How the U.S. Lost National Healthcare

By  Kai Bird, a Pulitzer Prize-winning historian, journalist, and Executive Director and Distinguished Lecturer of CUNY Graduate Center’s Leon Levy Center for Biography. Originally published at the Institute for New Economic Thinking website

At the end of January 1978, Delaware’s thirty-five-year-old senator, Joe Biden, dropped by the White House and tried to warn Carter that he thought “Ted Kennedy is running for president in 1980 and is already lining up support.” In addition, Biden conveyed that the Jewish community had a “deep distrust” of the president. Carter was not exactly surprised on either score, but Biden’s message was the first concrete report he had that Kennedy was contemplating a challenge. Carter distrusted the Massachusetts senator. Privately, he claimed that there were “no philosophical differences between me and the Senator. He’s just an impatiently ambitious man.” Kennedy’s sense of entitlement annoyed Carter—who in turn went out of his way not to do the senator any favors. When Kennedy made it known that he sought the appointment of Harvard Law School’s Archibald Cox to the federal bench, Kirbo advised against the appointment: “I would think it would be a mistake to appoint Cox as you will have a rash of pressures to appoint people of similar ages.” Kennedy took it as a personal affront when Carter declined to appoint his old friend. Carter gave that federal judgeship to the senator’s committee counsel, Stephen Breyer, but Kennedy was hardly mollified.

Setting aside their personal chemistry, the two politicians actually shared many liberal aspirations, including the notion that all Americans had a right to healthcare. Democrats had been talking about national healthcare since the Truman administration in the 1940s. In 1973, Kennedy introduced a national healthcare bill that would have fulfilled this dream. A radical piece of legislation, Kennedy’s bill would have established a single-payer, nonprofit insurance scheme to cover all Americans. The health insurance companies would have been driven from the market. The bill had the ardent support of Meany’s AFL-CIO but also the more liberal United Auto Workers union and a broad coalition of liberal activist groups. But Republican presidents Nixon and Ford had promised to veto it—so it languished.

Carter had endorsed the idea of a comprehensive national health insurance during the 1976 presidential campaign. Twenty-six million Americans had no health insurance at all and another 28 million had only minimal coverage. “We have an abominable system in this country,” he wrote, “for the delivery of healthcare, with gross inequities toward the poor—particularly the working poor—and profiteering by many hospitals.” And once in office, he had instructed his HEW secretary, Joe Califano, to formulate a concrete bill. Califano dithered for much of 1977, knowing the complications. Frustrated, Kennedy invited Califano to his Virginia home and warned him that he was going to hold Carter accountable to his campaign promise. That autumn Kennedy gave a speech at the UAW’s annual convention in which he suggested that healthcare remained the “missing promise” of the Carter administration. In response, Carter told union leaders that he still intended to submit legislation early in 1978. But he warned them that he didn’t think he had the votes in Congress to pass a universal health insurance scheme without containing costs, particularly hospital charges. “We can’t get this overnight,” he told them. “If we demand too much and are not fiscally responsible, the whole thing will be rejected. This needs to be politically feasible.” Needless to say, Kennedy and the union leaders chafed at any talk about fiscal responsibility. Kennedy later brusquely told Eizenstat, “I will move it myself if you don’t.”

In early March 1978, Califano and Treasury Secretary Mike Blumenthal came by the Oval Office and asked Carter to delay any healthcare legislation until the following year. Carter demurred, saying he was “too deep to reverse myself” on his pledge to Senator Kennedy. Five weeks later, Carter had a “heated meeting” with Kennedy, UAW chief Doug Fraser, and the AFL-CIO’s Meany. Carter was taken aback by the intensity of the emotions expressed and wondered if Kennedy was “posturing in front of the labor leaders.” Finally, in late June 1978, Carter met again with Kennedy—and this time, he told him that while he was still in favor of a comprehensive health insurance program, it would have to be phased in over some years due to budget constraints. Kennedy was furious. Carter later wrote in his 1982 presidential memoirs that he had sought to convince Kennedy that the “best approach was a comprehensive system passed into law and then phased into operation as the federal budget could accommodate the costs.” But in his diary, he noted that “it would be years before we could impose it.” The president’s number crunchers were telling him that Kennedy’s comprehensive bill would cost the federal budget $30 billion to $40 billion by 1983. Carter didn’t care that most Republicans labeled national health insurance “socialized medicine.” But he did care about the federal deficit. “It is ridiculous to think about endorsing a bill like Kennedy’s,” he told Mondale and Eizenstat. “I am not going to destroy my credibility on inflation and budgetary matters.”

