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15Domestic Policy

L E A R N I N G O B J E C T I V E S

After reading this chapter, you will be able to:

■ 15.1 Define public policy and describe the policy- making process as it applies to American national government institutions.

■ 15.2 E xplain the principles underlying the American health-care system and the issues facing that system.

■ 15.3 Describe the environmental policies of the United States and the role of the Environmental Protection Agency in implementing these policies.

■ 15.4 Analyze American energy policy and discuss how it encourages energy independence.

■ 15.5 Describe the national policies for ending pover t y in the United States and alleviating the issues caused by economic downturns.

■ 15.6 Discuss the issues raised by immigration into the United States and the proposed reforms to the immigration system.

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What if…

Background In the United States, we have a private health-care sys- tem, but around 40 percent of Americans use government programs to pay for health insurance. That includes the senior citizens under Medicare, military veterans, perma- nently disabled Americans, children insured under the state–federal partnership program, and the poorest Americans who are covered under Medicaid, another joint state–federal program. The Patient Protection and Affordable Care Act, hereafter referred to as the Affordable Care Act (ACA), is a step toward universal health care but maintains the private health-care system. Although it requires that all Americans have health insurance, either purchased privately or through the federal or state govern- ment, it does not take control of private physicians, the prescription drug industry, or hospitals. Even after all pro- visions of the ACA are implemented, the United States will remain the only major industrialized democratic nation without a health-care system that guarantees equal access to basic health care for all citizens.

What If We Had Universal Health Care? With universal health care, everyone in need of basic medical care would have access to physicians, clinics, and hospital services. Every legal resident of the United States would receive free or nearly free medical examinations, routine phy- sician visits, well-baby care, and required tests. Most likely, prescription drugs would be available at very low cost to all Americans, regardless of their income or where they obtain their insurance. Such a health-care system would likely be paid for by a combination of taxes on workers and their employers and income taxes on all. Such a system might include the option for additional private insurance available for extra cost. Doctors might work for the state or national government, or they could remain as private practitioners.

How Does Universal Health Care Affect the Individual Patient? The National Audit Office of the United Kingdom (Great Britain, Scotland, and Wales) conducted a study of the health-care sys- tems in ten major industrialized nations in 2011, which under- scored the fact that all of these nations except the United States guaranteed universal health care. Different countries utilize various systems: Britain has state-employed doctors and state-run hospitals; France features national health insurance but private physicians who “bill” the state for their services.

Studies of universal systems show that for the average individual, good basic care is available. Infant mortality tends to decrease because all pregnant women have access to prenatal care. People with chronic diseases get more regular care and tend to do better at maintaining their health. Most nations cover the cost of prescriptions so that no individual is denied an expensive but necessary medication. However, in some nations there are long waits for advanced procedures and less availability of some of the more expensive tests and scans performed routinely in the United States. Some pro- cedures that are covered in the United States might not be covered under a national system, but it is difficult to general- ize across all nations. Americans have made clear their desire to keep their private physicians, private hospitals, and the right to access very expensive and advanced treatments. Whether Americans will be willing to trade these practices for a universal health-care system is a question yet to be decided.

We Had Universal Health Care?

For Critical Analysis 1. W hat are the advantages and disadvantages of a

universal health-care system?

2. How could the United States implement a universal health-care system and retain some of the features of the current system that are desired by citizens?

A mericans expect the federal government to pay attention to the issues that affect the lives of American citizens. The legislation and regulations passed to address these problems are usually called “domestic policy.” Domestic

policy can be defined as all of the laws, government planning, and government actions that affect each individual’s daily life in the United States. Consequently, the span of such policies is enormous. Domestic policies range from relatively

domestic policy Public plans or courses of action that concern internal issues of national importance, such as poverty, health care, and the environment.

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simple issues, such as what the speed limit should be on interstate highways, to more complex ones, such as how best to reduce our nation’s contribution to cli- mate change or how to improve the performance of schools across the nation.

The question of providing health care to all Americans is a consuming national issue. In 2010, the United States adopted a major reform of our health policies, but Congress did not adopt a universal health-care system. The com- plex nature of the health policy reform legislation and the debate that accom- panied that reform effort reflect the fact that the reform will touch virtually all Americans. Like many other domestic policies, this one was formulated and implemented by the federal government but will involve efforts of federal, state, and local governments and the private sector.

