In recent years, major new studies have tried to rehabilitate the presidency of Jimmy Carter, who died on Dec. 29 at age 100. They’ve emphasized a range of underappreciated accomplishments in everything from foreign policy to environmental protection and racial equity. These accounts still acknowledge Carter’s failures but balance them with a longer-term perspective on how his presidency changed the United States and the world.
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This positive reappraisal, however, hasn’t extended to health care policy. This makes sense considering how devastating the battle over health care was to Carter during his presidency. Congress rejected his major health care policy initiatives, and his grudging support for a much more limited national health insurance plan in part spurred Sen. Ted Kennedy (D-Mass.) to challenge the incumbent Carter from the left in the 1980 Democratic presidential primary.
Yet Carter’s health care record deserves a more nuanced evaluation. More than any other modern president, he took on the health care industry, as well as his own allies, by attempting to address the high costs of American health care. And his health care proposals pushed his party toward the policy strategies that eventually produced the landmark Affordable Care Act in 2010.
Carter’s willingness to tackle the politically perilous task of trying to rein in health care costs offers a template for the kind of leadership and focus needed to address the health care system’s enduring flaws in 2024.
Carter entered office at a moment when health care spending was skyrocketing. Between 1970 and January 1977, total national health expenditures had more than doubled, from $74 billion to $152 billion. As a percentage of gross domestic product, health care spending had risen from 6.9% to 8.1%.
Much of this increase stemmed from the enactment of Medicare in 1965, with its generous reimbursement formulas for hospitals. These formulas not only raised direct costs, but, critically, also allowed hospitals to generate new revenue streams that enabled them both to build capital reserves and take on debt by entering the bond markets. Hospitals in turn used this access to capital to build new facilities, renovate old ones and add sophisticated new equipment. This created a cost spiral as hospitals competed with one another on facilities and technology, rather than affordability.
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Carter tried to duck the issue of health care policy in the 1976 Democratic primary, but exploding prices, along with continued interest in national health insurance on the left flank of the Democratic Party, made that impossible. After Carter’s victory in the Florida primary in March 1976, the United Automobile Workers (UAW) union demanded that he endorse national health insurance as a condition for receiving its critical endorsement. As an outsider from Georgia, Carter needed the union’s support. So after extended negotiations, he agreed to satisfy the UAW’s demand in an April 1976 speech.
Even then, however, Carter refrained from backing Kennedy’s “Health Security Bill”—which offered complete single-payer public health coverage with no cost sharing and no role for private insurers—despite all of his main rivals for the Democratic nomination endorsing it. Instead, he described the general principles of a program that would be introduced in phases. Carter envisioned relying on private as well as public insurance, and his plan included checks on both hospital and physician fees to control costs. Carter also tied his program, in some unspecified way, to reductions to welfare.
Since the union wanted to maintain influence if Carter won, this proposal was enough to secure its support. Carter went on to win the nomination and the election in 1976.
As the president-elect and his team evaluated their priorities, concerns about the federal budget deficit and rising inflation took precedence over his campaign promise on health insurance. They decided to focus on hospital costs instead. As one Carter adviser later put it, they couldn’t “even begin talking about affording a national health insurance program if hospital costs had an unlimited straw into the Federal Treasury.”
Kennedy and other supporters of a national health program deferred to the new president—but they were unhappy about it. They agreed about the need to control costs, but believed the two goals could be pursued simultaneously.
By April 1977, the Carter team had drafted an innovative, two-part hospital cost containment proposal. The first part capped total hospital revenue growth at nine percent annually, with limited exceptions, achieved through a limit on average revenue per admission. The second part of the Carter bill audaciously proposed limiting total annual hospital capital expenditures to $2.5 billion nationally. This would cut spending for new facilities, and thus was key to slowing the rapid growth of the hospital sector.
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Together, the two prongs had the potential to be as transformative as Kennedy’s “Health Security Bill” because of the way they challenged unchecked hospital expansion and cost increases.
The proposal triggered a brutal war.
