public policy, 577, 579–80; vulnerabilities, 19, 537(f), 541, 544; windows of opportunity, 19, 29–30, 29(f), 519(t)–520(t). See also strategic domain theory mosaic strategy, countries. See Medicare/ Medicaid, 1965 mosaic (US); UK, 2010–12, mosaic strategy; US, 1965, mosaic strategy; US, 2009–10, mosaic strategy Moscardelli, Vincent G., 596n16 Moury, Catherine, 602n12 Moynihan, Daniel Patrick, 172 Mukherjee, Ishani, 529, 535 Mulroney, Brian, government: neoliberal policies and collapse of PCs, 377; non-enforcement of penalties under CHA, 146, 414; reductions in federal transfers to provinces (after 1984), 144 Murkowski, Lisa, 253 Murray, Patty, 256 National Association of Primary Care (NAPC), 297–8, 303, 304, 306–7, 450, 456 National Care Institute, 365, 370–1 National Federation of Independent Business v. Sebelius (US, 2012), 238, 263 National Forum on Health (CA, 1997), 382, 383 National Health Council of Canada, 334, 387(t), 394, 406, 409–11, 416 National Health Service Act (UK, 1946), 83. See also UK, foundational model of health care (national health service); UK, 1945–6, big bang strategy national health service systems: about, 25, 53–5; funding by taxation, 25, 53; hierarchical model, 25, 53, 54; policy

logics, 53–5, 547(t); pre-reform model, 53–5; state functions, 25, 53, 548; UK model, 25, 27(t), 53–5, 81, 515, 518(t); universal coverage, 25, 53. See also health care systems; UK, foundational model of health care (national health service) Nelson, Ben, 214 Netherlands: compared with Germany, 563–5; corporatism, 107–8, 335–6, 563, 588n1; elite accommodations, 105–6, 148; EU’s competition law, 307, 314, 338; functional groups, 107–8, 588n3; “poldering” (collaboration), 108, 110, 369–70, 372, 373; religious and cultural divisions, 105, 106–7; shared political space, 105, 108, 150, 528, 563, 610n8; social middle ground (state and civil society), 107, 109, 150, 358, 373, 528, 549–50; social security, 335; solidarity and subsidiarity, 106–7, 109, 111; technocratic advisory bodies, 106, 108–9, 371, 565; welfare-state reforms, 335, 346–7 Netherlands, overall changes in model of health care: about, 25, 27(t), 53–5, 105, 374–5, 547(t), 549–50; citizenship rights and obligations, 108, 375, 542–3, 547(t), 550; funding, 25; hospitals, 25, 53, 365–6; long-term care, 25, 54; mandatory regulated private insurance model, 25, 53, 336–7, 363–6, 374, 542–3, 547(t), 550; medical profession, 25, 53, 365–6; organizing principles, 54, 356, 375, 547(t), 550; policy logics, 546(t)–547(t), 549–50; private insurance, 25, 54, 112–14, 118, 336–8, 355–6, 363–5, 374–5, 547(t); regulation, 474–5; risk adjustment, 473–4; sickness funds, 25, 53, 110–12, 336–8, 342–4, 355–6, 363–5, 367(t), 374–5, 447(t), 466–7; state functions, 54, 375, 550; statistics on spending (1985–2013), 548(t), 560. See also Netherlands, Exceptional Medical Expenses Act (AWBZ) (1966) Netherlands, Exceptional Medical Expenses Act (AWBZ) (1966): about,

698 Index 111–13, 344, 347–8, 367(t), 371–2; amendments (1989, 1991), 341, 343, 367(t); as base for reforms, 112, 347–8, 353–4, 371–2; CTZ inspection, 350; disabled, 112; drugs, 342, 344, 348, 351; expansion report (1993), 345; financing, 112, 344; under Health Care Insurance Act (2006), 365; long-term care, 112, 348, 363, 371, 466; mental health, 112, 341, 371; repeal, 371; single-payer aspects, 112; social insurance coverage, 113; transfer of services from social insurance (1989–1990), 341–2; for uninsurable risks, 112, 347–8 Netherlands, institutional entrepreneurs: about, 33–5, 446–8, 447(t), 466–75, 508–9, 555–9; centralization/ decentralization, 558–9; convergence of social and private insurers, 445–6, 447(t), 467–70, 557, 565; EU competition law, 360–1, 374, 474–5; hospitals and finance, 470–3; independent sector treatment centres, 471–2; long-term care, 466; mandatory insurance, 263–4, 447(t), 542–3; medical remuneration, 470–1; mergers, 474–5; public/private hybrids, 508; sickness funds, 447(t), 466–70, 508, 556; tension between central planning and markets, 475. See also institutional entrepreneurs Netherlands, parliamentary system: about, 109–10, 330; electoral cycles, 572; House and Senate, 343, 602n3; legislative amending process, 602n3; regional powers, 105; unitary state, 105, 107–8. See also specific prime ministers Netherlands, party system: coalition governments, 30–1, 105, 109–10; majoritarian centrism, 358; multi-party system, 109; political parties, 109–10, 340, 366–7; populist parties, 220, 356–8. See also Christian Democratic party (CDA) (NL); D66 (NL); Labour Party (PvdA) (NL); People’s Party for Freedom (VVD) (NL) Netherlands, before 1950s, foundational model adopted: German occupation,

106, 110–11, 150, 516, 563–4, 588n4; sickness funds, 110–11, 150, 563–4; social insurance (Bismarckian) model, 53–5, 150, 516, 563–4 Netherlands, 1950s to 1970s: about, 53–5, 110–14, 150, 466; corporatism, 110, 335–6; hospitals, 53, 113; insurerprovider relations, 54, 113; medical remuneration, 113–14; not-for-profit insurers, 113; policy cycling, 516–17; private insurance, 54, 111, 112–14, 563–4, 588–9n6; sickness funds, 53–4, 110–11, 112–13, 466; social insurance, 54, 112–15, 563–4; social middle ground, 113–14, 150, 333, 358, 373–4, 475, 528, 549; solidarity/subsidiarity mixed models, 111; state as delegator and regulator, 54; supplemental insurance, 114, 588n5; technocratic advisory bodies, 106, 108–9; universal coverage, 53–4, 112, 114–15. See also Netherlands, Exceptional Medical Expenses Act (AWBZ) (1966) Netherlands, 1970s and 1980s: about, 114–18, 150; Central Council on Health Care Prices (COTG), 116–17, 349, 350; centralization/decentralization, 331–2; Central Office on Hospital Prices (COZ), 113, 116–17; coalition governments, 114–17, 331–2, 532, 589n7; cost control, 113–14, 116–18, 334, 564; den Uyl’s failed big bang strategy, 115–17, 331, 532; economic recession, 114–15, 331; hospitals, 116–17; institutional entrepreneurs, 466, 508; long-term care, 466; medical remuneration, 116–17; policy cycling, 516–17; political will, 333–4; private insurance, 114, 118, 563–4, 588–9n6; regional planning, 117; sickness funds, 110–11, 114, 118, 466; social insurance, 114, 118, 563–4; social middle ground, 109, 150; solidarity, 114; spending, 114; state activism, 116–17; supplemental insurance, 114, 588n5; Wagner report (1982), 331–2. See also Netherlands, Exceptional Medical Expenses Act (AWBZ) (1966)

Index 699 Netherlands, 1987–8, blueprint strategy adopted: about, 29(f), 30–1, 150, 331–5, 367(t), 372–3, 516–17, 519(t), 522, 528– 9, 539; blueprint classification, 16(f), 29(f), 30–1; coalition, 2nd (1986–89) CDA-VVD, 30–1, 332–5, 340–1, 367(t), 519(t), 522, 528; coalition of support, 519(t), 528–9, 537(f), 539, 576–7; conditions for, 519(t), 528–9, 530; corporatism’s limits, 335–6; current and future influence, 341, 373, 519(t), 528–9; economic recession, 114–15, 331, 332; election (1982), 332, 519(t); enactment in phases, 31, 341, 343, 367(t), 539; institutional entrepreneurs, 447(t), 466–7, 508–9; neoliberalism, 334–6, 519(t), 528; pace of change, 31, 330–1, 335, 338–42, 576–7; policy cycling, 65, 516–17, 528–9; policy spiralling, 530; political compromises, 340–1; political opposition, 31, 344–6; political will and authority, 30–1, 333–5, 341, 518(t), 522; private sector restructuring, 334, 344; scale of change, 335–8, 528–9; shadow of the future, 529, 530; technocratic advisory bodies, 340–1, 565, 572; timeline and adjustments, 244, 330–1, 339, 341; vulnerabilities, 31, 539; welfare state reforms, 334–5, 519(t); window of opportunity, 29(f), 30–1, 150, 331–5, 367(t), 372–3, 519(t), 522, 528–9. See also Lubbers, Ruud, government Netherlands, 1987–2006, blueprint strategy evolution: about, 26, 27(t), 330–1, 372–3, 516–17, 519(t), 522, 546(t)–547(t); AWBZ reforms, 336, 345; competition scope, 338; contracting with providers, 337, 343; convergence of social and private insurers, 26, 118, 345, 445–6, 447(t), 467–70, 565; corporatism, 546(t); cost control, 345; Dekker report as blueprint, 335–40, 343–4, 367(t), 565, 572, 601–2n2, 602n8; enactment in phases, 341; GP mobility, 341; group membership, 25, 546(t); hospital ownership, 25; institutional

change, 338; institutional entrepreneurs, 447(t), 466–70, 508–9; insurers’ status (private vs. public), 338, 341; long-term care, 25; managed competition among insurers, 30–1, 336–8, 353, 564–5, 601–2n2; mandatory insurance, 31, 336, 542–3, 547(t); market-oriented reforms, 30–1, 334–6, 341; medical remuneration, 345; policy spiral, 528–9; premium mix, 336, 337–8, 339, 341, 344–5; private insurance, 25, 27(t), 336–7, 344–5; public/private boundary, 334–5; shift from corporatism to oligopolistic regime, 55, 335–6, 546(t); sickness funds, 25, 27(t), 342–5, 367(t); social insurance, 25, 27(t), 336–7; supplemental insurance, 336, 339; technocratic advisory bodies, 340–1, 565, 572; universal comprehensive coverage, 26, 336, 338. See also Netherlands, 1987–94, reforms under Lubbers; Netherlands, 1995–2002, reforms under Kok; Netherlands, 2002–2010, reforms under Balkenende Netherlands, 1987–94, reforms under Lubbers: about, 116, 367(t); amendments (1989), 341, 367(t); coalition (1986–9) CDA-VVD, 340–1, 367(t); coalition (1989–94) CDA-Labour, 341–4, 346, 367(t), 602n12; convergence of social and private insurers, 118, 345, 445–6, 447(t), 467–70, 565; Dekker report (“Willingness to Change”), 335–40, 343–4, 367(t), 565, 572, 601–2n2, 602n8; Dekker report, response (“Change Assured”), 340–1, 367(t); institutional entrepreneurs, 447(t), 467; pause, 345–6, 367(t); policy cycling, 516–17; sickness funds, 334, 342–4, 367(t), 467–9; Simons plan (“Working on the Innovation of Care,” 1990), 342–6; social middle ground, 109, 358; Van Otterloo Act (1994), 367(t); Willems Committee report (1994), 345–6, 367(t). See also Lubbers, Ruud, government; Netherlands, institutional entrepreneurs