The two men had opposing, nearly intractable differences over tactics. Kennedy said he wanted “bold leadership and swift action built around a single piece of legislation.” Carter favored an incremental, step-by-step approach—a strategy that Kennedy believed to be “a recipe for failure.” On June 26, 1978, Kennedy told the president in a phone conversation, “I don’t think you can go to an elderly group and say … if hospitals keep their costs down and the economy doesn’t go so much into a deficit, then you might be phased in.” Kennedy thought there was no political constituency for incrementalism. Carter saw Kennedy’s bill as “an enormously complicated program run entirely by the federal government.” As drafted, the Kennedy bill was essentially a watered-down version of the senator’s original single-payer plan for universal and mandatory health insurance. It still provided a role for private insurance companies, but the federal government would shoulder the lion’s share of the costs. Carter feared it would cost “at least $100 billion—and perhaps twice as much.” And politically speaking, Carter didn’t think any such bill had a chance of winning congressional approval.

By contrast, Carter wanted to preserve the “existing employer-employee” health insurance relationships. He would have the federal government stipulate basic standards to the private insurance companies. Under his program, private insurers would be required to place a priority on preventive medicine, outpatient care, and complete coverage for infants and children. But the most innovative feature of Carter’s eventual proposal was the notion that the federal government would itself offer universal health insurance for “catastrophic” medical issues. Such “catastrophic” insurance would cover emergency or extraordinary medical expenses above a flat ceiling of $2,500 annually for every American family. (For senior citizens and the disabled, out-of-pocket expenses would be limited to $1,250 per person.) The plan would dramatically improve the health coverage of 56 million workers and their families, provide basic health coverage to all women and children, and extend fully subsidized comprehensive care to an additional 15.7 million aged and non-aged poor. It wasn’t a universal, single-payer system—but Carter believed it would be “a major step toward a fully developed, universal, comprehensive National Health Plan.” The White House estimated that some 56 million Americans would receive protection against major illnesses “that they do not have at present.”

Carter also knew that his universal “catastrophic” health insurance would be much cheaper than Kennedy’s program. (Califano estimated the cost at $15 billion $27 billion to provide basic benefits for the poor and children, plus catastrophic benefits for all citizens.) And if Kennedy and his labor union allies supported it, the president believed it had “a good chance to succeed.”

Stu Eizenstat and Califano lobbied Kennedy over the next few weeks and tried to convince him not only that Carter’s program was politically viable but that the catastrophic insurance program was a foot in the door that would pave the way for a truly comprehensive federal health insurance program in the years to come. As a negotiating gambit, Carter and his team proposed building a trigger into the bill whereby the different levels of healthcare benefits would be phased in over time—depending on economic conditions. Interestingly, this idea had come from Mondale, usually the reliable liberal voice in the Carter White House. Kennedy’s allies responded that a trigger would be okay, but he could allow the president only the option of requestinga delay from Congress. The president alone would not be able to halt the phase-in toward universal and comprehensive health insurance. Carter saw this as fiscally unacceptable. At this point, Kennedy insisted he wanted one comprehensive bill. And while he would talk to Carter on the phone, he refused to come to the White House for a personal meeting. Carter was incensed by this behavior and thought it signaled that Kennedy was done negotiating. In a conference call Kennedy angrily told the president, “You’ve slid on so many timetables, I fear this will slide more.” And he refused to accept Carter’s definition of the trigger: “I can’t go to the groups [unions] and say we may get benefits if we meet the triggers. The key is one bill with a minimum of standards. Otherwise, opponents can pick it off bit by bit.” Afterward, Eizenstat told Carter that “we could not win with a comprehensive bill.” He urged the president to reject Kennedy’s bill and instead introduce a series of healthcare bills that would expand benefits and coverage incrementally.