This chapter looks at domestic policy issues involving health care, the environment and energy, poverty and welfare, immigration, and others. Before we start our analysis, though, we must look at how public policies are made.

The Policymaking Process ■ 15.1  Define public policy and describe the policymaking process as it applies to

American national government institutions.

How does any issue get resolved? First, the issue must be identified as a prob- lem. Often, policymakers simply have to turn on the news or look at the Internet or hear from a constituent to discover that a problem is brewing. On rare occa- sions, a crisis, such as that brought about by the terrorist attacks of September 11, 2001, or the destruction caused by Hurricane Maria in 2017, creates the need to formulate policy. Like most Americans, however, policymakers receive much of their information from the national media. Of course, interest groups are always bringing issues to the attention of Congress in hopes of influencing policy outcomes.

Consider the Affordable Care Act. President Obama made it a priority of his first year in office. The law, which was passed about 14 months later, requires all Americans to have health insurance, whether through their employer, state insurance exchanges, or a federal program such as Medicaid. Some provisions of the law took effect almost immediately, including the one that requires insur- ance companies to allow parents to keep their children on their policies until age 26. No matter how simple or how complex the problem, those who make policy follow several steps. We can divide the process of policymaking into at least five steps: agenda building, policy formulation, policy adoption, policy implementation, and policy evaluation (see Figure 15-1).

Agenda Building First, the issue must get on the agenda—Congress must become aware that an issue requires congressional action. Agenda building may occur as the result of a crisis, technological change, or mass media campaigns, as well as through the efforts of strong political personalities and effective lobbying groups.

Advocates for improved health care in this nation had called for a serious reform of the system for years. The Democratic majorities

Agenda Building (media, interest groups, social movements)

Policy Formulation (president, Congress, interest groups)

Policy Adoption (Congress, president)

Policy Implementation (executive branch, bureaucracy)

Policy Evaluation and Revision (scientists, executive branch, Congress)

Figure 15-1 ▸ The Policy Process

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in both the House and the Senate supported President Obama’s priority as they, under the leadership of the late Senator Ted Kennedy, had pushed for reform of the health system for many years.

Policy Formulation During the next step in the policymaking process, various policy proposals are discussed among government officials and the public. Such discussions may take place in the printed media, on television, and in the halls of Congress. Congress holds hearings, the president voices the administration’s views, and the topic may even become a campaign issue.

With the Democratic majorities in Congress beginning work on the legislation, Republicans quickly took the position that they opposed the reform bill, but they lacked the votes in either house to change the momentum. Interest groups, seeing that the bill had a chance to become law, offered their own proposals. As the policy was being formulated, groups represent- ing America’s doctors, hospitals, pharmacies, medical appliance makers, pharmaceutical manufacturers, and every other part of the medical industry, offered proposals and commented on the draft legislation. In some cases, groups agreed not to oppose the law if their interests were protected.1 The input of these groups into the policy formulation process is invalu- able: they know more about the health-care system than any member of Congress.

Policy Adoption The third step in the policymaking process involves choosing a specific policy from among the proposals that have been discussed. In the end, the bill passed both houses, although the margin in the Senate was very small. The progress of the bill through Congress revealed some of the intense partisan behavior that has become common in recent years. Republicans put forward alternative proposals and claimed that they were ignored by the administration and the Democrats. Democrats used all parliamentary means to pass the bill, including keeping the Republicans out of the final negotiations between the House and the Senate. This, of course, was exactly how Republicans had treated Democrats in passing the Medicare prescription drug bill in 2006.

Policy Implementation The fourth step in the policymaking process involves the implementation of the policy alternative chosen by Congress. Government action must be implemented by bureaucrats, the courts, police, and individual citizens. In the example of the Affordable Care Act, the main portion of the legislation was not to come into effect until 2014. For the most part, therefore, implementation did not begin immediately. Some sections of the bill did become effective in 2011, however, including the creation of insurance pools for people with existing conditions, new taxes on wealthier retirees for their prescription drug coverage, dependents’ eligibility for their parents’ health insurance until up to age 26, and support for the creating of electronic medical records. The actual requirement to have health

1 Lawrence R. Jacobs and Theda Skocpol, Health Care Reform and American Politics: What Everyone Needs to Know, Revised and Updated, 2nd ed. (New York: Oxford University Press, 2012).