700 Index Netherlands, 1995–2002, reforms under Kok: about, 346–7, 367(t); advisory apparatus, 349; AWBZ reforms, 347–8, 367(t); Board for Health Care Tariffs, 350; Central Council on Health Care Prices (COTG), 349, 350; coalition (1994–8) Labour-VVD-D66, 346–7, 367(t), 602n12; coalition (1998–2002) Labour-VVD-D66, 347, 353, 367(t), 602n12; competition, 349, 352, 354, 356; convergence of social and private insurers, 348, 354, 445–6, 447(t), 467–70, 565; cost control, 351–3, 367(t); Diagnostic Treatment Combinations (DBCs), 352–3, 362, 365–6, 368, 370, 372–3, 603n24; disability status, 349; drugs, 342, 344, 348, 349, 351, 367(t); Health Care Inspectorate, 349, 365; Health Care Insurance Board (CVZ), 349–50, 365, 367(t), 370–1; institutional entrepreneurs, 355–6, 447(t), 467; legislation, 367(t); long-term care, 351; managed competition among insurers, 353, 356; medical remuneration, 351, 367(t); organizing principles, 350–1; premiums, 355; private insurance, 348, 351; public opinion, 352, 354–5; quality of care, 349; A Question of Demand, 354, 367(t); risk-adjustment formulas, 349, 356, 364–5, 367(t), 473–4, 503; “shadow of the future,” 354–6, 529; shift from corporatism to competition, 55, 350–1; sickness funds, 348–50, 367(t), 467–9, 474; social insurance, 349–51, 356; social middle ground, 358; staff transfers to new institutions, 350, 353; Supervisory Board for Health Care Insurance (CTZ), 349–50, 365, 367(t); supplemental insurance, 348; user fees, 351, 367(t); wait times, 351–3; welfare-state reforms, 333, 347. See also Kok, Wim, government; Netherlands, institutional entrepreneurs Netherlands, 2002–2010, reforms under Balkenende: about, 362–8, 367(t), 546(t)–547(t); AWBZ reforms, 363; big bang in microcosm, 360, 603n16;

coalition (2002–6) CDA-VVD-D66, 357–9, 367(t), 603n13; coalition (2006–10) CDA-Labour-CU, 366, 367(t), 368; comprehensiveness, 363–4, 546(t); convergence of social and private insurers, 363, 445–6, 447(t), 467–70, 565; cost control, 368–9, 471; Diagnostic Treatment Combinations (DBCs), 352–3, 362, 365–6, 368, 603n24; Dutch Health Care Authority (NZa), 365, 603n24; employer associations and unions, 362; EU law, 360–1, 364; financing, 364; Health Care Inspectorate, 365; hospitals, 365–6, 470–3; independent treatment centres, 471–2; institutional entrepreneurs, 365–6, 447(t), 467–73; legislation, 362–3, 365–70, 367(t); long-term care, 363; managed competition, 366; mandatory insurance, 363, 447(t), 542–3, 546(t); medical remuneration, 365–6, 368, 470–3; National Care Institute (2012), 365, 370–1; not-for-profit insurers, 364; patients’ rights, 362; policy logics, 546(t)–547(t); premiums, 368; private status for insurers, 360–1, 364; provider remuneration, 361–2, 365–6, 470–3; quality control, 366, 368; regulated competition, 364–5, 546(t); regulatory structure, 365; risk-adjustment formulas, 473–4, 503; social insurance, 360–3; uninsured population, 363, 610n8; universality, 363; window of opportunity, 359–60. See also Balkenende, Jan Peter, government; Netherlands, institutional entrepreneurs Netherlands, 2010 and after, reforms under Rutte: about, 368–72; coalition (2010–12) VVD-CDA-PVV, 369; coalition (2012–17) VVD-Labour, 369; cost control, 368–70; Diagnostic Treatment Combinations (DBCs), 370; home care, 371; hospitals, 369–70; incremental changes, 368–72; long-term care, 371–2, 466; medical remuneration, 370; mental health, 371; National Care Institute (2012), 370–1; poldering

Index 701 (collaboration), 108, 110, 369–70, 372–3; policy cycling, 516–17; quality control, 369–71; risk-adjustment formulas, 473–4, 503; technocratic advisory bodies, 371. See also Netherlands, institutional entrepreneurs Netherlands Hospital Association, 473 New Brunswick: ambulance services, 494; hospitals, 424. See also Canada New Democratic Party (NDP) (CA): origin, 122; relations with Liberal Party, 131, 134, 137, 382; role in adoption of universal hospital and physician insurance, 135, 522, 525; support for Health Accords, 401, 409. See also Canada, government (federal); and entries beginning with Canada, 1965–6, big bang strategy Newfoundland and Labrador: “facility fees” dispute (1990s), 414. See also Canada New Zealand: big bang strategy for internal market reforms, 575 NHS Alliance (UK), 297–8, 303, 304, 305–7, 450, 456 “NHS Autonomy and Accountability” (UK, 2007) and response, 280, 282, 284–99, 301, 303–9, 325 NHS Confederation (UK), 297, 303, 306, 307, 317 Nicholson, Sir David, 281, 303–4 Nixon, Richard, government, 98–9 NL. See Netherlands NOMINATE scale of partisanship (US), 594n7, 595n8, 596nn15, 16, 596n19 Northern Ireland: constitutional reforms (1999), 172–3 Northwest Territories, 589n9 Nova Scotia: ambulance services, 494; “facility fees” dispute (1990s), 414; hospitals, 424. See also Canada Nuffield Trust, 299–300, 303, 305 Nunavut, 589n9 Obama, Barack, government: bipartisanship, 206, 207; climate/energy bill, 236; communication of ACA

rationale, 264–6; cost control, 204; economic agenda, 164, 204; economic stimulus (ARRA), 208, 213–15, 221, 227, 236, 579; elections (2008, 2012, 2014), 201–3, 236–7; executive orders on ACA, 233, 243; individual mandate, 211, 554; “keep your plan” promises, 243, 597n27; negative lessons from Clinton’s failed big bang, 205–6, 536; political will and ACA, 203–7, 231, 257, 259; popular vote, 202; president’s role in choice and execution of mosaic strategy, 203–10, 216–17, 231, 257, 259, 523, 533–4; public opinion on, 236, 261–6, 263(f); recession and financial crisis (2008), 204, 206, 207, 208. See also US, 2009–10, mosaic strategy; US, 2010, Affordable Care Act Obamacare. See entries beginning with US, 2010, Affordable Care Act Obamacare Repeal and Reconciliation Act (US, 2015, failed), 255–6 O’Donnell, Gus, 288 O’Higgins, Michael, 535 Okma, Kieke G.H. (2009), 113, 374, 601–2n2 Oliver, Thomas R., 477 Ontario: air ambulance, 494, 500; base for federal Liberals, 123; cancer care, 499; cardiac surgery (CCN), 498–9; decentralization, 496; delisted services, 426; drugs, 425–6; Health Accord (2000), 389; hospital insurance, universal, 128–30; hospitals, 129–30, 422–4, 496, 609n23; institutional entrepreneurialism, 499; Liberal government (2003), 395; medical remuneration, 421–2, 424, 606n34; not-for-profit insurance (BCBS), 129–30; Ontario Telemedicine Network (OTN), 494–5; primary care delivery, 497; reform commission (2012), 496; regional planning (LHINs), 423–4, 496; variation in electoral cycles, 393; waiting times, 498–9. See also Canada Orange Book (UK), 271

702 Index Oregon: ACA health exchange, 245, 608n14; blueprint attempts, 575; health exchanges, 608n14 organizing principles: about, 8, 36, 46–51, 547(t), 583n3; conflict levels and pace of change, 537(f), 542–3; policy frameworks, 36, 51–3, 52(t); policy logics, 547(t), 553–4; policy shifts in four countries, 545–54, 547(t); public support, 46; state functions, 46–7, 49–51, 547(t), 559–61; unintended change, 553–4; welfare-state frameworks, 46–53. See also citizenship rights and obligations; policy frameworks; policy logics; the state; state functions Osborne, George, 272, 273, 275, 276, 285 Ostrom, Elinor, 441 Owen, Lord David, 313 pace of policy change: about, 4–5, 11–12, 14(f), 16(f), 55–6; coherence, 10–12; complementarity, 536–44, 537(f); conflict levels, 537(f), 542–3; continuity/discontinuity, 56–66; current and future influence, 7, 67–74, 73(f), 518(t)–520(t), 535–6; enactment, 11–12; feedback, 56–8, 60–4, 514, 562; historical institutionalism, 55–6; implementation, 11–12, 71; importance of agency, 75–6; “normal” incrementalism, 56–60; path dependency, 56–7, 65, 441; policy cycling, 60–5, 514–17, 528–9, 537(f); policy spiralling, 528–9, 530; process sequencing, 61; punctuated equilibrium theory, 6–7, 9, 65; strategic decisions, 55–6, 67–71, 72–6, 73(f); windows of opportunity, 65. See also political actors; strategic decisions; strategic domain theory; windows of opportunity pace of policy change, strategic domains: pace, scale, and types of domains, 4–5, 12–15, 14(f), 16(f). See also big bang strategy; blueprint strategy; incrementalism, as deliberate strategy; mosaic strategy; strategic domain theory Pal, Leslie A., 383