The matter came to an abrupt and disastrous confrontation on the morning of July 28, 1978, when Kennedy relented and finally agreed to come to the White House to discuss the healthcare bill. They met in the Cabinet Room. Sitting at the long table were the president’s top domestic policy advisers, including Vice President Mondale, Eizenstat, Califano, David Rubenstein, and Joseph Onek—who had worked on the nitty-gritty details of the Carter plan. Onek had previously worked on health issues for a Nader-inspired public-interest law firm, the Center for Law and Social Policy. He was a public-interest liberal, like many of the people Carter had recruited to work in the executive wing of the federal government. And he had once worked on Kennedy’s senate staff. But now he was on the other side of the table from Kennedy. President Carter began the conversation on a conciliatory note, confessing that he had “slipped on timing.” Appealing directly to Kennedy, Carter said, “It will doom health care if we split. I have no other place to turn if I can’t turn to you… . I would like to leave office with a comprehensive bill in place, but I must emphasize fiscal responsibility if we are to have a chance.”

When Carter made it clear that he intended to submit his own bill—and that he was not going to support Kennedy’s more comprehensive bill—Eizenstat leaned over and whispered into Onek’s ear, “This is the beginning of Kennedy’s presidential campaign.” Onek was shocked: “I remember thinking at the time that this was just not possible.” But Kennedy made it all too clear that he didn’t like the Carter proposal; it was too little and already too late. Carter was unmoved: “We’ll just have to hang tough.” Kennedy asked the president to delay his press conference to announce the legislation “long enough for him to study the proposal more thoroughly.” Carter agreed, and the two men shook hands.

But just a few hours later, Kennedy held his own press conference and blasted the president’s “catastrophic” healthcare program. Accompanied by Meany, Kennedy deemed the president’s plan “unacceptable” and pledged to “take the issue to the people.” Carter thought Kennedy had “betrayed my trust.” Clearly, Kennedy had asked for a delay in the administration’s announcement only so that he could first denounce it. Carter was deeply annoyed, but he also thought Kennedy’s posturing “made us look responsible and conservative with our plan.” The New York Times editorialized that Carter’s approach seemed “a mere down-payment, and a belated one” on his campaign promises—but the newspaper conceded that the president’s strategy “appears to have the wiser side of the argument.”

It became clear, however, that without Kennedy’s support—and the support of the liberal wing of the Democratic Party—Carter’s own program would languish. The senator from Massachusetts never even allowed the Carter bill to move out of his Senate health committee. “In effect,” Carter later wrote, “he insisted on his own plan or nothing at all.” The country got nothing at all. Carter spent the next two years trying to push both his “catastrophic” health insurance bill and a companion hospital-cost-containment bill through Congress. Had it passed into law, no American would have paid more than $2,500 annually in healthcare costs—and the government would have paid for anything above that amount, defined as catastrophic coverage. Employers would have been required to offer their workers this basic health insurance, equally sharing the monthly premiums with the federal government. Eizenstat estimated that an additional sixteen million citizens would have been covered at a cost of about $18 billion in 1980 dollars. But without Kennedy’s support, the administration could not defeat the powerful medical lobby. The American Medical Association (AMA) contributed an average of $8,000 to each of the 250 House members who voted against these bills. The administration could not even prevail on its anti-inflationary hospital-cost-containment bill. Even a moderate Democratic congressman like Representative Dick Gephardt fought Carter on the bill—ostensibly because it wasn’t liberal enough. Some Carter White House aides, like Alicia Smith, were incredulous. Jody Powell was exercised enough to sit down and write Carter a rare memo complaining that Kennedy’s approach—a “comprehensive plan now or nothing at all”—had become an “absolute article of faith” over the last thirty years. It was more important, he argued, to provide “badly needed health insurance benefits” at the earliest possible date than to adhere “to some semi-sacred ideological principle.” Powell couldn’t believe that the Democratic Party’s liberal wing was willing to settle for nothing. In the end, the administration couldn’t even get passage of a bill to place a cap on hospital costs. “The truth is hospital cost containment didn’t have a chance,” recalled Onek, “because the hospitals are the strongest lobby in America… . Hospitals are like an enormous company with a plant in every [congressional] district. It’s often the largest employer in the district. The people on the board of the hospital are the most powerful people in the community. You don’t have a prayer.”

