Lobbyists get Clinton to do about-face, restore health benefits for early retirees THE PRESIDENT'S PLAN FOR HEALTH CARE

October 28, 1993|By Gilbert A. Lewthwaite and John Fairhall | Gilbert A. Lewthwaite and John Fairhall,Washington Bureau Staff writer Karen Hosler contributed to this article.

WASHINGTON -- Bowing to heavy lobbying pressure, the Clinton administration has retreated from plans to scale back one of the most controversial elements of its health reform proposal: an expensive new benefit for early retirees.

The administration was considering phasing in its plan to have the government pick up most of the health care costs for early retirees, a proposal which had drawn conservative criticism after it was unveiled last month.

But the final version of the Clinton proposal sent to Congress yesterday sticks with the original plan to introduce the reform in 1998.

Among those who lobbied to keep the benefit from being watered down were the auto industry and its most powerful defender in Congress, Democratic Rep. John D. Dingell of Michigan. Joining in the effort was organized labor, which appealed to members of Congress earlier in the week.

"We talked to a number of our friends on the Hill, and they interceded with the administration, and the provision was restored to what it had previously been," said Alan Reuther, legislative director of the United Auto Workers, who made the rounds on Capitol Hill with Jim Johnson, a representative of General Motors.

"I don't want to say what caused what. All I know is that it's been restored to what we originally understood it to be. We are very happy."

The early-retiree episode illustrates the sort of political power-playing that will be a central feature of the process over coming months as Congress considers one of the most complex pieces of legislation in decades.

Almost every subsection of the massive effort to offer basic health insurance to all Americans at reduced costs affects a variety of powerful lobbies, from doctors to insurance companies, from the elderly to the needy.

The early retirement provision, which would essentially create a new federal entitlement for retired workers between the ages of 55 and 64, was put into the Clinton plan, in large part, to attract big business' support for health reform.

The retiree proposal, if enacted by Congress, would be a major windfall to older manufacturing industries, such as steel and automakers, who have been saddled with the cost of providing health care to workers forced to retire early as companies shrink their payrolls.

For some auto companies, for example, retirement health costs per car exceed the cost of steel per car.

However, the retiree benefit drew relatively little praise from business when it was announced last month.

Instead, there was criticism from several quarters that the provision would cost far more than the administration had estimated.

Mr. Clinton is proposing that the federal government pay 80 percent of the medical premiums for early retirees, starting in 1998.

The other 20 percent would be paid by the retirees or picked up by the companies.

The administration estimates that this provision would cost $11 billion in the first three years, from 1998 to 2000.

But some administration officials admit privately there is no way to know for sure how much it would cost, since the number of those who might take early retirement can only be guessed.

To help offset the cost of the provision, the administration changed its draft plan to include a 50 percent "windfall" tax on companies that save money by not having to pay premiums.

But in drafting the actual legislation, the White House was seriously considering a further reduction in the cost of the plan, phasing it in over a number of years, said an administration official, who spoke on condition he not be identified.

That idea was dropped, he added, after it drew heated opposition from Representative Dingell, who chairs the House Energy and Commerce Committee, one of the main legislative gates through which the Clinton plan must pass.

Roger Altman, deputy Treasury secretary, defended the early retiree provision against critics who call it a giveaway to big business.

He told reporters that it would make U.S. corporations more competitive abroad by lifting a major financial "burden" from them. The plan would also create jobs for younger workers by encouraging early retirement, he said.

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