Palier, Bruno, 58 parliamentary systems: about, 17; big bangs, 17, 199; cabinet government, 285; coalition governments, 268, 271, 275, 598n2, 600n11; coherence of policy, 17; minority governments, 268; pace of change, 17, 71; pace of government formation, 279, 600n12; party discipline, 255; party systems, 17; veto-free system, 17, 71. See also Canada, government (federal); Canada, government (provinces/territories); Netherlands, parliamentary system; UK, parliamentary government Patashnik, Eric M., 10, 34, 61 path dependency, 11, 56–7, 65, 441 Patient Protection and Affordable Care Act. See entries beginning with US, 2010, Affordable Care Act patients: balance of influence, 585n1; eligibility for services, 52; information asymmetries, 37, 62; persuasion (public education), 44; rights of patients, 362; social control of relationships, 562; technological change, 37–8; trust in medical profession, 64; uncertainty in illness and treatments, 37, 43, 62; “wicked” problems in policy, 62–3. See also agency relationship; citizenship rights and obligations; medical profession Pearson, Lester, government, 131–3, 137, 139, 577–8. See also Canada, 1965–6, big bang strategy peer control, 8, 44–6, 51–3, 52(t), 547(t), 557. See also instruments of control Pelletier, Gérard, 134 Pelosi, Nancy, 214, 220–5, 229, 233, 258–9 People’s Party for Freedom (VVD) (NL): about, 340; health portfolio in second Balkenende cabinet, 359–61; ideological tension in purple coalitions with Labour, 354–5; lead party in coalition governments (2010 and after), 369. See also Netherlands, party system; Netherlands, 1987–94, reforms under Lubbers; Netherlands, 1995–2002,

Index 703 reforms under Kok; Netherlands, 2002–2010, reforms under Balkenende; Netherlands, 2010 and after, reforms under Rutte Peterson, Mark, 201–2 Pharmaceuticals Pricing Act (1995), 367(t) Physician Practice Management Plans, 476 Pierson, Paul, 22, 67, 80 Pim Fortuyn’s List (LPF), 357–9 Planned Parenthood, 249, 256 policy change: about, 4–7, 75–6; “fog” of policy-making, 75; importance of agency, 75; incremental as norm, 4, 6–7, 20, 56–60, 443; inferences from decisions, 70–1, 75–6, 534–6; institutional change, defined, 7–9; national differences, 74–5; policy shifts in four countries, summarized, 25–8, 53–5, 545–54, 547(t); policy spiralling, 528–9, 530; regime logic, 7–9; unintended change, 553–4; windows of opportunity, 5, 65–6. See also pace of policy change; political actors; scale of policy change; strategic decisions; strategic domain theory; windows of opportunity policy cycling: about, 60–5, 514–17, 537(f), 562; in Canada, 140–8, 410–26; feedback, 56–8, 60–4, 514, 562; marketoriented reforms, 561; in the Netherlands, 114–18; in the UK, 94–8, 173–93; in the US, 98–103, 193–8; “wicked” problems in policy, 62–3 policy frameworks: about, 7–9, 36; accountability, 38, 64; balance of influence, instruments of control, and principles, 8, 51–3, 52(t), 515, 547(t), 553–4; balance of influence of state, private finance, and providers, 37–44, 51–3, 52(t), 63, 515, 547(t); durability, 544; hierarchies, 44–6, 63–4; incentives, 38–43, 51; information needs, 45–6, 63–4; institutional change, defined, 8; markets, 44–6; medical profession, 42–4; national differences, 74–5; organizing principles, 8, 36, 46–51, 547(t); peer control, 44–6, 51–3, 52(t); policy

logics, 36, 545, 546(t)–547(t); profit, 506–7; public mandates, 505–7; regime logic, 7–9; state actors, 37–9, 52(t). See also balance of influence; institutional entrepreneurs; instruments of control; organizing principles; policy logics; the state; state functions policy logics: about, 8–9, 36, 51–5, 52(t), 545, 546(t)–547(t), 553–4; defined, 51, 583n4; instruments of control, 52(t), 547(t); intersection of influence, instruments, and principles, 51–3, 52(t), 547(t), 553–4; national health service model, 53–5, 547(t); organizing principles, 547(t), 553–4; policy frameworks, 51–3, 52(t), 547(t); policy shifts in four countries, summarized, 25–8, 53–5, 545–54, 546(t)–547(t); regime logics, 7–9; residual model, 54–5, 547(t); scale of change, 545, 547(t); single-payer model, 54–5, 547(t); social insurance model, 53–5, 547(t); unintended change, 553–4. See also balance of influence; citizenship rights and obligations; instruments of control; organizing principles; state functions political actors: about, 13, 38–9, 67–8, 153–4, 523–4; accountability, 38, 64; assumptions of, 13–15; autonomy and agency, 39, 75; balance of influence in frameworks, 38–9; coalitions of support, 38–9, 67–8, 70, 72–3, 75, 518(t)–520(t), 524; competing readings, 532–4; conflict levels, 537(f), 542–3, 544–5; current and future influence, 7, 15, 67–75, 73(f), 518(t)–520(t), 523–4, 535–6; electoral cycles, 67–9; incentives, 38–9, 505; incremental change, 19–20; inferences from decisions, 70–1, 75–6, 534–6; institutional resources, 6, 14, 15–17; pace, scale, and four types of strategies, 4–5, 12–19, 14(f), 16(f); political will and authority, 6–7, 14–15, 66, 72, 73(f), 518(t)–520(t), 521–2; public mandates, 505–7; risk, 505; state actors, 38–9, 51–3, 52(t); strategic decisions, 72–6, 73(f), 523–4. See also

704 Index coalitions of support; current and future influence; strategic decisions; windows of opportunity political systems. See parliamentary system; political actors; and specific countries Powell, Martin, 184 power relations: bases (authority, capital, knowledge), 37, 42, 63, 439–42, 445; current and future influence, 67–74, 73(f), 518(t)–520(t), 535–6; institutional entrepreneurs, 34, 439; medical profession, 37, 42–3, 62–4; pace of policy change, 62–3; political actors, 14–15; social control and power concentrations, 562. See also instruments of control Pressman, Jeffrey, 12, 71 Presthus, 120 Price, Tom, 246–7 Prince Edward Island: ambulance services, 494; hospitals, 424, 606n37. See also Canada Prince, Michael, 396 private finance: about, 24–5, 40–2, 52(t), 547(t); accountability, 38, 40; balance of influence in frameworks, 37–44, 51–3, 52(t), 515, 547(t); collectivization of risk, 37–8; convergence of for-profit and not-for-profit forms, 40–1; defined, 390; incentives, 40–3, 51; incremental changes within, 64; individuals, 585–6n4; institutional entrepreneurs, 445, 447(t), 506, 557; policy frameworks, 40–2, 51–3, 52(t); policy logics, 547(t); risk, 501–6; statistics on private insurance, 585n2; technological change, 37–8. See also balance of influence; health care systems; markets; policy frameworks process sequencing, 11, 61 Progressive Conservative party (PC) (CA): as brokerage party, 122–3; collapse (1993), 377; Diefenbaker governments (1957–63), 130–1; Hall Commission, 135; support for Canada Health Act (1984), 145; support for Medical

Care Act (1966), 525. See also Canada, government (federal); Mulroney, Brian, government providers, medical. See medical profession public policy on health. See health care systems; policy frameworks; strategic domain theory public policy on non-health issues: about, 576–7, 581; application of strategic domain theory, 576–81; big bang, 577–9, 581; blueprint, 576–7; incremental, 579–80; mosaic, 577, 579–80. See also political actors; the state; state functions; strategic domain theory; welfare states; windows of opportunity punctuated equilibrium theory, 6–7, 9, 65 PvdA. See Labour Party (PvdA) (NL) Quebec: about, 118–19; asymmetrical federalism, 408; base for federal Liberals, 123; before big bang, 128–9, 130–1, 132; BQ (Bloc Québécois), 377, 401; Chaoulli case (Charter rights), 426–7, 433; commissions, 389; constitutional conflict, 140–1, 379–80; court case on private insurance, 426–7; drugs, 404, 426; electoral cycles, 393; extra-billing penalties, 415–16; federal transfer of “tax points,” 137, 590n15; Health Accords (2000, 2004), 389, 407; Health Council non-participation, 394, 410; hospitals, 423, 496; Liberal federal sponsorship scandal, 397, 398, 403; Liberal provincial government (2003), 395; medical remuneration, 419, 420, 421; medical-state axis, 419, 420; PQ (Parti Québécois), 140, 426; primary care delivery, 497; QPP (Quebec Pension Plan), 133; Quiet Revolution, 123, 129, 130–1; referendum (1981, 1995), 141, 379; religious nationalism, 123, 128; separatism, 132, 140–1, 393; statist nationalism, 123; window for big bang, 134. See also Canada A Question of Demand (2001), 354, 367(t) Quirk, Paul J., 165, 611n13

Index 705 Rawnsley, Andrew, 187 Reagan, Ronald, government, 99, 102, 586n11. See also US, 1970s and 1980s, policy cycling Reform Party (CA), 382. See also Canada, government (federal) regional differences and identities, 105, 118–25, 141 Reid, Harry, 224, 227–30, 232–3, 258–9, 596n19 Reinventing the State (UK), 271 Reischauer, Robert, 169 Reisman, David, 586n Republican Party (US): effective strength in Congress, 86(f); opposition to ACA, 31, 213, 214, 227–8, 233, 235–41, 595n12; opposition to Clinton reforms, 171–2, 525–6; and party polarization, 172, 193–4, 212–13. See also Bush, George W., government; Reagan, Ronald, government; Trump, Donald, government; and entries beginning with US residual health system: about, 25–6, 27(t), 53–5, 262; citizenship rights and obligations, 262, 264, 265, 375; market mechanisms, 54; policy logics, 53–5; policy shifts in scale, 547(t); private insurance, 25–6, 54–5, 200; public spending, 55; shadow state, 26, 27(t), 55, 200; state functions, 54–5; US model, 25–6, 27(t), 53–5, 200, 593–4n1. See also health care systems; US, foundational model of health care (residual + shadow state) Restructuring Sickness Fund Act (1997), 367(t) Rhode Island, ACA exchange, 608n17 Richardson, Lilliard, 236, 596n23 Rigby, Elizabeth, 593n24 risk, 501–6. See also institutional entrepreneurs; markets; private finance Rist, R., 44 Robarts, John, 137 Rocco, Philip, 10–11, 240–1 Rock, Allan, 384 Rockman, 164