As Carter had prophesied, Kennedy’s own bill went nowhere. Califano quipped that the Kennedy bill had “less of a chance of passing than putting an elephant through a keyhole.” Carter finally submitted his own National Health Plan, focused on catastrophic healthcare, in the summer of 1979. “I urge the Congress,” Carter said, “not to lose this precious opportunity for progress. The real needs of our people are not served by waiting and hoping for a better tomorrow. That tomorrow will never come unless we act today.” The bill would provide free healthcare to infants and pregnant women; employers would be required to subsidize two-thirds of their employees’ health insurance, and eventually eighty million more Americans would be insured. Carter’s plan would have been a radical step forward.

The Democratically controlled House and Senate let the bill die. Ironically, three decades later President Barack Obama introduced a universal health insurance bill modeled closely after the Carter bill. Mondale’s former aide Richard Moe wrote that Obamacare “bore a striking resemblance to Carter’s proposal three decades before.” The legislation passed Congress in 2009 with the support of Senator Kennedy, by then diagnosed with fatal brain cancer. In retrospect, Kennedy’s refusal to support Carter’s incremental, catastrophic national health insurance bill in 1978–79 condemned the country to wait three decades for meaningful healthcare reform. By any measure, this was a tragedy for the country. “The missed opportunity,” Eizenstat later wrote, “haunts me to this day.”

Excerpted from The Outlier by Kai Bird. Copyright © 2021 by Kai Bird. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.

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  1. upstater

    “…Kennedy’s refusal to support Carter’s incremental, catastrophic national health insurance bill in 1978–79 condemned the country to wait three decades for meaningful healthcare reform. By any measure, this was a tragedy for the country. “

    Wondering if Kai Bird has ever shopped for expensive, threadbare health insurance on the Obamacare exchanges? Or perhaps Kai has a partner employed by government with a gold plated group plan?? Being self employed, we lost our small business plan and were mandated to use the exchange. Coverage was worse and we suffered through double digit percent cost increases every year.

    If that counts as “meaningful” reform, it was “meaningful” only to health insurance corporations and their lobbyists. Propping up a dying business model with public money and mandated wasn’t “reform” it was corruption.

  2. Brooklin Bridge

    This is a fascinating and puzzling piece. The closing paragraph, ” In retrospect, Kennedy’s refusal to support Carter’s incremental, catastrophic national health insurance bill in 1978–79 condemned the country to wait three decades for meaningful healthcare reform”, implies (to me) a qualification of Obama’s health care bill (“meaningful healthcare reform”) that I find hard to square with the facts, unless “meaningful … reform” is code for bait and switch. At the same time, it is puzzling, since the author’s intent is so clearly positive and squarely in the camp of universal health care. And then there is the whole issue of incrementalism and the fact it was alive and well in 1978 – a time in which I was a young adult and yet completely and happily unaware of incrementalism as a bosom buddy of Big Greed’s status quo. And yet…, perhaps back then, it was indeed a more viable way to address the problem. Then, add personality to the mix; Ted Kennedy and his calamitous habit of combining near spot on intuition with his insatiable need to stoke his self importance vs. Carter, often a well meaning servant of neo-liberalism.

    1. Arizona Slim

      Yup. Blame it all on Kennedy.

      Me? I blame it all on the greed of the for-profit “healthcare” system. When dealing with this system, keep the following thought in mind:

      Your health is NOT their concern.

      1. NotTimothyGeithner

        Teddy was the champion of the HMO Act of 1973. He did manage to get that done, so the for profit system is Teddy’s creation as much as Kaiser’s.

        1. Arizona Slim

          I double-dawg dare anyone to name an HMO that gave or gives a flying feather about anyone’s health. Case in point:

          Slim used to work for a lady who had to fight tooth and nail to get her HMO to pay for an Epstein-Barr virus test. She had all the major symptoms, and it was obvious to the rest of us at the office.

          Well, the dear sweet HMO finally relented. My boss got the test, it was positive, and treatment finally begin. In time, she did get better.

          1. NotTimothyGeithner

            The HMOs didn’t beget themselves. They were allowed and encourgaed with the HMO Act of 1973. They could exist previously but the regulations made them nothing like the last near 50 years. The skyrocketing costs and increasingly poor care really jump in the wake of that legislation.

