By skyforbes This article was originally written in November 2022 as part of a larger piece called “Contradictions in the Age of Reagan.”
Introduction
The focus on cutting social funding and the stigmatization of social programs are seen as major markers of 70’s and 80’s politics. Indeed, the concepts dominated popular conversation, and led many to see social programs as catering to the worst of society, producing fabricated narratives such as that of the freeloading “welfare queen.” By the start of the 80’s, Medicaid was widely associated with handouts, and “socialized medicine” had become a euphemism for the spread of communism — a perspective coming from a combination of societal contempt towards the “undeserving poor” and a culture shaped by Cold-War era propaganda (Katz, 167) (Thompson, 20, 40, 41 & 65).
Curiously, however, America saw consistent expansion to Medicaid eligibility and services throughout the 80’s, despite Reagan’s administration slashing billions in social funding during his first year in office (Patel and Rushefsky, 88) (Palmer, 81). First beginning in 1984, and continuing every year of Reagan’s presidency, Medicaid saw continued growth — a development that stands in stark contrast to his claims in a second-week address that “we can lecture our children about extravagance until we run out of voice and breath, or we can cure their extravagance by simply reducing their allowance” (Thompson, 13). Despite a targeted cabinet goal of cutting government assistance and a cultural view of beneficiaries as lazy and undeserving, Medicaid cemented its essentialness, bounced back from Reagan’s cuts, and rapidly expanded throughout the rest of the decade.
Background
As industrialization rapidly changed the lives of working-class America at the start of the twentieth century, there was no established healthcare system set up to meet the needs of the poor. By the end of the 50’s, the cost of medicine had doubled (Patel & Rushefsky, 76). The wealth gap continued to widen under President Johnson so considerably that in 1965, a proto-Medicaid was created, backed by Democrats that held a 2:1 House majority (Patel and Rushefsky, 76). This first attempt at Medicaid was considered bloated and clunky (Olson, 48), but it was supported by politicians who were eager to preserve a shoddy attempt at such a system rather than work towards implementing an effective one (Olson, 48, 49) (Stevens and Stevens, 26–51).
Fast forward to the 70’s, and president-to-be Ronald Reagan, now past his days as a Hollywood actor, represented a growing popular movement focused on reducing federal spending and pursuing the replacement of federal programs with ones ran on the state level (Palmer and Sawhill, 16). Accompanying the economic discussion was a rhetorical opposition that smeared beneficiaries of public assistance and drove up public contempt; no better example of this exists than the “welfare queen,” a woman (usually black) who (Reagan claimed) received tens of thousands of dollars a year simply by lying to government program facilitators. While there was only one, singular example of someone matching this description, and this person faced a slew of mental health problems informing her actions, the impact of Reagan highlighting her story immediately stuck. The act of receiving public benefits now became a person’s entire identity, not merely an action they took (Hancock, 12).
With a public perception of Medicaid recipients as freeloaders, an administration dedicated to slashing funding for public assistance, and a clunky and difficult program that many couldn’t benefit from, the prospect of Medicaid expansion seemed grim. But the economy-driven policy of the 80’s turned out to be its own best critic, bringing an outpouring of documentation that showed the economic benefits of Medicaid and proved, unequivocally, that adequate health care for the poor saved the country money.
Policy Progression
In 1984, after a decline in infant health following Reagan’s initial Medicaid cuts, Congress successfully expanded coverage to include more low-income pregnant women (Olson, 33). This policy was backed by a (somewhat begrudging) President Reagan for the Deficit Reduction Act of 1984 (Reagan). Studying the result of the act, a report by the Institute of Medicine the following year would highlight a crucial finding: money spent on proper prenatal care led to a decrease in money spent on infant care in the year after. More specifically, every dollar spent on prenatal care saved $3.38 on costs for care needed by low-birth-weight babies — a huge amount when considering the rising costs of healthcare and the trend of decline in overall infant health (Patel & Rushefsky, 81, 90). This documented benefit of savings would help inspire Reagan to authorize Medicaid to expand their coverage to all pregnant women that met AFDC standards. This trend would continue for each remaining year of his presidency, eventually expanding coverage to include any child of mothers that met AFDC standards up to age seven (Thompson, 16). Nutrition programs for pregnant mothers such as WIC would also soon be shown to have proven success and a financial benefit (Thompson, 18), and while some of these programs were still temporarily cut, the Reagan administration would soon back down from its initial goal of across-the-board cutting.