role of the state. See state functions Romanow report (CA, 2002): about, 390–3; CHST division into CST and CHT, 391; compared with Kirby report, 391–2; drugs, 391, 392, 393, 404–5; against for-profit delivery, 392; Health Accords (2003, 2004), 392, 393, 409; “Romanow gap,” 391, 393, 400–2, 407–8 Ronfeldt, David, 586n5 Roosevelt, Franklin D., government: big bang of New Deal, 86–90, 86(f), 519(t); reform government, 66, 586n11; southern conservative bloc, 87–8, 90, 202 Rose, Richard, 61 Rothgang, Heinz, 561 Rothstein, Henry, 74 Royal College of General Practitioners (RCGP), 296–7, 305–7, 309, 315, 317 Royal College of Nurses, 315 Royal College of Physicians, 303, 305, 307–8, 315, 317 Royal College of Surgeons, 305, 307–8, 315, 317 Rutte, Mark, government, 369–72. See also Netherlands, 2010 and after, reforms under Rutte Ryan, Paul, 247, 251, 252–3, 598n32 Saskatchewan: agrarian populism, 123; catalyst for big bang, 135–7; commissions, 389; drugs, 425–6; electoral cycles, 393; hospitals, 423. See also Canada Sauter, Wolf, 474–5 scale of policy change: about, 4–5, 7–11, 14(f), 16(f), 36–55, 583n3; balance of influence, 8, 36, 583n3; complementarity and coherence, 10–12, 536–44, 537(f); conflict levels, 537(f), 542–3; defined, 8–9, 36, 545; durability, 10–11, 537, 544; hierarchy (command), 52(t), 547(t); importance of agency, 75–6; instruments of control, 36, 44–6, 52(t), 583n3; intersection of influence, instruments, and principles, 51–3, 52(t); measurement of, 10, 547(t); organizing

706 Index principles, 7, 46–51, 547(t), 553–4; and pace, 11–12; policy change in four countries, 545–54, 547(t); policy frameworks, 8, 52(t); policy logics, 8–9, 545, 546(t)–547(t); private finance, 40–2; professionals, 42–4; regime logic, 7–9; state actors, 38–9, 51–3, 52(t); state functions, 547(t)–548(t); unintended change, 553–4. See also balance of influence; mix of instruments of social control; organizing principles; policy logics; state functions; strategic decisions; strategic domain theory scale of policy change, strategic domains: pace, scale, and types, 4–5, 12–15, 14(f), 16(f). See also big bang strategy; blueprint strategy; incrementalism, as deliberate strategy; mosaic strategy S–CHIP (State Children’s Health Insurance Plan) (US, 1997), 194–5, 198, 210, 215, 221, 593nn24, 25 Schippers, Edith, 369–70 Schneider, Mark, 443 Schröder, Gerhard, 569, 573 Schut, Frederik, 362–3, 601–2n2 Scotland: coalition governments, 268; constitutional reforms (1999), 172–3, 174; purchaser/provider split, 173; regional health boards, 185 Sebelius, National Federation of Independent Business v. (US, 2012), 238, 263 Seehofer, Horst, 567–8, 570 Seldon, Anthony, 190 shadow state, 26, 27(t), 55, 200. See also residual health system; US, foundational model of health care (residual + shadow state) Shapiro, Robert Y., 166, 591n8 sharing community, 124–5 Sharp, Mitchell, 139 Sheldon, Tony, 187 Sickness Fund Act (NL, 1962, 1997), 111, 113, 350, 367(t) Sickness Fund Council, 111, 334, 349–50, 365, 474 Sides, John, 236 Silvers, J.B., 41 Simeon, Richard, 380, 381

Simons, Hans, 342–6 single-payer systems: about, 25, 53–5; accountability, 328; Canadian model, 25, 27(t), 53–5; hospitals, 25, 54; medical profession, 25, 54; mixed market for other services, 25, 27(t), 150; NL’s AWBZ exceptional expenses, 112; policy logics, 54–5; state functions, 54; taxation, 25; UK’s NHS system, 189, 191, 327–8, 547–8, 553; universal coverage, 25, 54; US public option proposal as precursor, 223–4; variation, 55. See also Canada, foundational model of health care (single-payer); health care systems Skocpol, Theda, 206, 258 Smith, Iain Duncan, 185, 282, 285, 581 Smith, Peter, 501 Snowe, Olympia, 214, 228, 230, 596n18 social control, 561–2. See also instruments of control Social Democratic party (SPD) (Germany): grand coalition with CDU/CSU, 568–71; Red-Green coalition government (1998–2005), 568; as veto-holder, in opposition, 567. See also Germany, incrementalism social insurance systems: about, 25, 53–5; Dutch model, 25, 27(t), 53–5; funding, 25; group membership, 25, 53–4, 586n9; hospital ownership, 25, 53; long-term care, 25, 54; mandatory contributions, 25, 53; medical profession, 25, 53; not-for-profit forms, 40–1; peer associations on provider and purchaser sides, 54; policy logics, 53–5, 547(t); private insurance for upper income, 25, 54; sickness funds, 25, 53; state functions, 54, 375; universal coverage with exceptions, 25, 53–4. See also health care systems; Netherlands, overall changes in model of health care Social Security Act (US, 1935): about, 86–7, 90–3; medical review (PSROs and PROs), 101; Medicare for disabled (1973), 100, 197, 593n25; Medicare/ Medicaid as amendments, 90–3, 103,

Index 707 519(t); precursor to big bang (1964), 86–7, 89, 519(t). See also Medicare/ Medicaid, 1965 mosaic (US) solidarity vs. subsidiarity, 49 Specter, Arlen, 208, 214 SSA. See Social Security Act (US, 1935) Starr, Paul, 591n5 the state: about, 37–9, 52(t), 559–61; accountability, 38; authority, 37–8; coalitions of support, 38–9, 67–8, 70, 72–3, 518(t)–520(t); collectivization of risk, 37; continuing weight under market-oriented reforms, 559–61; fiscal role, 559–60; hybridization, 27, 554–5, 561; incentives, 38–9, 51; information needs, 45–6; instruments of control, 44–6, 52(t), 561–2; peer control (public education), 52(t); policy frameworks, 51–3, 52(t); policy logics, 547(t), 554–5; policy shifts in four countries, 545–54, 547(t); social control, 561–2; state actors, 38–9, 51–3, 52(t); values, 501. See also citizenship rights and obligations; policy frameworks; political actors; welfare states state functions: about, 46–7, 49–51, 559–61; balance of influence in frameworks, 37–44, 547(t); definition of need vs. demand, 48; as delegator, 8, 50, 52, 547(t), 550, 557–8; fiscal role, 548(t), 559–61; institutional entrepreneurs, 557–8; market-oriented approaches, 50; national health service, 25, 53, 548; organizing principles, 8, 547(t), 553, 559–61; as payer, 8, 49, 52–4, 547(t); policy frameworks, 51–3, 52(t); policy logics, 547(t), 548; policy shifts in four countries, 547(t); as provider, 8, 49–50, 52–3, 547(t); as purchaser and contractor, 49, 560–1, 562; as regulator, 8, 49–50, 52, 547(t), 560–2; residual health system, 54–5; single-payer systems, 54; social insurance systems, 54, 375; as subsidizer, 8, 49, 52, 558; unintended change, 553. See also organizing principles; policy frameworks state, shadow, 26, 27(t), 55, 200. See also residual health system; US, foundational

model of health care (residual + shadow state) states, welfare. See welfare states State Children’s Health Insurance Plan (S–CHIP) (US, 1997), 194–5, 198, 210, 215, 221, 593nn24, 25 Stein, Janice Gross, 44, 586n5 Stevens, Simon, 183–4, 304, 320–1, 329, 459, 460, 462 Stiller, Sabine, 344, 350, 571 strategic decisions: about, 7, 72–6, 73(f), 75, 523–4, 535–6; coalitions of support, 38–9, 67–8, 70, 72–3, 518(t)–520(t), 524; competing readings, 532–3; current and future influence, 7, 67–74, 73(f), 518(t)–520(t), 535–6; decision tree, 72–6, 73(f); ease of reversal, 72–4, 73(f); enactment and implementation, 11–12, 71; group think, 578–9; importance of agency, 75; inferences from decisions, 70–1, 75–6, 534–6; institutional considerations, 71; intertemporal policy, 68– 9; pace of change, 55–6, 67–71; pace, scale, and four types of strategies, 4–5, 12–15, 14(f), 16(f); political actors, 13, 67–9, 73(f); political will and authority, 6, 66, 72, 73(f), 517–22, 518(t)–520(t); state actors, 38–9; windows of opportunity, 6, 72, 518(t)–20(t). See also pace of policy change; political actors; scale of policy change; windows of opportunity strategic domain theory: about, 4–5, 12–15, 14(f), 16(f), 518(t)–520(t), 523–4; advantages, 536–7, 537(f); alternative explanations, 534–6; application to other policy areas, 576–81; competing readings, 532–4; complementarity, 536–44, 537(f); inferences from political decisions, 70–1, 75–6, 534–6; pace of change, 4–5, 11–12, 14(f), 16(f), 55–6; political actors, 13, 38–9, 67–8, 153–4, 523–4, 532–4; scale of change, 4–5, 7–11, 14(f), 16(f), 36–55; strategic decisions, 7, 72–6, 73(f), 75, 523–4; vulnerabilities, 536–7, 537(f); windows of opportunity, 5–7, 28–33, 29(f), 75, 518(t)–520(t), 523–4. See also pace of