            Teddy and Nixon working together! George Carlin was right about bipartisanship.

            1. Carolinian

              There’s also the view held by some at the time that Kennedy’s 1980 challenge gave us Reagan, another disaster. Kennedy was famously wishy washy and muffed his interview with Roger Mudd from the get go. Then there’s his character revealing behavior at Chappaquiddick (there’s a movie). Our now long gone local mega tycoon had a bumper sticker on his Cadillac: “more people died at Chappaquiddick than at Three Mile Island.”

              As always there’s the question–why doesn’t the US political Left have better leaders?

    2. timbers

      I agree. It’s nice to have this retrospective. I lived thru this period and was somewhat attentive to politics at the time and recall this in broad terms. But the concluding sentences implying everything is all right now because O-care seem rushed, as if the writer suddenly had to take a bio-break and was required to finish the article before they were allowed to. The reality being, unfortunately, that what Carter supported and Obama passed make it seem today as if there has been no real reform at all and we’re still waiting/hoping it will come. Oh sure, those maximum deductibles in 1970’s dollars look incredibly fabulous by today’s deductibles, and that makes Carter’s incrementalism look eye popping awesome today in those 1970’s dollars.. But we know they would have been raised to what we have now.

      Interesting, too, the unions supported single payer back then. And today the teacher’s unions are against. Sheesh.

      1. PHLDenizen

        Given the disproportionate amount of power Dems aka PMC wield in the corridors of power these days — most of whom live in blue states with eye watering property taxes — one way to beat the teacher unions’ into submission is framing the argument in terms of compressing property taxes. Those particular unions exert a large amount of political pressure, but residents of those locales detest property taxes. Look at the Dems’ tantrum over the SALT caps as an example.

        School taxes, at least in Philly and the suburbs that ring it, are the largest component of property taxes. Often by orders of magnitude. My parents pay 18k/year and don’t live in anything remotely resembling some resplendent estate. And almost all of that is school taxes. The same is true along the Main Line, except for places with a large base of businesses. King of Prussia for instance.

        Usually the largest point of contention during contract negotiations is healthcare costs. And we all know healthcare costs are staggering. PMC wants “good schools”, but loathe the unions. Speculation, but nationalized healthcare clobbers a large chunk of property taxes by pushing healthcare costs out of the budget.

        When one domino falls…such a sentiment is quixotic, but maybe there’s a ghost of chance.

        I used to empathize with teacher’s unions’, but they’ve become as ossified and pathologically opposed to firing awful teachers as police unions are to bad cops.

  3. The Rev Kev

    Could it be that the medical companies, hospitals, etc. stoked the feud between Carter and Kennedy to kill any defining legislation that they might come up if they had cooperated? I find it noteworthy how a young Biden was sent in to tell Carter that Kennedy was gunning for his job. Carter knew that already so for Biden to do that was merely to make a bad situation even worse. The present American healthcare system is an outgrowth of failures to cooperate like this.

    People will be familiar with Caitlin Johnstone. Her husband as it turns out is American who came down south to live. I saw a tweet of hers today which is titled ‘My American husband with his Australian healthcare card and his US healthcare card.’ which sounds true (language alert)-

    1. Mel

      I think the ‘feud between Carter and Kennedy’ is just a function of this article and the way it reports the incident. I don’t see any news about whom Carter was listening to between meetings with Kennedy. Ditto for whom Kennedy was listening to. (I skimmed the article — maybe it’s there and I didn’t spot it. I think that lack is what makes the article “puzzling” per the commenter above.)

  4. freebird

    Fascinating look at how petty personality issues can affect millions of people. But, as with most pieces by policy ‘institutes’ studiously avoids mentioning the elephants in the room. This was all about disagreements and strategic errors? Um, no. Big checks were being written by big insurance to keep things status quo (or create new ‘profit centers’ like HMOs), while our ‘leaders’ were too blind to look across the northern border to see how grown-up countries somehow manage to pay for health care instead of massive war machines.

  5. Acacia

    The Democratically controlled House and Senate let the bill die.

    Says it all. Yup. Tales from the sh*thole crypt.

