The R-Word

WILLIAM NEIKIRK

March 19, 1993|By WILLIAM NEIKIRK

WASHINGTON — Washington. -- Good health to Hillary Rodham Clinton in her efforts to reform the nation's health-care system. Quagmire is too weak a word to describe what she confronts.

Those who have to deal routinely with the bewildering array of forms and fees, precertifications and pre-existing conditions, hospital and physician reimbursements, and premiums and deductibles can appreciate only a portion of the mess.

More broadly, this system simply has become too costly for a nation trying to compete globally in the last years of the 20th century. Without change, it will break apart before the turn of the century, because it is structurally unsound and a drag on economic growth.

That much has been clear for some time. But Mrs. Clinton and the administration must take care that, in overhauling the system in order to cut costs and increase access, they do not destroy it. They could do so by going too fast and by resorting to price controls as a way to finance health-care access for all.

Price controls in the health area would have a pernicious effect that would quickly force the government into the realm of rationing care. In voting for a new administration, Americans expressed the need for a lower-cost, broader-based health-care system, but never voted for rationing.

It could happen, said Barry Bosworth, an economist at the Brookings Institution who ran the voluntary price-control system under President Carter and now believes that controls just don't work, period.

If the administration tries to control hospital and doctors' fees to the point that they really bite, these venerable institutions will just find a way around them, just as other industries did in wage-price control days, he said. They'll do it primarily by changing the quantity of care, increasing costs.

Very quickly, the government will find that it has to dictate quantity of health care as well as the price of it, probably through the means of an overall budget allocation for health-care spending. In fact, this idea is under consideration and probably will be incorporated into the system.

By any other name, this is rationing. ''This is a very explosive issue,'' said Bosworth. ''It's nice to try to say there's a lot of waste and inefficiency in health, but the truth is that costs are being driven by very expensive procedures, episodes of care that cost $25,000 or more.''

Once Americans understand that a plan ostensibly designed to control costs to allow more people to be included actually is a rationing plan in disguise, they may rebel, he added. This is a fundamental ethical question that the nation has not debated in full, and should do so before any plan is adopted.

If President Clinton decides on price controls as part of his ''managed competition'' system, he also may prevent health-care providers and insurance companies from making billions of dollars in investments to prepare for it, said Don Moran, vice president of Lewin-VHI, a large health-care consulting firm.

For the health and insurance system to be competitive in bidding for the health-care business of the future under managed competition, Mr. Moran maintained that firms and health-care providers will have to invest in new technology and new computer systems to make such a giant system work.

Yet, if prices are frozen at the outset, this will make the job of raising money much more difficult and make capital markets less likely to put money where they don't think they can get a good return. In other words, they ration their funds.

Mr. Moran's argument implies that there's a sizable cost involved in setting up any new system, something that probably should be recognized by the administration. Often to fix something that's broken you must replace worn-out parts. Same principle here.

Right up front, there needs to be more honesty by the administration in the kinds of basic issues that reforming health care raises. The first is going to be how to finance providing access for the 35 million not now covered by health care, a cost estimated as high as $60 to $70 billion.

Increases in ''sin taxes'' and cutting administrative costs will not it, even though the administration may claim that they will. Price controls, the other element, will lead to rationing, though the administration won't use that dreaded word, either.

A broader tax, like a value-added tax, seems in order to pay for increased access if the administration is not willing to resort to rationing.

The managed-competition system holds some promise, but it needs a real-life test before it is implemented nationwide, said Mr. Bosworth. Perhaps a demonstration project in a couple of states for a few years would be wise. (Under managed competition, employer purchasing cooperatives contract with health-care providers to offer a standard, required package of benefits.)

If this delay does not happen, Americans should not be misled that this new system will be cost-free, resulting from a magical discovery of wasted, misdirected funds. The true savings may ++ be found in being denied what once was deemed a right.

NB William R. Neikirk is a senior writer for the Chicago Tribune.

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