708 Index policy change; political actors; scale of policy change; strategic decisions; windows of opportunity strategic domain theory, conditions for types: about, 518(t)–520(t), 523–32; big bang, 524–6; blueprint, 527–9; coalition of support, 523–4; current and future influence, 523–4; incrementalism, 529–32; mosaic, 526–7; overview of four countries, 28–33, 518(t)–520(t). See also coalitions of support; current and future influence; political actors; windows of opportunity strategic domain theory, four types of domains. See big bang strategy; blueprint strategy; incrementalism, as deliberate strategy; mosaic strategy strategic domain theory, vulnerabilities and advantages of types: about, 536–7, 537(f); big bang, 537–9, 537(f); blueprint, 537(f), 539, 576; coherence and complementarity of policy result, 10–12, 536–44, 537(f), 543–4; conflict levels, 537(f), 542–3; consequences, 537(f); durability, 10–12, 544; incrementalism, 537(f), 540; mosaic, 537(f), 540–2 Streeck, Wolfgang, 8, 12, 19, 57–8, 583n2, 588–9n6 Stupak, Bart, 225, 233 subsidiarity vs. solidarity, 49 Supervisory Board for Health Care Insurance (CTZ), 349–50, 365, 367(t) Supreme Court (US): ACA drafting errors, 238–40; ACA individual mandate, 238, 263, 264, 543, 551–2; ACA penalty for refusal of Medicaid expansion, 238, 241; King v. Burwell (2015), 238–40; National Federation of Independent Business v. Sebelius (2012), 238, 263 Taylor, Malcolm G., 129 Taylor-Gooby, Peter, 48 Teles, Steven, 20, 402, 531 Teske, Paul, 443 Thatcher, Margaret, government: austerity, 281; closed/open processes, 578–9;

elections (1979, 1983), 82(t); election (1987), 80, 82(t), 155–7, 518(t), 578; pace of change, 591n4; poll tax, 578–9; reform government, 66, 578–9, 586n11; self-reliance vs. welfare state, 155. See also UK, 1950–89, incrementalism; UK, 1989–90, big bang strategy Thelen, Kathleen, 8, 12, 19, 57–8, 583n2, 588–9n6 timeframes. See pace of policy change Timmermans, Arco, 602n12 Timmins, Nicholas, 160, 277, 280, 284, 286–7, 297, 311, 313, 314, 581 Titmuss, Richard, 586n5 Trudeau, Justin, government, 416–17 Trudeau, Pierre, government, 134, 140 Truman, David, 60 Truman, Harry, government, 88, 90, 202 Trump, Donald, government: ACA dismantling attempts, 246, 248–57, 259, 489, 597–8n29; election (2016), 246, 248–9; low approval ratings, 249; turbulent style, 257 UK (United Kingdom): constitutional devolution (1999), 172–3; national differences in policy styles, 74–5; national health service system, 25 UK, foundational model of health care (national health service): about, 25–6, 27(t), 53–5, 547(t); balance of influence, 547(t), 549–51; funding by taxation, 25, 53; hierarchical model, 25, 54, 548; policy logics, 53–5, 545–9, 546(t)– 547(t); state functions, 25, 548, 553; statistics on spending, 153, 548(t), 560; unintended change, 553; universal coverage, 25, 53 UK, institutional entrepreneurs: about, 33–5, 329, 446–8, 447(t), 461–6, 508–9, 555–9; alliance model, 459–60; centralization/decentralization issues, 558–9; Clinical Commissioning Groups (CCGs), 329, 447(t), 450, 457–62, 464, 504, 507, 580, 601n23; Coalition reforms, 325, 329, 456–63; Commissioning Support Unit, 323, 460; coordination of rules of central

Index 709 bodies, 461; Five Year Forward View, 321, 460–2, 508, 559; Foundation Trusts (FTs), 329, 447(t), 452–7, 461, 464, 503–4, 530; GP fundholders and commissioning, 34, 161, 329, 447(t), 448–51, 457–8, 502–3, 507, 556, 558–9; health and wellbeing boards, 458–9; hospitals, 447(t), 454–5; hospital patients in “pay beds,” 84, 291, 448; Independent Sector Treatment Centres, 182, 192, 463, 465, 471, 592n19; internal markets and purchaser/provider split, 447(t), 448, 451, 547(t), 590n1; Locality Commissioning Groups, 450; Monitor (regulator), 459, 461, 504; mutuals and cooperatives, 447(t), 455–6, 556, 607n3; NHS Commissioning Board (NHS England), 457–9; NHS Trust model, 447(t), 448, 451–6; non-NHS providers, 463–4; pace of change, 456; pathfinder groups, 457, 507; patient choice, 329, 600n18, 19; pilot projects, 449; Primary and Acute Care System (PACS), 460–1; Primary Care Trusts (PCTs), 450, 455–8, 504; prime contractor model, 459–60; Private Finance Initiative (PFI), 162, 175–6, 183, 189, 455; public/ private boundary, 325, 455–6, 464; quality of care, 452, 454, 465–6; risk, 503–5; state/private contracts, 463–6; variation, 329, 447(t), 461–2. See also institutional entrepreneurs UK, parliamentary government: about, 17, 104; accountability, 80; big bang changes, 17, 104, 199; cabinet government, 79, 285; coalition governments, 268, 271, 275, 598n2; coherence of policy, 17; hierarchical system, 80; historical background, 267–8; House of Lords, 312–13; implementation before enactment, 318; majority governments (1945–2010), 82(t); minority governments, 268; pace of change, 17, 71, 318; pace of government formation, 279, 600n12; party systems, 17, 255; vetofree system, 17, 71, 80. See also Conservative Party (UK); Labour Party (UK); Liberal Democrat party (UK)

UK, 1945–6, big bang strategy: about, 79–85, 103–4, 518(t), 524; Bevan’s review, 83–4; Beveridge report (1942), 81, 518(t); big bang classification, 16(f), 29–30, 29(f); coalition of support, 518(t), 524; conditions for, 80–5, 518(t), 524; current and future influence, 518(t), 524; internal divisions, 82–3, 84; Labour landslide (1945), 29, 79, 80–2, 82(t), 518(t), 524; pace of change, 80, 82–3; policy logics, 84, 546(t), 547(t); political opposition, 83; political will and authority, 81, 518(t); public appetite for bold action, 81–2; scale of change, 80, 83–5; strategic decisions, 81–5, 518(t), 524; window of opportunity, 29–30, 29(f), 79–85, 518(t), 524 UK, 1945–6, foundational NHS model adopted: about, 25, 27(t), 53–5, 83–5, 103–4, 518(t), 546(t); Beveridge model, 53, 54, 80; centralization/decentralization, 80, 103; Executive Councils, 83, 85; expenditure trends (1955–2016), 157(t); hierarchical framework, 25, 80, 83, 84, 103; hospitals, 25, 83–4, 103; internal tensions, 84–5; local authorities, 83–4; medical profession, 25, 83–5; modified classic bureaucracy, 546(t); National Health Service Act, 83, 524; nurses, 85; public health offices, 83; taxation, 25, 83; universal coverage, 25, 83, 103, 546(t) UK, 1950–89, incrementalism: about, 94–8, 103; “British decline,” 154–5, 590–1n2; centralization/decentralization, 95, 97, 103; cost constraints, 95, 157; District Health Authorities, 96; elections (1983, 1987), 82(t), 155–7, 518(t); Family Practitioner Committees, 96; governments, 82(t); Griffiths inquiry, 96–7; individualism vs. welfare state, 155–6; managerial reforms, 96–7, 156–7; medical audit, 97; medical remuneration, 156; monetarism, 155; NHS policy options, 155–6; policy cycling, 94–8, 515; public opinion, 95, 155–6, 157, 591n3; spending, 156–7, 157(f); unified model with tiered authority, 96–8, 103

710 Index UK, 1989–90, big bang strategy: about, 29(f), 153–4, 518(t); alternative strategies not chosen, 157–8, 523; big bang classification, 16(f), 29, 29(f), 30; blueprint aspects, 184; coalition of support, 518(t), 524–5; conditions for, 518(t), 524–5; conflict levels, 542; current and future influence, 518(t), 524–5, 535–6; NHS White Paper (1989), 158–60; opposition attacks, 157, 158–9, 518(t), 524–5; pace of change, 158–9; political agenda, 518(t), 521, 524–5; public opinion, 157–8, 591n3; scale of change, 159–62; strategic decisions, 158; Thatcherism, 155–6; Thatcher’s majority (1987), 30, 80, 155–7, 518(t), 524–5; window of opportunity, 29(f), 30, 153–4, 518(t), 524–5. See also Thatcher, Margaret, government UK, 1989–90, reform model, internal markets: about, 26–7, 27(t), 160–2, 518(t), 546(t), 590n1; competition levels, 161–2; drugs, 160–1; GP fundholding, 160–1, 173–4, 296, 448–51, 502–3, 546(t); institutional entrepreneurs, 447(t), 448–50, 451–2, 509; internal markets (purchaser/provider split), 26–7, 27(t), 80, 160–2, 173, 281, 296, 323, 518(t), 546(t), 590n1; mediating logics in implementation, 161–2, 172–3; NHS trusts, 160–1, 451–6; organizing principles, 162; policy shift (unified hierarchy to internal market), 546(t), 547(t); private finance options, 160, 162; public/private partnerships (PFI), 162; relational markets, 161–2; single-payer aspects, 547–8; terminology (internal markets and purchaser/ provider split), 173, 191, 553, 590n1, 592n13; universal eligibility, 546(t); waiting times, 160 UK, 1997–2010, incremental strategy: about, 32–3, 174, 190–1, 520(t), 530; alternative strategies not chosen, 154, 174, 181, 187–91, 280, 520(t), 529–31; Blair/Brown rivalry, 32–3, 179–81, 186–7, 520(t), 530; coalition of support,

520(t), 530–1; conditions for, 520(t), 530–1; current and future influence, 520(t), 530–2; incrementalism in window of opportunity (2002–5), 32–3, 183–91, 520(t), 530–1; intra-party dynamics, 154, 190; Labour election (1997), 172, 173; Labour election (2001), 154, 178, 520(t), 530; pace of change, 180–3, 190, 531; planning documents, 181–2; policy cycling, 515, 530; policy documents (2002), 184; policy spiralling, 528–9, 530; scale of change, 180–3, 190, 531 UK, 1997–2010, reforms to NHS: about, 32–3, 174, 190, 515, 520(t), 530; centralization/decentralization, 174, 177, 185–6, 188–9, 453, 462, 515; choice of provider, 181, 182, 184, 188–9, 191–2, 286; comparison with Coalition reforms, 325–9, 326(f); complementarity, 190–1; financing of NHS, 184–5; Foundation Trusts (FTs), 182, 184, 188–90, 192–3, 286, 452–5, 503–4, 530; GP executive committees, 177, 181–2; GP fundholding, 173–4, 176, 448–51, 502–3; hierarchy vs. market, 176–7, 183; hospitals, 174, 177, 181; Independent Sector Treatment Centres, 182, 192, 463, 465, 471, 592n19; institutional entrepreneurs, 174, 190–1, 452–3; internal markets and purchaser/ provider split, 175–6, 185, 193, 281, 323–4, 453, 547(t), 590n1; market-based reforms on supply side, 181, 183–5, 191; Monitor (2003, regulator), 182, 189, 286, 504; national standards, 177, 183, 192; NHS plan (10-year, 2000), 178, 180–1, 187–8; NHS reorganization, 181–2, 191; NHS spending, 175, 177, 180, 181, 183, 592n15; NHS Trust model, 452–3; policy cycling, 515; Primary Care Groups, 176–7, 181–2, 294, 324; Primary Care Trusts (PCTs), 173–4, 176–7, 181–2, 283–4, 286, 290, 300, 504; Private Finance Initiative (PFI), 175, 183, 189, 455; privately owned facilities, 182, 184, 185–6;