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insurance took effect in 2014. The troubled roll-out of the federal health insurance exchange website in the fall of 2013, however, became the most noticed part of the implementation process. Republican opposition to the law did not abate, and it became a major campaign issue in every federal election that has followed. Although Republicans did gain a major- ity in the House of Representatives in that election, they could not over- turn the bill without gaining control of the Senate. However, a number of states elected Republican administrations, and 26  Republican attorneys general filed suit against the bill, challenging the individual mandate to buy insurance and the provision requiring states to expand their Medicaid rolls. The individual mandate was upheld by the Supreme Court in 2012, but the Medicaid mandate to the states was overturned, leaving that part of the law unenforceable.

Policy Evaluation After a policy has been implemented, it is evaluated. Groups conduct studies to determine what actually happens after a policy has been in place for a given period. Based on this feedback and the perceived success or failure of the policy, a new round of policymaking initiatives will be undertaken to improve on the effort. Because the Affordable Care Act has not been fully implemen- ted, there has been little evaluation of the policy’s outcomes. Some health industry economists and the Congressional Budget Office have suggested that the cost will be far higher than originally estimated, whereas other sources predict it will save billions over the long term. Some believe that many small businesses will drop insurance coverage for their employees due to the high cost of the new program, but these are simply predictions for the future. As of 2016, data reveal that many more families and individuals have found health insurance coverage through Medicaid; however, premium increases for those who buy their own insurance through the state exchanges have been signific- ant. With the penalty for not having insurance still being fairly low, many younger and healthier Americans still have no insurance coverage. It will be the job of future legislators and members of the administration to propose reforms to the Affordable Care Act.

Health Care ■ 15.2 E xplain the principles underlying the American health-care system and the

issues facing that system.

Undoubtedly, one of the most important problems facing the nation is how to guarantee affordable health care for all Americans at a cost the nation can bear. Spending for health care is estimated to account for about 18 percent of the total U.S. economy. In 1965, about 6 percent of our income was spent on health care, and that percentage has been increasing ever since, exceeding 17.5 percent by 2014 and projected to reach 20 percent by 2020. Per capita spending on health care is greater in the United States than almost anywhere else in the world. Measured by the percentage of the gross domestic product (GDP) devoted to health care, America spends almost twice as much as Australia or Canada (see Figure 15-2). (The GDP is the dollar value of all final goods and services produced in a one-year period.)

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The Rising Cost of Health Care Numerous explanations exist for why health-care costs have risen so much. At least one has to do with changing demographics—the U.S. population is get- ting older. Life expectancy has gone up, as shown in Figure 15-3. The top 5 percent of those using health care incur more than 50 percent of all health-care costs. The bottom 70 percent of health-care users account for only 10 percent of health-care expenditures. The elderly make up most of the top users of health-care services, including nursing home care and long-term care for those suffering from debilitating diseases.

Advanced Technology Another reason why health-care costs have risen so dramatically is advancing technology. A magnetic resonance imaging (MRI) scanner can cost more than $2 million. A positron emission tomography (PET) scanner costs approximately $4 million. All of these machines have become increasingly available in recent decades and are in demand around the country. The development of new technologies that help physicians and hospitals pro- long human life is an ongoing process in an ever-advancing industry. New procedures and drugs that involve even greater costs can be expected in the future. It is also true that these advanced procedures are more readily available in the United States than anywhere else in the world.

The Government’s Role in Financing Health Care Currently, govern- ment spending on health care constitutes about 43 percent of total health-care spending. Private insurance accounts for about 33 percent of payments for health care. The remainder is paid directly by individuals or by philanthropy.

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Figure 15-2 ▸ Costs of Health Care in Economically Advanced Nations Cost is given as a percentage of total gross domestic product (GDP).