  6. Pinhead

    The US would have had universal health care in the 1940’s if the Southern Congressmen had not been frightened by the prospects of negro patients in white hospitals. Their voters had no issue with negro orderlies and probably could have accepted a few negro nurses. I don’t think many know that negro doctors existed, even then. Surely they would not have known how to treat white southerners.

    This was a far more explosive issue at the time than Communism and that was explosive enough.

    1. David B Harrison

      Actually when Truman conceived his national healthcare plan the American Medical Association mounted the biggest lobbying effort up to that time to stop it.

  7. steelhead23

    This article is good journalism – it discusses the conflict with the slightest of a pro-Carter slant. Very informative – and sad. As regards cost containment, I am routinely shocked by the cost of medical care and the variation in costs from one vendor to the next. I have read of MRI charges ranging from $200 to $2000 or so. Our current “capitalism is great” healthcare system is a costly scam that seems to be exploring the limits of our willingness and ability to pay.

  8. ChrisPacific

    After reading Kelton’s ‘The Deficit Myth’ I confess I have started seeing deficit hysteria everywhere I look. It’s always the dreaded ‘fiscal responsibility’ that holds us back from making much-needed reforms, even if they would result in a meaningful improvement to society and probably pay for themselves many times over. It’s woven through every line of this story like a cancer.

  9. Sound of the Suburbs

    It’s in classical economics.
    It’s in Keynesian economics.
    It’s not in neoclassical economics.

    We got some stuff from Ricardo, like the law of comparative advantage.
    What’s gone missing?
    Ricardo was part of the new capitalist class, and the old landowning class were a huge problem with their rents that had to be paid both directly and through wages.
    “The interest of the landlords is always opposed to the interest of every other class in the community” Ricardo 1815 / Classical Economist
    What does our man on free trade, Ricardo, mean?

    Disposable income = wages – (taxes + the cost of living)
    Employees get their money from wages and the employers pay the cost of living through wages, reducing profit.
    Employees get less disposable income after the landlords rent has gone.
    Employers have to cover the landlord’s rents in wages reducing profit.
    Ricardo is just talking about housing costs, employees all rented in those days.
    Low housing costs work best for employers and employees.

    Of course, employees get their money from wages and it is the employers that are paying the high housing costs via wages, reducing profit.

    Everyone pays their own way.
    Employees get their money from wages.
    The employer pays the way for all their employees in wages.

    What was Keynes really doing?
    Creating a low cost, internationally competitive economy.
    Keynes’s ideas were a solution to the problems of neoclassical economics, but we forgot why he did, what he did.

    They tried running an economy on debt in the 1920s.
    The 1920s roared with debt based consumption and speculation until it all tipped over into the debt deflation of the Great Depression. No one realised the problems that were building up in the economy as they used an economics that doesn’t look at private debt, neoclassical economics.

    Keynes looked at the problems of the debt based economy and came up with redistribution through taxation to keep the system running in a sustainable way and he dealt with the inherent inequality capitalism produced.

    The cost of living = housing costs + healthcare costs + student loan costs + food + other costs of living
    Disposable income = wages – (taxes + the cost of living)

    Strong progressive taxation funded a low cost economy with subsidised housing, healthcare, education and other services to give more disposable income on lower wages.
    Employers and employees both win with a low cost of living.

    Keynesian ideas went wrong in the 1970s and everyone had forgotten the problems of neoclassical economics that he originally solved.

    Of course.
    The high US cost of living makes it expensive to do anything in the US.
    Employees get their money from wages and it is the employers that are paying the high cost of living via wages, reducing profit.

    “Income inequality is not killing capitalism in the United States, but rent-seekers like the banking and the health-care sectors just might” Angus Deaton, Nobel prize winner.
    Employees get their money from wages and the employers pay the cost of living through wages, reducing profit.
    This raises the costs of doing anything in the US, and drives off-shoring.

    1. Sound of the Suburbs

      Someone from the CBI (Confederation of British Industry) has just seen the equation.
      Disposable income = wages – (taxes + the cost of living)
      Two seconds later …..
      They realise the UK’s high housing costs push up wages and are actually paid by the UK’s employers reducing profit.

      Employees do get their money from wages, so employers are actually paying through wages.

  10. eg

    Now I understand why some claim Carter, not Reagan, was the first neoliberal President.

    Presumably we have him to “thank” for the ongoing deficit hysteria.

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