Index 711 regulatory agencies, 182–3; singlepayer aspects, 189, 191, 327–8, 547–8; spending at EU average, 177, 592n15; state as regulator, 191; Strategic Health Authorities, 177, 182; UK countries and constitutional devolution (1999), 172–3; waiting times, 177, 178; White Paper (2007), 280, 282, 284–99, 301. See also Blair, Tony, government UK, 2010–12, mosaic strategy: about, 26, 29(f), 31–2, 153–4, 267–78, 321–3, 520(t), 521–2, 527, 535–6; adaptation of previous policies, 304, 323–4, 520(t); cabinet formation, 273–7; centralized leadership, 268–9, 271–3; centrist ideology, 268–71; Coalition Agreement (Conservative/Liberal Democrat), 272–80, 322, 580–1; Coalition election (2010), 26, 31–2, 267–71, 277–8, 520(t), 522, 527; coalition of support (Conservative/Liberal Democrat Coalition), 26, 31–2, 520(t), 527, 536; conditions for, 268–78, 520(t), 527; conflict levels, 542; current and future influence, 527, 535–6; decision-making, 276–7, 285; five-year term of government, 274, 279, 280, 520(t), 527, 580; House of Lords, 312–18; ideological compatibility, 269–71; implementation, 32, 301–2; internal divisions, 31–2, 154, 271–3, 281–2, 520(t), 527; manifestos, 269–78, 282–3, 287–8, 523, 599n7; mosaic classification, 16(f), 29(f), 31–2; “NHS Autonomy and Accountability” (2007), 280, 282, 284–7, 288; opposition to reforms, 302–10, 315; organizational incoherence, 317, 323–9; organizing principles, 312–18; pace of change, 31–2, 278–80, 286–8, 295, 301–2, 310, 312, 318–20, 322, 456, 527; pace of government formation, 279, 600n12; policy logics, 293–6, 546(t); political will, 277–8, 321–2, 520(t), 521–2, 527; process of accommodation and adjustment, 321–3, 527; scale of change, 278–9, 280–2, 286–7, 294–5, 294(f); unintended change, 554; welfare state

reforms, 280–2; window of opportunity, 26, 29(f), 31–2, 153–4, 267–78, 321–3, 520(t), 521–2, 527, 535–6 UK, 2010–12, reforms to NHS: about, 26, 293–6, 294(f), 321–3, 325–9, 326(f), 515; accountability, 325–8, 601n23; austerity, 157(f), 274, 280–2, 301, 302–7, 320–1, 462–3, 600n13; Care Quality Commission, 183, 291, 294(f), 325–8, 326(f), 461, 465, 600n14, 601n23; centralization/decentralization, 270, 283, 453, 462; choice of “any qualified provider,” 311, 324, 329, 600n18, 19; choice of “any willing provider” (AWP), 286, 288, 290–2, 295, 306, 317, 600n18; Clinical Commissioning Groups (CCGs), 304–6, 311, 313, 319–20, 324, 326(f), 328, 457, 504, 507, 580, 601n23; Commissioning Support Units, 323, 460; competition, 288, 290–2, 295, 298, 306–9, 311–12, 317, 324–5, 520(t); Department of Health, 294(f), 319, 325–9, 326(f); disruption, 302–7, 310; Equity and Excellence (2010), 287–99, 294(f), 301; Equity and Excellence (2010), response, 296–309, 325; EU competition law, 314, 338; Five Year Forward View, 321, 460–2, 559; Foundation Trusts (FTs), 291–2, 295–6, 298, 306–7, 310–11, 313, 314, 326(f), 452–5, 503–4, 530; GP commissioning, 283–4, 286–90, 292, 294–8, 294(f), 304–7, 311, 323–4, 326(f); health and wellbeing boards, 293, 301, 308, 309, 311, 326(f), 458–9, 600n14; hospital patients in “pay beds,” 84, 291, 448; independence, 292–3, 309; institutional entrepreneurs, 456–64, 509; internal markets and purchaser/ provider split, 281, 295, 323–4, 328, 547(t), 590n1; local authorities, 293–4, 294(f), 309, 311, 328; Monitor (regulator), 291–2, 294(f), 310–11, 314, 316, 319, 325–9, 326(f), 453, 459, 461, 504, 600n14, 601n23; “NHS Autonomy and Accountability” (2007), 280, 282, 284–7, 288; NHS Commissioning Board (NHS England), 292–3, 294(f),

712 Index 309–11, 315, 318–20, 323, 325–9, 326(f), 350, 457–9, 464; NHS Trust Development Authority, 318, 319, 323; organizational incoherence, 323–9, 326(f); organizational structure, 293–6, 294(f); organizing principles, 312–18, 328; pathfinder groups, 301, 308, 318–19, 457, 507; policy cycling, 515; Primary Care Trusts, 283–4, 287, 290, 300, 310, 324, 326(f), 455–7, 504; Primary Care Trusts, elimination, 287–90, 293, 295, 296, 318–19, 322–4, 326(f), 456, 460, 554, 580, 601n22; principal elements, 288–93; private sector, 288, 290–2, 309, 316, 324–5, 326(f); privatization, 306–8, 311–12, 314, 324–5, 328; Programme for Government, 278–89, 295–6, 299, 303, 322; public health and social care, 293, 600n14; public/private boundary, 325, 455–6; response by health care arena, 296–302; secretary of state and Parliament, 292–3, 294(f), 309, 312–16, 326(f), 327–8; single-payer aspects, 327–8, 547–8, 553; spending, 157(f), 321, 600n13; staff continuity during implementation, 320, 328–9; Strategic Health Authorities, 283, 288–90, 318–19, 323–4, 326(f); Strategic Health Authorities, elimination, 283, 288–90, 318–19, 323, 326(f), 554, 601n22; timelines for change, 310, 312, 318–20, 323; traditional state/private contracts, 463–4; unintended change, 554 UK, 2010–12, Health and Social Care Act (2012): amendments to bill, 310–18; Commons committee stage, 302–10; consultation phase, 296–302; draft legislation, 285–92; enactment and implementation, 317–18; House of Lords, 312–18; NHS Future Forum, 308–13; opposition to reforms, 302–10, 315, 520(t); organizational incoherence, 323–9, 326(f); organizing principles, 312–18; regulations, 290, 317; secretary of state’s role, 327; stakeholder responses to bill, 296–309; timelines, 301–2, 310, 312, 318–20, 323, 456

UK, 2013 and after: about, 328–9, 461–2; clinical vs. commissioning tensions, 462; Commissioning Support Units, 323, 460; elections (2015, 2017), 610n7; implementation, 318–21; institutional entrepreneurs, 329, 456–66; market mores, 328–9; policy cycling, 329, 515; quality of care, 465–6; spending on non-NHS providers, 463–4 US (United States): abortion issues, 224, 230, 232–3, 249, 252, 256; incremental change, 59, 90; national differences in policy styles, 74–5; racial issues, 87–8, 89–90, 93–4, 577, 587n9, 610n3; Social Security as welfare state template, 92 US, foundational model of health care (residual + shadow state): about, 25–6, 27(t), 54–5, 262, 547(t); balance of influence, 547(t), 549–51; citizenship rights and obligations, 262, 264, 265, 375; employer-based coverage, 54, 59, 200, 591n5, 593–4n1; incremental change, 59; insured population, 593–4n1; market mechanisms, 26, 54; Medicare and Medicaid, 25–6, 54, 200, 593–4n1; organizing principles, 262–6, 547(t), 551–2; policy logics, 53–5, 546(t)–547(t), 550–2; policy shifts in scale, 547(t); private insurance, 25–6, 54, 200, 593–4n1, 607–8n12; shadow state, 26, 27(t), 55, 200, 547(t); state functions, 54–5, 547(t), 550–1; statistics on spending, 59, 548(t), 560, 607–8n12; uninsured population, 200, 261, 550, 593–4n1, 610n8. See also Medicare/ Medicaid, 1965 mosaic (US); US, 2010, Affordable Care Act US, congressional system: about, 85, 104, 200–1; big bangs as challenge for, 199; bipartisanship, 85, 93, 98–100, 169, 171–2, 193–7, 206–7, 209, 212–15, 226– 7, 236–7, 256–7; budget reconciliation process, 231–2, 249, 255; committees for health care bills, 221–2, 226, 229; decentralization in House, 209; House rules, 221; party leaders, 221, 224–5, 255, 258–9; polarization, defined,

Index 713 172; polarization scale, 594n7, 595n8, 596nn15, 16, 596n19; polarized twoparty system, 85, 172, 212–13; political party strength (1933–2011), 85–6, 86(f), 98; presidential role in major changes, 204–5, 257; Senate rules, 86, 87, 93, 163, 208, 226; veto points, 71, 79–80, 85–6, 93, 104, 200, 235, 258–9. See also Democratic Party (US); Republican Party (US) US, institutional entrepreneurs: about, 33–5, 446–8, 447(t), 481–91, 509, 546(t), 557; ACOs (accountable care organizations), 489–91, 556; after ACA reforms, 447(t); decision-making structures, 475; federal subsidies, 483; health exchanges, 34, 446, 447(t), 478–85, 508; HMOs (health maintenance organizations), 102, 163, 476–8, 490; individual mandate, 445–6, 447(t); innovation, 235, 241, 482, 508, 559; innovation waivers, 481–2, 483; institutional change, 489–90; lobbying, 475; managed care, 102, 163, 476–7; Massachusetts exchange model, 479–81; Medicare and Medicaid, 476, 477; navigator organizations, 486; objectives, 500–1; pace of change, 508, 557; pilot projects, 489–91; prepaid group practice, 477; private capital as base, 475; private web exchanges, 447(t), 485–9, 503, 507, 508–9; public/ private boundary, 446; purchasing cooperatives, 478–81; regulations, 102, 447(t); risk, 503; sites, 445, 447(t), 508; state-based exchanges, 447(t), 482–3; Utah exchange model, 241, 480–1. See also institutional entrepreneurs; US, 2010, Affordable Care Act US, before 1965: alternative strategies not chosen, 88–9, 533; big bang precursor (New Deal), 86–90, 519(t); hospital insurance, 587n6; market-based model, 87; political party strength (1933–2011), 85–6, 86(f), 98; southern conservatives, 87–8; template for welfare state, 87–8