Source: Organization for Economic Cooperation and Development, OECD Health.

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Medicare and Medicaid have been the main sources of hospital and other medical benefits for more than 100 million U.S. residents, including 47 million Americans over 65 and 61 million others.

Medicare is specifically designed to support the elderly, regardless of income. Medicaid, a joint state–federal program, is in principle a program to subsidize health care for the poor. In practice, it often provides long-term health care to persons living in nursing homes. (To become eligible for Medicaid, these individuals must first exhaust their financial assets.) Medicare, Medicaid, and private insurance companies are called third parties. Caregivers and patients are the two primary parties. When third parties pay for medical care, the demand for such services increases; health-care recip- ients have no incentive to restrain their use of health care. One result is some degree of wasted resources.

Medicare The Medicare program, created in 1965 under President Lyndon B. Johnson, pays hospital and physicians’ bills for U.S. residents age 65 and older. Beginning in 2006, Medicare also pays for at least part of the prescription drug expenses of the elderly. In return for paying a tax on their earnings (cur- rently set at 2.9 percent of wages and salaries) while in the workforce, retir- ees are assured that the majority of their hospital and physicians’ bills will be paid for with public funds.

Over the past 40 years, Medicare has become the second-largest domestic spending program, after Social Security. Government expenditures on Medicare have routinely turned out to be far in excess of the expenditures forecast at the time the program was put into place or expanded. Chapter 16

Medicare A federal health insurance program that covers U.S. residents age 65 and older. The costs are met by a tax on wages and salaries.

Medicaid A joint state–federal program that provides medical care to the poor (including indigent elderly persons in nursing homes). The program is funded out of general government revenues.

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Figure 15-3 ▸ Life Expectancy in the United States Along with health-care spending, life expectancy has gone up. More Americans are living longer due, in great part, to advances in medi-

cine. Immunizations have decreased death from many diseases, allowing more children to reach adulthood.

Source: Social Security Administration, Office of the Chief Actuary.

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discusses Medicare’s impact on the current federal budget and the impact it is likely to have in the future. For now, consider only that the total outlays on Medicare are high enough to create substantial demands to curtail its costs.

One response by the federal government to soaring Medicare costs has been to impose reimbursement caps on specific procedures. To avoid going over Medicare’s reimbursement caps, however, hospitals have an incentive to discharge patients quickly. The government has also cut rates of reimburse- ment to individual physicians and physician groups, such as health mainten- ance organizations (HMOs). One consequence has been a nearly 15 percent reduction in the amount the government pays for Medicare services provided by physicians.

Medicaid In a few short years, the joint federal–state taxpayer-funded Medicaid pro- gram for the “working poor” has generated one of the biggest expansions of government entitlements in the last 50 years. In 1997, Medicaid spend- ing was around $150 billion. By 2014, it tripled to $495 billion. At the end of the last decade, 34 million people were enrolled in the program. Today, there are more than 60  million. The increase in unemployment after the financial crisis of 2008 increased the number by 15 percent. When you add Medicaid coverage to Medicare and the military and federal employee health plans, the government has clearly become the nation’s primary health insurer. More than 100 million people—one in three—in the United States has government coverage.

Why Has Medicaid Spending Exploded? The Medicaid program has expanded over time by making more individuals and families eligible for the health insurance. Children of families making up to $46,100 per year are eli- gible for CHIPs, the health insurance program for children. As the population ages, more senior citizens are being served in nursing homes and assisted living facilities. Almost 10 million senior citizens who have limited means are now Medicaid patients. Medicaid will continue to expand over the next few years as the provisions of the Affordable Care Act take effect. For the states that have chosen to be in the federal program, eligibility for Medicaid now extends to households making 133 percent of the poverty level. The Supreme Court ruling made participation in that part of the Affordable Care Act volun- tary, so not all states have this new eligibility level.