The documentation continued well throughout Reagan’s presidency, and even after he left office. In 1987, for example, data across multiple states showed that the birthrate had increased by five percent among white women, the largest single demographic of pregnant mothers receiving assistance (Joyce, Kaestner, and Kwan, 108). Joyce et all indicate that this could have been a product of lowered rates of abortion, a trend strongly correlated with an increase in ability to afford the cost of childcare. Later studies of the 90’s and the new millennium would greatly expand on this point, showing directly the “return on investment” of proper childcare and support for pregnant mothers (Dave et. All, 2015). But even the initial batch of data that came out during Reagan’s time in office indicated change was in the air; if it was anything that would push an administration focused heavily on budget deficit to reconsider, it was proof of future savings.
What Went Wrong
No politicians did more to prove the disastrous results of reckless cutting than those who passed the cuts themselves. Broader deregulation was almost immediately linked to a slew of increased costs and decreased benefits for Americans (Heclo, 558), and in the case of Medicaid, the application of budget cutting was short-lived, if even alive at all. Policies implemented in 1981 would trigger a recession the following year, with decreasing family income, increased poverty, and a jump in unemployment (Palmer, 19); furthermore, because of the many cuts already taken to Medicaid, governments were unable to pay for the services that an increased number of people now depended on, prompting a dramatic raise in taxes (Palmer, 20). These continued negative results stalled the ambitious plans of the Reagan administration, and in some cases left future policy change dead in the water (Engel, 165).
Block granting — the practice of combining multiple programs into a single, consolidated grant — was Reagan’s second approach to dialing back the federal scope of Medicaid. Multiple benefit policies were consolidated, reducing spending on a federal level, but ultimately offsetting savings by raising costs to states tremendously (Palmer, 78) (Heclo, 559) (Patel and Rushefsky, 88). By 1984, overall federal contribution to Medicaid had decreased each year, but taxes on the middle and lower class had increased substantially (Palmer and Sawhill, 21) (Patel and Rushefsky, 89). In the grand scheme of financing, Reagan’s shuffling had largely only succeeded in pushing the cost of Medicaid onto lower-income earners, who by and large weren’t able to pay it; what’s more, under Medicaid’s tightened restrictions, disabled people were penalized for having even part-time employment, and often lost their benefits if they held a job (Bagenstos, 69, 140). To avoid losing their benefits, workers left their jobs entirely, driving rising unemployment up even further. America’s massive investment in the Middle East during the 1970’s had put the country’s economy on shaky ground, but the Medicaid cuts cleaved the ground staright apart. America’s workforce was in serious trouble.
The effects of (and backlash to) the cuts were immediate. In 1981, the cuts were in introduced; in 1982, the effects were widely covered in popular media; in 1983, Reagan himself had started to admit defeat, even if his cabinet hadn’t. Faced with growing disapproval, Reagan signed on to guarantee the future of several social assistance programs, and when it came time to plan for re-election, the new enemy wasn’t specific spending, but rather a nebulous “big government” that Reagan vowed to fight against for the rest of his presidency (Heclo, 559). By 1984, shortly before the start of his second term, Medicaid eligibility had been expanded, and the Reagan administration had abandoned many of the cuts that had been initially championed, noting that it wouldn’t be possible to balance the future budget with their continued present economic turmoil (Palmer, 7). The administration would only pursue modest budget cuts to Medicaid (and other social assistance programs) moving forward, still seeking to reduce spending, but generally shying away from large-scale cuts not backed by thorough documentation (Palmer, 7).
Correcting Course
Despite its flaws, the (partial) transfer of Medicaid responsibility to the states had several positive results as well — namely, the reduction of redundancies and unnecessary expenses. One notable example of this was the case of Katie Beckett, a three-year-old who was unable to receive hospital care at home, causing her family to pay thousands a month to receive medical coverage in a hospital (Power, Lord, and DeFranco, 99). This inefficiency was so prominent and so highlighted that Reagan would eventually push to grant waivers in 1982 (known as TERFA waivers, or more colloquially, “the Katie Beckett option”). These waivers allowed states to ignore certain Medicaid requirements entirely, and instead reallocate a portion of Medicaid funding to go towards “other forms of care such as case management, personal care services, and respite care” (Power, Lord, and DeFranco, 99).
Many Americans are rightfully skeptical of privatization and de-regulation of social programs, as this course has often failed to meaningfully cut costs without also substantially reducing quality of care. However, in the case of Medicaid, the resulting changes helped cut a substantial amount of red tape; most notably, by offering “the Katie Beckett option,” the dependence on a system of institutional care slowly waned, opening the door for improved individual care.