US, 1965, mosaic strategy: about, 103–4, 519(t), 526; alternative strategies not chosen, 88–9, 523, 532, 533; bipartisanship, 90–1, 93–4; coalition of support, 90, 92–3, 526, 533; conditions for, 519(t), 526; election (1964), 30, 79, 88–94, 519(t); election (1968), 519(t); intra-party divisions, 79–80, 519(t); mosaic classification, 16(f), 28–30, 29(f); New Deal as precursor, 86–90, 519(t); organization of delivery, 92; pace of change (no dead cats), 92–4; political agenda, 79, 519(t); political party strength (1933–2011), 85–6, 86(f), 98; racial issues, 90, 93–4; scale of change, 80, 90–2; southern conservative bloc, 89–91; state authority, 92; strategic decision, 90–1; strong presidential-congressional leadership, 79, 519(t); veto points, 71, 79–80, 85–6, 90, 93, 519(t), 526; window of opportunity, 28–30, 29(f), 79–80, 88–94, 103–4, 519(t), 523, 526. See also Medicare/ Medicaid, 1965 mosaic (US) US, 1965, foundational model adopted (residual + shadow state): about, 25–6, 27(t), 53–5, 103–4, 519(t), 523, 546(t); citizens as consumers, 54; employer-based private insurance as norm, 27(t), 59, 519(t); government role as payer for groups, 54, 265; hospitals, 93–4, 587n6; implementation, 93–4; individualism, 546(t); market mechanisms, 54; Medicaid (poor) and Medicare (elderly), 27(t), 30, 91–3, 103, 526; medical profession, 103–4; medical remuneration, 94, 100; multipayer system, 103; organization of delivery, 92; private insurance norms, 54, 92, 104; private supplementary insurance, 92; racial issues, 90, 93–4; residual model, defined, 54–5; residual plus shadow state, 25–6, 27(t), 546(t); shadow state, 26, 55, 200, 547(t); SSA amendments, 90–3, 103, 519(t). See also Medicare/Medicaid, 1965 mosaic (US)

714 Index US, 1970s and 1980s, policy cycling: about, 65, 98–104; administrative action, 100–3; bipartisanship, 98–100; budgetary politics on Medicare, 102–3; catastrophic coverage (MCCA, 1988), 99–100, 103, 587n10; centralization/ decentralization, 101–2; cost control, 100–3; Democratic election (1976), 99; disabled, Medicare expansion (1973), 100, 197, 593n25; HMO legislation (1973), 102, 477, 490; hospitals, 102; incrementalism, 101–3; institutional entrepreneurs, 101–2; medical peer control, 101; medical remuneration, 100; policy cycling (generally), 60–5; political party strength (1933–2011), 85–6, 86(f), 98; transitional insurance coverage, 102. See also Medicaid, 1966–2008 (US); Medicare, 1966–2008 (US) US, 1993–4, big bang strategy (failed): about, 29(f), 30, 163–4, 170–2, 519(t), 525–6; alternative strategies not chosen, 170–2, 407, 519(t), 523, 526, 533, 579; big bang classification, 16(f), 167, 259–60; bipartisan alternative, 171–2; blueprint option, 168, 169; coalition of support, 29–30, 163, 519(t), 525–6; compared with Obama, 164, 202–3, 209, 210, 211, 217; conditions for, 29, 168, 519(t), 525–6; economic agenda, 164–8; employer mandate, 479; fragmented private-sector opposition, 163; incremental option, 164, 166; managed competition, 30, 164–6, 210, 478, 519(t); mid-term elections (1994) (loss), 172, 193–4, 519(t); New Democrat agenda, 163–4, 171, 519(t), 525–6; opportunistic centrism, 165, 194; pace of change, 164–5, 168–72; party disunity, 168, 170, 519(t), 598n36; political party strength (1933–2011), 85–6, 86(f), 98; political polarization, 171–2, 193–4, 594n7, 595n8; presidential–congressional divisions, 519(t); principled centrism, 164–8, 194; public opinion, 261; regional alliances, 167, 259–60, 479, 527; Republican opposition, 171–2, 525–6; rise

of for-profit managed care, 163; scale as enemy of pace, 168–9, 526; scale of change, 164–8, 170–2; single-payer option, 164, 165, 210; strategic decisions, 164–5, 168–72; task force, 166–9, 170, 206, 535–6, 538, 591n8; veto points, 71, 168, 170, 526; window of opportunity, 29(f), 519(t), 525–6 US, 1994–2009, incrementalism: about, 193–8; accountability (privacy of electronic records), 195; Balanced Budget Act (1997), 194; bipartisanship, 194–5, 196–7; budgetary politics, 194; drugs, Medicare expansion (MMA), 196–8, 246, 503; election (2012), 236; employer-based coverage, 608n13; political party strength (1933–2011), 85–6, 86(f), 98; political polarization, 193–4, 196, 594n7, 595n8; portability of insurance (job change), 195; public opinion, 201; S-CHIP (children), 194–5, 198, 215. See also Medicaid, 1966–2008 (US); Medicare, 1966–2008 (US) US, 2009–10, mosaic strategy: about, 29(f), 31, 201–5, 211–12, 257–9, 519(t), 526–7; alternative strategies not chosen, 207–10, 231, 523, 533–4; ARRA as mosaic, 208, 213–15, 221, 227, 236, 579; bipartisanship attempts, 206–7, 209–15, 227–8, 595n12; compared with Clinton’s failed big bang, 202–3, 209, 210, 211, 217, 232, 235–6, 259, 481; conditions for, 31, 201–5, 519(t), 526–7; current and future influence, 519(t), 526–7, 535–6; Democratic coalitions and factions, 31, 209, 519(t), 526–7, 610n4; economic agenda, 204, 212, 242, 519(t); election (2008), 201–3, 208–9, 519(t); election (2010), 207; House, 31, 202–3, 220–5; implementation, 31, 527; mosaic classification, 29(f), 31, 257–9; negative lessons from Clinton’s failed big bang, 205–6; pace of change, 200, 205–8, 211–12, 257–9, 508, 533–4; partisanship, 31, 210, 212–13, 244, 262, 265, 519(t), 594n7, 595n8, 595n12; policy options, 210–12; political party strength (1933–2011), 85–6, 86(f), 98,

Index 715 209, 594n6; political will, 31, 203–7, 231, 257–9; reconciliation of House and Senate bills, 230–5, 249; Republican opposition, 31, 213–14, 227–8, 233, 235–41, 595n12; scale of change, 205–6, 208–12, 257–9; Senate, 31, 202–3, 226– 30, 481–2, 526; states, 240–1; strategic decisions, 206–9, 231, 533–4, 535–6; veto points, 201, 202, 212, 481–2, 526. See also US, 2010, Affordable Care Act; US, 2010, Affordable Care Act, negotiations, House; US, 2010, Affordable Care Act, negotiations, Senate; US, 2010, Affordable Care Act, reconciliation, House and Senate US, 2010, Affordable Care Act: about, 234, 257–66, 481, 519(t), 526–7, 546(t)– 547(t); administrative burden, 242–3; broad principles, 212, 217, 481–2; citizenship rights and obligations, 262–6, 554; cost and coverage estimates (CBO), 212, 259–60; cost control, 217, 232, 234–5, 597n25; court challenges, 237–40; coverage of population, 217, 245, 259, 261, 481, 593–4n1, 597n28; drug industry, 216–18; durability, 543–4; employer mandate, 234, 260–3, 597n26; federal subsidies, 251–2; health exchanges, 26, 210, 234, 527; hospital industry, 216–18; implementation, 235–46, 541; individual mandate, 217, 218, 234, 242, 257, 263, 266, 551–2; innovation and policy ideas, 235, 241, 482; institutional structure retained, 261; insurance industry, 216–18; logic of complementarity, 26, 259, 262–3, 537(f), 543–4, 546(t)–547(t); Medicaid expansion, 234, 238, 240–1, 519(t), 527; medical profession, 218–20; medical remuneration, 194, 195, 217, 219–20; Medicare payment, 217, 231–2, 234, 242, 246, 597n25; open/closed legislative processes, 249–51, 258, 595n12; organizing principles, 262–6, 553–4; pre-existing conditions, 234, 248, 249; public opinion, 236, 248, 261–6, 263(f); public option proposal, 211, 222–5, 232–3, 237; regulation, 218, 251, 260–1,

519(t), 546(t); risk pools, 245–6, 249, 260, 482, 485, 487, 544; shadow state, 26, 546(t); tax revenues, 234–5; timelines, 31, 235, 482. See also Medicaid, 2009 and after (US), ACA expansion; US, institutional entrepreneurs; US, 2010, Affordable Care Act, employer mandate; US, 2010, Affordable Care Act, health insurance exchanges; US, 2010, Affordable Care Act, individual mandate; US, 2010, Affordable Care Act, Republican opposition; US, 2010 and after, Affordable Care Act, Republican repeal attempts US, 2010, Affordable Care Act, employer mandate: about, 234, 260–3, 597n26; ACA dismantling attempts, 249–51, 263; administrative burden, 242–3; “Cadillac” plans, 232, 242; delays, 243; exemption of small employers, 260–1; ideational changes, 262; large employers (50+), 234, 260–1, 488, 597n26; penalties, 234, 251, 256; private web brokers and exchanges, 447(t), 488, 503, 507; public opinion, 248 US, 2010, Affordable Care Act, health insurance exchanges: about, 210, 234, 259–60, 446, 447(t), 481–4; compared with Clinton’s regional alliances, 167, 259–60, 479, 481, 527; federally facilitated exchange, 234, 240–1, 244–5, 262, 484, 487–8; federal-state partnerships, 484; federal subsidies, 234, 447(t); innovation waivers, 482, 483; institutional entrepreneurs, 446, 447(t), 503, 556; navigator organizations, 486; non-for-profit options, 230; partisanship, 240–1, 483–4; precursors, 478–81; premium changes, 245–6; private insurance, 234, 484–5; private web brokers and exchanges, 446, 447(t), 486–8, 503, 507, 508–9; risk pooling, 245–6, 249, 260, 485, 487, 503; state compliance, 234, 240–1, 244–5, 447(t), 482–4; terminology (brokers, exchange, marketplace), 596n21, 609n19; variety of, 245–6, 484–5, 488–9, 508–9; White Paper (2008), 210, 227