The hospital industry organized an aggressive local lobbying campaign against the bill while implementing a much-hyped “voluntary effort” to control costs. Anne Wexler, Carter’s special assistant for public liaison, explained that every local hospital board included “the president of the bank, the president of whatever local community organizations there were, the leading lights in all the religious organizations in town and so forth.” The hospitals’ powerful allies meant that Carter had lost public opinion, “before we ever got going.”
Congress voted down Carter’s proposal multiple times between 1977 and 1979, dealing what he considered to be a crucial blow against his domestic agenda.
Meanwhile, a frustrated Kennedy pressed the president to announce a national health insurance plan before the 1978 midterm elections. Carter recognized, however, that Kennedy had no support from moderate and conservative Democrats in Congress and pushed to defer release of a specific plan until the following year. Kennedy grudgingly agreed, but at the midterm Democratic convention that December, he savaged Carter’s inaction.
Finally, in June 1979, Carter released a plan for the first phase of a program to achieve universal coverage. It relied on both public and private insurance to cover “catastrophic” medical costs, and it proposed federalizing Medicaid by combining it with Medicare into a new federal program known as “Healthcare.” This would have eliminated the state-to-state variations that made Medicaid an inconsistent and unequal vehicle for insuring low-income Americans.
While covering all expenses for the poor, Healthcare had a $1250 deductible ($5151 in 2023 dollars) for higher income recipients. In addition, the Carter plan retained employer-provided private insurance with a mandate that employers offer at least catastrophic coverage for their workers for costs above a deductible of $2500. On the cost control side, the bill limited hospital capital expenditures and added a new system of physician fee controls.
More comprehensive coverage, the administration argued, could be added as economic conditions allowed.
Kennedy balked at the skimpy benefits, understanding that Congress could not be relied on to regularly expand coverage. Even so, Carter’s vision influenced him. Kennedy’s own proposal began to include public and private elements, including an employer mandate and a requirement that insurance companies provide marketing and administrative services for the plan’s public elements. It also included an annual national health budget to control costs.
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Neither bill made any real progress in Congress, and Kennedy’s frustrations fueled his decision to challenge Carter for the 1980 Democratic nomination.
Despite the political damage done by Carter’s twin defeats on health care, he achieved two major things. First, he recognized the burgeoning cost control problems in the American health care system. His proposal, if passed, would have laid the foundation for a more cost effective and equal system. He understood that such hospital cost containment was a prerequisite for achieving universal coverage.
Second, Carter changed the terms of the health care debate for Democrats. No longer would they push universal federally provided insurance like Kennedy’s proposal from the early 1970s had done. Instead, Bill Clinton (unsuccessfully) and eventually Barack Obama in his signature bill in 2010 both embraced a mixture of public and private health insurance that built on Carter’s legacy. Its debatable whether this shift was positive, but it marked a key step toward our current system.
The other element of Carter’s health care agenda—the critical but politically perilous problem of high costs—remains largely unaddressed. While President Biden’s Inflation Reduction Act took important steps to control the costs of prescription drugs, those only account for nine percent of healthcare costs. Also under Biden, the Federal Trade Commission has increased its scrutiny of both horizontal and vertical hospital mergers, but this has had limited effects and is largely after-the-fact, as the industry has already undergone significant consolidation. Unlike Carter, Biden has not pursued the direct regulation of costs stemming from hospitals, physicians, and clinical services, despite them accounting for 51 percent of health care costs.
With cost problems still plaguing Americans in 2023, Carter has proved right on health care. While he couldn’t bend Congress to his will, his hospital spending caps could have prevented many of the challenges we continue to confront. The question now is whether today’s political leaders have the courage to follow his lead.
Guian McKee is professor of presidential studies at the University of Virginia’s Miller Center for Public Affairs. He is the author of Hospital City, Health Care Nation: Race, Capital, and the Costs of American Health Care, published by the University of Pennsylvania Press.
Made by History takes readers beyond the headlines with articles written and edited by professional historians. Learn more about Made by History at TIME here.
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