Medicaid and the States On average, the federal government pays almost 60 percent of Medicaid’s cost; the states pay the rest. Certain states, particu- larly in the South, receive even higher reimbursements. For those states that have accepted the new eligibility level under the Affordable Care Act, the expanded enrollment will be reimbursed by the federal government completely for a few years, with a reduction in the federal share to 90 percent by 2020. States that have accepted the new plan are satisfied that the federal reim- bursement will help their bottom line. In general, the states have been finan- cially stressed by the increase in Medicaid expenditures over the last two decades. Many states have changed their eligibility rules and their reimburse- ments to health providers to try to balance their budgets. The federal govern- ment, in paying 100 percent of the bill for the new enrollees, is trying to help the states with their Medicaid budget issues.

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The Uninsured One of the driving forces for the passage of the Affordable Care Act was the  fact that more than 49 million Americans—about 18.5 percent of the population—have not had health insurance. Because about half of all working Americans have health insurance through their employers, the recession of 2008 and the loss of jobs added about 4 million Americans to the ranks of the uninsured. The primary goal of the Affordable Care Act is to make health insurance available through the federal or state exchanges to this population through a combination of incentives (subsidies) and penalties: if a person does not have health insurance, he or she will have part of his or her income tax refund withheld as a penalty. There are, however, a number of ways that an individual or family can request an exemption from the penalty.

Being uninsured has negative health consequences. People without cover- age are less likely to get basic preventive care, such as mammograms; less likely to have a personal physician; and more likely to rate their own health as only poor or fair.

A further problem faced by the uninsured is that when they do seek med- ical care, they must usually pay much higher fees than would be paid on their behalf if they had insurance coverage. Large third-party insurers, private or public, normally strike hard bargains with hospitals and physicians over how much they will pay for procedures and services. The uninsured have less bar- gaining power. As a result, hospitals attempt to recover from the uninsured the revenues they lost in paying third-party insurers.

In any given year, most people do not require expensive health care. Young, healthy people in particular can be tempted to do without insurance. One benefit of insurance coverage, however, is that it protects the insured against catastrophic costs resulting from unusual events. Medical care for life-threatening accidents or diseases can run into thousands or even hun- dreds of thousands of dollars. An uninsured person who requires this kind of medical care may be forced into bankruptcy.

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The 2010 Health-Care Reform Legislation On March 23, 2010, after a long and intense battle in Congress, President Obama signed the Patient Protection and Affordable Care Act, the biggest reform of the American health-care and health insurance system since the approval of Medicare in 1965. The new legislation relies on a combination of private insurance, public programs such as Medicare and Medicaid, and new state-based nonprofit health exchanges to provide health insurance coverage to almost all Americans.2 By 2017, the number of uninsured nonelderly people in the United States dropped from nearly 43 million to 28 million, or about 10.3 percent. The Kaiser Family Foundation reported that about half of the uninsured said the cost was too high.3 According to their data, the greatest gain in the insured population was among poor and low-income households. Hispanic and African American households were more likely to gain insurance than white households. Most of these gains were due to the increased enrollment of individuals and families in the Medicaid program under the higher income levels. Clearly, the ACA has benefited the less advantaged members of the community. The Trump administration sought repeal of the ACA but Congress did not accomplish this. The American health-care program as it passed the Congress is not like the types of programs adopted in many European countries or in Canada. Western Europe, Japan, Canada, and Australia all provide systems of universal coverage through national health insurance. The government takes over the economic function of providing basic health-care coverage. Private insurers are excluded from this market. The government collects premiums from employ- ers and employees on the basis of their ability to pay and then pays physicians and hospitals for basic services to the entire population. Because the govern- ment provides all basic insurance coverage, national health insurance systems are often called single-payer plans or socialized medicine. Only health insur- ance is socialized. The government does not employ most physicians, and in many countries the hospitals are largely private as well.4

Environmental Policy ■ 15.3 Describe the environmental policies of the United States and the role of the

Environmental Protection Agency in implementing these policies.

Sixty years ago, Rachel Carson published Silent Spring, the book that can be credited with starting the contemporary environmental movement in the United States.5 Carson’s book called attention to the consequences of wide- spread use of pesticides and other chemicals that are dispersed into the water- ways and have deadly effects on fish and wildlife. Eight years later, the first Earth Day was celebrated. Later that same year, President Nixon proposed and the Congress approved the creation of the Environmental Protection Agency (EPA), an independent executive agency charged with protecting the …