The tough choices remaining on health care

Robert Kuttner

April 05, 1993|By Robert Kuttner

HILLARY Rodham Clinton's task force on health reform envisions a system that would entitle every citizen to a basic health plan, financed socially but operated by private-sector sponsors and regulated by regional public authorities. Citizens could shop around among plans, including Blue Cross, local health maintenance organizations (HMOs) or plans sponsored by insurance companies.

You would be free to choose the plan whose details you liked best. If you wanted a plan with extra features, say, dental coverage, you would have to pay extra. The regional authorities, called Health Insurance Purchasing Co-ops (HIPCs), would collect revenue from employers, employees and the federal government, and then forward payments to the plans on behalf of members.

This "managed competition" approach builds on the present system of health care delivery, while eliminating waste and relying on competition to restrain costs. But the plan will fly or crash -- depending on critical details. Herewith a consumer's guide to the tough choices still to be made:

* Will the basic plan be attractive enough to the middle class? If the basic plan is bare-bones -- if it requires large out-of-pocket charges for doctor visits, or fails to cover many conditions -- middle class voters will see it as a deterioration in their present coverage, and political support will erode. Some in the administration also want to limit tax deductibility to spartan plans that provide only minimal coverage. This raises choice No. 2:

* Will the package raise additional revenue? Any plan that extends coverage to the 37 million people currently uninsured without lowering coverage to the middle class will cost an additional $75 billion to $150 billion a year, at least in the early years.

By 1996 or 1997, universal coverage will begin to yield net savings, by reducing administrative waste, unnecessary procedures, excess profits and redundant facilities. But in the short run universal health care will require additional money. If budget hawks win the day, the result will be a stripped-down plan that alienates middle class voters in their role as consumers of health care. If on the other hand the plan is too lavish, it will alienate those same middle class voters as taxpayers.

* Will the plan allow large companies to sponsor their own plans? At present, many Americans get health coverage through their employers. Most are stuck with whatever their employer offers, and if they change or lose their jobs, they are often out of luck.

The best reform would break that patient-employer link, and allow every American to choose any qualified plan. That would eliminate much administrative complexity and end the problem of dependence on one employer.

However, some large companies think they would save money by continuing to operate their own plans, since companies with relatively young and healthy work forces are cheaper to insure. If permitted, that would perpetuate the costly fragmentation of the present system. Some people would get relatively better coverage at lower cost while the government would have to pay extra for small business coverage, the unemployed and the uninsured.

* Will Medicare and Medicaid be merged into the new system? Some want Medicare to continue indefinitely as a separate program for the elderly. However, a key source of inefficiency today is that doctors and hospitals follow one set of rules and reimbursements for Medicare, and another for each private insurer. The best reform would create a single system where costs are shared equitably and paperwork is simplified.

* How will long-term care for the elderly be included? At present, old people get costly institutional nursing care under Medicaid, by first qualifying as paupers. But they can't get any help from Medicaid for less intensive forms of care. This places into nursing homes many people who don't need or want to be there.

Medicaid should be abolished and merged into the new system; it should cover not just nursing homes but a whole range of intermediate services for the elderly, including home care and assisted living arrangements, both of which are much cheaper alternatives. Medicaid's costs are now inflating at rates in excess of 20 percent a year. If nursing care remains an all-or-nothing program under Medicaid, an expensive, inefficient and inhumane system will be prolonged.

* How will plans be reimbursed? A single annual payment on behalf of each subscriber would instantly eliminate the incentive to maximize treatments in order to maximize reimbursements. But if we continue the micro-reimbursement of doctors and hospitals, based on how many tests are prescribed and how many operations are done, then providers have no incentive to save money.

* What needs to be regulated directly? This new system will cut costs in many ways, but a great deal still needs to be regulated. For example, managed competition by itself has no leverage on drug prices. Conversely, somebody needs to make sure that doctors and hospitals don't start minimizing costs by minimizing care.

This short list of hard calls includes only the highlights, but it suggests the complexity and political difficulty of the Clintons' task. If they succeed, the Clintons will be hailed as healers if not magicians. If they fail, the malaise of the health system will quickly infect the Clinton presidency.

Robert Kuttner, an economist, writes a syndicated column.

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