Health care compromises lack room for maneuver

February 13, 1994|By John Fairhall | John Fairhall,Washington Bureau of The Sun

WASHINGTON -- They talk a good game about compromising on health reform, but President Clinton and members of Congress are really playing on a small field, with few options if they want to reach the goal of guaranteed insurance for all Americans.

The Congressional Budget Office made that clear last week, laying out a road map to reform that shows no easy routes to universal coverage. Any plan that seeks to accomplish this will require huge new revenues and tough cost controls -- steps that would test the political courage and ingenuity of Congress.

The report, which concludes that the Clinton plan could cover all Americans without breaking the bank, underscores the comments of health policy specialists who have been puzzled by the president's recent declarations of flexibility.

"If the president now gives into too many things, he is basically in the end kissing universality goodbye," says Uwe E. Reinhardt, an influential health policy specialist and professor at Princeton University who wants all Americans covered.

Mr. Clinton told a group of governors recently that he is willing to be flexible on two pillars of his plan: government controls on insurance premium prices and the creation of regional "health alliances," organizations that would collect premiums from virtually all employers and workers and negotiate coverage with insurers.

Premium price controls are extremely controversial because, in the view of critics, they could lead to rationing of health care and a backlash of public outrage.

The problem would arise if premium levels are set so low that there would not be enough money to meet medical demands. In that case, the Congressional Budget Office report warns, there might be "longer waiting times for non-emergency services" and "reduced access to new high-cost medical technologies."

Yet giving much ground on price controls or alliances would drastically increase the cost of Mr. Clinton's plan and force him to propose the politically unpalatable step of raising federal taxes, many economists believe. Under the president's plan, the bulk of costs are covered by requiring employers and workers to pay insurance premiums.

"If you want to achieve . . . universal coverage without raising taxes, then you are building an extremely delicate machine, and if you take one screw out of it that machine can sort of run away and collapse on you," cautions Mr. Reinhardt, who supports the Clinton plan as the best option available for covering the 38 million uninsured Americans.

Congressional Budget Office director Robert D. Reischauer emphasized the importance of the proposed premium price controls, telling the Senate Finance Committee on Wednesday that they are the heart of Mr. Clinton's scheme for restraining health spending.

Mr. Clinton insists that price controls are not as important as another tool he proposes for generating more competition among insurers -- the controversial government-directed health alliances. "Rather than looking at price controls . . . we want to let market forces" work, the president said in September.

But he also indicated to the governors that he was willing to compromise on the alliances. They are an essential part of his plan because they would bring most Americans into a single system in which prices would be kept low and basic benefits guaranteed for everyone. Under the present system, tens of thousands of companies negotiate on their own with insurers, paying different prices for different benefts.

Through the alliances, Mr. Clinton could enforce a system called "community rating," in which people living in a region would be charged essentially the same insurance premium, regardless of their health. The current insurance industry practice is to charge people in the same group or company the same price, but to treat groups and companies differently.

The alliances, which would be state-chartered, also would serve a critical financing role, says John Sheils, vice president of Lewin-VHI, Inc., a benefits consulting firm that has extensively studied the Clinton plan.

The president's plan would actually require most employers to pay more than the cost of covering just their own workers -- a little-known feature of the plan. The extra funds paid by employers would subsidize insurance for workers' families, the unemployed and retirees.

But if employers are not required to join an alliance -- there's mounting sentiment in Congress to exempt most firms -- then the government would have to make up the difference, Mr. Sheils says, driving up the federal costs of the Clinton plan.

The Clinton plan already faces cost troubles because Mr. Reischauer estimated that it would add $70 billion to the deficit in the first six years. If employers don't pay into the alliances, the Clinton plan would drive up the deficit another $68 billion, Lewin-VHI calculates.

"Congress wants a health reform bill that doesn't involve a new tax; that's the problem," Mr. Sheils says. "If you alter this alliance size, what happens is you get federal costs going through the roof. It means you have to have a new tax."

Some people believe that when Mr. Clinton offers to compromise, he is really challenging Congress to come up with alternatives to his plan.

"Very astute politically," observes Gerard Anderson, director of the Center for Hospital Finance and Management at the Johns Hopkins University. "But the financial realities are there."

Increasingly, members of Congress are saying it will be necessary to push back Mr. Clinton's goal -- coverage of all Americans -- years beyond his 1998 timetable.

If that happens, and the promised guarantee of universal coverage is made dependent on another president and another Congress, some of Mr. Clinton's supporters will view him as having failed.

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