Previously, the federal focus on nursing homes highlighted by the Beckett case had meant that almost everyone living below the poverty line while receiving assistance was funneled into Immediate Care Facilities (ICF’s). Living conditions in ICF’s were dreadful; famously, the conditions of Staten Island’s Willowbrook Hospital were so bad that television host Geraldo Rivera ran an exposé on the hospital in 1972, a landmark moment that was credited with bringing awareness to the failure of the ICF’s to greater America.
The soaring costs of lawsuits during this time also added to the growing list of factors in Reagan’s decision to continue to move the focus of Medicaid away from the strict institution of ICF’s (Power, Lord, and DeFranco, 95–101) (Olson, 24) (Smith and Moore, 24), marking a shift in policy that would come to define Reagan’s later years as president. Lawsuits rates skyrocketed, an ability that was bolstered by the passing of the Civil Rights of Institutionalized Persons Act of 1980, passed just six months before Reagan was elected to office. Thanks to this act, the Justice Department was now able to file suits on behalf of formerly voiceless institutional residents whose civil rights were violated under existing disability legislation. With the legal right of the disabled to protest violations of their civil liberties, cuts to programs such as Medicaid now had a legal basis for objection.
The growing wave was impossible to fight, even for Reagan. Although his administration did still argue for cuts where possible, Medicaid was spared from large-scale slashes, with focus instead going towards decentralization and local decision-making rather than policies being determined by federal programmers (Palmer, 7, 79).
Riding the Wave
The case of the waivers shows that, even before the expansions of the mid-80’s, Reagan moved away from gutting Medicaid almost immediately, both because of what was set in motion by disability activists, and because of direct documentation of what the cuts did to the economy. The cutting of Medicaid budget in 1981 and the tightening of the Disability Amendments Act that same year pushed millions against a wall; the structure of Medicaid and loss of eligibility for AFDC had the latent effect of kicking millions of poor and disabled Americans off Medicaid as well, resulting in nearly half a million families no longer being supported by the program (General Accounting Office, 10).
By 1982, before the documentation would even factor in to Reagan’s policymaking, Medicaid reform as a product of disability rights visibility was already on the horizon. Protests were ramping up in nearly every major city, and the Katie Beckett case was publicized in the media to such an extent that in 1984, Reagan met her in person (Power, Lord, and DeFranco, 99). What persuaded public opinion is difficult to say; in this case, it wouldn’t be unreasonable to pessimistically assume that the image of Katie Beckett, an “innocent” young white girl who was tragically disabled by encephalitis provided suburbia with a sympathetic face for disability that it previously was able to easily ignore. Either way, though, it was getting harder by the day for America to deny the need for Medicaid, and those that still opposed it were rapidly dwindling in numbers.
Further progress for the institutionalized, and additional criticism for the focus of Medicaid and disability programs on institutional care, would come from the publicity of the case of Nicholas Romeo, a thirty-three-year-old man who was involuntarily institutionalized when his mother could no longer care for him. The case, with the court’s opinion delivered by Reagan-appointed judge Lewis Powell, ruled that those receiving institutional care were entitled to reasonable freedom from restraints and physical control by institution staff (Youngberg V. Romeo). This added onto the nearly decade-long public decrying of institution-centric policy and gave more teeth to the fight to restructure Medicaid and other social programs’ forms of care (Power, Lord, and DeFranco, 96). There was simply no denying the shortcomings of Medicaid and other disability benefits systems, and those who relied on it found common ground with those trying to defund it by highlighting the need for increased efficiency. Ultimately, this was yet another factor contributing to the documented shift that began with the introduction of the TERFA waivers in 1982 (Olson, 24) (Smith and Moore, 24).
Reagan would be publicly vocal about multiple cases following the Katie Beckett media coverage, and would even close out his presidency by declaring March Disability Awareness Month. While some might argue this move was functionally small, it undeniably marked a significant departure from Reagan’s initial discussions of public programs.
Shortly after Reagan’s presidency concluded, President Bush’s would officially sign the Americans with Disabilities Act, also known as the ADA; while criticized in its own right — a topic for another article — the ADA brought many legal benefits for disabled Americans, including a requirement that Medicaid-covered facilities comply with certain standards (Americans With Disabilities Act). While the fight for Medicaid didn’t start with Reagan, Medicaid was here to stay thanks in no small part to the actions of the president that most publicly demonized public assistance in the first place.
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