716 Index US, 2010, Affordable Care Act, individual mandate: about, 210–11, 234, 260–3, 542–3, 547(t), 551–4; ACA dismantling attempts, 249–51, 257, 261, 263, 266, 551–2; adopted for pragmatic reasons, 210, 218, 322, 551, 553–4; Chafee’s plan, 172, 211; citizenship rights and obligations, 51, 262–6, 554; compared with Netherlands and Germany, 263–4, 542–3, 551; conflict levels, 542–3; conservative genesis, 172, 210, 264; court challenges, 238, 263, 264, 543, 551–2; coverage of population, 245, 597n28; exemptions, 261; ineffectiveness, 245, 261, 551; institutional entrepreneurs, 446; “keep your plan” promises, 243, 597n27; Massachusetts model, 211, 218, 227, 245, 479–80; organizing principles, 262–6, 551, 553–4; partisanship, 264–5; penalties, 218, 245, 251, 256, 260, 263–4; policy logic, 547(t), 551–2, 553–4; public opinion, 248, 261–6, 263(f); Republican repeal of tax penalty, 257, 261, 263, 266, 551–2; risk pooling, 210, 249, 482–3; unintended change, 553–4 US, 2010, Affordable Care Act, negotiations, House: about, 220–5, 257–9, 595n12; abortion issues, 222, 225; “Cadillac” plans, 232, 242; committees, 221–2, 226, 251; Democratic conservatives (Blue Dogs), 220–5; polarization, 225, 226–7, 595n12; political leadership, 220–5, 257–9, 595n12; public option, 222–5; rules and procedures, 221–2, 249; taxes, 232 US, 2010, Affordable Care Act, negotiations, Senate: about, 226–30, 257–9; bipartisanship attempts, 226–30; committees, 226, 230, 251; Democratic leadership, 227–9; individual and employer mandates, 228, 230; Medicaid expansion, 228; Medicare eligibility option, 230; political leadership, 257–9; public opinion, 229, 231, 263(f); public option, 228, 230; regular legislative order, 249; supermajority needed, 226, 229, 231, 258

US, 2010, Affordable Care Act, reconciliation, House and Senate: about, 230–5; abortion issues, 232–3; amendments, 233; budget reconciliation process, 231–3, 249, 609–10n2; “Cadillac” plans, 232, 242; committees, 230, 250–1; difference from Clinton episode, 232; intra-party bargaining, 233; loss of supermajority, 230–1; public option, 232–3 US, 2010, Affordable Care Act, Republican opposition: about, 216, 235–41, 595n12; Senate negotiations, 227–30; state actions, 240–1; Tea Party, 228, 248, 596n17, 597n24; veto points, 248; votes to repeal, 235, 236–7 US, 2010 and after, Affordable Care Act implementation: Accountable Care Organizations, 489–91, 556; administrative deferrals, 242–3; healthcare. gov launch, 244; insurance regulation, 240–1; “keep your plan” promises, 243, 597n27; Medicaid block grant proposal, 252; Medicaid expansion, 234, 240–1; partisanship, 240–1, 483; phasing, 241–2; public opinion, 236, 252, 261–6, 263(f); risk-corridor provisions, 503, 608–9n18; state health exchanges, 240–1, 244–6, 447(t), 482–5, 508; state implementation of ACA, 240–2; tax reform, 250, 252, 257; veto points, 483 US, 2010 and after, Affordable Care Act, Republican repeal attempts: abortion issues, 249, 252, 256; ACA dismantling attempts, 246–57, 259, 263, 489, 540–2, 551–2, 597–8n29; ACA dismantling, coverage estimates, 252, 254, 597– 8n29; blame-avoidance tactics, 250; courts, 237–40; election (2016), 246, 248–9, 541–2; election (2018), uncertainty, 246, 266; executive orders, 246; funding reductions, 237; government shutdown (2013), 237, 597n24; health savings accounts, 252, 256; implementation period, 235; individual mandate tax penalty repealed, 257, 261, 263, 266, 489, 551–2; mid-term elections (2010), 235, 236; “Obamacare” as

Index 717 pejorative, 235, 248; open/closed processes, 250–1, 252–3, 598n32; opposition to fixes to exchanges, 246; policy options, 247, 256–7; public opinion on reforms, 236, 261–6, 263(f); scale and pace of ACA dismantling attempts, 246–8, 251 Utah: health exchanges, 241, 480–1 van Agt, Dries, government, 331–2, 335 van de Ven, Wynand, 362–3, 601–2n2 van Leeuwen, Hannie, 360 Vavrcek, Lynn, 236 Vedung, E., 44 Veldkamp, Gerard, 111 veto points, 15, 17, 65–6, 542 Vickers, Geoffrey, 13 Vogel, Steven, 560–1 VVD. See People’s Party for Freedom (VVD) (NL) Waddan, Alex, 10–11, 240–1 Wagner, Gerritt, 331 Waldegrave, William, 159 Wales: coalition governments, 268; constitutional reforms (1999), 172–3; purchaser/provider split, 173 Waller, Peter, 283 Wanless, Sir Derek, 185 Washington (state): blueprint attempts, 575 Wassenaar Agreement (NL, 1982), 332, 333, 347 Weaver, R. Kent, 57, 80, 254–5 welfare states: about, 20–4, 46–51; citizenship rights and obligations, 47–9; corporatism, 585n18, 588n1; costs, 21–2, 24; eligibility, 47–9; health care systems, 22; hybridization, 27, 554–5, 561; impersonality of state, 48–9; institutional entrepreneurs, 502; liberal states, 585n18; market reforms, 23–5, 554–5; needs and wants, 47–8; new demands, 48; organizing principles, 46–7, 547(t); paternalism vs. individual autonomy, 47–8, 49; pensions, 22, 48, 68–9; political actors, 68–9; redesign phase, 22–3, 26; redistributive phase,

21, 23, 24, 26; retrenchment phase, 21–4, 26; social democracies, 585n18; solidarity and subsidiarity, 49; spending, 21–2; state functions, 49–51; statistics on spending, 22–3, 59; taxes, 48; unemployment benefits, 22; variation, 47. See also citizenship rights and obligations; the state; state functions Westminster parliamentary systems. See parliamentary systems White, Joe, 220–1, 475–6 Wildavsky, Aaron, 12, 71 Wilders, Geert, 369 Willems Committee report, 367(t) Williams, Baroness Shirley, 313, 316 “Willingness to Change” (Dekker report) (NL, 1987), 335–40, 343–4, 367(t), 565, 572, 601–2n2, 602n8 Wilson, Harold, government, 82(t), 95 windows of opportunity: about, 5–7, 28–33, 29(f), 75, 518(t)–520(t), 523–4; big bang, 28–30, 29(f), 518(t)–519(t), 524–6; blueprint, 28, 29(f), 30–1, 519(t), 527–9; classification of strategies, 5–6, 28–9, 29(f); coalitions of support, 523–4; discontinuous change, 65–6; enactment and implementation, 544–5; importance of agency, 75; incremental change, 28–33, 29(f), 66, 520(t), 529–32; institutional resources, 6; mosaic, 28–32, 29(f), 519(t)–520(t), 526–7; political agenda, 5–6, 517–22, 518(t)– 520(t); political will and authority, 6, 66, 72, 73(f), 518(t)–520(t), 521–2; punctuated equilibrium theory, 6–7, 9, 65; strategic decisions, 72–6, 73(f), 523–4; veto points, 15, 17, 65–6. See also coalitions of support; current and future influence; political actors; strategic decisions; strategic domain theory Wofford, Harris, 163, 169 Woodward, Bob, 595n12 Wyden, Ron, 608n14 Yong, Ben, 283 Yukon, 589n9 Zalm, Gerrit, 351

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Studies in Comparative Political Economy and Public Policy  1 The Search for Political Space: Globalization, Social Movements, and the Urban Political Experience / Warren Magnusson  2 Oil, the State, and Federalism: The Rise and Demise of Petro-Canada as a Statist Impulse / John Erik Fossum  3 Defying Conventional Wisdom: Political Movements and Popular Contention against North American Free Trade / Jeffrey M. Ayres  4 Community, State, and Market on the North Atlantic Rim: Challenges to Modernity in the Fisheries / Richard Apostle, Gene Barrett, Peter Holm, Svein Jentoft, Leigh Mazany, Bonnie McCay, Knut H. Mikalsen  5 More with Less: Work Reorganization in the Canadian Mining Industry / Bob Russell  6 Visions for Privacy: Policy Approaches for the Digital Age / Edited by Colin J. Bennett and Rebecca Grant  7 New Democracies: Economic and Social Reform in Brazil, Chile, and Mexico/ Michel Duquette  8 Poverty, Social Assistance, and the Employability of Mothers: Restructuring Welfare States / Maureen Baker and David Tippin  9 The Left’s Dirty Job: The Politics of Industrial Restructuring in France and Spain/ W. Rand Smith 10 Risky Business: Canada’s Changing Science-Based Policy and Regulatory Regime / Edited by G. Bruce Doern and Ted Reed 11 Temporary Work: The Gendered Rise of a Precarious Employment Relationship / Leah Vosko 12 Who Cares?: Women’s Work, Childcare, and Welfare State Redesign / Jane Jenson and Mariette Sineau with Franca Bimbi, Anne-Marie DauneRichard, Vincent Della Sala, Rianne Mahon, Bérengèr Marques-Pereira, Olivier Paye, and George Ross 13 Canadian Forest Policy: Adapting to Change / Edited by Michael Howlett 14 Knowledge and Economic Conduct: The Social Foundations of the Modern Economy / Nico Stehr 15 Contingent Work, Disrupted Lives: Labour and Community in the New Rural Economy/Anthony Winson and Belinda Leach 16 The Economic Implications of Social Cohesion / Edited by Lars Osberg 17 Gendered States: Women, Unemployment Insurance, and the Political Economy of the Welfare State in Canada, 1945–1997 / Ann Porter 18 Educational Regimes and Anglo-American Democracy / Ronald Manzer 19 Money in Their Own Name: The Feminist Voice in Poverty Debate in Canada, 1970–1995 / Wendy McKeen

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