Worse than nothing

December 17, 1993|By Robert Kuttner

REP. Jim Cooper of Tennessee could emerge as the key power broker on health reform, leaving the Clintons with a cure worse than the disease. Mr. Cooper's bill superficially resembles the president's, but where Mr. Clinton streamlines the present system to get universal health coverage, Mr. Cooper rejects universal coverage and leaves most of the present flaws intact.

If he were just any rank-and-file Democrat, Mr. Cooper's bill wouldn't matter. But he is a stalwart of the center-right Democratic Leadership Council (DLC), the self-proclaimed "New Democrats" with whom Mr. Clinton himself identifies.

Last week, Mr. Clinton addressed the DLC, and was chagrined that 57 of his New Democrat friends are co-sponsoring the Cooper bill rather than his own. That means Mr. Clinton will be sorely tempted to split his differences with the Tennessean to attain a majority.

The key differences, however, are not splittable. Mr. Clinton assures decent coverage to everyone; Mr. Cooper merely offers a subsidy to help low-income people buy insurance in a largely unreformed private market. Many would remain uninsured or minimally insured.

Mr. Clinton requires most businesses to contribute a payroll charge directly to local purchasing pools ("health alliances") as a kind of voucher. Individuals could use the voucher to select any approved plan. Only very large companies with over 5,000 employees could opt out of the alliance system and sponsor health plans directly, and would pay a penalty if they did so.

Mr. Cooper, by contrast, would allow companies with over 100 employees to sponsor their own plans, which would leave the system badly fragmented. Mr. Cooper's version of the alliances would be providers of last resort -- an assigned-risk pool. The poor, the ill and the conventionally "uninsurable" would be the main customers, and would pay more money for less coverage.

In addition, Mr. Cooper fails to ensure cost-control. Where the Clinton plan caps overall premium charges, which would force health plans to live within annual budgets, Mr. Cooper has no such cap and relies only on tax incentives to restrain costs. And by leaving intact the existing patchwork of health plans, Mr. Cooper fails either to reap administrative savings, or to spare doctors and patients red tape.

Mr. Cooper's plan has been naively praised for being more "market- like." But this is faint praise indeed. For it is the present, private market system that has led to a crisis of both access and cost. Mr. Cooper only entrenches the mess that we have now, and extends it to the poor and the uninsured.

In devising his hybrid approach of "managed competition," the president sought several goals. A single, more coherent system would cut the red tape which now afflicts doctors and patients alike -- the endless reimbursements, pre-approvals, claim forms, payment denials, etc. That alone would save tens of billions of dollars annually.

By requiring any health plan to accept any applicant regardless of health history, Mr. Clinton's plan would save billions more that insurers now spend on "underwriting," which in plain English means avoiding risks. Medicare, by analogy, spends nothing on risk selection because everyone is in the same pool. Universal insurance also saves costs because more people see doctors preventively, and fewer sore throats are treated, inefficiently, in emergency rooms.

Finally, the Clinton system of annual budgeting would discourage the game of commissioning unnecessary tests. Doctors and other providers would simply set their clinical priorities within an annual budget. They would have no incentive to inflate costs to maximize reimbursements.

Politically, Mr. Clinton's plan was based on three, interrelated calculations: By mandating employers to pay most of the cost of universal coverage, Mr. Clinton hoped to avoid a general tax increase. By retaining insurers as the main sponsors of health plans, the president hoped to win support from the insurance industry. And by invoking the ideal of "competition," he hoped his plan would pass ideological muster with political moderates enamored of markets.

The emergence of the Cooper alternative suggests that this strategy may well be frustrated, for Mr. Cooper trumps Mr. Clinton on each point. Although Mr. Clinton's proposed payroll levy is described as a mandate rather than a tax, many employers would prefer no mandate at all. Mr. Cooper obliges them.

While insurers are pleased that the Clinton approach does not put them out of business, most are even happier with the voluntary alternative that Mr. Cooper offers. And if "competition" rather than regulation is the test of soundness, the Cooper bill offers more competition and less regulation than Mr. Clinton.

Politically, the Cooper bill sandbags Mr. Clinton with his own strategy and rhetoric. It is more convincingly "New Democrat" in every respect. Its flaw is that it fails to solve the health problem.

Mr. Clinton's health plan is already a delicate compromise. This mutation of it would be worse than nothing.

Robert Kuttner writes a column on economic matters.

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